EXHIBIT INDEX ON PAGE 30
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended: December 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________To________________________________
Commission File Number: 333-40701
VORNADO OPERATING COMPANY
(Exact name of Registrant as specified in its charter)
Delaware 22-3569068
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Park 80 West, Plaza II, Saddle Brook, New Jersey 07663
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (201) 587-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Stock, American Stock Exchange
par value $.01 per share
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES _X_ NO ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting shares held by non-affiliates of the
registrant, i.e. by persons other than officers and directors of Vornado
Operating Company as reflected in the table in Item 12 of this Form 10-K, as of
March 2, 1999 was $25,837,000.
As of March 2, 1999, there were 4,068,310 shares of the registrant's common
stock, par value $.01 per share, outstanding.
Documents Incorporated by Reference
Part III: Proxy Statement for Annual Meeting of Stockholders to be held on May
19, 1999.
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TABLE OF CONTENTS
Item
Page
PART I. ...................................................................3
Item 1. Business...........................................................3
Item 2. Properties........................................................10
Item 3. Legal Proceedings.................................................10
Item 4. Submission of Matters to a Vote of Security Holders...............10
PART II. ..................................................................12
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters...........................................................12
Item 6. Selected Consolidated Financial Data..............................12
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................13
Item 7A. Quantitative and Qualitative Disclosures about Market Risk........14
Item 8. Financial Statements and Supplementary Data.......................14
Item 9. Changes In and Disagreements With Independent Auditors on
Accounting and Financial Disclosure...............................15
PART III. (1) ..............................................................29
Item 10. Directors and Executive Officers of the Registrant................29
Item 11. Executive Compensation............................................29
Item 12. Security Ownership of Certain Beneficial Owners and Management....29
Item 13. Certain Relationships and Related Transactions....................29
PART IV. ..................................................................30
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..30
SIGNATURES...................................................................31
- - - --------------------
(1) These items are omitted because the Registrant will file a definitive
Proxy Statement pursuant to Regulation 14A involving the election of
directors with the Securities and Exchange Commission not later than 120
days after December 31, 1998, which is incorporated by reference herein.
Information relating to Executive Officers of the Registrant appears on
page 9 of this Annual Report on Form 10-K.
Certain statements contained herein constitute forward-looking statements
as such term is defined in Section 27A of the Securities Act of 1933, as amended
(the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"). Certain factors could cause actual results to
differ materially from those in the forward-looking statements. Factors that
might cause such a material difference include, but are not limited to: (a) the
Company's lack of operating history and operating results; (b) the Company's
lack of operating assets; (c) restrictions on the Company's business and future
opportunities; (d) dependence upon Vornado Realty Trust; (e) the substantial
influence of the Company's controlling stockholders and conflicts of interest;
(f) risks associated with potential investments and ability to manage those
investments; (g) competition; (h) the Company's obligations under the revolving
credit facility; (i) the Company's limited financial resources; (j) dependence
on key personnel; (k) potential antitakeover effects of the Company's charter
documents and applicable law; (l) dependence on dividends and distributions of
subsidiaries; (m) potential costs of compliance with environmental laws; (n)
changes in the general economic climate; and (o) government regulations.
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PART I.
Item 1. Business
General
On October 16, 1998 Vornado Realty L.P. (the "Operating Partnership"), a
subsidiary of Vornado Realty Trust together with its consolidated subsidiaries
and preferred stock affiliates, ("Vornado"), made a distribution (the
"Distribution") of one share of common stock, par value $.01 per share (the
"Common Stock"), of Vornado Operating Company, a Delaware corporation (the
"Corporation"), for 20 units of limited partnership interest of the Operating
Partnership (including the units owned by Vornado) held of record as of the
close of business on October 9, 1998 (the "Record Date"), and Vornado in turn
made a distribution of the Common Stock it received to the holders of its common
shares of beneficial interest. While no Common Stock was distributed in respect
of Vornado's $3.25 Series A Convertible Preferred Shares, Vornado adjusted the
conversion price to take into account the Distribution.
The Corporation was formed on October 30, 1997, as a wholly owned
subsidiary of Vornado. 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 real estate assets. Accordingly, Vornado
is prevented from owning certain assets and conducting certain activities that
would be inconsistent with its status as a REIT. The Corporation was formed to
own assets that Vornado could not itself own and conduct activities that Vornado
could not itself conduct. The Corporation is intended to function principally as
an operating company, in contrast to Vornado's principal focus on investments in
real estate assets. The Corporation is able to do so because it is taxable as a
regular "C" corporation rather than a REIT.
The Corporation will seek to become the operator of businesses conducted
at properties it leases from Vornado, as contemplated by the Intercompany
Agreement, dated as of October 16, 1998, between the Corporation and Vornado
(the "Intercompany Agreement"), referred to below. The Corporation expects to
rely exclusively on Vornado to identify business opportunities for the
Corporation, and the Corporation currently expects that those opportunities will
relate in some manner to Vornado and its real estate investments rather than to
unrelated businesses.
The principal executive offices of the Corporation are located at Park 80
West, Plaza II, Saddle Brook, New Jersey 07663, and its telephone number at that
location is (201) 587-1000.
Intercompany Agreement and Charter Purpose Clauses
The Corporation and Vornado have entered into the Intercompany Agreement
pursuant to which, among other things, (a) Vornado will under certain
circumstances offer the Corporation 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 Corporation will not 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 requires, subject to certain
terms, that Vornado provide the Corporation 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 Corporation 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 Corporation 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
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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 Corporation. 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 Corporation in accordance with the procedures specified above prior to
offering such Tenant Opportunity to any other party.
In addition, the Intercompany Agreement prohibits the Corporation 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
Corporation 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 Internal Revenue Code of 1986, as amended (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 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
Corporation by the Operating Partnership. The Intercompany Agreement also
requires the Corporation to assist Vornado in structuring and consummating any
such investment which Vornado elects to pursue, on terms determined by Vornado.
In addition, the Corporation has agreed to notify Vornado of, and make available
to, Vornado investment opportunities developed by the Corporation or of which
the Corporation becomes aware but is unable or unwilling to pursue.
Under the Intercompany Agreement, Vornado has agreed to provide the
Corporation with certain administrative, corporate, accounting, financial,
insurance, legal, tax, data processing, human resources and operational
services. For these services, the Corporation will compensate Vornado in an
amount determined in good faith by Vornado as the amount an unaffiliated third
party would charge the Corporation for comparable services and will reimburse
Vornado for certain costs incurred and paid to third parties on behalf of the
Corporation.
Vornado and the Corporation 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, 2003. In addition, Vornado has the right to terminate
the Intercompany Agreement upon a change in control of the Corporation.
The Corporation's restated certificate of incorporation (the "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 Corporation 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.
Vornado Operating L.P. and the Interstate Exchange
The Corporation holds its assets and conducts its business through Vornado
Operating L.P., a Delaware limited partnership ("Company L.P."). The Corporation
is the sole general partner of, and as of December 31, 1998 owned a 90.1%
partnership interest in, Company L.P. All references to the Company refer to
Vornado Operating Company and its subsidiaries including the Company L.P.
Interstate Properties, a New Jersey general partnership ("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 owned, in the aggregate, 17.0% of the Company's Common Stock
immediately after the Distribution (excluding shares underlying stock
appreciation rights ("SARs") and options held by Messrs. Roth and Wight for this
purpose).
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Under applicable provisions of 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. 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
and to achieve certain other purposes, pursuant to the Exchange Agreement, dated
as of October 16, 1998, between the Company and Interstate, (i) Interstate
exchanged 447,017 shares of Common Stock for a 9.9% undivided interest in all of
the Company's assets and (ii) Interstate and the Company contributed all of
their interests in such assets to Company L.P. and in return Interstate received
a 9.9% limited partnership interest and the Company received a 90.1% partnership
interest therein. At any time after October 16, 1999, Interstate will have the
right to have its limited partnership interest in Company L.P. redeemed by
Company L.P. either (a) for cash in an amount equal to the fair market value, at
the time of redemption, of 447,017 shares of Common Stock or (b) for 447,017
shares of Common Stock, in each case as selected by the Company and subject to
customary anti-dilution adjustments.
