<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998.
REGISTRATION NO. 333-47975
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHILIPS INTERNATIONAL REALTY CORP.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
------------------------
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
(212) 545-1100
(ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PHILIP PILEVSKY
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
PHILIPS INTERNATIONAL REALTY CORP.
417 FIFTH AVENUE
NEW YORK, NEW YORK 10016
(212) 545-1100
(NAME, ADDRESS, INCLUDING ZIP CODE,
AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
Copies to:
JONATHAN A. BERNSTEIN LYNN TOBY FISHER
BLAKE HORNICK KAYE, SCHOLER, FIERMAN,
PRYOR CASHMAN SHERMAN & FLYNN LLP HAYS & HANDLER, LLP
410 PARK AVENUE 425 PARK AVENUE
NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10022
(212) 421-4100 (212) 836-8000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
- ------------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
- ------------------------------------
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C>
Common Stock, par value $.01 per share................. $173,880,000 $51,295
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) of the Act.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 31. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the fees and expenses paid by the Company in
connection with the issuance and distribution of the securities being registered
hereunder. Except for the Securities and Exchange Commission registration fee,
all amounts are estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee................................$ $51,295
NASD Fee........................................................................... 17,888
New York Stock Exchange Listing Fee................................................ 108,233
Transfer Agent and Registrar's Fees................................................ 20,000
Printing and Engraving Expenses.................................................... 300,000
Legal Fees and Expenses (other than Blue Sky)...................................... 2,300,000
Accounting Fees and Expenses....................................................... 1,300,000
Blue Sky Fees and Expenses......................................................... 10,000
Miscellaneous Expenses............................................................. 200,000
-------
Total......................................................................... $4,307,416
-------
-------
</TABLE>
(b) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the Company's Form
8-K dated December 31, 1997 and incorporated herein by reference)
3.2 Articles Supplementary of Series A Preferred Stock (filed as Exhibit 3.2 to the Company's Form 8-K dated
December 31, 1997 and incorporated herein by reference)
3.3** Second Amended and Restated By-Laws of the Company
3.4** Form of Certificate of Common Stock
5.1* Opinion of Ballard Spahr Andrews & Ingersoll regarding the validity of the Common Stock being registered
8.1* Opinion of Pryor Cashman Sherman & Flynn LLP regarding tax matters
10.1* Amended and Restated Agreement of Limited Partnership of the Operating Partnership
10.2 Form of 1997 Stock Option and Long-Term Incentive Plan of the Company (filed as Exhibit 10.2 to the
Company's Registration Statement on Form S-4, Registration No. 333-41431, and incorporated herein by
reference)
10.3 Form of Agreement of Limited Partnership for Property Partnerships (filed as Exhibit 10.3 to the
Company's Registration Statement on Form S-4, Registration No. 333-41431, and incorporated herein by
reference)
10.4 Form of Articles of Incorporation of Philips Subs (filed as Exhibit 10.4 to the Company's Registration
Statement on Form S-4, Registration No. 333-41431, and incorporated herein by reference)
10.5 Form of Bylaws of Philips Subs (filed as Exhibit 10.5 to the Company's Registration Statement on Form
S-4, Registration No. 333-41431, and incorporated herein by reference)
10.6 Contribution and Exchange Agreement, dated August 11, 1997, among National, the Board of Trustees, the
Company, the Operating Partnership and certain contributing partnerships or limited liability companies
associated with a private real estate firm controlled by Philip Pilevsky and certain partners and members
thereof (filed as Exhibit 10.6 to the Company's Registration Statement on Form S-4, Registration No.
333-41431, and incorporated herein by reference)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------------------------------------------------------------------------------------------------
<S> <S>
10.7 Form of Registration Rights Agreement among the Company and certain holders of limited partnership
interests in the Operating Partnership (filed as Exhibit 10.7 to the Company's Registration Statement on
Form S-4, Registration No. 333-41431, and incorporated herein by reference)
10.8 Amended and Restated Management Agreement among the Company, the Operating Partnership and Philips
International Management Corp. (filed as Exhibit 10.8 to the Company's Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference)
10.9 Amended and Restated Non-Competition Agreement among the Company, the Operating Partnership, Philip
Pilevsky and Sheila Levine (filed as Exhibit 10.9 to the Company's Form 10-K for the year ended December
31, 1997 and incorporated herein by reference)
10.10 Employment Agreement between the Company and Louis J. Petra (filed as Exhibit 10.1 to the Company's Form
8-K dated December 31, 1997 and incorporated herein by reference)
10.11 Employment Agreement between the Company and Sheila Levine (filed as Exhibit 10.2 to the Company's Form
8-K dated December 31, 1997 and incorporated herein by reference)
10.12* Employment Agreement between the Company and Brian J. Gallagher
10.13 Form of Warrant (filed as Exhibit 10.12 to the Company's Registration Statement on Form S-4, Registration
No. 333-41431, and incorporated herein by reference)
10.14 Amendment No. 1 to Contribution and Exchange Agreement, dated as of December 29, 1997 (filed as Exhibit
10.13 to the Company's Form 8-K dated December 31, 1997 and incorporated herein by reference)
10.15 Non-Recourse Secured Promissory Note of National Properties Trust (filed as Exhibit 10.14 to the
Company's Form 8-K dated December 31, 1997 and incorporated herein by reference)
10.16* Commitment Letter and Term Sheet with respect to Credit Facility among the Company, the Operating
Partnership and Prudential Securities Credit Corporation
10.17 Form of Amended and Restated Mortgage Assignment of Leases, Security Agreement and Spreader Agreement and
Renewal Promissory Note for Mall on the Mile and Palm Springs Village (filed as Exhibit 10.15 to the
Company's Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.18** Form of Letter Agreement with respect to Supplemental Representations and Warranties
10.19** Form of Letter Agreement with respect to Right of First Refusal
21.1 List of Subsidiaries of the Company (filed as Exhibit 21.1 to the Company's Form 10-K for the year ended
December 31, 1997 and incorporated herein by reference)
23.1** Consent of Ernst & Young LLP
23.2** Consent of Rosen Consulting Group
23.3* Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1)
23.4* Consent of Pryor Cashman Sherman & Flynn LLP (contained in Exhibit 8.1)
24.1** Power of Attorney (contained on signature page)
27.1** Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith
** Previously filed
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Amendment No. 2 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York, State of New York, on the 30th day of April, 1998.
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ PHILIP PILEVSKY
----------------------------------
PHILIP PILEVSKY
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 2 to the Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------------------- -------------------
<S> <C> <C>
/s/ PHILIP PILEVSKY Director, Chief Executive Officer and April 30, 1998
- ------------------------------------------ Chairman of the Board
Philip Pilevsky
* Director and President April 30, 1998
- ------------------------------------------
Louis J. Petra
* Director, Chief Operating Officer, April 30, 1998
- ------------------------------------------ Executive Vice President and Secretary
Sheila Levine
* Chief Financial Officer, Acquisitions April 30, 1998
- ------------------------------------------ Director and Treasurer
Brian J. Gallagher
* Director April 30, 1998
- ------------------------------------------
Arnold S. Penner
* Director April 30, 1998
- ------------------------------------------
A. F. Petrocelli
* Director April 30, 1998
- ------------------------------------------
Elise Jaffe
* Director April 30, 1998
- ------------------------------------------
Robert Grimes
* By: /s/ PHILIP PILEVSKY
Philip Pilevsky
Attorney-in-Fact
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------
<S> <C> <C>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation of the Company (filed as Exhibit 3.1 to the
Company's Form 8-K dated December 31, 1997 and incorporated herein by reference)
3.2 Articles Supplementary of Series A Preferred Stock (filed as Exhibit 3.2 to the Company's
Form 8-K dated December 31, 1997 and incorporated herein by reference)
3.3** Second Amended and Restated By-Laws of the Company
3.4** Form of Certificate of Common Stock
5.1* Opinion of Ballard Spahr Andrews & Ingersoll regarding the validity of the Common Stock
being registered
8.1* Opinion of Pryor Cashman Sherman & Flynn LLP regarding tax matters
10.1* Amended and Restated Agreement of Limited Partnership of the Operating Partnership
10.2 Form of 1997 Stock Option and Long-Term Incentive Plan of the Company (filed as Exhibit
10.2 to the Company's Registration Statement on Form S-4, Registration No. 333-41431, and
incorporated herein by reference)
10.3 Form of Agreement of Limited Partnership for Property Partnerships (filed as Exhibit 10.3
to the Company's Registration Statement on Form S-4, Registration No. 333-41431, and
incorporated herein by reference)
10.4 Form of Articles of Incorporation of Philips Subs (filed as Exhibit 10.4 to the Company's
Registration Statement on Form S-4, Registration No. 333-41431, and incorporated herein by
reference)
10.5 Form of Bylaws of Philips Subs (filed as Exhibit 10.5 to the Company's Registration
Statement on Form S-4, Registration No. 333-41431, and incorporated herein by reference)
10.6 Contribution and Exchange Agreement, dated August 11, 1997, among National, the Board of
Trustees, the Company, the Operating Partnership and certain contributing partnerships or
limited liability companies associated with a private real estate firm controlled by
Philip Pilevsky and certain partners and members thereof (filed as Exhibit 10.6 to the
Company's Registration Statement on Form S-4, Registration No. 333-41431, and incorporated
herein by reference)
10.7 Form of Registration Rights Agreement among the Company and certain holders of limited
partnership interests in the Operating Partnership (filed as Exhibit 10.7 to the Company's
Registration Statement on Form S-4, Registration No. 333-41431, and incorporated herein by
reference)
10.8 Amended and Restated Management Agreement among the Company, the Operating Partnership and
Philips International Management Corp. (filed as Exhibit 10.8 to the Company's Form 10-K
for the year ended December 31, 1997 and incorporated herein by reference)
10.9 Amended and Restated Non-Competition Agreement among the Company, the Operating
Partnership, Philip Pilevsky and Sheila Levine (filed as Exhibit 10.9 to the Company's
Form 10-K for the year ended December 31, 1997 and incorporated herein by reference)
10.10 Employment Agreement between the Company and Louis J. Petra (filed as Exhibit 10.1 to the
Company's Form 8-K dated December 31, 1997 and incorporated herein by reference)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------
<S> <C> <C>
10.11 Employment Agreement between the Company and Sheila Levine (filed as Exhibit 10.2 to the
Company's Form 8-K dated December 31, 1997 and incorporated herein by reference)
10.12* Employment Agreement between the Company and Brian J. Gallagher
10.13 Form of Warrant (filed as Exhibit 10.12 to the Company's Registration Statement on Form
S-4, Registration No. 333-41431, and incorporated herein by reference)
10.14 Amendment No. 1 to Contribution and Exchange Agreement, dated as of December 29, 1997
(filed as Exhibit 10.13 to the Company's Form 8-K dated December 31, 1997 and incorporated
herein by reference)
10.15 Non-Recourse Secured Promissory Note of National Properties Trust (filed as Exhibit 10.14
to the Company's Form 8-K dated December 31, 1997 and incorporated herein by reference)
10.16* Commitment Letter and Term Sheet with respect to Credit Facility among the Company, the
Operating Partnership and Prudential Securities Credit Corporation
10.17 Form of Amended and Restated Mortgage Assignment of Leases, Security Agreement and
Spreader Agreement and Renewal Promissory Note for Mall on the Mile and Palm Springs
Village (filed as Exhibit 10.15 to the Company's Form 10-K for the year ended December 31,
1997 and incorporated herein by reference)
10.18** Form of Letter Agreement with respect to Supplemental Representations and Warranties
10.19** Form of Letter Agreement with respect to Right of First Refusal
21.1 List of Subsidiaries of the Company (filed as Exhibit 21.1 to the Company's Form 10-K for
the year ended December 31, 1997 and incorporated herein by reference)
23.1** Consent of Ernst & Young LLP
23.2** Consent of Rosen Consulting Group
23.3* Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit 5.1)
23.4* Consent of Pryor Cashman Sherman & Flynn LLP (contained in Exhibit 8.1)
24.1** Power of Attorney (contained on signature page)
27.1** Financial Data Schedule
</TABLE>
- ------------------------
* Filed herewith
** Previously filed
<PAGE>
PHILIPS INTERNATIONAL REALTY CORP.
7,200,000 Shares1
Common Stock
UNDERWRITING AGREEMENT
May ____, 1998
PRUDENTIAL SECURITIES INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
As Representatives of the several Underwriters
c/o Prudential Securities Incorporated
One New York Plaza
New York, New York 10292
Ladies and Gentlemen:
Philips International Realty Corp., a Maryland
corporation intending to qualify as a real estate investment trust (the
"Company"), and Philips International Realty, L.P., a Delaware limited
partnership (the "Operating Partnership"), each hereby confirms its
agreement with the several underwriters named in Schedule 1 hereto (the
"Underwriters"), for whom you have been duly authorized to act as
representatives (in such capacities, the "Representatives"), as set forth
below. If you are the only Underwriters, all references herein to the
Representatives shall be deemed to be to the Underwriters.
1. Securities. Subject to the terms and conditions
herein contained, the Company proposes to issue and sell to the several
Underwriters an aggregate of 7,200,000 shares (the "Firm Securities") of
the Company's common stock, par value $.01 per share (the "Common
Stock"). The Company also proposes to issue and sell to the several
Underwriters not more than 1,080,000 additional shares of Common Stock if
requested by the Representatives as provided in Section 3 of this
Agreement. Any and all shares of Common Stock to be purchased by the
Underwriters pursuant to such option are referred to herein as the
"Option Securities," and the Firm Securities and any Option Securities
are collectively referred to herein as the "Securities."
- --------
1 Plus an option to purchase from Philips International Realty
Corp. up to 1,080,000 additional shares to cover over-allotments.
<PAGE>
2. Representations and Warranties of the Company and
the Operating Partnership. The Company and the Operating Partnership,
jointly and severally, represent and warrant to, and agree with, each of
the several Underwriters that:
(a) A registration statement on Form S-11 (File No.
333-47975) with respect to the Securities, including a prospectus subject
to completion, has been filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933,
as amended (the "Act"), and one or more amendments to such registration
statement may have been so filed. After the execution of this Agreement,
the Company will file with the Commission either (i) if such registration
statement, as it may have been amended, has been declared by the
Commission to be effective under the Act, either (A) if the Company
relies on Rule 434 under the Act, a Term Sheet (as hereinafter defined)
relating to the Securities, that shall identify the Preliminary
Prospectus (as hereinafter defined) that it supplements containing such
information as is required or permitted by Rules 434, 430A and 424(b)
under the Act or (B) if the Company does not rely on Rule 434 under the
Act, a prospectus in the form most recently included in an amendment to
such registration statement (or, if no such amendment shall have been
filed, in such registration statement), with such changes or insertions
as are required by Rule 430A under the Act or permitted by Rule 424(b)
under the Act, and in the case of either clause (i)(A) or (i)(B) of this
sentence as have been provided to and approved by the Representatives
prior to the execution of this Agreement, or (ii) if such registration
statement, as it may have been amended, has not been declared by the
Commission to be effective under the Act, an amendment to such
registration statement, including a form of prospectus, a copy of which
amendment has been furnished to and approved by the Representatives prior
to the execution of this Agreement. The Company may also file a related
registration statement with the Commission pursuant to Rule 462(b) under
the Act for the purpose of registering certain additional Securities,
which registration shall be effective upon filing with the Commission. As
used in this Agreement, the term "Original Registration Statement" means
the registration statement initially filed relating to the Securities, as
amended at the time when it was or is declared effective, including all
financial schedules and exhibits thereto and including any information
omitted therefrom pursuant to Rule 430A under the Act and included in the
Prospectus (as hereinafter defined); the term "Rule 462(b) Registration
Statement" means any registration statement filed with the Commission
pursuant to Rule 462(b) under the Act (including the Registration
Statement and any Preliminary Prospectus or Prospectus incorporated
therein at the time such Registration Statement becomes effective); the
term "Registration Statement" includes both the Original Registration
Statement and any Rule 462(b) Registration Statement; the term
"Preliminary Prospectus" means each prospectus subject to completion
filed with such registration statement or any amendment thereto
(including the prospectus subject to completion, if any, included in the
Registration Statement or any amendment or supplement thereto at the time
it was or is declared effective); the term "Prospectus" means:
(A) if the Company relies on Rule 434 under the Act,
the Term Sheet relating to the Securities that is first filed
pursuant to Rule 424(b)(7) under the Act, together with the
Preliminary Prospectus identified therein that such Term Sheet
supplements;
2
<PAGE>
(B) if the Company does not rely on Rule 434 under the
Act, the prospectus first filed with the Commission pursuant to
Rule 424(b) under the Act; or
(C) if the Company does not rely on Rule 434 under the
Act and if no prospectus is required to be filed pursuant to
Rule 424(b) under the Act, the prospectus included in the
Registration Statement;
and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Act. Any reference herein to the
"date" of a Prospectus that includes a Term Sheet shall mean the date of
such Term Sheet.
(b) The Commission has not issued any order preventing
or suspending use of any Preliminary Prospectus. When any Preliminary
Prospectus was filed with the Commission it (i) contained all statements
required to be stated therein in accordance with, and complied in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. When the
Registration Statement or any amendment thereto was or is declared
effective, it (i) contained or will contain all statements required to be
stated therein in accordance with, and complied or will comply in all
material respects with the requirements of, the Act and the rules and
regulations of the Commission thereunder and (ii) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein not misleading.
