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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1998
REGISTRATION NO. 333-40701
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-11
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933
VORNADO OPERATING INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
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PARK 80 WEST, PLAZA II,
SADDLE BROOK, NEW JERSEY 07663
TELEPHONE: (201) 587-1000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOSEPH MACNOW
EXECUTIVE VICE PRESIDENT, FINANCE AND ADMINISTRATION
VORNADO OPERATING INC.
PARK 80 WEST, PLAZA II
SADDLE BROOK, NEW JERSEY 07663
TELEPHONE: (201) 587-1000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPY TO:
ALAN SINSHEIMER
SULLIVAN & CROMWELL
125 BROAD STREET
NEW YORK, NEW YORK 10004
TELEPHONE: (212) 558-4000
FACSIMILE: (212) 558-3588
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) 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 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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PROPOSED
MAXIMUM
TITLE OF SECURITIES AGGREGATE AMOUNT OF
BEING REGISTERED(1) OFFERING PRICE(2) REGISTRATION FEE(3)
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<S> <C> <C>
Common Stock, par value $.01 per share......... $25,000,000 $4,217
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</TABLE>
(1) This Registration Statement relates to (i) the distribution (the
"Distribution") to common shareholders of Vornado Realty Trust ("Vornado")
of one share of common stock, par value $.01 per share ("Common Stock"), of
Vornado Operating Inc. for every 20 common shares of beneficial interest,
par value $.04 per share, of Vornado held as of the record date for the
Distribution and to limited partners of Vornado Realty L.P. of one share of
Common Stock for every 20 units of limited partnership interest in Vornado
Sub held as of the record date for the Distribution and (ii) the offer and
sale of shares of Common Stock received in the Distribution by Interstate
Properties. The number of securities to be issued in connection with the
Distribution is not determinable at this time.
(2) Calculated (solely for purposes of determining the registration fee) at the
book value of the shares being registered.
(3) A fee of $3,359 was previously paid upon the initial filing of this
registration statement. The amount of the registration fee hereunder,
$7,576, has been reduced by the amount of such previously paid fee.
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.
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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 JANUARY 23, 1998
VORNADO OPERATING COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
This Prospectus is being furnished to both the common shareholders
("Vornado Shareholders") of Vornado Realty Trust, a Maryland real estate
investment trust ("Vornado"), and the limited partners other than Vornado
("Limited Partners") of Vornado Realty L.P., a Delaware limited partnership and
a subsidiary of Vornado ("Vornado Sub"), in connection with the distribution
(the "Distribution") by Vornado Sub and Vornado of all of the outstanding shares
of common stock, par value $.01 per share ("Common Stock"), of Vornado Operating
Company, a Delaware corporation currently owned by Vornado Sub (the "Company").
In order to maintain its status as a real estate investment trust ("REIT")
for federal income tax purposes, Vornado is required to focus principally on
investments in certain qualified real estate assets. The Company is a new
corporation which has been formed to own assets that Vornado could not itself
own and conduct activities that Vornado could not itself conduct.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS RELEVANT TO THE OWNERSHIP OF COMMON STOCK.
On --, 1998 (the "Distribution Date"), Vornado Shareholders will receive
one share of Common Stock for every 20 common shares of beneficial interest, par
value $.04 per share, of Vornado (each, a "Vornado Common Share") held of record
as of the close of business on --, 1998 (the "Record Date"), and Limited
Partners will receive one share of Common Stock for every 20 units of limited
partnership interest (each, a "Unit") in Vornado Sub held of record as of the
close of business on the Record Date. Based on the number of Vornado Common
Shares and Units outstanding as of January 16, 1998, Vornado Sub will distribute
3,893,429 shares of Common Stock to its partners (i.e., Vornado and the Limited
Partners), and Vornado in turn will distribute 3,507,980 shares of Common Stock
to the Vornado Shareholders. Cash will be paid in lieu of fractional shares of
Common Stock.
NO HOLDER OF VORNADO COMMON SHARES OR UNITS WILL BE REQUIRED TO MAKE ANY
PAYMENT, EXCHANGE ANY VORNADO COMMON SHARES OR UNITS OR TAKE ANY OTHER ACTION IN
ORDER TO RECEIVE COMMON STOCK IN THE DISTRIBUTION.
37,146 shares of Common Stock to be distributed in the Distribution to
Interstate Properties, a New Jersey general partnership ("Interstate"), are
being sold by Interstate (in the open market or otherwise). The Company will not
receive any of the proceeds from the sale of the shares being sold by
Interstate. See "The Distribution -- Interstate Transaction."
The Company's restated certificate of incorporation (the "Charter")
provides that no person may own more than 9.9% of the outstanding Common Stock.
Shares of Common Stock owned in excess of such limit will be deemed "Excess
Shares" pursuant to the Charter, in which case the holder will lose certain
ownership rights with respect to such shares and the Company will have the right
to purchase such Excess Shares from the holder. See "Description of Capital
Stock -- Certain Charter and By-laws Provisions -- Restrictions on Ownership."
Application has been made to list the Common Stock on the American Stock
Exchange under the symbol "VOO."
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NO VOTE OF VORNADO SHAREHOLDERS OR LIMITED PARTNERS IS REQUIRED IN
CONNECTION WITH THE DISTRIBUTION. THEREFORE, WE ARE NOT ASKING YOU FOR A PROXY,
AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
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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.
------------------------
The date of this Prospectus is --, 1998.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-11 (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock described herein. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information, reference is made
hereby to the Registration Statement and such exhibits and schedules. Statements
contained herein concerning any documents are not necessarily complete and, in
each instance, reference is made to the copies of such documents filed as
exhibits to the Registration Statement. Each such statement is qualified in its
entirety by such reference. The Registration Statement, including the exhibits
and schedules thereto, can be inspected and copied at 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 information can be
obtained from the Public Reference Section of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates and from a web site maintained
by the Commission on the World Wide Web that contains reports, proxy and
information statements and other information on registrants, such as the
Company, that must file such material with the Commission electronically. The
Commission's address on the world wide web is "http://www.sec.gov".
The Company intends to furnish its stockholders with annual reports
containing audited financial statements examined and reported upon by
independent certified public accountants for each fiscal year.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information set forth elsewhere in this Prospectus, including the discussion of
certain factors set forth under "Risk Factors." Unless the context requires
otherwise, all references to "Vornado" in this Prospectus shall be deemed to
refer to Vornado Realty Trust and its consolidated subsidiaries, including
Vornado Sub, and all references to the "Company" in this Prospectus shall be
deemed to refer to Vornado Operating Inc. and its consolidated subsidiaries,
including Vornado Operating L.P. ("Company Sub"). Vornado is the general partner
of Vornado Sub and the Company is the general partner of Company Sub. All share
and per share amounts in this Prospectus are based on the number of Vornado
Common Shares and Units outstanding as of January 16, 1998.
THE DISTRIBUTION
Distributing Companies..... Vornado Sub and Vornado.
Distribution Ratio......... One share of Common Stock for every 20 Vornado
Common Shares or Units.
Record Date................ -- , 1998.
Distribution Date.......... -- , 1998.
No Payment Required........ No holder of Vornado Common Shares or Units will be
required to make any payment, exchange any Vornado
Common Shares or Units or take any other action in
order to receive Common Stock in the Distribution.
Background of and Reasons
for the Distribution..... In order to maintain its status as a REIT for
federal income tax purposes, Vornado is required to
focus principally on investment in certain real
estate assets. The Company is a new corporation
which has been formed to own assets that Vornado
could not itself own and conduct activities that
Vornado could not itself conduct. The Company will
be able to do so because it will be taxable as a
regular corporation rather than a REIT for taxable
years after 1998.
The Distribution of Common Stock will enable
investors who own both Vornado Common Shares (or
Units) and Common Stock the opportunity to
participate in the benefits of the REIT operations
of Vornado (including ownership of real property)
and the non-REIT operations of the Company
(including the lease and operation of certain
assets owned by Vornado and the lease or ownership
and operation of certain other non-real estate
assets).
Interstate Transaction..... Interstate and its three partners -- Steven Roth
(Chairman of the Board and Chief Executive Officer
of Vornado and the Company), David Mandelbaum (a
trustee of Vornado) and Russell B. Wight, Jr. (a
trustee of Vornado and a director of the
Company) -- will beneficially own, in the
aggregate, 19.8% of the Common Stock as a result of
the Distribution (excluding shares underlying stock
appreciation rights ("SARs") held by Messrs. Roth
and Wight for this purpose). The beneficial
ownership by Interstate and its partners of 10% or
more of the Common Stock at a time when Interstate
and its partners beneficially own Vornado Common
Shares representing 10% or more of the total value
of Vornado's outstanding shares would cause rent
Vornado receives from the Company to fail to be
treated as qualifying rent for purposes of the
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REIT gross income requirements. Consequently,
Interstate and the Company have agreed that (a)
immediately after completion of the Distribution,
(i) Interstate will exchange shares representing
9.9% of the Common Stock that will be outstanding
immediately after giving effect to the Distribution
for a 9.9% undivided interest in all of the
Company's assets, and (ii) Interstate and the
Company will contribute all of their interests in
such assets to Company Sub (a Delaware limited
partnership through which the Company will hold its
assets and conduct its business) and in return
Interstate will receive a 9.9% limited partnership
interest and the Company will receive a 90.1%
partnership interest therein (such exchange and
contribution being collectively referred to herein
as the "Interstate Exchange"), and (b) by no later
than December 31, 1998, Interstate will sell 37,146
additional shares of Common Stock (in the open
market or otherwise) (the "Interstate Sale" and,
together with the Interstate Exchange, the
"Interstate Transaction"). See "The
Distribution -- Interstate Transaction."
Distribution Agent,
Transfer Agent and
Registrar................ First Union National Bank, Charlotte, North
Carolina, will be the distribution agent for the
Distribution (the "Distribution Agent") and the
Transfer Agent and Registrar for the Common Stock.
Federal Income Tax
Considerations........... The Distribution of shares of Common Stock by
Vornado will be treated as a taxable dividend to
Vornado shareholders to the extent that it is
treated as made out of Vornado's current or
accumulated earnings and profits (as determined for
federal income tax purposes). To the extent that
the value of the shares of Common Stock distributed
to a Vornado Shareholder exceeds the earnings and
profits of Vornado allocated to such Distribution,
such excess will be treated first as a return of
such shareholder's basis in its Vornado Common
Shares to the extent thereof and thereafter as gain
on a deemed disposition of Vornado Common Shares.
Vornado will recognize gain in connection with the
Distribution to the extent that the fair market
value of the Common Stock distributed by Vornado
exceeds Vornado's $23.2 million share of the
aggregate basis that Vornado Sub had in the assets
contributed by Vornado Sub to the Company (i.e., to
the extent that the fair market value of the Common
Stock exceeds the book value of $6.42 per share).
Such gain will give rise to additional taxable
income for Vornado Shareholders as such gain will
result in an increase in Vornado's current earnings
and profits for 1998. Vornado Shareholders will
receive a basis in the Common Stock equal to the
fair market value thereof at the time of
Distribution. A Limited Partner will generally
recognize gain in connection with the Distribution
to the extent that the fair market value of the
Common Stock received by the Limited Partner
exceeds the Limited Partner's basis in the Limited
Partner's partnership interest. Certain Limited
Partners, however, may not be required to recognize
gain in the full amount of such excess. See
"Federal Income Tax Considerations -- The
Distribution."
4
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THE COMPANY
General.................... The Company was incorporated on October 30, 1997
and has had no operations to date. The Company has
been formed to own assets that Vornado could not
itself own and conduct activities that Vornado
could not itself conduct. The Company is intended
to function principally as an operating company, in
contrast to Vornado's principal focus on investment
in real estate assets.
The Company will seek to become the lessee and
operator of certain real estate assets owned now or
in the future by Vornado, as contemplated by the
Intercompany Agreement referred to below. In
addition, the Company may pursue other
opportunities, although it currently expects that
those opportunities will relate in some manner to
Vornado and its real estate investments rather than
to unrelated businesses.
See "The Distribution -- Background of and Reasons
for the Distribution" and "Business -- General."
Intercompany Agreement and
Charter Purpose
Clauses.................. The Company and Vornado Sub intend to enter into an
agreement (the "Intercompany Agreement"), promptly
after the Distribution, pursuant to which, among
other things, (a) Vornado will agree under certain
circumstances to offer the Company an opportunity
to become lessee of certain real property owned now
or in the future by Vornado (under mutually
satisfactory lease terms) and (b) the Company will
agree not to make any real estate investment or
other REIT-Qualified Investment (as defined) unless
it first offers Vornado the opportunity to make
such investment and Vornado has rejected that
opportunity. The Company's Charter specifies that
one of its corporate purposes is to perform the
Intercompany Agreement and, for so long as the
Intercompany Agreement remains in effect, prohibits
the Company from making any real estate investment
or other REIT-Qualified Investment without
complying with the requirement referred to in (b)
of the preceding sentence. See
"Business -- Intercompany Agreement and Charter
Purpose Clauses."
Initial Capitalization;
Specific Operating Assets
or Operations to Be
Acquired................. Vornado Sub has capitalized the Company with an
equity contribution of $25 million of cash. In
addition, the Company intends, promptly after the
Distribution, to enter into a $75 million revolving
credit agreement with Vornado Sub (the "Revolving
Credit Agreement"). See "Management's Discussion
and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
The Company has not yet identified specific
operating assets or operations that it will
acquire. Although the Company expects to attempt to
negotiate to become lessee and operator of some or
all of the real estate assets and to purchase some
or all of the non-real estate assets of the Cold
Storage Companies referred to under
"Business -- Initial Capitalization; Specific
Operating Assets or Operations to be Acquired,"
there is no assurance that the
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Company will be successful in doing so and there is
no assurance as to the terms of any such
transaction. Moreover, unless Vornado waives the
Company's obligation under the Intercompany
Agreement to seek to qualify as a REIT for federal
income tax purposes for its taxable year ending
December 31, 1998 (see "Federal Income Tax
Considerations -- Taxation of the Company in
General"), the Company does not expect to do so
until after December 31, 1998. In the interim, the
Company expects to invest its available funds
primarily in government securities.
Company Sub................ The Company will hold its assets and conduct its
business through Company Sub. The Company will be
the sole general partner of, and will own a 90.1%
partnership interest in, Company Sub.
Management of the
Company.................. Steven Roth (Chairman of the Board and Chief
Executive Officer of Vornado), Michael D.
Fascitelli (President of Vornado) and other senior
officers of Vornado serve (and after the
Distribution are expected to continue to serve) in
the same capacities at the Company. See
"Management."
Dividend Policy............ The Company intends to use its available funds to
pursue investment and business opportunities and,
therefore, does not anticipate the payment of any
cash dividends on the Common Stock in the
foreseeable future, except to the extent that the
Company is required to make distributions in order
to qualify for federal income tax purposes as a
REIT for the taxable year ending December 31, 1998.
See "Federal Income Tax Considerations -- Taxation
of the Company in General -- Taxation of the
Company as a REIT for 1998 (But Not Thereafter)."
REIT for 1998
(But Not Thereafter)..... The Company will agree in the Intercompany
Agreement to seek to qualify as a REIT for federal
income tax purposes for its taxable year ending
December 31, 1998, but not for subsequent years.
The Company's qualification as a REIT for its
taxable year ending December 31, 1998 may be
necessary in order to ensure that the Distribution
will not adversely effect Vornado's REIT status. If
Vornado determines in its sole discretion that such
qualification is not necessary, Vornado may waive
such obligation. In any event, the Company will be
subject to federal income tax as a regular
corporation in taxable years after 1998. See
"Federal Income Tax Considerations -- Taxation of
the Company in General."
RISK FACTORS
Vornado Shareholders and Limited Partners should consider carefully, in
addition to the other information contained in this Prospectus, the matters set
forth under the caption "Risk Factors."
6
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SUMMARY PRO FORMA CONSOLIDATED FINANCIAL DATA
The Company is a new corporation which has been formed to own assets that
Vornado could not itself own and conduct activities that Vornado could not
itself conduct. See "The Distribution -- Background of and Reasons for the
Distribution." The Company was incorporated on October 30, 1997 and has had no
operations to date. The following sets forth unaudited summary data for the
Company as of January 23, 1998, adjusted to give pro forma effect to the
Distribution and the Interstate Transaction as if such transactions had occurred
as of such date.
PRO FORMA CONSOLIDATED FINANCIAL DATA (in thousands, except share and per share
data)
<TABLE>
<S> <C>
Cash....................................................................... $ 25,000
Minority interest of Interstate in Company Sub............................. $ 2,475
Stockholders' equity....................................................... $ 22,525
Number of shares of Common Stock outstanding............................... 3,507,980(1)
Stockholders' equity per share............................................. $ 6.42(1)
</TABLE>
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(1) Based on number of Vornado Common Shares and Units outstanding as of January
16, 1998 and a Distribution ratio of one share of Common Stock for every 20
Vornado Common Shares or Units.
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<PAGE> 9
RISK FACTORS
Vornado Shareholders and Limited Partners should carefully consider and
evaluate all of the information set forth in this Prospectus, including the risk
factors listed below.
LACK OF OPERATING HISTORY AND OPERATING RESULTS; NO OPERATING ASSETS
The Company was incorporated on October 30, 1997 and has had no operations
to date. The Company owns no operating assets and has not yet entered into any
agreement to lease or purchase operating assets.
RESTRICTIONS ON THE COMPANY'S BUSINESS AND FUTURE OPPORTUNITIES
The Intercompany Agreement and the Charter will prohibit the Company from
making any real estate investment or other REIT-Qualified Investment unless it
first offers Vornado the opportunity to make such investment and Vornado has
rejected that opportunity. See "Business -- Intercompany Agreement and Charter
Purpose Clauses." Because of the provisions of the Intercompany Agreement and
the Charter, the nature of the Company's business and the opportunities it may
pursue are significantly restricted.
The Company will agree in the Intercompany Agreement to seek to qualify as
a REIT for federal income tax purposes for its taxable year ending December 31,
1998, but not for subsequent years. The Company's qualification as a REIT for
its taxable year ending December 31, 1998 may be necessary in order to ensure
that the Distribution will not adversely affect Vornado's REIT status. Unless
Vornado waives the Company's obligation to seek to qualify as a REIT for federal
income tax purposes for its taxable year ending December 31, 1998, the Company
does not expect to lease or purchase operating assets until after December 31,
1998. In the interim, the Company expects to invest its available funds
primarily in government securities.
DEPENDENCE UPON VORNADO
The Company expects to rely exclusively on Vornado to identify business
opportunities for the Company, and the Company currently expects that those
opportunities will relate in some manner to Vornado and its real estate
investments rather than to unrelated businesses. There is no assurance that
Vornado will identify opportunities for the Company or that any opportunities
that Vornado identifies will be within the Company's financial, operational or
management parameters. Vornado will be required under the Intercompany Agreement
to provide the Company with an opportunity to become the lessee of real property
acquired by Vornado only if Vornado determines in its sole discretion that,
consistent with Vornado's status as a REIT, it is required to enter into a
master lease arrangement with respect to such property and that the Company is
qualified to act as lessee thereof. Moreover, the Company will be entitled to
enter into such a master lease arrangement with Vornado only if the Company and
Vornado are able to agree on mutually satisfactory lease terms.
If Vornado in the future should fail to qualify as a REIT and thereafter
acquired a property, Vornado would have the right under the Intercompany
Agreement to lease the property to any person or entity pursuant to any type of
lease (including a master lease arrangement) or to operate the property itself,
in either case without offering the Company an opportunity to become a lessee
thereof. The Company, however, would remain subject to all of the limitations on
its operations contained in the Charter and the Intercompany Agreement.
Accordingly, if Vornado should fail to qualify as a REIT, that failure could
have a material adverse effect on the Company. For a discussion of Vornado's
status as a REIT, see "Federal Income Tax Considerations -- Taxation of Vornado
in General."
If Vornado in the future should sell any property which is leased to the
Company, it is possible that the new owner might refuse to renew the lease upon
the expiration of its term.
8
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SUBSTANTIAL INFLUENCE OF CONTROLLING SHAREHOLDERS; CONFLICTS OF INTEREST
Interstate and its three partners -- Steven Roth (Chairman of the Board and
Chief Executive Officer of Vornado and the Company), David Mandelbaum (a trustee
of Vornado) and Russell B. Wight, Jr. (a trustee of Vornado and a director of
the Company) -- beneficially own, in the aggregate, 21.3% of the outstanding
Vornado Common Shares (excluding shares issuable on conversion of Units for this
purpose) and will, after giving effect to the Interstate Transaction,
beneficially own, in the aggregate, a 9.9% limited partnership interest in
Company Sub and 9.9% of the Common Stock (excluding shares underlying SARs held
by Messrs. Roth and Wight for this purpose). Because of the foregoing, Messrs.
Roth, Mandelbaum and Wight and Interstate (collectively, the "Interstate
Parties") will have substantial influence on the Company and Vornado and on the
outcome of any matters submitted to the Company's or Vornado's shareholders for
approval.
Four of the members of the Company's Board (including Messrs. Roth and
Fascitelli) are members of Vornado's Board, and each member of senior management
of the Company holds a corresponding position with Vornado. Members of the
Company's Board and senior management may have different percentage equity
interests in the Company and in Vornado. Moreover, the Interstate Parties engage
in a wide variety of activities in the real estate business. Thus, members of
the Board and senior management of the Company and Vornado and the Interstate
Parties may be presented with conflicts of interest with respect to certain
matters affecting the Company, such as determination of which of such entities
or persons, if any, may take advantage of potential business opportunities,
decisions concerning the business focus of such entities (including decisions
concerning the types of properties and geographic locations in which such
entities make investments), potential competition between business activities
conducted, or sought to be conducted, by such entities or persons (including
competition for properties and tenants), possible corporate transactions (such
as acquisitions) and other strategic decisions affecting the future of such
parties.
Neither Mr. Roth nor any other member of management is committed to
spending a particular amount of time on the Company's affairs, nor will any of
them devote his full time to the Company. Because of their other time
commitments and because the Company does not yet own any operating assets, Mr.
Roth and the other members of management anticipate that they will initially not
be devoting a significant amount of time to the activities of the Company. Once
the Company acquires material operating assets, Mr. Roth and the other members
of management anticipate that they will devote such time and efforts as they
deem reasonably necessary to conduct the operations of the Company while
continuing to devote a material amount of their time and efforts to the
management and properties of Vornado.
RISKS ASSOCIATED WITH POTENTIAL INVESTMENTS AND ABILITY TO MANAGE THOSE
INVESTMENTS; COMPETITION
Although the Company currently expects that the opportunities it pursues
will relate in some manner to Vornado and its real estate investments rather
than to unrelated businesses, it is possible that they will not. In addition,
whether or not such opportunities relate in some manner to Vornado and its real
estate investments, the businesses in which it engages may require a wide range
of skills and qualifications, and there is no assurance that the Company
management or employees will have, or that the Company will be able to hire and
retain employees with, such skills and qualifications. There also is no
assurance that the opportunities the Company pursues will be integrated, perform
as expected or contribute significant revenues or profits to the Company, and
there is a risk that the Company may realize substantial losses with respect
thereto. The industries in which the Company will compete may be subject to
government regulation and restrictions, some of which may be significant and
burdensome. The businesses with which it will compete may be better capitalized
or have other features that will make it difficult for the Company to compete
effectively.
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OBLIGATIONS UNDER REVOLVING CREDIT FACILITY; LIMITED FINANCIAL RESOURCES
The Company intends, promptly after the Distribution, to enter into a $75
million Revolving Credit Agreement with Vornado Sub. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." Although only interest and
commitment fees will be payable under the Revolving Credit Agreement until it
expires on December 31, 2002, there can be no assurance that the Company will be
able to satisfy all of its obligations under the Revolving Credit Agreement.
The Company expects that its initial equity contribution of $25 million of
cash and borrowings under the Revolving Credit Agreement will be used to support
future acquisitions of assets by the Company and other cash requirements. There
is no assurance that the Company will have sufficient working capital to finance
future acquisitions or pursue additional opportunities. The Company expects to
be able to access capital markets or to seek other financing, including
financing from Vornado, but there is no assurance that it will be able to do so
at all or in amounts or on terms acceptable to the Company. Under certain
circumstances it may be deemed desirable by the Company and Vornado to offer and
sell Common Stock and Vornado Common Shares under a common plan of distribution.
There is no assurance that the timing, terms and manner of such an offering will
be as favorable to the Company as the timing, terms and manner of an offering of
Common Stock made independently of Vornado. Neither Vornado nor any other person
is obligated to provide any additional funds to the Company, to offer securities
under a common plan of distribution or to assist it in obtaining additional
financing.
ABSENCE OF A PUBLIC MARKET FOR COMMON STOCK
There is currently no public market for the Common Stock. Application has
been made to list the Common Stock on the American Stock Exchange under the
symbol "VOO." Until the Common Stock is fully distributed and an orderly trading
market develops, the prices at which trading in such stock occurs may fluctuate
significantly. There can be no assurance that an active trading market in the
Common Stock will develop or be sustained in the future. In the event no active
trading market develops for the Common Stock, holders of shares of Common Stock
may not be able to sell their shares promptly at a reasonable price.
Accordingly, holders of Common Stock should consider the Common Stock a
long-term investment. Interstate has agreed to sell 37,146 shares of Common
Stock by December 31, 1998, and these sales could adversely affect the market
price of the Common Stock.
The prices at which the Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others, the
Company's performance and prospects, the depth and liquidity of the market for
the Common Stock, investor perception of the Company and of the industries in
which the Company operates and economic conditions in general, the Company's
dividend policy, and general financial and other market conditions. In addition,
financial markets have experienced extreme price and volume fluctuations that
have affected the market price of the stocks of many companies and that, at
times, could be viewed as unrelated or disproportionate to the operating
performance of such companies. Such fluctuations have also affected the share
prices of many newly public issuers. Such volatility and other factors may
materially adversely affect the market price of the Common Stock.
ABSENCE OF DIVIDENDS ON COMMON STOCK
The Company intends to use its available funds to pursue investment and
business opportunities and, therefore, does not anticipate the payment of any
cash dividends on the Common Stock in the foreseeable future, except to the
extent that the Company is required to make distributions in order to qualify
for federal income tax purposes as a REIT for the taxable year ending December
31, 1998. See "Federal Income Tax Considerations -- Taxation of the Company in
General -- Taxation of the Company as a REIT for 1998 (But Not Thereafter)."
Except for distributions described in the preceding sentence, payment of
dividends on the Common Stock is prohibited under the Revolving Credit Agreement
until all amounts outstanding thereunder have been paid in full and the commit-
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<PAGE> 12
ment thereunder is terminated, and will also be subject to such limitations as
may be imposed by any other credit facilities that the Company may obtain from
time to time.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of Steven Roth, the Chairman and
Chief Executive Officer of the Company, and Michael D. Fascitelli, the President
of the Company. While the Company believes that it could find replacements for
these key personnel, the loss of their services could have an adverse effect on
the operations of the Company.
POTENTIAL ANTITAKEOVER EFFECTS OF CHARTER DOCUMENTS AND APPLICABLE LAW
The Charter and By-laws, the Company's rights plan and applicable sections
of the Delaware General Corporation Law (the "DGCL") contain provisions that may
make more difficult the acquisition of control of the Company without the
approval of the Company's Board. See "Description of Capital Stock."
DEPENDENCE ON DIVIDENDS AND DISTRIBUTIONS OF SUBSIDIARIES
Substantially all of the Company's assets will consist of its partnership
interests in Company Sub, of which the Company will be a general partner.
Substantially all of Company Sub's properties and assets are expected to be held
through subsidiaries. Any right of the Company's stockholders to participate in
any distribution of the assets of any indirect subsidiary of the Company upon
the liquidation, reorganization or insolvency of such subsidiary (and any
consequent right of the Company's securityholders to participate in those
assets) will be subject to the claims of the creditors (including trade
creditors) and preferred holders of equity, if any, of Company Sub and such
subsidiary, except to the extent the Company has a recognized claim against such
subsidiary as a creditor of such subsidiary. In addition, in the event that
claims of the Company as a creditor of a subsidiary are recognized, such claims
would be subordinate to any security interest in the assets of such subsidiary
and any indebtedness of such subsidiary senior to that held by the Company.
POTENTIAL COSTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner or operator of real estate (including, e.g., the
Company as lessee of real estate) may be required to investigate and clean up
certain hazardous substances released at a property, and may be held liable to a
governmental entity or to third parties for property damage or personal injuries
and for investigation and clean-up costs incurred in connection with the
contamination. Such laws often impose liability without regard to whether the
owner or operator knew of, or was responsible for, the release of such hazardous
substances. The presence of contamination or the failure to remediate
contamination may adversely affect the owner's ability to sell or lease real
estate or to borrow using the real estate as collateral or the operator's
ability to sell or finance the operations. Other federal, state and local laws,
ordinances and regulations require abatement or removal of certain
asbestos-containing materials in the event of demolition or certain renovations
or remodeling and also govern emissions of and exposure to asbestos fibers in
the air. The operation and subsequent removal of certain underground storage
tanks are also regulated by federal and state laws. In connection with the
ownership, operation and management of its properties, including the properties
it expects to lease from Vornado or others, the Company could be held liable for
the costs of remedial action with respect to such regulated substances or tanks
or related claims.
FEDERAL INCOME TAX RISKS
The Distribution of shares of Common Stock by Vornado will be treated as a
taxable dividend to Vornado shareholders to the extent that it is treated as
made out of Vornado's current or accumulated earnings and profits (as determined
for federal income tax purposes). To the extent that the value of the shares of
Common Stock distributed to a Vornado Shareholder exceeds the earnings and
profits of Vornado allocated to such Distribution, such excess will be treated
first as a return of such shareholder's basis in its Vornado Common Shares to
the extent thereof and thereafter as gain on a deemed disposition of Vornado
Common Shares. Vornado will recognize gain in connection with the Distribution
to the extent that the fair market value of the Common Stock
11
<PAGE> 13
distributed by Vornado exceeds Vornado's $23.2 million share of the aggregate
basis that Vornado Sub had in the assets contributed by Vornado Sub to the
Company (i.e., to the extent that the fair market value of the Common Stock
exceeds approximately $6.42 per share). Such gain will give rise to additional
taxable income for Vornado Shareholders as such gain will result in an increase
in Vornado's current earnings and profits for 1998. Vornado Shareholders will
receive a basis in the Common Stock equal to the fair market value thereof at
the time of Distribution. A Limited Partner will generally recognize gain in
connection with the Distribution to the extent that the fair market value of the
Common Stock received by the Limited Partner exceeds the Limited Partner's basis
in the Limited Partner's partnership interest. Certain Limited Partners,
however, may not be required to recognize gain in the full amount of such
excess. See "Federal Income Tax Considerations -- The Distribution."
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<PAGE> 14
THE DISTRIBUTION
BACKGROUND OF AND REASONS FOR THE DISTRIBUTION
In order to maintain its status as a REIT for federal income tax purposes,
Vornado is required to focus principally on investment in certain real estate
assets. See "Federal Income Tax Considerations -- Taxation of Vornado in
General." Accordingly, Vornado has been prevented from owning certain assets and
conducting certain activities that would be inconsistent with its status as a
REIT.
The Company is a new corporation which has been formed to own assets that
Vornado could not itself own and conduct activities that Vornado could not
itself conduct. The Company will be able to do so because it will be taxable as
a regular corporation rather than a REIT for taxable years after 1998. In this
regard, the Company and Vornado intend to enter into the Intercompany Agreement,
promptly after the Distribution, pursuant to which, among other things, (a)
Vornado will agree under certain circumstances to offer the Company an
opportunity to become lessee of certain real property owned now or in the future
by Vornado (under mutually satisfactory lease terms) and (b) the Company will
agree not to make any real estate investment or other REIT-Qualified Investment
unless it first offers Vornado the opportunity to make such investment and
Vornado has rejected that opportunity. See "Business -- Intercompany Agreement
and Charter Purpose Clauses."
The Distribution of Common Stock will enable investors who own both Vornado
Common Shares (or Units) and Common Stock the opportunity to participate in the
benefits of the REIT operations of Vornado (including ownership of real
property) and the non-REIT operations of the Company (including the lease and
operation of certain assets owned by Vornado and the lease or ownership and
operation of certain other non-real estate assets). A small number of REITs,
operating under tax provisions that no longer are available, have shares that
are "paired" or "stapled" with shares of a related operating company. The shares
of Common Stock and the Vornado Common Shares are not, and will not be, paired
or stapled in any manner and may be owned and transferred separately and
independently of each other. However, investors who choose to own shares of
Common Stock and Vornado Common Shares will in effect have the economic
equivalent of a paired investment in the Company and Vornado.
MANNER OF EFFECTING THE DISTRIBUTION
On the Distribution Date, Vornado Sub will distribute all of the
outstanding shares of Common Stock to its partners (i.e., Vornado and the other
Limited Partners), pro rata in accordance with their respective interests in
Vornado Sub held of record as of the close of business on the Record Date, and
will deliver to Vornado and the other Limited Partners certificates representing
such shares. Vornado in turn will distribute all of the shares of Common Stock
it receives to the Vornado Shareholders, pro rata in accordance with the number
of Vornado Common Shares held of record as of the close of business on the
Record Date, and will cause the Distribution Agent to mail certificates
representing such shares to the Vornado Shareholders entitled thereto. As a
result of these distributions, Vornado Shareholders will receive one share of
Common Stock for every 20 Vornado Common Shares held of record as of the close
of business on the Record Date, and Limited Partners will receive one share of
Common Stock for every 20 Units held of record as of the close of business on
the Record Date.
No Vornado Shareholder or Limited Partner will be entitled to receive a
fractional share of Common Stock in connection with the Distribution. Instead,
the Distribution Agent will (a) aggregate all fractional shares of Common Stock
which would otherwise be issuable in connection with the Distribution, (b) sell
those shares in the open market for cash and (c) mail to each Vornado
Shareholder or Limited Partner, in lieu of the fractional share such Vornado
Shareholder or Limited Partner would otherwise receive, a check in an amount
equal to such Vornado Shareholder's or Limited Partner's pro rata share in the
aggregate amount received for such shares.
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<PAGE> 15
Inquiries relating to the Distribution should be directed to the
Distribution Agent at First Union National Bank, 1525 West W.T. Harris
Blvd. -- 3C3, Charlotte, North Carolina 28288-1153, Attention: Corporate Trust
Client Services NC-1153; or by telephone at 800-829-8432, Monday through Friday,
9:00 a.m. to 5:00 p.m. (Eastern time).
NO HOLDER OF VORNADO COMMON SHARES OR UNITS WILL BE REQUIRED TO MAKE ANY
PAYMENT, EXCHANGE ANY VORNADO COMMON SHARES OR UNITS OR TAKE ANY OTHER ACTION IN
ORDER TO RECEIVE COMMON STOCK IN THE DISTRIBUTION.
INTERSTATE TRANSACTION
Interstate, a New Jersey general partnership, and its three
partners -- Steven Roth (Chairman of the Board and Chief Executive Officer of
Vornado and the Company), David Mandelbaum (a trustee of Vornado) and Russell B.
Wight, Jr. (a trustee of Vornado and a director of the Company) -- will
beneficially own, in the aggregate, 19.8% of the Common Stock as a result of the
Distribution (ignoring SARs held by Messrs. Roth and Wight for this purpose).
Under applicable provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), Vornado will not continue to be treated as a REIT unless it
satisfies, among other things, requirements relating to the sources of its gross
income. See "Federal Income Tax Considerations -- Taxation of Vornado in
General." Rents received or accrued by Vornado from the Company will not be
treated as qualifying rent for purposes of these requirements if Vornado is
treated, either directly or under the applicable attribution rules, as owning
10% or more of the Common Stock of the Company. Vornado will be treated as
owning, under the applicable attribution rules, 10% or more of the Common Stock
at any time that Interstate and its partners own, directly or under the
applicable attribution rules, (a) Vornado shares with a value equal to 10% or
more of the total value of Vornado's outstanding shares and (b) 10% or more of
the Common Stock of the Company. Thus, in order to enable rents received or
accrued by Vornado from the Company to be treated as qualifying rent for
purposes of the REIT gross income requirements, Interstate and the Company have
agreed that (a) immediately after completion of the Distribution, (i) Interstate
will exchange shares representing 9.9% of the Common Stock that will be
outstanding after giving effect to the Distribution for a 9.9% undivided
interest in all of the Company's assets and (ii) Interstate and the Company will
contribute all of their interests in such assets to Company Sub (a Delaware
limited partnership through which the Company will hold its assets and conduct
its business) and in return Interstate will receive a 9.9% limited partnership
interest and the Company will receive a 90.1% partnership interest therein, and
(b) by no later than December 31, 1998, Interstate will sell 37,146 additional
shares of Common Stock (in the open market or otherwise). At any time after the
first anniversary of the Interstate Exchange, Interstate will have the right to
have its limited partnership interest in Company Sub redeemed by Company Sub
either (a) for cash in an amount equal to the fair market value, at the time of
redemption, of a number of shares of Common Stock equal to the number originally
exchanged by Interstate as described in the preceding sentence or (b) for such
number of shares of Common Stock, in each case as selected by the Company and
subject to customary anti-dilution adjustments.
TRADING OF COMMON STOCK
There is currently no public market for the Common Stock. Application has
been made to list the Common Stock on the American Stock Exchange under the
symbol "VOO." Until the Common Stock is fully distributed and an orderly trading
market develops, the prices at which trading in such stock occurs may fluctuate
significantly. There can be no assurance that an active trading market in the
Common Stock will develop or be sustained in the future.
The Company will have approximately 2,000 stockholders of record, based on
the number of record holders of Vornado Common Shares and Units on the Record
Date. The Transfer Agent and Registrar for the Common Stock will be First Union
National Bank, Charlotte, North Carolina.
Based on the number of Vornado Common Shares and Units outstanding as of
January 16, 1998 and after giving effect to the Distribution and the Interstate
Transaction, 3,507,980 million shares of
14
<PAGE> 16
Common Stock will be outstanding.These shares will be freely transferable,
except for securities received by persons who may be deemed to be "affiliates"
of the Company under the Securities Act of 1933, as amended (the "Securities
Act"). Persons who may be deemed to be affiliates of the Company after the
Distribution generally include individuals or entities that control, are
controlled by, or are under common control with, the Company and may include
certain officers and directors of the Company as well as principal stockholders
of the Company, if any. Persons who are affiliates of the Company will be
permitted to sell their shares of Common Stock only pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act, such as the exemption afforded
by Section 4(2) of the Securities Act (relating to private sales) or by Rule 144
under the Securities Act. Interstate has agreed to sell 37,146 shares of Common
Stock following the Distribution, and these sales have been registered under the
Registration Statement of which this Prospectus is a part. See "--Interstate
Transaction." Besides these shares, neither Vornado nor the Company is able to
predict whether substantial amounts of Common Stock will be sold in the open
market following the Distribution. Sale of substantial amounts of Common Stock
in the public market, or the perception that such sales might occur, could
adversely affect the market price of Common Stock.
FEDERAL INCOME TAX CONSIDERATIONS
The Distribution of shares of Common Stock by Vornado will be treated as a
taxable dividend to Vornado shareholders to the extent that it is treated as
made out of Vornado's current or accumulated earnings and profits (as determined
for federal income tax purposes). To the extent that the value of the shares of
Common Stock distributed to a Vornado Shareholder exceeds the earnings and
profits of Vornado allocated to such Distribution, such excess will be treated
first as a return of such shareholder's basis in its Vornado Common Shares to
the extent thereof and thereafter as gain on a deemed disposition of Vornado
Common Shares. Vornado will recognize gain in connection with the Distribution
to the extent that the fair market value of the Common Stock distributed by
Vornado exceeds Vornado's $23.2 million share of the aggregate basis that
Vornado Sub had in the assets contributed by Vornado Sub to the Company (i.e.,
to the extent that the fair market value of the Common Stock exceeds $6.42 per
share). Such gain will give rise to additional taxable income for Vornado's
shareholders as such gain will result in an increase in Vornado's current
earnings and profits for 1998. Vornado Shareholders will receive a basis in the
Common Stock equal to the fair market value thereof at the time of Distribution.
A Limited Partner will generally recognize gain in connection with the
Distribution to the extent that the fair market value of the Common Stock
received by the Limited Partner exceeds the Limited Partner's basis in the
Limited Partner's partnership interests. Certain Limited Partners, however, may
not be required to recognize gain in the full amount of such excess.
All Vornado Shareholders and Limited Partners should carefully read the
discussion of the material federal income tax consequences of the Distribution
under "Federal Income Tax Considerations -- The Distribution" and are urged to
consult their own tax advisers as to the federal, state, local and foreign tax
consequences in their particular circumstances.
DIVIDEND POLICY
The Company intends to use its available funds to pursue investment and
business opportunities and, therefore, does not anticipate the payment of any
cash dividends on the Common Stock in the foreseeable future, except to the
extent that the Company is required to make distributions in order to qualify
for federal income tax purposes as a REIT for the taxable year ending December
31, 1998. See "Federal Income Tax Considerations -- Taxation of the Company in
General -- Taxation of the Company as a REIT for 1998 (But Not Thereafter)."
Except for distributions described in the preceding sentence, payment of
dividends on the Common Stock is prohibited under the Revolving Credit Agreement
until all amounts outstanding thereunder are paid in full and the commitment
thereunder is terminated, and will also be subject to such limitations as may be
imposed by any other credit facilities that the Company may obtain from time to
time. The declaration of dividends will be subject to the discretion of the
Board.
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<PAGE> 17
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The Company is a new corporation which has been formed to own assets that
Vornado could not itself own and conduct activities that Vornado could not
itself conduct. See "The Distribution -- Background of and Reasons for the
Distribution." The Company was incorporated on October 30, 1997 and has had no
operations to date. The following sets forth unaudited selected data for the
Company as of January 23, 1998, adjusted to give pro forma effect to the
Distribution and the Interstate Transaction as if such transactions had occurred
as of such date.
PRO FORMA CONSOLIDATED FINANCIAL DATA (in thousands, except share and per share
data)
<TABLE>
<S> <C>
Cash....................................................................... $ 25,000
Minority interest of Interstate in Company Sub............................. $ 2,475
Stockholders' equity....................................................... $ 22,525
Number of shares of Common Stock outstanding............................... 3,507,980(1)
Stockholders' equity per share............................................. $ 6.42(1)
</TABLE>
- ---------------
(1) Based on number of Vornado Common Shares and Units outstanding as of January
16, 1998 and a Distribution ratio of one share of Common Stock for every 20
Vornado Common Shares or Units.
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<PAGE> 18
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Pro Forma Consolidated Financial Data" and the historical and pro forma balance
sheet and note thereto appearing elsewhere in this Prospectus.
The Company was incorporated on October 30, 1997 and has had no operations
to date. The Company has been formed to own assets that Vornado could not itself
own and conduct activities that Vornado could not itself conduct. The Company is
intended to function principally as an operating company, in contrast to
Vornado's principal focus on investment in real estate assets.
The Company will seek to become the lessee and operator of certain real
estate assets owned now or in the future by Vornado, as contemplated by the
Intercompany Agreement. In addition, the Company may pursue other opportunities,
although it currently expects that those opportunities will relate in some
manner to Vornado and its real estate investments rather than to unrelated
businesses.
The Company will agree in the Intercompany Agreement to seek to qualify as
a REIT for federal income tax purposes for its taxable year ending December 31,
1998, but not for subsequent years. The Company's qualification as a REIT for
its taxable year ending December 31, 1998 may be necessary in order to ensure
that the Distribution will not adversely affect Vornado's REIT status. Unless
Vornado waives the Company's obligation to seek to qualify as a REIT for federal
income tax purposes for its taxable year ending December 31, 1998, the Company
does not expect to lease or purchase operating assets until after December 31,
1998. In the interim, the Company expects to invest its available funds
primarily in government securities.
LIQUIDITY AND CAPITAL RESOURCES
Vornado Sub has capitalized the Company with an equity contribution of $25
million of cash. The Company intends to obtain a $75 million unsecured five-year
revolving credit facility from Vornado Sub under the Revolving Credit Agreement.
Borrowings under the Revolving Credit Agreement will bear interest at a floating
rate per annum equal to LIBOR plus 3%. The Company will pay Vornado Sub a
commitment fee equal to 1% per annum on the average daily unused portion of the
facility. Amounts may be borrowed under the Revolving Credit Agreement, repaid
and reborrowed from time to time on a revolving basis (so long as the principal
amount outstanding at any time does not exceed $75 million). Only interest and
commitment fees will be payable under the Revolving Credit Agreement until it
expires on December 31, 2002. The Revolving Credit Agreement will prohibit the
Company from incurring indebtedness to third parties (other than certain
purchase money debt and certain other exceptions) and will prohibit the Company
from paying dividends (except to the extent that the Company is required to pay
dividends in order to qualify for federal income tax purposes as a REIT for the
taxable year ending December 31, 1998). Debt under the Revolving Credit
Agreement will be fully recourse against the Company. The Company expects that
borrowings under the Revolving Credit Agreement will be used to support future
acquisitions of assets by the Company and other cash requirements.
The Company owns no operating assets and has not yet entered into any
agreement to lease or purchase operating assets. The Company will have no
external sources of financing except for the Revolving Credit Agreement.
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<PAGE> 19
BUSINESS
GENERAL
The Company was incorporated on October 30, 1997 and has had no operations
to date. The principal executive offices of the Company are located at Park 80
West, Plaza II, Saddle Brook, New Jersey 07663, and its telephone number at that
location is (201) 587-1000.
The Company has been formed to own assets that Vornado could not itself own
and conduct activities that Vornado itself could not conduct. The Company is
intended to function principally as an operating company, in contrast to
Vornado's principal focus on investment in real estate assets. See "The
Distribution -- Background of and Reasons for the Distribution."
The Company will seek to become the lessee and operator of certain real
estate assets owned now or in the future by Vornado, as contemplated by the
Intercompany Agreement referred to below. In addition, the Company may pursue
other opportunities, although it currently expects that those opportunities will
relate in some manner to Vornado and its real estate investments rather than to
unrelated businesses.
INTERCOMPANY AGREEMENT AND CHARTER PURPOSE CLAUSES
The Company and Vornado intend to enter into the Intercompany Agreement,
promptly after the Distribution, pursuant to which, among other things, (a)
Vornado will agree under certain circumstances to offer the Company an
opportunity to become the lessee of certain real property owned now or in the
future by Vornado (under mutually satisfactory lease terms) and (b) the Company
will agree not to make any real estate investment or other REIT-Qualified
Investment unless it first offers Vornado the opportunity to make such
investment and Vornado has rejected that opportunity.
More specifically, the Intercompany Agreement will require, subject to
certain terms, that Vornado provide the Company with an opportunity (a "Tenant
Opportunity") to become the lessee of any real property owned now or in the
future by Vornado if Vornado determines in its sole discretion that, consistent
with Vornado's status as a REIT, it is required to enter into a "master" lease
arrangement with respect to such property and that the Company is qualified to
act as lessee thereof. In general, a master lease arrangement is an arrangement
pursuant to which an entire property or project (or a group of related
properties or projects) are leased to a single lessee. Under the Intercompany
Agreement, the Company and Vornado will negotiate with each other on an
exclusive basis for 30 days regarding the terms and conditions of the lease in
respect of each Tenant Opportunity. If a mutually satisfactory agreement cannot
be reached within the 30-day period, Vornado may for a period of one year
thereafter enter into a binding agreement with respect to such Tenant
Opportunity with any third party on terms no more favorable to the third party
than the terms last offered to the Company. If Vornado does not enter into a
binding agreement with respect to such Tenant Opportunity within such one-year
period, Vornado must again offer the Tenant Opportunity to the Company in
accordance with the procedures specified above prior to offering such Tenant
Opportunity to any other party.
In addition, the Intercompany Agreement will prohibit the Company from
making (i) any investment in real estate (including the provision of services
related to real estate, real estate mortgages, real estate derivatives or
entities that invest in the foregoing) or (ii) any other REIT-Qualified
Investment, unless it has provided written notice to Vornado of the material
terms and conditions of the investment opportunity and Vornado has determined
not to pursue such investment either by providing written notice to the Company
rejecting the opportunity within 10 days from the date of receipt of notice of
the opportunity or by allowing such 10-day period to lapse. As used herein,
"REIT-Qualified Investment" means an investment, at least 95% of the gross
income from which would qualify under the 95% gross income test set forth in
section 856(c)(2) of the Code (or could be structured to so qualify) and the
ownership of which would not cause Vornado to violate the asset limitations set
forth in section 856(c)(4) of the Code (or could be structured not to cause
18
<PAGE> 20
Vornado to violate the section 856(c)(4) limitations); provided, however, that
"REIT-Qualified Investment" does not include an investment in government
securities, cash or cash items (as defined for purposes of section 856(c)(4) of
the Code), money market funds, certificates of deposit, commercial paper having
a maturity of not more than 90 days, bankers' acceptances or the property
transferred to the Company by Vornado Sub. The Intercompany Agreement will also
require the Company to assist Vornado in structuring and consummating any such
investment which Vornado elects to pursue, on terms determined by Vornado. In
addition, the Company will agree to notify Vornado of, and make available to,
Vornado investment opportunities developed by the Company or of which the
Company becomes aware but is unable or unwilling to pursue.