The Cold Storage Companies
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 Company ("Crescent") have a 40% interest acquired each of
Americold Corporation ("Americold") and URS Logistics, Inc. ("URS"). In June
1998, Vornado/Crescent Partnerships acquired the assets of Freezer Services,
Inc. and in July 1998 acquired the Carmar Group (Americold, URS, Freezer
Services, Inc. and the Carmar Group, collectively, the "Cold Storage
Companies").
On March 12, 1999, the Company and Crescent Operating Inc. ("Crescent
Operating") formed a new partnership that has purchased all of the non-real
estate assets of the Cold Storage Companies which do business under the name
"AmeriCold Logistics" encompassing the operations of the cold storage business
for approximately $48 million from the Vornado/Crescent Partnership. The new
partnership leases 88 cold storage warehouses used in this business from the
Vornado/Crescent Partnership, which continues to own the real estate. In
addition to the leased warehouses, AmeriCold Logistics manages 13 additional
warehouses containing approximately 80 million cubic feet of space.
To fund its share of the purchase price, the Company utilized $4.6 million
of cash and borrowed $18.6 million under its revolving credit facility with
Vornado. Further, the Company will pay $6 million to close the warehousing
operation of one of the leased facilities.
The purchase price of the cold storage operating assets was proposed by
the partnership of Vornado and Crescent (the Sellers). The Board of Directors of
both the Company and Crescent Operating reviewed and approved the transaction
after concluding that the price was fair market value at the time of the
transaction.
The acquired business has 5,500 employees and operates 101 warehouse
facilities nationwide with an aggregate of approximately 530 million cubic feet
of refrigerated, frozen and dry storage space under the name AmeriCold
Logistics. AmeriCold Logistics has its headquarters in Atlanta, Georgia.
AmeriCold Logistics provides the frozen food industry with refrigerated
warehousing and transportation management services. Refrigerated warehouses are
comprised of production and distribution facilities. Production facilities
typically serve one or a small number of customers, generally food processors,
located nearby. These customers store large quantities of processed or partially
processed products in the facility until they are shipped to the next stage of
production or distribution. Distribution facilities primarily warehouse a wide
variety of customers' finished products until future shipment to end-users. Each
distribution facility primarily services the surrounding regional market.
AmeriCold Logistics offers transportation management services including freight
routing, dispatching,
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freight rate negotiation, backhaul coordination and distribution channel
assessment. AmeriCold Logistics temperature-controlled logistics expertise and
access to both frozen food warehouses and distribution channels enable its
customers to respond quickly and efficiently to time-sensitive orders from
distributors and retailers.
AmeriCold Logistics customers consist primarily of national, regional and
local frozen food manufacturers, distributors, retailers and food service
organizations including Con-Agra, Inc., Tyson Foods, H.J. Heinz & Co., McCain
Foods, Pillsbury, Sara Lee, Philip Morris, J.R. Simplot, Farmland Industries and
Unilever.
AmeriCold Logistics faces national, regional and local competition.
Breadth of service, warehouse locations, customer mix, warehouse size, service
performance and price are major competitive factors.
Leases for the cold storage warehouse properties
------------------------------------------------
AmeriCold Logistics entered into six leases covering the warehouses used
in this business. The leases have a 15-year term with two-five year renewal
options and provide for the payment of fixed base rent and percentage rent based
on revenues AmeriCold receives from its customers. Fixed rent is approximately
$123 million per annum through 2003, $126 million per annum from 2004 through
2008 and $130 million per annum from 2009 through 2014. Percentage rent for each
lease is based on a specified percentage of revenues in excess of a specified
base amount. The aggregate base revenue amount under five of the six leases is
approximately $321 million, and the weighted average percentage rate is 36.5%
for the initial five-year period, 39.1% for the period from 2004 through 2008
and 40.7% for the period from 2009 through February 28, 2014. The aggregate base
revenue amount under the sixth lease is approximately $32 million, and the
percentage rate is 24% for the initial two-year period, 37.5% for the period
from 2002 through 2006, 40% from 2007 through 2011 and 41% from 2012 through
February 28, 2014. Fixed base rent and percentage rent for the initial year are
projected to be approximately $151,000,000.
AmeriCold Logistics has the right to defer the payment of 15% of fixed
rent and all percentage rent for up to three years beginning on March 12, 1999
to the extent that available cash, as defined in the leases, is insufficient to
pay such rent.
The fixed rent for each of the two five-year renewal options is equal to
the greater of the then fair market value rent and the fixed rent for the
immediately preceding lease year plus 5%.
AmeriCold Logistics is required to pay all costs arising from the
operation, maintenance and repair of the properties, including all real estate
taxes and assessments, utility charges, permit fees and insurance premiums, as
well as property capital expenditures in excess of $5,000,000 annually.
Terms of the new partnership
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Vornado is the day-to-day liaison to the management of AmeriCold
Logistics. The new partnership will pay Vornado an annual fee of $487,000, which
is based on the cold storage operating assets acquired by the new partnership on
March 12, 1999. The fee increases by an amount equal to 1% of the cost of new
acquisitions, including transaction costs. The new partnership will provide
financial statement preparation, tax and similar services to the
Vornado/Crescent real estate partnership (the lessor of the Cold Storage
warehouse properties) for an annual fee of $250,000 increasing 2% each year.
The Company must obtain Crescent Operating's approval for specified
matters involving AmeriCold Logistics, including approval of the annual budget,
requiring specified capital contributions, entering into specified new leases or
amending existing leases, selling or acquiring specified assets and any sale,
liquidation or merger of AmeriCold Logistics. If the partners fail to reach
agreement on certain matters prior to October 30, 2000, the Company will be
entitled to buy Crescent Operating's interest in the partnership at cost plus a
10% per annum return. If the partners fail to reach agreement on such matters
during the period from November 1, 2000 through October 30, 2007, the Company
may set a price at which it commits to either buy Crescent Operating's
investment, or sell its own, and Crescent Operating will decide whether to buy
or sell at that price. If the partners fail to reach agreement on such matters
after October 30, 2007, either party may set a price at which it commits to
either buy the other party's investment, or sell its own, and the other party
will decide whether to buy or sell at that price.
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Neither partner may transfer its rights or interest in the partnership
without the consent of the other partner. The partnership will continue for a
term through October 30, 2027, except as the partners may otherwise agree.
The senior management of AmeriCold Logistics consists of the same individuals
who were the senior management of this business before the new partnership
acquired it. Daniel F. McNamara, the Chief Executive Officer of AmeriCold
Logistics, was Chief Executive Officer since October 1997, when partnerships of
Vornado and Crescent Real Estate acquired the business. From March 1996 to
October 1997, Mr. McNamara was Chief Executive Officer of URS Logistics, Inc.
(one of the predecessors to AmeriCold Logistics). Before March 1996, Mr.
McNamara was Executive Vice President and Chief Operating Officer of Value
Rent-A-Car, a wholly-owned subsidiary of Mitsubishi Motors.
Acquisition and Disposition of Interest in Charles E. Smith Commercial
Realty L.P.