When the Prospectus or any Term Sheet that is a part thereof or any
amendment or supplement to the Prospectus is filed with the Commission
pursuant to Rule 424(b) (or, if the Prospectus or part thereof or such
amendment or supplement is not required to be so filed, when the
Registration Statement or the amendment thereto containing such amendment
or supplement to the Prospectus was or is declared effective) and on the
Firm Closing Date and any Option Closing Date (both as hereinafter
defined), the Prospectus, as amended or supplemented at any such time,
(i) contained or will contain all statements required to be stated
therein in accordance with, and complied or will comply in all material
respects with the requirements of, the Act and the rules and regulations
of the Commission thereunder and (ii) did not or will not include any
untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The foregoing
provisions of this paragraph (b) do not apply to statements or omissions
made in any Preliminary Prospectus, the Registration Statement or any
amendment thereto or the Prospectus or any amendment or supplement
thereto in reliance upon and in conformity with written information
furnished to the Company by any Underwriter through the Representatives
specifically for use therein.
(c) If the Company has elected to rely on Rule 462(b)
and the Rule 462(b) Registration Statement has not been declared
effective (i) the Company has filed a Rule 462(b) Registration Statement
in compliance with and that is effective upon filing pursuant to Rule
462(b) and has received confirmation of its receipt and (ii) the Company
has given irrevocable instructions for transmission of the applicable
filing fee in connection with the filing of the Rule 462(b)
3
<PAGE>
Registration Statement, in compliance with Rule 111 promulgated under the
Act or the Commission has received payment of such filing fee.
(d) The Company and each of its subsidiaries (which are
corporations) have been duly organized and are validly existing as
corporations in good standing under the laws of their respective
jurisdictions of incorporation and are duly qualified to transact
business as foreign corporations and are in good standing under the laws
of all other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified
does not amount to a material liability or disability to the Company and
its subsidiaries, taken as a whole. Each of the Company's subsidiaries
(which are partnerships or limited liability companies) have been duly
organized and are validly existing as partnerships or limited liability
companies, as the case may be, in good standing under the laws of their
respective jurisdictions of organization and, as applicable, are duly
qualified to transact business as foreign partnerships or limited
liability companies, as the case may be, and are in good standing under
the laws of all other jurisdictions where the ownership or leasing of
their respective properties or the conduct of their respective businesses
requires such qualification, except where the failure to be so qualified
does not amount to a material liability or disability to the Company and
its subsidiaries, taken as a whole.
(e) The Company and each of its subsidiaries have full
power (corporate or other) to own or lease their respective properties
and conduct their respective businesses as described in the Registration
Statement and the Prospectus or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus; and each of the Company and the
Operating Partnership has full power (corporate or other) to enter into
this Agreement and to carry out all the terms and provisions hereof to be
carried out by it.
(f) The issued shares of capital stock of each of the
Company's subsidiaries (which are corporations) have been duly authorized
and validly issued, are fully paid and nonassessable and, except as
otherwise set forth in the Prospectus or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus, are owned beneficially
by the Company free and clear of any security interests, liens,
encumbrances, equities or claims. The partnership agreements of the
Company's subsidiaries (which are partnerships) have been duly
authorized, executed and delivered by the partners thereof and constitute
the valid and binding obligation of the partners thereof. Such
partnership agreements reflect the Company and/or one or more of the
Company's subsidiaries as the sole beneficial owners of the partnership
interests in such partnerships. The operating agreements of the Company's
subsidiaries (which are limited liability companies) have been duly
authorized, executed and delivered by the members thereof and constitute
the valid and binding obligation of the members. Such operating
agreements reflect the Company and/or one or more of the Company's
subsidiaries as the sole beneficial owners of all the membership
interests in such limited liability companies.
(g) The Operating Partnership has been duly organized
and is validly existing as a limited partnership in good standing under
the laws of its jurisdiction of organization and is duly qualified to
transact business as a foreign limited partnership and is in good
standing under the laws
4
<PAGE>
of all other jurisdictions where the ownership or leasing of its
properties or the conduct of its business requires such qualification,
except where the failure to be so qualified does not amount to a material
liability or disability to the Operating Partnership or to the Company
and its subsidiaries, taken as a whole. The general partner interests in
the Operating Partnership and all of the limited partnership interests in
the Operating Partnership (the "Units") are validly issued and fully paid
and were issued free and clear of any security interests, liens,
encumbrances, equities or claims. There are, and as of the Firm Closing
Date will be, __________ Units of limited partnership interest issued and
outstanding. The Units conform in all material respects to the
description thereof contained in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus). The Operating
Partnership has not consented to any transfer of an interest in the
Operating Partnership in accordance with Sections 12.1 or 13.1 of the
Amended and Restated Limited Partnership Agreement of the Operating
Partnership filed as Exhibit 10.1 to the Registration Statement. As of
the Firm Closing Date, the Company will be the sole general partner of
the Operating Partnership with a ___% general partnership interest, which
interest will be validly issued, fully paid and free and clear of any
security interests, liens, encumbrances, equities or claims.
(h) The Company has an authorized, issued and
outstanding capitalization as set forth in the Prospectus or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus.
All of the issued shares of capital stock of the Company have been duly
authorized and validly issued and are fully paid and nonassessable. The
Firm Securities and the Option Securities have been duly authorized and
at the Firm Closing Date or the related Option Closing Date (as the case
may be), after payment therefor in accordance herewith, will be validly
issued, fully paid and nonassessable. No holders of outstanding shares of
capital stock of the Company are entitled as such to any preemptive or
other rights to subscribe for any of the Securities, and no holder of
securities of the Company has any right which has not been fully
exercised or waived to require the Company to register the offer or sale
of any securities owned by such holder under the Act in the public
offering contemplated by this Agreement.
(i) The capital stock of the Company conforms to the
description thereof contained in the Prospectus or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus.
(j) Except as disclosed in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus),
there are no outstanding (A) securities, equity interests or obligations
of the Company or any of its subsidiaries convertible into or
exchangeable for any capital stock or equity interests (as the case may
be) of the Company or any such subsidiary, (B) warrants, rights or
options to subscribe for or purchase from the Company or any such
subsidiary any such capital stock or equity interests or any such
convertible or exchangeable securities, equity interests or obligations,
or (C) obligations of the Company or any such subsidiary to issue any
shares of capital stock, equity interests or any such convertible or
exchangeable securities, equity interests or obligations, or any such
warrants, rights or options.
(k) The financial statements (including the notes
thereto) of the Company included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence,
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the most recent Preliminary Prospectus) fairly present the financial
position, the results of operations and shareholders' equity and cash
flows of the Company at the date and for the period therein specified.
The balance sheet (including the notes thereto) of Philips International
Realty, L.P. included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly presents the financial position of Philips
International Realty, L.P. at the date therein specified. The combined
balance sheet (including the notes thereto) of the Property Partnerships
(as defined in the Prospectus) included in the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) fairly present the financial position of
the Property Partnerships at the date therein specified. The combined
financial statements (including the notes thereto) of The Philips Company
(as defined in the notes thereto) included in the Registration Statement
and the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) fairly present the financial position, the
results of operations, owners' deficit and cash flows of The Philips
Company, at the date and for the periods therein specified. The combined
statements of revenues and certain expenses (including the notes thereto)
of the Merrick Commons and Mill Basin Plaza Properties (as defined in the
notes thereto) included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) fairly present the combined revenues and certain expenses of
the Merrick Commons and Mill Basin Plaza Properties for the periods
therein specified. All of the foregoing financial statements (including
the notes thereto) and the related schedule have been prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved (except as otherwise noted
therein). The selected financial data set forth under the caption
"Selected Financial Data" in the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) fairly present, on
the basis stated in the Prospectus (or such Preliminary Prospectus), the
information included therein.
(l) The pro forma condensed financial statements
(including the notes thereto) of the Company included in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) comply in all material respects
with the applicable requirements of Rule 11-02 of Regulation S-X of the
Commission and the pro forma adjustments have been properly applied to
the historical amounts in the compilation of such information and the
assumptions used in the preparation thereof are, in the opinion of the
Company, reasonable. Other than the historical and pro forma financial
statements included therein, no other historical or pro forma financial
statements are required to be included in the Registration Statement or
Prospectus.
(m) Ernst & Young LLP, who have audited certain
financial statements and schedules, and delivered their reports with
respect to the financial statements and schedules, included in the
Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus), are independent
public accountants as required by the Act and the applicable rules and
regulations thereunder.
(n) The execution and delivery of this Agreement have
been duly authorized by the Company and the Operating Partnership and
this Agreement has been duly executed and delivered by the Company and
the Operating Partnership, and is the valid and binding agreement of
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each of the Company and the Operating Partnership, enforceable against
the Company and the Operating Partnership in accordance with its terms,
subject to the effect of bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization and similar laws relating to creditors' rights
generally and to the application of equitable principles in any
proceeding, whether at law or in equity.
(o) No legal or governmental proceedings are pending to
which the Company or any of its subsidiaries is a party or to which the
property of the Company or any of its subsidiaries is subject that are
required to be described in the Registration Statement or the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) and are not described therein, and no such proceedings have
been threatened against the Company or any of its subsidiaries or with
respect to any of their respective properties; and no contract or other
document is required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement
that is not described therein (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus) or filed as required.
(p) The issuance, offering and sale of the Securities
to the Underwriters by the Company pursuant to this Agreement, the
compliance by the Company and the Operating Partnership with the other
provisions of this Agreement and the consummation of the other
transactions herein contemplated do not (i) require the consent,
approval, authorization, registration or qualification of or with any
governmental authority, except such as have been obtained, such as may be
required under state securities or blue sky laws and, if the registration
statement filed with respect to the Securities (as amended) is not
effective under the Act as of the time of execution hereof, such as may
be required (and shall be obtained as provided in this Agreement) under
the Act, or (ii) conflict with or result in a breach or violation of any
of the terms and provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their
respective properties are bound, or the charter documents or by-laws or
certificate of limited partnership or partnership agreement or limited
liability company operating agreement (as the case may be) of the Company
or any of its subsidiaries, or any statute or any judgment, decree,
order, rule or regulation of any court or other governmental authority or
any arbitrator applicable to the Company or any of its subsidiaries.
(q) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), neither the Company nor any of its subsidiaries has
sustained any material loss or interference with their respective
businesses or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor dispute
or any legal or governmental proceeding and there has not been any
material adverse change, or any development involving a prospective
material adverse change, in the condition (financial or otherwise),
management, business prospects, net worth, or results of operations of
the Company or any of its subsidiaries, taken as a whole, except in each
case as described in or contemplated by the Registration Statement and
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
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<PAGE>
(r) The Company has not, directly or indirectly, (i)
taken any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities or (ii) since the
filing of the Registration Statement (A) sold, bid for, purchased, or
paid anyone any compensation for soliciting purchases of, the Securities
or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(s) The Company has not distributed and, prior to the
later of (i) the Firm Closing Date and (ii) the completion of the
distribution of the Securities, will not distribute any offering material
in connection with the offering and sale of the Securities other than the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
other materials, if any, permitted by the Act.
(t) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus), (i) the Company and its subsidiaries have not incurred any
material liability or obligation, direct or contingent, nor entered into
any material transaction not in the ordinary course of business; (ii) the
Company has not purchased any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind
on its capital stock other than the payment of $44,650 on March 3, 1998
as a dividend on the Series A Preferred Stock (as defined in the
Registration Statement and the Prospectus, or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus); and (iii) there
has not been any material change in the capital stock or partnership
interests (as the case may be), short-term debt or long-term debt of the
Company and its subsidiaries, except in each case as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(u) The Company or its subsidiaries have good and
marketable title in fee simple to all items of real property comprising
the Properties (as defined in the Registration Statement and the
Prospectus, or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) and marketable title to all personal property
comprising the Properties, in each case free and clear of any security
interests, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of such
property and do not interfere with the use made or proposed to be made of
such property by the Company or such subsidiary.
(v) No labor dispute with the employees of the Company
or any of its subsidiaries exists or is threatened or imminent that could
result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(w) The Company and its subsidiaries own or possess all
material patents, patent applications, trademarks, service marks, trade
names, licenses, copyrights and proprietary or other confidential
information currently employed by them in connection with their
respective businesses,
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and neither the Company nor any such subsidiary has received any notice
of infringement of or conflict with asserted rights of any third party
with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would
result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(x) The Company and each of its subsidiaries own or
possess all contract rights that are material to the businesses operated
by them, taken as a whole, as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus).
All such contracts are in full force and effect, and neither the Company
nor any such subsidiary is aware of any material breach by any party
under any of such contracts.
(y) The Company and each of its subsidiaries is insured
by insurers of recognized financial responsibility against such losses
and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged as described in the Prospectus;
neither the Company nor any such subsidiary has been refused any
insurance coverage sought or applied for; and neither the Company nor any
such subsidiary has any reason to believe that it will not be able to
renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not materially and
adversely affect the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and its
subsidiaries, taken as a whole, except as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(z) No subsidiary of the Company is currently
prohibited, directly or indirectly, from paying any dividends to the
Company, from making any other distribution on such subsidiary's capital
stock, partnership interests or membership interests, from repaying to
the Company any loans or advances to such subsidiary from the Company or
from transferring any of such subsidiary's property or assets to the
Company or any other subsidiary of the Company, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus) and except pursuant to
(i) existing indebtedness as in effect on the date hereof, (ii) the
Credit Facility (as defined in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus)), (iii)
applicable law and (iv) with respect to prohibitions only against
transferring any of such subsidiary's property or assets to the Company
or any other subsidiary of the Company, (A) customary non-assignment
provisions contained in leases to which the Company or any of its
subsidiaries is a party and (B) security interests, including purchase
money obligations, applicable to any property of the Company or any of
its subsidiaries as of the date hereof.
(aa) The Company and its subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
their respective businesses, and neither the Company nor any such
subsidiary has received any notice
9
<PAGE>
of proceedings relating to the revocation or modification of any such
certificate, authorization or permit which, singly or in the aggregate,
if the subject of any unfavorable decision, ruling or finding, would
result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(bb) The Company is not, and as of the Firm Closing
Date and the Option Closing Date will not be, subject to registration as
an investment company under the under the Investment Company Act of 1940,
as amended and this transaction will not cause the Company to become an
investment company subject to registration under such Act.
(cc) Each of the Company and its subsidiaries has filed
all foreign, federal, state and local tax returns that are required to be
filed or has requested in a timely manner and/or has received extensions
thereof (except in any case in which the failure so to file would not
have a material adverse effect on the Company and its subsidiaries, taken
as a whole) and has paid all taxes required to be paid by it and any
other interest, assessment, fine or penalty levied or assessed against
it, to the extent that any of the foregoing is due and payable and for
which the Company has, to the extent required, adequately provided for on
its financial statements under generally accepted accounting principles,
except for any such interest, assessment, fine or penalty that is
currently being contested in good faith or as described in or
contemplated by the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus).
(dd) (i) Except as described in or contemplated by the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), the Company and its subsidiaries, the Properties
and each business operating at the Properties are in full compliance with
Environmental Laws, and have obtained and are in compliance with all
permits, licenses or other authorizations ("Permits") that are required
under Environmental Laws except where any non-compliance with
Environmental Laws or the failure to obtain or otherwise comply with any
such Permits would not, individually or in the aggregate, result in a
material adverse change in the condition (financial or otherwise),
business prospects, net worth or results of operations of the Company and
its subsidiaries, taken as a whole.
(ii) Except as disclosed in the Phase I
environmental site assessments of the Properties completed
within the last year by independent environmental consultants,
copies of which were delivered to the Underwriters (the
"Environmental Site Assessments"), none of the Properties are
currently or, to the knowledge of the Company and its
subsidiaries, have in the past been used for the generation,
storage, treatment, transportation disposal of Hazardous
Materials except in full compliance with Environmental Laws and
only in reasonable amounts that are customary and necessary for
the businesses located on the Properties.
(iii) Except as disclosed in the Environmental
Site Assessments, there are no Releases of Hazardous Materials
at, from, onto or under any of the Properties nor have
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their been any Releases of Hazardous Substances in the past at,
from, onto or under any of the Properties.
(iv) Except as disclosed in the Environmental
Site Assessments, no Remedial Actions are currently being
performed or, to the best knowledge of the Company, are planned
to be performed at any of the Properties.
(v) Except as disclosed in the Environmental
Site Assessments, none of the Properties have been listed or, to
the best of the Company's knowledge, have been proposed to be
listed on the National Priorities List ("NPL"), the CERCLA
Information System ("CERCLIS") or any similar state list or
inventory of sites which have been potentially contaminated with
Release of Hazardous Materials.
(vi) No Environmental Claims have been
asserted against the Company and its subsidiaries, the
Properties or any of the businesses operating at the Properties
which Environmental Claims, singly or in the aggregate, if the
subject of any unfavorable decision, ruling or finding, would
result in a material adverse change in the condition (financial
or otherwise), business prospects, net worth or results of
operations of the Company and its subsidiaries, taken as a
whole.
(vii) Except as disclosed in the environmental
site assessments, the property condition reports or seismic risk
assessments performed on the Properties, the Company is not
aware of any environmental or engineering conditions at any of
the Properties that would, individually or in the aggregate,
result in a material adverse change in the condition (financial
or otherwise), or business prospects, net worth or results of
operations of the Company and its subsidiaries, taken as a
whole.