Under the Intercompany Agreement, Vornado will agree to provide the Company
with certain administrative, corporate, accounting, financial, insurance, legal,
tax, data processing, human resources and operational services. For these
services, the Company will compensate Vornado in an amount determined in good
faith by Vornado as the amount an unaffiliated third party would charge the
Company for comparable services and will reimburse Vornado for certain costs
incurred and paid to third parties on behalf of the Company.
Under the Intercompany Agreement, the Company will agree that it will seek
to qualify as a REIT for its taxable year ending December 31, 1998. The
Company's qualification as a REIT for its taxable year ending December 31, 1998
may be necessary to ensure that Vornado's status as a REIT will not be adversely
affected by the Distribution. If Vornado concludes in its sole discretion that
such qualification is not necessary, Vornado may waive such obligation. See
"Federal Income Tax Considerations -- Taxation of the Company in
General -- Taxation of the Company as a REIT for 1998 (But Not Thereafter)."
Vornado and the Company each have the right to terminate the Intercompany
Agreement if the other party is in material default of the Intercompany
Agreement or upon 90 days written notice to the other party at any time after
December 31, 2002. In addition, Vornado has the right to terminate the
Intercompany Agreement upon a change in control of the Company.
The Company's Charter specifies that one of its corporate purposes is to
perform the Intercompany Agreement and, for so long as the Intercompany
Agreement remains in effect, prohibits the Company from making any real estate
investment or other REIT-Qualified Investment without first offering the
opportunity to Vornado in the manner specified in the Intercompany Agreement.
COMPANY SUB
The Company will hold its assets and conduct its business through Company
Sub. The Company will be the sole general partner of, and will own a 90.1%
partnership interest in, Company Sub.
INITIAL CAPITALIZATION; SPECIFIC OPERATING ASSETS OR OPERATIONS TO BE ACQUIRED
Vornado Sub has capitalized the Company with an equity contribution of $25
million of cash. In addition, the Company intends, promptly after the
Distribution, to enter into a $75 million Revolving Credit Agreement with
Vornado Sub.
The Company has not yet identified specific operating assets or operations
that it will acquire. Although the Company expects to attempt to negotiate to
become lessee and operator of some or all of the real estate assets and to
purchase some or all of the non-real estate assets of the Cold Storage Companies
referred to below, there is no assurance that the Company will be successful in
doing so and there is no assurance as to the terms of any such transaction.
Moreover, unless Vornado waives the Company's obligation under the Intercompany
Agreement to seek to qualify as a REIT for federal income tax purposes for its
taxable year ending December 31, 1998 (see "Federal Income Tax Considerations --
Taxation of the Company in General"), the Company does
19
<PAGE> 21
not expect to do so until after December 31, 1998. In the interim, the Company
expects to invest its available funds primarily in government securities.
On October 31, 1997, partnerships (the "Vornado/Crescent Partnerships") in
which affiliates of Vornado have a 60% interest and affiliates of Crescent Real
Estate Equities Limited ("Crescent") have a 40% interest acquired each of
Americold Corporation ("Americold") and URS Logistics, Inc. ("URS," and together
with Americold, the "Cold Storage Companies"). Vornado's investments in the
Vornado/Crescent Partnerships are currently held by corporations in which
Vornado owns all of the preferred stock and none of the common equity
("preferred stock affiliates"). Ownership of the preferred stock entitles
Vornado to substantially all of the economic benefits in the preferred stock
affiliates. The common stock of the preferred stock affiliates is owned by
officers and/or trustees of Vornado. Accordingly, Vornado is not able to elect
the boards of directors of the preferred stock affiliates, and does not have the
authority to control the management and operations of such affiliates.
Americold, headquartered in Portland, Oregon, is the nation's largest cold
storage and logistics warehouse company. In connection with its warehouse
business, Americold manages an integrated distribution logistics system serving
the frozen food industry. URS, headquartered in Atlanta, Georgia, provides
refrigerated and frozen storage and distribution to the leading food
manufacturers in the nation.
Americold's consolidated revenues in 1996 were $310.8 million and URS's
consolidated revenues in 1996 were $144.2 million.
The Cold Storage Companies collectively own and operate 80 warehouse
facilities with an aggregate of approximately 367 million cubic feet of
refrigerated, frozen and dry storage space. The Cold Storage Companies currently
operate the warehouses pursuant to arrangements with national food suppliers
such as Tyson Foods, Kraft Foods, ConAgra and Pillsbury, and employ
approximately 3,900 employees. The management and operation of the Cold Storage
Companies includes, among other things, the management of the warehouse
facilities and the performance of certain logistics, transportation management,
accounting, marketing, engineering, data processing and operational functions.
Vornado is currently considering a number of alternatives in respect of its
investments in the Cold Storage Companies, and has not yet finalized its plans
in respect of such investments. One such alternative involves Vornado offering
the Company the opportunity to negotiate to become lessee and operator of some
or all of the real estate assets and to purchase some or all of the non-real
estate assets of the Cold Storage Companies. However, significant tax and
structuring considerations must be resolved before Vornado finalizes its plans
in respect of the Cold Storage Companies, including determining whether to
provide the Company with such an opportunity. These tax and structuring
considerations include, among others, determining whether to seek one or more
private letter rulings from the Internal Revenue Service (which could take up to
one year to obtain); identifying the nature and value of individual assets
currently owned by the Cold Storage Companies; division of the assets that will
be owned by the Vornado/Crescent Partnerships and any assets that such
partnership may wish to sell; and obtaining the necessary consent from Crescent
for certain transactions involving the Cold Storage Companies. In addition,
because Vornado holds its investments in the Vornado/Crescent Partnerships
through preferred stock affiliates, Vornado does not have the authority to
control when or if the Company is offered an opportunity to become a lessee and
operator of some or all of the real estate assets and to purchase some or all of
the non-real estate assets of the Cold Storage Companies. Accordingly, no
assurance can be given that Vornado will provide the Company with such an
opportunity or that Vornado and the Company will be able to agree on the terms
and conditions of any lease or purchase of assets.
Vornado, Crescent and the Company have not previously engaged in the cold
storage business. The Company expects to retain many of the existing officers
and employees of the Cold Storage Companies if it enters into a "master" lease
arrangement in respect of the Cold Storage Compa-
20
<PAGE> 22
nies' businesses. However, there can be no assurance that the Company will be
able to successfully manage such businesses. The businesses of the Cold Storage
Companies may be subject to certain other risks, including dependence on key
customers and downturns in agricultural markets resulting from severe weather or
other factors.
PROPERTY
Under the Intercompany Agreement, Vornado will agree to make available to
the Company, at Vornado's principal office in Saddle Brook, New Jersey, space
for the Company's principal corporate office, for which the Company will
compensate Vornado in an amount determined in good faith by Vornado as the
amount an unaffiliated third party would charge the Company for comparable
space. The Company believes that such facilities will be adequate to meet its
expected requirements for the coming year.
EMPLOYEES
As of the date of this Prospectus, the Company had no employees. The
Company expects that, when it acquires specific assets and business operations,
the subsidiaries of the Company making such acquisitions will have their own
employees.
LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or
which any of its properties are subject.
21
<PAGE> 23
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to those
persons who have agreed to serve as the directors and executive officers of the
Company:
<TABLE>
<CAPTION>
DIRECTOR
NAME CLASS AGE POSITION
- ----------------------------------- -------- --- ----------------------------------------
<S> <C> <C> <C>
Steven Roth(1)..................... III 56 Chairman of the Board and Chief
Executive Officer
Michael D. Fascitelli(1)........... III 40 President and Director
Russell B. Wight, Jr.(1)........... II 57 Director
[First independent director]....... II -- Director
Richard West....................... I 59 Director
[Second independent director]...... I -- Director
Joseph Macnow...................... 52 Executive Vice President of Finance and
Administration
Irwin Goldberg..................... 53 Vice President and Chief Financial
Officer
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Audit Committee and Compensation Committee.
Officers are appointed by and serve at the discretion of the Board of
Directors.
Mr. Roth has been Chairman of the Board and Chief Executive Officer of
Vornado since May 1989 and Chairman of the Executive Committee of the Board of
Vornado since April 1980. Since 1968, he has been a general partner of
Interstate and more recently, managing general partner. On March 3, 1995, he
became Chief Executive Officer of Alexander's, Inc. ("Alexander's"). Mr. Roth is
also a director of Alexander's.
Mr. Fascitelli has been President and a trustee of Vornado, and a Director
of Alexander's, since December 2, 1996. From December 1992 to December 1996, Mr.
Fascitelli was a partner at Goldman, Sachs & Co. in charge of its real estate
practice.
Mr. Wight has been a general partner of Interstate since 1968. Mr. Wight
became a director of Alexander's in March 1995 and is also a trustee or director
of Vornado and Insituform Technologies, Inc.
Mr. West is Dean Emeritus of the Leonard N. Stern School of Business, New
York University. He was a professor there from September 1984 until September
1995. He was also Dean from September 1984 until August 1993. From July 1976
through August 1984, he was a faculty member of the Amos Tuck School of Business
Administration of Dartmouth College. From July 1976 until 1983, Mr. West was
also Dean of the Amos Tuck School. Mr. West is also a director or a trustee of
Vornado, Alexander's, Smith-Corona, Inc., Bowne & Co., Inc., and various
investment companies managed by Merrill Lynch Asset Management, Inc., an
affiliate of Merrill Lynch & Co.
Mr. Macnow has been Executive Vice President of Finance and Administration
of Vornado since January 1998. From 1985 until 1998, Mr. Macnow was Vice
President and Chief Financial Officer of Vornado and from 1982 until 1998 he was
Controller of Vornado.
Mr. Goldberg has been Vice President and Chief Financial Officer of Vornado
since January 1998. From 1978 to January 1998, Mr. Goldberg was a partner at
Deloitte & Touche LLP.
The Company is not aware of any family relationships between any directors
or executive officers of the Company. Messrs. Roth and Wight are affiliated with
each other as general partners of Interstate and in other businesses.
22
<PAGE> 24
COMMITTEES OF THE BOARD OF DIRECTORS
The Board has an Executive Committee, an Audit Committee and a Compensation
Committee. The Executive Committee possesses and may exercise all the authority
and powers of the Board in the management of the business and affairs of the
Company, except those reserved to the Board by the DGCL. The Executive Committee
consists of three members, Messrs. Roth, Fascitelli and Wight. Mr. Roth is
Chairman of the Executive Committee.
The Audit Committee's functions include reviewing annual and quarterly
reports and proxy statements sent to stockholders and filed with the Commission,
recommending to the Board the engaging of the independent auditors, reviewing
with the independent auditors the plan and results of the auditors' engagement
and other matters of interest to the Audit Committee, including the
effectiveness of the Company's internal controls and the results of its
operations. The Audit Committee consists of two members, Messrs. -- and --. Mr.
- -- is the Chairman of the Audit Committee.
The Compensation Committee is responsible for establishing the terms of the
compensation of the executive officers and the granting of awards under the
Company's Omnibus Share Plan. The Committee consists of two members, Messrs. --
and -- . Mr. -- is the Chairman of the Compensation Committee.
STAGGERED BOARD OF DIRECTORS
The Board currently has six members. The Charter provides that the
directors of the Company will be divided into three classes, as nearly equal in
number as reasonably possible, as determined by the Board of Directors. The
initial term of office of Class I directors will expire at the first annual
meeting of stockholders, the initial term of office of Class II directors will
expire at the second annual meeting of stockholders and the initial term of
office of Class III directors will expire at the third annual meeting of
stockholders, with each class of directors to hold office until their successors
have been duly elected and qualified. At each annual meeting of stockholders,
directors elected to succeed the directors whose terms expire at such annual
meeting shall be elected to hold office for a term expiring at the annual
meeting of stockholders in the third year following the year of their election
and until their successors have been duly elected and qualified.
COMPENSATION OF DIRECTORS
Each member of the Board who is not an employee of the Company will receive
from the Company compensation at a rate of $ -- per year for serving as a
director. In addition, each member of the Board has been granted either SARs or
options to purchase shares of Common Stock. See "-- Security Ownership of
Certain Beneficial Owners and Management After the Distribution and the
Interstate Transaction."
23
<PAGE> 25
EXECUTIVE COMPENSATION
The Company was recently formed. None of the Company's executive officers
has received compensation from or on behalf of the Company since its formation.
Although the Company currently has no employment agreements with any person and
does not currently pay a salary or other compensation to any executive officer
for his services in such capacity (except that options or SARs have been granted
to executive officers), the Company expects that it will pay salaries and other
compensation to its executive officers when it begins conducting business
operations material enough to warrant such compensation.
The following table lists all grants of share options or SARs to the
Company's named executive officers made as of January --, 1998 and their
potential realizable values, assuming annualized rates of share price
appreciation of 5% and 10% over the term of the grant. All of such grants were
made in 1998. The Company has not, to date, granted any performance shares or
restricted stock under the Omnibus Share Plan referred to below.
OPTION/SAR GRANTS IN FISCAL 1998
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SHARES OPTIONS/SARS EXERCISE ANNUAL RATES OF
UNDERLYING GRANTED OR BASE STOCK PRICE
OPTIONS/SARS IN FISCAL PRICE PER EXPIRATION APPRECIATION FOR
NAME GRANTED 1998 SHARE(1) DATE OPTION/SAR TERM(2)
- --------------------------------- ------------ ------------ --------- --------- -----------------------
5% 10%
-------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven Roth...................... 200,000 33.4% $6.42 1/31/2008 $807,837 $2,047,218
Michael D. Fascitelli............ 200,000 33.4% $6.42 1/31/2008 $807,837 $2,047,218
Joseph Macnow.................... 20,000 3.3% $6.42 1/31/2008 $ 80,750 $ 204,637
Irwin Goldberg................... 3,000 0.5% $6.42 1/31/2008 $ 12,118 $ 30,708
</TABLE>
- ---------------
(1) The exercise or base price per share is equal to the book value per share as
of January --, 1998 (the date of grant), which the Company's Board of
Directors has determined represents the fair market value as of the date of
grant.
(2) Potential Realizable Value is based on the assumed annual growth rates for
the market value of the Common Stock shown over their ten-year term
(assuming the per share market value as of the date of grant equals the book
value per share after giving effect to the Interstate Transaction). For
example, a 5% growth rate, compounded annually, results in a stock price of
$10.46 per share and a 10% growth rate, compounded annually, results in a
stock price of $16.66 per share. These Potential Realizable Values are
listed to comply with the regulations of the Commission, and the Company
cannot predict whether these values will be achieved. Actual gains, if any,
on stock option and SAR exercises are dependent on the future performance of
the Common Stock.
24
<PAGE> 26
OMNIBUS SHARE PLAN
The 1998 Omnibus Stock Plan of Vornado Operating Company (the "Omnibus
Stock Plan") was approved prior to the Distribution by Vornado Sub (the sole
stockholder of the Company) and by the Company's independent directors. Of the
4,000,000 shares authorized under the Omnibus Stock Plan, 3,401,007 shares were
available for issuance as of January --, 1998.
The purpose of the Omnibus Stock Plan is to promote the financial interests
of the Company and its subsidiaries by encouraging their officers, directors,
employees and consultants to acquire an ownership position in the Company,
enhancing its ability to attract and retain officers, directors, employees and
consultants of outstanding ability and providing such individuals with a way to
acquire or increase their proprietary interest in the Company's success.
The following summary of the Omnibus Stock Plan is qualified by the full
text of the Omnibus Stock Plan, a copy of which is an Exhibit to the
Registration Statement of which this Prospectus is a part.
Under the Omnibus Stock Plan, officers, directors, employees and
consultants of the Company and its subsidiaries may be granted awards of stock
options, stock appreciation rights, performance shares and restricted stock. The
Omnibus Stock Plan is administered by the Compensation Committee of the Board of
Directors, which is authorized to select officers, directors, employees and
consultants to receive awards, determine the type of awards to be made,
determine the number of shares or share units subject to any award and determine
the other terms and conditions of any award. All officers, directors, employees
and consultants of the Company and its subsidiaries who are selected by the
Compensation Committee, are eligible to receive awards under the Omnibus Stock
Plan. As such criteria are subjective in nature, the Company cannot accurately
estimate the number of persons who may be included in such class from time to
time.
Except as determined by the Compensation Committee with respect to
non-qualified stock options, the awards are not assignable or transferable
except by will or the laws of descent and distribution and no right or interest
of any participant may be subject to any lien, obligation or liability of the
holder.
STOCK OPTIONS
Except as provided below, stock options entitle the holder to purchase the
Company's Common Stock at a per share price determined by the Compensation
Committee which in no event may be less than the fair market value of the shares
on the date of grant. Options may be either "incentive stock options" within the
meaning of Section 422 of the Code or non-qualified stock options. Stock options
are exercisable for such period as is determined by the Compensation Committee,
but in no event may options be exercisable after 10 years from the date of
grant. The option price for shares purchased upon the exercise of an option must
be paid in full at the time of exercise and may be paid in cash, by tender of
Common Stock, by such other consideration as the Compensation Committee deems
appropriate or by a combination of cash, Common Stock and such other
consideration.
Upon the grant or exercise of an incentive stock option, no income will be
recognized by the optionee for Federal income tax purposes, and the Company will
not be entitled to any deduction. If the shares acquired upon exercise are not
disposed of within the one-year period beginning on the date of the transfer of
the shares to the optionee, nor within the two-year period beginning on the date
of the grant of the option, any gain or loss realized by the optionee upon the
disposition of such shares will be taxed as long-term capital gain or loss. In
such event, no deduction will be allowed to the Company. If such shares are
disposed of within the one-year or two-year periods referred to above, the
excess of the fair market value of the shares on the date of exercise (or, if
less, the fair market value on the date of disposition) over the exercise price
will be taxable as ordinary income to the optionee at the time of disposition,
and the Company will be entitled to a corresponding
25
<PAGE> 27
deduction. The amount by which the fair market value of the shares at the time
of exercise of an incentive stock option exceeds the option price will
constitute an item of tax preference which could subject the optionee to the
alternative minimum tax. Whether the optionee will be subject to such tax
depends on the facts and circumstances applicable to the individual.
Upon the grant of a non-qualified stock option, no income will be realized
by the optionee, and the Company will not be entitled to any deduction. Upon the
exercise of such an option, the amount by which the fair market value of the
shares at the time of exercise exceeds the exercise price will be taxed as
ordinary income to the optionee and the Company will be entitled to a
corresponding deduction.
Notwithstanding the foregoing, upon the effective date of the Distribution,
each employee of Vornado, whether or not such employee becomes an employee of
the Company, may be granted stock options to purchase such number of shares of
Common Stock of the Company and under such terms and conditions as set by the
Compensation Committee on the date of grant. Such stock options may be granted
with an option price at or below the fair market value of the Common Stock on
the date of grant.
STOCK APPRECIATION RIGHTS
Stock appreciation rights entitle the holder to receive from the Company an
amount equal to the amount by which the fair market value of a share of stock on
the date of exercise exceeds the grant price. Stock appreciation rights may be
granted in tandem with a stock option, in addition to a stock option or may be
freestanding and unrelated to a stock option and may not be exercised earlier
than six months after grant except in the event of the holder's death or
disability. The Compensation Committee is authorized to determine whether a
stock appreciation right will be settled in cash, shares or a combination
thereof.
PERFORMANCE STOCK
Performance stock awards consist of a grant of actual shares of stock or
stock units having a value equal to an identical number of the Company's shares
in amounts determined by the Compensation Committee at the time of grant.
Performance stock awards consisting of actual shares of stock entitle the holder
to receive shares in an amount based upon performance conditions of the Company
over a performance period as determined by the Compensation Committee at the
time of grant. Such performance stock awards may provide the holder with
dividends and voting rights prior to vesting. Performance stock awards
consisting of stock units entitle the holder to receive the value of such units
in cash, shares of stock or a combination thereof based upon performance
conditions and over a performance period as determined by the Compensation
Committee at the time of grant. Such performance stock awards may provide the
holder with dividend equivalents prior to vesting.
RESTRICTED STOCK
Restricted stock awards consist of a grant of actual shares of stock or
stock units having a value equal to an identical number of shares of stock of
the Company. Restricted stock awards consisting of actual shares of stock
entitle the holder to receive shares of stock of the Company. Such restricted
stock awards may provide the holder with dividends and voting rights prior to
vesting. Restricted stock awards consisting of stock units entitle the holder to
receive the value of such units in cash, shares of stock or a combination
thereof as determined by the Compensation Committee. Such restricted stock
awards may provide the holder with dividend equivalents prior to vesting. The
employment conditions and the length of the period for vesting of restricted
stock awards are established by the Compensation Committee at the time of grant.
26
<PAGE> 28
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AFTER THE
DISTRIBUTION AND THE INTERSTATE TRANSACTION
The following table sets forth the number of shares of Common Stock that
will be beneficially owned following the Distribution by (i) each person who
will hold more than a 5% interest in the Company, (ii) directors of the Company,
(iii) executive officers of the Company, and (iv) the directors and executive
officers of the Company as a group. In addition, unless otherwise noted, the
address of all such persons is c/o Vornado Realty Trust, Park 80 West, Plaza II,
Saddle Brook, New Jersey 07663.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
TO BE BENEFICIALLY OWNED
AFTER THE DISTRIBUTION
-------------------------------------
AFTER THE
INTERSTATE
AFTER THE EXCHANGE AND
INTERSTATE INTERSTATE
EXCHANGE(1) SALE(1)
---------------- ----------------
NAME OF BENEFICIAL OWNER NUMBER % NUMBER %
- ------------------------------------------------------- ------- ---- ------- ----
<S> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS
Steven Roth(2)(3)...................................... 340,846 9.7 303,700 8.7
Michael D. Fascitelli(4)............................... 45,977 1.3 45,977 1.3
Russell B. Wight, Jr.(2)(5)............................ 289,341 8.3 252,195 7.2
[First independent director](6)........................ -- -- -- --
Richard West(7)........................................ 1,050 * 1,050 *
[Second independent director](6)....................... -- -- -- --
Joseph Macnow(8)....................................... 3,750 * 3,750 *
Irwin Goldberg(9)...................................... -- -- -- --
All executive officers and directors as a group (8
persons)(10)......................................... 419,263 12.0 382,117 10.9
OTHER BENEFICIAL OWNERS
David Mandelbaum(2).................................... 277,651 7.9 240,505 6.9
Interstate(2).......................................... 261,701 7.5 224,555 6.4
Cohen & Steers Capital Management, Inc.(11)............ 258,870 7.4 258,870 7.4
Frederick Zissu(12).................................... 183,262 5.2 183,262 5.2
</TABLE>
- ---------------
* Less than 1%.
(1) Unless otherwise indicated, each person will be the direct owner of and
have sole voting power and sole investment power with respect to such
Common Stock. Numbers and percentages in table are based on number of
Vornado Common Shares and Units outstanding as of January 9, 1998 and a
Distribution ratio of one share of Common Stock for every 20 Vornado Common
Shares or Units.
(2) Interstate, a partnership of which Messrs. Roth, Wight and Mandelbaum are
the general partners, will own 261,701 shares before the Interstate Sale
and 224,555 shares after the Interstate Sale and will also own a 9.9%
limited partnership interest in Company Sub. At any time after the first
anniversary of the Interstate Exchange, Interstate will have the right to
have its limited partnership interest in Company Sub redeemed by Company
Sub either (a) for cash in an amount equal to the fair market value, at the
time of redemption, of 385,449 shares of Common Stock or (b) for 385,449
shares of Common Stock, in each case as selected by the Company and,
subject to customary anti-dilution provisions. Although shares of Common
Stock that will be owned by Interstate are reflected in the numbers and
percentages set forth in this table for Interstate and for each of Messrs.
Roth, Wight and Mandelbaum (who will share voting and investment power with
respect thereto), neither Interstate's 9.9% limited partnership interest in
Company Sub nor the shares for which that interest may be redeemed are
reflected in such numbers or percentages. If the shares for which such
interest may be
27
<PAGE> 29
redeemed were reflected in such numbers and percentages, the percentages to be
owned after the Distribution and the Interstate Exchange would increase to
18.7%, 17.3%, 17.0% and 16.6% for Messrs. Roth, Wight and Mandelbaum and
Interstate, respectively, and the percentages to be owned after the
Distribution, the Interstate Exchange and the Interstate Sale would
increase to 17.7%, 16.4%, 16.1% and 15.7% for Messrs. Roth, Wight and
Mandelbaum and Interstate, respectively.
(3) Includes 1,720 shares to be owned by the Daryl and Steven Roth Foundation,
over which Mr. Roth holds sole voting power and investment power. Does not
include 1,800 shares to be owned by Mr. Roth's wife, as to which Mr. Roth
disclaims any beneficial interest. Does not include SARs with respect to
200,000 shares.
(4) Does not include options to purchase 200,000 shares that will not be
exercisable within 60 days.
(5) Includes 4,690 shares to be owned by the Wight Foundation, over which Mr.
Wight holds sole voting power and investment power. Does not include SARs
with respect to 15,000 shares.
(6) Does not include options to purchase 15,000 shares that will not be
exercisable within 60 days.
(7) Mr. West and his wife will own 150 shares jointly. Mr. West will hold 900
of these shares in self-directed Keogh accounts. Does not include options
to purchase 15,000 shares that will not be exercisable within 60 days.
(8) Does not include options to purchase 20,000 shares that will not be
exercisable within 60 days.
(9) Does not include options to purchase 3,000 shares that will not be
exercisable within 60 days.
(10) Does not include SARs with respect to 200,000 shares and 15,000 shares held
by Messrs. Roth and Wight, respectively. Does not include options to
purchase 200,000 shares held by Mr. Fascitelli, options to purchase 20,000
shares held by Mr. Macnow, options to purchase 3,000 shares held by Mr.
Goldberg and options to purchase 15,000 shares held by each of Messrs. --,
West and --, in each case that are not exercisable within 60 days.
(11) Based on Schedule 13G dated February 11, 1997 in respect of Vornado, Cohen
& Steers Capital Management, Inc. will have the sole power to vote or to
direct the vote of 222,580 shares and will have the sole power to dispose
or to direct the disposition of 258,870 shares. The address of this
beneficial owner is 757 Third Avenue, New York, New York 10017.
(12) Based on Schedule 13D filed on May 14, 1993 by Frederick Zissu in respect
of Vornado, he will own 186,191 shares. According to Vornado's records, he
will own 183,261 shares. Does not include 2,338 shares to be owned by Mr.
Zissu's wife, as to which Mr. Zissu disclaims any beneficial interest. The
address of this person is 80 Hamilton Drive West, No. Caldwell, New Jersey
07006.
28
<PAGE> 30
CERTAIN TRANSACTIONS
OWNERSHIP OF COMMON STOCK; CAPITALIZATION OF THE COMPANY
Vornado Sub is the sole stockholder of the Company as of the date of this
Prospectus. Prior to the date of this Prospectus, the Company received an equity
contribution from Vornado Sub as described under "Business -- Initial
Capitalization; Specific Operating Assets or Operations to be Acquired."
REVOLVING CREDIT AGREEMENT
The Company intends, promptly after the Distribution, to enter into a $75
million Revolving Credit Agreement with Vornado Sub. The Company believes that
the terms of the Revolving Credit Agreement will be at least as favorable to the
Company as those terms that could be currently obtained by the Company from an
unaffiliated third party. For a discussion of such terms, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
THE INTERCOMPANY AGREEMENT
The Intercompany Agreement between the Company and Vornado will set forth
the basis on which the Company and Vornado will refer opportunities to one
another. For a discussion of the terms of the Intercompany Agreement, see
"Business -- Intercompany Agreement and Charter Purpose Clauses."
INTERSTATE TRANSACTION; MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
For a discussion of the Interstate Transaction and the beneficial ownership
by the Interstate Parties and Mr. Fascitelli of Vornado Common Shares, Common
Stock and interests in Company Sub, see "The Distribution -- Interstate
Transaction" and "Management -- Security Ownership of Certain Beneficial Owners
and Management After the Distribution and the Interstate Transaction."
29
<PAGE> 31
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
The Charter authorizes the issuance of up to 30,000,000 shares, consisting
of 10,000,000 shares of Common Stock, par value $.01 per share, 5,000,000 shares
of preferred stock, par value $.01 per share (the "Preferred Stock"), and
15,000,000 excess shares, par value $.01 per share (the "Excess Shares"). Based
on the number of Vornado Common Shares and Units outstanding as of January 16,
1998, immediately following the Distribution (and after giving effect to the
Interstate Transaction), approximately 3,507,980 shares of Common Stock will be
outstanding and held of record by approximately 2,000 stockholders. As of the
date of this Prospectus, no shares of Preferred Stock or Excess Shares were
issued and outstanding. All of the shares of Common Stock that will be
outstanding immediately following the Distribution will be validly issued, fully
paid and nonassessable.
COMMON STOCK
The holders of Common Stock will be entitled to one vote for each share
held of record on all matters voted on generally by stockholders, including
elections of directors, and, except as otherwise required by law or provided in
any resolution adopted by the Company's Board with respect to any series of
Preferred Stock, the holders of such shares will possess all voting power. The
Charter does not provide for cumulative voting in the election of directors.
Subject to any preferential rights of any outstanding series of Preferred Stock
created by the Board from time to time, the holders of Common Stock will be
entitled to such dividends as may be declared from time to time by the Board
from funds available therefor, and upon liquidation will be entitled to receive
pro rata all assets of the Company available for distribution to such holders.
PREFERRED STOCK
The Charter provides that shares of Preferred Stock may be issued in one or
more series from time to time by the Board, and the Board is expressly
authorized to fix by resolution or resolutions the designations and the powers,
preferences and rights, and the qualifications, limitations and restrictions
thereof, of the shares of each series of Preferred Stock, including without
limitation the following: (a) the distinctive serial designation of such series
which shall distinguish it from other series; (b) the number of shares included
in such series; (c) the dividend rate (or method of determining such rate)
payable to the holders of the shares of such series, any conditions upon which
such dividends shall be paid and the date or dates upon which such dividends
shall be payable; (d) whether dividends on the shares of such series shall be
cumulative and, in the case of shares of any series having cumulative dividend
rights, the date or dates or method of determining the date or dates from which
dividends on the shares of such series shall be cumulative; (e) the amount or
amounts which shall be payable out of the assets of the Company to the holders
of the shares of such series upon voluntary or involuntary liquidation,
dissolution or winding up of the Company, and the relative rights of priority,
if any, of payment of the shares of such series; (f) the price or prices at
which, the period or periods within which and the terms and conditions upon
which the shares of such series may be redeemed, in whole or in part, at the
option of the Company or at the option of the holder or holders thereof or upon
the happening of a specified event or events; (g) the obligation, if any, of the
Company to purchase or redeem shares of such series pursuant to a sinking fund
or otherwise and the price or prices at which, the period or periods within
which and the terms and conditions upon which the shares of such series shall be
redeemed or purchased, in whole or in part, pursuant to such obligation; (h)
whether or not the shares of such series shall be convertible or exchangeable,
at any time or times at the option of the holder or holders thereof or at the
option of the Company or upon the happening of a specified event or events, into
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the Company, and the price or prices or rate
or rates of exchange or conversion and any adjustments
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applicable thereto; and (i) whether or not the holders of the shares of such
series shall have voting rights, in addition to the voting rights provided by
law, and if so the terms of such voting rights. Subject to the rights of the
holders of any series of Preferred Stock, the number of authorized shares of any
class or series of Preferred Stock may be increased or decreased (but not below
the number of shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote, irrespective
of the provisions of Section 242(b)(2) of the DGCL or any corresponding
provision hereafter enacted.
CERTAIN CHARTER AND BY-LAWS PROVISIONS
RESTRICTIONS ON OWNERSHIP
The Charter contains a number of restrictions relating to the ownership and
transfer of the Company's stock, including Common Stock. The Charter provides,
with certain exceptions, that no person may own, either directly or under the
attribution rules set forth in Section 318(a) of the Code, as modified by
Section 856(d)(5) of the Code, more than 9.9% of the shares of any class of the
Company's stock (the "Ownership Limit").
The Charter provides that a transfer of Common Stock that would otherwise
result in ownership of Common Stock in excess of the Ownership Limit will be
void ab initio as to the Common Stock that would otherwise be owned in violation
of the Ownership Limit and the intended transferee will acquire no rights or
economic interest in such Common Stock. In addition, the Charter provides that
Common Stock that would otherwise be owned, whether as a result of a transfer or
otherwise, in violation of the Ownership Limit will automatically be designated
as Excess Shares that shall be transferred, by operation of law, to a special
trust for the benefit of a charitable organization designated by the Board of
Directors of the Company.
The trustee of the special trust shall have the authority to exercise any
voting rights associated with Excess Shares during the period that they are held
as Excess Shares. Except as described below, any distributions on Excess Shares
shall be paid to the trustee of the special trust for the benefit of the
charitable organization designated by the Board of Directors of the Company.
Excess Shares may be transferred only to a person designated by the Board of
Directors whose ownership of the Excess Shares will not result in a violation of
the Ownership Limit, in which case such Excess Shares cease to be held as Excess
Shares. In the event of a transfer of Excess Shares, the holder of the shares of
Common Stock that were automatically exchanged for Excess Shares shall be
entitled to receive, from the proceeds of the transfer of the Excess Shares, an
amount equal to the lesser of (a) the proceeds from the transfer of the Excess
Shares and (b) the amount paid by such holder if the automatic designation as
Excess Shares resulted from a transfer for value or, if the automatic
designation did not result from a transfer for value, the fair market value of
the shares of Common Stock on the date of their designation as Excess Shares. In
the event of a liquidation, dissolution or winding up of the Company while
shares are held as Excess Shares, the holder of the shares of Common Stock that
were automatically designated as Excess Shares will be entitled to receive, from
the proceeds of such liquidation, dissolution or winding-up, an amount equal to
the lesser of (a) the proceeds from the liquidation, dissolution or winding-up
which would have been applicable to such shares if they had remained shares of
Common Stock and (b) the amount paid by such holder if the automatic designation
as Excess Shares resulted from a transfer for value or, if the automatic
designation did not result from a transfer for value, the fair market value of
the shares of Common Stock on the date of their designation as Excess Shares.
Any excess proceeds from a transfer of the Excess Shares or on liquidation,
dissolution or winding-up shall be paid to the trustee of the special trust for
the benefit of the designated charitable organization.
The Company shall also have the right to purchase any Excess Shares at a
price equal to the lesser of (a) the fair market value of such shares on the
date that the Company or its designee exercises such right to purchase and (b)
the price per share in the transaction that resulted in designation of such
Excess Shares or, if the Excess Share designation resulted from an event other
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than a transfer for value, the fair market value of the Common Stock designated
as Excess Shares at the time of such designation.
The Charter provides that the Ownership Limit shall not apply to Vornado,
Vornado Sub, Interstate, the partners in Interstate or certain affiliates until
after December 31, 1997.
STAGGERED BOARD OF DIRECTORS
The Board currently has six members. The Charter provides that the
directors of the Company will be divided into three classes, as nearly equal in
number as reasonably possible, as determined by the Board. The initial term of
office of Class I directors will expire at the first annual meeting of
stockholders, the initial term of office of Class II directors will expire at
the second annual meeting of stockholders and the initial term of office of
Class III directors will expire at the third annual meeting of stockholders,
with each class of directors to hold office until their successors have been
duly elected and qualified. At each annual meeting of stockholders, directors
elected to succeed the directors whose terms expire at such annual meeting shall
be elected to hold office for a term expiring at the annual meeting of
stockholders in the third year following the year of their election and until
their successors have been duly elected and qualified. The classification of the
Board will have the effect of making it more difficult for stockholders to
change the composition of the Board, because only a minority of the directors
are up for election at each annual meeting, and the Board may not be replaced by
vote of the stockholders at any one time.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The Charter provides that the Board of Directors will consist of one or
more members, the number of which will be fixed from time to time pursuant to
the By-laws. The By-laws provide that the Board will consist of one or more
members, the number of which will be determined from time to time by the Board.
The Charter and By-laws provide that in the event of any increase or decrease in
the authorized number of directors, (a) each director then serving as such shall
nevertheless continue as a director of the class of which he is a member until
the expiration of his current term, or his earlier death, retirement,
resignation, or removal, and (b) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the Board among
the three classes of directors so as to maintain such classes as nearly equal in
number as reasonably possible. The Charter and By-laws provide that directors
may be removed only for cause. The By-laws provide that vacancies, whether
arising through death, retirement, resignation or removal of a director or
through an increase in the authorized number of directors of any class, may only
be filled by a majority vote of the remaining directors of the class in which
such vacancy occurs, or by the sole remaining director of that class if one such
director remains, or by the majority vote of the directors of the remaining
classes if no such director remains, or by stockholders at an annual meeting of
stockholders of the Company. A director elected to fill a vacancy shall serve
for the remainder of the then present term of office of the class to which he is
elected. These provisions would prevent any stockholder from enlarging the Board
and then filling the new directorships with such stockholder's own nominees.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The Charter and By-laws provide that any action required or permitted to be
taken by the stockholders of the Company must be duly effected at a duly called
annual or special meeting of such holders and may not be taken by any consent in
writing by such holders. The Charter and By-laws provide that special meetings
of stockholders of the Company may be called only by the Chairman of the Board,
the Vice Chairman of the Board, the President or the Board pursuant to a
resolution stating the purpose or purposes thereof, and any power of
stockholders to call a special meeting is specifically denied. No business other
than that stated in the notice shall be transacted at any special meeting. These
provisions will have the effect of delaying consideration of a stockholder
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proposal until the next annual meeting unless a special meeting is called by the
Chairman, Vice Chairman, President or the Board for consideration of such
proposal.
ADVANCE NOTICE FOR STOCKHOLDER NOMINATIONS AND PROPOSALS OF NEW BUSINESS
The By-laws require notice of any proposal to be presented by any
stockholder or of the name of any person to be nominated by any stockholder for
election as a director of the Company at a meeting of stockholders to be
delivered to the Secretary of the Company not less than 60 nor more than 90 days
prior to the date of the meeting. Accordingly, failure by a stockholder to act
in compliance with the notice provisions will mean that the stockholder will not
be able to nominate directors or propose new business.
AMENDMENTS
The Charter provides that the affirmative vote of the holders of at least
80% of the stock entitled to vote generally in the election of directors, voting
together as a single class, or a majority of the Board is required to amend
provisions of the By-laws relating to stockholder action without a meeting; the
calling of special meetings; the number (or manner of determining the number),
election and term of the Company's directors; the filling of vacancies; and the
removal of directors.
CERTAIN PROVISIONS OF DELAWARE LAW
The Company is incorporated under the DGCL. The Company is subject to
Section 203 of the DGCL, which, subject to certain exceptions, restricts certain
transactions and "business combinations" between a Delaware corporation and an
"interested stockholder" (defined generally as any person who beneficially owns
15% or more of the outstanding voting stock of the Company or any person
affiliated with such person), for a period of three years following the time
that such stockholder becomes an interested stockholder, unless (i) prior to
such time the board of directors of the corporation approved either the business
combination or the transaction that resulted in the stockholder becoming an
interested stockholder; (ii) upon consummation of the transaction that resulted
in the stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding for purposes of
determining the number of shares outstanding those shares owned (x) by persons
who are directors and also officers of the corporation and (y) by employee stock
plans in which employee participants do not have the right to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer); or (iii) at or subsequent to such time the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of the stockholders (and not by written consent) by the
affirmative vote of at least 66 2/3% of the outstanding voting stock of the
corporation that is not owned by the interested stockholder.
Section 203 and the provisions of the Company's Charter, By-laws and Rights
Agreement described above may make it more difficult for a third party to
acquire, or discourage acquisition bids for, the Company. Section 203 and these
provisions could have the effect of inhibiting attempts to change the membership
of the Company's Board of Directors.
LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION; INSURANCE
Section 102 of the DGCL authorizes a Delaware corporation to include a
provision in its certificate of incorporation limiting or eliminating the
personal liability of its directors to the corporation and its stockholders for
monetary damages for breach of the directors' fiduciary duty of care. The duty
of care requires that, when acting on behalf of the corporation, directors
exercise an informed business judgment based on all material information
reasonably available to them. Absent the limitations authorized by such
provision, directors are accountable to corporations and their stockholders for
monetary damages for conduct constituting gross negligence in the exercise of
their duty of care. Although Section 102 of the DGCL does not change a
director's duty of care, it
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enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Company's Charter and By-laws include provisions
which limit or eliminate the personal liability of its directors to the fullest
extent permitted by Section 102 of the DGCL. Consequently, a director or officer
will not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director, except for (i) any breach of
the director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases, redemptions or other distributions and (iv) any transaction from
which the director derived an improper personal benefit.
The Charter and By-laws provide that the Company will indemnify to the full
extent permitted by law any person made or threatened to be made a party to any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director, officer or employee of the Company or serves
or served at the request of the Company any other enterprise as a director,
officer or employee. The Charter and By-laws provide that expenses, including
attorneys' fees, incurred by any such person in defending any such action, suit
or proceeding will be paid or reimbursed by the Company promptly upon receipt by
it of an undertaking of such person to repay such expenses if it shall
ultimately be determined that such person is not entitled to be indemnified by
the Company. The inclusion of these indemnification provisions in the Company's
Charter and By-laws is intended to enable the Company to attract qualified
persons to serve as directors and officers who might otherwise be reluctant to
do so.
The directors and officers of the Company are insured under policies of
insurance maintained by the Company, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such officers or directors. In addition, Vornado Sub has
entered into indemnification agreements with all of the Company's directors and
officers providing, subject to the terms therein, that Vornado Sub will
indemnify such individuals to the full extent authorized or permitted by law for
damages suffered by reason of the fact that any such individual is or was a
director or officer of the Company or is or was serving at the request of the
Company as a director or officer of another corporation or enterprise.
In addition, the limited liability provisions in the Charter and the
indemnification provisions in the Charter and By-laws may discourage
stockholders from bringing a lawsuit against directors for breach of their
fiduciary duty (including breaches resulting from grossly negligent conduct) and
may have the effect of reducing the likelihood of derivative litigation against
directors and officers, even though such an action, if successful, might
otherwise have benefitted the Company and its stockholders. Furthermore, a
stockholder's investment in the Company may be adversely affected to the extent
the Company pays the costs of settlement and damage awards against directors and
officers of the Company pursuant to the indemnification provisions in the
Company's By-laws. The limited liability provisions in the Charter will not
limit the liability of directors under federal securities laws.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of material federal income tax considerations
associated with the Distribution and the ownership of Common Stock. This summary
is based on the Code, its legislative history, existing and proposed regulations
thereunder, published rulings and court decisions, all as currently in effect
and all subject to change at any time, perhaps with retroactive effect. This
summary does not purport to deal with the federal income or other tax
consequences applicable to all Vornado Shareholders or Limited Partners in light
of their particular circumstances or to all categories of investors, some of
which may be subject to special rules (including dealers in securities, banks,
tax-exempt organizations, life insurance companies, foreign corporations and
persons that are not citizens or residents of the United States). Accordingly,
this summary is not tax advice. No ruling on the federal, state or local tax
considerations relevant to the operation of Vornado or the Company or to the
Distribution is being requested from the Internal Revenue Service (the
"Service") or from any other tax authority. Sullivan & Cromwell has rendered its
opinions with respect to the qualification of Vornado (and, for 1998, the
Company) as a REIT which are raised by the structure and currently anticipated
activities of the Company.
ALL VORNADO SHAREHOLDERS AND LIMITED PARTNERS ARE URGED TO CONSULT THEIR
OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE DISTRIBUTION TO
THEM, INCLUDING THE APPLICATION OF STATE, LOCAL AND FOREIGN TAX LAWS.
THE DISTRIBUTION
INCOME RECOGNITION BY VORNADO AS A RESULT OF THE DISTRIBUTION
Vornado will generally recognize gain in connection with the Distribution
to the extent the fair market value of the Common Stock distributed by Vornado
exceeds Vornado's share of the aggregate basis Vornado Sub had in the assets
contributed by Vornado Sub to the Company. The amount of such gain, if any, will
generally increase Vornado's current earnings and profits for 1997. Such
increase in Vornado's current earnings and profits will result in taxable income
to Vornado's shareholders by increasing the portion of Vornado's distributions
that are treated as made out of current earnings and profits for federal income
tax purposes. Vornado's current earnings and profits for 1998 will generally be
allocated, for purposes of determining which portions of Vornado's distributions
made or deemed made in 1998, including the Distribution, were attributable to
Vornado's earnings and profits, first to distributions made or deemed made in
1998 on Vornado's preferred shares of beneficial interest and thereafter to
distributions, including the Distribution, made or deemed made by Vornado in
1998 on Vornado Common Shares in proportion to the relative size of such
distributions on Vornado Common Shares. For purposes of allocating Vornado's
earnings and profits among distributions on Vornado Common Shares, any
distribution declared by Vornado in October, November or December of any year
payable to a shareholder of record on a specified date in any such month shall
be treated as both paid by Vornado and received by the shareholder on December
31 of such year; provided that such distribution is actually paid by Vornado
during January of the following taxable year.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS OF VORNADO AS A RESULT OF THE
DISTRIBUTION
The Distribution will be treated as a distribution whose amount equals the
fair market value of the Common Stock distributed plus any cash distributed in
lieu of fractional shares, and Vornado Shareholders will receive a basis in the
Common Stock equal to the fair market value thereof at the time of the
Distribution. A Shareholder's holding period in the shares of Common Stock
distributed by Vornado will not include any period during which such shares (or
the assets contributed to the Company) were held by Vornado or Vornado Sub. As
long as Vornado qualifies as a REIT, the portion of the Distribution made to
Vornado's taxable U.S. shareholders out of Vornado's current or accumulated
earnings and profits (and not designated as capital gain dividends) will be
taken into account by such U.S. shareholders as ordinary income and, for
corporate shareholders, will not be
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eligible for the dividends received deduction. The portion of the Distribution
in excess of the current and accumulated earnings and profits allocated to the
Distribution will not be taxable to a shareholder to the extent that it does not
exceed the adjusted basis of the shareholder's Vornado Common Shares, but rather
will reduce the adjusted basis of such shares. To the extent that the portion of
the Distribution in excess of the current and accumulated earnings and profits
allocated to the Distribution exceeds the adjusted basis of a shareholder's
Vornado Common Shares, such excess will be included in income as capital gain
(and will be short-term capital gain if the shares have been held for one year
or less) assuming the shares are a capital asset in the hands of the
shareholder.
To the extent that Vornado designates a portion of the Distribution as a
capital gain dividend, such portion will be taxable to Vornado Shareholders as
gain from the sale or exchange of a capital asset held for more than one year,
without regard to the period for which the shareholder has held its Vornado
Common Shares. U.S. shareholders that are corporations may, however, be required
to treat up to 20% of certain capital gain dividends as ordinary income.
TAXATION OF TAX-EXEMPT SHAREHOLDERS OF VORNADO AS A RESULT OF THE DISTRIBUTION
Most tax-exempt employees' pension trusts are not subject to federal income
tax except to the extent of their receipt of "unrelated business taxable income"
as defined in Section 512(a) of the Code ("UBTI"). The Distribution should not
result in UBTI to a shareholder that is a tax-exempt entity, provided that the
tax-exempt entity has not financed the acquisition of its Vornado Common Shares
with "acquisition indebtedness" within the meaning of the Code and the Vornado
Common Shares are not otherwise used in an unrelated trade or business of the
tax-exempt entity. In addition, certain pension trusts that own more than 10% of
a "pension-held REIT" must report a portion of the dividends that they receive
from such a REIT as UBTI. Vornado has not been and does not expect to be treated
as a pension-held REIT for purposes of this rule.
TAXATION OF FOREIGN STOCKHOLDERS OF VORNADO AS A RESULT OF THE DISTRIBUTION
The rules governing United States federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
stockholders (collectively, "Non-U.S. Stockholders") are complex, and no attempt
will be made in this Prospectus to provide more than a summary of such rules.
Non-U.S. Stockholders should consult with their own tax advisors to determine
the impact of federal, state and local tax laws with regard to the Distribution,
including any reporting requirements. In general, as is the case with domestic
taxable Vornado Shareholders, the Distribution is treated as a distribution
whose amount equals the value of the Common Stock distributed plus any cash in
lieu of fractional shares, and Vornado Shareholders will receive a basis in the
Common Stock equal to the fair market value thereof at the time of the
Distribution.