On December 31, 1998, the Company purchased from a subsidiary of Vornado
approximately 1.7% of the outstanding partnership units of Charles E. Smith
Commercial Realty L.P. ("CESCR"), a Delaware limited partnership that owns
interests in and manages approximately 10.7 million square feet of office
properties in Crystal City, Arlington, Virginia, a suburb of Washington, D.C.,
and manages an additional 14.6 million square feet of office and other
commercial properties in the Washington, D.C. area, for an aggregate purchase
price of approximately $12.9 million, or $34 per unit (which is the price at
which CESCR issued partnership units in October 1998 in connection with a
significant "roll-up" transaction). The purchase price was funded out of the
Company's working capital. In connection with this purchase, the Company was
granted an option to require Vornado to repurchase all of the CESCR units at the
price at which the Company purchased the CESCR units from Vornado, plus a
cumulative return on such amount at a rate of 10% per annum. This option may be
exercised at any time prior to December 31, 1999. On March 4, 1999, the Company
exercised such option and Vornado acquired the CESCR units from the Company for
$13.2 million.
Employees
As of December 31, 1998, 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.
Risk Factors
Lack of Operating History and Operating Results; No Operating Assets
The Company was incorporated on October 30, 1997. 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 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 "Item 1. 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.
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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 is 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 is 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 in the future Vornado 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.
If in the future Vornado 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.
Substantial Influence of Controlling Stockholders; Conflicts of
Interest
As of December 31, 1998, 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 owned, in the aggregate,
18.1% of the outstanding Vornado Common Shares (excluding shares issuable on
conversion of units of the Operating Partnership for this purpose) and
beneficially owned, in the aggregate, a 9.9% limited partnership interest in
Company L.P. and 7.8% of the Common Stock (excluding shares underlying SARs and
options held by Messrs. Roth and Wight for this purpose). Because of the
foregoing, Messrs. Roth, Mandelbaum and Wight and Interstate (collectively, the
"Interstate Parties") have substantial influence on the Company and Vornado and
on the outcome of any matters submitted to the Company's Stockholders 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 certain members 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.
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
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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.
Obligations under Revolving Credit Facility; Limited Financial
Resources
The Company has entered into a $75 million Revolving Credit Agreement with
Vornado (the "Revolving Credit Agreement"). See "Item 7. 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, 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 cash on hand 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 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. 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
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.
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 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.
Dependence on Dividends and Distributions of Subsidiaries
Substantially all of the Corporation's assets consist of its partnership
interests in Company L.P., of which the Company is the sole general partner.
Substantially all of Company L.P. 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
9
<PAGE>
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 L.P. 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.
Item 2. Properties
Under the Intercompany Agreement, Vornado has agreed 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 compensates
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.
Item 3. Legal Proceedings
There are no pending legal proceedings to which the Company is a party or
to which any of its properties are subject.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth
quarter of the year ended December 31, 1998.
Executive Officers of the Registrant
The following is a list of the names, ages, principal occupations and
positions with the Company of the executive officers of the Company and the
position held by such officers since the Company was incorporated. Officers are
appointed by and serve at the discretion of the Board of Directors.
Steven Roth, age 57, is Chairman of the Board and Chief Executive
Officer of the Company. 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
the managing general partner of Interstate. On March 2, 1995, he became
Chief Executive Officer of Alexander's, Inc. ("Alexander's"). Mr. Roth is
also a director of Alexander's and of Capital Trust.
10
<PAGE>
Michael D. Fascitelli, age 42, is President and a director of the
Company. 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.
Joseph Macnow, age 53, is Executive Vice President - Finance and
Administration of the Company. Mr. Macnow has been Executive Vice President -
Finance and Administration of Vornado since January 1998. From 1985 to January
1998, Mr. Macnow was Vice President and Chief Financial Officer of Vornado.
Irwin Goldberg, age 54, is Vice President - Chief Financial Officer of
the Company. Mr. Goldberg has been Vice President - Chief Financial Officer
of Vornado since January 1998. From 1978 to January 1998, Mr. Goldberg was a
partner at Deloitte & Touche LLP.
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.
11
<PAGE>
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Common Stock of the Company is listed on the American Stock Exchange
under the symbol "VOO". The Transfer Agent and Registrar for the Common Stock is
First Union National Bank, Charlotte, North Carolina.
The high and low sale prices of the Common Stock for the period from
October 16, 1998 (the initial day of trading of the Common Stock on the American
Stock Exchange) through December 31, 1998, was $5.75 to $8.50.
The approximate number of record holders of Common Stock as of December
31, 1998, was 1,200.
No cash dividends have been declared or paid in respect of the 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. 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. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." The declaration
of dividends will be subject to the discretion of the Board.
Item 6. Selected Consolidated Financial Data
For the Period
October 16,
1998
(Commencement
of Operations) to
December 31, 1998
-----------------
Revenues:
Interest income.................. $ 261,948
---------
Expenses:
General and administrative....... 271,698
Organization costs............... 971,959
---------
Total expenses...................... 1,243,657
---------
Loss before income tax benefit and
minority interest................... (981,709)
Income tax benefit.................. --
---------
Loss before minority interest....... (981,709)
Minority interest................... 97,189
---------
Net loss............................ $(884,520)
=========
Net loss per share - basic and diluted $ (.22)
=========
December 31, 1998
-----------------
Balance Sheet Data:
Total assets........................ $25,226,674
Stockholder's equity................ 21,653,923
AmeriCold Logistics is considered a predecessor of the Company. The
Company will account for its investment in the partnership which acquired the
non-real estate assets of Americold Logistics on the equity method. The net
equity in income (loss) of the predecessor was $10,193,000 in 1998,
$(11,209,000) in 1997, $(2,206,000) in 1996, $(5,780,000) in 1995 and $1,750,000
in 1994.
12
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General
The Company was incorporated on October 30, 1997, as a wholly-owned
subsidiary of Vornado. The Company was 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 is
able to do so because it is taxable as a regular corporation rather than a REIT.
The Company will seek to become the operator of businesses conducted at
properties it leases from Vornado, as contemplated by the Intercompany
Agreement. 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.
On October 16, 1998, the Operating Partnership distributed all of the
shares of Common Stock then owned by the Operating Partnership to its limited
partners, and Vornado in turn distributed all of the shares of Common Stock it
received from the Operating Partnership to the common shareholders of Vornado.
See "Item 1. Business -- General."
Results of Operations
The Company had a net loss of $884,520 for the period from October 16,
1998 to December 31, 1998. Revenues of $261,948 consisted solely of interest
income. Expenses were comprised of (i) organization costs, primarily
professional fees, of $971,959 and (ii) general and administrative expenses of
$271,698, including reimbursements paid to Vornado for certain administrative
and other services provided to the Company, directors fees, insurance and legal
and accounting fees. The Company had no other operations (except for the
investment in CESCR discussed above). See "Item 1. Business -- Intercompany
Agreement and Charter Purpose Clauses" and "Item 2. Property."
Year 2000 Readiness Disclosure
The Company is managed by Vornado. Vornado has advised the Company that
Vornado initiated its Year 2000 compliance programs and information systems
modifications in early 1998 to ensure that its systems and key processes will
remain functional. Vornado expects this objective to be achieved either by
modifying present systems using existing internal and external programming
reousrces or by installing new systems, and by monitoring supplier and other
third-party interfaces. In certain cases, Vornado will be relying on statements
from outside vendors as to the Year 2000 readiness of its systems.
The Company is not aware of any operational systems within its control
that are not Year 2000 compliant. In the event that a third-party service is
interrupted due to a Year 2000 issue, the Company will seek to obtain such
service from another third-party provider.
13
<PAGE>
Liquidity and Capital Resources
Vornado initially capitalized the Company with an equity contribution of
$25 million of cash. On December 31, 1998, the Company purchased from Vornado
approximately 1.7% of the outstanding partnership units of CESCR for an
aggregate purchase price of approximately $12.9 million. The purchase price was
funded out of the Company's working capital. See "Item 1. Business - Acquisition
and Disposition of Interest in Charles E. Smith Commercial Realty L.P." As of
December 31, 1998, the Company had approximately $11.8 million of cash.