As used herein, "Environmental Claims" refers to any
complaint, summons, citation, notice, directive, order, claim,
litigation, investigation, judicial or administrative proceeding,
judgment, letter or other communication from any governmental agency,
department, bureau, office or other authority, or any third party
involving (i) violations of Environmental Laws at the Properties or (ii)
Releases of Hazardous Materials at, from, onto or under any of the
Properties; (iii) Releases of Hazardous Materials migrating from
adjoining properties or businesses onto or under the Properties; or (iv)
Releases of Hazardous Materials migrating from the Properties onto or
under adjoining properties or businesses "Environmental Laws" includes
the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"), 42 U.S.C. 9601 et seq., as amended; the Resource Conservation
and Recovery Act ("RCRA"), 42 U.S.C. 6901 et seq., as amended; the Clean
Air Act ("CAA"), 42 U.S.C. 7401 et seq., as amended; the Clean Water Act
("CWA"), 33 U.S.C. 1251 et seq., as amended; the Occupational Safety and
Health Act ("OSHA"), 29 U.S.C. 655 et seq., and any other federal, state,
local or municipal laws, statutes, regulations, rules or ordinances
imposing liability or establishing standards of conduct for protection of
the environment.
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As used herein, "Environmental Liabilities" means any
monetary obligations, losses, liabilities (including strict liability),
damages, punitive damages, consequential damages, treble damages, costs
and expenses (including all reasonable out-of-pocket fees, disbursements
and expenses of counsel, out-of-pocket expert and consulting fees and
out-of-pocket costs for environmental site assessments, remedial
investigation and feasibility studies), fines, penalties, sanctions and
interest incurred as a result of any Environmental Claim filed by any
Governmental Authority or any third party which relate to any violations
of Environmental Laws, Remedial Actions, Releases or threatened Releases
of Hazardous Materials from or onto (i) any property presently or
formerly owned by the Corporation or any of its Subsidiaries or a
predecessor in interest, or (ii) any facility which received Hazardous
Materials generated by the Corporation or any of its Subsidiaries or a
predecessor in interest.
As used herein, "Hazardous Materials" shall include (a)
any element, compound, or chemical that is defined, listed or otherwise
classified as a contaminants, pollutant, toxic pollutant, toxic or
hazardous substances, extremely hazardous substance or chemical,
hazardous waste, biohazardous or infectious waste, special waste, or
solid waste under Environmental Laws, (b) petroleum, petroleum-based or
petroleum-derived products, (c) polychlorinated biphenyls, (d) any
substance exhibiting a hazardous waste characteristic including but not
limited to corrosivity, ignitibility, toxicity or reactivity as well as
any radioactive or explosive materials, and (e) any asbestos-containing
materials.
As used herein, "Release" means any spilling, leaking,
pumping, emitting, emptying, discharging, injecting, escaping, leaching,
migrating, dumping, or disposing of Hazardous Materials (including the
abandonment or discarding of barrels, containers or other closed
receptacles containing Hazardous Materials) into the environment.
As used herein, "Remedial Action" means all actions
taken to (i) clean up, remove, remediate, contain, treat, monitor,
assess, evaluate or in any other way address Hazardous Materials in the
indoor or outdoor environment, (ii) prevent or minimize a Release or
threatened Release of Hazardous Materials so they do not migrate or
endanger or threaten to endanger public health or welfare or the indoor
or outdoor environment, (iii) perform pre-remedial studies and
investigations and post-remedial operation and maintenance activities, or
(iv) any other actions authorized by 42 U.S.C. 9601.
(ee) Each certificate signed by any officer of the
Company and delivered to the Representatives or counsel for the
Underwriters on the Firm Closing Date or on the Option Closing Date or
which otherwise states that it is being delivered in connection with the
Offering, shall be deemed to be a representation and warranty by the
Company to each Underwriter as to the matters covered thereby.
(ff) Except for the shares of capital stock of, or
partnership or membership interests in (as applicable), each of the
subsidiaries owned by the Company and such subsidiaries, neither the
Company nor any such subsidiary owns any shares of stock or any other
equity securities of any corporation or has any equity interest in any
firm, partnership, limited liability company,
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association or other entity, except as described in or contemplated by
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus).
(gg) The Company and each of its subsidiaries maintain
a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles and to maintain
asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(hh) No default exists, and no event has occurred
which, with notice or lapse of time or both, would constitute a default
in the due performance and observance of any term, covenant or condition
of any indenture, mortgage, deed of trust, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or any of their
respective properties is bound or may be affected in any material adverse
respect with regard to property, business or operations of the Company
and its subsidiaries, taken as a whole, except as described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus).
(ii) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
or as otherwise described in the supplemental letter provided to the
Commission, dated March 13, 1998, in connection with the filing of the
Registration Statement (the "Supplemental Letter"), since July 1, 1992 no
foreclosures have been instituted and none are currently threatened with
respect to any property or assets directly or indirectly owned (whether
now or in the past) by the Philips Group (as defined in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus)) or the Company or any of its subsidiaries. The Company has
concluded that the information regarding the bankruptcy and foreclosure
proceedings described in the Supplemental Letter is not material and is
properly excluded from the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus). The Company and its
subsidiaries do not own or operate any real property other than the real
properties comprising the Properties (as defined in the Registration
Statement and the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus)).
(jj) Except as otherwise described in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) or as otherwise described in the Supplemental Letter, (i) no
proceeding or filing of a petition seeking relief under Title 11 of the
United States Code or any other federal, state or foreign bankruptcy,
insolvency, liquidation or similar law has been commenced or instituted
(whether voluntary or involuntary) by or with respect to the Company, any
subsidiary of the Company or any member of the Philips Group, (ii)
neither the Company nor any subsidiary of the Company nor any member of
the Philips Group has applied for or consented to the appointment of a
receiver, trustee, custodian, sequestrator or similar official for any
such persons or for a substantial part of any such persons' property or
assets and (iii) none of the Company, any
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<PAGE>
subsidiary of the Company or any member of the Philips Group has made a
general assignment for the benefit of its creditors.
(kk) No relationship, direct or indirect, exists
between or among the Company or the Operating Partnership on the one
hand, and the directors, officers, shareholders (in the case of the
Company), limited partners (in the case of the Operating Partnership),
tenants, customers or suppliers of the Company or the Operating
Partnership on the other hand, which is required to be described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) which is not so described.
(ll) The transfer of interests or other assets pursuant
to the agreements and instruments related to the Formation Transactions
(as defined in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus)) (the "Transfer Documents") did
not violate the articles or certificate of incorporation, by-laws,
limited liability company operating agreement, declaration of trust,
certificate of limited partnership, partnership agreement or other
organizational documents, as the case may be, of any member of the
Philips Group. The Transfer Documents were sufficient to effect the
transfer to the Company or its subsidiaries of all direct or indirect
interests in the Properties and other assets specified therein upon
payment of the consideration therefor.
(mm) The Company has been organized in conformity with
the requirements for qualification as a real estate investment trust (a
"REIT") under the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder (the "Code"), commencing with its
taxable year ending December 31, 1997, and has and will have no earnings
and profits accumulated in a non-REIT year within the meaning of Section
857(a)(3)(B) of the Code, and the method of operation of the Company and
its subsidiaries enables the Company to meet the requirements for
taxation as a REIT under the Code commencing with its taxable year ending
December 31, 1997 and for its subsequent taxable years except as
described in the Prospectus (or, if the Prospectus is not in existence,
the most recent Preliminary Prospectus). All statements in the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) regarding the Company's qualification as a REIT are true,
complete and correct in all material respects.
(nn) (i) Each of the Properties complies with all
applicable codes, laws, ordinances and regulations (including, without
limitation, building and zoning codes and laws and regulations relating
to access to the Properties) and deed restrictions or other covenants,
except for such failures to comply that would not materially impair the
value of any of the Properties or would not result in a forfeiture or
reversion of title; (ii) neither the Company nor any of its subsidiaries
has knowledge of any pending or threatened litigation, moratorium,
condemnation proceedings, zoning change, or other similar proceeding or
action that could in any manner affect the size of, use of, improvements
on, construction on, access to or availability of utilities or other
necessary services to, the Properties, except such proceedings or actions
which are not reasonably expected to, singly or in the aggregate, result
in a material adverse change in the condition (financial or otherwise),
business prospects, net worth or results of operations of the Company and
its subsidiaries, taken as a whole; (iii) all liens, charges,
encumbrances, claims, or restrictions on or affecting the properties
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and assets (including the Properties) of the Company or any of its
subsidiaries that are required to be disclosed in the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) are disclosed therein; (iv) except as described in the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), neither the Company, any of its subsidiaries nor
any tenant of any portion of any of the Properties is in default under
any space lease (as lessor or lessee, as the case may be) or other
occupancy or license agreement relating to, or under any of the mortgages
or other security documents or other agreements encumbering or otherwise
recorded against, the Properties and there is no event which, but for the
passage of time or the giving of notice or both, would constitute a
default under any of such documents or agreements, except such defaults
that would not, singly or in the aggregate, result in a material adverse
change in the condition (financial or otherwise), business prospects, net
worth or results of operations of the Company and its subsidiaries, taken
as a whole; and (v) except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
or as specifically identified to the Underwriters, no tenant under any
lease pursuant to which the Company or any of its subsidiaries lease the
Properties has an option or right of first refusal to purchase the
premises leased thereunder or the building of which such premises are a
part.
(oo) Each of the Properties is in substantial
compliance with all presently applicable provisions of the Americans with
Disabilities Act and no failure of the Company or any of its subsidiaries
to comply with all presently applicable provisions of the Americans with
Disabilities Act would result in a material adverse change in the
condition (financial or otherwise), business prospects, net worth or
results of operations of the Company and its subsidiaries.
(pp) The Company or its subsidiaries have title
insurance on each of the Properties which constitute real property in an
amount at least equal to the fair market value of such Property and
without coinsurance provisions.
(qq) None of the environmental consultants which
prepared environmental and asbestos inspection reports with respect to
any of the Properties, the engineering consultants which prepared
engineering inspection reports with respect to any of the Properties or
real estate advisors which prepared regional economic overviews and
market analysis, were employed for such purpose on a contingent basis or
has any substantial interest in the Company or any of its subsidiaries
and none of them or any of their directors, officers or employees is
connected with the Company or any of its subsidiaries as a promoter,
selling agent, voting trustee, director, officer or employee.
(rr) The execution and delivery of the documents listed
in Sections 3 and 10 of the Exhibit Index to the Registration Statement
(the "Operative Agreements") which require execution and delivery by
their terms have been duly authorized by each of the parties thereto, and
the Operative Agreements have been duly executed and delivered by each of
the parties thereto, and are the valid and binding agreements of each of
the parties thereto, enforceable against each of the parties thereto in
accordance with their respective terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization
and similar laws relating to creditors' rights generally and to the
application of equitable principles in any proceeding, whether at law or
in equity.
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(ss) All of the representations and warranties of the
Company, the Operating Partnership, Philip Pilevsky, Sheila Levine, the
property partnerships and partners contained in the Contribution and
Exchange Agreement (as defined in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus)), as
extended by the Letter Agreement filed as Exhibit 10.18 to the
Registration Statement, are true and correct in all material respects as
of the date when made.
3. Purchase, Sale and Delivery of the Securities. (a)
On the basis of the representations, warranties, agreements and covenants
herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to each of the Underwriters,
and each of the Underwriters, severally and not jointly, agrees to
purchase from the Company, at a purchase price of (i) $___ per share, the
number of Reserved Shares (as defined herein) and (ii) $___ per share,
the number of Firm Securities (excluding the Reserved Shares) set forth
opposite the name of such Underwriter in Schedule 1 hereto. One or more
certificates in definitive form for the Firm Securities that the several
Underwriters have agreed to purchase hereunder, and in such denomination
or denominations and registered in such name or names as the
Representatives request upon notice to the Company at least 48 hours
prior to the Firm Closing Date, shall be delivered by or on behalf of the
Company to the Representatives for the respective accounts of the
Underwriters, against payment by or on behalf of the Underwriters of the
purchase price therefor by wire transfer in same-day funds (the "Wired
Funds") to the account of the Company. Such delivery of and payment for
the Firm Securities shall be made at the offices of Pryor Cashman Sherman
& Flynn LLP, 410 Park Avenue, New York, New York 10022 at 9:30 A.M., New
York time, on ____________, 1998, or at such other place, time or date as
the Representatives and the Company may agree upon or as the
Representatives may determine pursuant to Section 9 hereof, such time and
date of delivery against payment being herein referred to as the "Firm
Closing Date." The Company will make such certificate or certificates for
the Firm Securities available for checking and packaging by the
Representatives at the offices in New York, New York of the Company's
transfer agent or registrar or of Prudential Securities Incorporated at
least 24 hours prior to the Firm Closing Date.
(b) For the purpose of covering any over-allotments in
connection with the distribution and sale of the Firm Securities as
contemplated by the Prospectus, the Company hereby grants to the several
Underwriters an option to purchase, severally and not jointly, the Option
Securities. The purchase price to be paid for any Option Securities shall
be $___ per share (the same price per share as the price per share for
the Firm Securities (excluding the Reserved Shares) set forth above in
paragraph (a)(ii) of this Section 3), plus, if the purchase and sale of
any Option Securities takes place after the Firm Closing Date and after
the Firm Securities are trading "ex-dividend," an amount equal to the
dividends payable on such Option Securities. The option granted hereby
may be exercised as to all or any part of the Option Securities from time
to time within thirty days after the date of the Prospectus (or, if such
30th day shall be a Saturday or Sunday or a holiday, on the next business
day thereafter when the New York Stock Exchange is open for trading). The
Underwriters shall not be under any obligation to purchase any of the
Option Securities prior to the exercise of such option. The
Representatives may from time to time exercise the option granted hereby
by giving notice in writing or by telephone (confirmed in writing) to the
Company
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<PAGE>
setting forth the aggregate number of Option Securities as to which the
several Underwriters are then exercising the option and the date and time
for delivery of and payment for such Option Securities. Any such date of
delivery shall be determined by the Representatives but shall not be
earlier than two business days or later than five business days after
such exercise of the option and, in any event, shall not be earlier than
the Firm Closing Date. The time and date set forth in such notice, or
such other time on such other date as the Representatives and Company may
agree upon or as the Representatives may determine pursuant to Section 9
hereof, is herein called the "Option Closing Date" with respect to such
Option Securities. Upon exercise of the option as provided herein, the
Company shall become obligated to sell to each of the several
Underwriters, and, subject to the terms and conditions herein set forth,
each of the Underwriters (severally and not jointly) shall become
obligated to purchase from the Company, the same percentage of the total
number of the Option Securities as to which the several Underwriters are
then exercising the option as such Underwriter is obligated to purchase
of the aggregate number of Firm Securities, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares. If the option is exercised as to all or any portion of the Option
Securities, one or more certificates in definitive form for such Option
Securities, and payment therefor, shall be delivered on the related
Option Closing Date in the manner, and upon the terms and conditions, set
forth in paragraph (a) of this Section 3, except that reference therein
to the Firm Securities and the Firm Closing Date shall be deemed, for
purposes of this paragraph (b), to refer to such Option Securities and
Option Closing Date, respectively.
(c) The Company hereby acknowledges that the wire
transfer by or on behalf of the Underwriters of the purchase price for
any Securities does not constitute closing of a purchase and sale of the
Securities. Only execution and delivery of a receipt for Securities by
the Underwriters indicates completion of the closing of a purchase of the
Securities from the Company. Furthermore, in the event that the
Underwriters wire funds to the Company prior to the completion of the
closing of a purchase of Securities, the Company hereby acknowledges that
until the Underwriters execute and deliver a receipt for the Securities,
by facsimile or otherwise, the Company will not be entitled to the Wired
Funds and shall return the Wired Funds to the Underwriters as soon as
practicable (by wire transfer of same-day funds) upon demand. In the
event that the closing of a purchase of Securities is not completed and
the Wired Funds are not returned by the Company to the Underwriters on
the same day the Wired Funds were received by the Company, the Company
agrees to pay to the Underwriters in respect of each day the Wired Funds
are not returned by it, in same-day funds, interest on the amount of such
Wired Funds in an amount representing the Underwriters' cost of financing
as reasonably determined by Prudential Securities Incorporated.
(d) It is understood that any of you, individually and
not as one of the Representatives, may (but shall not be obligated to)
make payment on behalf of any Underwriter or Underwriters for any of the
Securities to be purchased by such Underwriter or Underwriters. No such
payment shall relieve such Underwriter or Underwriters from any of its or
their obligations hereunder.
(e) The Underwriters acknowledge and agree that they
have reserved up to [720,000] shares of Common Stock of the Company
constituting the Firm Securities (collectively,
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<PAGE>
the "Reserved Shares") for sale at the public offering price to Philip
Pilevsky and certain other directors, officers and employees of the
Company and their business affiliates and related parties who have
expressed an interest in purchasing such shares. Concurrently with the
execution of this Agreement, the Company has advised the Underwriters in
writing that all of the Reserved Shares have been sold to such persons.