The Distribution will be treated as an ordinary income dividend to the
extent that it is treated as made out of the current or accumulated earnings and
profits of Vornado (under the rules described above under the heading
"-- Taxation of Taxable Domestic Shareholders of Vornado as a Result of the
Distribution") and is not (i) designated by Vornado as a capital gain dividend
or (ii) attributable to gain recognized by Vornado in connection with the
disposition of a "United States real property interest". The Company does not
anticipate that a significant portion of the Distribution will be treated as
attributable to a disposition by Vornado of a "United States real property
interest". The portion of the Distribution that is treated as such an ordinary
income dividend ordinarily will be subject to a withholding tax equal to 30% of
the gross amount of such portion, unless an applicable tax treaty reduces or
eliminates that tax. Vornado expects to withhold U.S. income tax at the rate of
30% on the gross amount of the Distribution made to a Non-U.S. Stockholder
unless (i) a lower treaty rate applies and the Non-U.S. Stockholder has filed
the required IRS Form 1001 with Vornado or (ii) the Non-U.S. Stockholder files
an IRS Form 4224 with Vornado claiming that the distribution is effectively
connected with the Non-U.S. Stockholder's conduct of a U.S. trade or business.
The portion of the Distribution that is in excess of Vornado's current and
accumulated earnings and
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profits allocated to the Distribution will be subject to a 10% withholding
requirement but will not be taxable to a shareholder to the extent that such
portion does not exceed the adjusted basis of the shareholder's Vornado Common
Shares, but rather will reduce the adjusted basis of such shares. To the extent
that the portion of the Distribution in excess of Vornado's current and
accumulated earnings and profits allocated to the Distribution exceeds the
adjusted basis of a Non-U.S. Stockholder's shares, such excess will give rise to
tax liability if the Non-U.S. Stockholder would otherwise be subject to tax on
any gain from the sale or disposition of the Vornado Common Shares. Any portion
of the Distribution which is treated as a capital gain dividend and is not
attributable to a disposition by Vornado of a United States real property
interest shall be subject to a similar rule. Provided that Vornado is a
"domestically controlled REIT" for federal income tax purposes, a Non-U.S.
Stockholder would be subject to taxation on gain from a sale or disposition of
Vornado Common Shares only if (i) the investment in the Vornado Common Shares
were treated as effectively connected with such Non-U.S. Stockholder's U.S.
trade or business, in which case the Non-U.S. Stockholder would be subject to
the same treatment as U.S. shareholders with respect to such gain or (ii) the
Non-U.S. Stockholder is a nonresident alien individual who was present in the
United States for 183 days or more during the taxable year of the sale or
disposition and either the individual has a "tax home" in the United States or
the gain is attributable to an office or other fixed place of business
maintained by the individual in the United States, in which case the gain will
be subject to a 30% tax. The Company believes that Vornado is and will continue
to be a "domestically controlled REIT" for federal income tax purposes.
As Vornado will not be able to determine, at the time that the Distribution
is made, the portion of the Distribution, if any, that will be in excess of the
current and accumulated earnings and profits allocated to the Distribution, the
Distribution will be subject to withholding as though the entire Distribution
(apart from any portion designated as a capital gain dividend) were an ordinary
income dividend. However, a Non-U.S. Stockholder may seek a refund of such
amounts from the Service if it is subsequently determined that a portion of the
Distribution was, in fact, in excess of Vornado's current and accumulated
earnings and profits allocable to the Distribution.
The Company does not anticipate that a significant portion of the
Distribution will be treated as attributable to Vornado's disposition of a
United States real property interest. To the extent that a portion of the
Distribution were to be treated as attributable to the disposition of a United
States real property interest, a non-U.S. Stockholder would be subject to tax on
such portion as though it were gain that was effectively connected with a United
States trade or business of such Non-U.S. Stockholder. Thus, Non-U.S.
Stockholders would be taxed on such portion of the Distribution at the normal
capital gain rates applicable to U.S. shareholders. Vornado is required under
applicable Treasury Regulations to withhold 35% of any distribution to a
Non-U.S. Stockholder that could be designated by Vornado as a capital gain
dividend. The amount so withheld is creditable against the Non-U.S.
Stockholder's U.S. tax liability.
Amounts required to be withheld from payments to Non-U.S. Stockholders will
be collected by converting a portion of the Common Stock to be distributed into
cash.
TAXATION OF LIMITED PARTNERS OF VORNADO SUB AS A RESULT OF THE DISTRIBUTION
The Distribution of Common Stock to a Limited Partner will generally result
in the recognition of gain by such Limited Partner to the extent that the fair
market value of the Common Stock distributed exceeds such Limited Partner's
basis in his partnership interest. Limited Partners that have not contributed
appreciated property to Vornado Sub or that have contributed appreciated
property where the excess of the fair market value of such property over its
basis at the time of contribution (such excess, "Precontribution Gain") was less
than the excess of the fair market value of the Common Stock distributed over
such Limited Partner's share of Vornado Sub's aggregate basis in the property
contributed to the Company, will not recognize gain on the distribution of
Common Stock in the full amount described in the preceding sentence. Such
Limited Partners will generally recognize gain in an amount not greater than the
sum of (i) the excess of
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their share of Vornado Sub's aggregate basis in the property contributed to the
Company over their basis in their partnership interest and (ii) their share of
any Precontribution Gain that would be allocated to them if Vornado Sub were to
dispose of all property that they had contributed to Vornado Sub prior to the
Distribution.
TAXATION OF THE COMPANY IN GENERAL
TAXATION OF THE COMPANY AS A REIT FOR 1998 (BUT NOT THEREAFTER)
The Company has agreed in the Intercompany Agreement to seek to qualify as
a REIT for federal income tax purposes for its taxable year ending December 31,
1998, but not for subsequent years. The Company's qualification as a REIT for
its taxable year ending December 31, 1998 may be necessary in order to ensure
that the Distribution will not adversely affect Vornado's REIT status. If
Vornado concludes in its sole discretion that such qualification is not
necessary, Vornado may waive such obligation. As a REIT for 1998, the Company
generally will not be subject to federal corporate income taxes on its net
income for 1998 that is currently distributed to its stockholders.
In order to qualify as a REIT for a taxable year, an entity is required to
satisfy a number of requirements relating to its organization, share ownership,
gross income, assets and stockholder distributions for such year. In applying
the gross income and asset tests, (i) the entity will be deemed to own its
proportionate share of the assets of any partnership in which it holds an
interest and will be deemed to be entitled to the income of such partnership
attributable to such share and (ii) certain wholly-owned subsidiaries of the
entity will be disregarded as entities separate from the parent entity.
ORGANIZATIONAL REQUIREMENTS. The Code requires that an entity that is to
be treated as a REIT (i) be managed by one or more trustees or directors, (ii)
have transferable beneficial ownership interests, (iii) be taxable as a domestic
corporation but for the REIT provisions of the Code and (iv) be neither a
financial institution nor an insurance company subject to certain provisions of
the Code. The Company believes that it will satisfy each of the foregoing
requirements throughout its taxable year ending December 31, 1998.
SHARE OWNERSHIP REQUIREMENTS. In order for an entity to be eligible to
qualify as a REIT, its shares must be beneficially owned by at least 100 persons
for at least 335 days of a taxable year of 12 months (or during a proportionate
part of a taxable year of less than 12 months) and at no time during the last
half of a taxable year may more than 50% in value of its outstanding shares be
owned, directly or under the applicable constructive ownership rules, by five or
fewer individuals (as defined in the Code to include certain entities). Neither
of these requirements applies to an entity's initial REIT year, and thus the
Company should not be required to satisfy these requirements for its taxable
year ending December 31, 1998.
INCOME TESTS. At least 75% of the entity's gross income must be derived,
directly or indirectly, from investments relating to real property or mortgages
in real property, certain types of temporary investments or certain other
sources. In addition, at least 95% of the entity's gross income must be derived
from such real property investments, dividends, interest, gain from the sale or
disposition of stock or securities or certain other sources. If the entity fails
to satisfy one or both of the 75% or 95% gross income tests, it may nonetheless
qualify as a REIT if it is entitled to relief under certain provisions of the
Code. These relief provisions will generally be available for a given year if
the entity's failure to satisfy such tests was due to reasonable cause and not
due to willful neglect, the entity attaches a schedule of the sources of its
income to its federal income tax return for such year and any incorrect
information on the schedule was not due to fraud with intent to evade tax. It is
not possible to state, however, whether in all circumstances an entity would be
entitled to the benefit of these relief provisions. Even if these relief
provisions applied, a 100% tax would be imposed on an amount equal to (x) the
amount of gross income by which the entity failed to satisfy the 75% or the 95%
test (whichever amount is greater), multiplied by (y) a fraction designed to
reflect the entity's profitability.
38
<PAGE> 40
ASSET TESTS. The entity must also satisfy a number of tests related to its
assets in order to qualify as a REIT for a taxable year. These tests must be
satisfied as of the close of each quarter of the entity's taxable year. First,
at least 75% of the value of the entity's total assets must be represented by
real estate assets, cash, cash items and government securities. Second, not more
than 25% of the entity's total assets may be represented by securities other
than those in the 75% asset class. Third, of the investments included in the 25%
asset class, the value of any one issuer's securities owned by the entity may
not exceed 5% of the value of the entity's total assets. Finally, the entity may
not own more than 10% of the outstanding voting securities of any non-REIT
issuer.
DISTRIBUTION REQUIREMENTS. In order to qualify as a REIT for a taxable
year, the entity will also be required to distribute dividends to its
stockholders in an amount at least equal to (A) the sum of (i) 95% of the
entity's real estate investment trust taxable income (computed without regard to
the dividends paid deduction and the entity's net capital gain) and (ii) 95% of
the net income (after tax), if any, from foreclosure property minus (B) the sum
of certain items of non-cash income. Such distributions generally must be paid
(or deemed paid) during the taxable year for which REIT status is being
determined . To the extent that the entity does not distribute all of its net
capital gain or distributes at least 95%, but less than 100% of its "real estate
investment trust taxable income", the entity will be subject to tax thereon at
the regular corporate tax rates. Furthermore, if the entity should fail to
distribute at least the sum of (i) 85% of its ordinary income for the relevant
taxable year and (ii) 95% of its capital gain net income for such year, the
entity would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed.
TAXATION OF THE COMPANY AS A REGULAR C CORPORATION
The Company will not seek to qualify as a REIT for taxable years after
1998. Thus, the Company will be subject to federal income tax as a regular
corporation in such years.
TAXATION OF SHAREHOLDERS OF THE COMPANY
DURING 1998
DIVIDENDS. If the Company qualifies as a REIT for its taxable year ending
December 31, 1998, distributions by the Company on the Common Stock during such
year to a holder of Common Stock that is (i) an individual that is a citizen or
resident of the United States, (ii) a domestic corporation or (iii) an estate or
trust that is subject to federal income tax on a net income basis in respect of
income from the Common Stock (a "U.S. Holder") will be treated in the manner
described below under the heading "-- During Periods When the Company is Taxed
as a Regular C Corporation (i.e., After 1998) -- Dividends" except as described
below. First, such distributions will not be eligible for the dividends received
deduction in the case of U.S. Holders that are corporations. Second, the Company
may designate a portion of such distributions (not in excess of the Company's
net capital gain) as capital gain distributions. Distributions made by the
Company that are properly designated as capital gain dividends will be taxable
to U.S. Holders as gain from the sale of a capital asset held for more than one
year, without regard to the period for which a U.S. Holder held its Common
Stock. U.S. Holders that are corporations may, however, be required to treat up
to 20% of certain capital gain dividends as ordinary income. Third, U.S. Holders
holding Common Stock at the close of the Company's taxable year will be required
to include, in computing their long-term capital gains for the taxable year in
which the last day of the Company's taxable year falls, such amount as the
Company may designate in a written notice mailed to its shareholders. The
Company may not designate amounts in excess of the Company's undistributed net
capital gain for such year. Each U.S. Holder required to include such a
designated amount in determining its long-term capital gains will be deemed to
have paid, in the taxable year of the inclusion, the tax paid by the Company in
respect of such undistributed net capital gains. U.S. Holders subject to these
rules will be allowed a credit or a refund, as they case may be, for the tax
deemed to have been paid by such shareholders. A U.S. Holder will increase its
basis in its Common Stock by the difference between the amount of the includible
gains and the tax deemed paid by the shareholder in respect of such gains.
Fourth,
39
<PAGE> 41
distributions to a holder of Common Stock other than a U.S. Holder (a "non-U.S.
Holder") that are attributable to dispositions by the Company of United State
real property interests or which could be designated by the Company as capital
gain dividends will be subject to the rules described above under the heading
"The Distribution -- Taxation of Foreign Stockholders of Vornado as a Result of
the Distribution", substituting "the Company" for "Vornado". Finally,
distributions to a non-U.S. Holder that are to be made out of the Company's
earnings and profits, are not attributable to a disposition by the Company of a
United States real property interest and are not designated as capital gain
dividends will be treated in a manner similar to the manner in which the
analogous portion of the Distribution made to non-U.S. Stockholders will be
treated, as described above under the heading "The Distribution -- Taxation of
Foreign Stockholders of Vornado as a Result of the Distribution."
DISPOSITIONS OF COMMON STOCK. Sales or dispositions of Common Stock while
the Company is taxable as a REIT will be treated in the manner described below
under the heading "-- During Periods When the Company is Taxed as a Regular C
Corporation (i.e., After 1998) -- Dispositions of Common Stock" except as
described below. First, any loss recognized by a U.S. Holder upon a sale or
disposition of shares of Common Stock that have been held for six months or less
will be treated as a long-term capital loss, to the extent of distributions
received by such U.S. Holder from the Company that were required to be treated
as gain from the sale of a capital asset held for more than one year. Second,
gain recognized by a non-U.S. Holder upon a sale or exchange of Common Stock
will be subject to U.S. taxation only if (i) the Company fails to be a
"domestically controlled REIT", (ii) the non-U.S. Holder's investment in the
Common Stock is treated as effectively connected with a U.S. trade or business
of the non-U.S. Holder, in which case the Non-U.S. Holder will be subject to the
same treatment as U.S. Holders in respect of such gain or (iii) the non-U.S.
Holder is a nonresident alien individual who is present in the United States for
183 days or more during the taxable year and either has a "tax home" in the
United States or maintains an office or a fixed place of business in the United
States to which the gain is attributable, in which case the gain will be subject
to a 30% tax.
DURING PERIODS WHEN THE COMPANY IS TAXED AS A REGULAR C CORPORATION (I.E.,
AFTER 1998)
DIVIDENDS. Distributions by the Company on the Common Stock during taxable
years when the Company is treated as a regular C corporation to a U.S. Holder
will be treated as ordinary income dividends to the extent attributable to the
current or accumulated earnings and profits of the Company and thereafter as a
return of basis to the extent thereof, with any excess being treated as gain
from a deemed disposition of the Common Stock. Dividends paid on the Common
Stock during such taxable years to a domestic corporation will generally be
eligible for the dividends received deduction, subject to the standard
limitations provided for in the Code with respect to the dividends received
deduction.
Dividends paid to a non-U.S. Holder will be subject to withholding of
United States federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty, unless the dividends are
effectively connected with the conduct of a trade or business in the United
States (and are attributable to a United States permanent establishment of such
holder, if an applicable income tax treaty so requires as a condition for the
non-U.S. Holder to be subject to United States federal income tax on a net
income basis in respect of such dividends). Such "effectively connected"
dividends are subject to tax at rates applicable to United States citizens,
resident aliens and domestic corporations, and are generally not subject to
withholding. Any such effectively connected dividends received by a non-United
States corporation may also, under certain circumstances, 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.
Under current United States Treasury Regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussion above and for purposes of determining the
40
<PAGE> 42
applicability of a tax treaty rate. Under recently-issued United States Treasury
Regulations that are effective for payments made after December 31, 1998,
however, a non-U.S. Holder of Common Stock who wishes to claim the benefit of an
applicable treaty rate would be required to satisfy applicable certification
requirements. In addition, under the recently-issued regulations, in the case of
Common Stock held by a foreign partnership, (x) the certification requirement
would generally be applied to the partners of the partnership and (y) the
partnership would be required to provide certain information, including a United
States taxpayer identification number. The regulations provide look-through
rules for tiered partnerships.
A non-U.S. Holder of Common Stock that is eligible for a reduced rate of
United States withholding tax pursuant to a tax treaty may obtain a refund of
any excess amounts currently withheld by filing an appropriate claim for refund
with the Service.
DISPOSITIONS OF COMMON STOCK. A U.S. Holder will generally recognize gain
or loss on a disposition of Common Stock in an amount equal to the difference
between the amount realized on the disposition and such holder's adjusted basis
in the Common Stock.
A non-U.S. Holder generally will not be subject to United States federal
income tax in respect of gain recognized on a disposition of Common Stock except
in the following circumstances: (i) the gain is effectively connected with a
trade or business conducted by the non-U.S. Holder in the United States (and is
attributable to a permanent establishment maintained in the United States by
such non-U.S. Holder if an applicable income tax treaty so requires as a
condition for such non-U.S. Holder to be subject to U.S. federal income taxation
on a net income basis in respect of gain from the sale or other disposition of
the Common Stock); (ii) in the case of a non-U.S. Holder who is an individual
and holds the Common Stock as a capital asset, such holder is present in the
United States for 183 or more days in the taxable year of the sale and certain
conditions exist; or (iii) the Company is or has been a "United States real
property holding corporation" for federal income tax purposes and the non-U.S.
Holder held, directly or indirectly, at any time during the five-year period
ending on the date of disposition, more than 5% of the Common Stock (and is not
eligible for any treaty exemption). Effectively connected gains recognized by a
corporate non-U.S. Holder may also, under certain circumstances, 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.
The Company is not, and does not expect to become, a "United States real
property holding corporation" for federal income tax purposes.
TAXATION OF VORNADO IN GENERAL
In the opinion of Sullivan & Cromwell, commencing with Vornado's taxable
year ending December 31, 1993, Vornado has been organized and operated in
conformity with the requirements for qualification and taxation as a REIT under
the Code and Vornado's proposed method of operation, including the completion of
the Distribution, will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. The requirements for
taxation as a REIT under the Code are generally summarized above under the
heading "-- Taxation of the Company in General -- Taxation of the Company as a
REIT for 1998 (But Not Thereafter)"[, except that for its taxable year ending
December 31, 1997, Vornado must also satisfy a requirement that less than 30% of
its gross income be derived from sales or dispositions of (i) stock or
securities held for less than one year, (ii) certain dealer property and (iii)
real property, including real estate mortgages, held for less than four years,
other than foreclosure property or property that is involuntarily converted.]
Opinions of counsel, however, are not binding upon the Service or any court. In
providing its opinion Sullivan & Cromwell is assuming that the Company will
qualify as a REIT for its taxable year ending December 31, 1998 and relying upon
(i) representations received from Vornado and (ii) an opinion of Shearman &
Sterling as to the qualification of Alexander's, Inc. ("Alexander's") as a REIT.
The Company intends to qualify as a REIT for its taxable year ending December
31, 1998. In providing its opinion to the effect that, commencing with
Alexander's taxable
41
<PAGE> 43
year ending December 31, 1995, Alexander's has been organized and operated in
conformity with the requirements for qualification and taxation as a REIT under
the Code, and Alexander's proposed method of operation will enable it to
continue to meet the requirements for qualification and taxation as a REIT under
the Code, Shearman & Sterling is in turn relying upon representations received
from Alexander's. The qualification and taxation of Vornado and Alexander's as
REITs depends upon their ability to meet (and, in the case of Vornado, upon the
ability of Two Penn Plaza REIT Inc. ("Two Penn REIT") to meet), through actual
annual operating results, distribution levels, stock ownership requirements and
the various qualification tests imposed under the Code. Accordingly, while
Vornado intends to continue to qualify to be taxed as a REIT, no assurance can
be given that the actual results of Vornado's, Alexander's or Two Penn REIT's
operations for any particular year will satisfy such requirements. Neither
Sullivan & Cromwell nor Shearman & Sterling will monitor the compliance of
Vornado, Alexander's or Two Penn REIT with the requirements for REIT
qualification on an ongoing basis.
EXPERTS
The balance sheet of Vornado Operating Inc. as of January 23, 1998 included
in this Prospectus and elsewhere in the Registration Statement has been audited
by Deloitte & Touche LLP, independent auditors, as stated in their report
appearing herein, and is included in reliance upon the report of such firm give
upon their authority as experts in accounting and auditing.
VALIDITY OF COMMON STOCK
The validity of the Common Stock to be distributed in the Distribution will
be passed upon for the Company by Sullivan & Cromwell, New York, New York.
42
<PAGE> 44
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.......................................................... F-2
Balance Sheet as of January 23, 1998.................................................. F-3
Note to Balance Sheet................................................................. F-3
Pro Forma Consolidated Balance Sheet as of January 23, 1998 (Unaudited)............... F-4
Notes to Pro Forma Consolidated Balance Sheet......................................... F-5
</TABLE>
F-1
<PAGE> 45
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Vornado Operating Inc.
Saddle Brook, New Jersey
We have audited the accompanying balance sheet of Vornado Operating Inc. as
of January 23, 1998. This balance sheet is the responsibility of the Company's
management. Our responsibility is to express an opinion on this balance sheet
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 balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of Vornado Operating Inc. as of January 23,
1998, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 23, 1998
F-2
<PAGE> 46
VORNADO OPERATING INC.
BALANCE SHEET
JANUARY 23, 1998
<TABLE>
<S> <C>
ASSETS
Cash.......................................................... $25,000,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity:
Common stock, par value $.01 per share (authorized,
issued and outstanding 1,000 shares)................... $ 10
Additional paid in capital............................... 24,999,990
-----------
Total stockholders' equity.......................... $25,000,000
-----------
Total liabilities and stockholders' equity..... $25,000,000
===========
</TABLE>
NOTE TO BALANCE SHEET
Vornado Operating Inc., a Delaware corporation (the "Company"), was formed
on October 30, 1997 and has had no operations to date. The Company's only asset
is $25,000,000 of cash. The Company was formed to own assets that Vornado Realty
Trust, a Maryland real estate investment trust ("Vornado"), could not itself own
and conduct activities that Vornado could not itself conduct. The Company is
intended to function principally as an operating company. The Company and
Vornado expect to enter into an agreement pursuant to which, among other things,
(a) Vornado will agree under certain circumstances to offer the Company the
opportunity to become lessee of certain real property owned now or in the future
by Vornado (under mutually satisfactory lease terms) and (b) the Company will
agree not to make any real estate investment or other REIT-Qualified Investment
(as defined) unless it first offers Vornado the opportunity to make such
investment and Vornado has rejected that opportunity.
F-3
<PAGE> 47
VORNADO OPERATING INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
JANUARY 23, 1998
(Unaudited)
The following unaudited pro forma consolidated balance sheet sets forth the
Company's historical balance sheet as of January 23, 1998, adjusted to give pro
forma effect to the Distribution and the Interstate Transaction as if such
transactions had occurred as of such date. It should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Balance Sheet and Note thereto included elsewhere in this
Prospectus. In management's opinion, all adjustments necessary to reflect the
foregoing transactions as if they had occurred on such date have been made.
This unaudited pro forma consolidated balance sheet is not necessarily
indicative of what the actual financial position would have been at January 23,
1998 had the foregoing transactions occurred on such date, nor does it purport
to represent the future financial position of the Company.
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA PRO FORMA
COMPANY ADJUSTMENTS COMPANY
---------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash...................................................... $ 25,000 $ -- $25,000
======= ====== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Minority interest of Interstate in Company Sub............ $ -- $ 2,475(1) $ 2,475
Stockholders' equity:
Common stock, par value $.01 per share (authorized,
issued and outstanding 1,000 shares)................. -- 39(2) 39
Additional paid in capital.............................. 25,000 (2,475)(3) 22,486
(39)(4)
------- ------ -------
Total stockholders' equity........................... 25,000 -- 22,525
------- ------ -------
Total liabilities and stockholders' equity...... $ 25,000 $ -- $25,000
======= ====== =======
</TABLE>
See Notes to Pro Forma Consolidated Balance Sheet
F-4
<PAGE> 48
VORNADO OPERATING INC.
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET
1. Reflects (a) the exchange by Interstate of shares representing 9.9% of
the Common Stock that will be outstanding immediately after giving
effect to the Distribution for a 9.9% undivided interest in all of the
Company's assets and (b) the joint contribution of such assets by
Interstate and the Company to Company Sub (a Delaware limited
partnership through which the Company will hold its assets and conduct
its business) in return for which Interstate will receive a 9.9%
limited partnership interest and the Company will receive a 90.1%
partnership interest therein.
2. Reflects the issuance of 3,892,429 shares of Common Stock, par value
$.01 per share, in connection with the Distribution.
3. Reflects the reduction in additional paid in capital resulting from the
minority interest of Interstate in Company Sub referred to in (1)
above.
4. Reflects the reduction in additional paid in capital resulting from the
issuance of 3,892,429 shares of Common Stock, par value $.01 per share,
in connection with the Distribution.
F-5
<PAGE> 49
======================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information............... 2
Prospectus Summary.................. 3
Risk Factors........................ 8
The Distribution.................... 13
Dividend Policy..................... 15
Selected Pro Forma Consolidated
Financial Data.................... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..................... 17
Business............................ 18
Management.......................... 22
Certain Transactions................ 29
Description of Capital Stock........ 30
Federal Income Tax Considerations... 35
Experts............................. 42
Validity of Common Stock............ 42
Index to Financial Statements....... F-1
</TABLE>
THROUGH AND INCLUDING --, 1998 (THE 25TH DAY AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
VORNADO OPERATING
COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------
PROSPECTUS
------------
======================================================
<PAGE> 50
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 30. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table itemizes the expenses incurred by the Registrant in
connection with the issuance and distribution of the securities being
registered. All of the amounts shown are estimates except the Securities and
Exchange Commission registration fee and the American Stock Exchange listing
fee:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission........ $ 7,576
American Stock Exchange Listing Fee........................... 20,000
Legal Fees and Expenses (other than Blue Sky)................. 700,000
Accounting Fees and Expenses.................................. 40,000
Blue Sky Fees and Expenses, including Legal Fees.............. 14,000
Printing, including Registration Statement, Prospectus,
etc......................................................... 40,000
Transfer Agent and Registrar Fees............................. 25,000
Miscellaneous Expenses........................................ 25,000
------
Total............................................... $871,576
======
</TABLE>
------------------------
* To be completed by amendment.
ITEM 32. SALES TO SPECIAL PARTIES.
See Item 33.
ITEM 33. RECENT SALES OF UNREGISTERED SECURITIES.
In connection with the formation of the Registrant, an affiliate of the
Company has been issued a total of 1,000 shares of Common Stock for total
consideration of $1,000 in cash. Such issuance was exempt from registration
under Section 4(2) of the Securities Act.
ITEM 34. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the DGCL makes provision for the indemnification of officers
and directors in terms sufficiently broad to indemnify officers and directors of
Company under certain circumstances from liabilities (including reimbursement
for expenses incurred) arising under the Securities Act. The Charter and By-laws
of the Company provide, in effect, that, to the fullest extent and under the
circumstances permitted by Section 145 of the DGCL, the Company will indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director or officer of the Company or is or was serving at the
request of the Company as a director or officer of another corporation or
enterprise. The Charter and By-laws of the Company relieve its directors from
monetary damages for breach of such director's fiduciary duty as directors to
the fullest extent permitted by the DGCL. Consequently, a director or officer
will not be personally liable to the Company or its stockholders for monetary
damages for any breach of their fiduciary duty as directors except (i) for a
breach of the duty of loyalty, (ii) for failure to act in good faith, (iii) for
intentional misconduct or knowing violation of law, (iv) for willful or
negligent violation of certain provisions in the DGCL imposing certain
requirements with respect to stock repurchases, redemption and dividends, or (v)
for any transactions from which the director derived an improper personal
benefit. Depending upon the character of the proceeding, under
II-1
<PAGE> 51
Delaware law, the Company may indemnify against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with any action, suit or proceeding if the person
indemnified acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the Company and, with respect to
any criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. To the extent that a present or former director or officer
of the Company has been successful in the defense of any action, suit or
proceeding referred to above, or in defense of any claim, issue or matter
therein, the Company will be obligated to indemnify him or her against expenses
(including attorneys' fees) actually and reasonably incurred in connection
therewith.
The directors and officers of the Company are insured under policies of
insurance maintained by the Company, subject to the limits of the policies,
against certain losses arising from any claim made against them by reason of
being or having been such officers or directors. In addition, Vornado Realty
L.P. has entered into indemnification agreements with all of the Company's
directors and officers providing, subject to the terms therein, that Vornado
Realty L.P. will indemnify such individuals to the full extent authorized or
permitted by law for damages suffered by reason of the fact that any such
individual is or was a director or officer of the Company or is or was serving
at the request of the Company as a director or officer of another corporation or
enterprise.
ITEM 35. TREATMENT OF PROCEEDS FROM STOCK BEING REGISTERED.
Not applicable.
ITEM 36. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements, all of which are included in the Prospectus:
Balance Sheet of Vornado Operating Inc. as of January 23, 1998
Pro Forma Consolidated Balance Sheet of Vornado Operating Inc. as of
January 23, 1998
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------- -------------------------------------------------------------------------
<S> <C>
3.1 -- Form of Certificate of Incorporation
3.2 -- Form of By-laws
4.1 -- Specimen stock certificate
5 -- Opinion of Sullivan & Cromwell*
8.1 -- Opinion of Sullivan & Cromwell*
8.2 -- Opinion of Shearman & Sterling*
10.1 -- Form of Intercompany Agreement between Vornado and the Company
10.2 -- Form of Revolving Credit Agreement between Vornado Sub and the Company,
together with related form of Line of Credit Note
10.3 -- Form of 1998 Stock Omnibus Plan of Vornado Operating Company
10.4 -- Form of Agreement of Limited Partnership of Vornado Operating L.P.
</TABLE>
II-2
<PAGE> 52
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------- -------------------------------------------------------------------------
<S> <C>
23.1 -- Consent of Sullivan & Cromwell (included in its opinions filed as
Exhibits 5 and 8.1)*
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of Shearman & Sterling (included in its opinion filed as Exhibit
8.2)*
24 -- Power of Attorney**
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed.
ITEM 37. UNDERTAKINGS.
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 foregoing provisions, 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 the question 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.
II-3
<PAGE> 53
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 registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Saddle Brook, State of New Jersey, on January 23,
1998.
VORNADO OPERATING, INC.
a Delaware corporation
By: /s/ STEVEN ROTH
------------------------------------
Steven Roth
Chairman of the Board of Directors
(Principal Executive Officer)
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/ Steven Roth Chairman of the Board of Directors January 23, 1998
- ---------------------------------- (Principal Executive Officer) and
Steven Roth Director
* President and Director January 23, 1998
- ----------------------------------
Michael D. Fascitelli
/s/ Irwin Goldberg Vice President -- Chief Financial January 23, 1998
- ---------------------------------- Officer (Principal Financial and
Irwin Goldberg Accounting Officer)
* Director January 23, 1998
- ----------------------------------
Russell B. Wight, Jr.
* Director January 23, 1998
- ----------------------------------
Richard West
*By: /s/ Joseph Macnow
- ----------------------------------
Joseph Macnow
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 54
Exhibit Index
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
--------------- -------------------------------------------------------------------------
<S> <C>
3.1 -- Form of Certificate of Incorporation
3.2 -- Form of By-laws
4.1 -- Specimen stock certificate
5 -- Opinion of Sullivan & Cromwell*
8.1 -- Opinion of Sullivan & Cromwell*
8.2 -- Opinion of Shearman & Sterling*
10.1 -- Form of Intercompany Agreement between Vornado and the Company
10.2 -- Form of Revolving Credit Agreement between Vornado Sub and the Company,
together with related form of Line of Credit Note
10.3 -- Form of 1998 Stock Omnibus Plan of Vornado Operating Company
10.4 -- Form of Agreement of Limited Partnership of Vornado Operating L.P.
23.1 -- Consent of Sullivan & Cromwell (included in its opinions filed as
Exhibits 5 and 8.1)*
23.2 -- Consent of Deloitte & Touche LLP
23.3 -- Consent of Shearman & Sterling (included in its opinion filed as Exhibit
8.2)*
24 -- Power of Attorney**
</TABLE>
* To Be filed By amendment.
** Previously filed.
<PAGE> 1
Exhibit 3.1
FORM OF
RESTATED CERTIFICATE OF INCORPORATION
OF
VORNADO OPERATING, INC.
Vornado Operating, Inc., a Delaware corporation, hereby
certifies as follows:
FIRST. The name of the corporation is Vornado Operating, Inc.
The date of filing of its original certificate of incorporation with the
Secretary of State was October 30, 1997 and the name under which it was
originally incorporated was Vornado Operating, Inc. Upon effectiveness of this
restated Certificate of Incorporation, the name of said corporation will be
Vornado Operating Company.
SECOND. This restated certificate of incorporation amends,
restates and integrates the provisions of the certificate of incorporation of
said corporation and has been duly adopted in accordance with the provisions of
Sections 242 and 245 of the General Corporation Law of the State of Delaware.
THIRD. The text of the certificate of incorporation of said
corporation is hereby amended and restated to read in full as follows:
<PAGE> 2
ARTICLE FIRST
NAME
The name of the corporation is Vornado Operating Company (the
"Corporation").
ARTICLE SECOND
REGISTERED OFFICE AND REGISTERED AGENT
The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE THIRD
PURPOSE
The purpose of the Corporation is (a) to own assets that
Vornado Realty Trust, a Maryland real estate investment trust ("Vornado"), could
not itself own and conduct activities that Vornado could not itself conduct due
to the status of Vornado as a real estate investment trust for federal income
tax purposes; (b) to perform an agreement to be entered into by and between the
Corporation and Vornado Realty L.P., a Delaware limited partnership and a
subsidiary of Vornado (the "Intercompany Agreement"), pursuant to which, among
other things, the parties will agree to provide each other with rights of first
opportunity with respect to certain transactions and investments; and (c) to
engage in any lawful act or activity for which
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<PAGE> 3
corporations may be organized under the General Corporation Law of Delaware. For
so long as the Intercompany Agreement shall remain in effect, the Corporation
will be prohibited from pursuing any REIT Opportunity (as described in the
Intercompany Agreement) except to the extent permitted by Article II of the
Intercompany Agreement.
ARTICLE FOURTH
CAPITAL STOCK
The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 30,000,000, of which 10,000,000
shares of the par value of $.01 per share shall be designated as Common Stock,
5,000,000 shares of the par value of $.01 per share shall be designated as
Preferred Stock and 15,000,000 shares of the par value of $.01 per share shall
be designated as Excess Shares.
Shares of Preferred Stock may be issued in one or more series
from time to time by the board of directors, and the board of directors is
expressly authorized to fix by resolution or resolutions the designations and
the powers, preferences and rights, and the qualifications, limitations and
restrictions thereof, of the shares of each series of Preferred Stock, including
without limitation the following:
(a) the distinctive serial designation of such series which
shall distinguish it from other series;
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<PAGE> 4
(b) the number of shares included in such series;
(c) the dividend rate (or method of determining such rate)
payable to the holders of the shares of such series, any conditions
upon which such dividends shall be paid and the date or dates upon
which such dividends shall be payable;
(d) whether dividends on the shares of such series shall be
cumulative and, in the case of shares of any series having cumulative
dividend rights, the date or dates or method of determining the date or
dates from which dividends on the shares of such series shall be
cumulative;
(e) the amount or amounts which shall be payable out of the
assets of the Corporation to the holders of the shares of such series
upon voluntary or involuntary liquidation, dissolution or winding up
the Corporation, and the relative rights of priority, if any, of
payment of the shares of such series;
(f) the price or prices at which, the period or periods within
which and the terms and conditions upon which the shares of such series
may be redeemed, in whole or in part, at the option of the Corporation
or at the option of the holder or holders thereof or upon the happening
of a specified event or events;
(g) the obligation, if any, of the Corporation to purchase or
redeem shares of such series pursuant to a
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<PAGE> 5
sinking fund or otherwise and the price or prices at which, the period
or periods within which and the terms and conditions upon which the
shares of such series shall be redeemed or purchased, in whole or in
part, pursuant to such obligation;
(h) whether or not the shares of such series shall be
convertible or exchangeable, at any time or times at the option of the
holder or holders thereof or at the option of the Corporation or upon
the happening of a specified event or events, into shares of any other
class or classes or any other series of the same or any other class or
classes of stock of the Corporation, and the price or prices or rate or
rates of exchange or conversion and any adjustments applicable thereto;
and
(i) whether or not the holders of the shares of such series
shall have voting rights, in addition to the voting rights provided by
law, and if so the terms of such voting rights.
Subject to the rights of the holders of any series of Preferred Stock, the
number of authorized shares of any class or series of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the
outstanding shares entitled to vote, irrespective of the provisions of Section
242(b)(2) of the
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<PAGE> 6
General Corporation Law of Delaware or any corresponding provision hereafter
enacted.
ARTICLE FIFTH
BY-LAWS
The by-laws of the Corporation may be altered or repealed and
new by-laws may be adopted (i) at any annual or special meeting of stockholders,
by the affirmative vote of the holders of not less than a majority of the voting
power of all outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors, considered for purposes hereof as a
single class, provided, however, that any proposed alteration or repeal of, or
the adoption of any by-law inconsistent with, Sections 1.2, 1.11 and 1.12 of
Article I of the by-laws, Sections 2.1 and 2.2 of Article II of the by-laws, or
this sentence, by the stockholders shall require the affirmative vote of the
holders of not less than eighty percent (80%) of the voting power of all
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for purposes hereof as a
single class, or (ii) by the affirmative vote of a majority of the board of
directors.
ARTICLE SIXTH
BOARD OF DIRECTORS
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<PAGE> 7
Section A. Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the board of
directors, except as may be otherwise provided by law or in this restated
certificate of incorporation.
Section B. Number. The board of directors of the Corporation
shall consist of one or more members, the number of which shall be fixed from
time to time pursuant to the by-laws of the Corporation.
Section C. Election and Term. The directors of the Corporation
shall be divided into three classes, as nearly equal in number as reasonably
possible, as determined by the board of directors, with the initial term of
office of the first class of such directors ("Class I") to expire at the first
annual meeting of stockholders, the initial term of office of the second class
of such directors ("Class II") to expire at the second annual meeting of
stockholders and the initial term of office of the third class of such directors
("Class III") to expire at the third annual meeting of stockholders, with each
class of directors to hold office until their successors have been duly elected
and qualified. At each annual meeting of stockholders, directors elected to
succeed the directors whose terms expire at such annual meeting shall be elected
to hold office for a term expiring at the annual meeting of stockholders in the
third year following the year of their
-7-
<PAGE> 8
election and until their successors have been duly elected and qualified.
Elections of directors need not be by written ballot except and to the extent
provided in the by-laws of the Corporation.
Section D. Vacancies. In the event of any increase or decrease
in the authorized number of directors, (a) each director then serving as such
shall nonetheless continue as a director of the class of which he is a member
until the expiration of his current term, or his earlier death, retirement,
resignation, or removal, and (b) the newly created or eliminated directorships
resulting from such increase or decrease shall be apportioned by the board of
directors among the three classes of directors so as to maintain such classes as
nearly equal in number as reasonably possible.
Section E. Removal. No director may be removed except for
cause.
Section F. Initial Directors. The name of the
persons who are to serve as the initial directors of the
Corporation until their successors have been duly elected
and qualified are as follows:
<TABLE>
<CAPTION>
Name Director Class
- ---- --------------
<S> <C>
Steven Roth III
Michael D. Fascitelli III
Russell B. Wight, Jr. II
[OUTSIDE DIRECTOR] II
</TABLE>
-8-
<PAGE> 9
Name Director Class
Richard West I
[OUTSIDE DIRECTOR] I
ARTICLE SEVENTH
STOCKHOLDER ACTION
Any action required or permitted to be taken by the
stockholders of the Corporation must be taken at a duly called annual or special
meeting of such holders and may not be taken by any consent in writing by such
holders. Except as otherwise provided for herein or required by law, special
meetings of stockholders of the Corporation for any purpose or purposes may be
called only by the Chairman of the Board, the Vice Chairman of the Board, the
President or the board of directors pursuant to a resolution stating the purpose
or purposes thereof, and any power of stockholders to call a special meeting is
specifically denied.
ARTICLE EIGHTH
DIRECTOR LIABILITY
A director of the Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except to the extent that such exemption from liability or
limitation thereof is not permitted under the Delaware General Corporation Law
as currently in effect or as the same may
-9-
<PAGE> 10
hereafter be amended. No amendment, modification or repeal of this Article shall
adversely affect any right or protection of a director that exists at the time
of such amendment, modification or repeal.
ARTICLE NINTH
OWNERSHIP AND TRANSFER RESTRICTIONS
Section A. Definitions. For the purposes of this
Article the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Shares by a
Person either directly or under the constructive ownership rules of Section
318(a) of the Code, as modified by Section 856(d)(5) of the Code. The terms
"Beneficial Owner," "Beneficially Owns," "Beneficially Own" and "Beneficially
Owned" shall have the correlative meanings.
"Charitable Beneficiary" shall mean an organization or
organizations described in Sections 170(b)(1)(A) and 170(c) of the Code and
identified by the board of directors as the beneficiary or beneficiaries of the
Excess Share Trust.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Excess Shares" shall mean Shares resulting from an event
described in Section C of this Article.
-10-
<PAGE> 11
"Excess Share Trust" shall mean the trust created pursuant to
Section C and Section K of this Article.
"Excess Share Trustee" shall mean a person, who shall be
unaffiliated with the Corporation, any Purported Beneficial Transferee and any
Purported Record Transferee, identified by the board of directors as the trustee
of the Excess Share Trust.
"Exchange" shall mean the American Stock Exchange.
"Fair Market Value" shall mean the last reported
sales price on the Exchange for Shares of the relevant class or series on the
trading day immediately preceding the relevant date, or if not then traded on
the Exchange, the last reported sales price for such Shares on the trading day
immediately preceding the relevant date as reported on any exchange or quotation
system over or through which such Shares may be traded, or if not then traded
over or through any exchange or quotation system, then the market price of such
Shares on the relevant date as determined in good faith by the board of
directors.
"Ownership Limit" shall initially mean 9.9%, in number of
Shares or value, of the outstanding Shares of any class or series of the
Corporation. The number and value of the outstanding Shares of any class or
series of the Corporation shall be determined by the board of directors in good
faith, which determination shall be conclusive for all purposes hereof.
-11-
<PAGE> 12
"Person" shall mean an individual, corporation, partnership,
estate, trust (including a trust qualified under Section 401(a) or 501(c)(17) of
the Code), 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.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer which results in Excess Shares, the Person who would have
been the beneficial holder of the Shares, if such Transfer had been valid under
Section B of this Article.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer which results in Excess Shares, the Person who would have
been the record holder of the Shares, if such Transfer had been valid under
Section B of this Article.
"REIT" shall mean a real estate investment trust under Section
856 of the Code.
"REIT Provisions of the Code" shall mean Sections 856 through
860 of the Code and any successor or other provisions of the Code relating to
real estate investment trusts (including provisions as to the attribution of
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<PAGE> 13
ownership of beneficial interests therein) and the regulations promulgated
thereunder.
"Restriction Termination Date" shall mean such date as may be
determined by the board of directors as the date on which the ownership and
transfer restrictions set forth in this Article should cease to apply, provided
that such date may not be prior to the date on which Vornado Realty Trust makes
a public announcement that neither Vornado Realty Trust nor any affiliate of
Vornado Realty Trust that, directly or indirectly, leases property to the
Corporation, intends to qualify as a REIT.
"Shares" shall mean the shares of the Corporation as may be
authorized and issued from time to time pursuant to Article FOURTH.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Shares (including (a) the granting of any option
or entering into any agreement for the sale, transfer or other disposition of
Shares, (b) the sale, transfer, assignment or other disposition of any
securities or rights convertible into or exchangeable for Shares and (c) any
transfer or other disposition of any interest in Shares as a result of a change
in the marital status of the holder thereof), whether voluntary or involuntary,
whether of record, constructively or beneficially and whether by operation of
law or
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<PAGE> 14
otherwise. The terms "Transfers" and "Transferred" shall have the correlative
meanings.
Section B. Ownership Limitation.
(1) Subject to clause (3) of this Section B, until the
Restriction Termination Date, no Person, or Persons acting as a group, shall
Beneficially Own Shares of any class or series in excess of the Ownership Limit.
(2) Subject to clause (3) of this Section B, until the
Restriction Termination Date, any Transfer that, if effective, would result in
any Person Beneficially Owning Shares of any class in excess of the Ownership
Limit shall be void ab initio as to the Transfer of such Shares which would be
otherwise Beneficially Owned by such Person in excess of the Ownership Limit;
and the intended transferee shall acquire no rights in such Shares.
(3) Nothing contained in this Article shall preclude the
settlement of any transaction entered into through the facilities of the
Exchange. The fact that the settlement of any transaction is permitted shall not
negate the effect of any other provision of this Article and any transferee in
such a transaction shall be subject to all of the provisions and limitations set
forth in this Article.
Section C. Excess Shares.
(1) If, notwithstanding the other provisions contained in
this Article, at any time prior to the Restriction Termination Date, there is a
purported Transfer
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<PAGE> 15
such that any Person would Beneficially Own Shares of any class in excess of the
applicable Ownership Limit, then Shares directly owned by such Person in excess
of the Ownership Limit shall be automatically designated as Excess Shares
(without reclassification) until such Person does not own Shares in excess of
the applicable Ownership Limit. The designation of such Shares as Excess Shares
shall be effective as of the close of business on the business day prior to the
date of the purported Transfer. If, after designation of such Shares owned
directly by a Person as Excess Shares, such Person still owns Shares in excess
of the applicable Ownership Limit, Shares Beneficially Owned by such Person
constructively in excess of the Ownership Limit shall be designated as Excess
Shares until such Person does not own Shares in excess of the applicable
Ownership Limit. Where such Person owns Shares constructively through one or
more Persons and the Shares held by such other Persons must be designated as
Excess Shares, the designation of Shares held by such other Persons as Excess
Shares shall be pro rata.
(2) If, at any time prior to the Restriction Termination Date,
an event other than a purported Transfer (an "Event") occurs which would cause
any Person to Beneficially Own Shares of any class in excess of the Ownership
Limit, then, Shares Beneficially Owned by such Person in excess of the Ownership
Limit shall be
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<PAGE> 16
automatically designated as Excess Shares to the extent necessary to eliminate
such excess ownership. The designation of Shares as Excess Shares shall be
effective as of the close of business on the business day prior to the date of
the Event. In determining which Shares are designated as Excess Shares, Shares
Beneficially Owned by any Person who caused the Event to occur shall be
designated as Excess Shares before any Shares not so held are designated. Where
several similarly situated Persons exist, the designation of Shares as Excess
Shares shall be pro rata. If Shares held by any Person are required to be
designated as Excess Shares pursuant to this Clause (2) of this Section C of
this Article, Shares directly held by such Person shall first be designated
before Shares Beneficially Owned constructively and designated. Where such
Person owns Shares constructively through one or more Persons and the Shares
held by such other Persons must be designated as Excess Shares, the designation
of Shares held by such other Persons as Excess Shares shall be pro rata.
Section D. Prevention of Transfer. If the board of directors
or its designee shall at any time determine in good faith that a Transfer has
taken place in violation of Section B of this Article or that a Person intends
to acquire or has attempted to acquire Beneficial Ownership (determined without
reference to any rules of attribution) of any Shares in violation of Section B
of this Article, the
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<PAGE> 17
board of directors or its designee shall take such action as it deems advisable
to refuse to give effect to or to prevent such Transfer, 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; provided,
however, that any Transfers or attempted Transfers in violation of Section B of
this Article shall automatically result in the designation and treatment
described in Section C of this Article, irrespective of any action (or
non-action) by the board of directors.
Section E. Notice to Corporation. Any Person who acquires or
attempts to acquire Shares in violation of Section B of this Article, or any
Person who is a transferee such that Excess Shares result under Section C of
this Article, shall immediately give written notice or, in the event of a
proposed or attempted Transfer, give at least 15 days prior written notice to
the Corporation of such event. Such person shall also provide to the Corporation
such other information as the Corporation may request in order to determine the
effect, if any, of such Transfer or attempted Transfer on the status of Vornado
Realty Trust or any affiliate of Vornado Realty Trust as a REIT and shall
execute and deliver such instruments and provide such further cooperation and
assistance as the board of directors deems advisable to preserve the status of
the Vornado Realty Trust or any affiliate of Vornado Realty Trust as a REIT.