As part of its formation, the Company obtained a $75 million unsecured
five-year revolving credit facility from Vornado. Borrowings under the Revolving
Credit Agreement bear interest at a floating rate per annum equal to LIBOR plus
3%. Commencing January 1, 1999, the Company pays Vornado 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 are
payable under the Revolving Credit Agreement until it expires. The Revolving
Credit Agreement prohibits the Company from incurring indebtedness to third
parties (other than certain purchase money debt and certain other exceptions)
and prohibits the Company from paying dividends. Debt under the Revolving Credit
Agreement is 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
has no external sources of financing except for the Revolving Credit Agreement.
On March 12, 1999, the Company and Crescent Operating Inc. ("Crescent
Operating") formed a new partnership that has purchased all of the non-real
estate assets of AmeriCold Logistics encompassing the operations of the cold
storage business for approximately $48 million from the Vornado/Crescent
Partnership. The new partnership leases 88 cold storage warehouses used in this
business from the Vornado/Crescent Partnership, which continues to own the real
estate. In addition to the leased warehouses AmeriCold Logistics manages 13
additional warehouses containing approximately 80 million cubic feet of space.
To fund its share of the purchase price, the Company utilized $4.6 million
of cash and borrowed $18.6 million under its revolving credit facility with
Vornado. Further, the Company will pay $6 million to close the warehousing
operation of one of the leased facilities.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company had no material exposure to market risk sensitive instruments
as of December 31, 1998.
Item 8. Financial Statements and Supplementary Data
INDEX TO FINANCIAL STATEMENTS
Page
Independent Auditors' Report.................................................16
Consolidated Balance Sheet at December 31, 1998..............................17
Consolidated Statement of Operations for the period October 16, 1998
(Commencement of Operations) to December 31, 1998...........................18
Consolidated Statement of Stockholders' Equity for the period October 16,
1998 (Commencement of Operations) to December 31, 1998.....................19
Consolidated Statement of Cash Flows for the period October 16, 1998
(Commencement of Operations) to December 31, 1998..........................20
Notes to Consolidated Financial Statements...................................21
14
<PAGE>
Item 9. Changes In and Disagreements With Independent Auditors on Accounting
and Financial Disclosure
Not applicable.
15
<PAGE>
INDEPENDENT AUDITORS' REPORT
Stockholders and Board of Directors
Vornado Operating Company
Saddle Brook, New Jersey
We have audited the accompanying consolidated balance sheet of Vornado
Operating Company and Subsidiary as of December 31, 1998 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the period October 16, 1998 (commencement of operations) to December 31, 1998.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Vornado Operating Company and
Subsidiary at December 31, 1998, and the results of their operations and their
cash flows for the period October 16, 1998 (commencement of operations) to
December 31, 1998 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 24, 1999
16
<PAGE>
VORNADO OPERATING COMPANY
CONSOLIDATED BALANCE SHEET
December 31, 1998
-----------------
ASSETS
Cash......................................................... $11,831,561
Investment in partnership.................................... 12,920,000
Prepaid insurance............................................ 475,113
-----------
$25,226,674
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to Vornado Realty Trust.................................. $ 1,066,451
Accrued expenses............................................. 127,015
-----------
Total liabilities............................................ 1,193,466
-----------
Minority interest............................................ 2,379,285
-----------
Commitments and contingencies
Stockholders' equity:
Common stock: par value $.01 per share;
authorized, 40,000,000 shares; issued and
outstanding, 4,068,310 shares............................. 40,683
Additional paid-in capital................................... 22,497,760
Deficit...................................................... (884,520)
-----------
Total stockholders' equity................................ 21,653,923
-----------
$25,226,674
===========
See notes to consolidated financial statements.
17
<PAGE>
VORNADO OPERATING COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
For the Period
October 16,
1998
(Commencement
of Operations)
to December 31, 1998
--------------------
Revenues:
Interest income.................. $ 261,948
----------
Expenses:
General and administrative....... 271,698
Organization costs............... 971,959
----------
Total expenses...................... 1,243,657
----------
Loss before income tax benefit and
minority interest................ (981,709)
Income tax benefit.................. --
----------
Loss before minority interest....... (981,709)
Minority interest................... 97,189
----------
Net loss............................ $ (884,520)
==========
Net loss per share -- basic and diluted $ (.22)
==========
See notes to consolidated financial statements.
18
<PAGE>
VORNADO OPERATING COMPANY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Paid-in Stockholders'
Stock Capital Deficit Equity
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Cash contribution for 1,000 shares
on October 16, 1998................. $ 10 $24,999,990 $ -- $25,000,000
Additional stock issued in
connection with the distribution,
4,514,327 shares.................... 45,143 (45,143) -- --
Additional equity contribution........ -- 14,917 -- 14,917
Exchange with Interstate Properties,
447,017 shares...................... (4,470) (2,472,004) -- (2,476,474)
Net loss.............................. -- -- (884,520) (884,520)
------- ----------- --------- -----------
Balance, December 31, 1998............ $40,683 $22,497,760 $(884,520) $21,653,923
======= =========== ========= ===========
</TABLE>
See notes to consolidated financial statements.
19
<PAGE>
VORNADO OPERATING COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Period
October 16, 1998
(Commencement
of Operations)
to December 31, 1998
--------------------
Cash Flows from Operating Activities:
Net loss............................................... $ (884,520)
Adjustments to reconcile net loss to net cash provided
by operations:
Minority interest................................... (97,189)
Non-cash compensation............................... 42,015
Changes in operating assets and liabilities:
Prepaid insurance................................... (475,113)
Accrued expenses.................................... 85,000
Due to Vornado Realty Trust......................... 1,066,451
-----------
Net cash used in operating activities..................... (263,356)
-----------
Cash Flows from Investing Activities:
Investment in partnership.............................. (12,920,000)
-----------
Net cash used in investing activities..................... (12,920,000)
-----------
Cash Flows from Financing Activities:
Initial capital contribution........................... 25,000,000
Additional equity contribution......................... 14,917
-----------
Net cash provided by financing activities................. 25,014,917
-----------
Net increase in cash and cash equivalents, and balance, at
December 31, 1998......................................... $11,831,561
===========
Non-Cash Transactions:
Non-cash compensation ................................. $ 42,015
Exchange with Interstate Properties.................... 2,476,474
See notes to consolidated financial statements.
20
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Business
Vornado Operating Company, a Delaware corporation, was incorporated on
October 30, 1997, as a wholly owned subsidiary of Vornado Realty Trust together
with its consolidated subsidiaries and preferred stock affiliates ("Vornado").
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 real estate assets. Accordingly, Vornado is prevented from owning
certain assets and conducting certain activities that would be inconsistent with
its status as a REIT. Vornado Operating Company was formed to own assets that
Vornado could not itself own and conduct activities that Vornado could not
itself conduct. Vornado Operating Company is intended to function principally as
an operating company, in contrast to Vornado's principal focus of investment in
real estate assets. Vornado Operating Company is able to do so because it is
taxable as a regular "C" corporation rather than a REIT.
On October 16, 1998, Vornado Realty L.P. (the "Operating Partnership"), a
subsidiary of Vornado, made a distribution (the "Distribution") of one share of
common stock, par value $.01 per share ("Common Stock"), of Vornado Operating
Company for 20 units of limited partnership interest of the Operating
Partnership (including the units owned by Vornado) held of record as of the
close of business on October 9, 1998 (the "Record Date"), and Vornado in turn
made a distribution of the Common Stock it received to the holders of its common
shares of beneficial interest, par value $.04 per share ("Vornado Common
Shares"). While no Common Stock was distributed in respect of Vornado's $3.25
Series A Convertible Preferred Shares, Vornado adjusted the conversion price to
take into account the Distribution.