The Company covenants and agrees with each of the Underwriters that all
sales of Reserved Shares shall be made in compliance with the National
Association of Securities Dealers, Inc.'s policies on free-riding and
withholding and any applicable laws or regulations in each jurisdiction
of any sale and the Company shall provide the Underwriters with evidence
of such compliance as the Underwriters shall reasonably request together
with a representation of each purchaser that he or she is acquiring such
Reserved Shares for investment purposes only and with no present
intention to resell such shares.
4. Offering by the Underwriters. Upon your
authorization of the release of the Firm Securities, the several
Underwriters propose to offer the Firm Securities for sale to the public
upon the terms set forth in the Prospectus.
5. Covenants of the Company and the Operating
Partnership. Each of the Company and the Operating Partnership covenants
and agrees with each of the Underwriters that:
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of this
Agreement, and any amendments thereto to become effective as promptly as
possible. If required, the Company will file the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or supplement
thereto with the Commission in the manner and within the time period
required by Rules 434 and 424(b) under the Act. During any time when a
prospectus relating to the Securities is required to be delivered under
the Act, the Company (i) will comply with all requirements imposed upon
it by the Act and the rules and regulations of the Commission thereunder
to the extent necessary to permit the continuance of sales of or dealings
in the Securities in accordance with the provisions hereof and of the
Prospectus, as then amended or supplemented, and (ii) will not file with
the Commission the Prospectus, Term Sheet or the amendment referred to in
the second sentence of Section 2(a) hereof, any amendment or supplement
to such Prospectus, Term Sheet or any amendment to the Registration
Statement or any Rule 462(b) Registration Statement of which the
Representatives previously have been advised and furnished with a copy
for a reasonable period of time prior to the proposed filing and as to
which filing the Representatives shall not have given their consent. The
Company will prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, promptly upon request by the
Representatives or counsel for the Underwriters, any amendments to the
Registration Statement or amendments or supplements to the Prospectus
that may be necessary or advisable in connection with the distribution of
the Securities by the several Underwriters, and will use its best efforts
to cause any such amendment to the Registration Statement to be declared
effective by the Commission as promptly as possible. The Company will
advise the Representatives, promptly after receiving notice thereof, of
the time when the Registration Statement or any amendment thereto has
been filed or declared effective or the Prospectus or any amendment or
supplement thereto has been filed and will provide evidence satisfactory
to the Representatives of each such filing or effectiveness.
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<PAGE>
(b) The Company will advise the Representatives,
promptly after receiving notice or obtaining knowledge thereof, of (i)
the issuance by the Commission of any stop order suspending the
effectiveness of the Original Registration Statement or any Rule 462(b)
Registration Statement or any amendment thereto or any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto, (ii) the suspension of the
qualification of the Securities for offering or sale in any jurisdiction,
(iii) the institution, threatening or contemplation of any proceeding for
any such purpose, or (iv) any request made by the Commission for amending
the Original Registration Statement or any Rule 462(b) Registration
Statement, for amending or supplementing the Prospectus or for additional
information. The Company will use its best efforts to prevent the
issuance of any such stop order and, if any such stop order is issued, to
obtain the withdrawal thereof as promptly as possible.
(c) The Company will arrange for the qualification of
the Securities for offering and sale under the securities or blue sky
laws of such jurisdictions as the Representatives may designate and will
continue such qualifications in effect for as long as may be necessary to
complete the distribution of the Securities, provided, however, that in
connection therewith the Company shall not be required to qualify as a
foreign corporation or to execute a general consent to service of process
in any jurisdiction.
(d) If, at any time prior to the later of (i) the final
date when a prospectus relating to the Securities is required to be
delivered under the Act or (ii) the Option Closing Date, any event occurs
as a result of which the Prospectus, as then amended or supplemented,
would include any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, or
if for any other reason it is necessary at any time to amend or
supplement the Prospectus to comply with the Act or the rules or
regulations of the Commission thereunder, the Company will promptly
notify the Representatives thereof and, subject to Section 5(a) hereof,
will prepare and file with the Commission, at the Company's expense, an
amendment to the Registration Statement or an amendment or supplement to
the Prospectus that corrects such statement or omission or effects such
compliance.
(e) The Company will, without charge, provide (i) to
the Representatives and to counsel for the Underwriters a conformed copy
of the registration statement originally filed with respect to the
Securities and each amendment thereto (in each case including exhibits
thereto) or any Rule 462(b) Registration Statement, certified by the
Secretary or an Assistant Secretary of the Company to be true and
complete copies thereof as filed with the Commission by electronic
transmission, (ii) to each other Underwriter, a conformed copy of such
registration statement or any Rule 462(b) Registration Statement and each
amendment thereto (in each case without exhibits thereto) and (iii) so
long as a prospectus relating to the Securities is required to be
delivered under the Act, as many copies of each Preliminary Prospectus or
the Prospectus or any amendment or supplement thereto as the
Representatives may reasonably request; without limiting the application
of clause (iii) of this sentence, the Company, not later than (A) 6:00
P.M., New York City time, on the date of determination of the public
offering price, if such determination occurred at or prior to 10:00 A.M.,
New York City time, on such date or (B) 2:00 P.M., New York City time, on
the
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business day following the date of determination of the public offering
price, if such determination occurred after 10:00 A.M., New York City
time, on such date, will deliver to the Underwriters, without charge, as
many copies of the Prospectus and any amendment or supplement thereto as
the Representatives may reasonably request for purposes of confirming
orders that are expected to settle on the Firm Closing Date.
(f) The Company, as soon as practicable, will make
generally available to its securityholders and to the Representatives a
consolidated earnings statement of the Company and its subsidiaries that
satisfies the provisions of Section 11(a) of the Act and Rule 158
thereunder.
(g) The Company will apply the net proceeds from the
sale of the Securities as set forth under "Use of Proceeds" in the
Prospectus.
(h) The Company and the Operating Partnership will not,
directly or indirectly, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, offer, sell,
offer to sell, contract to sell, pledge, grant any option to purchase or
otherwise sell or dispose (or announce any offer, sale, offer of sale,
contract of sale, pledge, grant of any option to purchase or other sale
or disposition) of any shares of Common Stock or other capital stock of
the Company or Units or other partnership interests of the Operating
Partnership, or any securities convertible into, or exchangeable or
exercisable for, shares of Common Stock or other capital stock of the
Company or Units or other partnership interests of the Operating
Partnership, for a period of 180 days after the date hereof, except (i)
pursuant to this Agreement, (ii) pursuant to a dividend reinvestment plan
of the Company, (iii) pursuant to the Company's 1997 Stock Option and
Long-Term Incentive Plan, and (iv) in connection with the acquisition by
the Company or the Operating Partnership of real property or interests in
entities holding real property, provided that the recipient or transferee
of such securities or interests agrees in writing to be subject to the
lock-up contained in this Section 5(h) (without giving effect to clauses
(i), (ii), (iii) and (iv)) for a period ending on the date that is 180
days after the date hereof.
(i) The Company will not, directly or indirectly, (i)
take any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Securities or (ii) (A) sell, bid
for, purchase, or pay anyone any compensation for soliciting purchases
of, the Securities or (B) pay or agree to pay to any person any
compensation for soliciting another to purchase any other securities of
the Company.
(j) The Company will obtain the agreements described in
Section 7(f) hereof prior to the Firm Closing Date.
(k) If at any time during the 25-day period after the
Registration Statement becomes effective or the period prior to the
Option Closing Date, any rumor, publication or event relating to or
affecting the Company shall occur as a result of which in your opinion
the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or
event necessitates a supplement to or amendment of the Prospectus), the
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Company will, after notice from you advising the Company to the effect
set forth above, forthwith prepare, consult with you concerning the
substance of, and disseminate a press release or other public statement,
reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(l) If the Company elects to rely on Rule 462(b), the
Company shall both file a Rule 462(b) Registration Statement with the
Commission in compliance with Rule 462(b) and pay the applicable fees in
accordance with Rule 111 promulgated under the Act by the earlier of (i)
10:00 P.M. Eastern time on the date of this Agreement and (ii) the time
confirmations are sent or given, as specified by Rule 462(b)(2).
(m) The Company will cause the Securities to be duly
authorized for listing by the New York Stock Exchange prior to the Firm
Closing Date, subject to official notice of issuance.
(n) The Company will use its best efforts to meet the
requirements to qualify, commencing with the taxable year ending December
31, 1997, as a REIT under the Code and will file with its United States
federal income tax return for each taxable year commencing with the
taxable year ending December 31, 1997, the election to be a REIT as
described in Section 856(c)(1) of the Code.
(o) The Company will cause the Operating Partnership to
operate as a limited partnership in accordance with the requirements of
Delaware law.
6. Expenses. The Company will pay all costs and
expenses incident to the performance of its and the Operating
Partnership's obligations under this Agreement, whether or not the
transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and
expenses incident to (i) the printing or other production of documents
with respect to the transactions, including any costs of printing the
registration statement originally filed with respect to the Securities
and any amendment thereto, any Rule 462(b) Registration Statement, any
Preliminary Prospectus and the Prospectus and any amendment or supplement
thereto, this Agreement and any blue sky memoranda, (ii) all arrangements
relating to the delivery to the Underwriters of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the
accountants and any other experts or advisors retained by the Company,
(iv) preparation, issuance and delivery to the Underwriters of any
certificates evidencing the Securities, including transfer agent's and
registrar's fees, (v) the qualification of the Securities under state
securities and blue sky laws, including filing fees and fees and
disbursements of counsel for the Underwriters relating thereto, (vi) the
filing fees of the Commission and the National Association of Securities
Dealers, Inc. relating to the Securities and the reasonable fees,
disbursements and expenses of counsel for the Underwriters in connection
with securing of any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Securities,
(vii) any listing of the Securities on the New York Stock Exchange,
(viii) any meetings with prospective investors in the Securities (other
than as shall have been specifically approved by the Representatives to
be paid for by the Underwriters); and (ix) advertising relating to the
offering of the Securities (other than as shall have been specifically
approved by the Representatives to be
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<PAGE>
paid for by the Underwriters). If the sale of the Securities provided for
herein is not consummated because any condition to the obligations of the
Underwriters set forth in Section 7 hereof is not satisfied, because this
Agreement is terminated pursuant to Section 11 hereof or because of any
failure, refusal or inability on the part of the Company or the Operating
Partnership to perform all obligations and satisfy all conditions on its
part to be performed or satisfied hereunder other than by reason of a
default by any of the Underwriters, the Company will reimburse the
Underwriters severally upon demand for all out-of-pocket expenses
(including counsel fees and disbursements) that shall have been incurred
by them in connection with the proposed purchase and sale of the
Securities. The Company shall not in any event be liable to any of the
Underwriters for the loss of anticipated profits from the transactions
covered by this Agreement.
7. Conditions of the Underwriters' Obligations. The
obligations of the several Underwriters to purchase and pay for the Firm
Securities shall be subject, in the Representatives' sole discretion, to
the accuracy of the representations and warranties of the Company and the
Operating Partnership contained herein as of the date hereof and as of
the Firm Closing Date, as if made on and as of the Firm Closing Date, to
the accuracy of the statements of the Company's officers made pursuant to
the provisions hereof, to the performance by the Company and the
Operating Partnership of their respective covenants and agreements
hereunder and to the following additional conditions:
(a) If the Original Registration Statement or any
amendment thereto filed prior to the Firm Closing Date has not been
declared effective as of the time of execution hereof, the Original
Registration Statement or such amendment and, if the Company has elected
to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall
have been declared effective not later than the earlier of (i) 11:00
A.M., New York time, on the date on which the amendment to the
registration statement originally filed with respect to the Securities or
to the Registration Statement, as the case may be, containing information
regarding the initial public offering price of the Securities has been
filed with the Commission and (ii) the time confirmations are sent or
given as specified by Rule 462(b)(2), or with respect to the Original
Registration Statement, or such later time and date as shall have been
consented to by the Representatives; if required, the Prospectus or any
Term Sheet that constitutes a part thereof and any amendment or
supplement thereto shall have been filed with the Commission in the
manner and within the time period required by Rules 434 and 424(b) under
the Act; no stop order suspending the effectiveness of the Registration
Statement or any amendment thereto shall have been issued, and no
proceedings for that purpose shall have been instituted or threatened or,
to the knowledge of the Company or the Representatives, shall be
contemplated by the Commission; and the Company shall have complied with
any request of the Commission for additional information (to be included
in the Registration Statement or the Prospectus or otherwise).