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<PAGE> 18
Section F. Information for Corporation. Until the Restriction
Termination Date: each Person who is a Beneficial Owner of Shares and each
Person (including the shareholder of record) who is holding Shares for a
Beneficial Owner shall provide to the Corporation in writing such information
with respect to direct, indirect and constructive ownership of Shares as the
board of directors deems reasonably necessary to comply with the provisions of
the Code applicable to the status of Vornado Realty Trust or any of its
affiliates as a REIT, to determine the status of Vornado Realty Trust or any of
its affiliates as a REIT, to comply with the requirements of any taxing
authority or governmental agency or to determine any such compliance.
Section G. Other Action by Board. Subject to Section B of this
Article, nothing contained in this Article shall limit the authority of the
board of directors to take such other action as it deems necessary or advisable
to protect the status of Vornado Realty Trust or any affiliate of Vornado Realty
Trust as a REIT.
Section H. Ambiguities. In the case of an ambiguity in the
application of any of the provisions of this Article, including any definition
contained in Section A, the board of directors shall have the power to determine
the application of the provisions of this Article with respect to any situation
based on the facts known to it. In the event this Article requires or permits an
action
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<PAGE> 19
by the board of directors and the Certificate of Incorporation fails to provide
specific guidance with respect to such action, the board of directors shall have
the power to determine the action to be taken so long as such action is not
contrary to the provisions of this Article.
Section I. Legend. Each certificate for Shares
shall bear substantially the following legend:
The securities represented by this certificate are subject to
restrictions on ownership and transfer. Except as otherwise
provided pursuant to the Certificate of Incorporation of the
Corporation, no Person may Beneficially Own Shares in excess
of 9.9% of the number or value of the outstanding Shares of
any class or series of the Common Stock or Preferred Stock of
the Corporation. Any Person who attempts or proposes to
Beneficially Own Shares in excess of the above limitations
must notify the Corporation in writing at least 15 days prior
to such proposed or attempted Transfer. All capitalized terms
in this legend have the meanings defined in the Certificate of
Incorporation of the Corporation, a copy of which, including
the restrictions on transfer, will be furnished to each
shareholder on request and without charge. If the restrictions
on transfer are violated, the securities represented hereby
which are in excess of the above limitations will be
designated and treated as Excess Shares which will be held in
trust by the Excess Share Trustee for the benefit of the
Charitable Beneficiary.
Instead of the foregoing legend, the certificate
may state that the Corporation will furnish a full statement about certain
restrictions on transferability to a shareholder on request and without charge.
Section J. Severability. If any provision of this Article or
any application of any such provision is
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<PAGE> 20
determined to be void, invalid or unenforceable by any court having jurisdiction
over the issue, the validity and enforceability of the remaining provisions
shall be affected only to the extent necessary to comply with the determination
of such court.
Section K. Transfer of Excess Shares. Upon any purported
Transfer that results in Excess Shares pursuant to Section C of this Article,
such Excess Shares shall be deemed to have been transferred to the Excess Share
Trustee, as trustee of a special trust for the exclusive benefit of the
Charitable Beneficiary. The Corporation shall name a Charitable Beneficiary, if
one does not already exist, within five days of the discovery of any designation
of any Excess Shares; however, the failure to so name a Charitable Beneficiary
shall not affect the designation of Shares as Excess Shares or the transfer
thereof to the Excess Share Trustee. Excess Shares so held in trust shall be
issued and outstanding Shares of the Corporation. The Purported Record
Transferee or Purported Record Holder shall have no rights in such Excess Shares
except as expressly provided in this Article.
Section L. Distributions on Excess Shares. Any dividends
(whether taxable as a dividend, return of capital or otherwise) on Excess Shares
shall be paid to the Excess Share Trust for the benefit of the Charitable
Beneficiary. Upon liquidation, dissolution or winding up, the Purported
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<PAGE> 21
Record Transferee shall receive, for each Excess Share, the lesser of (1) the
amount per share of any distribution made upon liquidation, dissolution or
winding up or (2) the price paid by the Purported Record Transferee for the
Excess Shares, or if the Purported Record Transferee did not give value for the
Excess Shares, the Fair Market Value of the Excess Shares on the day of the
event causing the Excess Shares to be held in trust. Any such dividend or
distribution paid to the Purported Record Transferee in excess of the amount
provided in the preceding sentence prior to the discovery by the Corporation
that the Shares with respect to which the dividend or distribution was made had
been designated as Excess Shares shall be repaid, upon demand, to the Excess
Share Trust for the benefit of the Charitable Beneficiary.
Section M. Voting of Excess Shares. The Excess Share Trustee
shall be entitled to vote the Excess Shares on behalf of the Charitable
Beneficiary on any matter. Subject to Delaware law, any vote cast by a Purported
Record Transferee with respect to the Excess Shares prior to the discovery by
the Corporation that the Excess Shares were held in trust will be rescinded ab
initio; provided, however, that if the Corporation has already taken
irreversible action with respect to a merger, reorganization, sale of all or
substantially all the assets, dissolution of the Corporation or other action by
the
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Corporation, then the vote cast by the Purported Record Transferee shall not be
rescinded. The owner of the Excess Shares will be deemed to have given an
irrevocable proxy to the Excess Share Trustee to vote the Excess Shares for the
benefit of the Charitable Beneficiary.
Notwithstanding the provisions of this Article, until the
Corporation has received notification that Excess Shares have been transferred
into an Excess Share Trust, the Corporation shall be entitled to rely on its
share transfer and other stockholder records for purposes of preparing lists of
stockholders entitled to vote at meetings, determining the validity and
authority of proxies and otherwise conducting votes of stockholders.
Section N. Non-Transferability of Excess Shares. Excess Shares
shall be transferable only as provided in this Section N. At the direction of
the Board of the Directors, the Excess Share Trustee shall transfer the Shares
held in the Excess Share Trust to a Person or Persons whose ownership of such
Shares will not violate the Ownership Limit. If such a transfer is made to such
a Person or Persons, the interest of the Charitable Beneficiary shall terminate
the designation of such Shares as Excess Shares shall thereupon cease. The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee for the Excess Shares or, if the Purported
Record Transferee did not give value for the Excess Shares,
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the Fair Market Value of the Excess Shares on the day of the event causing the
Excess Shares to be held in trust, or (2) the price received by the Excess Share
Trust from the sale or other disposition of the Excess Shares. Any proceeds in
excess of the amount payable to the Purported Record Transferee will be paid to
the Charitable Beneficiary. The Excess Share Trustee shall be under no
obligation to obtain the highest possible price for the Excess Shares. Prior to
any transfer of any Excess Shares by the Excess Share Trustee, the Corporation
must have waived in writing its purchase rights under Section O. It is expressly
understood that the Purported Record Transferee may enforce the provisions of
this Section against the Charitable Beneficiary.
If any of the foregoing restrictions on transfer of Excess Shares is
determined to be void, invalid or unenforceable by any court of competent
jurisdiction, then the Purported Record Transferee may be deemed, at the option
of the Corporation, to have acted as an agent of the Corporation in acquiring
such Excess Shares in trust and to hold such Excess Shares on behalf of the
Corporation.
Section O. Call by Corporation on Excess Shares. Excess Shares
shall be deemed to have been offered for sale to the Corporation, or its
designee, at a price equal to the lesser of (a) the price paid by the Purported
Record Transferee for the Excess Shares or, if the Purported Record
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Transferee did not give value for the Excess Shares, the Fair Market Value of
the Excess Shares on the day of the event causing the Excess Shares to be held
in trust and (b) the Fair Market Value of the Excess Shares on the date the
Corporation, or its designee, accepts such offer (the "Redemption Price"). The
Corporation shall have the right to accept such offer for a period of ninety
days after the later of (x) the date of the Purported Transfer which resulted in
such Excess Shares or (y) the date the board of directors determines in good
faith that a Purported Transfer resulting in Excess Shares has occurred, if the
Corporation does not receive a notice of such Purported Transfer pursuant to
Section E of this Article but in no event later than a permitted Transfer
pursuant to and in compliance with the terms of Section N of this Article.
Unless the board of directors determines that it is in the interests of the
Corporation to make earlier payments of all of the amount determined as the
Redemption Price in accordance with the preceding sentence, the Redemption Price
may be payable at the option of the board of directors at any time up to but not
later than the five years after the date the Corporation accepts the offer to
purchase the Excess Shares. In no event shall the Corporation have an obligation
to pay interest to the Purported Record Transferee.
Section P. Underwritten Offerings. The Ownership
Limit shall not apply to the acquisition of Shares or
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rights, options or warrants for, or securities convertible into, Shares by an
underwriter in a public offering, provided that (i) the underwriter makes a
timely distribution of such Shares or rights, options or warrants for, or
securities convertible into, Shares and (ii) the underwriter Beneficially Owns
(x) less than 10% of the value of the outstanding shares of Vornado Realty Trust
and (y) less than 10% of the value of the outstanding shares of any affiliate of
Vornado Realty Trust that is a REIT.
Section Q. Enforcement. The Corporation is
authorized specifically to seek equitable relief, including injunctive relief,
to enforce the provisions of this Article.
Section R. Non-Waiver. No delay or failure on the part of the
Corporation or the board of directors in exercising any right hereunder shall
operate as a waiver of any right of the Corporation or the board of directors,
as the case may be, except to the extent specifically waived in writing.
Section S. Interstate Properties. The Ownership Limit set
forth in this Article shall not apply to Interstate Properties, any partner in
Interstate Properties or any person treated as Beneficially Owning Shares
Beneficially Owned by Interstate Properties or any partner in Interstate
Properties until after December 31, 1998.
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IN WITNESS WHEREOF, Vornado Operating, Inc. has caused this
certificate to be signed by Joseph Macnow, its Executive Vice President, on the
___ day of __________, 1998.
VORNADO OPERATING, INC.
By___________________________
Joseph Macnow
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Exhibit 3.2
FORM OF
BY-LAWS
OF
VORNADO OPERATING COMPANY
ARTICLE I
Stockholders
Section 1.1. Annual Meetings. An annual meeting of stockholders
shall be held for the election of directors at such date, time and place either
within or without the State of Delaware as may be designated by the Board of
Directors from time to time. Any other proper business may be transacted at the
annual meeting.
Section 1.2. Special Meetings. Special meetings of stockholders may
be called at any time by the Chairman of the Board, if any, the Vice Chairman of
the Board, if any, the President or the Board of Directors pursuant to a
resolution stating the purpose or purposes thereof, to be held at such date,
time and place either within or without the State of Delaware as may be stated
in the notice of the meeting. Any power of stockholders to call a special
meeting is specifically denied.
Section 1.3. Notice of Meetings. Whenever stockholders are required
or permitted to take any action at a meeting, a written notice of the meeting
shall be given which shall state the place, date and hour of the meeting, and,
in the case of a special meeting, the purpose or purposes for which the meeting
is called. Unless otherwise provided by law, the written notice of any meeting
shall be given not less than ten nor more than sixty days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as it
appears on the records of the Corporation.
Section 1.4. Adjournments. Any meeting of stockholders, annual or
special, may be adjourned from time to time, to reconvene at the same or some
other place, and notice need not be given of any such adjourned meeting if
<PAGE> 2
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the Corporation may transact any business
which might have been transacted at the original meeting. If the adjournment is
for more than thirty days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 1.5. Quorum. At each meeting of stockholders, except where
otherwise provided by law or the certificate of incorporation or these by-laws,
the holders of a majority of the outstanding shares of stock entitled to vote on
a matter at the meeting, present in person or represented by proxy, shall
constitute a quorum. For purposes of the foregoing, where a separate vote by
class or classes is required for any matter, the holders of a majority of the
outstanding shares of such class or classes, present in person or represented by
proxy, shall constitute a quorum to take action with respect to that vote on
that matter. Two or more classes or series of stock shall be considered a single
class if the holders thereof are entitled to vote together as a single class at
the meeting. In the absence of a quorum of the holders of any class of stock
entitled to vote on a matter, the holders of such class so present or
represented may, by majority vote, adjourn the meeting of such class from time
to time in the manner provided by Section 1.4 of these by-laws until a quorum of
such class shall be so present or represented. Shares of its own capital stock
belonging on the record date for the meeting to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
Section 1.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in the absence of
the President by a Vice President, or in the absence of the foregoing persons by
a chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary, or in the
absence of the Secretary an Assistant Secretary, shall act as secretary of the
meeting, but in the
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absence of the Secretary and any Assistant Secretary the chairman of the meeting
may appoint any person to act as secretary of the meeting.
The order of business at each such meeting shall be as determined by
the chairman of the meeting. The chairman of the meeting shall have the right
and authority to prescribe such rules, regulations and procedures and to do all
such acts and things as are necessary or desirable for the proper conduct of the
meeting, including, without limitation, the establishment of procedures for the
maintenance of order and safety, limitations on the time allotted to questions
or comments on the affairs of the Corporation, restrictions on entry to such
meeting after the time prescribed for the commencement thereof and the opening
and closing of the voting polls.
Section 1.7. Inspectors. Prior to any meeting of stockholders, the
Board of Directors or the President shall appoint one or more inspectors to act
at such meeting and make a written report thereof and may designate one or more
persons as alternate inspectors to replace any inspector who fails to act. If no
inspector or alternate is able to act at the meeting of stockholders, the person
presiding at the meeting shall appoint one or more inspectors to act at the
meeting. Each inspector, before entering upon the discharge of his or her
duties, shall take and sign an oath faithfully to execute the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors shall ascertain the number of shares outstanding and the
voting power of each, determine the shares represented at the meeting and the
validity of proxies and ballots, count all votes and ballots, determine and
retain for a reasonable period a record of the disposition of any challenges
made to any determination by the inspectors and certify their determination of
the number of shares represented at the meeting and their count of all votes and
ballots. The inspectors may appoint or retain other persons to assist them in
the performance of their duties. The date and time of the opening and closing of
the polls for each matter upon which the stockholders will vote at a meeting
shall be announced at the meeting. No ballot, proxy or vote, nor any revocation
thereof or change thereto, shall be accepted by the inspectors after the closing
of the polls. In determining the validity and counting of proxies and ballots,
the inspectors shall be limited to an examination of the proxies, any envelopes
submitted therewith, any information provided by a stockholder who submits a
proxy by telegram, cablegram or other electronic transmission from which it can
be determined that the proxy was authorized by the stockholder, ballots and the
regular books and records
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of the corporation, and they may also consider other reliable information for
the limited purpose of reconciling proxies and ballots submitted by or on behalf
of banks, brokers, their nominees or similar persons which represent more votes
than the holder of a proxy is authorized by the record owner to cast or more
votes than the stockholder holds of record. If the inspectors consider other
reliable information for such purpose, they shall, at the time they make their
certification, specify the precise information considered by them, including the
person or persons from whom they obtained the information, when the information
was obtained, the means by which the information was obtained and the basis for
the inspectors' belief that such information is accurate and reliable.
Section 1.8. Voting; Proxies. Unless otherwise provided in the
certificate of incorporation, each stockholder entitled to vote at any meeting
of stockholders shall be entitled to one vote for each share of stock held by
such stockholder which has voting power upon the matter in question. Each
stockholder entitled to vote at a meeting of stockholders or to express consent
or dissent to corporate action in writing without a meeting may authorize
another person or persons to act for such stockholder by proxy, but no such
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power, regardless
of whether the interest with which it is coupled is an interest in the stock
itself or an interest in the Corporation generally. A stockholder may revoke any
proxy which is not irrevocable by attending the meeting and voting in person or
by filing an instrument in writing revoking the proxy or another duly executed
proxy bearing a later date with the Secretary of the Corporation. Voting at
meetings of stockholders need not be by written ballot unless the holders of a
majority of the outstanding shares of all classes of stock entitled to vote
thereon present in person or represented by proxy at such meeting shall so
determine. Directors shall be elected by a plurality of the votes of the shares
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. In all other matters, unless otherwise provided by
law or by the certificate of incorporation or these by-laws, the affirmative
vote of the holders of a majority of the shares present in person or represented
by proxy at the meeting and entitled to vote on the subject matter shall be the
act of the stockholders. Where a separate vote by class or classes is required,
the affirmative vote of the holders of a majority of the shares
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<PAGE> 5
of such class or classes present in person or represented by proxy at the
meeting shall be the act of such class or classes, except as otherwise provided
by law or by the certificate of incorporation or these by-laws.
Section 1.9. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date shall not be more than sixty nor
less than ten days before the date of such meeting. If no record date is fixed
by the Board of Directors, the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days prior to such
action. If no record date is fixed, the record date for determining stockholders
for any such purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
Section 1.10. List of Stockholders Entitled to Vote. The Secretary
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place
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within the city where the meeting is to be held, which place shall be specified
in the notice of the meeting, or, if not so specified, at the place where the
meeting is to be held. The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof and may be inspected by any
stockholder who is present.
Section 1.11 Consent of Stockholders Not Permitted. Any action
required or permitted to be taken by the stockholders of the Corporation must be
taken at a duly called annual or special meeting of such holders and may not be
taken by any consent in writing by such holders.
Section 1.12. Advance Notice of Stockholder Proposals. At any annual
or special meeting of stockholders, proposals by stockholders and persons
nominated for election as directors by stockholders shall be considered only if
advance notice thereof has been timely given as provided herein and such
proposals or nominations are otherwise proper for consideration under applicable
law and the certificate of incorporation and by-laws of the Corporation. Notice
of any proposal to be presented by any stockholder or of the name of any person
to be nominated by any stockholder for election as a director of the Corporation
at any meeting of stockholders shall be delivered to the Secretary of the
Corporation at its principal executive office not less than 60 nor more than 90
days prior to the date of the meeting; provided, however, that if the date of
the meeting is first publicly announced or disclosed (in a public filing or
otherwise) less than 70 days prior to the date of the meeting, such advance
notice shall be given not more than ten days after such date is first so
announced or disclosed. Public notice shall be deemed to have been given more
than 70 days in advance of the annual meeting if the Corporation shall have
previously disclosed, in these by-laws or otherwise, that the annual meeting in
each year is to be held on a determinable date, unless and until the Board
determines to hold the meeting on a different date. Any stockholder who gives
notice of any such proposal shall deliver therewith the text of the proposal to
be presented and a brief written statement of the reasons why such stockholder
favors the proposal and setting forth such stockholder's name and address, the
number and class of all shares of each class of stock of the Corporation
beneficially owned by such stockholder and any material interest of such
stockholder in the proposal (other than as a stockholder). Any stockholder
desiring to nominate any person for election as a director of the Corporation
shall deliver with such notice a statement in writing setting forth the name of
the person to be nominated, the number and class of all shares of each class
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of stock of the Corporation beneficially owned by such person, the information
regarding such person required by paragraphs (a), (e) and (f) of Item 401 of
Regulation S-K adopted by the Securities and Exchange Commission (or the
corresponding provisions of any regulation subsequently adopted by the
Securities and Exchange Commission applicable to the Corporation), such person's
signed consent to serve as a director of the Corporation if elected, such
stockholder's name and address and the number and class of all shares of each
class of stock of the Corporation beneficially owned by such stockholder. As
used herein, shares "beneficially owned" shall mean all shares as to which such
person, together with such person's affiliates and associates (as defined in
Rule 12b-2 under the Securities Exchange Act of 1934), may be deemed to
beneficially own pursuant to Rules 13d-3 and 13d-5 under the Securities Exchange
Act of 1934, as well as all shares as to which such person, together with such
person's affiliates and associates, has the right to become the beneficial owner
pursuant to any agreement or understanding, or upon the exercise of warrants,
options or rights to convert or exchange (whether such rights are exercisable
immediately or only after the passage of time or the occurrence of conditions).
The person presiding at the meeting, in addition to making any other
determinations that may be appropriate to the conduct of the meeting, shall
determine whether such notice has been duly given and shall direct that
proposals and nominees not be considered if such notice has not been given.
ARTICLE II
Board of Directors
Section 2.1. Powers; Number; Qualifications. The business and
affairs of the Corporation shall be managed by or under the direction of the
Board of Directors, except as may be otherwise provided by law or in the
certificate of incorporation. The Board of Directors shall consist of one or
more members, the number thereof to be determined from time to time by the
Board. Directors need not be stockholders.
Section 2.2. Election; Term of Office; Resignation; Removal;
Vacancies. The directors of the Corporation shall be divided into three classes,
as nearly equal in number as reasonably possible, as determined by the Board of
Directors, with the initial term of office of the first class of such directors
to expire at the first annual meeting of stockholders, the initial term of
office of the
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second class of such directors to expire at the second annual meeting of
stockholders and the initial term of office of the third class of such directors
to expire at the third annual meeting of stockholders, with each class of
directors to hold office until their successors have been duly elected and
qualified. At each annual meeting of stockholders, directors elected to succeed
the directors whose terms expire at such annual meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders in the third
year following the year of their election and until their successors have been
duly elected and qualified or until his or her earlier resignation or removal.
Any director may resign at any time upon written notice to the Board
of Directors or to the President or the Secretary of the Corporation. Such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein no acceptance of such resignation shall be necessary
to make it effective. No director may be removed except for cause.
In the event of any increase or decrease in the authorized number of
directors, (a) each director then serving as such shall nonetheless continue as
a director of the class of which he is a member until the expiration of his
current term, or his earlier death, retirement, resignation, or removal, and (b)
the newly created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board of Directors among the three classes
of directors so as to maintain such classes as nearly equal in number as
reasonably possible. Unless otherwise provided in the certificate of
incorporation or these by-laws, vacancies, whether arising through death,
retirement, resignation or removal of a director or through an increase in the
authorized number of directors of any class, may only be filled by a majority
vote of the remaining directors of the class in which such vacancy occurs, or by
the sole remaining director of that class if one such director remains, or by
the majority vote of the directors of the remaining classes if no such director
remains, or by stockholders at an annual meeting of stockholders of the
Corporation. Any director elected or appointed to fill a vacancy shall hold
office until the next election of the class of directors of the director which
such director replaced, and until and his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Section 2.3. Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within
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or without the State of Delaware and at such times as the Board may from time to
time determine, and if so determined notice thereof need not be given.
Section 2.4. Special Meetings. Special meetings of the Board of
Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board, if any, by the Vice
Chairman of the Board, if any, by the President or by any two directors.
Reasonable notice thereof shall be given by the person or persons calling the
meeting.
Section 2.5. Participation in Meetings by Conference Telephone
Permitted. Unless otherwise restricted by the certificate of incorporation or
these by-laws, members of the Board of Directors, or any committee designated by
the Board, may participate in a meeting of the Board or of such committee, as
the case may be, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this by-law shall
constitute presence in person at such meeting.
Section 2.6. Quorum; Vote Required for Action. At all meetings of
the Board of Directors one-third of the entire Board shall constitute a quorum
for the transaction of business. The vote of a majority of the directors present
at a meeting at which a quorum is present shall be the act of the Board unless
the certificate of incorporation or these by-laws shall require a vote of a
greater number. In case at any meeting of the Board a quorum shall not be
present, the members of the Board present may adjourn the meeting from time to
time until a quorum shall be present.
Section 2.7. Organization. Meetings of the Board of Directors shall
be presided over by the Chairman of the Board, if any, or in the absence of the
Chairman of the Board by the Vice Chairman of the Board, if any, or in the
absence of the Vice Chairman of the Board by the President, or in their absence
by a chairman chosen at the meeting. The Secretary, or in the absence of the
Secretary an Assistant Secretary, shall act as secretary of the meeting, but in
the absence of the Secretary and any Assistant Secretary the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 2.8. Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation or these by-laws, any action
required or permitted to be taken at any meeting of the Board of
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Directors, or of any committee thereof, may be taken without a meeting if all
members of the Board or of such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
Section 2.9. Compensation of Directors. Unless otherwise restricted by
the certificate of incorporation or these by-laws, the Board of Directors shall
have the authority to fix the compensation of directors.
ARTICLE III
Committees
Section 3.1. Committees. The Board of Directors may designate one or
more committees, each committee to consist of one or more of the directors of
the Corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the Board to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors or
in these by-laws, shall have and may exercise all the powers and authority of
the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; but no such committee shall have the power or
authority in reference to the following matters: (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by law
to be submitted to stockholders for approval, (ii) adopting, amending or
repealing these By-Laws or (iii) removing or indemnifying directors.
Section 3.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board or a provision in the rules of such committee to the contrary, a
majority of the entire authorized number of members of such committee shall
constitute a quorum for the transaction of business, the vote of a majority of
the members present at a meeting at the time of such vote if a
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quorum is then present shall be the act of such committee, and in other respects
each committee shall conduct its business in the same manner as the Board
conducts its business pursuant to Article II of these by-laws.
ARTICLE IV
Officers
Section 4.1. Officers; Election. As soon as practicable after the
annual meeting of stockholders in each year, the Board of Directors shall elect
a President and a Secretary, and it may, if it so determines, elect from among
its members a Chairman of the Board and a Vice Chairman of the Board. The Board
may also elect one or more Vice Presidents, one or more Assistant Vice
Presidents, one or more Assistant Secretaries, a Treasurer and one or more
Assistant Treasurers and such other officers as the Board may deem desirable or
appropriate and may give any of them such further designations or alternate
titles as it considers desirable. Any number of offices may be held by the same
person unless the certificate of incorporation or these by-laws otherwise
provide.
Section 4.2. Term of Office; Resignation; Removal; Vacancies. Unless
otherwise provided in the resolution of the Board of Directors electing any
officer, each officer shall hold office until his or her successor is elected
and qualified or until his or her earlier resignation or removal. Any officer
may resign at any time upon written notice to the Board or to the President or
the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein no acceptance of such
resignation shall be necessary to make it effective. The Board may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled by the Board at any
regular or special meeting.
Section 4.3. Powers and Duties. The officers of the Corporation
shall have such powers and duties in the management of the Corporation as shall
be stated in these by-laws or in a resolution of the Board of Directors which is
not inconsistent with these by-laws and, to the extent not so stated, as
generally pertain to their respective offices, subject to the control of the
Board. The Secretary
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<PAGE> 12
shall have the duty to record the proceedings of the meetings of the
stockholders, the Board of Directors and any committees in a book to be kept for
that purpose. The Board may require any officer, agent or employee to give
security for the faithful performance of his or her duties.
ARTICLE V
Stock
Section 5.1. Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman or Vice Chairman of the Board of Directors, if any,
or the President or a Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary, of the Corporation,
representing the number of shares of stock in the Corporation owned by such
holder. If such certificate is manually signed by one officer or manually
countersigned by a transfer agent or by a registrar, any other signature on the
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if such person were such officer, transfer agent or registrar at the date of
issue.
If the Corporation is authorized to issue more than one class of
stock or more than one series of any class, the powers, designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications or restrictions of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise provided by
law, in lieu of the foregoing requirements, there may be set forth on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock a statement that the Corporation will furnish without
charge to each stockholder who so requests the powers, designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.
-12-
<PAGE> 13
Section 5.2. Lost, Stolen or Destroyed Stock Certificates; Issuance
of New Certificates. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen or destroyed, and the Corporation may require the owner of the lost,
stolen or destroyed certificate, or such owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
ARTICLE VI
Miscellaneous
Section 6.1. Fiscal Year. The fiscal year of the Corporation shall
be determined by the Board of Directors.
Section 6.2. Seal. The Corporation may have a corporate seal which
shall have the name of the Corporation inscribed thereon and shall be in such
form as may be approved from time to time by the Board of Directors. The
corporate seal may be used by causing it or a facsimile thereof to be impressed
or affixed or in any other manner reproduced.
Section 6.3. Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Whenever notice is required to be given by law or under any
provision of the certificate of incorporation or these by-laws, a written waiver
thereof, signed by the person entitled to notice, whether before or after the
time stated therein, shall be deemed equivalent to notice. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders,
directors or members of a committee of directors need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these by-laws.
Section 6.4. Indemnification of Directors, Officers and Employees;
Insurance. The Corporation shall indemnify to the full extent permitted by law
any person made or threatened to be made a party to any action, suit or
proceeding, whether civil, criminal, administrative or
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<PAGE> 14
investigative, by reason of the fact that such person or such person's testator
or intestate is or was a director, officer or employee of the Corporation or
serves or served at the request of the Corporation any other enterprise as a
director, officer or employee. Expenses, including attorneys' fees, incurred by
any such person in defending any such action, suit or proceeding shall be paid
or reimbursed by the Corporation promptly upon receipt by it of an undertaking
of such person to repay such expenses if it shall ultimately be determined that
such person is not entitled to be indemnified by the Corporation. The rights
provided to any person by this by-law shall be enforceable against the
Corporation by such person who shall be presumed to have relied upon it in
serving or continuing to serve as a director, officer or employee as provided
above. No amendment of this by-law shall impair the rights of any person arising
at any time with respect to events occurring prior to such amendment. For
purposes of this by-law, the term "Corporation" shall include any predecessor of
the Corporation and any constituent corporation (including any constituent of a
constituent) absorbed by the Corporation in a consolidation or merger; the term
"other enterprise" shall include any corporation, partnership, joint venture,
trust or employee benefit plan; service "at the request of the Corporation"
shall include service as a director, officer or employee of the Corporation
which imposes duties on, or involves services by, such director, officer or
employee with respect to an employee benefit plan, its participants or
beneficiaries; any excise taxes assessed on a person with respect to an employee
benefit plan shall be deemed to be indemnifiable expenses; and action by a
person with respect to an employee benefit plan which such person reasonably
believes to be in the interest of the participants and beneficiaries of such
plan shall be deemed to be action not opposed to the best interests of the
Corporation.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
Section 6.5. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the Corporation and any other corporation, partnership,
association or other organization in which one or more of its directors or
officers are directors or officers, or have
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<PAGE> 15
a financial interest, shall be void or voidable solely for this reason, or
solely because the director or officer is present at or participates in the
meeting of the Board of Directors or committee thereof which authorizes the
contract or transaction, or solely because his or her or their votes are counted
for such purpose, if: (1) the material facts as to his or her relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board or the committee, and the Board or committee in good faith authorizes the
contract or transaction by the affirmative votes of a majority of the
disinterested directors, even though the disinterested directors be less than a
quorum; or (2) the material facts as to his or her relationship or interest and
as to the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified, by the Board, a committee thereof or the stockholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
Section 6.6. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time. The Corporation shall so convert any
records so kept upon the request of any person entitled to inspect the same.
Section 6.7. Amendment of By-Laws. These by-laws may be amended or
repealed, and new by-laws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional by-laws and may amend or
repeal any by-law whether or not adopted by them.
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<PAGE> 1
EXHIBIT 4.1
NUMBER VORNADO SHARES
[ ] OPERATING COMPANY [ ]
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 92904N 10 3
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE IN CHARLOTTE, N.C. AND NEW YORK, N.Y.
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK, $.01 PAR VALUE, OF
VORNADO OPERATING COMPANY
transferable on the books of the Company by the holder hereof in person or by
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Company and the facsimile signatures of
its duly authorized officers.
DATED
Countersigned and Registered
FIRST UNION NATIONAL BANK President
(Charlotte, N.C.)
Transfer Agent [SEAL]
and Registrar
By
Authorized Signature Secretary
<PAGE> 2
VORNADO OPERATING COMPANY
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.
<TABLE>
<S> <C>
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties UNIF GIFT MIN ACT - Custodian
JT TEN - as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
(State)
</TABLE>
Additional abbreviations may also be used though not in the above list
For value received, _______________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
| |
| |
| |
________________________________________
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
_______________________________________________________________________________
_______________________________________________________________________________
_________________________________________________________________________shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________, Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution on the premises.
Dated _______________________ _________
_________________________________________________
NOTICE THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER
<TABLE>
<S> <C>
_______________________________________________________________ __________________________________________________________________
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR, LISA MARTIN: 215-830-2155
680 BLAIR MILL ROAD PROOF OF NOVEMBER 24, 1997
HORSHAM, PA 19044 VORNADO OPERATING INC.
(215) 657-3480 H 53628 back
- ---------------------------------------------------------------- ------------------------------------------------------------------
SALES: R. JOHNS: 212-557-9100 OPERATOR: LARRY/HJ/KOSHY
- ---------------------------------------------------------------- ------------------------------------------------------------------
Zip Disk 1/VORNADO H53628 REV 3
________________________________________________________________ _________________________________________________________________
</TABLE>
<PAGE> 1
EXHIBIT 10.1
INTERCOMPANY AGREEMENT
This Intercompany Agreement is made and entered into as of
January -, 1998, by and between Vornado Realty L.P., a Delaware limited
partnership, and Vornado Operating Company, a Delaware corporation.
WITNESSETH:
WHEREAS, Vornado Sub is a Subsidiary of Vornado;
WHEREAS, Vornado Sub may in certain circumstances determine
that it is precluded from pursuing, or is limited in the manner in which it
pursues, various business opportunities due to the status of Vornado as a REIT;
WHEREAS, the Company is a newly created corporation that was
formed to own assets that Vornado could not itself own and conduct activities
that Vornado could not itself conduct;
WHEREAS, in light of the limited purpose for which the Company
was formed, Vornado Sub and the Company desire to agree on certain matters
relating to (a) REIT Opportunities and Tenant Opportunities and (b) the
provision of certain services to the Company;
NOW, THEREFORE, the undersigned parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Certain Defined Terms. The following terms have the
meanings set forth below:
"Agreement" means this Intercompany Agreement, as it may be
amended, modified or supplemented from time to time.
"Affiliate" means, with respect to any Person, any other
Person that controls, is controlled by, or is under common control with, such
Person. Any Person in which a majority of the beneficial ownership interests are
owned by Vornado or Vornado Sub or any of their Affiliates shall be deemed to be
an Affiliate of Vornado Sub for purposes of this Agreement. Any Person in which
a majority of the beneficial ownership interests is owned by the Company or any
of its Affiliates shall be deemed to be an Affiliate of the Company for purposes
of this Agreement.
<PAGE> 2
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Company" means Vornado Operating Company, a Delaware
corporation, together with all of its Subsidiaries (except where the context
otherwise requires).
"Exchange Act" means the Securities Exchange Act of 1934 as it
may be amended and any successor act thereto.
"Person" means any individual or entity.
"REIT" means a real estate investment trust under sections 856
through 860 of the Code;
"REIT Opportunity" means any opportunity to (i) make any
investment in real estate (including the provision of services related to real
estate, real estate mortgages, real estate derivatives, or entities that invest
in the foregoing), or (ii) make any REIT-Qualified Investment; provided, that
Vornado Sub may from time to time modify the foregoing definition of REIT
Opportunity by providing written notice to the Company specifying certain
additional criteria that an opportunity must meet in order to constitute a "REIT
Opportunity"; provided, further, that any such written notice from Vornado Sub
may from time to time be modified or canceled by providing written notice to the
Company.
"REIT Opportunity Notice" has the meaning assigned to such
term in Section 2.1.
"REIT Opportunity Withdrawal Date" means any one of the
following dates, as applicable: (i) the date that Vornado Sub notifies the
Company that it has rejected the REIT Opportunity, (ii) if Vornado Sub does not
respond to the Company regarding the REIT Opportunity, the expiration date of
the applicable Ten-Day Period, or (iii) if Vornado Sub notifies the Company that
it desires to pursue the REIT Opportunity but subsequently ceases to pursue the
REIT Opportunity, the earlier of (A) 30 days after the date on which Vornado Sub
ceases to pursue the REIT Opportunity or (B) the date of receipt by the Company
of written notice from Vornado Sub that it is no longer pursuing the REIT
Opportunity.
"REIT-Qualified Investment" means an investment, at least 95%
of the gross income from which would qualify under the 95% gross income test set
forth in section 856(c)(2) of the Code (or could be structured to so qualify)
and the ownership of which would not cause Vornado to violate the asset
limitations set forth in section 856(c)(4) of the Code (or could be structured
not to cause Vornado to violate the section 856(c)(4) limitations); provided,
however, that "REIT-Qualified Investment" does not include an
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<PAGE> 3
investment in government securities, cash or cash items (as defined for purposes
of section 856(c)(4) of the Code), money market funds, certificates of deposit,
commercial paper having a maturity of not more than 90 days, bankers'
acceptances or the property transferred to the Company by Vornado Sub prior to
the date hereof.
"Subsidiary" means, with respect to any Person, any Affiliate
of such Person which is controlled by such Person.
"Tenant Opportunity" means the opportunity to become the
lessee of any real property owned now or in the future by Vornado Sub if Vornado
Sub determines in its sole discretion that, consistent with Vornado's status as
a REIT, Vornado Sub is required to enter into a "master" lease arrangement with
respect to such property and the Company is qualified to act as lessee thereof;
provided, that the Company may from time to time modify the foregoing definition
of Tenant Opportunity by providing written notice to Vornado Sub specifying
certain additional criteria that an opportunity must meet in order to constitute
a "Tenant Opportunity"; provided, further, that any such written notice from the
Company may from time to time be modified or canceled by providing written
notice to Vornado Sub; provided, further, a Tenant Opportunity shall not include
an opportunity in respect of (i) a property which has a "master" lessee as of
the date of this Agreement, (ii) a property which has a "master" lessee that
predates the acquisition of the property by Vornado Sub and (iii) a property in
which the seller of such property (or any affiliate or designee of the seller)
desires to enter into a "master" lease arrangement with Vornado Sub.
"Tenant Opportunity Notice" has the meaning assigned to the
term in Section 3.1.
"Ten-Day Period" has the meaning assigned to such term in
Section 2.1.
"Thirty-Day Period" has the meaning assigned to such term in
Section 3.1.
"Vornado" means Vornado Realty Trust, a Maryland real estate
investment trust.
"Vornado Sub" means Vornado Realty L.P., a Delaware limited
partnership, together with all of its Subsidiaries (except where the context
otherwise requires).
ARTICLE II
REIT OPPORTUNITIES
2.1 Offer of REIT Opportunities to Vornado Sub. (a) During the
term of this Agreement, if the Company desires to pursue a REIT Opportunity, or
if any REIT
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<PAGE> 4
Opportunity otherwise becomes available to the Company, the Company shall first
offer such REIT Opportunity to Vornado Sub.
(b) The offer of a REIT Opportunity shall be made by written
notice (the "REIT Opportunity Notice") from the Company to Vornado Sub
containing a detailed description of all material terms and conditions of the
REIT Opportunity.
(c) Vornado Sub shall have ten days (the "Ten-Day Period")
from the date of receipt of the REIT Opportunity Notice to notify the Company in
writing that it desires to pursue the REIT Opportunity. If Vornado Sub does not
respond by the end of the Ten-Day Period, Vornado Sub shall be deemed to have
rejected the REIT Opportunity. If Vornado Sub notifies the Company that Vornado
Sub desires to pursue the REIT Opportunity, but subsequently decides not to
pursue the REIT Opportunity, or for any other reason fails to consummate the
REIT Opportunity, Vornado Sub shall immediately provide written notice that it
is no longer pursuing the REIT Opportunity to the Company.
(d) The Company shall use its best efforts to assist Vornado
Sub in structuring and consummating any REIT Opportunity Vornado Sub elects to
pursue, on terms determined by Vornado Sub (including structuring such REIT
Opportunity as a REIT-Qualified Investment).
2.2 Rejected REIT Opportunities. (a) If Vornado Sub rejects a
REIT Opportunity, or accepts such REIT Opportunity but thereafter provides, or
is required by the provisions hereof to provide, written notice to the Company
that it is no longer pursuing such REIT Opportunity, the Company shall, for a
period of one year after the REIT Opportunity Withdrawal Date, be entitled to
pursue, and enter into a binding agreement in respect of, the REIT Opportunity
(i) at a price, and on terms and conditions, that are not more favorable to the
Company in any material respect than the price, terms and conditions set forth
in the REIT Opportunity Notice relating to such REIT Opportunity or (ii) if
Vornado Sub, at any time after the REIT Opportunity Notice, negotiated a
different price or different terms or conditions with the seller, then at a
price, and on terms and conditions, that are not more favorable to the Company
than the price, terms and conditions negotiated by Vornado Sub with the seller.
(b) If the Company does not enter into a binding agreement in
respect of the REIT Opportunity within such one-year period, or if the price,
terms or conditions are more favorable to the Company in any material respect
than the price, terms or conditions set forth in the REIT Opportunity Notice
(or, if applicable, than the price, terms or conditions negotiated by Vornado
Sub with the seller subsequent to the REIT Opportunity Notice), the Company
shall again be required to comply with the procedures set forth above in Section
2.1 if it desires to pursue such REIT Opportunity.
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<PAGE> 5
ARTICLE III
TENANT OPPORTUNITIES
3.1 Offer of Tenant Opportunity to Company. (a) During the
term of this Agreement, if Vornado Sub develops a Tenant Opportunity, or if a
Tenant Opportunity otherwise becomes available to Vornado Sub, Vornado Sub shall
first offer such Tenant Opportunity to the Company.
(b) The offer of a Tenant Opportunity shall be made by written
notice (the "Tenant Opportunity Notice") from Vornado Sub to the Company
containing a detailed description of the material terms and conditions under
which Vornado Sub proposes to offer such Tenant Opportunity to the Company.
Vornado Sub shall thereafter provide or cause to be provided promptly to the
Company such additional information relating to the Tenant Opportunity as the
Company reasonably may request.
(c) For a period of 30 days (the "Thirty-Day Period") after
the date that Vornado Sub delivers the Tenant Opportunity Notice to the Company,
Vornado Sub and the Company shall negotiate with each other on an exclusive
basis with respect to such Tenant Opportunity.
(d) Notwithstanding anything to the contrary contained in this
Agreement, (i) Vornado Sub shall not be required to offer to the Company any
Tenant Opportunity in connection with a proposed acquisition until a binding
agreement has been entered into with respect to such acquisition, and the
consummation of any agreement between Vornado Sub and the Company with respect
to such Tenant Opportunity shall be subject to the actual closing of such
acquisition by Vornado Sub, (ii) Vornado Sub shall have the right in its sole
discretion to decide not to pursue, or to discontinue at any time pursuing, any
investment opportunity, even if such opportunity, if pursued, would create a
Tenant Opportunity, and (iii) Vornado Sub shall have no obligation to offer any
opportunity other than a Tenant Opportunity to the Company.
(e) The Company shall use its best efforts to assist Vornado
Sub in structuring all dealings with outside parties in connection with any
Tenant Opportunity that the Company and Vornado Sub agree to enter into in the
manner desired by Vornado Sub. The Company shall use its best efforts to assist
Vornado Sub in structuring any Tenant Opportunity with Vornado Sub as a
REIT-Qualified Investment for Vornado Sub. Vornado Sub shall have the right, in
its sole discretion, to structure any investment as a REIT-Qualified Investment,
even if such structuring prevents Vornado Sub from creating a Tenant Opportunity
for the Company.
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<PAGE> 6
3.2 Rejected Tenant Opportunities. (a) If Vornado Sub and the
Company are unable to enter into a mutually satisfactory arrangement with
respect to the Tenant Opportunity within the Thirty-Day Period, or if the
Company indicates that it is not interested in pursuing such Tenant Opportunity
(in which event the Company shall provide written notice to Vornado Sub as soon
as the Company decides against pursuing such opportunity), then Vornado Sub
shall be free for a period of one year after the expiration of the Thirty-Day
Period to enter into a binding agreement with respect to such Tenant Opportunity
with any party on terms no more favorable to such party than the terms last
offered the Company.
(b) If Vornado Sub does not enter into a binding agreement
with respect to such Tenant Opportunity within such one-year period, or if the
terms are more favorable to the party than the terms last offered the Company,
Vornado Sub shall again be required to comply with the procedures set forth
above in Section 3.1 if it desires to enter into a binding agreement with
respect to such Tenant Opportunity with any party other than the Company.
ARTICLE IV
OTHER INVESTMENT OPPORTUNITIES
4.1 Other Investment Opportunities. The Company shall
immediately notify Vornado Sub of, and make available to Vornado Sub, any
investment opportunity other than a REIT Opportunity developed by or available
to the Company or of which the Company becomes aware but is unable or unwilling
to pursue. The Company shall provide to Vornado Sub a copy of all written
information, and a description of all material terms not set forth in writing,
available to the Company concerning such opportunity.
ARTICLE V
PROVISION OF CERTAIN SERVICES AND EXECUTIVE OFFICES; NON-EXCLUSIVE LICENSE
5.1 Provision of Certain Services and Executive Offices. (a)
During the term of this Agreement, Vornado Sub shall provide the Company with
such administrative, corporate, accounting, financial, insurance, legal, tax,
data processing, human resources and operational services as the Company shall
from time to time reasonably request.
(b) During the term of this Agreement, Vornado Sub shall make
available to the Company, at Vornado Sub's principal office in Saddle Brook, New
Jersey, space for the Company's principal corporate office.
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<PAGE> 7
(c) The Company shall compensate Vornado Sub for the services
and space provided to the Company under this Section 5.1 in an amount determined
in good faith by Vornado Sub as the amount an unaffiliated third party would
charge the Company for comparable services and shall reimburse Vornado Sub for
certain costs incurred and paid to third parties on behalf of the Company.
Vornado Sub shall, on a monthly basis, provide the Company with a statement
setting forth its charges for such services and space and the Company shall pay
all undisputed charges within ten days of the receipt by the Company of such
monthly statement.
5.2 Non-Exclusive License. (a) Subject to the terms and
conditions of this Agreement, Vornado Sub hereby grants to the Company, and the
Company hereby accepts, a non-exclusive, royalty-free license to use Vornado and
other names that include Vornado ("Licensed Property") in the corporate name of
the Company, in connection with a Tenant Opportunity and in related activities.
The Company acknowledges and agrees that the terms of this Agreement shall not
restrict the ability of Vornado Sub and its Affiliates to use the Licensed
Property.
(b) Upon the termination of this Agreement pursuant to
Section 6.2, (i) all rights of the Company to the Licensed Property shall
immediately terminate and the Company shall have no further rights with respect
thereto; (ii) the Company shall not offer any services in connection with the
Licensed Property or any confusingly similar Licensed Property and shall cease
all use of the Licensed Property (including, without limitation, the use of the
Licensed Property in the corporate name of the Company); and (iii) the Company
shall immediately cease any activity which suggests they have any rights to the
Licensed Property or that it has any association with Vornado Sub, in either
case except as may be contemplated pursuant to any other agreement between the
Company and Vornado Sub.
ARTICLE VI
MISCELLANEOUS
6.1 Qualification as a REIT. (a) The Company shall use its
best efforts to seek to qualify as a REIT for its taxable year ending December
31, 1998.
(b) The Company shall use its best efforts to assist Vornado
Sub in maintaining Vornado's qualification as a REIT.
6.2 Term and Termination; Default. (a) The term of this
Agreement shall commence as of the date first written above and a party hereto
may terminate this Agreement by providing not less than 90 days written notice
to the other party at any time after December 31, 2002.
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<PAGE> 8
(b) Notwithstanding Section 6.2(a), a party hereto may
terminate this Agreement by providing written notice to the other party if the
other party or any Subsidiary of such other party is in default of this
Agreement and such default is material and remains uncured for fifteen days
after receipt of notice thereof by the other party.
(c) Notwithstanding Section 6.2(a), Vornado Sub may terminate
this Agreement by providing written notice to the Company upon the occurrence of
a Change in Control. The Company shall, within 10 days following the date of the
consummation of a transaction resulting in a Change of Control, provide Vornado
Sub with written notice of such Change of Control. A "Change of Control" shall
be deemed to have occurred in the event that, after the date of this Agreement,
either (A) any Person or any Persons acting together which would constitute a
"group" (a "Group") for purposes of Section 13(d) of the Exchange Act, or any
successor provision thereto, together with any Affiliates thereof, shall
beneficially own (as defined in Rule 13d-3 of the Exchange Act or any successor
provision thereto) at least 50% of the aggregate voting power of all classes of
capital stock of the Company entitled to vote generally in the election of
directors of the Company; or (B) during any consecutive two-year period,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election to such
Board of Directors or whose nomination for election by the stockholders of the
Company was approved by a vote of a majority of the directors of the Company
then still in office who were either directors at the beginning of such period
or whose election was previously so approved) cease for any reason to constitute
a majority of the Board of Directors of the Company then in office.
6.3 Expenses; Compensation. Unless waived or expressly agreed
to as part of a REIT Opportunity or Tenant Opportunity, (i) each party to this
Agreement shall bear its own expenses with respect to any REIT Opportunity or
Tenant Opportunity to which this Agreement is applicable and (ii) neither party
to this Agreement shall be entitled to any compensation from the other party
hereto with respect to any REIT Opportunity or Tenant Opportunity to which this
Agreement is applicable.