Vornado Operating Company holds its assets and conducts its business
through Vornado Operating L.P., a Delaware limited partnership ("Company L.P.").
The Company is the sole general partner of, and as of December 31, 1998 owned a
90.1% partnership interest in, Company L.P. All references to the "Company"
refer to Vornado Operating Company and its subsidiaries including the Company
L.P.
2. Summary of Significant Accounting Policies
Basis of Presentation: The accompanying consolidated financial statements
are prepared in conformity with generally accepted accounting principles and
include the accounts of the Company and Company L.P. Management has made
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
Cash: Cash consists of highly liquid investments purchased with
original maturities of three months or less.
Income Taxes: Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes currently
due plus deferred taxes related primarily to differences between the treatment
of certain items for financial statement purposes and the treatment of those
items for corporation tax purposes. The deferred tax assets and liabilities
represent the future tax return consequences of those differences, which will
either be taxable or deductible when the assets and liabilities are recovered or
settled.
The net basis of the Company's assets and liabilities for tax purposes
approximates the amount reported for financial statement purposes.
Amounts Per Share: Basic and diluted earnings per share exclude the
effects of options, warrants and convertible securities as they are
anti-dilutive.
Stock Options: The Company accounts for stock-based compensation using the
intrinsic value method. Under the intrinsic value method compensation cost is
measured as the excess, if any, of the quoted market price of the Company's
stock at the date of grant over the exercise price of the option granted.
Compensation cost for stock
21
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
options, if any, is recognized ratably over the vesting period. The Company's
policy is to grant options with an exercise price equal to the quoted market
price of the Company's stock on the grant date. Accordingly, no compensation
cost has been recognized for the Company's stock option plans.
Organization Costs: Costs incurred in connection with the organization of
Company were expensed in accordance with the American Institute of Certified
Public Accountant's Statement of Position 98-5 -- "Reporting on the Costs of
Start-up Activities" which the Company adopted in December 1998.
3. Acquisition and Disposition
Charles E. Smith Commercial Realty L.P. ("CESCR")
On December 31, 1998, the Company purchased approximately 1.7% of the
outstanding partnership units of CESCR for an aggregate price of approximately
$12.9 million, or $34 per unit from Vornado. No distributions were received by
the Company on this investment in 1998. CESCR owns interests in and manages
office properties in Crystal City, Arlington, Virginia, a suburb of Washington,
D.C., and manages additional office and other commercial properties in the
Washington, D.C. area. In connection with this purchase, the Company was granted
an option to require Vornado to repurchase all of the CESCR units at the price
at which the Company purchased the CESCR units from Vornado, plus a cumulative
return on such amount at a rate of 10% per annum. This option may be exercised
at any time prior to December 31, 1999. On March 4, 1999, the Company exercised
its option and Vornado acquired the CESCR units from the Company for $13.2
million.
4. Income Taxes
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes, specifically the
write-off of organization costs for financial reporting purposes in the current
period and the amortization of organization cost over 60 months for tax
reporting purposes. The tax effects of significant items comprising the
Company's net deferred tax asset as of December 31, 1998 are as follows:
December 31, 1998
-----------------
Deferred assets:
Organization costs..................... $372,600
Accrued compensation................... 16,800
Net operating loss carryforward........ 3,300
--------
392,700
Valuation allowance...................... (392,700)
--------
Net deferred tax asset................... $ --
========
22
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Because the Company does not have any operating history, a valuation
allowance has been established for its deferred tax assets. The need for this
allowance will be reassessed as the Company obtains operating assets.
A reconciliation of income taxes to the expected income tax benefit is as
follows:
For the Period
October 16, 1998
(Commencement
of Operations)
to December 31, 1998
--------------------
Loss before income taxes...... $981,700
Statutory federal income tax
rate.......................... 34%
--------
Expected federal income tax
benefit....................... 333,800
Expected state income tax
benefit....................... 58,900
--------
392,700
Change in valuation allowance. (392,700)
--------
Income taxes.................. $ --
========
5. Revolving Credit Facility
As part of its formation, the Company obtained a $75 million unsecured
five-year revolving credit facility from Vornado. Borrowings under the Revolving
Credit Agreement bear interest at a floating rate per annum equal to LIBOR plus
3%. Commencing January 1, 1999 the Company pays Vornado 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 are
payable under the Revolving Credit Agreement until it expires. The Revolving
Credit Agreement prohibits the Company from incurring indebtedness to third
parties (other than certain purchase money debt and certain other exceptions)
and prohibits the Company from paying dividends.
6. Employees' Stock Option Plan and Stock Appreciation Rights
Under the 1998 Omnibus Stock Plan (the "Plan"), various officers and key
employees of Vornado were granted incentive stock options and non-qualified
options to purchase Common Stock of the Company prior to the Distribution.
Options granted are at prices equal to 100% of the market price of the Common
Stock at the date of grant. Shares vest ratably, becoming fully vested 36 months
after grant. All options expire ten years after grant.
If compensation cost for Plan awards had been determined based on fair
value at the grant dates, net income and income per share would have been
reduced to the pro-forma amounts below, for the period October 16, 1998
(commencement of operations) to December 31, 1998:
Net loss:
As reported...................................... $(884,520)
Pro-forma........................................ $(988,182)
Net loss per share:
Basic and diluted:
As reported................................ $ (.22)
Pro-forma.................................. $ (.24)
23
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The fair value of each option grant is estimated on the date of grant
using the Binomial option-pricing model with the following weighted-average
assumptions used for grants:
Expected volatility............................... 71%
Expected life..................................... 5 years
Risk-free interest rate........................... 4.6%
Expected dividend yield........................... --
A summary of the Plan's status and changes are presented below:
Exercise
Shares Price
--------- -------------
Granted on October 9, 1998..................... 426,809 $ 5.54
Exercised...................................... -- --
Cancelled...................................... (210) 5.54
-------
Outstanding at December 31, 1998............... 426,599 $ 5.54
=======
Options exercisable at December 31, 1998....... --
=======
Fair value of options granted (per option)..... $ 3.43
=======
The following table summarizes information about options outstanding under
the Plan at December 31, 1998:
Options Outstanding Options Exercisable
- - - ---------------------------------------- ------------------------------
Number
Outstanding at
at Remaining Number
Exercise December 31, Contractual Exercisable at Exercise
Price 1998 Life December 31, 1998 Price
- - - --------- ---------------- ----------- ----------------- --------
$5.54 426,599 9.8 Years -- --
Shares available for future grant at December 31, 1998 were 573,401.
Stock appreciation rights ("SARs") were granted to an officer of the
Company prior to the Distribution. SARs are granted at 100% of the market price
of the Common Stock at the date of grant. SARs vest ratably, becoming fully
vested 36 months after grant. SARs issued at the Distribution and outstanding at
December 31, 1998 were 130,000, with an exercise price of $5.54. No SARs were
exercisable at December 31, 1998. The Company charged $42,015 to compensation
expense in the current period related to this grant.
7. Intercompany Agreement
The Company and Vornado have entered into an Intercompany Agreement
("Intercompany Agreement") pursuant to which, among other things, (a) Vornado
will under certain circumstances 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 not make any real
estate investment or other REIT-Qualified
24
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Investment unless it first offers Vornado the opportunity to make such
investment and Vornado has rejected that opportunity.
Under the Intercompany Agreement, Vornado has agreed 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. Also
under the Intercompany Agreement, Vornado makes 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 compensates Vornado in an
amount determined in good faith by Vornado as the amount an unaffiliated third
party would charge the Company for comparable space. For the period October 16,
1998 (commencement of operations) to December 31, 1998, the Company incurred
approximately $50,000 for such services.
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, 2003. In addition, Vornado has the right to terminate the
Intercompany Agreement upon a change in control of the Company.