(b) The Representatives shall have received an opinion,
dated the Firm Closing Date, of Pryor Cashman Sherman & Flynn LLP,
counsel for the Company and its subsidiaries, to the effect that:
(i) the Company and each of its subsidiaries listed in
Exhibit 21.1 to the Registration Statement (the "Subsidiaries")
(which are corporations) have been duly
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organized and are validly existing as corporations in good
standing under the laws of their respective jurisdictions of
incorporation and are duly qualified to transact business as
foreign corporations and, based solely on certificates from
public officials, are in good standing under the laws of all
other jurisdictions where the ownership or leasing of their
respective properties or the conduct of their respective
businesses requires such qualification, except where the failure
to be so qualified does not amount to a material liability or
disability to the Company and the Subsidiaries, taken as a
whole. Each of the Subsidiaries (which are partnerships or
limited liability companies) have been duly organized and are
validly existing as partnerships or limited liability companies,
as the case may be, in good standing under the laws of their
respective jurisdictions of organization and, as applicable, are
duly qualified to transact business as foreign partnerships and,
based solely on certificates from public officials, are in good
standing under the laws of all other jurisdictions where the
ownership or leasing of their respective properties or the
conduct of their respective businesses requires such
qualification, except where the failure to be so qualified does
not amount to a material liability or disability to the Company
and the Subsidiaries, taken as a whole;
(ii) the Operating Partnership has been duly organized
and is validly existing as a limited partnership in good
standing under the laws of the State of Delaware and is duly
qualified to transact business as a foreign limited partnership
and, based solely on certificates from public officials, is in
good standing under the laws of all other jurisdictions where
the ownership or leasing of its properties or the conduct of its
businesses requires such qualification, except where the failure
to be so qualified does not amount to a material liability or
disability to the Operating Partnership, the Company and the
Subsidiaries, taken as a whole;
(iii) the Company and each of the Subsidiaries have
corporate power or partnership or limited liability company
power (as the case may be) to own or lease their respective
properties and conduct their respective businesses as described
in the Registration Statement and the Prospectus, and each of
the Company and the Operating Partnership has the corporate
power or partnership power (as the case may be) to enter into
this Agreement and to carry out all the terms and provisions
hereof to be carried out by it;
(iv) the issued shares of capital stock of each of the
corporate Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and, except as
otherwise set forth in the Prospectus, are owned of record and,
to the knowledge of such counsel after due inquiry, beneficially
by the Company free and clear of any perfected security
interests or, to the knowledge of such counsel, any other
security interests, liens, encumbrances, equities or claims. The
partnership agreement of the Operating Partnership has been duly
authorized, executed and delivered by the Company, as its
general partner, and constitutes the valid and binding
obligation of the Company, as its general partner. As to each
Property Partnership, the general partnership, limited
partnership and membership interests have been issued in
accordance with the partnership agreement or limited liability
company operating agreement (as applicable);
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(v) the Company has an authorized, issued and
outstanding capitalization as set forth in the Prospectus; all
of the issued shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and
nonassessable, have been issued in compliance with the
registration requirements of federal securities laws (or
pursuant to an exemption therefrom) and were not issued in
violation of or subject to, under the Company's charter or
Maryland law or any agreement to which the Company is a party
and which is known to such counsel based on a certificate of the
Company's Chief Executive Officer and its President, any
preemptive rights or other rights to subscribe for or purchase
securities; the Firm Securities have been duly authorized by all
necessary corporate action of the Company and, when issued and
delivered to and paid for by the Underwriters pursuant to this
Agreement, will be validly issued, fully paid and nonassessable;
the Securities have been duly authorized for listing, subject to
official notice of issuance, on the New York Stock Exchange; to
the knowledge of such counsel after due inquiry, no holders of
outstanding shares of capital stock of the Company are entitled
under the Company's charter or Maryland law or any agreement to
which the Company is a party and which is known to such counsel
based on a certificate of the Company's Chief Executive Officer
and its President, as such, to any preemptive or other rights to
subscribe for any of the Securities; and no holders of
securities of the Company are entitled to have such securities
registered under the Registration Statement;
(vi) the Units and general partnership interests issued
in connection with the Formation Transactions, including,
without limitation, the general partnership interests issued to
the Company, were duly authorized for issuance by the Operating
Partnership to the holders thereof and were validly issued. The
terms of the Units conform in all material respects to the
description thereof and all statements related thereto contained
in the Prospectus. The issuances of securities described in
Items 32 and 33 of the Registration Statement were not at the
time of issue, and are not as of the Firm Closing Date, required
to be registered under the Act;
(vii) the Formation Transactions constituted a
transaction in which the securities issued or exchanged were not
required to be and were not registered under the Securities Act
and, therefore, pursuant to the exception provided by Item
901(c)(2)(ii) of Regulation S-K under the Securities Act
("Regulation S-K"), did not constitute a "roll-up transaction"
within the meaning of Item 901(c)(1) of Regulation S-K. For
purposes of this paragraph, "Formation Transactions" shall (a)
be limited to (1) the formation of the Company and, except as
set forth in clause (b), the issuance of shares of the Company's
Common Stock, (2) the formation of the Operating Partnership,
(3) the formation of the Property Partnerships, and (4) the
contribution of the Properties to the Operating Partnership in
exchange for the Units representing limited partnership
interests therein pursuant to the terms and conditions as set
forth in the Contribution and Exchange Agreement, as amended,
and (b) exclude the acquisition of the National Property and
issuance of Common Stock therefor;
(viii) except as disclosed in the Registration
Statement and the Prospectus, to the knowledge of such counsel
after due inquiry, there are no outstanding (A) securities,
equity
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interests or obligations of the Company or any of the
Subsidiaries convertible into or exchangeable for any capital
stock or equity interests (as the case may be) of the Company or
any such Subsidiary, (B) warrants, rights or options to
subscribe for or purchase from the Company to any such
Subsidiary any such capital stock or equity interests or any
such convertible or exchangeable securities, equity interests or
obligations, or (C) obligations of the Company or any such
Subsidiary to issue any shares of capital stock, equity
interests, any such convertible or exchangeable securities,
equity interests or obligations, or any such warrants, rights or
options;
(ix) the statements set forth under the heading
"Description of Capital Stock" in the Prospectus, insofar as
such statements purport to summarize certain provisions of the
capital stock of the Company, provide a fair summary of such
provisions; and the statements set forth under the headings
"Formation Transactions and Structure of the Company",
"Partnership Agreement of Operating Partnership", "Certain
Relationships and Related Transactions", "Certain Provisions of
Maryland Law and of the Company's Charter and ByLaws", "Shares
Eligible for Future Sale", "Federal Income Tax Considerations",
"ERISA Considerations" and "Legal Matters" in the Prospectus,
insofar as such statements constitute a summary of the legal
matters, documents or proceedings referred to therein, provide a
fair summary of such legal matters, documents and proceedings;
(x) the execution and delivery of this Agreement has
been duly authorized by all necessary corporate or partnership
action (as the case may be) of the Company and the Operating
Partnership, and this Agreement has been duly executed and
delivered by the Company and the Operating Partnership, and is
the valid and binding agreement of the Company and the Operating
Partnership, enforceable against the Company and the Operating
Partnership in accordance with its terms, subject to the effect
of bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization and similar laws relating to creditors' rights
generally, to the application of equitable principles in any
proceeding, whether at law or in equity, as limited by the
unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of or
contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy and
to the extent that enforceability of such provisions may be
limited due to the existence of an untrue statement of a
material fact in the Prospectus or the Registration Statement or
omission to state a material fact therein necessary to make the
statements in the Prospectus or the Registration Statement,
respectively, not misleading, it being understood that such
counsel need express no view with respect thereto other than as
set forth in the paragraph immediately following clause (xviii)
below;
(xi) the execution and delivery of the Operative
Agreements have been duly authorized by all necessary corporate
or partnership action (as the case may be) of the parties
thereto, and the Operative Agreements have been duly executed
and delivered by the parties thereto, and are the valid and
binding agreements of the parties thereto, enforceable against
the parties thereto in accordance with their respective terms,
subject to the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance, reorganization and similar laws
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relating to creditors' rights generally and to the application of
equitable principles in any proceeding, whether at law or in equity;
(xii) to the knowledge of such counsel based on the
representations of the Company contained herein, review of the
letters of attorneys delivered to the Company's auditors with
respect to the existence of contingent liabilities of the
Company and a certificate of the Chief Executive Officer or
President and the principal financial officer or accounting
officer of the Company, (A) no legal or governmental proceedings
are pending to which the Company or any of the Subsidiaries is a
party or to which the property of the Company or any of the
Subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not described
therein, and no such proceedings have been threatened against
the Company or any of the Subsidiaries or with respect to any of
their respective properties and (B) no contract or other
document is required to be described in the Registration
Statement or the Prospectus or to be filed as an exhibit to the
Registration Statement that is not described therein or filed as
required;
(xiii) the issuance, offering and sale of the
Securities to the Underwriters by the Company pursuant to this
Agreement, the compliance by the Company and the Operating
Partnership with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do
not (A) require the consent, approval, authorization,
registration or qualification of or with any federal, New York
or Maryland governmental authority, except such as have been
obtained under the Act and such as may be required under state
securities or blue sky laws, or (B) conflict with or result in a
breach or violation of any of the terms and provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, lease or other agreement or instrument to which the
Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries or any of their respective
properties are bound identified by the Chief Executive Officer
or President and the principal financial officer or accounting
officer of the Company as material to the Company or any of the
Subsidiaries or filed as an Exhibit to the Registration
Statement, or the charter documents or by-laws or certificate of
limited partnership or partnership agreement or certificate of
formation or limited liability company operating agreement (as
the case may be) of the Company or any of the Subsidiaries, or
any provision of any New York or Maryland statute, rule or
regulation (other than federal or state securities laws, which
are addressed elsewhere herein) or court order specifically
directed to the Company and identified by the Chief Executive
Officer and President and the principal financial officer or
accounting officer of the Company as material to the Company or
any of the Subsidiaries or otherwise known to such counsel;
(xiv) the Company is not, and after giving effect to
the transactions contemplated by this Agreement will not be,
subject to registration as an investment company under the
Investment Company Act of 1940, as amended;
(xv) the Registration Statement is effective under the
Act; any required filing of the Prospectus, or any Term Sheet
that constitutes a part thereof, pursuant to Rules 424(b)
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and 434 has been made in the manner and within the time period
required by Rules 424(b) and 434; and based upon such counsel's
due inquiry made to the office of the Secretary of the
Commission, no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued,
and no proceedings for that purpose have been instituted or
threatened or, to the knowledge of such counsel, are
contemplated by the Commission;
(xvi) the Registration Statement originally filed with
respect to the Securities and each amendment thereto, any Rule
462(b) Registration Statement and the Prospectus (in each case,
other than the financial statements, schedules and other
financial and statistical data contained therein, as to which
such counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the Act
and the rules and regulations of the Commission thereunder;
(xvii) if the Company elects to rely on Rule 434, the
Prospectus is not "materially different," as such term is used
in Rule 434, from the prospectus included in the Registration
Statement at the time of its effectiveness or an effective
post-effective amendment thereto (including such information
that is permitted to be omitted pursuant to Rule 430A); and
(xviii) the Company has been organized in conformity
with the requirements for qualification as a real estate
investment trust under the Code and the method of operation of
the Company and its subsidiaries as described in the
Registration Statement will enable the Company to meet the
requirements for taxation as a real estate investment trust
under the Code commencing with its taxable year ended December
31, 1997. Such opinion may be based on the method of operation
of the Company as described in the Registration Statement, the
Prospectus and a certificate of an authorized officer of the
Company.
Such counsel shall also state that they have
participated in conferences with officers and other representatives of
the Company, representatives of the independent public accountants for
the Company, and representatives of the Underwriters, at which the
contents of the Registration Statement and the Prospectus and related
matters were discussed and, although such counsel is not passing upon,
and does not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and
the Prospectus and has not made any independent check or verification
thereof, during the course of such participation (relying as to
materiality to a large extent upon the statements of officers and other
representatives of the Company) no facts came to the attention of such
counsel that caused such counsel to believe that the Registration
Statement, as of its effective date, contained any untrue statement of a
material fact or omitted to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or
that the Prospectus, as of its date or the date of such opinion, included
or includes any untrue statement of a material fact or omitted or omits
to state a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; it being understood that such counsel need express no
belief with respect to the financial statements, schedules and other
financial and statistical data included in the Registration Statement or
Prospectus.
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In rendering any such opinion, such counsel may rely,
as to matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and public officials
and, as to matters involving the application of the laws of any
jurisdiction other than the State of New York, the Delaware General
Corporation Law and the Delaware Revised Limited Partnership Act or the
United States, to the extent satisfactory in form and scope to counsel
for the Underwriters, upon the opinion of Ballard Spahr Andrews &
Ingersoll. The foregoing opinion shall also state that the Underwriters
are justified in relying upon such opinion of Ballard Spahr Andrews &
Ingersoll as to matters involving the application of the laws of
Maryland, and copies of such opinion shall be delivered to the
Representatives and counsel for the Underwriters.
References to the Registration Statement and the
Prospectus in this paragraph (b) shall include any amendment or
supplement thereto at the date of such opinion.
(c) The Representatives shall have received an opinion,
dated the Firm Closing Date, of Kaye, Scholer, Fierman, Hays & Handler,
LLP, counsel for the Underwriters, with respect to the issuance and sale
of the Firm Securities, the Registration Statement and the Prospectus,
and such other related matters as the Representatives may reasonably
require, and the Company shall have furnished to such counsel such
documents as they may reasonably request for the purpose of enabling them
to pass upon such matters.
In rendering such opinion, such counsel may rely as to
all matters of Maryland law upon the opinion of Ballard Spahr Andrews &
Ingersoll referred to in paragraph (b) above.
(d) The Representatives shall have received from Ernst
& Young LLP a letter or letters dated, respectively, the date hereof and
the Firm Closing Date, in form and substance satisfactory to the
Representatives, to the effect that:
(i) they are independent accountants with respect to
the Company and its subsidiaries, the Operating Partnership, the
Property Partnerships, The Philips Company and the Merrick
Commons and Mill Basin Plaza Properties within the meaning of
the Act and the applicable rules and regulations thereunder;
(ii) in their opinion, the audited financial statements
and schedules and pro forma condensed financial statements
examined by them and included in the Registration Statement and
the Prospectus comply in form in all material respects with the
applicable accounting requirements of the Act and the related
published rules and regulations;
(iii) on the basis of a reading of the latest available
interim unaudited financial statements, if any, of the Company,
the Operating Partnership and the Property Partnerships,
carrying out certain specified procedures (which do not
constitute an examination made in accordance with generally
accepted auditing standards) that would not necessarily reveal
matters of significance with respect to the comments set forth
in this paragraph (iii), a reading of the minute books of the
shareholders, the board of directors and any committees thereof
of the Company, or the record of any actions by the partners or
members, as the case
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may be, of the Operating Partnership and the Property
Partnerships and inquiries of certain officials of the Company,
the Operating Partnership and the Property Partnerships who have
responsibility for financial and accounting matters, nothing
came to their attention that caused them to believe that:
(A) at a specific date (not more than five
business days prior to the date of such letter), there were any
increases in debt or accumulated deficit of the Company, the
Operating Partnership or the Property Partnerships or any
decreases in total assets or shareholders' or owners' equity (as
applicable) of the Company, the Operating Partnership or the
Property Partnerships, in each case as compared with amounts
shown in the December 31, 1997 balance sheet included in the
Registration Statement and the Prospectus, or for the period
from January 1, 1998 to May __, 1998, there were any decreases,
as compared with the corresponding period of the previous year,
in combined total revenues of the Properties, or in rental
revenue, income before extraordinary items, net income, net
income per share of Common Stock, total assets, or shareholders'
or owners' equity (as applicable) of the Company, the Operating
Partnership or the Property Partnerships, except in all
instances for changes, increases or decreases which the
Registration Statement and the Prospectus disclose have occurred
or may occur; and
(B) at a specific date (not more than five
business days prior to the date of such letter), with respect to
the Company, the Operating Partnership and the Property
Partnerships, there were any increases in borrowings as compared
with amounts shown in the December 31, 1997 balance sheet
included in the Registration Statement and the Prospectus,
except in all instances for changes or increases which the
Registration Statement and the Prospectus disclose have occurred
or may occur.
(iv) they have carried out certain specified
procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information identified by the
Representatives that are derived from the general accounting
records of the Company and its subsidiaries and are included in
the Registration Statement and the Prospectus and have compared
such amounts, percentages and financial information with such
records of the Company and its subsidiaries and with information
derived from such records and have found them to be in
agreement, excluding any questions of legal interpretation; and
(v) on the basis of a reading of the unaudited pro
forma condensed financial statements included in the
Registration Statement and the Prospectus, carrying out certain
specified procedures that would not necessarily reveal matters
of significance with respect to the comments set forth in this
paragraph (v), inquiries of certain officials of the Company and
its subsidiaries who have responsibility for financial and
accounting matters and proving the arithmetic accuracy of the
application of the pro forma adjustments to the historical
amounts in the unaudited pro forma condensed financial
statements, nothing came to their attention that caused them to
believe that the unaudited pro forma condensed financial
statements do not comply in form in all material respects with
the applicable accounting
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requirements of Rule 11-02 of Regulation S-X or that the pro
forma adjustments have not been properly applied to the
historical amounts in the compilation of such statements.
In the event that the letters referred to above set
forth any such changes, decreases or increases, it shall be a further
condition to the obligations of the Underwriters that (A) such letters
shall be accompanied by a written explanation of the Company as to the
significance thereof, unless the Representatives deem such explanation
unnecessary, and (B) such changes, decreases or increases do not, in the
sole judgment of the Representatives, make it impractical or inadvisable
to proceed with the purchase and delivery of the Securities as
contemplated by the Registration Statement, as amended as of the date
hereof.
References to the Registration Statement and the
Prospectus in this paragraph (d) with respect to either letter referred
to above shall include any amendment or supplement thereto at the date of
such letter.
(e) The Representatives shall have received a
certificate, dated the Firm Closing Date, of the Chief Executive Officer
or President and the principal financial or accounting officer of the
Company to the effect that:
(i) the representations and warranties of the Company and the
Operating Partnership in this Agreement are true and correct as if
made on and as of the Firm Closing Date; the Registration Statement,
as amended as of the Firm Closing Date, does not include any untrue
statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented as of the Firm Closing
Date, does not include any untrue statement of a material fact
or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading; and each of the Company
and the Operating Partnership has performed all covenants and
agreements and satisfied all conditions on its part to be
performed or satisfied at or prior to the Firm Closing Date;
(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued,
and no proceedings for that purpose have been instituted or threatened
or, to the best of the Company's or the Operating Partnership's
knowledge, are contemplated by the Commission; and
(iii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, neither the
Company nor any of its subsidiaries has sustained any material loss or
interference with their respective businesses or properties from
fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any labor dispute or any legal
or governmental proceeding, and there has not been any material
adverse change, or any development involving a prospective
material adverse change, in the condition (financial or
otherwise), management, business prospects, net worth or results
of operations of the Company or any of its subsidiaries, taken
as a whole, except
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in each case as described in or contemplated by the Registration
Statement and the Prospectus (exclusive of any amendment or
supplement thereto).
(f) The Representatives shall have received from Philip
Pilevsky and the other executive officers and directors of the Company
agreements to the effect that such person will not, directly or
indirectly, without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell
or dispose (or announce any offer, sale, offer of sale, contract of sale,
pledge, grant of an option to purchase or other sale or disposition) of
any shares of Common Stock or other capital stock of the Company or Units
or other partnership interests of the Operating Partnership, or any
securities convertible into, or exchangeable or exercisable for, shares
of Common Stock or other capital stock of the Company or Units or other
partnership interests of the Operating Partnership, for a period of one
year after the Firm Closing Date; provided, however, that Philip Pilevsky
and Sheila Levine may pledge to the Company Units held by them, either
directly or indirectly, to secure certain indemnification obligations in
favor of the Company in connection with the Formation Transactions
pursuant to the Letter Agreement filed as Exhibit 10.18 to the
Registration Statement.
(g) On or before the Firm Closing Date, the
Representatives and counsel for the Underwriters shall have received such
further certificates, documents or other information as they may have
reasonably requested from the Company.
(h) Prior to the commencement of the offering of the
Securities, the Securities shall have been approved for listing on the
New York Stock Exchange, subject to official notice of issuance.
(i) On or before the Firm Closing Date, the
Representatives and counsel for the Underwriters shall have received a
true and complete copy of each of the Operative Agreements and there
shall have been no amendments, alterations, modifications or waivers of
any of the provisions of any of the Operative Agreements since their date
of execution from the form in which they shall have been delivered.
(j) On or before the Firm Closing Date, the Company and
the Operating Partnership shall have delivered to you with respect to
each of the Properties copies of:
(i) owners' policies of title insurance insuring that
the Property Partnerships own fee simple title to the real
property comprising the Properties and each title insurance
policy is in an amount not less than the fair market value of
the Property being insured. Such policies shall be issued by a
title insurance company acceptable to the Representatives and
shall contain any coinsurance or reinsurance provisions the
Representatives' require. The title insurance policies shall
contain as exceptions to title only those exceptions acceptable
to the Representatives;
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(ii) all third party consents, waivers, licenses,
permits, authorizations, agreements, certificates and the like
necessary to operate each of the Properties;
(iii) policies or certificates of insurance relating to
each of the Properties evidencing coverages and in amounts as
are prudent and customary in the businesses in which they are or
will be engaged;
(iv) UCC, judgment and tax lien searches confirming
that the real and personal property comprising the Properties is
subject to no liens, charges, encumbrances, claims or
restrictions (other than the mortgages referred to in the
Prospectus); and
(v) a current payoff letter from the holder of any
mortgage that will be repaid in full or in part with the
proceeds of this offering indicating the principal amount
required to satisfy all amounts then secured by such mortgage
and the additional amount required for each day after the date
of such letter necessary to satisfy all obligations secured
thereby.
All opinions, certificates, letters and documents
delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects
to the Representatives and counsel for the Underwriters. The Company
shall furnish to the Representatives such conformed copies of such
opinions, certificates, letters and documents in such quantities as the
Representatives and counsel for the Underwriters shall reasonably
request.