6.4 Offers to Related Persons. Any REIT Opportunity or Tenant
Opportunity that is offered by a party hereto to the other party hereto and
rejected by such other party may thereafter be offered to any third party, at
the sole discretion of the offering party (including without limitation to any
senior officer or director of Vornado Sub, the Company or any of their
Affiliates), subject to the reoffer provisions set forth in this Agreement.
6.5 Subsidiaries. (a) Any REIT Opportunity that is offered to
and accepted by Vornado Sub under this Agreement may be entered into by Vornado
Sub or by any designee of Vornado Sub which is a Subsidiary of Vornado Sub. Any
Tenant
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<PAGE> 9
Opportunity that is offered to and accepted by the Company under this Agreement
may be entered into by the Company or by any designee of the Company which is a
Subsidiary of the Company.
(b) Each party hereto shall cause its Subsidiaries to comply
with any terms of this Agreement applicable to such Subsidiaries.
6.6 Contractual Restrictions. No party shall be required to
comply with the offering rights and notice provisions set forth in Section 2.1
and 3.1 of this Agreement if such compliance would violate any confidentiality
requirement or other contractual restriction binding on such party.
6.7 No Partnership. While it is the intention of the parties
to align their businesses in accordance with the terms of this Agreement, each
party shall act independently in its own best interests, and neither party shall
be considered a partner or agent of the other party or to owe any fiduciary or
other common law duties to the other party.
6.8 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.
6.9 WAIVER OF JURY. EACH OF THE PARTIES HERETO HEREBY WAIVES
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE RELATIONSHIPS
ESTABLISHED HEREUNDER.
6.10 Jurisdiction and Venue; Service of Process. (a) Each of
the parties hereto hereby irrevocably submits to the non-exclusive jurisdiction
of any state or federal court in the Borough of Manhattan, The City of New York
for the purpose of any suit, action, proceeding or judgment relating to or
arising out of this Agreement and to the laying of venue in the Borough of
Manhattan, The City of New York. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any objection to the
laying of the venue of any such suit, action or proceeding brought in the
aforesaid courts and hereby irrevocably waives any claim that any such suit,
action or proceeding brought in any such court has been brought in an
inconvenient forum.
(b) Each of the parties hereto agrees that service of process
in any such suit, action or proceeding may be effected by mailing a copy thereof
by registered or certified
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mail (or any substantially similar form of mail), postage prepaid, to such party
at its address set forth in subsection 6.12 or at such other address of which
the other party to this Agreement shall have been notified pursuant thereto.
Each of the parties further agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall limit
the right to sue in any other jurisdiction.
6.11 Specific Performance. Each party hereto hereby
acknowledges that the obligations undertaken by it pursuant to this Agreement
are unique and that the other party hereto would likely have no adequate remedy
at law if such party shall fail to perform its obligations hereunder, and such
party therefor confirms that the other party's right to specific performance of
the terms of this Agreement is essential to protect the rights and interests of
the other party. Accordingly, in addition to any other remedies that a party
hereto may have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto.
6.12 Notices. (a) Any communication or notice to be given
hereunder will be duly given when delivered in writing or by telecopy to a party
at its address as indicated below or such other address as such party may
specify in a notice to the other party hereto. A communication or notice given
pursuant to this Section shall be addressed:
If to Vornado Sub, to:
Vornado Realty L.P.
c/o Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Telecopy: 201-587-0600
Attention: Chief Financial Officer
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If to the Company, to:
Vornado Operating Company
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Telecopy: 201-587-0600
Attention: Chief Financial Officer
(b) Unless otherwise provided to the contrary herein, any
notice which is required to be given in writing pursuant to the terms of this
Agreement may be given by telecopy.
6.13 Reasonable and Necessary Restrictions. Each of the
parties hereto hereby acknowledges and agrees that the restrictions,
prohibitions and other provisions of this Agreement are reasonable, fair and
equitable in scope, term and duration, are necessary to protect the legitimate
business interests of the parties hereto and are a material inducement to the
parties hereto to enter into the transactions described in and contemplated by
the recitals hereto. Each party hereto agrees that it will not sue to challenge
the enforceability of this Agreement or raise any equitable defense to its
enforcement.
6.14 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the prior
express written consent of each of the parties hereto. Notwithstanding the
foregoing, this Agreement may be assigned without the consent of any party
hereto in connection with any merger, consolidation, reorganization or other
combination of a party with or into another entity where the party is not the
surviving entity.
6.15 Amendments; Waivers. No amendment to this Agreement, or
any provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such amendment or waiver is specifically set
forth in a writing signed by the party or parties to be bound thereby. The
waiver of any right or remedy with respect to any occurrence on one occasion
shall not be deemed a waiver of such right or remedy with respect to such
occurrence (or any other occurrence) on any other occasion.
6.16 Severability. In the event that one or more of the terms
or provisions of this Agreement or the application thereof to any person(s) or
in any circumstance(s) shall, for any reason and to any extent, be found by a
court of competent jurisdiction to be invalid, illegal or unenforceable, such
court shall have the power, and hereby is directed, to substitute for or limit
such invalid term(s), provision(s) or application(s) and to enforce such
substituted
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<PAGE> 12
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
6.17 Entire Agreement; No Third-Party Beneficiaries. This
Agreement (i) constitutes the entire agreement and supersedes all prior
agreements, understandings, negotiations and discussions, whether written or
oral, between the parties hereto with respect to the subject matter hereof, so
that no such external or separate agreement relating to the subject matter of
this Agreement shall have any effect or be binding, unless the same is referred
to specifically in this Agreement or is executed by the parties after the date
hereof; and (ii) is not intended to confer upon any other person any rights or
remedies hereunder, and shall not be enforceable by any party not a signatory to
this Agreement.
6.18 Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all the counterparts shall together constitute one and the same instrument.
6.19 Indemnification. (a) The Company will indemnify and hold
harmless Vornado Sub and its Affiliates against any losses, claims, damages or
liabilities, joint or several, to which Vornado Sub or its Affiliates may become
subject insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of, relate to or are caused by the assets,
liabilities, business or operations of the Company, and will reimburse Vornado
Sub and its Affiliates for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such action or claim as
such expenses are incurred.
(b) Vornado Sub will indemnify and hold harmless the Company
and its Affiliates against any losses, claims, damages or liabilities, joint or
several, to which the Company or its Affiliates may become subject insofar as
such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of, relate to or are caused by the assets, liabilities, business or
operations of Vornado Sub, and will reimburse the Company and its Affiliates for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such action or claim as such expenses are
incurred.
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<PAGE> 13
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date first above written.
VORNADO REALTY L. P.
By: Vornado Realty Trust,
its sole general partner
By: _______________________________
Name:
Title:
VORNADO OPERATING COMPANY
By: _____________________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.2
CREDIT AGREEMENT
dated as of
___, 1998
between
VORNADO OPERATING L.P.,
as Borrower
and
VORNADO REALTY L.P.,
as Lender
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I
DEFINITIONS...............................................1
Section 1.01 Definitions........................................................................1
(a) Terms Generally................................................................1
(b) Other Terms....................................................................1
ARTICLE II
THE REVOLVING CREDIT FACILITY......................................6
Section 2.01 Commitment and Loans. ............................................................6
Section 2.02 Borrowing Procedure................................................................6
Section 2.03 Termination and Reduction of Commitment............................................6
Section 2.04 Repayment..........................................................................6
Section 2.05 Optional Prepayment................................................................6
ARTICLE III
INTEREST AND FEES............................................7
Section 3.01 Interest Rate......................................................................7
Section 3.02 Interest on Overdue Amounts........................................................7
Section 3.03 Maximum Interest Rate..............................................................7
Section 3.04 Commitment Fee.....................................................................8
ARTICLE IV
DISBURSEMENT AND PAYMENT.........................................8
Section 4.01 Method and Time of Payments........................................................8
Section 4.02 Compensation for Losses............................................................8
Section 4.03 Withholding and Additional Costs...................................................8
(a) Withholding........................................................................9
(b) Additional Costs...................................................................9
(c) Certificate, Etc...................................................................9
Section 4.04 Expenses; Indemnity................................................................9
Section 4.05 Survival..........................................................................10
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<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES.....................................10
Section 5.01 Representations and Warranties....................................................10
(a) Subsidiaries......................................................................10
(b) Good Standing and Power...........................................................10
(c) Authority.........................................................................11
(d) Authorizations....................................................................11
(e) Binding Obligation................................................................11
(f) Litigation........................................................................11
(g) No Conflicts......................................................................11
(h) Taxes.............................................................................11
(i) Properties........................................................................12
(j) Compliance with Laws and Charter Documents........................................12
(k) Disclosure........................................................................12
Section 5.02 Survival..........................................................................12
ARTICLE VI
CONDITIONS PRECEDENT..........................................12
Section 6.01 Conditions to the Availability of the Commitment..................................12
(a) This Agreement....................................................................12
(b) Certificate of Limited Partnership and Agreement of Limited
Partnership..................................................................12
(c) Representations and Warranties....................................................13
(d) Other Documents...................................................................13
Section 6.02 Conditions to All Loans...........................................................13
(a) Borrowing Request.................................................................13
(b) No Default........................................................................13
(c) Representations and Warranties; Covenants.........................................13
Section 6.03 Satisfaction of Conditions Precedent..............................................13
ARTICLE VII
COVENANTS...............................................14
Section 7.01 Affirmative Covenants.............................................................14
(a) Financial Statements; Compliance Certificates.....................................14
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<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
(b) Existence.........................................................................14
(c) Conduct of Business...............................................................15
(d) Authorizations....................................................................15
(e) Inspection........................................................................15
(f) Maintenance of Records............................................................15
(g) Notice of Defaults and Adverse Developments.......................................15
Section 7.02 Negative Covenants................................................................16
(a) Mergers, Consolidations and Sales of Assets.......................................16
(b) Liens.............................................................................16
(c) Indebtedness......................................................................16
(d) Dividends.........................................................................16
(e) Certain Amendments................................................................16
ARTICLE VIII
EVENTS OF DEFAULT...........................................17
Section 8.01 Events of Default.................................................................17
ARTICLE IX
EVIDENCE OF LOANS; TRANSFERS......................................18
Section 9.01 Evidence of Loans.................................................................18
ARTICLE X
MISCELLANEOUS.............................................19
Section 10.01 APPLICABLE LAW...................................................................19
Section 10.02 WAIVER OF JURY...................................................................19
Section 10.03 Jurisdiction and Venue; Service of Process.......................................19
Section 10.04 Confidentiality..................................................................20
Section 10.05 Amendments and Waivers...........................................................20
Section 10.06 Cumulative Rights; No Waiver.....................................................20
Section 10.07 Notices..........................................................................20
Section 10.08 Certain Acknowledgments..........................................................21
Section 10.09 Separability.....................................................................21
Section 10.10 Parties in Interest..............................................................21
Section 10.11 Execution in Counterparts........................................................21
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<PAGE> 5
CREDIT AGREEMENT, dated as of ___, 1998, between Vornado
Operating L.P., a Delaware limited partnership, and Vornado Realty L.P., a
Delaware limited partnership.
W I T N E S S E T H:
WHEREAS, the Borrower has requested the Lender to commit to
lend to the Borrower up to $75 million on a revolving basis for acquisitions of
assets and general corporate purposes; and
WHEREAS, the Lender is willing to make revolving credit loans
on the terms and conditions provided herein;
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
(a) Terms Generally. The definitions ascribed to terms in this
Agreement apply equally to both the singular and plural forms of such terms.
Whenever the context may require, any pronoun shall be deemed to include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be interpreted as if followed by the phrase
"without limitation". The phrase "individually or in the aggregate" shall be
deemed general in scope and not to refer to any specific Section or clause of
this Agreement. All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and Exhibits
and Schedules to, this Agreement unless the context shall otherwise require. The
table of contents, headings and captions herein shall not be given effect in
interpreting or construing the provisions of this Agreement. Except as otherwise
expressly provided herein, all references to "dollars" or "$" shall be deemed
references to the lawful money of the United States of America.
(b) Other Terms. The following terms have the meanings
ascribed to them below or in the Sections of this Agreement indicated below:
"Affiliate" means, with respect to any Person, any other
Person that controls, is controlled by, or is under common control
with, such Person.
"Agreement" means this credit agreement, as it may be amended,
modified or supplemented from time to time.
"Available Commitment" means, on any day, an amount equal to
(i) the Commitment on such day minus (ii) the aggregate outstanding
principal amount of Loans on such day.
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<PAGE> 6
"Borrower" means Vornado Operating L.P., a Delaware limited
partnership.
"Borrowing Date" means, with respect to any Loan, the Business
Day set forth in the relevant Borrowing Request as the date upon which
the Borrower desires to borrow such Loan;
"Borrowing Request" means a request by the Borrower for a
Loan, which shall specify (i) the requested Borrowing Date and (ii) the
aggregate amount of such Loan.
"Business Day" means any day that is not a Saturday, Sunday or
other day on which commercial banks in The City of New York are
authorized by law to close.
"Capital Lease Obligations" means, with respect to any Person,
the obligation of such Person to pay rent or other amounts under any
lease with respect to any property (whether real, personal or mixed)
acquired or leased by such Person that is required to be accounted for
as a liability on a consolidated balance sheet of such Person.
"Commitment" means $75 million, as such amount may be reduced
from time to time pursuant to Section 2.03.
"Commitment Fee" has the meaning assigned to such term in
Section 3.04.
"Commitment Termination Date" means the earlier to occur of
(i) December 31, 2002 and (ii) the date, if any, on which the
Commitment is terminated.
"Confidential Information" means information delivered to the
Lender by or on behalf of the Borrower in connection with the
transactions contemplated by or otherwise pursuant to this Agreement
that is confidential or proprietary in nature at the time it is so
delivered or information obtained by the Lender in the course of its
review of the books or records of the Borrower contemplated herein;
provided that such term shall not include information (i) that was
publicly known or otherwise known to the Lender prior to the time of
such disclosure, (ii) that subsequently becomes publicly known through
no act or omission by the Lender or any Person acting on the Lender's
behalf, (iii) that otherwise becomes known to the Lender other than
through disclosure by the Borrower or (iv) that constitutes financial
information delivered to the Lender that is otherwise publicly
available.
"Default" means any event or circumstance which, with the
giving of notice or the passage of time, or both, would be an Event of
Default.
"Effective Date" has the meaning assigned to such term in
Section 6.01.
"Event of Default" has the meaning assigned to such term in
Section 8.01.
"GAAP" means generally accepted accounting principles, as 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
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<PAGE> 7
Financial Accounting Standards Board or in such other statements by
such other entities as may be approved by a significant segment of the
accounting profession of the United States of America.
"General Partner" means Vornado Operating Company, a Delaware
corporation and the sole general partner of the Borrower.
"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.
"Guaranty" means, with respect to any Person, any obligation,
contingent or otherwise, of such Person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other Person
(the "primary obligor") in any manner, whether directly or indirectly,
and including any obligation of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such
Indebtedness or to purchase (or to advance or supply funds for the
purchase of) any security for the payment of such Indebtedness, (ii) to
purchase property, securities or services for the purpose of assuring
the holder of such Indebtedness of the payment of such Indebtedness or
(iii) to maintain working capital, equity capital or the financial
condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness. The term "Guaranteed" shall
have the corresponding meaning.
"Indebtedness" means, with respect to any Person, (i) all
obligations of such Person for borrowed money or for the deferred
purchase price of property or services (including all obligations,
contingent or otherwise, of such Person in connection with letters of
credit, bankers' acceptances, interest rate swap agreements, interest
rate cap agreements or other similar instruments, including currency
swaps) other than indebtedness to trade creditors and service providers
incurred in the ordinary course of business and payable on usual and
customary terms, (ii) all obligations of such Person evidenced by
bonds, notes, debentures or other similar instruments, (iii) all
indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person (even though the remedies available to the seller or lender
under such agreement are limited to repossession or sale of such
property), (iv) all Capital Lease Obligations of such Person, (v) all
obligations of the types described in clauses (i), (ii), (iii) or (iv)
above secured by (or for which the obligee has an existing right,
contingent or otherwise, to be secured by) any Lien upon or in any
property (including accounts, contract rights and other intangibles)
owned by such Person, even though such Person has not assumed or become
liable for the payment of such Indebtedness, (vi) all preferred stock
issued by such Person which is redeemable, prior to full satisfaction
of the Borrower's obligations under this Agreement (including repayment
in full of the Loans and all interest accrued thereon), other than at
the option of such Person, valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends,
(vii) all Indebtedness of others Guaranteed by such Person and (viii)
all Indebtedness of any partnership of which such Person is a general
partner.
"Indemnitee" has the meaning assigned to such term in Section
4.04(b).
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"Intercompany Agreement" means the intercompany agreement,
dated as of the date hereof, by and between the Lender and the General
Partner.
"Interest Period" means, with respect to any Loan, each one,
two, three or six-month period, such period being the one selected by
the Borrower pursuant to Section 2.02 or 3.01(b) and commencing on the
date such Loan is made or at the end of the preceding Interest Period,
as the case may be; provided, however, that:
(i) any Interest Period that would otherwise end on a
day that is not a Business Day shall be extended to the next
Business Day, unless such Business Day falls in another
calendar month, in which case such Interest Period shall end
on the next preceding Business Day;
(ii) any Interest Period that begins on the last
Business Day of a calendar month (or on a day for which there
is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall, subject to clause
(iii) below, end on the last Business Day of a calendar month;
and
(iii) any Interest Period that would otherwise end
after the Commitment Termination Date then in effect shall end
on such Commitment Termination Date.
"Lender" means Vornado Realty L.P., a Delaware limited
partnership.
"LIBOR" means, with respect to any Interest Period, the rate
per annum determined by the Lender to be the offered rate for dollar
deposits with a term comparable to such Interest Period that appears on
the display designated as Page 3750 on the Dow Jones Telerate Service
(or such other page as may replace such page on such service, or on
another service designated by the British Bankers' Association, for the
purpose of displaying the rates at which dollar deposits are offered by
leading banks in the London interbank deposit market) at approximately
11:00 A.M., London time, on the second Business Day preceding the first
day of such Interest Period. If such rate does not appear on such page,
"LIBOR" shall mean the arithmetic mean (rounded, if necessary, to the
next higher 1/16 of 1%) of the respective rates of interest
communicated by the LIBOR Reference Banks to the Lender as the rate at
which U.S. dollar deposits are offered to the LIBOR Reference Banks by
leading banks in the London interbank deposit market at approximately
11:00 A.M., London time, on the second Business Day preceding the first
day of such Interest Period in an amount substantially equal to the
respective LIBOR Reference Amounts for a term equal to such Interest
Period.
"LIBOR Reference Amount" means, with respect to any LIBOR
Reference Bank and Interest Period, the amount of the Loan scheduled to
be outstanding during that Interest Period and rounded up to the
nearest integral multiple of $1,000,000.
"LIBOR Reference Banks" mean three major banks in the London
interbank market, as selected by the Lender and agreed to by the
Borrower.
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<PAGE> 9
"Lien" means, with respect to any asset of a Person, (i) any
mortgage, deed of trust, lien, pledge, encumbrance, charge or security
interest in or on such asset, (ii) the interest of a vendor or lessor
under any conditional sale agreement, capital lease or title retention
agreement relating to such asset, and (iii) in the case of securities,
any purchase option, call or similar right of any other Person with
respect to such securities.
"Loans" has the meaning assigned to such term in Section 2.01.
"Material Adverse Effect" means any material and adverse
effect on (i) the consolidated business, properties, condition
(financial or otherwise) or operations, present or prospective, of the
Borrower and its Subsidiaries, (ii) the ability of the Borrower timely
to perform any of its material obligations, or of the Lender to
exercise any remedy, under this Agreement or (iii) the legality,
validity, binding nature or enforceability of this Agreement.
"Permitted Liens" means, collectively, the following: (i)
Liens expressly approved by the Lender, which approval shall not be
unreasonably withheld; (ii) Liens imposed by any Governmental Authority
for taxes, assessments or charges not yet due or that are being
contested in good faith by appropriate proceedings and for which
adequate reserves are being maintained (in accordance with GAAP); and
(iii) Liens existing on the date hereof.
"Person" means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation,
entity or government (whether Federal, state, county, city, municipal
or otherwise, including any instrumentality, division, agency, body or
department thereof).
"Responsible Officer" means the chief executive officer,
president, chief financial officer, chief accounting officer, treasurer
or any vice president, senior vice president or executive vice
president of the General Partner.
"SEC" means the Securities and Exchange Commission (or any
successor Governmental Authority).
"Subsidiary" means, at any time and with respect to any
Person, any other Person the shares of stock or other ownership
interests of which having ordinary voting power to elect a majority of
the board of directors or with respect to other matters of such Person
are at the time owned, or the management or policies of which is
otherwise at the time controlled, directly or indirectly through one or
more intermediaries (including other Subsidiaries) or both, by such
first Person. Unless otherwise qualified or the context indicates
clearly to the contrary, all references to a "Subsidiary" or
"Subsidiaries" in this Agreement refer to a Subsidiary or Subsidiaries
of the Borrower.
"Taxes" has the meaning assigned to such term in Section
4.03(a).
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ARTICLE II
THE REVOLVING CREDIT FACILITY
Section 2.01 Commitment and Loans. Until the Commitment
Termination Date, subject to the terms and conditions of this Agreement, the
Lender agrees to make revolving credit loans (collectively, "Loans") in dollars
to the Borrower in an aggregate principal amount at any one time outstanding not
to exceed the Commitment.
Section 2.02 Borrowing Procedure. In order to borrow a Loan,
the Borrower shall give a Borrowing Request to the Lender, by telephone, telex
or telecopy or in writing, not later than 10:30 A.M., New York time, on the
third Business Day before the Borrowing Date (or such later time or date as the
Lender may in its sole discretion permit). (If any Borrowing Request is made
otherwise than in writing, Borrower shall promptly confirm such Borrowing
Request in writing.) Subject to satisfaction, or waiver by the Lender, of each
of the applicable conditions precedent contained in Article VI, on the Borrowing
Date the Lender shall make available, in immediately available funds, to the
Borrower the amount of the requested Loan.
Section 2.03 Termination and Reduction of Commitment. The
Borrower may terminate the Commitment, or reduce the amount thereof, by giving
written notice to the Lender, not later than 5:00 P.M., New York time, on the
fifth Business Day prior to the date of termination or reduction (or such later
time or date as the Lender may in its sole discretion permit).
Section 2.04 Repayment. Loans shall be repaid, together with
all accrued and unpaid interest thereon, on the Commitment Termination Date.
Section 2.05 Optional Prepayment. The Borrower may prepay
Loans by giving notice (specifying the Loans to be prepaid in whole or in part,
the principal amount thereof to be prepaid and the date of prepayment) to the
Lender, by telephone, telex, telecopy or in writing not later than 12:00 noon,
New York time, on the fourth Business Day preceding the proposed date of
prepayment (or such later time or date as the Lender may in its sole discretion
permit). (If any such prepayment notice is made otherwise than in writing,
Borrower shall promptly confirm such notice in writing.) Each such prepayment
shall be at the aggregate principal amount of the principal being prepaid,
together with accrued interest on the principal being prepaid to the date of
prepayment and the amounts required by Section 4.03. Subject to the terms and
conditions of this Agreement, prepaid Loans may be reborrowed.
ARTICLE III
INTEREST AND FEES
Section 3.01 Interest Rate. (a) Each Loan shall bear interest
from the date made until the date repaid, payable in arrears, with respect to
Interest Periods of three months or less, on the last day of such Interest
Period, and with respect to Interest Periods longer than three months, on the
day which is three months after the commencement of such Interest Period and on
the last day of such Interest Period, at a rate per annum equal to the sum of
(i) 3% and (ii) LIBOR for the applicable Interest Period.
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(b) At the end of an Interest Period for any Loan (other than
an Interest Period that ends on the Commitment Termination Date), the succeeding
Interest Period for such Loan shall be deemed to be three months; provided, that
if the Borrower shall give notice to the Lender specifying some other Interest
Period, by telephone, telex, telecopy or in writing not later than the third
Business Day prior to the last day of such Interest Period (or such later date
as the Lender may in its sole discretion permit), the succeeding Interest Period
for such Loan shall become the period so specified. (If any such notice
specifying an Interest Period is given otherwise than in writing, Borrower shall
promptly confirm such notice in writing.)
Section 3.02 Interest on Overdue Amounts. All overdue amounts
(including principal, interest and fees) hereunder, and, during the continuance
of any Event of Default that shall have occurred, each Loan, shall bear
interest, payable on demand, at a rate per annum equal to the sum of (i) 6% and
(ii) LIBOR for the applicable Interest Period.
Section 3.03 Maximum Interest Rate. (a) Nothing in this
Agreement shall require the Borrower to pay interest at a rate exceeding the
maximum rate permitted by applicable law. Neither this Section nor Section 10.01
is intended to limit the rate of interest payable for the account of the Lender
to the maximum rate permitted by the laws of the State of New York (or any other
applicable law) if a higher rate is permitted with respect to the Lender by
supervening provisions of U.S. Federal law.
(b) If the amount of interest payable for the account of the
Lender on any interest payment date in respect of the immediately preceding
interest computation period, computed pursuant to this Article III, would exceed
the maximum amount permitted by applicable law to be charged by the Lender, the
amount of interest payable for its account on such interest payment date shall
automatically be reduced to such maximum permissible amount.
(c) If the amount of interest payable for the account of the
Lender in respect of any interest computation period is reduced pursuant to
Section 3.03(b) and the amount of interest payable for its account in respect of
any subsequent interest computation period would be less than the maximum amount
permitted by law to be charged by the Lender, then the amount of interest
payable for its account in respect of such subsequent interest computation
period shall be automatically increased to such maximum permissible amount;
provided that at no time shall the aggregate amount by which interest paid for
the account of the Lender has been increased pursuant to this Section 3.03(c)
exceed the aggregate amount by which interest paid for its account has
theretofore been reduced pursuant to Section 3.03(b).
Section 3.04 Commitment Fee. The Borrower agrees to pay to the
Lender, on the last day of each calendar quarter of each year, commencing with
the first such day after the Effective Date, and on the Commitment Termination
Date (or other date on which the Commitment shall terminate), a commitment fee
(the "Commitment Fee") computed by applying (i) 0.25% to (ii) the average daily
Available Commitment during such quarter.
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ARTICLE IV
DISBURSEMENT AND PAYMENT
Section 4.01 Method and Time of Payments.
(a) All payments by the Borrower hereunder shall be made
without setoff or counterclaim to the Lender, for its account, in dollars and in
immediately available funds to the account of the Lender theretofore designated
in writing to the Borrower not later than 12:00 noon, New York time, on the date
when due or, in the case of payments pursuant to Sections 4.03 and 4.04 or
payments otherwise specified as payable upon demand, forthwith upon written
demand therefor.
(b) Whenever any payment from the Borrower shall be due on a
day that is not a Business Day, the date of payment thereof shall be extended to
the next succeeding Business Day. If the date for any payment of principal is
extended by operation of law or otherwise, interest thereon shall be payable for
such extended time.
Section 4.02 Compensation for Losses. (a) If (i) the Borrower
prepays Loans, (ii) the Borrower revokes any Borrowing Request or (iii) Loans
(or portions thereof) shall become or be declared to be due prior to the
scheduled maturity thereof, then the Borrower shall pay to the Lender an amount
that will compensate the Lender for any loss (other than lost profit) or premium
or penalty incurred by the Lender as a result of such prepayment, declaration or
revocation in respect of funds obtained for the purpose of making or maintaining
the Lender's Loans, or any portion thereof. Such compensation shall include an
amount equal to the excess, if any, of (i) the amount of interest that would
have accrued on the amount so paid or prepaid, or not borrowed, for the period
from the date of such payment or prepayment or failure to borrow to the last day
of such Interest Period (or, in the case of a failure to borrow, the Interest
Period that would have commenced on the expected Borrowing Date) in each case at
the applicable rate of interest for such Loan over (ii) the amount of interest
(as reasonably determined by the Lender) that would have accrued on such amount
were it on deposit for a comparable period with leading banks in the London
interbank market.
(b) If requested by the Borrower, in connection with a payment
due pursuant to this Section 4.02, the Lender shall provide to the Borrower a
certificate setting forth in reasonable detail the amount required to be paid by
the Borrower to the Lender and the computations made by the Lender to determine
such amount. In the absence of manifest error, such certificate shall be
conclusive as to the amount required to be paid.
Section 4.03 Withholding and Additional Costs.
(a) Withholding. All payments under this Agreement (including
payments of principal and interest) shall be payable to the Lender free and
clear of any and all present and future taxes, levies, imposts, duties,
deductions, withholdings, fees, liabilities and similar charges (collectively,
"Taxes"). If any Taxes are required to be withheld or deducted from any amount
payable under this Agreement, then the amount payable under this Agreement shall
be increased to the amount which, after deduction from such increased amount of
all Taxes required to be
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withheld or deducted therefrom, will yield to the Lender the amount stated to be
payable under this Agreement. The Borrower shall also hold the Lender harmless
and indemnify it for any stamp or other taxes with respect to the preparation,
execution, delivery, recording, performance or enforcement of this Agreement
(all of which shall be included within "Taxes"). If any of the Taxes specified
in this Section 4.03(a) are paid by the Lender, the Borrower shall, upon demand
of the Lender, promptly reimburse the Lender for such payments, together with
any interest, penalties and expenses incurred in connection therewith. The
Borrower shall deliver to the Lender certificates or other valid vouchers for
all Taxes or other charges deducted from or paid with respect to payments made
by the Borrower hereunder.
(b) Additional Costs. Subject to Section 4.03 (c), and without
duplication of any amounts payable described in Section 4.02 or 4.03(a), if
after the date hereof any change in any law or regulation or in the
interpretation thereof by any court or administrative or Governmental Authority
charged with the administration thereof or the enactment of any law or
regulation shall either (1) impose, modify or deem applicable any reserve,
special deposit or similar requirement against the Lender's Commitment or Loans
or (2) impose on the Lender any other condition regarding this Agreement, its
Commitment or the Loans and the result of any event referred to in clause (1) or
(2) shall be to increase the cost to the Lender of maintaining its Commitment or
any Loans made by the Lender (which increase in cost shall be calculated in
accordance with the Lender's reasonable averaging and attribution methods) by an
amount which the Lender deems to be material, then, upon demand by the Lender,
the Borrower shall pay to the Lender an amount equal to such increase in cost.
(c) Certificate, Etc. If requested by the Borrower, in
connection with any demand for payment pursuant to this Section 4.03, the Lender
shall provide to the Borrower a certificate setting forth in reasonable detail
the basis for such demand, the amount required to be paid by the Borrower to the
Lender, the computations made by the Lender to determine such amount and
satisfaction of the conditions set forth in the next sentence. Anything to the
contrary herein notwithstanding, the Lender shall not have the right to demand
any payment or compensation under this Section 4.03 (i) with respect to any
period more than 180 days prior to the date it has made a demand pursuant to
this Section 4.03, and (ii) to the extent that the Lender determines in good
faith that the interest rate on the relevant Loans appropriately accounts for
any increased cost or reduced rate of return. In the absence of manifest error,
the certificate referred to above shall be conclusive as to the amount required
to be paid.
Section 4.04 Expenses; Indemnity. (a) The Borrower agrees: (i)
to pay or reimburse the Lender for all reasonable out-of-pocket costs and
expenses incurred in connection with the preparation and execution of, and any
amendment, supplement or modification to, this Agreement and any other documents
prepared in connection herewith or therewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of Sullivan & Cromwell, counsel to the Lender;
and (ii) to pay or reimburse the Lender for all reasonable costs and expenses
incurred in connection with the enforcement or preservation of any rights under
this Agreement and any such other documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Lender. The Borrower also
agrees to indemnify the Lender against any transfer taxes, documentary taxes,
assessments or charges made by any Governmental Authority by reason of the
execution and delivery of this Agreement.
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(b) The Borrower agrees to indemnify the Lender and its
directors, officers, partners, employees, agents and Affiliates (for purposes of
this paragraph, each, an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all claims, liabilities, damages, losses, costs, charges
and expenses (including fees and expenses of counsel) incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of (i) the execution or delivery of this Agreement or any agreement or
instrument contemplated by this Agreement, the performance by the parties
thereto of their respective obligations under this Agreement or the consummation
of the transactions and the other transactions contemplated by this Agreement,
(ii) the use of the proceeds of the Loans or (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a party thereto; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee.
(c) All amounts due under this Section 4.04 shall be payable
in immediately available funds upon written demand therefor.
Section 4.05. Survival. The provisions of Sections 4.02, 4.03
and 4.04 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 hereby, the repayment of any of the Loans, the reduction or
termination of the Commitment, the invalidity or unenforceability of any term or
provision of this Agreement, or any investigation made by or on behalf of the
Lender.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
Section 5.01 Representations and Warranties. The Borrower
represents and warrants to the Lender as follows:
(a) Good Standing and Power. The Borrower and each Subsidiary
is a limited partnership or corporation, duly organized and validly
existing in good standing under the laws of the jurisdiction of its
organization; each has the power to own its property and to carry on
its business as now being conducted; and each is duly qualified to do
business and is in good standing in each jurisdiction in which the
character of the properties owned or leased by it therein or in which
the transaction of its business makes such qualification necessary,
except where the failure to be so qualified, or to be in good standing,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect.
(b) Authority. The Borrower has full power and authority to
execute and deliver, and to incur and perform its obligations under,
this Agreement, which has been duly authorized by all proper and
necessary action. No consent or approval of limited partners is
required as a condition to the validity or performance of, or the
exercise by the Lender of any of its rights or remedies under, this
Agreement.
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(c) Authorizations. All authorizations, consents, approvals,
registrations, notices, exemptions and licenses with or from any
Governmental Authority or other Person necessary for the execution,
delivery and performance by the Borrower of, and the incurrence and
performance of each of its obligations under, this Agreement, and the
exercise by the Lender of its remedies under this Agreement have been
effected or obtained and are in full force and effect.
(d) Binding Obligation. This Agreement constitutes the valid
and legally binding obligation of the Borrower enforceable in
accordance with its terms, subject as to enforcement to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles.
(e) Litigation. There are no proceedings or investigations now
pending or, to the knowledge of the Borrower, threatened before any
court or arbitrator or before or by any Governmental Authority which,
individually or in the aggregate, if determined adversely to the
interests of the Borrower or any Subsidiary, could reasonably be
expected to have a Material Adverse Effect.
(f) No Conflicts. There is no statute, regulation, rule, order
or judgment, and no provision of any agreement or instrument binding
upon the Borrower or any Subsidiary, or affecting their properties, and
no provision of the certificate of limited partnership, certificate of
incorporation, agreement of limited partnership or by-laws (or similar
constitutive instruments) of the Borrower or any Subsidiary, that would
prohibit, conflict with or in any way impair the execution or delivery
of, or the incurrence or performance of any obligations of the Borrower
under, this Agreement, or result in or require the creation or
imposition of any Lien on property of the Borrower or any Subsidiary as
a consequence of the execution, delivery and performance of this
Agreement.
(g) Taxes. The Borrower and the Subsidiaries each has filed or
caused to be filed all tax returns that are required to be filed and
paid all taxes that are required to be shown to be due and payable on
said returns or on any assessment made against it or any of its
property and all other taxes, assessments, fees, liabilities, penalties
or other charges imposed on it or any of its property by any
Governmental Authority, except for any taxes, assessments, fees,
liabilities, penalties or other charges which are being contested in
good faith and (unless the amount thereof is not material to the
Borrower's consolidated financial condition) for which adequate
reserves have been established in accordance with GAAP.
(h) Properties. The Borrower and the Subsidiaries each has
good and marketable title to, or valid leasehold interests in, all of
its respective properties and assets. All such assets and properties
are so owned or held free and clear of all Liens, except Permitted
Liens.
(i) Compliance with Laws and Charter Documents. Neither the
Borrower nor any Subsidiary is, or as a result of performing any of its
obligations under this Agreement will be, in violation of (a) any law,
statute, rule, regulation or order of any Governmental
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Authority applicable to it or its properties or assets or (b) its
certificate of limited partnership, certificate of incorporation,
agreement of limited partnership, by-laws or any similar document.
(j) No Material Adverse Effect. Since October 30, 1997, there
has not occurred or arisen any event, condition or circumstance that,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(k) Disclosure. All information relating to the Borrower or
its Subsidiaries delivered in writing to the Lender in connection with
the negotiation, execution and delivery of this Agreement is true and
complete in all material respects. There is no material fact of which
the Borrower is aware which, individually or in the aggregate, would
reasonably be expected adversely to influence the Lender's credit
analysis relating to the Borrower and its Subsidiaries which has not
been disclosed to the Lender in writing.
Section 5.02 Survival. All representations and warranties made
by the Borrower in this Agreement, and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement, shall
(i) be considered to have been relied upon by the Lender, (ii) survive the
making of Loans regardless of any investigation made by, or on behalf of, the
Lender and (iii) continue in full force and effect as long as the Commitment has
not been terminated and, thereafter, so long as any Loan, fee or other amount
payable under this Agreement remains unpaid.
ARTICLE VI
CONDITIONS PRECEDENT
Section 6.01 Conditions to the Availability of the Commitment.
The obligations of the Lender hereunder are subject to, and the Lender's
Commitment shall not become available until the earliest date (the "Effective
Date") on which each of the following conditions precedent shall have been
satisfied or waived in writing by the Lender:
(a) This Agreement. The Lender shall have received this
Agreement duly executed and delivered by the Borrower.
(b) Certificate of Limited Partnership and Agreement of
Limited Partnership. The Lender shall have received the following:
(i) a copy of the Certificate of Limited Partnership
of the Borrower, as in effect on the Effective Date, certified
by the Secretary of State of Delaware, and a certificate from
such Secretary of State as to the good standing of the
Borrower, in each case as of a date reasonably close to the
Effective Date; and
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(ii) a certificate of a Responsible Officer of the
Borrower, dated the Effective Date, and stating that attached
thereto is a true and complete copy of the Agreement of
Limited Partnership of the Borrower as in effect on such date.
(c) Representations and Warranties. The representations and
warranties contained in Section 5.01 shall be true and correct on the
Effective Date, and the Lender shall have received a certificate,
signed by a Responsible Officer of the Borrower, to that effect.
(d) Other Documents. The Lender shall have received such other
certificates, opinions and other documents as the Lender reasonably may
require.
(e) REIT STATUS of General Partner. The General Partner shall
no longer be required under the Intercompany Agreement to seek to
qualify as a real estate investment trust.
Section 6.02 Conditions to All Loans. The obligations of the
Lender to make each Loan are subject to the conditions precedent that, on the
date of each Loan and after giving effect thereto, each of the following
conditions precedent shall have been satisfied, or waived in writing by the
Lender:
(a) Borrowing Request. The Lender shall have received a
Borrowing Request in accordance with the terms of this Agreement.
(b) No Default. No Default or Event of Default shall have
occurred and be continuing, nor shall any Default or Event of Default
occur as a result of the making of such Loan.
(c) Representations and Warranties; Covenants. The
representations and warranties contained in Section 5.01 shall have
been true and correct when made and (except to the extent that any
representation or warranty speaks as of a date certain) shall be true
and correct on the Borrowing Date with the same effect as though such
representations and warranties were made on such Borrowing Date; and
the Borrower shall have complied with all of its covenants and
agreements under this Agreement.
Section 6.03 Satisfaction of Conditions Precedent. Each of (i)
the delivery by the Borrower of a Borrowing Request (unless the Borrower
notifies the Lender in writing to the contrary prior to the Borrowing Date) and
(ii) the acceptance of the proceeds of a Loan shall be deemed to constitute a
certification by the Borrower that, as of the Borrowing Date, each of the
conditions precedent contained in Section 6.02 has been satisfied with respect
to the Loan then being made.
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ARTICLE VII
COVENANTS
Section 7.01 Affirmative Covenants. Until satisfaction in full
of all the obligations of the Borrower under this Agreement and termination of
the Commitment of the Lender hereunder, the Borrower will:
(a) Financial Statements; Compliance Certificates. Furnish to
the Lender:
(i) as soon as available, but in no event more than
60 days following the end of each of the first three quarters
of each fiscal year, copies of the General Partner's Quarterly
Report on Form 10-Q being filed with the SEC, which shall
include a consolidated balance sheet and consolidated income
statement of the General Partner, the Borrower and the
Subsidiaries for such quarter;
(ii) as soon as available, but in no event more than
120 days following the end of each fiscal year, a copy of the
General Partner's Annual Report on Form 10-K being filed with
the SEC, which shall include the consolidated financial
statements of the General Partner, the Borrower and the
Subsidiaries, together with a report thereon by Deloitte &
Touche LLP (or another firm of independent certified public
accountants reasonably satisfactory to the Lender), for such
year;
(iii) within five Business Days of any Responsible
Officer of the Borrower obtaining knowledge of any Default or
Event of Default, if such Default or Event of Default is then
continuing, a certificate of a Responsible Officer of the
Borrower stating that such certificate is a "Notice of
Default" and setting forth the details thereof and the action
which the Borrower is taking or proposes to take with respect
thereto; and
(iv) such additional information, reports or
statements, regarding the business, financial condition or
results of operations of the Borrower and its Subsidiaries, as
the Lender from time to time may reasonably request.
(b) Existence. Except as permitted by Section 7.02(a),
maintain its existence in good standing and qualify and remain
qualified to do business in each jurisdiction in which the character of
the properties owned or leased by it therein or in which the trans
action of its business is such that the failure to qualify,
individually or in the aggregate, could reasonably be expected to have
a Material Adverse Effect.
(c) Compliance with Law and Agreements. Comply, and cause each
Subsidiary to comply, with all applicable laws, ordinances, orders,
rules, regulations and requirements of all Governmental Authorities and
with all agreements except where the necessity of compliance therewith
is contested in good faith by appropriate proceedings or
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where the failure to comply therewith, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(d) Authorizations. Obtain, make and keep in full force and
effect all authorizations from and registrations with Governmental
Authorities required for the validity or enforceability of this
Agreement.
(e) Inspection. Permit, and cause each Subsidiary to permit,
the Lender to have one or more of its officers and employees, or any
other Person designated by the Lender, to visit and inspect any of the
properties of the Borrower and the Subsidiaries and to examine the
minute books, books of account and other records of the Borrower and
the Subsidiaries, and to photocopy extracts from such minute books,
books of account and other records, and to discuss its affairs,
finances and accounts with its officers and with the Borrower's
independent accountants, during normal business hours and at such other
reasonable times, for the purpose of monitoring the Borrower's
compliance with its obligations under this Agreement.
(f) Maintenance of Records. Keep, and cause each Subsidiary to
keep, proper books of record and account in which full, true and
correct entries will be made of all dealings or transactions of or in
relation to its business and affairs.
(g) Notice of Defaults and Adverse Developments. Promptly
notify the Lender upon the discovery by any Responsible Officer of the
occurrence of (i) any Default or Event of Default; (ii) any event,
development or circumstance whereby the financial statements most
recently furnished to the Lender fail in any material respect to
present fairly, in accordance with GAAP, the financial condition and
operating results of the Borrower and the Subsidiaries as of the date
of such financial statements; (iii) any material litigation or
proceedings that are instituted or threatened (to the knowledge of the
Borrower) against the Borrower or any Subsidiary or any of their
respective assets; (iv) any event, development or circumstance which,
individually or in the aggregate, could reasonably be expected to
result in an event of default (or, with the giving of notice or lapse
of time or both, an event of default) under any Indebtedness and the
amount thereof; and (v) any other development in the business or
affairs of the Borrower or any Subsidiary if the effect thereof would
reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect; in each case describing the nature thereof and
the action the Borrower proposes to take with respect thereto.
Section 7.02 Negative Covenants. Until satisfaction in full of
all the obligations of the Borrower under this Agreement and termination of the
Commitment of the Lender hereunder, the Borrower will not:
(a) Mergers, Consolidations and Sales of Assets. Wind up,
liquidate or dissolve its affairs or enter into any merger,
consolidation or share exchange, or convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future time),
whether in one or a series of transactions, all or any substantial part
of its assets, or permit any Subsidiary so to do, unless such
transaction or series of transactions are expressly approved by the
Lender, which approval shall not be unreasonably withheld.
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(b) Liens. Create, incur, assume or suffer to exist any Lien
upon or with respect to any of its property or assets, whether now
owned or hereafter acquired, or assign or otherwise convey any right to
receive income, except Permitted Liens.
(c) Indebtedness. Create, incur, issue, assume, guarantee or
suffer to exist any Indebtedness, or permit any Subsidiary so to do,
except:
(i) Indebtedness to the Lender under this Agreement,
(ii) Non-recourse Indebtedness of the Borrower and
any Subsidiary secured by mortgages, encumbrances or liens
specifically permitted by Section 7.02(b), and
(iii) Indebtedness expressly approved by the Lender
in writing, which approval may be withheld in the Lender's
sole discretion.
(d) Dividends. Declare any dividends or distributions on any
of its partnership interests unless such dividend or distribution is
expressing approval by the Lender, which approval shall not be
unreasonably withheld.
(e) Certain Amendments. Amend, modify or waive, or permit to
be amended, modified or waived, any provision of its Certificate of
Limited Partnership or Agreement of Limited Partnership unless, within
not less than 5 days prior to such amendment, modification or waiver
(or such later time as the Lender may in its sole discretion permit),
the Borrower shall have given the Lender notice thereof, including all
relevant terms and conditions thereof, and the Lender shall have
consented in writing thereto, which consent shall not be unreasonably
withheld.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01 Events of Default. If one or more of the
following events (each, an "Event of Default") shall occur:
(a) The Borrower shall fail duly to pay any principal of any
Loan when due, whether at maturity, by notice of intention to prepay or
otherwise; or
(b) The Borrower shall fail duly to pay any interest, fee or
any other amount payable under this Agreement within two days after the
same shall be due; or
(c) The Borrower shall fail duly to observe or perform any
term, covenant, or agreement contained in Section 7.02; or
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(d) The Borrower shall fail duly to observe or perform any
other term, covenant or agreement contained in this Agreement, and such
failure shall have continued unremedied for a period of 30 days; or
(e) Any representation or warranty made or deemed made by the
Borrower in this Agreement, or any statement or representation made in
any certificate, report or opinion delivered by or on behalf of the
Borrower in connection with this Agreement, shall prove to have been
false or misleading in any material respect when so made or deemed
made; or
(f) The Borrower shall fail to pay any Indebtedness (other
than obligations here under) in an amount of $100,000 or more when due;
or any such Indebtedness having an aggregate principal amount
outstanding of $100,000 or more shall become or be declared to be due
prior to the expressed maturity thereof; or
(g) An involuntary case or other proceeding shall be commenced
against the Borrower seeking liquidation, reorganization or other
relief with respect to it or its debts under any applicable bankruptcy,
insolvency, reorganization or similar law or seeking the appointment of
a custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of it or any substantial part of its property, and
such involuntary case or other proceeding shall remain undismissed and
unstayed for a period of more than 60 days; or an order or decree
approving or ordering any of the foregoing shall be entered and
continued unstayed and in effect; or
(h) The Borrower shall commence a voluntary case or proceeding
under any applicable bankruptcy, insolvency, reorganization or similar
law or any other case or proceeding to be adjudicated a bankrupt or
insolvent, or any of them shall consent to the entry of a decree or
order for relief in respect of the Borrower in an involuntary case or
proceeding under any applicable bankruptcy, insolvency, reorganization
or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against any of them, or any of them shall
file a petition or answer or consent seeking reorganization or relief
under any applicable law, or any of them shall consent to the filing of
such petition or to the appointment of or taking possession by a
custodian, receiver, liquidator, assignee, trustee, sequestrator or
similar official of the Borrower or any substantial part of its
property, or the Borrower shall make an assignment for the benefit of
creditors, or the Borrower shall admit in writing its inability to pay
its debts generally as they become due, or the Borrower shall take
corporate action in furtherance of any such action; or
(i) One or more judgments against the Borrower or attachments
against its property, which in the aggregate exceed $100,000, or the
operation or result of which could be to interfere materially and
adversely with the conduct of the business of the Borrower remain
unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for
a period of more than 30 days; or
(j) Any court or governmental or regulatory authority shall
have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree,
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<PAGE> 22
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which prohibits, enjoins or otherwise restricts,
in a manner that, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, any of the transactions
contemplated under this Agreement;
then, and at any time during the continuance of such Event of Default, the
Lender may, by written notice to the Borrower, take either or both of the
following actions, at the same or different times: (i) terminate forthwith the
Commitment and (ii) declare any Loans then outstanding to be due, whereupon the
principal of the Loans so declared to be due, together with accrued interest
thereon and any unpaid amounts accrued under this Agreement, shall become
forthwith due, without presentment, demand, protest or any other notice of any
kind (all of which are hereby expressly waived by the Borrower); provided that,
in the case of any Event of Default described in Section 8.01(g) or (h)
occurring with respect to the Borrower, the Commitment shall automatically and
immediately terminate and the principal of all Loans then outstanding, together
with accrued interest thereon and any unpaid amounts accrued under this
Agreement, shall automatically and immediately become due without presentment,
demand, protest or any other notice of any kind (all of which are hereby
expressly waived by the Borrower).