8. Minority Interest
Minority interest represents limited partnership interests in Company L.P.
not owned by the Company. On October 16, 1998, (i) Interstate Properties, a New
Jersey general partnership ("Interstate"), exchanged 447,017 shares of Common
Stock for a 9.9% undivided interest in all of the Company's assets and (ii)
Interstate and the Company contributed all of their interests in such assets to
Company L.P. and in return Interstate received a 9.9% limited partnership
interest and the Company received the 90.1% sole general partnership interest
therein. At any time after October 16, 1999, Interstate will have the right to
have its limited partnership interest in Company L.P. redeemed by Company L.P.
either (a) for cash in an amount equal to the fair market value, at the time of
redemption, of 447,017 shares of Common Stock or (b) for 447,017 shares of
Common Stock, in each case as selected by the Company and subject to customary
anti-dilution adjustments.
No distributions were made to Interstate for the period October 16, 1998
(commencement of operations) to December 31, 1998.
9. Earnings Per Share
The following table sets forth the computation of basic and diluted
earnings per share for the period October 16, 1998 (commencement of operations)
to December 31, 1998:
Numerator:
Net loss..................................................... $(884,520)
=========
Denominator:
Denominator for basic earnings per share-weighted average 4,068,310
shares.......................................................
Effect of dilutive securities:
Employee stock options.................................... --
---------
Denominator for diluted earnings per share-adjusted weighted 4,068,310
=========
Net loss per share-basic and diluted............................ $ (.22)
=========
25
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10.Subsequent Event
On March 12, 1999, the Company and Crescent Operating Inc. ("Crescent
Operating") formed a new partnership that has purchased all of the non-real
estate assets of the cold storage companies which do business under the name of
AmeriCold Logistics encompassing the operations of the cold storage business for
approximately $48 million from the Vornado/Crescent Partnership. The new
partnership leases 88 cold storage warehouses used in this business from the
Vornado/Crescent Partnership, which continues to own the real estate. In
addition to the leased warehouses AmeriCold Logistics manages 13 additional
warehouses containing approximately 80 million cubic feet of space.
The Company owns 60% of the new partnership through Company L.P. and
Crescent Operating indirectly owns 40% of the new partnership. The Company is
the sole general partner of, and owns a 90.1% partnership interest in, Company
L.P.
To fund its share of the purchase price, the Company utilized $4.6 million
of cash and borrowed $18.6 million under its revolving credit facility. Further,
the Company will pay $6 million to close the warehousing operation of one of the
leased facilities.
The following unaudited data presents the combination of the historical
income statements of the separate component companies of AmeriCold Logistics as
follows: (1) AMERICOLD CORPORATION year ended December 31, 1998, URS Logistics,
Inc. year ended December 31, 1998, the Freezer Services Companies (acquired
6/12/98) and The Carmar Group of Companies (acquired 7/1/98), (2) AMERICOLD
CORPORATION ten months ended December 31, 1997 and URS Logistics, Inc. year
ended December 31, 1997 and (3) AMERICOLD CORPORATION year ended February 28,
1997 and URS Logistics, Inc. year ended December 31, 1996. Such companies are
considered to be predecessors.
COMBINED STATEMENT OF INCOME
(amounts in thousands) For the Year Ended December 31,
-----------------------------------------
1998 1997 1996
------------- ----------- -----------
Revenues........................... $ 567,867 $ 414,280 $ 454,996
Expenses:
Cost of services ............. 411,874 286,314 323,693
General & administrative ..... 26,877 39,957 45,086
Depreciation & amortization .. 59,337 37,151 17,080
Compensation expense ......... -- 12,115 --
------------- ----------- -----------
Total Expenses .................... 498,088 375,537 385,859
------------- ----------- -----------
Operating income .................. 69,779 38,743 69,137
Interest expense .................. (45,828) (63,263) (74,715)
Other income (expense) ............ 2,275 3,210 1,125
------------- ----------- -----------
Income (loss) before income tax ... 26,226 (21,310) (4,453)
Income taxes (benefit) ............ 9,238 (7,278) (777)
------------- ----------- -----------
Income (loss) before extraordinary
item .............................. 16,988 (14,032) (3,676)
Extraordinary item ................ -- (4,649) --
------------- ----------- -----------
Net income (loss) ................. $ 16,988 $(18,681) $ (3,676)
============= =========== ===========
26
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The following unaudited proforma Balance Sheet as of December 31, 1998
presents the Company on a historical basis and reflects proforma adjustments for
the purchase of the non-real estate assets of AmeriCold Logistics and the
disposition of the Company's interest in CESCR.
December 31, 1998
----------------------------------------
(amounts in thousands)
Proforma
Historical Adjustments Proforma
---------- ----------- --------
Assets:
Cash .......................... $ 11,832 $ (4,647)(1) $20,105
12,920 (2)
Investment in partnership -
AmeriCold .................... 23,234 (1) 23,234
Investment in partnership -
CESCR ........................ 12,920 (12,920)(2)
Prepaid insurance ............. 475 475
-------- ----------- -------
$ 25,227 $ 18,587 $43,814
======== =========== =======
Liabilities and Stockholders'
Equity:
Due to Vornado Realty Trust ... $ 1,067 $ 1,067
Debt .......................... $ 18,587 18,587
Accrued expenses .............. 127 127
Minority interest ............. 2,379 2,379
Commitments and contingencies..
Stockholders' equity .......... 21,654 21,654
-------- ----------- -------
Total stockholders' equity. $ 25,227 $ 18,587 $43,814
======== =========== =======
(1) Purchase of 60% of the non-real estate assets of AmeriCold Logistics
(2) Put of investment in CESCR to Vornado
The following unaudited proforma income data reflects the purchase of the
non-real estate assets of AmeriCold Logistics as if it had occurred on January
1, 1998:
December 31, 1998
------------------------------------------
(amounts in thousands)
Proforma
Historical Adjustments Proforma
---------- ----------- --------
Revenues $567,867 $ 44,458 (3) $612,325
Expenses:
Cost of services .............. 411,874 27,775 (3) 439,649
Rent expense .................. -- 146,568 (4) 146,568
General & administrative ...... 26,877 2,404 (3) 29,281
Depreciation and amortization . 59,337 (51,371)(5) 7,966
-------- -------- -------
Total expenses .................... 498,088 125,376 623,464
-------- -------- -------
Operating income (loss) ........... 69,779 (80,918) (11,139)
Interest expense .................. (45,828) 42,304 (6) (3,524)
Other income (expense) ............ 2,275 -- 2,275
-------- -------- -------
Income (loss) before income tax ... 26,226 (38,614) (12,388)
Income taxes (benefit) ............ 9,238 (9,238)(7) --
-------- -------- -------
Net income ........................ $ 16,988 $ (29,376) $(12,388)
======== ======== =======
The Company's share of net
income (60%) ................... $ 10,193 $ (7,433)
======== =======
Footnotes 3-7 are explained on the following page.
27
<PAGE>
VORNADO OPERATING COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(3) To reflect operations of Freezer Services Inc. and the Carmar Group prior
to their respective dates of acquisition (June 12, 1998 and July 1, 1998)
(4) To record rent expense under leases with the Vornado/Crescent Partnership.
(5) To adjust (i) depreciation expense for assets not acquired and (ii)
amortization of the purchase price over a period of 20 years. Valuations
and other studies are not yet complete. Accordingly, they are subject to
change as such information is finalized.
(6) To reflect (i) interest for debt under the revolving credit agreement of
$18,587 at LIBOR plus 3% per annum (currently 8.02%), (ii) elimination
of interest on historical debt not asummed and (iii) reduced interest
income for cash portion of the purchase price ($4,657 at 5% per annum).
(7) Tax effect of proforma adjustments.
28
<PAGE>
PART III.