The respective obligations of the several Underwriters
to purchase and pay for any Option Securities shall be subject, in their
discretion, to each of the foregoing conditions to purchase the Firm
Securities, except that all references to the Firm Securities and the
Firm Closing Date shall be deemed to refer to such Option Securities and
the related Option Closing Date, respectively.
8. Indemnification and Contribution. (a) Each of the
Company and the Operating Partnership, jointly and severally, agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter within the meaning of Section 15 of the Act or
Section 20 of the Securities Exchange Act of 1934 (the "Exchange Act"),
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter or such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon:
(i) any untrue statement or alleged untrue statement
made by the Company or the Operating Partnership in Section 2 of
this Agreement,
(ii) any untrue statement or alleged untrue statement
of any material fact contained in (A) the Registration Statement
or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto or (B) any
application or other document, or any amendment or supplement
thereto, executed by the Company or based upon written
information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Securities under the
securities or blue sky laws thereof or
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filed with the Commission or any securities association or securities
exchange (each an "Application"),
(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto, or any Application a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or
(iv) any untrue statement or alleged untrue statement
of any material fact contained in any audio or visual materials
used in connection with the marketing of the Securities,
including, without limitation, slides, videos, films and tape
recordings,
and will reimburse, as incurred, each Underwriter and each such
controlling person for any legal or other expenses reasonably incurred by
such Underwriter or such controlling person in connection with
investigating, defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action;
provided, however, that neither the Company nor the Operating Partnership
will be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such
registration statement or any amendment thereto, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto or any
Application in reliance upon and in conformity with written information
furnished to the Company by such Underwriter through the Representatives
specifically for use therein; and provided, further, that neither the
Company nor the Operating Partnership will be liable to any Underwriter
or any person controlling such Underwriter with respect to any such
untrue statement or omission made in any Preliminary Prospectus that is
corrected in the Prospectus (or any amendment or supplement thereto) if
the person asserting any such loss, claim, damage or liability purchased
Securities from such Underwriter but was not sent or given a copy of the
Prospectus (as amended or supplemented) at or prior to the written
confirmation of the sale of such Securities to such person in any case
where such delivery of the Prospectus (as amended or supplemented) is
required by the Act, unless such failure to deliver the Prospectus (as
amended or supplemented) was a result of noncompliance by the Company or
the Operating Partnership with Section 5(d) and (e) of this Agreement.
This indemnity agreement will be in addition to any liability which the
Company or the Operating Partnership may otherwise have. Neither the
Company nor the Operating Partnership will, without the prior written
consent of the Underwriter or Underwriters purchasing, in the aggregate,
more than fifty percent (50%) of the Securities, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification may be
sought hereunder (whether or not any such Underwriter or any person who
controls any such Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action, suit
or proceeding), unless such settlement, compromise or consent includes an
unconditional release of all of the Underwriters and such controlling
persons from all liability arising out of such claim, action, suit or
proceeding.
(b) Each Underwriter, severally and not jointly, will
indemnify and hold harmless the Company, each of its directors, each of
its officers who signed the Registration Statement and
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each person, if any, who controls the Company within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act against any
losses, claims, damages or liabilities to which the Company or any such
director, officer or controlling person may become subject under the Act
or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in
the Registration Statement or any amendment thereto, any Preliminary
Prospectus or the Prospectus or any amendment or supplement thereto, or
any Application or (ii) the omission or the alleged omission to state
therein a material fact required to be stated in the Registration
Statement or any amendment thereto, any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, or any Application or
necessary to make the statements therein not misleading, in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
by such Underwriter through the Representatives specifically for use
therein; and, subject to the limitation set forth immediately preceding
this clause, will reimburse, as incurred, any legal or other expenses
reasonably incurred by the Company or any such director, officer or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability or any action in respect thereof. This
indemnity agreement will be in addition to any liability which such
Underwriter may otherwise have. No Underwriter will, without the prior
consent of the Company, settle or compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or
proceeding in respect of which indemnification may be sought hereunder
(whether or not the Company, any of its directors or officers who signed
the Registration Statement or any person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional
release of the Company, its officers and directors who signed the
Registration Statement and such controlling persons from all liability
arising out of such claim, action, suit or proceeding.
(c) Promptly after receipt by an indemnified party
under this Section 8 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party of the commencement thereof; but the omission so to
notify the indemnifying party will not relieve it from (i) any liability
which it may have to any indemnified party under this Section 8 except to
the extent the indemnifying party has been prejudiced as a result thereof
or (ii) any liability which it may have to any indemnified party
otherwise than under this Section 8. In case any such action is brought
against any indemnified party, and it notifies the indemnifying party of
the commencement thereof, the indemnifying party will be entitled to
participate therein and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party; provided,
however, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be one or more legal
defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying
party, the indemnifying party shall not have the right to direct the
defense of such action on behalf of such indemnified party or parties and
such indemnified party or parties shall have the right to
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select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof
and approval by such indemnified party of counsel appointed to defend
such action, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses,
other than reasonable costs of investigation, subsequently incurred by
such indemnified party in connection with the defense thereof, unless (i)
the indemnified party shall have employed separate counsel in accordance
with the proviso to the next preceding sentence (it being understood,
however, that in connection with such action the indemnifying party shall
not be liable for the expenses of more than one separate counsel (in
addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by the
Representatives in the case of paragraph (a) of this Section 8,
representing the indemnified parties under such paragraph (a) who are
parties to such action or actions) or (ii) the indemnifying party does
not promptly retain counsel satisfactory to the indemnified party or
(iii) the indemnifying party has authorized the employment of counsel for
the indemnified party at the expense of the indemnifying party. After
such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the
consent of the indemnifying party.
(d) In circumstances in which the indemnity agreement
provided for in the preceding paragraphs of this Section 8 is unavailable
or insufficient, for any reason, to hold harmless an indemnified party in
respect of any losses, claims, damages or liabilities (or actions in
respect thereof), each indemnifying party, in order to provide for just
and equitable contribution, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion
as is appropriate to reflect (i) the relative benefits received by the
indemnifying party or parties on the one hand and the indemnified party
on the other from the offering of the Securities or (ii) if the
allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative
fault of the indemnifying party or parties on the one hand and the
indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such
losses, claims, damages or liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Operating Partnership on the one
hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters. The relative
fault of the parties shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Underwriters, the parties'
relative intents, knowledge, access to information and opportunity to
correct or prevent such statement or omission, and any other equitable
considerations appropriate in the circumstances. The Company, the
Operating Partnership and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata
or per capita allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that does
not take into account the equitable considerations referred to above in
this paragraph (d).
35
<PAGE>
Notwithstanding any other provision of this paragraph (d), no Underwriter
shall be obligated to make contributions hereunder that in the aggregate
exceed the total public offering price of the Securities purchased by
such Underwriter under this Agreement, less the aggregate amount of any
damages that such Underwriter has otherwise been required to pay in
respect of the same or any substantially similar claim, and no person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute hereunder are several in proportion to their
respective underwriting obligations and not joint, and contributions
among Underwriters shall be governed by the provisions of the Prudential
Securities Incorporated Master Agreement Among Underwriters. For purposes
of this paragraph (d), each person, if any, who controls an Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act shall have the same rights to contribution as such Underwriter, and
the Company and the Operating Partnership shall be deemed one party and
jointly and severally liable for any obligations to contribute hereunder
and each director of the Company, each officer of the Company who signed
the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company
and the Operating Partnership.
(e) In connection with the reservation and sale of the
Reserved Shares, each of the Company and the Operating Partnership,
jointly and severally, agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
against any losses, claims, damages or liabilities, joint or several, to
which such Underwriter or such controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon the sale or purchase of the Reserved Shares or the failure of the
purchasers to pay for and accept delivery of the shares of Common Stock
which are subject to a confirmation of sale.
9. Default of Underwriters. If one or more Underwriters
default in their obligations to purchase Firm Securities or Option
Securities hereunder and the aggregate number of such Securities that
such defaulting Underwriter or Underwriters agreed but failed to purchase
is ten percent or less of the aggregate number of Firm Securities or
Option Securities to be purchased by all of the Underwriters at such time
hereunder, the other Underwriters may make arrangements satisfactory to
the Representatives for the purchase of such Securities by other persons
(who may include one or more of the non-defaulting Underwriters,
including the Representatives), but if no such arrangements are made by
the Firm Closing Date or the related Option Closing Date, as the case may
be, the other Underwriters shall be obligated severally in proportion to
their respective commitments hereunder to purchase the Firm Securities or
Option Securities that such defaulting Underwriter or Underwriters agreed
but failed to purchase. If one or more Underwriters so default with
respect to an aggregate number of Securities that is more than ten
percent of the aggregate number of Firm Securities or Option Securities,
as the case may be, to be purchased by all of the Underwriters at such
time hereunder, and if arrangements satisfactory to the Representatives
are not made within 36 hours after such default for the purchase by other
persons (who may include one or more of the non-defaulting Underwriters,
including the Representatives) of the Securities with
36
<PAGE>
respect to which such default occurs, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter or the
Company or the Operating Partnership other than as provided in Section 10
hereof. In the event of any default by one or more Underwriters as
described in this Section 9, the Representatives shall have the right to
postpone the Firm Closing Date or the Option Closing Date, as the case
may be, established as provided in Section 3 hereof for not more than
seven business days in order that any necessary changes may be made in
the arrangements or documents for the purchase and delivery of the Firm
Securities or Option Securities, as the case may be. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 9. Nothing herein shall relieve any
defaulting Underwriter from liability for its default.
10. Survival. The respective representations,
warranties, agreements, covenants, indemnities and other statements of
the Company, its officers, the Operating Partnership and the several
Underwriters set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement shall remain in full force and
effect, regardless of (i) any investigation made by or on behalf of the
Company, any of its officers or directors, the Operating Partnership, any
Underwriter or any controlling person referred to in Section 8 hereof and
(ii) delivery of and payment for the Securities. The respective
agreements, covenants, indemnities and other statements set forth in
Sections 6 and 8 hereof shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement.
11. Termination. (a) This Agreement may be terminated
with respect to the Firm Securities or any Option Securities in the sole
discretion of the Representatives by notice to the Company given prior to
the Firm Closing Date or the related Option Closing Date, respectively,
in the event that the Company or the Operating Partnership shall have
failed, refused or been unable to perform all obligations and satisfy all
conditions on its part to be performed or satisfied hereunder at or prior
thereto or, if at or prior to the Firm Closing Date or such Option
Closing Date, respectively,
(i) the Company or any of its subsidiaries shall have,
in the sole judgment of the Representatives, sustained any
material loss or interference with their respective businesses
or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding or there shall
have been any material adverse change, or any development
involving a prospective material adverse change (including
without limitation a change in management or control of the
Company), in the condition (financial or otherwise), business
prospects, net worth or results of operations of the Company and
its subsidiaries, taken as a whole, except in each case as
described in or contemplated by the Registration Statement and
the Prospectus (exclusive of any amendment or supplement
thereto);
(ii) trading in the Common Stock shall have been
suspended by the Commission or the New York Stock Exchange or
trading in securities generally on the New York Stock Exchange
shall have been suspended or minimum or maximum prices shall
have been established on such exchange;
37
<PAGE>
(iii) a banking moratorium shall have been declared by
New York or United States authorities; or
(iv) there shall have been (A) an outbreak or
escalation of hostilities between the United States and any
foreign power, (B) an outbreak or escalation of any other
insurrection or armed conflict involving the United States or
(C) any other calamity or crisis or material adverse change in
general economic, political or financial conditions having an
effect on the U.S. financial markets that, in the sole judgment
of the Representatives, makes it impractical or inadvisable to
proceed with the public offering or the delivery of the
Securities as contemplated by the Registration Statement, as
amended as of the date hereof.
(b) Termination of this Agreement pursuant to this
Section 11 shall be without liability of any party to any other party
except as provided in Sections 6 and 10 hereof.
12. Information Supplied by Underwriters. The
statements set forth in the last paragraph on the front cover page and
under the heading "Underwriting" in any Preliminary Prospectus or the
Prospectus (to the extent such statements relate to the Underwriters)
constitute the only information furnished by any Underwriter through the
Representatives to the Company for the purposes of Sections 2(b) and 8
hereof. The Underwriters confirm that such statements (to such extent)
are correct.
13. Notices. All communications hereunder shall be in
writing and, if sent to any of the Underwriters, shall be delivered or
sent by mail, telex or facsimile transmission and confirmed in writing to
Prudential Securities Incorporated, One New York Plaza, New York, New
York 10292, Attention: Equity Transactions Group; and if sent to the
Company or the Operating Partnership, shall be delivered or sent by mail,
telex or facsimile transmission and confirmed in writing to the Company
at 417 Fifth Avenue, New York, New York 10016, Attention: Chief Executive
Officer.
14. Successors. This Agreement shall inure to the
benefit of and shall be binding upon the several Underwriters, the
Company, the Operating Partnership and their respective successors and
legal representatives, and nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any other person any
legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained, this Agreement and all
conditions and provisions hereof being intended to be and being for the
sole and exclusive benefit of such persons and for the benefit of no
other person except that (i) the indemnities of the Company and the
Operating Partnership contained in Section 8 of this Agreement shall also
be for the benefit of any person or persons who control any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act and (ii) the indemnities of the Underwriters contained in Section 8
of this Agreement shall also be for the benefit of the directors of the
Company, the officers of the Company who have signed the Registration
Statement and any person or persons who control the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act. No
purchaser of Securities from any Underwriter shall be deemed a successor
because of such purchase.
38
<PAGE>
15. Applicable Law. THE VALIDITY AND INTERPRETATION OF
THIS AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF
LAWS.
16. Consent to Jurisdiction and Service of Process. All
judicial proceedings arising out of or relating to this Agreement may be
brought in any state or federal court of competent jurisdiction in the
State of New York, and by execution and delivery of this Agreement, each
of the Company and the Operating Partnership accepts for itself and in
connection with its properties, generally and unconditionally, the
nonexclusive jurisdiction of the aforesaid courts and waives any defense
of forum non conveniens and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. Each of the
Company and the Operating Partnership designates and appoints Philip
Pilevsky, and such other persons as may hereafter be selected by each of
the Company and the Operating Partnership irrevocably agreeing in writing
to so serve, as its agent to receive on its behalf service of all process
in any such proceedings in any such court, such service being hereby
acknowledged by each of the Company and the Operating Partnership to be
effective and binding service in every respect. A copy of any such
process so served shall be mailed by registered mail to each of the
Company and the Operating Partnership at its address provided in Section
13 hereof; provided, however, that, unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the
validity of service of such process. If any agent appointed by the
Company or the Operating Partnership refuses to accept service, each of
the Company and the Operating Partnership hereby agrees that service of
process sufficient for personal jurisdiction in any action against the
Company or the Operating Partnership in the State of New York may be made
by registered or certified mail, return receipt requested, to the Company
or the Operating Partnership at its address provided in Section 13
hereof, and each of the Company and the Operating Partnership hereby
acknowledges that such service shall be effective and binding in every
respect. Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any Underwriter
to bring proceedings against the Company and the Operating Partnership in
the courts of any other jurisdiction.
17. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
39
<PAGE>
If the foregoing correctly sets forth our
understanding, please indicate your acceptance thereof in the space
provided below for that purpose, whereupon this letter shall constitute
an agreement binding the Company, the Operating Partnership and each of
the several Underwriters.
Very truly yours,
PHILIPS INTERNATIONAL REALTY CORP.
By: _________________________________
Philip Pilevsky
Chief Executive Officer and
Chairman of the Board
PHILIPS INTERNATIONAL REALTY, L.P.
By: Philips International Realty Corp.,
its General Partner
By: _____________________________
Philip Pilevsky
Chief Executive Officer and
Chairman of the Board
The foregoing Agreement is hereby confirmed and accepted as of the date
first above written.
PRUDENTIAL SECURITIES INCORPORATED
RAYMOND JAMES & ASSOCIATES, INC.
By: PRUDENTIAL SECURITIES INCORPORATED
By:__________________________________________
Jean-Claude Canfin
Managing Director
For itself and on behalf of the Representatives.
40
<PAGE>
SCHEDULE 1
UNDERWRITERS
Number of
Firm Securities
Underwriter to be Purchased
Prudential Securities Incorporated
Raymond James & Associates, Inc.
41
<PAGE>
<PAGE>
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
April 27, 1998
Philips International Realty Corp.
417 Fifth Avenue
New York, New York 10016
Re: Philips International Realty Corp., a Maryland
corporation (the "Company") - Registration Statement on Form
S-11 (Registration No. 333-47975) pertaining to Eight Million
Two Hundred Eighty Thousand (8,280,000) shares of common stock,
par value one cent ($.01) per share (the "Shares")
---------------------------------------------------------------
Ladies and Gentlemen:
In connection with the registration of the Shares under the
Securities Act of 1933 as amended (the "Act"), by the Company on Form S-11
filed with the Securities and Exchange Commission (the "Commission") on or
about March 13, 1998, as amended (the "Registration Statement"), you have
requested our opinion with respect to the matters set forth below.