ARTICLE IX
EVIDENCE OF LOANS; TRANSFERS
Section 9.01 Evidence of Loans. (a) The Lender shall maintain
accounts evidencing the indebtedness of the Borrower to the Lender resulting
from each Loan made by the Lender from time to time, including the amounts of
principal and interest payable and paid to the Lender in respect of Loans.
(b) The Lender's written records described above shall be
available for inspection during ordinary business hours by the Borrower from
time to time upon reasonable prior notice to the Lender.
(c) The entries made in the Lender's written or electronic
records and the foregoing accounts shall be prima facie evidence of the
existence and amounts of the indebtedness of the Borrower therein recorded;
provided, however, that the failure of the Lender to maintain any such account
or such records, as applicable, or any error therein, shall not in any manner
affect the validity or enforceability of any obligation of the Borrower to repay
any Loan actually made by the Lender in accordance with the terms of this
Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. APPLICABLE LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
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STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PER FORMED ENTIRELY
WITHIN SUCH STATE.
SECTION 10.02. WAIVER OF JURY. THE BORROWER AND THE LENDER
EACH HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY
OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT, THE NOTES
OR THE RELATIONSHIPS ESTABLISHED HEREUNDER.
Section 10.03. Jurisdiction and Venue; Service of Process. The
Borrower and the Lender each hereby irrevocably submits to the non-exclusive
jurisdiction of any state or federal court in the Borough of Manhattan, The City
of New York for the purpose of any suit, action, proceeding or judgment relating
to or arising out of this Agreement and to the laying of venue in the Borough of
Manhattan, The City of New York. The Borrower and the Lender each hereby
irrevocably waives, to the fullest extent permitted by applicable law, any
objection to the laying of the venue of any such suit, action or proceeding
brought in the aforesaid courts and hereby irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
(b) The Borrower agrees that service of process in any such
action or proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage prepaid, to
the Borrower at its address set forth in subsection 10.07 or at such other
address of which the Lender shall have been notified pursuant thereto. The
Borrower further agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the right
to sue in any other jurisdiction; and
(c) The Borrower waives, to the maximum extent not prohibited
by law, any right it may have to claim or recover in any legal action or
proceeding referred to in this subsection any special, exemplary, punitive or
consequential damages.
Section 10.04. Confidentiality. The Lender agrees (on behalf
of itself and each of its Affiliates, partners, officers, employees and
representatives) to use its best efforts to keep confidential, in accordance
with their customary procedures for handling confidential information of this
nature and in accordance with commercially reasonable business practices, any
Confidential Information; provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by statute, rule,
regulation or judicial process, (ii) to counsel for the Lender, (iii) to
auditors or accountants, (iv) by the Lender to an Affiliate thereof, or (v) in
connection with any litigation relating to enforcement of this Agreement;
provided further, that, unless specifically prohibited by applicable law or
court order, the Lender shall, prior to disclosure thereof, notify the Borrower
of any request for disclosure of any Confidential Information (x) by any
Governmental Authority or representative thereof or (y) pursuant to legal
process.
Section 10.05. Amendments and Waivers. (a) Any provision of
this Agreement may be amended, modified, supplemented or waived, but only by a
written amendment or supplement, or written waiver, signed by the Borrower and
the Lender.
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(b) Except to the extent expressly set forth therein, any
waiver shall be effective only in the specific instance and for the specific
purpose for which such waiver is given.
Section 10.06. Cumulative Rights; No Waiver. Each and every
right granted to the Lender hereunder or under any other document delivered in
connection herewith, or allowed it by law or equity, shall be cumulative and not
exclusive and may be exercised from time to time. No failure on the part of the
Lender to exercise, and no delay in exercising, any right will operate as a
waiver thereof, nor will any single or partial exercise by the Lender of any
right preclude any other or future exercise thereof or the exercise of any other
right.
Section 10.07. Notices. Any communication, demand or notice to
be given hereunder will be duly given when delivered in writing or by telecopy
to a party at its address as indicated below or such other address as such party
may specify in a notice to the other party hereto. A communication, demand or
notice given pursuant to this Agreement shall be addressed:
If to the Borrower, to:
Vornado Operating L.P.
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Telecopy: (201) 587-0600
Attention: Chief Financial Officer
If to the Lender, to:
Vornado Realty L.P.
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Telecopy: (201) 587-0600
Attention: Chief Financial Officer
This Section 10.07 shall not apply to notices referred to in
Article II of this Agreement, except to the extent set forth therein.
Section 10.08. Certain Acknowledgments. The Borrower hereby
confirms and acknowledges that (a) the Lender does not have any fiduciary or
similar relationship to the Borrower by virtue of this Agreement and the
transactions contemplated herein and that the relationship established by this
Agreement between the Lender and the Borrower is solely that of creditor and
debtor and (b) no joint venture exists between the Borrower and the Lender by
virtue of this Agreement and the transactions contemplated herein.
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Section 10.09. Separability. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect under any law, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
Section 10.10. Parties in Interest. This Agreement shall be
binding upon and inure to the benefit of the Borrower and the Lender and their
respective successors and assigns, except that the Borrower may not assign any
of its rights hereunder without the prior written consent of the Lender, and any
purported assignment by the Borrower without such consent shall be void.
Section 10.11. Execution in Counterparts. This Agreement may
be executed in any number of counterparts and by the different parties hereto on
separate counterparts, each of which when so executed and delivered shall be an
original, but all the counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
VORNADO OPERATING L.P., as Borrower
By: Vornado Operating Company,
its general partner
By:___________________________
Name:
Title:
VORNADO REALTY L.P., as
Lender
By: VORNADO REALTY TRUST,
its general partner
By:___________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 10.3
VORNADO OPERATING COMPANY
1998 OMNIBUS STOCK PLAN
1. PURPOSE. The purpose of the 1998 Omnibus Stock Plan of
Vornado Operating Company (the "Plan") is to promote the financial interests of
Vornado Operating Company (the "Company"), including its growth and performance,
by encouraging employees, officers, directors and consultants of the of the
Company and its subsidiaries to acquire an ownership position in the Company,
enhancing the ability of the Company and its subsidiaries to attract and retain
employees, officers, directors and consultants of outstanding ability, and
providing employees, officers, directors and consultants with a way to acquire
or increase their proprietary interest in the Company's success.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as
provided in Section 14, the number of shares of common stock, par value $.01
(the "Common Stock") which shall be available for the grant of awards under the
Plan shall not exceed [__________]. No Participant (as defined in Section 3)
shall be granted stock options and stock appreciation rights with respect to
more than an aggregate number of [__________] shares of Common Stock, subject to
adjustment as provided in Section 14. The Common Stock issued under the Plan may
be authorized and unissued or treasury stock, as the Company may from time to
time determine.
Common Stock subject to an award that expires unexercised,
that is forfeited, terminated or cancelled, in whole or in part, or is paid in
cash in lieu of Common Stock, shall thereafter again be available for grant
under the Plan.
3. ADMINISTRATION. The Plan shall be administered by the
Compensation Committee (the "Committee") of the Board of Directors of the
Company. A majority of the Committee shall constitute a quorum, and the acts of
a majority shall be the acts of the Committee.
The Committee (i) shall select the employees, officers,
directors and consultants of the Company and its subsidiaries who will be
participants in the Plan (the "Participants"), determine the type of awards to
be made to Participants, determine the number of shares of Common Stock or stock
units subject to awards, and (ii) shall have the authority to interpret the
Plan, to establish, amend, and rescind any rules and regulations relating to the
Plan, to determine the terms and provisions of any agreements entered into
hereunder, and to make all other determinations necessary or advisable for the
administration of the Plan. The Committee may correct any defect, supply any
omission or reconcile any inconsistency in the Plan or in any award in the
manner and to the extent it shall deem desirable to carry it into effect. The
determinations of the
<PAGE> 2
Committee in the administration of the Plan, as described herein, shall be final
and conclusive.
4. ELIGIBILITY. Except as otherwise provided herein, only
employees, officers, directors and consultants of the Company and its
subsidiaries are eligible to be Participants of the Plan. Notwithstanding the
foregoing, only employees of the Company shall be eligible for the grant of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.
5. AWARDS. Awards under the Plan may consist of the following:
stock options (either incentive stock options or non-qualified stock options),
stock appreciation rights, performance stock, or grants of restricted stock.
Awards of performance stock and restricted stock may provide the Participant
with dividends or dividend equivalents and voting rights prior to vesting
(whether based on a period of time or based on attainment of specified
performance conditions).
6. STOCK OPTIONS. Except as otherwise provided herein, the
Committee shall establish the option price at the time each stock option is
granted, which price shall not be less than 100% of the fair market value of the
Common Stock on the date of grant. Stock options shall be exercisable for such
period as specified by the Committee, but in no event may options be exercisable
more than ten years after their date of grant. The option price of each share of
Common Stock as to which a stock option is exercised shall be paid in full at
the time of such exercise. Such payment shall be made in cash, by tender of
Common Stock owned by the Participant valued at fair market value as of the date
of exercise, in such other consideration as the Committee deems appropriate, or
by a combination of cash, Common Stock and such other consideration.
If determined by the Committee at or subsequent to the date of
grant of a stock option, in the event a Participant pays the exercise price of
such stock option (in whole or in part) by tendering Common Stock owned by the
Participant, such Participant shall automatically be granted a reload stock
option for the number of shares of Common Stock used to pay the exercise price.
The reload stock option shall have terms and conditions determined by the
Committee consistent with this Section. If a reload stock option is granted as
set forth above, one or more successive reload stock options shall automatically
be granted, unless otherwise determined by the Committee, to a Participant who
pays all or part of the exercise price of any such reload stock option by
tendering Common Stock owned by the Participant. Such reload stock options
grants shall not be treated as Common Stock granted under the Plan in
determining the aggregate number of Common Stock available for the grant of
awards pursuant to the first sentence of Section 2.
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Notwithstanding any other term of the Plan, upon the effective
date of the spinoff of the Company from Vornado Realty Trust ("Vornado"), each
employee of Vornado, whether or not such employee becomes an employee of the
Company, may be granted stock options to purchase such number of shares of
Common Stock of the Company and under such terms and conditions as set by the
Committee on the date of grant. Such stock options may be granted with an option
price at, or below the fair market value of the Common Stock on the date of
grant.
7. STOCK APPRECIATION RIGHTS. Stock appreciation rights may be
granted in tandem with a stock option, in addition to a stock option, or may be
freestanding and unrelated to a stock option. Stock appreciation rights granted
in tandem with or in addition to a stock option may be granted either at the
same time as the stock option or at a later time. No stock appreciation right
shall be exercisable earlier than six months after grant, except in the event of
the Participant's death or disability. A stock appreciation right shall entitle
the Participant to receive from the Company an amount equal to the increase of
the fair market value of the Common Stock on the exercise of the stock
appreciation right over the grant price. The Committee, in its sole discretion,
shall determine whether the stock appreciation right shall be settled in cash,
Common Stock or a combination of cash and Common Stock.
8. PERFORMANCE STOCK. Performance stock may be granted in the
form of actual shares of Common Stock or stock units having a value equal to an
identical number of shares of Common Stock. In the event that a certificate is
issued in respect of a share of Common Stock subject to a grant of performance
stock, such certificate shall be registered in the name of the Participant but
shall be held by the Company until the time the shares of Common Stock subject
to the grant of performance stock are earned. The performance conditions and the
length of the performance period shall be determined by the Committee. The
Committee, in its sole discretion, shall determine whether performance stock
granted in the form of stock units shall be paid in cash, Common Stock, or a
combination of cash and Common Stock.
9. RESTRICTED STOCK. Restricted stock may be granted in the
form of actual Common Stock or stock units having a value equal to an identical
number of shares of Common Stock. In the event that a certificate is issued in
respect of shares of Common Stock subject to a grant of restricted stock, such
certificate shall be registered in the name of the Participant but shall be held
by the Company until the end of the restricted period. The employment conditions
and the length of the period for vesting of restricted stock shall be
established by the Committee at time of grant. The Committee, in its sole
discretion, shall determine whether restricted stock granted in the form of
stock units shall be paid in cash, Common Stock, or a combination of cash and
Common Stock.
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10. AWARD AGREEMENTS. Each award under the Plan shall be
evidenced by an agreement setting forth the terms and conditions, as determined
by the Committee, which shall apply to such award, in addition to the terms and
conditions specified in the Plan.
11. WITHHOLDING. The Company shall have the right to deduct
from any payment to be made pursuant to the Plan, or to require prior to the
issuance or delivery of any shares of Common Stock or the payment of cash under
the Plan, any taxes required by law to be withheld therefrom. The Committee, in
its sole discretion, may permit a Participant to elect to satisfy such
withholding obligation by having the Company retain the number of shares of
Common Stock whose fair market value equals the amount required to be withheld.
Any fraction of a share of Common Stock required to satisfy such obligation
shall be disregarded and the amount due shall instead be paid in cash to the
Participant.
12. NONTRANSFERABILITY. Except as may otherwise be determined
by the Committee with respect to the transferability of non-qualified stock
options by a Participant to such Participant's immediate family members (or
companies, partnerships, or limited liability companies established for such
immediate family members), no award under the Plan shall be assignable or
transferable except by will or the laws of descent and distribution, and no
right or interest of any Participant shall be subject to any lien, obligation or
liability of the Participant. For this purpose, immediate family members means,
except as otherwise defined by the Committee, the Participant's children,
stepchildren, grandchildren, parents, stepparents, grandparents, spouse,
siblings (including half brothers and sisters), in-laws and persons related by
reason of legal adoption. Such transferees may transfer a stock option only by
will or the laws of descent or distribution. A stock option transferred pursuant
to this Section 12 shall remain subject to the provisions of the Plan, and shall
be subject to such other rules as the Committee shall determine. Upon transfer
of a stock option, any related stock appreciation right shall be cancelled.
Except in the case of a holder's incapacity, an award shall be exercisable only
by the holder thereof.
13. NO RIGHT TO EMPLOYMENT. No person shall have any claim or
right to be granted an award, and the grant of an award shall not be construed
as giving a Participant the right to be retained in the employ of the Company or
its subsidiaries. Further, the Company and its subsidiaries expressly reserve
the right at any time to dismiss a Participant free from any liability, or any
claim under the Plan, except as provided herein or in any agreement entered into
hereunder.
14. ADJUSTMENT OF AND CHANGES IN COMMON STOCK. In the event of
any change in the outstanding Common Stock by reason of any stock dividend or
split, recapitalization, merger, consolidation, spinoff, combination or exchange
of
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<PAGE> 5
Common Stock or other corporate change, or any distributions to common
stockholders other than regular cash dividends, the Committee may make such
substitution or adjustment, if any, as it deems to be equitable, as to the
number or kind of Common Stock or other securities issued or reserved for
issuance pursuant to the Plan and to outstanding awards.
15. AMENDMENT. The Board of Directors may amend or terminate
the Plan or any portion thereof at any time.
16. EFFECTIVE DATE. The Plan shall be effective as of
[____________]. Subject to earlier termination pursuant to Section 15, the Plan
shall have a term of ten years from its effective date.
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EXHIBIT 10.14
-----------------------------------------
FORM OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
VORNADO OPERATING L.P.
-----------------------------------------
Dated as of: -, 1998
-----------------------------------------
IN RELIANCE UPON CERTAIN EXEMPTIONS FROM REGISTRATION, THE PARTNERSHIP INTERESTS
BEING OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. ACCORDINGLY, NO
PARTNERSHIP INTEREST MAY BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
UNLESS SUBSEQUENTLY REGISTERED UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE, AND
UNLESS THE OTHER TRANSFER RESTRICTIONS CONTAINED HEREIN HAVE BEEN SATISFIED.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THEIR INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE OFFERING,
INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES 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 DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I
DEFINED TERMS
Act.............................................................................................................. 1
Additional Limited Partner....................................................................................... 1
Adjusted Capital Account......................................................................................... 1
Adjusted Capital Account Deficit................................................................................. 1
Adjusted Property................................................................................................ 1
Adjustment Date.................................................................................................. 1
Affiliate........................................................................................................ 1
Affiliated Transferee............................................................................................ 2
Agreed Value..................................................................................................... 2
Agreement........................................................................................................ 2
Assignee......................................................................................................... 2
Bankruptcy....................................................................................................... 2
Book-Tax Disparities............................................................................................. 2
Business Day..................................................................................................... 2
Capital Account.................................................................................................. 2
Capital Contribution............................................................................................. 3
Carrying Value................................................................................................... 3
Cash Amount...................................................................................................... 3
Certificate...................................................................................................... 3
Class A Unit..................................................................................................... 3
Code............................................................................................................. 3
Consent.......................................................................................................... 3
Consent of the Outside Limited Partners.......................................................................... 3
Contributed Property............................................................................................. 3
Conversion Factor................................................................................................ 3
Convertible Funding Debt......................................................................................... 4
Corporate Expenses............................................................................................... 4
Debt............................................................................................................. 4
Deemed Partnership Interest Value................................................................................ 4
Deemed Value of the Partnership Interest......................................................................... 5
Depreciation..................................................................................................... 5
Effective Date................................................................................................... 5
ERISA............................................................................................................ 5
Exchange Act..................................................................................................... 5
Funding Debt..................................................................................................... 5
General Partner.................................................................................................. 5
General Partner Certificate...................................................................................... 5
General Partner Entity........................................................................................... 5
General Partnership Interest..................................................................................... 5
Incapacity....................................................................................................... 5
Incapacitated.................................................................................................... 5
Indemnitee....................................................................................................... 6
Intercompany Agreement........................................................................................... 6
Interstate....................................................................................................... 6
IRS.............................................................................................................. 6
Limited Partner.................................................................................................. 6
</TABLE>
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<TABLE>
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Limited Partnership Interest..................................................................................... 6
Liquidating Event................................................................................................ 6
Liquidator....................................................................................................... 6
Majority in Interest............................................................................................. 6
Net Income....................................................................................................... 6
Net Loss......................................................................................................... 7
New Securities................................................................................................... 7
Nonrecourse Built-in Gain........................................................................................ 7
Nonrecourse Deductions........................................................................................... 7
Nonrecourse Liability............................................................................................ 7
Notice of Redemption............................................................................................. 7
Partner.......................................................................................................... 7
Partner Minimum Gain............................................................................................. 7
Partner Nonrecourse Debt......................................................................................... 7
Partner Nonrecourse Deductions................................................................................... 7
Partnership...................................................................................................... 7
Partnership Interest............................................................................................. 7
Partnership Minimum Gain......................................................................................... 7
Partnership Record Date.......................................................................................... 8
Partnership Unit................................................................................................. 8
Partnership Year................................................................................................. 8
Percentage Interest.............................................................................................. 8
Person........................................................................................................... 8
Predecessor Entity............................................................................................... 8
Publicly Traded.................................................................................................. 8
Recapture Income................................................................................................. 8
Redeeming Partner................................................................................................ 8
Redemption Amount................................................................................................ 8
Redemption Right................................................................................................. 8
Regulations...................................................................................................... 9
REIT............................................................................................................. 9
Residual Gain or Residual Loss................................................................................... 9
Safe Harbors..................................................................................................... 9
Securities Act................................................................................................... 9
704(c) Value..................................................................................................... 9
Share............................................................................................................ 9
Shares Amount.................................................................................................... 9
Specified Redemption Date........................................................................................ 9
Stock Option Plan................................................................................................ 9
Subsidiary....................................................................................................... 9
Substituted Limited Partner...................................................................................... 9
Successor Entity................................................................................................. 10
Terminating Capital Transaction.................................................................................. 10
Termination Transaction.......................................................................................... 10
Unit Equivalent.................................................................................................. 10
Unrealized Gain.................................................................................................. 10
Unrealized Loss.................................................................................................. 10
Valuation Date................................................................................................... 10
Value............................................................................................................ 10
Vornado Sub...................................................................................................... 11
</TABLE>
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<TABLE>
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ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Organization................................................................................... 11
Section 2.2 Name........................................................................................... 11
Section 2.3 Registered Office and Agent; Principal Office.................................................. 11
Section 2.4 Term........................................................................................... 11
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business........................................................................... 11
Section 3.2 Powers......................................................................................... 12
Section 3.3 Partnership Only for Purposes Specified........................................................ 12
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
Section 4.1 Capital Contributions of the Partners.......................................................... 12
Section 4.2 Issuances of Partnership Interests............................................................. 13
Section 4.3 No Preemptive Rights........................................................................... 14
Section 4.4 Other Contribution Provisions.................................................................. 14
Section 4.5 No Interest on Capital......................................................................... 14
ARTICLE V
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions.............................................. 14
Section 5.2 Amounts Withheld............................................................................... 15
Section 5.3 Distributions Upon Liquidation................................................................. 15
Section 5.4 Revisions to Reflect Issuance of Additional Partnership Interests.............................. 15
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes....................................................... 15
Section 6.2 Revisions to Allocations to Reflect Issuance of Additional Partnership Interests............... 16
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management..................................................................................... 16
Section 7.2 Certificate of Limited Partnership............................................................. 19
Section 7.3 Title to Partnership Assets.................................................................... 20
Section 7.4 Reimbursement of the General Partner........................................................... 20
Section 7.5 Outside Activities of the General Partner...................................................... 21
Section 7.6 Transactions with Affiliates................................................................... 23
Section 7.7 Indemnification................................................................................ 23
Section 7.8 Liability of the General Partner............................................................... 25
Section 7.9 Other Matters Concerning the General Partner................................................... 25
Section 7.10 Reliance by Third Parties...................................................................... 26
</TABLE>
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<TABLE>
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Section 7.11 Restrictions on General Partner's Authority.................................................... 26
Section 7.12 Loans by Third Parties......................................................................... 26
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability........................................................................ 26
Section 8.2 Management of Business......................................................................... 27
Section 8.3 Outside Activities of Limited Partners......................................................... 27
Section 8.4 Return of Capital.............................................................................. 27
Section 8.5 Rights of Limited Partners Relating to the Partnership......................................... 27
Section 8.6 Redemption Right............................................................................... 28
Section 8.7 Right of Offset................................................................................ 30
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting......................................................................... 31
Section 9.2 Fiscal Year.................................................................................... 31
Section 9.3 Reports........................................................................................ 31
ARTICLE X
TAX MATTERS
Section 10.1 Preparation of Tax Returns..................................................................... 32
Section 10.2 Tax Elections.................................................................................. 32
Section 10.3 Tax Matters Partner............................................................................ 32
Section 10.4 Organizational Expenses........................................................................ 33
Section 10.5 Withholding.................................................................................... 33
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer....................................................................................... 34
Section 11.2 Transfers of Partnership Interests of General Partner.......................................... 34
Section 11.3 Limited Partners' Rights to Transfer........................................................... 35
Section 11.4 Substituted Limited Partners................................................................... 37
Section 11.5 Assignees...................................................................................... 37
Section 11.6 General Provisions............................................................................. 37
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner......................................................... 39
Section 12.2 Admission of Additional Limited Partners....................................................... 39
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership.................................. 39
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution.................................................................................... 40
Section 13.2 Winding Up..................................................................................... 40
</TABLE>
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<TABLE>
<S> <C>
Section 13.3 Compliance with Timing Requirements of Regulations............................................. 41
Section 13.4 Deemed Distribution and Recontribution......................................................... 41
Section 13.5 Rights of Limited Partners..................................................................... 42
Section 13.6 Notice of Dissolution.......................................................................... 42
Section 13.7 Cancellation of Certificate of Limited Partnership............................................. 42
Section 13.8 Reasonable Time for Winding Up................................................................. 42
Section 13.9 Waiver of Partition............................................................................ 42
Section 13.10 Liability of Liquidator........................................................................ 42
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments..................................................................................... 43
Section 14.2 Meetings of the Partners....................................................................... 44
ARTICLE XV
GENERAL PROVISIONS
Section 15.1 Addresses and Notice........................................................................... 44
Section 15.2 Titles and Captions............................................................................ 44
Section 15.3 Pronouns and Plurals........................................................................... 45
Section 15.4 Further Action................................................................................. 45
Section 15.5 Binding Effect................................................................................. 45
Section 15.6 Creditors; Other Third Parties................................................................. 45
Section 15.7 Waiver......................................................................................... 45
Section 15.8 Counterparts................................................................................... 45
Section 15.9 Applicable Law................................................................................. 45
Section 15.10 Invalidity of Provisions....................................................................... 45
Section 15.11 Power of Attorney.............................................................................. 45
Section 15.12 Entire Agreement............................................................................... 46
Section 15.13 No Rights as Stockholders...................................................................... 47
</TABLE>
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EXHIBIT A
PARTNERS AND
PARTNERSHIP INTERESTS
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
EXHIBIT C
SPECIAL ALLOCATION RULES
EXHIBIT D
NOTICE OF REDEMPTION
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<PAGE> 8
FORM OF
AGREEMENT OF LIMITED PARTNERSHIP
OF
VORNADO OPERATING L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP of Vornado Operating L.P., dated
as of -, 1998, is entered into by and among Vornado Operating Company, a
Delaware corporation, as the General Partner of and a Limited Partner in the
Partnership, and Interstate Properties, a New Jersey general partnership, as a
Limited Partner in the Partnership, together with any other Persons who become
Partners in the Partnership as provided herein.
The parties hereto hereby agree to form the Partnership as a
limited partnership under the Delaware Revised Uniform Limited Partnership Act,
as amended from time to time, 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.
"Act" means the Delaware Revised Uniform Limited Partnership
Act, as it may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the
Partnership as a Limited Partner pursuant to Section 12.2 hereof and who is
shown as such on the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account
maintained for each Partner as of the end of each Partnership Year (i) increased
by any amounts which such Partner is obligated to restore pursuant to any
provision of this Agreement or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any
Partner, the deficit balance, if any, in such Partner's Adjusted Capital Account
as of the end of the relevant Partnership Year.
"Adjusted Property" means any property the Carrying Value of
which has been adjusted pursuant to Exhibit B hereto.
"Adjustment Date" has the meaning set forth in Section 4.2.B
hereof.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by or under common control with
such Person, (ii) any Person owning or controlling ten percent (10%) or more of
the outstanding voting interests of such Person, (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests or
(iv) any officer, director, general partner or trustee of such Person or any
Person referred to in clauses (i), (ii), and (iii) above. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
<PAGE> 9
"Affiliated Transferee" means, with respect to any Limited
Partner, a member of such Limited Partner's Immediate Family, a trust formed
solely for the benefit of such Limited Partner and/or members of such Limited
Partner's Immediate Family, or any partnership, limited liability company, joint
venture, corporation or other business entity all of the interests in which are,
and remain, directly or indirectly owned and controlled solely by such Limited
Partner and/or members of such Limited Partner's Immediate Family, and if the
Limited Partner is an entity and owned Partnership Units on the Effective Date,
Persons who, as of the Effective Date, directly or indirectly owned interests in
or were beneficiaries of such Limited Partner and continue to own such interests
(or be beneficiaries) at the time of the proposed transfer or any Affiliated
Transferee of such Persons.
"Agreed Value" means (i) in the case of any Contributed
Property, the 704(c) Value of such property as of the time of its contribution
to the Partnership, reduced by any liabilities either assumed by the Partnership
upon such contribution or to which such property is subject when contributed;
and (ii) in the case of any property distributed to a Partner by the
Partnership, the Partnership's Carrying Value of such property at the time such
property is distributed, reduced by any indebtedness either assumed by such
Partner upon such distribution or to which such property is subject at the time
of distribution as determined under Section 752 of the Code and the regulations
thereunder.
"Agreement" means this Agreement of Limited Partnership, as it
may be amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership
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 hereof.
"Bankruptcy" with respect to any Person shall be deemed to
have occurred when (a) the Person commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency or
other similar law now or hereafter in effect, (b) the Person 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 Person, (c) the Person executes and delivers a general
assignment for the benefit of the Person's creditors, (d) the Person files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Person in any proceeding of the
nature described in clause (b) above, (e) the Person seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Person or for all or any substantial part of the Person's properties, (f) any
proceeding seeking liquidation, reorganization or other relief 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, (g) the appointment without the Person's consent or acquiescence of a
trustee, receiver or liquidator has not been vacated or stayed within ninety
(90) days of such appointment or (h) an appointment referred to in clause (g) is
not vacated within ninety (90) days after the expiration of any such stay.
"Book-Tax Disparities" means, with respect to any item of
Contributed Property or Adjusted Property, as of the date of any determination,
the difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax purposes
as of such date. A Partner's share of the Partnership's Book-Tax Disparities in
all of its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B hereto and the hypothetical balance of such Partner's Capital
Account computed as if it had been maintained, with respect to each such
Contributed Property or Adjusted Property, strictly in accordance with federal
income tax accounting principles.
"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.
"Capital Account" means the Capital Account maintained for a
Partner pursuant to Exhibit B hereto.
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<PAGE> 10
"Capital Contribution" means, with respect to any Partner, any
cash, cash equivalents or the Agreed Value of Contributed Property which such
Partner contributes or is deemed to contribute to the Partnership pursuant to
Section 4.1 or 4.2 hereof.
"Carrying Value" means (i) with respect to a Contributed
Property or Adjusted Property, the 704(c) Value of such property reduced (but
not below zero) by all Depreciation with respect to such Contributed Property or
Adjusted Property, as the case may be, charged to the Partners' Capital Accounts
and (ii) with respect to any other Partnership property, the adjusted basis of
such property for federal income tax purposes, all as of the time of
determination. The Carrying Value of any property shall be adjusted from time to
time in accordance with Exhibit B hereto, and to reflect changes, additions or
other adjustments to the Carrying Value for dispositions and acquisitions of
Partnership properties, as deemed appropriate by the General Partner.
"Cash Amount" means an amount of cash equal to the Value on
the Valuation Date of the Shares Amount, subject to Section 8.6.A(v).
"Certificate" means the Certificate of Limited Partnership of
the Partnership filed in the office of the Delaware Secretary of State on -,
1998, as amended from time to time in accordance with the terms hereof and the
Act.
"Class A Unit" means any Partnership Unit that is not
specifically designated by the General Partner as being of another specified
class of Partnership Units.
"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.
"Consent of the Outside Limited Partners" means the Consent of
Limited Partners (excluding for this purpose the General Partner, any Person of
which the General Partner owns or controls more than fifty percent (50%) of the
voting interests and any Person owning or controlling, directly or indirectly,
more than fifty percent (50%) of the outstanding voting interests of the General
Partner) holding Percentage Interests regardless of class that are greater than
fifty percent (50%) of the aggregate Percentage Interest of all Limited Partners
of all classes taken together who are not excluded for the purposes hereof.
"Contributed Property" means each property or other asset
contributed to the Partnership, in such form as may be permitted by the Act, but
excluding cash contributed or deemed contributed to the Partnership. Once the
Carrying Value of a Contributed Property is adjusted pursuant to Exhibit B
hereto, such property shall no longer constitute a Contributed Property for
purposes of Exhibit B hereto, but shall be deemed an Adjusted Property for such
purposes.
"Conversion Factor" means 1.0; provided that in the event that
the General Partner Entity (i) declares (and the applicable record date has
passed or will have passed before a Redeeming Partner would receive cash or
Shares in respect of the Partnership Units being redeemed) or pays a dividend on
its outstanding Shares in Shares or makes a distribution to all holders of its
outstanding Shares in Shares, (ii) subdivides its outstanding Shares or (iii)
combines its outstanding Shares into a smaller number of Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of Shares issued and outstanding on the
record date for such dividend, distribution, subdivision or combination
(assuming for such purposes 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 (determined without the above assumption) issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination; and provided further that in the event that an entity shall cease
to be the General Partner Entity (the "Predecessor Entity") and another entity
shall become the General Partner Entity (the
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<PAGE> 11
"Successor Entity"), the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by a fraction, the numerator of which is the Value of one
Share of the Predecessor Entity, determined as of the time immediately prior to
when the Successor Entity becomes the General Partner Entity, and the
denominator of which is the Value of one Share of the Successor Entity,
determined as of that same date. (For purposes of the second proviso in the
preceding sentence, in the event that any stockholders of the Predecessor Entity
will receive consideration in connection with the transaction in which the
Successor Entity becomes the General Partner Entity, the numerator in the
fraction described above for determining the adjustment to the Conversion Factor
(that is, the Value of one Share of the Predecessor Entity) shall be the sum of
the greatest amount of cash and the fair market value of any securities and
other consideration that the holder of one Share in the Predecessor Entity could
have received in such transaction (determined without regard to any provisions
governing fractional shares).) Any adjustment to the Conversion Factor shall
become effective immediately after the effective date of such event retroactive
to the record date, if any, for the event giving rise thereto; it being intended
that (x) adjustments to the Conversion Factor are to be made in order to avoid
unintended dilution or anti-dilution as a result of transactions in which Shares
are issued, redeemed or exchanged without a corresponding issuance, redemption
or exchange of Partnership Units and (y) if a Specified Redemption Date shall
fall between the record date and the effective date of any event of the type
described above, that the Conversion Factor applicable to such redemption shall
be adjusted to take into account such event.
"Convertible Funding Debt" has the meaning set forth in
Section 7.5.F hereof.
"Corporate Expenses" shall mean (i) costs and expenses
relating to the continuity of existence of the General Partner and any Person in
which the General Partner owns an equity interest, to the extent not prohibited
by Section 7.5.A (and excluding expenses relating to any Person in which the
General Partner acquired an interest with the Consent of the Outside Limited
Partners, unless the Consent of the Outside Limited Partners has been obtained
to include such expenses within the definition of "Corporate Expenses"), other
than the Partnership (which Persons shall, for purposes of this definition, be
included within the definition of "General Partner"), and any and all costs,
expenses or fees payable to any trustee or director of the General Partner or
such Persons, (ii) costs and expenses relating to any offer or registration of
securities by the General Partner (the proceeds of which will be contributed or
advanced to the Partnership) and all statements, reports, fees and expenses
incidental thereto, including underwriting discounts and selling commissions
applicable to any such offer of securities, (iii) 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 filings with the
Securities and Exchange Commission, (iv) costs and expenses associated with
compliance by the General Partner with laws, rules and regulations promulgated
by any regulatory body, including the Securities and Exchange Commission, and
(v) all other operating or administrative costs of the General Partner incurred
in the ordinary course of its business; provided, however, that any of the
foregoing expenses that are determined by the General Partner to be expenses
relating to the ownership and operation of, or for the benefit of, the
Partnership shall be treated, subject to Section 7.4.E hereof, as reimbursable
expenses under Section 7.4.B hereof rather than as "Corporate Expenses".
"Debt" means, as to any Person, as of any date of
determination, (i) all indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services, (ii) all amounts owed by such
Person to banks or other Persons in respect of reimbursement obligations under
letters of credit, surety bonds and other similar instruments guaranteeing
payment or other performance of obligations by such Person, (iii) all
indebtedness for borrowed money or for the deferred purchase price of property
or services secured by any lien on any property owned by such Person, to the
extent attributable to such Person's interest in such property, even though such
Person has not assumed or become liable for the payment thereof, and (iv)
obligations of such Person incurred in connection with entering into a lease
which, in accordance with generally accepted accounting principles, should be
capitalized.
"Deemed Partnership Interest Value" means, as of any date with
respect to any class of Partnership Interests, the Deemed Value of the
Partnership Interest of such class multiplied by the applicable Partner's
Percentage Interest of such class.
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<PAGE> 12
"Deemed Value of the Partnership Interest" means, as of any
date with respect to any class of Partnership Interests, (a) if the shares of
common stock (or other comparable equity interest) of the General Partner are
Publicly Traded, (i) the total number of shares of common stock (or other
comparable equity interest) of the General Partner corresponding to such class
of Partnership Interest (as provided for in Section 4.2.B hereof) issued and
outstanding as of the close of business on such date (excluding any treasury
shares) multiplied by the Value of a share of such common stock (or other
comparable equity interest) on such date divided by (ii) the Percentage Interest
of the General Partner in such class of Partnership Interests on such date, and
(b) otherwise, the aggregate Value of such class of Partnership Interests
determined as set forth in the fourth and fifth sentences of the definition of
Value.
"Depreciation" means, for each fiscal year, an amount equal to
the federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if the
Carrying Value of an asset differs from its adjusted basis for federal income
tax purposes at the beginning of such year or other period, Depreciation shall
be an amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Effective Date" means the date of the this Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Funding Debt" means the incurrence of any Debt by or on
behalf of the General Partner for the purpose of providing funds to the
Partnership.
"General Partner" means Vornado Operating Company, a Delaware
corporation, or its successors as general partner of the Partnership.
"General Partner Certificate" means the Restated Certificate
of Incorporation or other similar organizational document governing the General
Partner, as amended, supplemented or restated from time to time.
"General Partner Entity" means the General Partner; provided,
however, that if (i) the shares of common stock (or other comparable equity
interests) of the General Partner are at any time not Publicly Traded and (ii)
the shares of common stock (or other comparable equity interests) of an entity
that owns, directly or indirectly, fifty percent (50%) or more of the shares of
common stock (or other comparable equity interests) of the General Partner are
Publicly Traded, the term "General Partner Entity" shall refer to such entity
whose shares of common stock (or other comparable equity securities) are
Publicly Traded. If both requirements set forth in clauses (i) and (ii) above
are not satisfied, then the term "General Partner Entity" shall mean the General
Partner.
"General Partnership Interest" means a Partnership Interest
held by the General Partner that is a general partnership interest. A General
Partnership Interest may be expressed as a number of Partnership Units.
"Immediate Family" means, with respect to any natural Person,
such natural Person's spouse, parents, descendants, nephews, nieces, brothers
and sisters.
"Incapacity" or "Incapacitated" means means, (i) as to any
individual Partner, death, total physical disability or entry of an order by a
court of competent jurisdiction adjudicating such Partner incompetent to manage
his or her Person or estate, (ii) 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, (iii) as to any partnership which is a
Partner, the
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<PAGE> 13
dissolution and commencement of winding up of the partnership, (iv) as to any
estate which is a Partner, the distribution by the fiduciary of the estate's
entire interest in the Partnership, (v) 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 (vi) as to any Partner, the Bankruptcy of such Partner.
"Indemnitee" means (i) any Person made a party to a proceeding
or threatened with being made a party to a proceeding by reason of its status as
(A) the General Partner, (B) a Limited Partner or (C) an officer of the
Partnership (or any Subsidiary or other entity in which the Partnership owns an
equity interest) or a trustee/director, officer or stockholder of the General
Partner or the General Partner Entity (or any Subsidiary or other entity in
which the General Partner owns an equity interest (so long as the General
Partner's ownership of an interest in such entity is not prohibited by Section
7.5.A) or for which the General Partner, acting on behalf of the Partnership,
requests the trustee/director, officer or stockholder to serve as a director,
officer, trustee or agent, including serving as a trustee of an employee benefit
plan) and (ii) such other Persons (including Affiliates of the General Partner,
a Limited 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.
"Intercompany Agreement" means the Intercompany Agreement to
be entered into between the General Partner and Vornado Sub, as it may be
amended, supplemented or restated from time to time.
"Interstate" means Interstate Properties, a New Jersey general
partnership.
"IRS" means the Internal Revenue Service, which administers
the internal revenue laws of the United States.
"Limited Partner" means any Person named as a Limited Partner
in Exhibit A attached hereto, as such Exhibit may be amended and restated from
time to time, or any Substituted Limited Partner or Additional Limited Partner,
in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of
a Limited Partner in the Partnership representing a fractional part of the
Partnership Interests of all Limited 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 Partnership Interest may
be expressed as a number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1
hereof.
"Liquidator" has the meaning set forth in Section 13.2.A
hereof.
"Majority in Interest" means Partners (excluding the General
Partner) who hold more than fifty percent (50%) of the outstanding Percentage
Interests not held by the General Partner.
"Net Income" means, for any taxable period, the excess, if
any, of the Partnership's items of income and gain for such taxable period over
the Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
Exhibit B hereto. If an item of income, gain, loss or deduction that has been
included in the initial computation of Net Income is subjected to the special
allocation rules in Exhibit C hereto, Net Income or the resulting Net Loss,
whichever the case may be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any,
of the Partnership's items of loss and deduction for such taxable period over
the Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Exhibit B. If an item of income, gain,
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<PAGE> 14
loss or deduction that has been included in the initial computation of Net Loss
is subjected to the special allocation rules in Exhibit C hereto, Net Loss or
the resulting Net Income, whichever the case may be, shall be recomputed without
regard to such item.
"New Securities" means (i) any rights, options, warrants or
convertible or exchangeable securities having the right to subscribe for or
purchase shares of common stock (or other comparable equity interest) of the
General Partner, excluding grants under any Stock Option Plan, or (ii) any Debt
issued by the General Partner that provides any of the rights described in
clause (i).
"Nonrecourse Built-in Gain" means, with respect to any
Contributed Properties or Adjusted Properties that are subject to a mortgage or
negative pledge securing a Nonrecourse Liability, the amount of any taxable gain
that would be allocated to the Partners pursuant to Section 2.B of Exhibit C
hereto if such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for
a Partnership Year shall be determined in accordance with the rules of
Regulations Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in
Regulations Section 1.752-1(a)(2).
"Notice of Redemption" means a Notice of Redemption
substantially in the form of Exhibit D attached hereto.
"Partner" means the General Partner or a Limited Partner, and
"Partners" means the General Partner and the Limited Partners.
"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 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 continued upon the terms and conditions set forth in this Agreement, and
any successor thereto.
"Partnership Interest" means a Limited Partnership Interest or
the General Partnership Interest, as the context requires, 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 Partnership 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 Partnership Minimum Gain, for a
Partnership 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 either (i) for the making of any distribution pursuant to
Section 5.1 hereof, which record date shall be the same as the record date
established by the General Partner Entity for a distribution to its stockholders
of some or all of its portion of such
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<PAGE> 15
distribution received by the General Partner if the shares of common stock (or
comparable equity interest) of the General Partner Entity are Publicly Traded,
or (ii) if applicable, for determining the Partners entitled to vote on or
consent to any proposed action for which the consent or approval of the Partners
is sought pursuant to Section 14.2 hereof.
"Partnership Unit" means a fractional, undivided share of the
Partnership Interests of all Partners issued pursuant to Sections 4.1 and 4.2
hereof, and includes Class A Units and any other classes or series of
Partnership Units established after the date hereof. The number of Partnership
Units outstanding and the Percentage Interests in the Partnership represented by
such Partnership Units are set forth in Exhibit A hereto, as such Exhibit may be
amended and restated from time to time. The ownership of Partnership Units may
be evidenced by a certificate in a form approved by the General Partner.
"Partnership Year" means the fiscal year of the Partnership.
"Percentage Interest" means, as to a Partner holding a
Partnership Interest of any class issued hereunder, its interest in such class,
determined by dividing the Partnership Units of such class owned by such Partner
by the total number of Partnership Units of such class then outstanding as
specified in Exhibit A attached hereto, as such exhibit may be amended and
restated from time to time, multiplied by the aggregate Percentage Interest
allocable to such class of Partnership Interests. For such time or times as the
Partnership shall at any time have outstanding more than one class of
Partnership Interests, the Percentage Interest attributable to each class of
Partnership Interests shall be determined as set forth in Section 4.2.B hereof.
"Person" means a natural person, partnership (whether general
or limited), trust, estate, association, corporation, limited liability company,
unincorporated organization, custodian, nominee or any other individual or
entity in its own or any representative capacity.
"Predecessor Entity" has the meaning set forth in the
definition of "Conversion Factor" herein.
"Publicly Traded" means listed or admitted to trading on the
New York Stock Exchange, the American Stock Exchange or another national
securities exchange or designated for quotation on the Nasdaq National Market,
or any successor to any of the foregoing.
"Recapture Income" means any gain recognized by the
Partnership (computed without regard to any adjustment required by Section 743
of the Code) upon the disposition of any property or asset of the Partnership,
which gain is characterized as ordinary income because it represents the
recapture of deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6.A
hereof.
"Redemption Amount" means either the Cash Amount or the Shares
Amount, as determined by the General Partner in its sole and absolute
discretion; provided that in the event that the Shares are not Publicly Traded
at the time a Redeeming Partner exercises its Redemption Right, the Redemption
Amount shall be paid only in the form of the Cash Amount unless the Redeeming
Partner, in its sole and absolute discretion, consents to payment of the
Redemption Amount in the form of the Shares Amount; provided further, the
foregoing is subject to Section 8.6.A(iv). A Redeeming Partner shall have no
right, without the General Partner's consent, in its sole and absolute
discretion, to receive the Redemption Amount in the form of the Shares Amount.
"Redemption Right" has the meaning set forth in Section 8.6.A
hereof.
"Regulations" means the Income Tax Regulations promulgated
under the Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
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"REIT" means a real estate investment trust under Section 856
of the Code.
"Residual Gain" or "Residual Loss" means any item of gain or
loss, as the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocated pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C hereto to
eliminate Book-Tax Disparities.
"Safe Harbors" has the meaning set forth in Section 11.6.F
hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"704(c) Value" of any Contributed Property means the fair
market value of such property at the time of contribution as determined by the
General Partner using such reasonable method of valuation as it may adopt.
Subject to Exhibit B hereto, the General Partner shall, in its sole and absolute
discretion, use such method as it deems reasonable and appropriate to allocate
the aggregate of the 704(c) Values of Contributed Properties in a single or
integrated transaction among each separate property on a basis proportional to
their fair market values.
"Share" means a share of capital stock (or other comparable
equity interest) of the General Partner Entity. Shares may be issued in one or
more classes or series in accordance with the terms of the General Partner
Certificate (or, if the General Partner is not the General Partner Entity, the
organizational documents of the General Partner Entity). In the event that there
is more than one class or series of Shares, the term "Shares" shall, as the
context requires, be deemed to refer to the class or series of Shares that
correspond to the class or series of Partnership Interests for which the
reference to Shares is made. When used with reference to Class A Units, the term
"Shares" refers to shares of common stock (or other comparable equity interest)
of the General Partner Entity.
"Shares Amount" means a number of Shares equal to the product
of the number of Partnership Units offered for redemption by a Redeeming Partner
times the Conversion Factor; provided, that in the event the General Partner
Entity issues to all holders of Shares rights, options, warrants or convertible
or exchangeable securities entitling such holders to subscribe for or purchase
Shares or any other securities or property (collectively, the "rights"), then
the Shares Amount shall also include such rights that a holder of that number of
Shares would be entitled to receive.
"Specified Redemption Date" means the tenth Business Day after
receipt by the General Partner of a Notice of Redemption; provided, that if the
Shares are not Publicly Traded, the Specified Redemption Date means the
thirtieth Business Day after receipt by the General Partner of a Notice of
Redemption.
"Stock Option Plan" means any share or stock incentive plan or
similar compensation arrangement (including, without limitation, any arrangement
whereby the Partnership or the General Partner delivers Units or shares of
capital stock of the General Partner into a "rabbi trust") of the General
Partner, the Partnership or any Affiliate of the Partnership or the General
Partner, as the context may require.
"Subsidiary" means, with respect to any Person, any
corporation, limited liability company, partnership or joint venture, or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) 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.
"Successor Entity" has the meaning set forth in the definition
of "Conversion Factor" herein.
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"Terminating Capital Transaction" means any sale or other
disposition of all or substantially all of the assets of the Partnership for
cash 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 for cash.
"Termination Transaction" has the meaning set forth in Section
11.2.B hereof.
"Unit Equivalent" has the meaning set forth in Section
8.6.A(v) hereof.
"Unrealized Gain" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i) the
fair market value of such property (as determined under Exhibit B hereto) as of
such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made pursuant to Exhibit B hereto) as of such date.
"Unrealized Loss" attributable to any item of Partnership
property means, as of any date of determination, the excess, if any, of (i) the
Carrying Value of such property (prior to any adjustment to be made pursuant to
Exhibit B hereto) as of such date, over (ii) the fair market value of such
property (as determined under Exhibit B hereto) as of such date.
"Valuation Date" means the date of receipt by the General
Partner of a Notice of Redemption or, if such date is not a Business Day, the
first Business Day thereafter.