Item 10. Directors and Executive Officers of the Registrant
Information relating to directors of the Company will be contained in a
definitive Proxy Statement involving the election of directors which the Company
will file with the Securities and Exchange Commission pursuant to Regulation 14A
under the Securities Exchange Act of 1934 not later than 120 days after December
31, 1998, and such information is incorporated herein by reference. For
information on the executive officers of the Company, see "Item 4. Submission of
Matters to a Vote of Security Holders - Executive Officers of the Registrant" in
Part I of this Annual Report on Form 10-K.
Item 11. Executive Compensation
Information relating to executive compensation will be contained in the
Proxy Statement referred to above in "Item 10. Directors and Executive Officers
of the Registrant," and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Information relating to security ownership of certain beneficial owners
and management will be contained in the Proxy Statement referred to in "Item 10.
Directors and Executive Officers of the Registrant," and such information is
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
Information relating certain relationships and related transactions will
be contained in the Proxy Statement referred to in "Item 10. Directors and
Executive Officers of the Registrant," and such information is incorporated
herein by reference.
29
<PAGE>
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1. The consolidated financial statements are set forth in Item 8
of this Annual Report on Form 10-K.
2. Financial Statement Schedules (not applicable).
3. The following exhibits listed on the Exhibit Index are filed
with this Annual Report on Form 10-K.
Exhibit No.
3.1 Restated Certificate of Incorporation of Vornado Operating
Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-11 (File No.
333-40701) filed with the Commission on September 28, 1998)
3.2 Bylaws of Vornado Operating Company (incorporated by reference
to Exhibit 3.2 of the Company's Registration Statement on Form
S-11 (File No. 333-40701) filed with the Commission on October
13, 1998)
4.1 Specimen stock certificate (incorporated by reference to
Exhibit 4.1 of the Company's Registration Statement on Form
S-11 (File No. 333-40701) filed with the Commission on January
23, 1998)
10.1 Intercompany Agreement, dated as of October 16, 1998,
between Vornado Operating Company and Vornado Realty Trust
10.2 Credit Agreement, dated as of January 1, 1999, between Vornado
Operating Company and Vornado Realty L.P., together with
related form of Line of Credit Note
10.3 1998 Omnibus Stock Plan of Vornado Operating Company
10.4 Agreement of Limited Partnership of Vornado Operating L.P.
13 Annual Report to Stockholders for the year ended December
31, 1998 (to be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1998).
(Except for the pages and information thereof expressly
incorporated by reference in this Form 10-K, the Annual Report
to Stockholders will be provided solely for the information of
the Securities and Exchange Commission and is not to be deemed
"filed" as part of this Form 10-K.)
21 Subsidiaries of Vornado Operating Company
27 Financial Data Schedule
(b) Reports on Form 8-K.
None.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VORNADO OPERATING COMPANY
By: /s/ Irwin Goldberg
------------------------------------
Irwin Goldberg, Vice President-
Chief Financial Officer
Date: March 24, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
By: /s/Steven Roth Chairman of the Board of March 24, 1999
-------------------------- Directors (Principal
(Steven Roth) Executive Officer)
By: /s/Michael D. Fascitelli President and Director March 24, 1999
--------------------------
(Michael D. Fascitelli)
By: /s/Irwin Goldberg Vice President-- March 24, 1999
-------------------------- Chief Financial Officer
(Irwin Goldberg) (Principal Financial and
Accounting Officer)
By: /s/Douglas H. Dittrick Director March 24, 1999
--------------------------
(Douglas H. Dittrick)
By: /s/Martin N. Rosen Director March 24, 1999
--------------------------
(Martin N. Rosen)
By: /s/Richard R. West Director March 24, 1999
--------------------------
(Richard R. West)
By: /s/Russell B. Wight, Jr. Director March 24, 1999
--------------------------
(Russell B. Wight, Jr.)
31
<PAGE>
Exhibit Index
Exhibit No.
3.1 Restated Certificate of Incorporation of Vornado Operating
Company (incorporated by reference to Exhibit 3.1 of the
Company's Registration Statement on Form S-11 (File No.
333-40701) filed with the Commission on September 28, 1998)
3.2 Bylaws of Vornado Operating Company (incorporated by reference
to Exhibit 3.2 of the Company's Registration Statement on Form
S-11 (File No. 333-40701) filed with the Commission on October
13, 1998)
4.1 Specimen stock certificate (incorporated by reference to
Exhibit 4.1 of the Company's Registration Statement on Form
S-11 (File No. 333-40701) filed with the Commission on January
23, 1998)
10.1 Intercompany Agreement, dated as of October 16, 1998,
between Vornado Operating Company and Vornado Realty Trust
10.2 Credit Agreement, dated as of January 1, 1999, between Vornado
Operating Company and Vornado Realty L.P., together with
related form of Line of Credit Note
10.3 1998 Omnibus Stock Plan of Vornado Operating Company
10.4 Agreement of Limited Partnership of Vornado Operating L.P.
13 Annual Report to Stockholders for the year ended December
31, 1998 (to be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1998).
(Except for the pages and information thereof expressly
incorporated by reference in this Form 10-K, the Annual Report
to Stockholders will be provided solely for the information of
the Securities and Exchange Commission and is not to be deemed
"filed" as part of this Form 10-K.)
21 Subsidiaries of Vornado Operating Company
27 Financial Data Schedule
32
Exhibit 10.1
INTERCOMPANY AGREEMENT
This Intercompany Agreement is made and entered into as of
October 16, 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 was formed to own assets that Vornado
could not itself own and conduct activities that Vornado could not itself
conduct and has conducted no material operations to date; and
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, regardless of
whether or not Vornado or Vornado Sub holds voting control of such Person. Any
Person in which a majority of the beneficial ownership interests is owned
<PAGE>
by the Company or any of its Affiliates shall be deemed to be an Affiliate of
the Company for purposes of this Agreement.
"Change in Control" has the meaning assigned to such term in
Section 6.2(c).
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor act thereto.
"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
amended from time to time, and any successor act thereto.
"Group" has the meaning assigned to such term in Section
6.2(c).
"Licensed Property" has the meaning assigned to such term in
Section 5.2(a).
"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 Vornado Sub may from time to time modify
or cancel any such written notice by providing written notice to the Company.
"REIT Opportunity Notice" has the meaning assigned to such
term in Section 2.1(b).
"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
-2-
<PAGE>
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 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.
"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, that 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 or (iii) a property
whose seller (or any affiliate or designee of the seller) desires to enter into
a "master" lease arrangement with respect to the property with Vornado Sub. 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.
"Tenant Opportunity Notice" has the meaning assigned to such
term in Section 3.1(b).
"Ten-Day Period" has the meaning assigned to such term in
Section 2.1(c).
"Thirty-Day Period" has the meaning assigned to such term in
Section 3.1(c).
-3-
<PAGE>
"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
(a) Offer of REIT Opportunities to Vornado Sub. During the
term of this Agreement, if the Company desires to pursue a REIT Opportunity, or
if any REIT 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
-4-
<PAGE>
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.
ARTICLE III
TENANT OPPORTUNITIES
3.1 Offer of Tenant Opportunity to the 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 offers 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
-5-
<PAGE>
(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 third parties in connection with any Tenant
Opportunity with respect to which the Company and Vornado Sub enter into an
agreement 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.
3.2 Rejected Tenant Opportunities. (a) If Vornado Sub and the
Company are unable to enter into a mutually satisfactory arrangement with
respect to a 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
to 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 of a proposal are more favorable to the other party than the terms last
offered to 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.
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<PAGE>
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.
(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
costs reasonably 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 such costs, and the
Company shall pay all undisputed charges and costs 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 " (the "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 that suggests that it has 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.
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<PAGE>
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, 2003.
(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
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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 that is a Subsidiary of Vornado Sub. Any
Tenant 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
that 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 Sections 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.