We have acted as special Maryland corporate counsel for the Company
in connection with the matters described herein. In our capacity as special
Maryland corporate counsel to the Company, we have reviewed and are familiar
with proceedings taken and proposed to be taken by the Company in connection
with the authorization, issuance and sale of the Shares, and for purposes of
this opinion have assumed such proceedings will be timely completed in the
manner presently proposed. In addition, we have relied upon certificates and
advice from the officers of the Company upon which we believe we are justified
in relying and on various certificates from, and documents recorded with, the
State Department of Assessments and Taxation of Maryland (the "SDAT"),
including the charter of the Corporation (the "Charter"), consisting of
Articles of Incorporation filed with the SDAT on July 16, 1997, Articles of
Amendment and Restatement filed with the SDAT on December 9, 1997, and
Articles Supplementary filed with SDAT on December 30, 1997. We have also
examined the Bylaws of the Company adopted as of September 30, 1997, and
<PAGE>
Philips International Realty Corp.
April 27, 1998
Page 2
amended and restated as of November 28, 1997 and April 14, 1998 (the "Bylaws")
and resolutions of the Board of Directors of the Company adopted on or before
the date of this letter and in full force and effect on the date of this
letter; and such laws, records, documents, certificates, opinions and
instruments as we deem necessary to render this opinion.
We have assumed the genuineness of all signatures on, and the
authenticity of, all documents submitted to us as originals, and the
conformity to original documents of all documents submitted to us as copies.
With respect to agreements and instruments executed by natural persons, we
have assumed the legal competency of such persons. We have also assumed that
all certificates submitted to us are true and correct, both when made and as
of the date hereof, and that none of the Shares will be issued and sold in
violation of the provisions of Article VI of the Charter captioned
"Restriction on Transfer, Acquisition and Redemption of Shares."
Based on the foregoing, and subject to the assumptions and
qualifications set forth herein, it is our opinion that, as of the date of
this letter, the offering of the Shares has been authorized by the Board of
Directors, and the Shares will, upon due authorization by the Board of
Directors of the Company for issuance, and issuance and delivery in accordance
with and subject to the terms and conditions described in the Registration
Statement against payment of the purchase price therefore as determined by the
Board of Directors of the Company thereof, be duly authorized, validly issued,
fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement, and further consent to the filing of this opinion as
an exhibit to the applications to securities commissioners for the various
states of the United States for registration of the Shares. We also consent to
the identification of our firm as Maryland counsel to the Company in the
section of the Prospectus (which is part of the Registration Statement)
entitled "Legal Matters."
The opinions expressed herein are limited to the laws of the State of
Maryland and we express no opinion concerning any laws other than the laws of
the State of Maryland. Furthermore, the opinions presented in this letter are
limited to the matters specifically set forth herein and no other opinion
shall be inferred beyond the matters expressly stated.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
------------------------------------
<PAGE>
April 27, 1998
Philips International Realty Corp.
417 Fifth Avenue
New York, New York 10016
RE: Certain Federal Income Tax Matters
----------------------------------
Ladies and Gentlemen:
We have acted as tax counsel to Philips International Realty Corp. (the
"Company") in connection with the Prospectus included as part of that certain
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on March 13, 1998 and as amended through the date hereof (the
"Registration Statement"). In connection therewith, you have requested our
opinion with respect to the qualification of the Company as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code") and the accuracy of the discussion included in the Registration
Statement under the heading "Certain United States Federal Income Tax
Considerations to the Company of its REIT Election."
We hereby consent to the use of our opinion as an Exhibit to the
Registration Statement and to any and all references to our firm in the
Prospectus that is a part of the Registration Statement, which Prospectus will
be delivered to prospective purchasers of securities of the Company, and we
hereby consent to such use of our opinion. All defined terms used herein shall
have the same meaning as used in the Registration Statement.
FACTS AND ASSUMPTIONS RELIED UPON
---------------------------------
In rendering the opinions expressed herein, we have examined the
Amended and Restated Articles of Incorporation and Second Amended and Restated
Bylaws of the Company, and such other records, certificates and documents as we
have deemed necessary or appropriate for purposes of rendering the opinions set
forth herein.
In our examination of documents, we have assumed, with your consent,
that all documents submitted to us are authentic originals, or if submitted as
photocopies, that they faithfully reproduce the originals thereof, that all such
documents have been or will be duly executed to the extent required, that all
representations and statements set forth in such documents are true and correct,
and that all obligations imposed by any such documents on the parties thereto
have been or will be performed or satisfied in accordance with their terms. We
<PAGE>
Philips International Realty Corp.
April 27, 1998
Page 2
have also assumed, without investigation, that all documents, certificates,
warranties and covenants on which we have relied in rendering the opinions set
forth below and that were given or dated earlier than the date of this letter
continue to remain accurate, insofar as relevant to the opinions set forth
herein, from such earlier date through and including the date of this letter.
We have reviewed the Registration Statement and the descriptions set
forth therein of the Company and its investments and activities. We have relied
upon the representations of the Company and its affiliates regarding the manner
in which the Company has been and will continue to be owned and operated, and
the type and amount of income received by the Company during its first taxable
year ended December 31, 1997 and the character and amount of distributions made
with respect to its first taxable year ended December 31, 1997. We have neither
independently investigated nor verified such representations, and we assume that
such representations are true, correct and complete and that all representations
made "to the best of the knowledge and belief" of any person(s) or party(ies)
are and will be true, correct and complete as if made without such
qualification. We assume that the Company has been and will be operated in
accordance with applicable laws and the terms and conditions of applicable
documents, and the descriptions of the Company and its investments, and the
proposed investments, activities, operations and governance of the Company set
forth in the Registration Statement continue to be true. In addition, we have
relied on certain additional facts and assumptions described below.
The foregoing representations have been made to us by officers and
representatives of the Company as of the date hereof. No facts have come to our
attention that are inconsistent with such facts and representations.
OPINIONS
--------
Based upon and subject to the foregoing, we are of the following
opinions:
1. Assuming that a timely election for REIT status has been made, the
Company has been organized in conformity with the requirements for qualification
as a REIT under the Code, and its method of operation, as described in the
representations referred to above, will enable it to continue to meet the
requirements for qualification and taxation as a REIT under the Code.
2. The Operating Partnership and each Property Partnership formed as a
partnership will be treated for federal income tax purposes as partnerships and
not as associations taxable as corporations or as publicly traded partnerships.
3. The discussion contained in that portion of the Registration
Statement under the caption "Federal Income Tax Considerations" fairly
summarizes the federal income tax considerations that are likely to be material
to a holder of Common Stock.
<PAGE>
The opinions expressed herein are based upon the Code, the Treasury
Regulations promulgated thereunder, current administrative positions of the
Internal Revenue Service, and existing judicial decisions, any of which could be
changed at any time, possibly on a retroactive basis. Any such changes could
adversely affect the opinions rendered herein and the tax consequences to the
Company and the investors in the Common Stock. In addition, as noted above, our
opinions are based solely on the documents that we have examined, the additional
information that we have obtained, and the representations that are being made
to us, and cannot be relied upon if any of the facts contained in such documents
or in such additional information are, or later become, inaccurate or if any of
the representations made to us are, or later become, inaccurate.
We express no opinion with respect to the Registration Statement other
than those expressly set forth herein. Furthermore, the Company's qualification
as a REIT will depend on the Company meeting, in its actual operations, the
applicable asset composition, source of income, shareholder diversification,
distribution, record keeping and other requirements of the Code necessary for a
corporation to qualify as a REIT. We will not review these operations and no
assurance can be given that the actual operations of the Company and its
affiliates will meet these requirements or the representations made to us with
respect thereto. Finally, our opinion is limited to the tax matters specifically
covered hereby, and we have not been asked to address, nor have we addressed,
any other tax consequences of an investment in the Common Stock.
Very truly yours,
/s/ Pryor Cashman Sherman & Flynn LLP
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PHILIPS INTERNATIONAL REALTY, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS............................................2
ARTICLE 2 CONTINUATION OF THE PARTNERSHIP..................... .13
2.1 Continuation.............................................13
2.2 Entire Agreement.........................................14
ARTICLE 3 NAME AND OFFICES......................................14
3.1 Name.....................................................14
3.2 Principal and Registered Offices.........................14
ARTICLE 4 PURPOSE...............................................15
4.1 Purpose..................................................15
4.2 Powers...................................................15
ARTICLE 5 TERM AND FISCAL YEAR..................................16
5.1 Term.....................................................16
5.2 Fiscal Year..............................................16
ARTICLE 6 CAPITAL CONTRIBUTIONS, ADDITIONAL FUNDING AND CAPITAL
ACCOUNTS........................................................16
6.1 Capital Contributions of the General Partner and the
Interim Managing General Partner.........................16
6.2 Capital Contributions of the Limited Partners............18
6.3 General Partner Option to Contribute Additional Capital..19
6.4 General Partner Option to Issue Additional Partnership
Units to Limited Partners................................20
6.5 Capital Accounts.........................................23
6.6 Limited Liability........................................24
6.7 Return of Capital........................................24
6.8 No Interest on Capital Contributions.....................25
6.9 No Third Party Beneficiary...............................25
6.10 Common Stock Option Plans...............................25
ARTICLE 7 ALLOCATION OF PROFITS AND LOSSES......................26
7.1 General Allocation of Profits and Losses.................26
<PAGE>
7.2 Allocations with Respect to Transferred Interests.......26
7.3 Deficit Restoration Obligation..........................26
7.4 Regulatory Allocations....................................27
(a) Minimum Gain Chargeback..............................27
(b) Exceptions to Section 7.4(a).........................27
(c) Qualified Income Offset..............................28
(d) Gross Income Allocation..............................28
(e) Partner Nonrecourse Debt.............................28
(f) Interpretation.......................................29
(g) Curative Allocations.................................29
7.5 Special Allocations with Respect to Contributed
or Revalued Property.. ...................................29
7.6 Allocations with Respect to Partnership Units other than
OP Units..................................................30
ARTICLE 8 DISTRIBUTIONS..........................................30
8.1 Distribution of Net Cash Flow.............................30
8.2 Distributions in Kind.....................................31
8.3 31
8.4 Distributions with Respect to Partnership Units other
than OP Units. ...........................................32
ARTICLE 9 MANAGEMENT.............................................32
9.1 Management of Partnership Affairs.........................32
9.2 Powers and Authorities of the General Partner.............34
9.3 Major Decisions..........................................37
9.4 Restrictions on General Partner's Authority...............38
9.5 Engagements by the Partnership............................38
9.6 Engagement of Affiliates..................................39
9.7 Liability of the General Partner..........................39
9.8 Reimbursement of Certain Expenses of the
General Partner ..........................................39
9.9 Outside Activities of the General Partner.................40
9.10 Operation in Accordance with REIT Requirements...........41
9.11 Title Holder.............................................42
ARTICLE 10 RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS............42
10.1 No Participation in Management of Partnership; Rights
of Limited Partners to Certain Documents.................42
10.2 Withdrawal, Retirement, Death, Incompetency,
Insolvency or Dissolution of a Limited Partner...........43
10.3 Redemption Rights........................................44
(a) Grant of Rights.......................................44
(b) Delivery of Exercise Notices..........................44
ii
<PAGE>
(c) Assumption by General Partner........................ 44
(d) Limitation on Exercise of Redemption Rights.......... 45
(e) Computation of Number of Exchange Shares and/or
Cash To Be Paid...................................... 46
(f) Closing; Delivery of Election Notice................. 47
(g) Closing Deliveries................................... 47
(h) Restriction on Redemption of Partnership Units........48
(i) Term of Rights....................................... 49
(j) (i) Covenants of the General Partner................ 49
(k) Limited Partners' Covenant........................... 51
ARTICLE 11 BANKING, RECORDS AND TAX MATTERS..................... 51
11.1 Partnership Funds....................................... 51
11.2 Books and Records....................................... 51
11.3 Financial Statements.................................... 52
11.4 Tax Returns............................................. 52
11.5 Section 754 Matters..................................... 52
11.6 Tax Matter Partners..................................... 52
11.7 Other Reports........................................... 53
ARTICLE 12 TRANSFER OF GENERAL PARTNER INTERESTS................ 53
12.1 Transfer of Interest of the General Partner............. 53
12.2 Retirement of the General Partner....................... 53
12.3 Transferee of the General Partner's Interest............ 54
12.4 Retirement of Last Remaining General Partner............ 54
12.5 Continuation of Partnership............................. 55
12.6 Merger or Consolidation of the General Partner.......... 55
ARTICLE 13 TRANSFER OF LIMITED PARTNER INTERESTS................ 57
13.1 Transfer of Interest of a Limited Partner............... 57
13.2 Assignee and Substitute Limited Partners................ 58
13.3 Assignment.............................................. 58
13.4 Cost of Admission....................................... 59
ARTICLE 14 DISSOLUTION AND LIQUIDATION OF PARTNERSHIP........... 59
14.1 Dissolution of the Partnership.......................... 59
14.2 Winding Up of Affairs................................... 60
14.3 Accounting.............................................. 60
14.4 Final Distribution of Partnership Property.............. 60
14.5 Certificate of Cancellation............................. 61
iii
<PAGE>
ARTICLE 15 POWER OF ATTORNEY.......................................61
15.1 Power of Attorney..........................................61
15.2 Grant of Authority Irrevocable.............................62
ARTICLE 16 AMENDMENT OF PARTNERSHIP AGREEMENT......................62
16.1 Amendments by Partners.....................................62
16.2 Amendment by the General Partner...........................63
16.3 Amendment of Certificate...................................64
ARTICLE 17 INDEMNIFICATION.........................................65
17.1 Indemnification............................................65
17.2 Partner Indemnification of Partnership.....................67
ARTICLE 18 MISCELLANEOUS PROVISIONS................................67
18.1 Notices....................................................67
18.2 Severability...............................................67
18.3 Parties Bound..............................................68
18.4 Applicable Law.............................................68
18.5 Partition..................................................68
18.6 Computation of Accountants.................................68
18.7 Headings...................................................68
18.8 Counterparts ..............................................68
Exhibit A - Partners and Partnership Units
Exhibit B - Form of Unit Certificate
iv
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
PHILIPS INTERNATIONAL REALTY, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
(this "Agreement") of PHILIPS INTERNATIONAL REALTY, L.P., a Delaware
limited partnership (the "Partnership"), is made and entered into as
of the 16th day of April, 1998, by and among PHILIPS INTERNATIONAL
REALTY CORP., a Maryland corporation, as general partner, PHILIPS
INTERNATIONAL REALTY, LLC, a Delaware limited liability company, as
interim managing general partner, and those parties who are designated
as limited partners on Exhibit A attached hereto and made a part
hereof by this reference, as limited partners.
R E C I T A L S:
WHEREAS, the Partnership was previously formed pursuant to
that certain Agreement of Limited Partnership, dated as of July 16,
1997 (the "Original Agreement"), and that certain Certificate of
Limited Partnership, dated as of July 16, 1997, which was filed with
the Secretary of State of Delaware on July 17, 1997;
WHEREAS, the Partnership entered into that certain
Contribution and Exchange Agreement, dated as of August 11, 1997, as
amended by Amendment No. 1, dated as of December 29, 1997 (the
"Contribution and Exchange Agreement"), among the Partnership,
National Properties Investment Trust, a Massachusetts business trust
("National"), Philips International Realty Corp. and the parties
designated as limited partners on Exhibit A attached hereto, whereby
the partners contributed to the Partnership, directly or indirectly,
all of the partners' right, title and interest in and to their
respective properties, on the terms and conditions set forth therein;
WHEREAS, the Original Agreement was amended and restated
pursuant to the terms of that certain Agreement of Limited
Partnership, dated as of December 31, 1997, (the LP Agreement");
WHEREAS, the parties hereto desire to continue the
Partnership and amend and restate the terms and provisions of the
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LP Agreement in its entirety, all upon the terms and provisions, and
subject to the conditions, set forth herein;
NOW, THEREFORE, in consideration of the foregoing, of the
mutual promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound,
hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, unless otherwise clearly indicated
to the contrary, the following terms have the meanings set forth
below.
"Accountants" shall mean the firm or firms of independent
certified public accountants selected from time to time by the General
Partner on behalf of the Partnership to audit the books and records of
the Partnership and to prepare statements and reports in connection
therewith.
"Act" shall mean the Delaware Revised Uniform Limited
Partnership Act, as amended from time to time subsequent to the date
hereof.
"Additional Partnership Units" shall have the definition
assigned to such term in Section 6.3 hereof.
"Additional Limited Partner" shall have the definition
assigned to such term in Section 6.4 hereof.
"Affiliate" shall mean, with respect to any Partner (or as to
any other Person the affiliates of whom are relevant for purposes of
any of the provisions of this Agreement), (i) any member of the
Immediate Family of such Partner; (ii) any trustee or beneficiary of a
Partner; (iii) any legal representative or successor of such Partner
or any Person referred to in the preceding clauses (i) and (ii); (iv)
any trustee for the benefit of such Partner or any Person referred to
in the preceding clauses (i) through (iii); or (v) any Person which
directly or indirectly through one or more intermediaries, Controls,
is Controlled by, or is under common Control with such Partner or any
Person referred to in the preceding clauses (i) through (iv).
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"Agreed Value" shall mean, with respect to any property
contributed by a Partner to the Partnership hereunder, an amount equal
to (i) the Gross Asset Value of the Capital Contribution determined as
of the date of such contribution, less (ii) the amount of any and all
liabilities securing such contributed property that the Partnership is
considered to assume or take subject to with respect to such property
under Code Section 752 or the Regulations promulgated thereunder.