"Value" means, with respect to any outstanding Shares of the
General Partner Entity that are Publicly Traded, the average of the daily market
price for the ten (10) consecutive trading days immediately preceding the date
with respect to which value must be determined or, if such day is not a Business
Day, the immediately preceding Business Day. The market price for each such
trading day shall be the closing price, regular way, 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. In the event that the outstanding Shares of the General Partner Entity
are Publicly Traded and the Shares Amount includes rights that a holder of
Shares would be entitled to receive, then the Value of such rights shall be
determined by the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate. In the event that the Shares of the General Partner Entity are not
Publicly Traded, the Value of the Shares Amount per Partnership Unit offered for
redemption (which will be the Cash Amount per Partnership Unit offered for
redemption payable pursuant to Section 8.6.A hereof) means the amount that a
holder of one Partnership Unit would receive if each of the assets of the
Partnership were to be sold for its fair market value on the Specified
Redemption Date, the Partnership were to pay all of its outstanding liabilities,
and the remaining proceeds were to be distributed to the Partners in accordance
with the terms of this Agreement. Such Value shall be determined by the General
Partner, acting in good faith and based upon a commercially reasonable estimate
of the amount that would be realized by the Partnership if each asset of the
Partnership (and each asset of each partnership, limited liability company,
joint venture or other entity in which the Partnership owns a direct or indirect
interest) were sold to an unrelated purchaser in an arms' length transaction
where neither the purchaser nor the seller were under economic compulsion to
enter into the transaction (without regard to any discount in value as a result
of the Partnership's minority interest in any property or any illiquidity of the
Partnership's interest in any property). In connection with determining the
Deemed Value of the Partnership Interest for purposes of determining the number
of additional Partnership Units issuable upon a Capital Contribution funded by
an underwritten public offering of shares of common stock (or other comparable
equity interest) of the General Partner, the Value of such shares shall be the
public offering price per share of such common stock (or other comparable equity
interest) sold.
"Vornado" means Vornado Realty Trust, a Maryland real estate
investment trust.
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"Vornado Sub" means Vornado Realty L.P., a Delaware limited
partnership.
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Organization
The Partnership is a limited partnership organized pursuant to
the provisions of the Act and upon the terms and conditions set forth herein.
The Partners hereby form the Partnership pursuant to and in accordance with 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.
Section 2.2 Name
The name of the Partnership is Vornado Operating 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 at any time and from time to time and shall notify
the Limited Partners of such change in the next regular communication to the
Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
The address of the registered office of the Partnership in the
State of Delaware shall be located at Corporation Trust Center, 1209 Orange
Street, Wilmington, County of New Castle, Delaware 19801, and the registered
agent for service of process on the Partnership in the State of Delaware at such
registered office shall be Corporation Trust Company. The principal office of
the Partnership shall be Vornado Operating L.P., Park 80 West, Plaza II, Saddle
Brook, New Jersey 07663, 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.
Section 2.4 Term
The term of the Partnership shall continue until December 31,
2095 (as such date may be extended by the General Partner in its sole
discretion), unless it is dissolved sooner pursuant to the provisions of Article
XIII hereof or as otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (a) to own assets that Vornado could not itself own and conduct
activities that Vornado could not itself conduct due to the status of Vornado as
a real estate investment trust for federal income tax purposes; (b) to perform
the Intercompany Agreement, pursuant to which, among other things, the parties
will agree to provide each other with rights of first opportunity with respect
to certain transactions and investments; (c) to conduct any business that may be
lawfully conducted by a limited
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partnership organized pursuant to the Act; (d) to enter into any partnership,
joint venture, limited liability company or other similar arrangement to engage
in any of the foregoing or the ownership of interests in any entity engaged,
directly or indirectly, in any of the foregoing; and (e) to do anything
necessary or incidental to the foregoing. For so long as the Intercompany
Agreement shall remain in effect, the Partnership will be prohibited from
pursuing any REIT Opportunity (as defined in the Intercompany Agreement) except
to the extent permitted by the Intercompany Agreement. In connection with the
foregoing, the Limited Partners acknowledge that the performance of the
Intercompany Agreement by the General Partner inures to the benefit of all the
Partners and not solely the General Partner or its Affiliates. Notwithstanding
the foregoing, the Limited Partners acknowledge and agree that the General
Partner Entity (or the General Partner, as applicable) may terminate the
Intercompany Agreement at any time to the full extent permitted under the
Intercompany Agreement.
Section 3.2 Powers
The Partnership shall have full power and authority 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,
including, without limitation, directly or through its ownership interest in
other entities, to enter into, perform and carry out contracts of any kind,
borrow money and issue evidences of indebtedness whether or not secured by
mortgage, deed of trust, pledge or other lien, acquire, own, manage, improve and
develop real property, and lease, sell, transfer and dispose of real property;
provided, however, 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 Entity (or the General Partner, as applicable) to perform the
Intercompany Agreement or (ii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the General Partner Entity
(or the General Partner, if different) or its securities, unless such action (or
inaction) shall have been specifically consented to by the General Partner in
writing.
Section 3.3 Partnership Only for Purposes Specified
The Partnership shall be a partnership only for the purposes
specified in Section 3.1 above, and this Agreement shall not be deemed to create
a partnership among the Partners with respect to any activities whatsoever other
than the activities within the purposes of the Partnership as specified in
Section 3.1 above.
ARTICLE IV
CAPITAL CONTRIBUTIONS AND ISSUANCES
OF PARTNERSHIP INTERESTS
Section 4.1 Capital Contributions of the Partners
A. Capital Contributions to the Partnership on the Effective
Date. On the Effective Date and concurrently with the execution of this
Agreement, the General Partner and Interstate are making Capital Contributions
to the Partnership. Thereafter, the General Partner will complete Exhibit A
hereto to reflect the Capital Contributions made by each Partner, the number of
Partnership Units (by class) held by each Partner and the Percentage Interest in
the Partnership represented by such Partnership Units. The Capital Accounts of
the Partners and the Carrying Values of the Partnership's assets shall be
determined as of the Effective Date pursuant to Exhibit B hereto to reflect the
Capital Contributions made on the Effective Date.
B. General Partnership Interest. A number of Partnership Units
held by the General Partner equal to one percent (1%) of all outstanding
Partnership Units shall be deemed to be the General Partnership Interest. All
other Partnership Units held by the General Partner shall be Limited Partnership
Interests and shall be held by the General Partner in its capacity as a Limited
Partner in the Partnership.
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C. Capital Contributions By Merger. 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 hereto.
D. No Obligation to Make Additional Capital Contributions.
Except as provided in Sections 7.5 and 10.5 hereof, the Partners shall have no
obligation to make any additional Capital Contributions or provide any
additional funding to the Partnership (whether in the form of loans, repayments
of loans or otherwise). No Partner shall have any obligation to restore any
deficit that may exist in its Capital Account, either upon a liquidation of the
Partnership or otherwise.
Section 4.2 Issuances of Partnership Interests
A. General. The General Partner is hereby authorized to cause
the Partnership from time to time to issue to Partners (including the General
Partner and its Affiliates) or other Persons (including, without limitation, in
connection with the contribution of property to the Partnership) Partnership
Units or other Partnership Interests in one or more classes, or in one or more
series of any of such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties, including
rights, powers and duties senior to Limited Partnership Interests, all as shall
be determined, subject to applicable Delaware law, by the General Partner in its
sole and absolute discretion, including, without limitation, (i) the allocations
of items of Partnership income, gain, loss, deduction and credit to each such
class or series of Partnership Interests, (ii) the right of each such class or
series of Partnership Interests to share in Partnership distributions and (iii)
the rights of each such class or series of Partnership Interests upon
dissolution and liquidation of the Partnership; provided that, no such
Partnership Units or other 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 Shares or other equity interests in the
General Partner having designations, preferences and other rights such that the
economic interests attributable to such Shares or other equity interests are
substantially similar to the designations, preferences and other rights (except
voting rights) of the additional Partnership Interests issued to the General
Partner in accordance with this Section 4.2.A, or (b) the Partnership Interests
are issued to all Partners holding Partnership Interests in the same class in
proportion to their respective Percentage Interests in such class or (c) the
Partnership Interests are issued in connection with a Termination Transaction or
a transaction in which another Person is merged, combined or consolidated with
or into the General Partner and in exchange for the transfer or contribution of
all or substantially all of the assets of such other person by the General
Partner to the Partnership. In the event that the Partnership issues Partnership
Interests pursuant to this Section 4.2.A, the General Partner shall make such
revisions to this Agreement (including but not limited to the revisions
described in Section 5.4, Section 6.2 and Section 8.6 hereof) as it deems
necessary to reflect the issuance of such additional Partnership Interests.
B. Percentage Interest Adjustments in the Case of Capital
Contributions for Partnership Units. Upon the acceptance of additional Capital
Contributions in exchange for Partnership Units, the Percentage Interest related
thereto shall be equal to a fraction, the numerator of which is equal to the
amount of cash, if any, plus the Agreed Value of Contributed Property, if any,
contributed with respect to such additional Partnership Units and the
denominator of which is equal to the sum of (i) the Deemed Value of the
Partnership Interests for all outstanding classes (computed as of the Business
Day immediately preceding the date on which the additional Capital Contributions
are made (such contribution date being referred to as an "Adjustment Date"))
plus (ii) the aggregate amount of additional Capital Contributions contributed
to the Partnership on such Adjustment Date in respect of such additional
Partnership Units. The Percentage Interest of each other Partner holding
Partnership Interests not making a full pro rata Capital Contribution shall be
adjusted to a fraction the numerator of which is equal to the sum of (i) the
Deemed Partnership Interest Value of such Limited Partner (computed as of the
Business Day immediately preceding the Adjustment Date) plus (ii) the amount of
additional Capital Contributions (such amount being equal to the amount of cash,
if any, plus the Agreed Value of Contributed Property, if any, so contributed),
if any, made by such Partner to the Partnership in respect of such Partnership
Interest as of such Adjustment Date and the denominator of which is equal to the
sum of
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(i) the Deemed Value of the Partnership Interests of all outstanding classes
(computed as of the Business Day immediately preceding such Adjustment Date)
plus (ii) the aggregate amount of the additional Capital Contributions
contributed to the Partnership on such Adjustment Date in respect of such
additional Partnership Interests. For purposes of calculating a Partner's
Percentage Interest pursuant to this Section 4.2.B, cash Capital Contributions
by the General Partner will be deemed to equal the cash contributed by the
General Partner plus (a) in the case of cash contributions funded by an offering
of any equity interests in or other securities of the General Partner, the
offering costs attributable to the cash contributed to the Partnership, and (b)
in the case of Partnership Units issued pursuant to Section 7.5.E hereof, an
amount equal to the difference between the Value of the Shares sold pursuant to
any Stock Option Plan and the net proceeds of such sale.
C. Classes of Partnership Units. From and after the Effective
Date, subject to Section 4.2.A above, the Partnership shall have one class of
Common Partnership Units entitled "Class A Units" which shall be issued to the
General Partner in respect of its General Partnership Interest and in respect of
its Limited Partnership Interest and to Interstate in respect of its Limited
Partnership Interest. The General Partner may, in its sole and absolute
discretion, issue to newly admitted Partners Class A Units or Partnership Units
of any other class established by the Partnership in accordance with Section
4.2.A in exchange for the contribution by such Partners of cash, partnership
interests, stock, notes or any other assets or consideration; provided that any
Partnership Unit that is not specifically designated by the General Partner as
being of a particular class shall be deemed to be a Class A Unit unless the
context clearly requires otherwise.
Section 4.3 No Preemptive Rights
Except to the extent expressly granted by the General Partner
(on behalf of the Partnership) pursuant to another agreement, no Person shall
have any preemptive, preferential or other similar right with respect to (i)
additional Capital Contributions or loans to the Partnership or (ii) issuance or
sale of any Partnership Units or other Partnership Interests.
Section 4.4 Other Contribution Provisions
In the event that any Partner is admitted to the Partnership
and is given a Capital Account in exchange for services rendered to the
Partnership, such transaction shall be treated by the Partnership and the
affected Partner as if the Partnership had compensated such Partner in cash for
the fair market value of such services, and the Partner had contributed such
cash to the capital of the Partnership.
Section 4.5 No Interest on Capital
No Partner shall be entitled to interest on its Capital
Contributions or its Capital Account.
ARTICLE V
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
A. General. Subject to Section 5.1.C, the General Partner
shall have the exclusive right and authority to declare and cause the
Partnership to make distributions as and when the General Partner deems
appropriate or desirable in its sole discretion. Notwithstanding anything to the
contrary contained herein, in no event may a Partner receive a distribution with
respect to a Partnership Unit for a quarter or shorter period if such Partner is
entitled to receive a distribution for such quarter or shorter period with
respect to a Share for which such Partnership Unit has been redeemed or
exchanged. Unless otherwise expressly provided for herein or in an agreement at
the time a new class of
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Partnership Interests is created in accordance with Article IV hereof, no
Partnership Interest shall be entitled to a distribution in preference to any
other Partnership Interest.
B. Method. When, as and if declared by the General Partner,
the Partnership will make distributions to the General Partner in any amount
necessary to enable the General Partner to pay Corporate Expenses, and
thereafter to the extent of the remaining distribution amount, to holders of
Partnership Units in proportion to their respective Percentage Interests. Each
holder of Partnership Interests that are entitled to any preference in
distribution shall be entitled to a distribution in accordance with the rights
of any such class of Partnership Interests (and, within such class, pro rata in
proportion to the respective Percentage Interests on such Partnership Record
Date).
C. Minimum Distributions for General Partner REIT Years. In
any taxable year for which the General Partner is attempting to qualify as a
real estate investment trust for federal income tax purposes, the General
Partner shall be permitted to use commercially reasonable efforts (including
incurring indebtedness), as determined by the General Partner in its sole
discretion exercised in good faith, to make cash distributions pursuant to
Section 5.1B in an aggregate amount sufficient to permit the distributions made
to the General Partner under Section 5.1B(ii) to at least equal 95% of the
Partnership's taxable income that is allocable to the General Partner.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of
any foreign, state or local tax law and Section 10.5 hereof with respect to any
allocation, payment or distribution to the General Partner, the Limited Partners
or Assignees shall be treated as amounts distributed to the General Partner,
Limited Partners or Assignees pursuant to Section 5.1 above for all purposes
under this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction shall be
distributed to the Partners in accordance with Section 13.2 hereof.
Section 5.4 Revisions to Reflect Issuance of Additional Partnership
Interests
In the event that the Partnership issues additional
Partnership Interests to the General Partner or any Additional Limited Partner
pursuant to Article IV hereof, the General Partner shall make such revisions to
this Article V as it deems necessary to reflect the issuance of such additional
Partnership Interests.
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in
determining the rights of the Partners among themselves, the Partnership's items
of income, gain, loss and deduction (computed in accordance with Exhibit B
hereto) shall be allocated among the Partners in each taxable year (or portion
thereof) as provided herein below.
A. Net Income. After giving effect to the special allocations
set forth in Section 1 of Exhibit C hereto, Net Income shall be allocated (i)
first, to the General Partner to the extent that Net Losses previously allocated
to the General Partner pursuant to the last sentence of Section 6.1.B below
exceed Net Income previously allocated to the General Partner pursuant to this
clause (i) of Section 6.1.A, and (ii) second, to all holders of Partnership
Units in proportion to their respective Percentage Interests.
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B. Net Losses. After giving effect to the special allocations
set forth in Section 1 of Exhibit C hereto, Net Losses shall be allocated to
holders of all Partnership Units in proportion to their Percentage Interests;
provided that, Net Losses shall not be allocated to any Limited Partner pursuant
to this Section 6.1.B to the extent that such allocation would cause such
Limited Partner to have an Adjusted Capital Account Deficit (or increase any
existing Adjusted Capital Account Deficit) at the end of such taxable year (or
portion thereof). All Net Losses in excess of the limitations set forth in this
Section 6.1.B shall be allocated to the General Partner.
C. Allocation of Nonrecourse Debt. For purposes of Regulations
Section 1.752-3(a), the Partners agree that Nonrecourse Liabilities of the
Partnership in excess of the sum of (i) the amount of Partnership Minimum Gain
and (ii) the total amount of Nonrecourse Built-in Gain shall be allocated among
the Partners in accordance with their respective Percentage Interests.
D. Recapture Income. Any gain allocated to the Partners upon
the sale or other taxable disposition of any Partnership asset shall, to the
extent possible after taking into account other required allocations of gain
pursuant to Exhibit C hereto, be characterized as Recapture Income in the same
proportions and to the same extent as such Partners have been allocated any
deductions directly or indirectly giving rise to the treatment of such gains as
Recapture Income.
Section 6.2 Revisions to Allocations to Reflect Issuance of Additional
Partnership Interests
In the event that the Partnership issues additional
Partnership Interests to the General Partner or any Additional Limited Partner
pursuant to Article IV hereof, the General Partner shall make such revisions to
this Article VI as it deems necessary to reflect the terms of the issuance of
such additional Partnership Interests, including making preferential allocations
to classes of Partnership Interests that are entitled thereto.
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Powers of General Partner. Except as otherwise expressly
provided in this Agreement, all management powers over the business and affairs
of the Partnership are and shall be exclusively 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.
The General Partner may not be removed by the Limited Partners with or without
cause. 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,
subject to Sections 7.6.A, 7.6.D and 7.11 below, shall have full power and
authority to do all things deemed necessary or desirable by it, on such terms
and conditions as the General Partner in its sole discretion deems appropriate,
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:
(1) the making of any expenditures, the lending, subject
to Section 7.6.D, or borrowing of money, the
assumption or guarantee of, or other contracting for,
indebtedness and other liabilities, the issuance of
evidences of indebtedness (including the securing of
same by mortgage, deed of trust or other lien or
encumbrance on the Partnership's assets) and the
incurring of any obligations the General Partner
deems necessary or desirable for the conduct of the
activities of the Partnership;
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(2) 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;
(3) the acquisition, disposition, sale, mortgage, pledge,
encumbrance, hypothecation or exchange of any or all
of the 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, on such terms as the General Partner deems
proper in its sole and absolute discretion;
(4) the use of the assets of the Partnership (including,
without limitation, cash on hand) for any purpose
consistent with the terms of this Agreement,
including, without limitation, the financing of the
conduct of the operations of the Partnership or any
of the Partnership's Subsidiaries, the lending of
funds to other Persons, subject to Section 7.6.D, and
the repayment of obligations of the Partnership and
its Subsidiaries and any other Person in which the
Partnership has an equity investment and the making
of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping,
repair, alteration, demolition or improvement of any
real property or improvements owned by the
Partnership or any Subsidiary of the Partnership or
any other Person in which the Partnership has made a
direct or indirect equity investment;
(6) 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;
(7) the distribution of Partnership cash or other
Partnership assets in accordance with this Agreement;
(8) the holding, managing, investing and reinvesting of
cash and other assets of the Partnership and, in
connection therewith, the opening, maintaining and
closing of bank and brokerage accounts and the
drawing of checks or other orders for the payment of
moneys;
(9) the collection and receipt of revenues and income of
the Partnership;
(10) the selection and dismissal of employees of the
Partnership (including, without limitation, employees
having titles such as "president," "vice president,"
"secretary" and "treasurer") and agents, outside
attorneys, accountants, consultants and contractors
of the Partnership, and the determination of their
compensation and other terms of employment or hiring;
(11) the maintenance of such insurance for the benefit of
the Partnership and the Partners;
(12) the formation of, or acquisition of an interest in,
and the contribution of property to, any further
limited or general partnerships, joint ventures,
limited liability companies or other relationships
that it deems desirable (including, without
limitation, the acquisition of
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interests in, and the contributions of property to
its Subsidiaries and any other Person in which it has
an equity investment from time to time);
(13) the control of any matters affecting the rights and
obligations of the Partnership, including 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, the
commencement or defense of suits, legal proceedings,
administrative proceedings, arbitrations or other
forms of dispute resolution, the representation of
the Partnership in all suits or legal proceedings,
administrative proceedings, arbitrations or other
forms of dispute resolution, the incurring of legal
expense and the indemnification of any Person against
liabilities and contingencies to the extent permitted
by law;
(14) the determination of the fair market value of any
Partnership property distributed in kind, using such
reasonable method of valuation as the General Partner
may adopt;
(15) 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 assets or investment held
by the Partnership;
(16) 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, individually or jointly
with any such Subsidiary or other Person;
(17) 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 any
interest pursuant to contractual or other
arrangements with such Person;
(18) the making, executing and delivering of any and all
deeds, leases, notes, deeds to secure debt,
mortgages, deeds of trust, security agreements,
conveyances, contracts, guarantees, warranties,
indemnities, waivers, releases or other legal
instruments or agreements in writing necessary or
appropriate in the judgment of the General Partner
for the accomplishment of any of the powers of the
General Partner under this Agreement;
(19) the distribution of cash to acquire Partnership Units
held by a Limited Partner in connection with a
Limited Partner's exercise of its Redemption Right
under Section 8.6 hereof;
(20) the amendment and restatement of Exhibit A hereto to
reflect accurately at all times the Capital
Contributions and Percentage Interests of the
Partners as the same are adjusted from time to time
to the extent necessary to reflect redemptions,
Capital Contributions, the issuance of Partnership
Units, the admission of any Additional Limited
Partner or any Substituted Limited Partner or
otherwise, which amendment and restatement,
notwithstanding anything in this Agreement to the
contrary, shall not be deemed an amendment of this
Agreement, as long as the matter or event being
reflected in Exhibit A hereto otherwise is authorized
by this Agreement;
(21) the approval and/or implementation of any merger
(including a triangular merger), consolidation or
other combination between the Partnership and another
Person that is not prohibited under this Agreement,
whether with or without Consent, the terms of Section
17- 211(g) of the Act shall be applicable such that
the General Partner shall have the right to
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effect any amendment to this Agreement or effect the
adoption of a new partnership agreement for a limited
partnership if it is the surviving or resulting
limited partnership on the merger or consolidation
(except as may be expressly prohibited under Section
14.1.C, Section 14.1.D or Section 14.1.F); and
(22) the taking of any and all actions necessary or
desirable in furtherance of, in connection with or
incidental to the foregoing.
B. No Approval by Limited Partners. Except as provided in
Section 7.11 below, 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 of the Partners, notwithstanding any other provision of this Agreement, the
Act or any applicable law, rule or regulation, to the full extent permitted
under the Act or other applicable law. The execution, delivery or performance by
the General Partner or the Partnership of the Intercompany Agreement or any
other 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. Insurance. At all times from and after the date hereof, the
General Partner may cause the Partnership to obtain and maintain (i) casualty,
liability and other insurance on the properties of the Partnership, (ii)
liability insurance for the Indemnitees hereunder and (iii) such other insurance
as the General Partner, in its sole and absolute discretion, determines to be
necessary.
D. Working Capital and Other Reserves. At all times from and
after the date hereof, the General Partner may cause the Partnership to
establish and maintain working capital reserves in such amounts as the General
Partner, in its sole and absolute discretion, deems appropriate and reasonable
(both in purpose and amount) from time to time, including upon liquidation of
the Partnership pursuant to Section 13.2 hereof.
E. No Obligations to Consider Tax Consequences of Limited
Partners. 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 (including the General 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 derived by such Limited Partner in
connection with such decisions, provided that the General Partner has acted in
good faith and not beyond its authority under this Agreement.
Section 7.2 Certificate of Limited Partnership
The Partnership has caused the Certificate to be filed with
the Secretary of State of Delaware. 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 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, the District of Columbia or other
jurisdiction in which the Partnership may elect to do business or own property.
Subject to the terms of Section 8.5.A(4) 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. 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, the District of Columbia or other jurisdiction
in which the Partnership may elect to do business or own property.
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Section 7.3 Title to Partnership Assets
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 Partners, individually or collectively, shall
have any ownership interest in such Partnership assets or any portion thereof.
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. The General Partner
hereby declares and warrants that any Partnership assets 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. 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.
Section 7.4 Reimbursement of the General Partner
A. No Compensation. Except as provided in this Section 7.4 and
elsewhere in this Agreement (including the provisions of Articles V and VI
hereof 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. Responsibility for Partnership Expenses. The Partnership
shall be responsible for and shall pay all expenses relating to the
Partnership's organization, the ownership of its assets and its operations. The
General Partner shall be reimbursed on a monthly basis, or such other basis as
the General Partner may determine in its sole and absolute discretion, for all
expenses it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership (including, without limitation, expenses related to
the management and administration of any Subsidiaries of the General Partner or
the Partnership or Affiliates of the Partnership such as auditing expenses and
filing fees); provided that (x) the amount of any such reimbursement shall be
reduced by (i) any interest earned by the General Partner with respect to bank
accounts or other instruments or accounts held by it as permitted in Section
7.5.A below and (ii) any amount derived by the General Partner from any
investments permitted in Section 7.5.A below and (y) Corporate Expenses shall
not be treated as Partnership expenses for purposes of this Section 7.4.B. The
General Partner shall determine in good faith the amount of expenses incurred by
it related to the ownership and operation of, or for the benefit of, the
Partnership. In the event that 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 in its sole and absolute discretion deems fair and
reasonable. Such reimbursements shall be in addition to any reimbursement to the
General Partner pursuant to Section 10.3.C hereof and as a result of
indemnification pursuant to Section 7.7 below. All payments and reimbursements
hereunder shall be characterized for federal income tax purposes as expenses of
the Partnership incurred on its behalf, and not as expenses of the General
Partner.
C. Partnership Interest Issuance Expenses. The General Partner
shall also be reimbursed for all expenses it incurs relating to any issuance of
additional Partnership Interests, Debt of the Partnership or rights, options,
warrants or convertible or exchangeable securities pursuant to Article IV hereof
(including, without limitation, all costs, expenses, damages and other payments
resulting from or arising in connection with litigation related to any of the
foregoing), all of which expenses are considered by the Partners to constitute
expenses of, and for the benefit of, the Partnership.
D. Purchases of Shares by the General Partner. In the event
that the General Partner elects to purchase from its stockholders Shares in
connection with a share repurchase or similar program or for the purpose of
delivering such Shares to satisfy an obligation under any dividend reinvestment
or share purchase program adopted by the General Partner, any employee share
purchase plan adopted by the General Partner or any similar obligation or
arrangement undertaken by the General Partner in the future, the purchase price
paid by the General Partner for such Shares and any other expenses incurred by
the General Partner in connection with such purchase shall be considered
Corporate Expenses, and the Partnership shall distribute cash to the General
Partner to offset such expenses pursuant
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to Section 5.1, subject to the conditions that: (i) if such Shares subsequently
are to be sold by the General Partner, the General Partner pays to the
Partnership any proceeds received by the General Partner for such Shares
(provided that a transfer of Shares for Partnership Units pursuant to Section
8.6 hereof would not be considered a sale for such purposes); and (ii) if such
Shares are not retransferred by the General Partner within thirty (30) days
after the purchase thereof, the General Partner shall cause the Partnership to
cancel a number of Partnership Units of the appropriate class (rounded to the
nearest whole Partnership Unit) held by the General Partner equal to the product
attained by multiplying the number of such Shares by a fraction, the numerator
of which is one and the denominator of which is the Conversion Factor.
E. Tax Treatment of Certain Reimbursements. If and to the
extent that any reimbursement made pursuant to this Section 7.4 is determined
for federal income tax purposes not to constitute a payment of expenses of the
Partnership, then such reimbursement shall be treated as a distribution pursuant
to Section 5.1.B. hereof.
Section 7.5 Outside Activities of the General Partner
A. General. Without the Consent of the Outside Limited
Partners, except as set forth in this Section 7.5.A, 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 as a General Partner or Limited Partner and the management of the
business of the Partnership and such activities as are incidental to any of the
foregoing. Without the Consent of the Outside Limited Partners, the assets of
the General Partner shall be limited to Partnership Interests and permitted debt
obligations of the Partnership (as contemplated by Section 7.5.F below), so that
Shares and Partnership Units are completely fungible except as otherwise
specifically provided herein; provided, that the General Partner shall be
permitted to hold (i) interests in entities that hold no material assets; (ii)
interests in entities that own only interests in the Partnership and/or
interests in other entities that either hold no assets or hold only interests in
the Partnership; (iii) assets and/or interests in entities that hold assets,
having an aggregate value not greater than [FIVE PERCENT (5%)] of the total
market value of the General Partner Entity (determined by reference to the value
of all outstanding equity securities of the General Partner Entity), provided
that (X) the General Partner Entity will apply the net income from such assets
(other than net income derived as a result of an entity's ownership of an
interest in the Partnership) to offset Corporate Expenses before utilizing the
distribution provisions of Section 5.1.B, (Y) the General Partner will
contribute all net income generated by such assets and/or interests (other than
net income derived as a result of an entity's ownership of an interest in the
Partnership) to the Partnership (after taking into account Corporate Expenses as
described in clause (X) above), and (Z) the General Partner will use
commercially reasonable efforts to transfer such assets and interests (other
than interests in the Partnership) to the Partnership or an entity controlled by
the Partnership as soon as such a transfer can be made without causing the
General Partner or the Partnership to incur any material expenses in connection
therewith; and (iv) such bank accounts or similar instruments or accounts in its
own name as it deems necessary to carry out its responsibilities and purposes as
contemplated under this Agreement and its organizational documents; and,
provided, further, that the General Partner shall be permitted to acquire,
directly or through a Subsidiary, up to a one percent (1%) interest in any
partnership or limited liability company at least ninety-nine percent (99%) of
the equity of which is owned directly or indirectly by the Partnership. The
General Partner and any of its Affiliates may acquire Limited Partnership
Interests and shall be entitled to exercise all rights of a Limited Partner
relating to such Limited Partnership Interests.
B. Repurchase of Shares. In the event the General Partner
elects to purchase from its stockholders Shares in connection with a share
repurchase or similar program or for the purpose of delivering such Shares to
satisfy an obligation under any dividend reinvestment or share purchase program
adopted by the General Partner, any employee share purchase plan adopted by the
General Partner or any similar obligation or arrangement undertaken by the
General Partner in the future, and the General Partner does not resell said
Shares within thirty (30) days after the purchase thereof as contemplated in
Section 7.4.D(i), then the General Partner shall cause the Partnership to
purchase from the General Partner (and eliminate) that number of Partnership
Units of the appropriate class equal to the product obtained by multiplying the
number of Shares purchased by the General Partner times a fraction, the
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numerator of which is one and the denominator of which is the Conversion Factor,
on the same terms and for the same aggregate price that the General Partner
purchased such Shares.
C. Forfeiture of Shares. In the event the Partnership or the
General Partner acquires Shares as a result of the forfeiture of such Shares
under a restricted or similar share plan, then the General Partner shall cause
the Partnership to cancel that number of Partnership Units of the appropriate
class equal to the number of Shares so acquired divided by the Conversion
Factor, and, if the Partnership acquired such Shares, it shall transfer such
Shares to the General Partner for cancellation.
D. Issuances of Shares. After the Effective Date, the General
Partner shall not grant, award, or issue any additional Shares (other than
Shares issued pursuant to Section 8.6 hereof or pursuant to a dividend or
distribution (including any share split) of Shares to all of its stockholders),
other equity securities of the General Partner, New Securities or Convertible
Funding Debt, unless (i) the General Partner shall cause, pursuant to Section
4.2.A hereof, the Partnership to issue to the General Partner Partnership
Interests or rights, options, warrants or convertible or exchangeable securities
of the Partnership having designations, preferences and other rights, all such
that the economic interests are substantially the same as those of such
additional Shares, other equity securities, New Securities or Convertible
Funding Debt, as the case may be, and (ii) the General Partner transfers to the
Partnership, as an additional Capital Contribution, the proceeds from the grant,
award, or issuance of such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be, or from the exercise
of rights contained in such additional Shares, other equity securities, New
Securities or Convertible Funding Debt, as the case may be. Without limiting the
foregoing, the General Partner is expressly authorized to issue additional
Shares, other equity securities, New Securities or Convertible Funding Debt, as
the case may be, for less than fair market value, and the General Partner is
expressly authorized, pursuant to Section 4.2.A hereof, to cause the Partnership
to issue to the General Partner corresponding Partnership Interests, as long as
(a) the General Partner concludes in good faith that such issuance is in the
interests of the General Partner and the Partnership (for example, and not by
way of limitation, the issuance of Shares and corresponding Partnership Units
pursuant to a share purchase plan providing for purchases of Shares, either by
employees or stockholders, at a discount from fair market value or pursuant to
employee share options that have an exercise price that is less than the fair
market value of the Shares, either at the time of issuance or at the time of
exercise) and (b) the General Partner transfers all proceeds from any such
issuance or exercise to the Partnership as an additional Capital Contribution.
E. Stock Option Plan. If at any time or from time to time, the
General Partner sells Shares pursuant to any Stock Option Plan, the General
Partner shall transfer the net proceeds of the sale of such Shares to the
Partnership as an additional Capital Contribution in exchange for an amount of
additional Partnership Units equal to the number of Shares so sold divided by
the Conversion Factor.
F. Funding Debt. The General Partner may incur a Funding Debt,
including, without limitation, a Funding Debt that is convertible into Shares or
otherwise constitutes a class of New Securities ("Convertible Funding Debt"),
subject to the condition that the General Partner lends to the Partnership the
net proceeds of such Funding Debt; provided, that Convertible Funding Debt shall
be issued pursuant to Section 7.5.D above. If the General Partner enters into
any Funding Debt, the loan to the Partnership shall be on comparable terms and
conditions, including interest rate, repayment schedule and costs and expenses,
as are applicable with respect to or incurred in connection with such Funding
Debt.
Section 7.6 Transactions with Affiliates
A. Transactions with Certain Affiliates. Except as expressly
permitted by this Agreement (other than Section 7.1.A hereof, which shall not be
considered authority for a transaction that otherwise would be prohibited by
this Section 7.6.A), the Partnership shall not, directly or indirectly, sell,
transfer or convey any property to, or purchase any property from, or borrow
funds from, or lend funds to, any Partner or any Affiliate of the Partnership or
the General Partner or the General Partner Entity that is not also a Subsidiary
of the Partnership, except (i) pursuant to
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a transaction entered into in connection with the Intercompany Agreement or (ii)
pursuant to a transaction that has been approved by a majority of the
disinterested directors of the General Partner or General Partner Entity (as
applicable), taking into account the fiduciary duties of the General Partner or
General Partner Entity (as applicable) to the Limited Partners.
B. Benefit Plans. 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 funded by
the Partnership for the benefit of employees of the General Partner, the
Partnership, 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, or any of the Partnership's Subsidiaries.
C. Conflict Avoidance. The General Partner is expressly
authorized to enter into, in the name and on behalf of the Partnership, a right
of first opportunity arrangement and other conflict avoidance agreements with
various Affiliates of the Partnership and General Partner on such terms as the
General Partner, in its sole and absolute discretion, believes are advisable.
D. Limitation on Loans to the General Partner. Except with the
Consent of the Outside Limited Partners, the General Partner may not cause the
Partnership to loan money to the General Partner or to any Subsidiary or
Affiliate of the General Partner which is not also a Subsidiary or an entity in
which the Partnership owns an equity interest.
Section 7.7 Indemnification
A. General. To the maximum extent permitted by applicable law
at the time, the Partnership, without requiring a preliminary determination of
the ultimate entitlement to indemnification, shall indemnify each Indemnitee
from and against any and all losses, claims, damages, liabilities, joint or
several, expenses (including, without limitation, attorneys fees and other legal
fees and expenses), judgments, fines, settlements and other amounts arising from
or in connection with any and all claims, demands, actions, suits or
proceedings, civil, criminal, administrative or investigative incurred by the
Indemnitee and relating to the Partnership or the General Partner or the
formation or the operations of, or the ownership of property by, either of them
as set forth in this Agreement in which any such Indemnitee may be involved, or
is threatened to be involved, as a party or otherwise, unless it is established
by a final determination of a court of competent jurisdiction that: (i) the act
or omission of the Indemnitee was material to the matter giving rise to the
proceeding and either was committed in bad faith or was the result of active and
deliberate dishonesty, (ii) the Indemnitee actually received an improper
personal benefit in money, property or services or (iii) in the case of any
criminal proceeding, the Indemnitee had reasonable cause to believe that the act
or omission was unlawful. The obligations of the Partnership under this Section
7.7 shall include reimbursement of the General Partner for any indemnification
or advance of expenses by the General Partner pursuant to the Delaware General
Corporation Law, the General Partner Certificate or its Bylaws. Without
limitation, the foregoing indemnity shall extend to any liability of any
Indemnitee, pursuant to a loan guarantee, contractual obligations for any
indebtedness or other obligations 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 subject to). The General Partner is hereby
authorized and empowered, on behalf of the Partnership, to enter into one or
more indemnity agreements not inconsistent with the provisions of this Section
7.7 in favor of any Indemnitee having or potentially having liability for any
such indebtedness. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. Any
indemnification pursuant to this Section 7.7 shall be made only out of the
assets of the Partnership and any insurance proceeds from the liability policy
covering the General Partner and any Indemnitees, 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 7.7.
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B. Advancement of Expenses. Reasonable expenses expected to be
incurred by an Indemnitee shall be paid or reimbursed by the Partnership in
advance of the final disposition of any and all claims, demands, actions, suits
or proceedings, civil, criminal, administrative or investigative made or
threatened against an Indemnitee, in the case of any trustee/director or officer
who is an Indemnitee upon receipt by the Partnership of (i) a written
affirmation by the Indemnitee of the Indemnitee's good faith belief that the
standard of conduct necessary for indemnification by the Partnership as
authorized in this Section 7.7.A has been met and (ii) a written undertaking by
or on behalf of the Indemnitee to repay the amount if it shall ultimately be
determined that the standard of conduct has not been met.
C. No Limitation of Rights. The indemnification provided by
this Section 7.7 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 Indemnitee is indemnified.
D. Insurance. The Partnership may purchase and maintain
insurance on behalf of the Indemnitees 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. Benefit Plan Fiduciary. For purposes of this Section 7.7,
(i) the Partnership shall be deemed to have requested an Indemnitee to serve as
fiduciary of an employee benefit plan whenever the performance by it of its
duties to the Partnership also imposes duties on, or otherwise involves services
by, it to the plan or participants or beneficiaries of the plan, (ii) 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 7.7 and (iii) 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 related to the Partnership.
F. No Personal Liability for Limited Partners. In no event may
an Indemnitee subject any of the Limited Partners to liability by reason of the
indemnification provisions set forth in this Agreement.
G. Interested Transactions. An Indemnitee shall not be denied
indemnification in whole or in part under this Section 7.7 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. Benefit. The provisions of this Section 7.7 are for the
benefit of the Indemnitees, their heirs, successors, assigns and administrators
and shall not be deemed to create any rights for the benefit of any other
Persons. 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
obligation of the Partnership to any Indemnitee under this Section 7.7 as in
effect immediately prior to such amendment, modification or repeal with respect
to claims arising from or related 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.
I. Indemnification Payments Not Distributions. If and to the
extent any payments to the General Partner pursuant to this Section 7.7
constitute gross income to the General Partner (as opposed to the repayment of
advances made on behalf of the Partnership), such amounts shall constitute
guaranteed payments within the meaning of Section 707(c) of the Code, shall be
treated consistently therewith by the Partnership and all Partners, and shall
not be treated as distributions for purposes of computing the Partners' Capital
Accounts.
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Section 7.8 Liability of the General Partner
A. General. Notwithstanding anything to the contrary set forth
in this Agreement, the General Partner and its directors and officers shall not
be liable for monetary damages to the Partnership, any Partners or any Assignees
for losses sustained, liabilities incurred or benefits not derived as a result
of errors in judgment or mistakes of fact or law or of any act or omission if
the General Partner acted in good faith.
B. No Obligation to Consider Separate Interests of Limited
Partners or Stockholders. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the General Partner's
stockholders collectively, that the General Partner is under no obligation to
consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners or Assignees or to such
stockholders) 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 or otherwise 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.
C. Actions of Agents. Subject to its obligations and duties as
General Partner, the General Partner may exercise any of the powers granted to
it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. 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. Effect of Amendment. Any amendment, modification or repeal
of this Section 7.8 or any provision hereof shall be prospective only and shall
not in any way affect the limitations on the General Partner's liability to the
Partnership and the Limited Partners under this Section 7.8 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.
Section 7.9 Other Matters Concerning the General Partner
A. Reliance on Documents. 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. Reliance on Advisors. The General Partner may consult with
legal counsel, accountants, appraisers, management consultants, investment
bankers and other consultants and advisors selected by it, and any act taken or
omitted to be taken in reliance upon the opinion of such Persons as to matters
which the 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. Action Through Agents. 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 a duly appointed attorney or
attorneys-in-fact. 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 all and every act and duty which is permitted or required to be done
by the General Partner hereunder.
Section 7.10 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement
(other than the limitations on the General Partner's authority set forth in
Sections 7.5, 7.6.A, 7.6.D, and 7.11), 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, to enter into any
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contracts on behalf of the Partnership and to 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. 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. 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 expedience
of any act or action of the General Partner or its representatives. 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.
Section 7.11 Restrictions on General Partner's Authority
The General Partner may not take any action in contravention
of an express prohibition or limitation of this Agreement without the written
Consent of (i) all Partners adversely affected or (ii) such lower percentage of
the Limited Partnership Interests as may be specifically provided for under a
provision of this Agreement or the Act.
Section 7.12 Loans by Third Parties
The Partnership may incur Debt, or enter into similar credit,
guarantee, financing or refinancing arrangements for any purpose (including,
without limitation, in connection with any acquisition of property) with any
Person upon such terms as the General Partner determines appropriate; provided,
that the Partnership shall not incur any Debt that is recourse to the General
Partner unless, and then only to the extent that, the General Partner has
expressly agreed.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 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.
Section 8.2 Management of Business
No Limited Partner or Assignee (other than 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 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. 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.
Section 8.3 Outside Activities of Limited Partners
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Subject to Section 7.5 hereof, and subject to any agreements
entered into pursuant to Section 7.6.C hereof and to any other agreements
entered into by a Limited Partner or its Affiliates with the Partnership or a
Subsidiary, any Limited Partner (other than the General Partner) and any
officer, director, employee, agent, trustee, Affiliate or stockholder 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 in direct or indirect competition
with the Partnership. 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. None of the Limited Partners (other than the General
Partner) 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 (other than the General Partner to the extent expressly
provided herein), 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.
Section 8.4 Return of Capital
Except pursuant to the right of redemption set forth in
Section 8.6 below, 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. No Limited Partner or Assignee shall have priority over any other
Limited Partner or Assignee either as to the return of Capital Contributions
(except as permitted by Section 4.2.A hereof) or, except to the extent provided
by Exhibit C hereto or as permitted by Sections 4.2.A or otherwise expressly
provided in this Agreement, as to profits, losses, distributions or credits.
Section 8.5 Rights of Limited Partners Relating to the Partnership
A. General. In addition to other rights provided by this
Agreement or by the Act, and except as limited by Section 8.5.D below, 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:
(1) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and
Exchange Commission by the General Partner Entity
pursuant to the Exchange Act;
(2) to obtain a copy of the Partnership's federal, state
and local income tax returns for each Partnership
Year;
(3) to obtain a current list of the name and last known
business, residence or mailing address of each
Partner; and
(4) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with
copies of all powers of attorney pursuant to which
this Agreement, the Certificate and all amendments
thereto have been executed.
B. Notice of Conversion Factor. The Partnership shall notify
each Limited Partner upon request of the then current Conversion Factor and any
changes that have been made thereto.
C. Notice of Extraordinary Transaction of the General Partner
Entity. The General Partner Entity shall not make any extraordinary
distributions of cash or property to its stockholders or effect a merger
(including, without limitation, a triangular merger), a sale of all or
substantially all of its assets or any other similar extraordinary transaction
without notifying the Limited Partners of its intention to make such
distribution or effect such merger, sale or other extraordinary transaction at
least twenty (20) days prior to the record date to determine stockholders
eligible
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to receive such distribution or to vote upon the approval of such merger, sale
or other extraordinary transaction (or, if no such record date is applicable, at
least twenty (20) days before consummation of such merger, sale or other
extraordinary transaction). This provision for such notice shall not be deemed
(i) to permit any transaction that otherwise is prohibited by this Agreement or
requires a Consent of the Partners or (ii) to require a Consent of the Limited
Partners to a transaction that does not otherwise require Consent under this
Agreement. Each Limited Partner agrees, as a condition to the receipt of the
notice pursuant hereto, to keep confidential the information set forth therein
until such time as the General Partner Entity has made public disclosure thereof
and to use such information during such period of confidentiality solely for
purposes of determining whether or not to exercise the Redemption Right;
provided, however, that a Limited Partner may disclose such information to its
attorney, accountant and/or financial advisor for purposes of obtaining advice
with respect to such exercise so long as such attorney, accountant and/or
financial advisor agrees to receive and hold such information subject to this
confidentiality requirement.
D. Confidentiality. 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 (ii) the Partnership is required by law or by agreements with
unaffiliated third parties to keep confidential.
Section 8.6 Redemption Right
A. General. (i) Subject to Section 8.6.C below, on or after
the date one (1) year after the Effective Date (or, if later, the date of the
issuance of a Partnership Unit to a Limited Partner pursuant to Article IV
hereof) which one-year period shall commence upon the issuance of such
Partnership Unit regardless of whether such Partnership Unit is designated upon
issuance as a Class A Unit or otherwise, or on or after such date prior to the
expiration of such one-year period as the General Partner, in its sole and
absolute discretion, designates with respect to any or all Partnership Units
then outstanding, the holder of a Partnership Unit (if other than the General
Partner or the General Partner Entity or any Subsidiary of either the General
Partner or the General Partner Entity) shall have the right (the "Redemption
Right") to require the Partnership to redeem such Partnership Unit on a
Specified Redemption Date and at a redemption price equal to and in the form of
the Cash Amount to be paid by the Partnership. Any such Redemption Right shall
be exercised pursuant to a Notice of Redemption delivered to the Partnership
(with a copy to the General Partner) by the Limited Partner who is exercising
the Redemption Right (the "Redeeming Partner"). A Limited Partner may not
exercise the Redemption Right for less than one thousand (1,000) Partnership
Units or, if such Redeeming Partner holds less than one thousand (1,000)
Partnership Units, for less than all of the Partnership Units held by such
Redeeming Partner.
(ii) The Redeeming Partner shall have no right with respect to
any Partnership Units so redeemed to receive any distributions paid after the
Specified Redemption Date, unless the record date for such distribution was a
date prior to the Specified Redemption Date.
(iii) The Assignee of any Limited Partner may exercise the rights
of such Limited Partner pursuant to this Section 8.6, 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 Limited Partner's Assignee. In connection
with any exercise of such rights by such Assignee on behalf of such Limited
Partner, the Cash Amount shall be paid by the Partnership directly to such
Assignee and not to such Limited Partner.
(iv) In the event that the General Partner provides notice to the
Limited Partners, pursuant to Section 8.5.C hereof, the Redemption Right shall
be exercisable, subject to the one-year limitation contained in Section
8.6.A(i), during the period commencing on the date on which the General Partner
provides such notice and ending on the record date to determine stockholders
eligible to receive such distribution or to vote upon the approval of such
merger, sale or other extraordinary transaction (or, if no such record date is
applicable, the date that is twenty (20) days after the date
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the General Partner provides such notice pursuant to Section 8.5.C hereof). In
the event that this subparagraph (iv) applies, the Specified Redemption Date
shall be the sooner of (1) the tenth (10th) Business Day after the Partnership
receives the Redemption Notice or (2) the Business Day immediately preceding the
record date to determine stockholders eligible to receive a distribution or vote
on approval; provided that if such time determined pursuant to clause (1) or (2)
above occurs in less than ten (10) Business Days and the Partnership elects to
redeem the subject Partnership Units for cash, the Partnership will have up to
ten (10) Business Days from receipt of the Redemption Notice to deliver payment
in respect of such Partnership Units.
(v) Notwithstanding the terms of Section 8.6.A(i) or anything
else in this Agreement to the contrary, if there shall have been a merger or
consolidation of the General Partner, or a sale of all or substantially all of
the assets of the General Partner as an entirety, and in either case, in
connection therewith, the stockholders of the General Partner are obligated to
accept cash and/or debt obligations in full or partial consideration for their
Shares, then the portion of the Redemption Amount per Partnership Unit that
corresponds to the portion of Value of the total consideration receivable for
one Share multiplied by the Conversion Factor (a "Unit Equivalent") that is
required to be accepted in cash and/or debt obligations shall thereafter be an
amount of cash equal to the sum of (i) the cash payable for a Unit Equivalent on
the date of the closing of such merger, consolidation or sale and (ii) the Value
on the date of the closing of such merger, consolidation, or sale of the debt
obligations to be received with respect to a Unit Equivalent. The balance of the
Redemption Amount per Partnership Unit shall be determined as provided for in
the definitions of Conversion Factor, Redemption Amount, Shares Amount, Cash
Amount and Value.