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<PAGE>
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 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:
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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
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, subject to the provisions of Section 6.2(c).
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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 or limited terms or provisions, or the application thereof. Subject
to the foregoing, the invalidity, illegality or unenforceability 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
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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>
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: /s/ Joseph Macnow
------------------------------
Name: Joseph Macnow
Title: Executive Vice President --
Finance and Administration
VORNADO OPERATING COMPANY
By: /s/ Irwin Goldberg
--------------------------------------
Name: Irwin Goldberg
Title: Vice President -- Chief Financial
Officer
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Exhibit 10.2
CREDIT AGREEMENT
dated as of
January 1, 1999
between
VORNADO OPERATING L.P.,
as Borrower
and
VORNADO REALTY L.P.,
as Lender
<PAGE>
TABLE OF CONTENTS
Page
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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Page
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
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Page
Section 7.01 Affirmative Covenants...........................................14
(a) Financial Statements; Compliance Certificates...................14
(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
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Section 10.09 Separability...................................................21
Section 10.10 Parties in Interest............................................21
Section 10.11 Execution in Counterparts......................................21
CREDIT AGREEMENT, dated as of January 1, 1999, between Vornado
Operating L.P., a Delaware limited partnership, and Vornado Realty L.P., a
Delaware limited partnership.
WITNESSETH:
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.
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"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.
"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, 2004 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.
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"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 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
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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).
"Intercompany Agreement" means the intercompany agreement, dated
as of October 16, 1998, 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.
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"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.
"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
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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).
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.
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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.
(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
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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.
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
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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 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.
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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.
(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:
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(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.
(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.
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(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 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 September 15, 1998, 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.
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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
(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.
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(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.
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
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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 transaction 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 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
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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.
(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
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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
(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
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<PAGE>
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, 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
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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 STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED 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
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<PAGE>
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.
(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
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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.
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.
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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: /s/ Irwin Goldberg
---------------------------------
Name: Irwin Goldberg
Title: Vice President--
Chief Financial Officer
VORNADO REALTY L.P., as
Lender
By: VORNADO REALTY TRUST,
its general partner
By: /s/ Joseph Macnow
---------------------------------
Name: Joseph Macnow
Title: Executive Vice President--
Finance and Administration
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Exhibit 10.3
1998 OMNIBUS STOCK PLAN OF VORNADO OPERATING COMPANY
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 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 per share
(the "Common Stock"), which shall be available for the grant of awards under the
Plan shall not exceed 1,000,000. 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 300,000 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
<PAGE>
the extent it shall deem desirable to carry it into effect. The determinations
of the 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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<PAGE>
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,
trusts, 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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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 September
17, 1998. Subject to earlier termination pursuant to Section 15, the Plan shall
have a term of ten years from its effective date.
-5-
Exhibit 10.4
-----------------------------------------
AGREEMENT OF LIMITED PARTNERSHIP
OF
VORNADO OPERATING L.P.
-----------------------------------------
Dated as of: October 16, 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>
TABLE OF CONTENTS
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
Excess Partnership Interests...................................................5
Exchange Act...................................................................5
Exchange Date..................................................................5
Funding Debt...................................................................5
General Partner................................................................5
General Partner Certificate....................................................5
General Partner Entity.........................................................5
Immediate Family...............................................................5
Incapacity.....................................................................5
Incapacitated..................................................................5
Indemnitee.....................................................................6
Intercompany Agreement.........................................................6
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Interstate.....................................................................6
IRS............................................................................6
Limited Partner................................................................6
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
Ownership Limit................................................................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
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Valuation Date................................................................10
Value.........................................................................10
Vornado.......................................................................10
Vornado Sub...................................................................11
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
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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
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
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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
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
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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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AGREEMENT OF LIMITED PARTNERSHIP
OF
VORNADO OPERATING L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP of Vornado Operating L.P., dated
as of October 16, 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.
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"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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"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 October
15, 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
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<PAGE>
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 "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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"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.
"Excess Partnership Interests" has the meaning set forth in Section
11.3.G hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange Date" has the meaning set forth in Section 11.3.G hereof.
"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.
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"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
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.
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"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, 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.
"Ownership Limit" has the meaning set forth in Section 11.3.G hereof.
"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.
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"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, if
any, established by the General Partner Entity for a distribution to its
stockholders of some or all of its portion of such 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).
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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).
"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 sixtieth 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.
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"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.
"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.
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"Vornado" means Vornado Realty Trust, a Maryland real estate investment
trust.
"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 commenced on October 15, 1998, the
date on which the Certificate was filed in the office of the Secretary of State
of the State of Delaware in accordance with the Act, and 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.
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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 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
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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.
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
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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 (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.
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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 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 5.1.B in
an aggregate amount sufficient to permit the distributions made to the General
Partner under Section 5.1.B(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
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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.
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:
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(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;
(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;
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(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 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;
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(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 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 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 Persons'
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
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any 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
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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, 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 shall not have 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
of 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
that 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 Units.
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
which 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 (90) days after 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
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done at any time and from time to time, as necessary by the General Partner
without the Consent of the Limited Partners.
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
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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 Partner or Assignee shall notify the General
Partner in writing.
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
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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.
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
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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.
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 of any meeting of stockholders for the election of
directors of the General Partner Entity or the General Partner (if different) or
any other matter.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
GENERAL PARTNER:
VORNADO OPERATING COMPANY
By: /s/ Irwin Goldberg
-----------------------------------------
Name: Irwin Goldberg
Title: Vice President -- Chief Financial Officer
LIMITED PARTNERS:
INTERSTATE PROPERTIES
By: /s/ Joseph Macnow
-----------------------------------------
Name: Joseph Macnow
Title: Agent
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EXHIBIT A
VORNADO OPERATING L.P.
PARTNERS AND PARTNERSHIP INTERESTS
(as of October 16, 1998)
<TABLE>
<CAPTION>
- - - --------------------------------------------------------------------------
Class A Agreed Initial Percentage
Partner Units Capital Account Interest
- - - --------------------------------------------------------------------------
<S> <C> <C> <C>
Vornado Operating Company 4,068,310 $22,525,000 90.1000%
Interstate Properties 200,133 2,475,000 9.9000%
--------
TOTAL 4,268,443 $25,000,000 100.0000%
=========
- - - --------------------------------------------------------------------------
</TABLE>
A-1 - 1 -
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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 - 1 -
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(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 - 2 -
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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 - 3 -
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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
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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
- 2 -
<PAGE>
"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
- 3 -
<PAGE>
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
- 1 -
Exhibit 21
Subsidiaries of Vornado Operating Company
AmeriCold Logistics II, LLC Delaware
AmeriCold Logistics, LLC Delaware
Americold Services Corporation Delaware
Americold/Offult, L.L.C. Oregon
AMLOGCANADA, Inc. Canada
Carmar Industries, L.L.C. Missouri
Distribution Development, L.L.C. Delaware
Inland Quarries, L.L.C. Delaware
KC Underground, L.L.C. Delaware
VC Carthage, L.L.C. Delaware
VC Logistics, L.L.C. Delaware
VC Omaha Texas, L.L.C. Delaware
VC Superior, L.L.C. Delaware
VC Texas, L.P. Delaware
Vornado Crescent Logistics
Operating Partnership Delaware
Vornado Operating L.P. Delaware
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's audited financial statements for the period October 16, 1998 to
December 31, 1998 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0001050080
<NAME> Vornado Operating Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-16-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,832
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,227
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 41
<OTHER-SE> 21,614
<TOTAL-LIABILITY-AND-EQUITY> 25,227
<SALES> 0
<TOTAL-REVENUES> 262
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,244
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (982)
<INCOME-TAX> 0
<INCOME-CONTINUING> (885)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (885)
<EPS-PRIMARY> (.22)
<EPS-DILUTED> (.22)
</TABLE>