B. General Partner Assumption of Right. (i) If a Limited
Partner has delivered a Notice of Redemption, the General Partner may, in its
sole and absolute discretion (subject to any limitations on ownership and
transfer of Shares set forth in the General Partner Certificate), elect to
assume directly and satisfy a Redemption Right by paying to the Redeeming
Partner either the Cash Amount or the Shares Amount, as the General Partner
determines in its sole and absolute discretion (provided that payment of the
Redemption Amount in the form of Shares shall be in Shares registered under
Section 12 of the Exchange Act and listed for trading on the exchange or
national market on which the Shares are Publicly Traded, and provided, further,
that in the event that the Shares are not Publicly Traded at the time a
Redeeming Partner exercises its Redemption Right, the Redemption Amount shall be
paid only in the form of the Cash Amount unless the Redeeming Partner, in its
sole and absolute discretion, consents to payment of the Redemption Amount in
the form of the Shares Amount), on the Specified Redemption Date, whereupon the
General Partner shall acquire the Partnership Units offered for redemption by
the Redeeming Partner and shall be treated for all purposes of this Agreement as
the owner of such Partnership Units and such Partnership Units shall
automatically convert to Class A Units upon acquisition by the General Partner.
Unless the General Partner, in its sole and absolute discretion, shall exercise
its right to assume directly and satisfy the Redemption Right, the General
Partner shall not have any obligation to the Redeeming Partner or to the
Partnership with respect to the Redeeming Partner's exercise of the
Redemption Right. In the event the General Partner shall exercise its right to
satisfy the Redemption Right in the manner described in the first sentence of
this Section 8.6.B and shall fully perform its obligations in connection
therewith, the Partnership shall have no right or obligation to pay any amount
to the Redeeming Partner with respect to such Redeeming Partner's exercise of
the Redemption Right, and each of the Redeeming Partner, the Partnership and the
General Partner shall, for federal income tax purposes, treat the transaction
between the General Partner and the Redeeming Partner as a sale of the Redeeming
Partner's Partnership Units to the General Partner. Nothing contained in this
Section 8.6.B shall imply any right of the General Partner to require any
Limited Partner to exercise the Redemption Right afforded to such Limited
Partner pursuant to Section 8.6.A above.
(ii) In the event that the General Partner determines to pay
the Redeeming Partner the Redemption Amount in the form of Shares, the total
number of Shares to be paid to the Redeeming Partner in exchange for the
Redeeming Partner's Partnership Units shall be the applicable Shares Amount. In
the event this amount is not a whole number of Shares, the Redeeming Partner
shall be paid (i) that number of Shares which equals the nearest whole number
less than such amount plus (ii) an amount of cash which the General Partner
determines, in its reasonable discretion, to represent the fair value of the
remaining fractional Share which would otherwise be payable to the Redeeming
Partner.
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(iii) Each Redeeming Partner agrees to execute such documents
as the General Partner may reasonably require in connection with the issuance of
Shares upon exercise of the Redemption Right.
C. Exceptions to Exercise of Redemption Right. Notwithstanding
the provisions of Sections 8.6.A and 8.6.B above, a Partner shall not be
entitled to exercise the Redemption Right pursuant to Section 8.6.A above if
(but only as long as) the delivery of Shares to such Partner on the Specified
Redemption Date (i) would be prohibited under the General Partner Certificate,
or (ii) as long as the Shares are Publicly Traded, would be prohibited under
applicable federal or state securities laws or regulations (assuming the General
Partner would in fact assume and satisfy the Redemption Right).
D. No Liens on Partnership Units Delivered for Redemption.
Each Limited Partner covenants and agrees with the General Partner that all
Partnership Units delivered for redemption shall be delivered to the Partnership
or the General Partner, as the case may be, free and clear of all liens, and,
notwithstanding anything contained herein to the contrary, neither the General
Partner nor the Partnership shall be under any obligation to acquire Partnership
Units which are or may be subject to any liens. Each Limited Partner further
agrees that, in the event any state or local property transfer tax is payable as
a result of the transfer of its Partnership Units to the Partnership or the
General Partner, such Limited Partner shall assume and pay such transfer tax.
E. Additional Partnership Interests. In the event that the
Partnership issues Partnership Interests to any Additional Limited Partner
pursuant to Article IV hereof, the General Partner shall make such amendments to
this Section 8.6 as it determines are necessary to reflect the issuance of such
Partnership Interests (including setting forth any restrictions on the exercise
of the Redemption Right with respect to such Partnership Interests).
Section 8.7 Right of Offset
The General Partner shall have the right to offset any amounts
owed to the Partnership or the General Partner by any Limited Partner pursuant
to (i) any written agreement between such Limited Partner and the Partnership,
the General Partner or an Affiliate of either of them pursuant to which such
Limited Partner acquired Partnership Units or (ii) the provisions of Section 5.2
of this Agreement, against any amounts owed to such Limited Partner by the
Partnership or the General Partner hereunder, including the right to cancel or
acquire, as applicable, the Partnership Units held by such Limited Partner,
based on the Cash Amount that would be payable therefor, assuming a redemption
as of the date of cancellation or acquisition, as applicable. In exercising the
foregoing offset rights, the General Partner shall be required to give a Limited
Partner, in the case of an offset against a distribution, five (5) days prior
written notice (provided, however, that if a distribution is to be made at any
time during such five day period the General Partner may retain the distribution
payable to any Limited Partner to whom such a written notice has been given to
the extent of the amount owed by such Limited Partner pending the passage of
such period and upon the passage of such period without payment of all amounts
owed by the applicable Limited Partner, the General Partner shall be entitled to
the right of offset described above, it being understood that if the Limited
Partner pays in full the amount owed the General Partner shall promptly release
the retained distribution to such Limited Partner) and, in the case of an offset
against Partnership Units (through cancellation or acquisition), ten (10) days'
prior written notice, in each case of the amount owed (determined as of a date
reasonably close to the date of such notice) and the proposed offset and the
Limited Partner has not paid the amount owed within such period.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including, without limitation, all books and
records
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necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 9.3 below. 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,
computer disk, 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. 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.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
A. Annual Reports. As soon as practicable, but in no event
later than the date on which the General Partner Entity mails its annual report
to its stockholders, the General Partner shall cause to be mailed to each
Limited Partner an annual report, as of the close of the most recently ended
Partnership Year, containing financial statements of the Partnership, or of the
General Partner Entity if such statements are prepared solely on a consolidated
basis with the Partnership, for such Partnership Year, presented in accordance
with generally accepted accounting principles, such statements to be audited by
a nationally recognized firm of independent public accountants selected by the
General Partner Entity.
B. Quarterly Reports. If and to the extent that the General
Partner Entity mails quarterly reports to its stockholders, as soon as
practicable, but in no event later than the date on which 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 such
quarter, of the Partnership, or of the General Partner Entity if such statements
are prepared solely 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 X
TAX MATTERS
Section 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.
Section 10.2 Tax Elections
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, that the General Partner
shall make the election under Section 754 of the Code in accordance with
applicable regulations thereunder. The General Partner shall have the right to
seek to revoke any such election (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.
Section 10.3 Tax Matters Partner
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A. General. The General Partner shall be the "tax matters
partner" of the Partnership for federal income tax purposes. Pursuant to Section
6223(c)(3) of the Code, upon receipt of notice from the IRS of the beginning of
an administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address, taxpayer identification
number and profit interest of each of the Limited Partners and any Assignees;
provided, that such information is provided to the Partnership by the Limited
Partners.
B. Powers. The tax matters partner is authorized, but not
required:
(1) to enter into any settlement with the IRS 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 IRS 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
Section 6223(b)(2) of the Code);
(2) 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;
(3) to intervene in any action brought by any other
Partner for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment
with the IRS at any time and, if any part of such
request is not allowed by the IRS, to file an
appropriate pleading (petition or complaint) for
judicial review with respect to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to
any item required to be taken into account by a
Partner for tax purposes, or an item affected by such
item; and
(6) to take any other action on behalf of the Partners of
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 7.7 hereof shall be fully applicable to the
tax matters partner in its capacity as such.
C. Reimbursement. The tax matters partner shall receive no
compensation for its services. All third party costs and expenses incurred by
the tax matters partner in performing its duties as such (including legal and
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accounting fees and expenses) shall be borne by the Partnership. Nothing herein
shall be construed to restrict the Partnership from engaging an accounting firm
or a law firm to assist the tax matters partner in discharging its duties
hereunder, as long as the compensation paid by the Partnership for such services
is reasonable.
Section 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.
Section 10.5 Withholding
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 Section 1441, 1442, 1445, or 1446 of the
Code. Any amount paid on behalf of or with respect to a Limited Partner shall
constitute a recourse 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 (i) the
Partnership withholds such payment from a distribution which would otherwise be
made to the Limited Partner or (ii) 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. Any amounts withheld pursuant to the foregoing clauses (i)
or (ii) shall be treated as having been distributed to such Limited Partner.
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. In the event that a
Limited Partner fails to pay any amounts owed to the Partnership pursuant to
this Section 10.5 when due, 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 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
(including, without limitation, the right to receive distributions). Any amounts
payable by a Limited Partner hereunder shall bear interest at the base rate on
corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four (4) percentage
points (but not higher than the maximum lawful rate) from the date such amount
is due (i.e., fifteen (15) days after demand) until such amount is paid in full.
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 XI
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. Definition. The term "transfer," when used in this Article
XI with respect to a Partnership Interest or a Partnership Unit, shall be deemed
to refer to a transaction by which the General Partner purports to assign all or
any part of its General Partnership Interest to another Person or by which a
Limited Partner purports to assign all or any part of its Limited Partnership
Interest to another Person, and includes a sale, assignment, gift, pledge,
encumbrance, hypothecation, mortgage, exchange or any other disposition by law
or otherwise. The term "transfer" when used in this Article XI does not include
any redemption or repurchase of Partnership Units by the Partnership from a
Partner (including the General Partner) or acquisition of Partnership Units from
a Limited Partner by the General Partner pursuant to Section 8.6 hereof or
otherwise. No part of the interest of a Limited Partner shall be subject to the
claims of any creditor, any spouse for alimony or support, or to legal process,
and no part of the interest of a Limited
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Partner may be voluntarily or involuntarily alienated or encumbered except as
may be specifically provided for in this Agreement.
B. General. No Partnership Interest shall be transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Article XI. Any transfer or purported transfer of a Partnership Interest
not made in accordance with this Article XI shall be null and void.
Section 11.2 Transfers of Partnership Interests of General Partner
A. Except for transfers of Partnership Units to the
Partnership as provided in Section 7.5 or Section 8.6 hereof, the General
Partner may not transfer any of its Partnership Interest (including both its
General Partnership Interest and its Limited Partnership Interest) except in
connection with a transaction described in Section 11.2.B below or as otherwise
expressly permitted under this Agreement, nor shall the General Partner withdraw
as General Partner except in connection with a transaction described in Section
11.2.B below.
B. The General Partner shall not engage in any merger
(including a triangular merger), consolidation or other combination with or into
another Person, sale of all or substantially all of its assets or any
reclassification, recapitalization or change of the terms of any outstanding
Shares (other than a change in par value, or from par value to no par value, or
as a result of a subdivision or combination as described in the definition of
"Conversion Factor") ("Termination Transaction"), unless , in connection
therewith, all Limited Partners (other than the General Partner, the General
Partner Entity and any entities controlled by either of them) will have the
right to elect to receive, or, will receive, for each Partnership Unit an amount
of cash, securities, or other property equal to the product of the Conversion
Factor and the greatest amount of cash, securities or other property paid to a
holder of Shares, if any, corresponding to such Partnership Unit in
consideration of one such Share; provided, that if, in connection with the
Termination Transaction, a purchase, tender or exchange offer shall have first
been made to and accepted by the holders of more than fifty percent (50%) of the
outstanding Shares and a holder of Partnership Units did not receive advance
written notice (whether from the General Partner, the offeror or otherwise) of
the offer and an opportunity to redeem its Partnership Units substantially in
accordance with the provisions in Section 8.6, then such holder of Partnership
Units shall receive, or shall 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 the Redemption Right and received Shares in exchange
for its Partnership Units immediately prior to such purchase, tender or exchange
offer and had thereupon accepted such purchase, tender or exchange offer and to
the extent required by the terms thereof applicable to all other holders of
Shares participating in the purchase, tender or exchange offer, participated in
all other phases of such Termination Transaction as well.
Section 11.3 Limited Partners' Rights to Transfer
A. General. Subject to the provisions of Sections 11.3.C,
11.3.D, 11.3.E, 11.3.F, 11.3.G, 11.4 and 11.6 below, prior to the first
anniversary of the Effective Date, the Limited Partnership Interest of any
Partner may not be transferred in whole or in part, directly, indirectly or
beneficially, without the prior written consent of the General Partner, which
consent the General Partner may withhold in its sole discretion; provided,
however, that it is expressly understood that subject to the provisions of
Sections 11.3.C, 11.3.D, 11.3.E, 11.3.F, 11.3.G, 11.4 and 11.6 below each
Limited Partner will be permitted to make one or more transfers to any
Affiliated Transferee of such Limited Partner. Commencing on the first
anniversary after the Effective Date, and subject to the provisions of Sections
11.3.C, 11.3.D, 11.3.E, 11.3.F, 11.3.G, 11.4 and 11.6 below, a Limited Partner
(other than the General Partner or the General Partner Entity or any Subsidiary
of either of them) may transfer all or any portion of its Limited Partnership
Interest to any Person, provided such Limited Partner obtains the prior written
consent of the General Partner, which consent may be withheld only if the
General Partner determines in its sole discretion exercised in good faith that
such a transfer would cause the Partnership or any or all of the Partners other
than the Limited Partner seeking to transfer its rights as a Limited Partner to
be subject to tax liability as a result of such transfer. Any purported transfer
attempted in violation of the foregoing sentence shall be deemed void ab initio
and shall have no force or effect.
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B. Incapacitated Limited Partners. If a Limited Partner is
subject to Incapacity, the executor, administrator, trustee, committee,
guardian, conservator or receiver of such Limited Partner's estate shall have
all 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 its interest in the Partnership. The Incapacity of a Limited Partner, in
and of itself, shall not dissolve or terminate the Partnership.
C. No Transfers Violating Securities Laws. The General Partner
may prohibit any transfer of Partnership Units by a Limited Partner if, in the
opinion of legal counsel to the Partnership, such transfer would require filing
of a registration statement under the Securities Act or would otherwise violate
any federal, or state securities laws or regulations applicable to the
Partnership or the Partnership Unit.
D. No Transfers Affecting Tax Status of Partnership. No
transfer of Partnership Units by a Limited Partner (including a redemption or
exchange pursuant to Section 8.6 hereof) may be made to any Person if (i) 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 or would result in a termination of the Partnership for federal income
tax purposes (except as a result of the redemption or exchange for Shares of all
Partnership Units held by all Limited Partners other than the General Partner or
the General Partner Entity or any Subsidiary of either the General Partner or
the General Partner Entity or pursuant to a transaction not prohibited under
Section 11.2 hereof) or (ii) 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 Transfers to Holders of Nonrecourse Liabilities. No
pledge or transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability without the consent of the General Partner,
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 or redeem for the Redemption
Amount any Partnership 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.
F. No Transfers Affecting Tax Status of Vornado. The General
Partner may prohibit any transfer of Partnership Units by a Limited partner if,
in the opinion of legal counsel to the Partnership, such transfer would
adversely affect Vornado's ability to qualify as a REIT for federal income tax
purposes, including, without limitation, any transfer that would have the result
of causing Vornado to be treated as owning, under the attribution rules that
apply for purposes of Section 856(d)(2)(B) of the Code, (i) 10 percent or more
of the assets or net profits of the Partnership or (ii) 10 percent or more of
the total combined voting power or total number of shares of the General
Partner. As a condition to approving a transfer of partnership Units, the
General Partner may require a representation from the transferee that the
transfer will not cause Vornado to be treated as owning, under the attribution
rules that apply for purposes of Section 856(d)(2)(B) of the Code, the interests
in the Partnership or the General Partner referred to in the preceding sentence.
In the absence of such a representation, the General Partner may prohibit the
transfer of Partnership Units.
G. Ownership Limitation. Without the prior written consent of
the General Partner, which may be withheld in the General Partner's sole
discretion, no Person other than the General Partner may own, either directly or
under the attribution rules of Section 318(a) of the Code, as modified by
Section 856(d)(5) of the Code, an interest of more than 9.9% in the assets or
net profits of the Partnership (the "Ownership Limit"). The General Partner may
prohibit any transfer of Partnership Units that would cause a Person to own,
either directly or under the applicable attribution rules, interests in the
Partnership in violation of the Ownership Limit. Any transfer of Partnership
Units that causes a Person to own, either directly or under the applicable
attribution rules, interests in the Partnership in violation
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of the Ownership Limit without the prior written approval of the General Partner
shall be void ab initio as to the interests in the Partnership that would
otherwise have been owned, either directly or under the applicable attribution
rules, in excess of the ownership Limit. If, notwithstanding the foregoing, a
Person owns, either directly or under the applicable attribution rules,
interests in the Partnership in violation of the Ownership Limit, such interests
will automatically be converted to "Excess Partnership Interests" as of the day
immediately prior to the first day on which such interests were owned, either
directly or under the applicable attribution rules, in violation of the
Ownership Limit (the "Exchange Date") and will be transferred as a matter of law
on the Exchange Date to a special trust established by the Partnership for the
benefit of a charitable organization designated by the Partnership. While
interests in the Partnership are Excess Partnership Interests, all distributions
in respect of such interests will be for the benefit of the special trust and
all rights associated with such interests will be exercised by such special
trust. If distributions were made in respect of such interests after the
Exchange Date but prior to the discovery that such interests were Excess
Partnership Interests, the recipient of such distributions will be required to
pay such distributions to the special trust. In the event that the special trust
disposes of such Excess Partnership Units, the special trust shall pay to the
Person who held such interests in the Partnership at the time that the interests
were converted to Excess Partnership Interests an amount equal to the lesser of
(i) the proceeds of the disposition by the special trust and (ii) the fair
market value of the interests on the Exchange Date.
As a condition to approving a transfer of Partnership Units,
the General Partner may require a representation from the transferee that the
transfer will not cause any Person to own, either directly or under the
applicable attribution rules, interests in the Partnership in violation of the
Ownership Limit. In the absence of such a representation, the General Partner
may prohibit the transfer of partnership Units.
Section 11.4 Substituted Limited Partners
A. Consent of General Partner. No Limited Partner shall have
the right to substitute a transferee as a Limited Partner in its place without
the consent of the General Partner to the admission of a transferee of the
interest of a Limited Partner pursuant to this Section 11.4 as a Substituted
Limited Partner, which consent may be given or withheld by the General Partner
in its sole and absolute discretion. The General Partner's failure or refusal to
permit a transferee of any such interests to become a Substituted Limited
Partner shall not give rise to any cause of action against the Partnership or
any Partner.
B. Rights of Substituted Limited Partner. A transferee who has
been admitted as a Substituted Limited Partner in accordance with this Article
XI shall have all the rights and powers and be subject to all the restrictions
and liabilities of a Limited Partner under this Agreement. The admission of any
transferee as a Substituted Limited Partner shall be conditioned upon the
transferee executing and delivering to the Partnership an acceptance of all the
terms and conditions of this Agreement (including, without limitation, the
provisions of Section 15.11 hereof and such other documents or instruments as
may be required to effect the admission).
C. Amendment and Restatement of Exhibit A. Upon the admission
of a Substituted Limited Partner, the General Partner shall amend and restate
Exhibit A hereto to reflect the name, address, Capital Account, number of
Partnership Units, and Percentage Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address, Capital Account and
Percentage Interest of the predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion,
does not consent to the admission of any permitted transferee under Section 11.3
above as a Substituted Limited Partner, as described in Section 11.4 above, such
transferee shall be considered an Assignee for purposes of this Agreement. An
Assignee shall be entitled to all the rights of an assignee of a limited
partnership interest under the Act, including the right to receive distributions
from the Partnership and the share of Net Income, Net Losses, gain, loss and
Recapture Income attributable to the Partnership
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Units assigned to such transferee, and shall have the rights granted to the
Limited Partners under Section 8.6 hereof, but shall not be deemed to be a
holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all other Partnership Units
held by Limited Partners are voted). In the event any such transferee desires to
make a further assignment of any such Partnership Units, such transferee shall
be subject to all the provisions of this Article XI to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
Section 11.6 General Provisions
A. Withdrawal of Limited Partner. No Limited Partner may
withdraw from the Partnership other than as a result of a permitted transfer of
all of such Limited Partner's Partnership Units in accordance with this Article
XI or pursuant to redemption of all of its Partnership Units under Section 8.6
hereof.
B. Termination of Status as Limited Partner. Any Limited
Partner who shall transfer all of its Partnership Units in a transfer permitted
pursuant to this Article XI or pursuant to redemption of all of its Partnership
Units under Section 8.6 hereof shall cease to be a Limited Partner.
C. Timing of Transfers. Transfers pursuant to this Article XI
may only be made on the first day of a fiscal quarter of the Partnership, unless
the General Partner otherwise agrees.
D. Allocations. If any Partnership Interest is transferred
during any quarterly segment of the Partnership's fiscal year in compliance with
the provisions of this Article XI or redeemed or transferred pursuant to Section
8.6 hereof, Net Income, Net Losses, each item thereof and all other items
attributable to such interest for such fiscal year shall be divided and
allocated between the transferor Partner and the transferee Partner by taking
into account their varying interests during the fiscal year in accordance with
Section 706(d) of the Code, using the interim closing of the books method
(unless the General Partner, in its sole and absolute discretion, elects to
adopt a daily, weekly, or a monthly proration period, in which event Net Income,
Net Losses, each item thereof and all other items attributable to such interest
for such fiscal year shall be prorated based upon the applicable method selected
by the General Partner). Solely for purposes of making such allocations, each of
such items for the calendar month in which the transfer or redemption occurs
shall be allocated to the Person who is a Partner as of midnight on the last day
of said month. All distributions attributable to any Partnership Unit with
respect to which the Partnership Record Date is before the date of such
transfer, assignment or redemption shall be made to the transferor Partner or
the Redeeming Partner, as the case may be, and, in the case of a transfer or
assignment other than a redemption, all distributions thereafter attributable to
such Partnership Unit shall be made to the transferee Partner.
E. Additional Restrictions. In addition to any other
restrictions on transfer herein contained, including without limitation the
provisions of this Article XI, in no event may any transfer or assignment of a
Partnership Interest by any Partner (including pursuant to Section 8.6 hereof)
be made without the express consent of the General Partner, in its sole and
absolute discretion, (i) to any Person or entity who lacks the legal right,
power or capacity to own a Partnership Interest; (ii) in violation of applicable
law; (iii) of any component portion of a Partnership Interest, such as the
Capital Account, or rights to distributions, separate and apart from all other
components of a Partnership Interest; (iv) if in the opinion of legal counsel to
the Partnership such transfer would cause a termination of the Partnership for
federal or state income tax purposes (except as a result of the redemption or
exchange for Shares of all Partnership Units held by all Limited Partners or
pursuant to a transaction not prohibited under Section 11.2 hereof); (v) if in
the opinion of counsel to the Partnership, such transfer would cause the
Partnership to cease to be classified as a partnership for federal income tax
purposes (except as a result of the redemption or exchange for Shares of all
Partnership Units held by all Limited Partners or pursuant to a transaction not
prohibited under Section 11.2 hereof); (vi) if 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 Section 3(14) of ERISA)
or a "disqualified person" (as defined in Section 4975(c) of the Code); (vii) if
such transfer would, in the opinion of counsel to the Partnership, cause any
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portion of the assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor Regulations Section 2510.1-101;
(viii) if such transfer requires the registration of such Partnership Interest
pursuant to any applicable federal or state securities laws; (ix) if 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 or such transfer causes the Partnership to become a
"publicly traded partnership," as such term is defined in Section 469(k)(2) or
Section 7704(b) of the Code; or (x) if such transfer subjects the Partnership to
regulation under the Investment Company Act of 1940, the Investment Advisors Act
of 1940 or ERISA, each as amended.
F. Avoidance of "Publicly Traded Partnership" Status. The
General Partner shall (a) use commercially reasonable efforts (as determined by
it in its sole discretion exercised in good faith) to monitor the transfers of
interests in the Partnership to determine (i) if such interests are being traded
on an "established securities market" or a "secondary market (or the substantial
equivalent thereof)" within the meaning of Section 7704 of the Code and (ii)
whether additional transfers of interests would result in the Partnership being
unable to qualify for at least one of the "safe harbors" set forth in
Regulations Section 1.7704-1 (or such other guidance subsequently published by
the IRS setting forth safe harbors under which interests will not be treated as
"readily tradable on a secondary market (or the substantial equivalent thereof)"
within the meaning of Section 7704 of the Code) (the "Safe Harbors") and (b)
take such steps as it believes are commercially reasonable and appropriate (as
determined by it in its sole discretion exercised in good faith) to prevent any
trading of interests or any recognition by the Partnership of transfers made on
such markets and, except as otherwise provided herein, to insure that at least
one of the Safe Harbors is met.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
A successor to all of the General Partner's General
Partnership Interest pursuant to Section 11.2 hereof who is proposed to be
admitted as a successor General Partner shall be admitted to the Partnership as
the General Partner, effective upon such transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the successor General Partner's executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement and such other documents or instruments as may be required to
effect the admission.
Section 12.2 Admission of Additional Limited Partners
A. General. No Person shall be admitted as an Additional
Limited Partner without the consent of the General Partner, which consent shall
be given or withheld in the General Partner's sole and absolute discretion. A
Person who makes a Capital Contribution to the Partnership in accordance with
this Agreement, including, without limitation, pursuant to Section 4.1.C hereof,
or who exercises an option to receive Partnership Units shall be admitted to the
Partnership as an Additional Limited Partner only with the consent of the
General Partner and 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, including, without limitation, the power of
attorney granted in Section 15.11 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. 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.
B. Allocations to Additional Limited Partners. 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
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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
(unless the General Partner, in its sole and absolute discretion, elects to
adopt a daily, weekly or monthly proration method, in which event Net Income,
Net Losses, and each item thereof would be prorated based upon the applicable
period selected by the General Partner). 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 the Partners
and Assignees including such Additional Limited Partner. All distributions 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 thereafter shall be made to
all the Partners and Assignees including such Additional Limited Partner.
Section 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 (including an amendment and restatement of
Exhibit A hereto) and, if necessary, to prepare as soon as practical an
amendment of this Agreement 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 15.11 hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution
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.
Upon the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
(each a "Liquidating Event"):
(i) the expiration of its term as provided in Section
2.4 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 the withdrawal a Majority in Interest of the remaining Partners
Consent in writing to continue the business of the Partnership and to the
appointment, effective as of the date of withdrawal, of a substitute General
Partner;
(iii) an election to dissolve the Partnership made by
the General Partner, in its sole and absolute discretion, after December 31,
2046;
(iv) entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
(v) the sale of all or substantially all of the
assets and properties of the Partnership for cash or for marketable securities;
or
(vi) a final and nonappealable judgment is entered by
a court of competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and nonappealable 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 or within ninety days after of the entry of such order
or
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judgment a Majority in Interest of the remaining Partners Consent 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.
Section 13.2 Winding Up
A. General. 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. 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. The General Partner (or, in the event there
is no remaining General Partner, any Person elected by a Majority in Interest of
the Limited Partners (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 equity or other securities of the General Partner or any other
entity) shall be applied and distributed in the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors
other than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners;
and
(3) The balance, if any, to the Partners in accordance
with their Capital Accounts, after giving effect to
all contributions, distributions, and allocations for
all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article XIII.
B. Deferred Liquidation. Notwithstanding the provisions of
Section 13.2.A above 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 assets 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 above,
undivided interests in such Partnership assets as the Liquidator deems not
suitable for liquidation. 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 interest 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. The Liquidator shall determine the fair market
value of any property distributed in kind using such reasonable method of
valuation as it may adopt.
Section 13.3 Compliance with Timing Requirements of Regulations
Subject to Section 13.4 below, in the event the Partnership is
"liquidated" within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g),
distributions shall be made pursuant to this Article XIII to the General Partner
and Limited Partners who have positive Capital Accounts in compliance with
Regulations Section 1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit
balance in its 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. In the discretion of the General
Partner, a pro rata portion of the distributions that would otherwise
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be made to the General Partner and Limited Partners pursuant to this Article
XIII 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 of the General
Partner arising out of or in connection with the Partnership (in which case 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 General Partner,
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 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 amounts shall be distributed to the
General Partner and Limited Partners as soon as practicable.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provision of this Article XIII, in
the event the Partnership is deemed liquidated within the meaning of Regulations
Section 1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the
Partnership's property shall not be liquidated, the Partnership's liabilities
shall not be paid or discharged and the Partnership's affairs shall not be wound
up. Instead, for federal income tax purposes and for purposes of maintaining
Capital Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed
to have distributed its assets in kind to the General Partner and Limited
Partners, who shall be deemed to have assumed and taken such assets subject to
all Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners shall
be deemed to have recontributed the Partnership assets in kind to the
Partnership, which shall be deemed to have assumed and taken such assets subject
to all such liabilities.
Section 13.5 Rights of Limited Partners
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. Except as otherwise expressly
provided in this Agreement, no Limited Partner shall have priority over any
other Limited Partner as to the return of its Capital Contributions,
distributions, or allocations.
Section 13.6 Notice of Dissolution
In the event a Liquidating Event occurs or an event occurs
that would, but for provisions of an election or objection by one or more
Partners pursuant to Section 13.1 above, 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 and to all other parties
with whom the Partnership regularly conducts business (as determined in the
discretion of the General Partner) and shall publish notice thereof in a
newspaper of general circulation in each place in which the Partnership
regularly conducts business (as determined in the discretion of the General
Partner).
Section 13.7 Cancellation of Certificate of Limited Partnership
Upon the completion of the liquidation of the Partnership cash
and property as provided in Section 13.2 above, the Partnership shall be
terminated and the Certificate 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.
Section 13.8 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 above, in order to minimize any losses otherwise
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attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to partition of the
Partnership property.
Section 13.10 Liability of Liquidator
The Liquidator shall be indemnified and held harmless by the
Partnership in the same manner and to the same degree as an Indemnitee may be
indemnified pursuant to Section 7.7 hereof.
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
A. General. Amendments to this Agreement may be proposed only
by the General Partner. Following such proposal (except an amendment pursuant to
Section 14.1.B below), the General Partner shall submit any proposed amendment
to the Limited Partners and 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. 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.
B. Amendments Not Requiring Limited Partner Approval. Subject
to Section 14.1.C and 14.1.D, the General Partner shall have the power, without
the Consent of the Limited Partners, to amend this Agreement as may be required
to reflect any changes to this Agreement that the General Partner deems
necessary or appropriate in its sole discretion, provided that such change does
not adversely affect or eliminate any right granted to a Limited Partner
pursuant to any of the provisions of this Agreement specified in Section 14.1.C
or Section 14.1.D as requiring a particular minimum vote. The General Partner
shall notify the Limited Partners when any action under this Section 14.1.B is
taken in the next regular communication to the Limited Partners.
C. Amendments Requiring Limited Partner Approval (Excluding
General Partner). Without the Consent of the Outside Limited Partners, the
General Partner shall not amend Section 4.2.A, Section 7.5, Section 7.6, Section
7.8, Section 11.2, Section 13.1, this Section 14.1.C or Section 14.2.
D. Other Amendments Requiring Certain Limited Partner
Approval. Notwithstanding anything in this Section 14.1 to the contrary, 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's interest, (ii) modify the limited liability of a Limited Partner,
(iii) amend Section 7.11, (iv) amend Article V, Article VI, or Section 13.2.A(3)
(except as permitted pursuant to Sections 4.2, 5.4 and 6.2, (v) amend Section
8.6 or any defined terms set forth in Article I that relate to the Redemption
Right (except as permitted in Section 8.6.E), or (vi) amend this Section 14.1.D.
E. Amendment and Restatement of Exhibit A Not An Amendment.
Notwithstanding anything in this Article XIV or elsewhere in this Agreement to
the contrary, any amendment and restatement of Exhibit A hereto by the General
Partner to reflect events or changes otherwise authorized or permitted by this
Agreement, whether pursuant to Section 7.1.A(20) hereof or otherwise, shall not
be deemed an amendment of this Agreement and may be done at any time and from
time to time, as necessary by the General Partner without the Consent of the
Limited Partners.
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<PAGE> 50
F. Amendment by Merger. In the event that the Partnership
participates in any merger (including a triangular merger), consolidation or
combination with another entity in a transaction not otherwise prohibited by
this Agreement and as a result of such merger, consolidation or combination this
Agreement is to be amended (or a new agreement for a limited partnership or
limited liability company, as applicable, is to be adopted for the surviving
entity) and any of the Outside Limited Partners (as defined herein in "Consent
of Outside Limited Partners") will hold equity interests in the continuing or
surviving entity, then any such amendments to this Agreement (or changes from
this Agreement reflected in the new agreement for the surviving entity) shall
require the consents provided in Section 14.1.C and Section 14.1.D.
Section 14.2 Meetings of the Partners
A. General. Meetings of the Partners may be called only by the
General Partner. The call shall state the nature of the business to be
transacted. 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; provided that a Partner's attendance at any meeting of Partners shall
be deemed a waiver of the foregoing notice requirement with respect to such
Partner. Partners may vote in person or by proxy at such meeting. Whenever the
vote or Consent of Partners is permitted or required under this Agreement, such
vote or Consent may be given at a meeting of Partners or may be given in
accordance with the procedure prescribed in Section 14.1.A above. Except as
otherwise expressly provided in this Agreement, the Consent of holders of a
majority of the Percentage Interests held by Limited Partners (including Limited
Partnership Interests held by the General Partner) shall control.
B. Actions Without a Meeting. 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). 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). Such consent shall be filed with the
General Partner. An action so taken shall be deemed to have been taken at a
meeting held on the effective date so certified.
C. Proxy. Each Limited Partner may authorize any Person or
Persons to act for such Limited Partner 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. Every proxy must be signed by
the Limited Partner or its attorney-in-fact. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the Limited
Partner executing it, such revocation to be effective upon the Partnership's
receipt of notice thereof in writing.
D. Conduct of Meeting. Each meeting of 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.
ARTICLE XV
GENERAL PROVISIONS
Section 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 other means of written communication to
the Partner or Assignee at the address set forth in Exhibit A hereto or such
other address as the Partners shall notify the General Partner in writing.
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<PAGE> 51
Section 15.2 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.
Section 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.
Section 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.
Section 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.
Section 15.6 Creditors; Other Third Parties
Other than as expressly set forth herein with regard to any
Indemnitee, none of the provisions of this Agreement shall be for the benefit
of, or shall be enforceable by, any creditor or other third party having
dealings with the Partnership.
Section 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.
Section 15.8 Counterparts
This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on all 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.
Section 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 law.
Section 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.
-44-
<PAGE> 52
Section 15.11 Power of Attorney
A. General. Each Limited Partner and each Assignee who accepts
Partnership Units (or any rights, benefits or privileges associated therewith)
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:
(1) 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 any 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
conduct business or own property, (b) all instruments
that the General Partner or any Liquidator deems
appropriate or necessary to reflect any amendment,
change, modification or restatement of this Agreement
in accordance with its terms, (c) all conveyances and
other instruments or documents that the General
Partner or any 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 XI, XII or XIII hereof
or the Capital Contribution of any Partner and (e)
all certificates, documents and other instruments
relating to the determination of the rights,
preferences and privileges of Partnership Interests;
and
(2) execute, swear to, 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 in this Section 15.11 shall be construed as
authorizing the General Partner or any Liquidator to amend this Agreement except
in accordance with Article XIV hereof or as may be otherwise expressly provided
for in this Agreement.
B. Irrevocable Nature. 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 or 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 Partnership Units and shall extend to such Limited
Partner's or Assignee's heirs, successors, assigns and personal representatives.
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. 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.
-45-
<PAGE> 53
Section 15.12 Entire Agreement
This Agreement and all Exhibits attached hereto (which
Exhibits are incorporated herein by reference as if fully set forth herein)
contains the entire understanding and agreement among the Partners with respect
to the subject matter hereof and supersedes any prior written or oral
understandings or agreements among them with respect thereto.
Section 15.13 No Rights as Stockholders
Nothing contained in this Agreement shall be construed as
conferring upon the holders of the Partnership Units any rights whatsoever as
stockholders of the General Partner Entity or the General Partner (if
different), including, without limitation, any right to receive dividends or
other distributions made to stockholders of the General Partner Entity or the
General Partner (if different) or to vote or to consent or receive notice as
stockholders in respect to any meeting of stockholders for the election of
directors of the General Partner Entity or the General Partner (if different) or
any other matter.
-46-
<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
VORNADO OPERATING COMPANY
By: _____________________________
Name:
Title:
LIMITED PARTNERS:
INTERSTATE PROPERTIES
By: _____________________________
Name:
Title:
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<PAGE> 55
EXHIBIT A
VORNADO OPERATING L.P.
PARTNERS AND PARTNERSHIP INTERESTS
(as of -, 1998)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Class A Agreed Initial Percentage
Cert. No. Units Capital Account Interest
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
R-A
R-A 1 Vornado Operating Company 90.1000%
R-A 2 Interstate Properties 9.9000%
- ----------------------------------------------------------------------------------------------
TOTAL 100.0000%
========
- ----------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE> 56
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate
Capital Account in accordance with the rules of Regulations Section
l.704-l(b)(2)(iv). Such Capital Account shall be increased by (i) the amount of
all Capital Contributions and any other deemed contributions made by such
Partner to the Partnership pursuant to this Agreement and (ii) all items of
Partnership income and gain (including income and gain exempt from tax) computed
in accordance with Section 1.B hereof and allocated to such Partner pursuant to
Section 6.1 of the Agreement and Exhibit C hereof, and decreased by (x) the
amount of cash or Agreed Value of all actual and deemed distributions of cash or
property made to such Partner pursuant to this Agreement and (y) all items of
Partnership deduction and loss computed in accordance with Section 1.B hereof
and allocated to such Partner pursuant to Section 6.1 of the Agreement and
Exhibit C hereof.
B. For purposes of computing the amount of any item of income,
gain, deduction or loss to be reflected in the Partners' Capital Accounts,
unless otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes 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)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of
income, gain, loss and deduction shall be made
without regard to any election under Section 754 of
the Code which may be made by the Partnership,
provided that the amounts of any adjustments to the
adjusted bases of the assets of the Partnership made
pursuant to Section 734 of the Code as a result of
the distribution of property by the Partnership to a
Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital
Accounts) shall be reflected in the Capital Accounts
of the Partners in the manner and subject to the
limitations prescribed in Regulations Section l.704-
1(b)(2)(iv) (m)(4).
(2) The computation of all items of income, gain, and
deduction shall be made without regard to the fact
that items described in Sections 705(a)(l)(B) or
705(a)(2)(B) of the Code are not includable in gross
income or are neither currently deductible nor
capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable
disposition of any Partnership property shall be
determined as if the adjusted basis of such property
as of such date of disposition were equal in amount
to the Partnership's Carrying Value with respect to
such property as of such date.
(4) In lieu of the depreciation, amortization, and other
cost recovery deductions taken into account in
computing such taxable income or loss, there shall be
taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership
Asset is adjusted pursuant to Section 1.D hereof, the
amount of any such adjustment shall be taken into
account as gain or loss from the disposition of such
asset.
B-1
<PAGE> 57
(6) Any items specially allocated under Section 2 of
Exhibit C hereof shall not be taken into account.
C. Generally, a transferee (including any Assignee) of a
Partnership Unit shall succeed to a pro rata portion of the Capital Account of
the transferor. The Capital Accounts of such reconstituted Partnership shall be
maintained in accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations
Section 1.704-1(b)(2)(iv)(f), and as provided in
Section 1.D(2), the Carrying Values of all
Partnership assets shall be adjusted upward or
downward to reflect any Unrealized Gain or Unrealized
Loss attributable to such Partnership property, as of
the times of the adjustments provided in Section
1.D(2) hereof, as if such Unrealized Gain or
Unrealized Loss had been recognized on an actual sale
of each such property and allocated pursuant to
Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following
times: (a) immediately prior to the acquisition of an
additional interest in the Partnership by any new or
existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior
to the distribution by the Partnership to a Partner
of more than a de minimis amount of property as
consideration for an interest in the Partnership; and
(c) immediately prior to the liquidation of the
Partnership within the meaning of Regulations Section
1.704-l(b)(2)(ii)(g), provided, however, that
adjustments pursuant to clauses (a) and (b) above
shall be made only if the General Partner determines
that such adjustments are necessary or appropriate to
reflect the relative economic interests of the
Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-
l(b)(2)(iv)(e), the Carrying Value of Partnership
assets distributed in kind shall be adjusted upward
or downward to reflect any Unrealized Gain or
Unrealized Loss attributable to such Partnership
property, as of the time any such asset is
distributed.
(4) In determining Unrealized Gain or Unrealized Loss for
purposes of this Exhibit B, the aggregate cash amount
and fair market value of all Partnership assets
(including cash or cash equivalents) shall be
determined by the General Partner using such
reasonable method of valuation as it may adopt, or in
the case of a liquidating distribution pursuant to
Article XIII of the Agreement, shall be determined
and allocated by the Liquidator using such reasonable
methods of valuation as it may adopt. The General
Partner, or the Liquidator, as the case may be, shall
allocate such aggregate fair market value among the
assets of the Partnership in such manner as it
determines in its sole and absolute discretion to
arrive at a fair market value for individual
properties.
E. The provisions of the Agreement (including this Exhibit B
and the other Exhibits to the Agreement) relating to the maintenance of Capital
Accounts are intended to comply with Regulations Section 1.704- 1(b), and shall
be interpreted and applied in a manner consistent with such Regulations. In the
event the General Partner shall 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 property or which are assumed by the
Partnership, the General Partner, or the Limited Partners) are computed in order
to comply with such Regulations, the General Partner may make such modification
without regard to Article XIV of the Agreement, provided that it is not likely
to have a material effect on the amounts distributable to any Person pursuant to
Article XIII of the Agreement upon the dissolution of the Partnership. The
General Partner also shall (i) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
l.704-l(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section l.704-1(b).
2. No Interest
B-2
<PAGE> 58
No interest shall be paid by the Partnership on Capital
Contributions or on balances in Partners' Capital Accounts.
3. No Withdrawal
No Partner shall be entitled to withdraw any part of its
Capital Contribution or Capital Account or to receive any distribution from the
Partnership, except as provided in Articles IV, V, VIII and XIII of the
Agreement.
B-3
<PAGE> 59
EXHIBIT C
SPECIAL ALLOCATION RULES
1. Special Allocation Rules.
Notwithstanding any other provision of the Agreement or this
Exhibit C, the following special allocations shall be made in the following
order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of
Section 6.1 of the Agreement or any other provisions of this Exhibit C, if there
is a net decrease in Partnership Minimum Gain during any Partnership 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, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
1.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and for purposes of this Section 1.A only, each
Partner's Adjusted Capital Account Deficit shall be determined prior to any
other allocations pursuant to Section 6.1 of this Agreement with respect to such
Partnership Year and without regard to any decrease in Partner Minimum Gain
during such Partnership Year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other
provision of Section 6.1 of this Agreement or any other provisions of this
Exhibit C (except Section 1.A hereof), if there is a net decrease in Partner
Minimum Gain attributable to a Partner Nonrecourse Debt during any Partnership
Year, each Partner who has a share of the Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i) (5), 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 Partner Minimum Gain attributable to
such Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i) (5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each General
Partner and Limited Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(i) (4). This
Section 1.B is intended to comply with the minimum gain chargeback requirement
in such Section of the Regulations and shall be interpreted consistently
therewith. Solely for purposes of this Section 1.B, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement or this Exhibit with respect to such
Partnership Year, other than allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner
unexpectedly receives any adjustments, allocations or distributions described in
Regulations Sections 1.704-l(b)(2)(ii)(d)(4), l.704-1(b)(2)(ii)(d)(5), or 1.704-
l(b)(2)(ii)(d)(6), and after giving effect to the allocations required under
Sections 1.A and 1.B hereof with respect to such Partnership Year, such Partner
has an Adjusted Capital Account Deficit, items of Partnership income and gain
(consisting of a pro rata portion of each item of Partnership income, including
gross income and gain for the Partnership Year) shall be specially allocated to
such Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit created by
such adjustments, allocations or distributions as quickly as possible. This
Section 1.C is intended to constitute a "qualified income offset" under
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
D. Gross Income Allocation. In the event that any Partner has
an Adjusted Capital Account Deficit at the end of any Partnership Year (after
taking into account allocations to be made under the preceding paragraphs hereof
with respect to such Partnership Year), each such Partner shall be specially
allocated items of Partnership income and gain (consisting of a pro rata portion
of each item of Partnership income, including gross income and gain for the
Partnership Year) in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit.
C-1
<PAGE> 60
E. Nonrecourse Deductions. Nonrecourse Deductions for any
Partnership Year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio for such
Partnership Year to the numerically closest ratio which would satisfy such
requirements.
F. Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions for any Partnership Year shall be specially allocated to the Partner
who bears the economic risk of loss with respect to the Partner Nonrecourse Debt
to which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Sections 1.704-2(b)(4) and 1.704-2(i).
G. Code Section 754 Adjustments. To the extent an adjustment
to the adjusted tax basis of any Partnership asset pursuant to Section 734(b) or
743(b) of the Code is required, pursuant to Regulations Section 1.704-
l(b)(2)(iv)(m), 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 item of gain or loss shall be
specially allocated to the Partners in a manner consistent with the manner in
which their Capital Accounts are required to be adjusted pursuant to such
Section of the Regulations.
2. Allocations for Tax Purposes
A. Except as otherwise provided in this Section 2, for federal
income tax purposes, each item of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as its correlative item of
"book" income, gain, loss or deduction is allocated pursuant to Section 6.1 of
the Agreement and Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities
attributable to a Contributed Property or Adjusted Property, items of income,
gain, loss, and deduction shall be allocated for federal income tax purposes
among the Partners as follows:
(1) (a) In the case of a Contributed Property,
such items attributable thereto shall be
allocated among the Partners consistent with
the principles of Section 704(c) of the Code
to take into account the variation between
the 704(c) Value of such property and its
adjusted basis at the time of contribution
(taking into account Section 2.C of this
Exhibit C); and
(b) any item of Residual Gain or Residual Loss
attributable to a Contributed Property shall
be allocated among the Partners in the same
manner as its correlative item of "book"
gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such
items shall
(i) first, be allocated among the Partners in a
manner consistent with the principles of Section
704(c) of the Code to take into account the
Unrealized Gain or Unrealized Loss attributable to
such property and the allocations thereof pursuant to
Exhibit B;
(ii) second, in the event such property was
originally a Contributed Property, be allocated among
the Partners in a manner consistent with Section
2.B(1) of this Exhibit C; and
(b) any item of Residual Gain or Residual Loss
attributable to an Adjusted Property shall
be allocated among the Partners in the same
manner its correlative item of
C-2
<PAGE> 61
"book" gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1
of this Exhibit C.
C. To the extent Regulations promulgated pursuant to Section
704(c) of the Code permit a Partnership to utilize alternative methods to
eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall, subject to the following, have the
authority to elect the method to be used by the Partnership and such election
shall be binding on all Partners.
C-3
<PAGE> 62
EXHIBIT D
NOTICE OF REDEMPTION
The undersigned hereby irrevocably (i) elects to redeem
Partnership Units in Vornado Operating L.P. in accordance with the
- -------
terms of the Agreement of Limited Partnership of Vornado Operating L.P., as
amended (the "Partnership Agreement"), and the Redemption Right referred to
therein, (ii) surrenders such Partnership Units and all right, title and
interest therein and (iii) directs that promptly after the Specified Redemption
Date the Cash Amount or Shares Amount (as determined by the General Partner)
deliverable upon exercise of the Redemption Right be delivered to the address
specified below, and if Shares are to be delivered, such Shares 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 Partnership Units, free and clear of
the rights of or interests of any other person or entity, (b) has the full
right, power and authority to redeem and surrender such Partnership Units as
provided herein and (c) has obtained the consent or approval of all persons or
entities, if any, having the right to consult or approve such redemption and
surrender. Capitalized terms used herein have the meanings assigned to them in
the Partnership Agreement.
Dated: Name of Limited Partner:
----------------- -----------------------------
--------------------------------------------------
(Signature of Limited Partner)
--------------------------------------------------
(Street Address)
--------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
-------------------------------
IF SHARES ARE TO BE ISSUED, ISSUE TO:
Name:
Please insert social security or identifying number:
D-1
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the inclusion in this Registration Statement of Vornado
Operating Inc. on Form S-11 of our report dated January 23, 1998 on the balance
sheet of Vornado Operating Inc. as of January 23, 1998 and to the reference to
us under the heading "Experts" in the Prospectus which is part of this
Registration Statement.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
January 23, 1998