"Board of Directors" shall mean the Board of Directors of the
General Partner.
"Capital Account" shall have the definition assigned to such
term in Section 6.5 hereof.
"Capital Contribution" shall mean, with respect to any
Partner, the amount of money and the Agreed Value of any property
(other than money) contributed to the Partnership with respect to the
Partnership Interest held by such Partner.
"Certificate" shall mean the Partnership's Certificate of
Limited Partnership, as amended from time to time in accordance with
the terms hereof and the Act.
"Closing Price" shall mean, on any date, with respect to a
share of Common Stock, the last sale price, regular way, or, in case
no such sale takes place on such day, the average of the closing bid
and asked prices, regular way, for one share of Common Stock in either
case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the
New York Stock Exchange or, if the Common Stock is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on
which the Common Stock is listed or admitted to trading, or if the
Common Stock is not listed or admitted to trading on any national
securities exchange, the last quoted price, or if not so quoted, the
average of the high bid and low asked prices in the over-the-counter
market, as reported by the National Association of Securities Dealers,
Inc. Automated Quotations System or, if such system is no longer in
use, the principal other automated quotations system that may then be
in use or, if the Common Stock is not quoted by any such
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organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the Common
Stock as such person is selected from time to time by the Board of
Directors.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, or any successor statute thereto.
"Common Stock" shall mean the shares of the common stock, par
value $.01 per share, of the General Partner.
"Contribution and Exchange Agreement" shall have the meaning
assigned to such term in the Recitals set forth above.
"Control" shall mean the ability, whether by the direct or
indirect ownership of shares or other equity interests, by contract or
otherwise, to elect a majority of the directors of a corporation, to
select the managing partner of a partnership, or otherwise to select,
or have the power to remove and then select, a majority of those
persons exercising governing authority over any particular entity. In
the case of a limited partnership, the sole general partner, all of
the general partners to the extent each has equal management control
and authority, or the managing general partner or managing general
partners thereof shall be deemed to have control of such partnership
and, in the case of a trust, any trustee thereof or any Person having
the right to select any such trustee shall be deemed to have control
of such trust.
"Current Per Share Market Price", on any date, shall mean the
average of the Closing Price for the five (5) consecutive Trading Days
ending on such date.
"Depreciation" shall mean, with respect to any asset of the
Partnership for any fiscal year or other period, the depreciation,
depletion, amortization or other cost recovery deduction, as the case
may be, allowed or allowable for Federal income tax purposes in
respect of such asset for such fiscal year or other period; provided,
however, that if there is a difference between the Gross Asset Value
and the adjusted tax basis of such asset, Depreciation shall mean
"book depreciation, depletion or amortization" as determined under
Section 1.704-1(b)(2)(iv)(g)(3) of the Regulations.
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"Excess Deficit Capital Account Balance" of any Partner shall
be the Capital Account balance of such Partner, adjusted as provided
in the immediately following sentence, to the extent, if any, that
such balance is a deficit (after adjustment). For purposes of
determining the existence and amount of an Excess Deficit Capital
Account Balance, the Capital Account balance of a Partner shall be
adjusted by: (i) crediting thereto (A) that portion of any deficit
Capital Account balance that such Partner is required to restore under
the terms of this Agreement or any other document, and (B) the amount
of such Partner's share of Minimum Gain, including any Partner
Nonrecourse Debt Minimum Gain; and (ii) charging thereto the items
described in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)
that apply to such Partner. The existence and amount of Excess Deficit
Capital Account Balance at the end of any year shall be determined
before any other allocations provided for in Article 7 for such year
have been made.
"Exercise Notice" shall mean the written notice as described
in Section 10.3(b) hereof to be given by an Exercising Partner to the
General Partner to exercise Redemption Rights, the form of which
Exercise Notice is attached to the Unit Certificate as Attachment 1.
"Exercising Partners" shall have the meaning set forth in
Section 10.3(b) hereof.
"General Partner" shall mean Philips International Realty
Corp., a Maryland corporation, and any substitute or additional
General Partner(s) duly admitted pursuant to the terms of this
Agreement, or, where the context so requires, any successor General
Partner(s) acting pursuant to the provisions of this Agreement, or,
where the context so requires, the Interim Managing General Partner.
"Gross Asset Value" shall mean, with respect to any asset of
the Partnership, such asset's adjusted basis for Federal income tax
purposes, except as follows:
(a) The initial Gross Asset Value of any asset
contributed by a Partner shall be equal to the gross fair
market value of such asset without reduction for liabilities,
as determined by the General Partner, in its reasonable
discretion (as set forth on Exhibit C attached hereto and as
amended from time to time to reflect new
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contributions); provided, however, that the Gross Asset
Value of the assets contributed by a Limited Partner
concurrent with an Offering or otherwise in exchange for
Partnership Units shall be equal to the product of (1) the
number of Partnership Units received by such Limited Partner
multiplied by (2) (i) the offering price per share of Common
Stock in connection with the Offering, or (ii) the Current
Per Share Price (as determined on the dates specified in
Article 6 of this Agreement) in connection with Partnership
Units issued subsequent to the Offering, and increased, in
both instances, by the amount of liabilities assumed or
taken subject to by the Partnership upon contribution.
(b) If the General Partner reasonably determines
that an adjustment is necessary or appropriate to reflect the
relative economic interests of the Partners, the Gross Asset
Values of all Partnership assets shall be adjusted to equal
their respective gross fair market values, as reasonably
determined by the General Partner, as of the following times:
(i) a Capital Contribution (other than a de
minimis Capital Contribution) to the
Partnership by a new or existing Limited
Partner as consideration for a Partnership
Interest;
(ii) the distribution by the Partnership to a
Partner of more than a de minimis amount of
Partnership money or property as
consideration for the redemption of a
Partnership Interest;
(iii) the liquidation of the Partnership within
the meaning of Section 1.704-1(b)(2)(ii)(g)
of the Regulations; and
(iv) any other time that such adjustment may be
made under the Code, the Regulations or any
administrative pronouncement or ruling by
the IRS.
(c) The Gross Asset Value of any Partnership asset
distributed to a Partner shall be the gross fair market
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value of such asset as reasonably determined by the General
Partner as of the date of distribution; and
(d) The Gross Asset Values of Partnership assets
shall be increased (or decreased) to reflect any adjustments
to the adjusted basis of such assets pursuant to Sections
734(b) or 743(b) of the Code, but only to the extent that
such adjustments are taken into account in determining
Capital Accounts pursuant to Section 1.704-1(b)(2)(iv)(m) of
the Regulations; provided, however, that Gross Asset Values
shall not be adjusted pursuant to this paragraph to the
extent that the General Partner reasonably determines that an
adjustment pursuant to paragraph (b) above is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this paragraph
(d).
At all times, Gross Asset Values shall be adjusted by any Depreciation
taken into account with respect to the Partnership's assets for
purposes of computing Profits and Losses. Any adjustment to the Gross
Asset Values of Partnership property shall require an adjustment to
the Partners' Capital Accounts; as for the manner in which such
adjustments are allocated to the Capital Accounts, see clause (iii) of
the definition of Profits and Losses in the case of adjustment by
Depreciation, and clause (iv) of said definition in all other cases.
"Immediate Family" shall mean, with respect to any individual
Person, such individual Person's spouse, parents, parents-in-law,
descendants, nephews, nieces, brothers, sisters, brothers-in-law,
sisters-in-law and children-in-law.
"Indemnitee" means (i) the General Partner and the Interim
Managing General Partner (in their respective capacities as General
Partner and Interim Managing General Partner) and their respective
Affiliates, trustees, officers, directors, employees and agents, or
their respective successors, executors, administrators or personal
representatives, or (ii) any Partner by reason of his or its
liabilities, pursuant to a loan guarantee or otherwise, for any
indebtedness of the Partnership or any Affiliate of the Partnership
(including, without limitation, any indebtedness which the Partnership
or any Affiliate of the Partnership has assumed or taken assets
subject to).
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"Interim Managing General Partner" shall mean Philips
International Realty, LLC, a Delaware limited liability company, and
any substitute or additional Interim Managing General Partner(s) duly
admitted pursuant to the terms of this Agreement and acting pursuant
to Section 9.1(b) of this Agreement, or, where the context so
requires, any successor Interim Managing General Partner(s), acting
pursuant to the provisions of this Agreement.
"IRS" means the Internal Revenue Service, which administers
the federal tax laws of the United States.
"Limited Partners" shall mean any Person named as a Limited
Partner on the Exhibit A attached hereto as such Exhibit may be
amended from time to time, or any substituted Limited Partner or
additional Limited Partner duly admitted to the Partnership pursuant
to the terms of this Agreement.
"Liquidation" shall mean the disposition of all or
substantially all of the assets of the Partnership pursuant to a
complete liquidation of the Partnership.
"Minimum Gain" shall have the meaning given such term in
Treasury Regulation Section 1.704-2(d), and shall generally mean the
amount by which the nonrecourse liabilities secured by any assets of
the Partnership exceed the adjusted tax basis of such assets as of the
date of determination. A Partner's share of Minimum Gain (and any net
decrease thereof) at any time shall be determined in accordance with
Treasury Regulation Section 1.704-2(g).
"Net Cash Flow" shall mean, with respect to any fiscal period
of the Partnership, the excess, if any, of "Receipts" over
"Expenditures." For purposes hereof, the term "Receipts" means the sum
of (i) all cash receipts of the Partnership from all sources for such
period, including Net Sale Proceeds and Net Financing Proceeds but
excluding Capital Contributions, and (ii) any amounts held as reserves
as of the last day of the period immediately prior to such fiscal
period that the General Partner deemed necessary for any capital or
operating expenditure permitted hereunder. The term "Expenditures"
means the sum of (a) all cash expenses of the Partnership for such
period, (b) the amount of all payments of principal and interest on
account of any indebtedness of the Partnership including payments of
principal and interest on account of any indebtedness owed to a
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Partner during such period, (c) any amounts held as reserves as of the
last day of such fiscal period as the General Partner in its sole
discretion deems necessary for any capital or operating expenditures
permitted hereunder or reserves for any other purpose that the General
Partner in its sole discretion shall determine to be appropriate and
(d) any amounts held in working capital accounts or other cash or
similar balances which the General Partner determines to be necessary
or appropriate in its sole discretion. In the event the General
Partner issues additional classes of Partnership Units other than OP
Units, the General Partner may, to the extent necessary, in its sole
discretion, determine the amount of Net Cash Flow attributable to each
class of Partnership Units and the timing of payment thereof.
"Net Financing Proceeds" shall mean the cash proceeds
received by the Partnership in connection with any borrowing or
refinancing of borrowing by or on behalf of the Partnership (whether
or not secured), after deduction of all costs and expenses incurred by
the Partnership in connection with such borrowing, and after deduction
of that portion of such proceeds used to repay any other indebtedness
of the Partnership, or any interest or premium thereon.
"Net Sale Proceeds" means the cash proceeds received by the
Partnership in connection with a sale of any asset by or on behalf of
the Partnership after deduction of any costs or expenses incurred by
the Partnership, or payable specifically out of the proceeds of such
sale (including, without limitation, any repayment of any indebtedness
required to be repaid as a result of such sale or which the General
Partner elects to repay out of the proceeds of such sale, together
with accrued interest and premium, if any, thereon and any sales
commissions or other costs and expenses due and payable to any Person
in connection with a sale, including to a Partner or its Affiliates).
"Offered Units" shall mean the Partnership Units of the
Exercising Partners identified in an Exercise Notice which, pursuant
to the exercise of a Redemption Right, can be acquired by the General
Partner under the terms hereof.
"Offering" shall mean any public offering of the General
Partner's Common Stock under the Securities Act or private equity
placement of securities of the General Partner that occurs on or after
the date hereof.
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"OP Units" shall mean those Partnership Units issued pursuant
to the terms of the Contribution and Exchange Agreement and any
additional OP Units issued by the General Partner pursuant to Article
6 hereof.
"Organizational Limited Partner" shall mean the initial
limited partner of the Partnership.
"Original Agreement" shall have the meaning assigned to such
term in the Recitals set forth above.
"Partner or Partners" shall mean, unless the context in which
the term is used requires otherwise, the General Partner, the Interim
Managing General Partner and the Limited Partners.
"Partner Nonrecourse Debt" shall have the meaning assigned to
such term in Regulation Section 1.704-2(b)(4).
"Partner Nonrecourse Debt Minimum Gain" shall have the
meaning assigned to such term in Regulation Section 1.704-2(i).
"Partnership" shall mean Philips International Realty, L.P.,
a Delaware limited partnership.
"Partnership Agreement" shall mean this Agreement of Limited
Partnership and the Exhibits and Schedules hereto, and any amendments
hereto from time to time.
"Partnership Interest" shall mean the ownership interest of a
Partner in the Partnership from time to time, including such Partner's
Percentage Interest and Capital Account and any and all other benefits
to which the holder of such a Partnership Interest may be entitled as
provided in this Agreement and under applicable laws, together with
all obligations of such Person to comply with the terms and provisions
of this Agreement.
"Partnership Unit" shall mean a fractional, undivided share
of the Partnership Interests of all Partners issued pursuant to
Article 6 hereof; provided, however, that in the event the General
Partner issues classes of Partnership Units to Limited Partners other
than the OP Units pursuant to Section 6.4 hereof, the term Partnership
Unit shall mean with respect to each class of Partnership Units, a
fractional, undivided share of the Partnership Interests of all
Partners in such class. Currently,
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each Partnership Unit may be redeemed for one share of Common Stock.
Accordingly, if the Common Stock of the General Partner (or any other
class of stock) undergoes any split or reverse split, then, without
any further action or consent by the General Partner or any Limited
Partner, each corresponding class of Partnership Unit that is
convertible into such stock shall similarly be split or combined by
the same ratio as was used to split or combine the stock. For example
if the Common Stock under a reverse 2 for 1 split (i.e. every two
shares of old Common Stock are converted into one share of new Common
Stock) then the corresponding class of Partnership Units shall undergo
a similar reverse split (i.e. every two old Partnership Units shall be
converted into one new Partnership Unit.
"Partnership Record Date" shall mean the record date
established by the General Partner for any particular distribution of
Net Cash Flow pursuant to Article 8 hereof, which record date shall be
the same as the record date established by the General Partner for
distribution to its stockholders of some or all of its portion of such
distribution.
"Percentage Interest" shall mean, with respect to any
Partner, its interest in the Partnership as determined by dividing the
Partnership Units owned by such Partner by the total number of
Partnership Units then issued and outstanding; provided, however, that
in the event the General Partner issues classes of Partnership Units
other than OP Units, the term Percentage Interest shall mean with
respect to any Partner, its interest in the Partnership as determined
by dividing the Partnership Units of each class owned by such Partner
by the total number of Partnership Units in such class then issued and
outstanding.
"Person" shall mean a natural person, corporation, trust,
partnership, estate, unincorporated association or other entity.
"Profits or Losses" shall mean, for each fiscal year or other
applicable period, an amount equal to the Partnership's net income or
loss for such year or period as determined for Federal income tax
purposes by the Accountants, determined in accordance with Section
703(a) of the Code (for this purpose, all items of income, gain, loss
or deduction required to be stated separately pursuant to Section
703(a) of the Code shall be included in taxable income or loss), with
the following adjustments: (i) by including as an item of gross income
any tax-exempt income
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received by the Partnership; (ii) by treating as a deductible expense
any expenditure of the Partnership described in Section 705(a)(2)(B)
of the Code (including amounts paid or incurred to organize the
Partnership (unless an election is made pursuant to Code Section
709(b)) or to promote the sale of interests in the Partnership and by
treating deductions for any losses incurred in connection with the
sale or exchange of Partnership property disallowed pursuant to
Section 267(a)(1) or Section 707(b) of the Code as expenditures
described in Section 705(a)(2)(B) of the Code); (iii) in lieu of
depreciation, depletion, amortization and other cost recovery
deductions taken into account in computing total income or loss, there
shall be taken into account Depreciation; (iv) gain or loss resulting
from any disposition of Partnership property with respect to which
gain or loss is recognized for Federal income tax purposes shall be
computed by reference to the Gross Asset Value of such property rather
than its adjusted tax basis; and (v) in the event of an adjustment of
the Gross Asset Value of any Partnership asset which requires that the
Capital Accounts of the Partnership be adjusted pursuant to Regulation
Section 1.704-1(b)(2)(iv)(e), (f) and (m), the amount of such
adjustment is to be taken into account as additional Profits or Losses
pursuant to Article 7.
"Properties" shall mean each of the following (i.e., those
partnerships or properties, as the case may be, in which, pursuant to
the Contribution and Exchange Agreement, the Partners are contributing
to the Partnership, directly or indirectly, all of their right, title
and interest as partners in such partnerships or owners of such
properties, as the case may be): (i) Palm Springs Mile Associates,
Ltd., (ii) Forest Avenue Shopping Associates, (iii) Philips Freeport
Associates, L.P., (iv) Merrick Shopping Associates, (v) SP Avenue U
Associates, L.P., (vi) Foxborough Shopping, L.L.C., (vii) Enfield
Shopping L.L.C., (viii) Delran Shopping L.L.C., (ix) Branhaven Plaza
LLC, and (x) The Shoppes at Lake Mary (the "National Property").
"Redemption Rights" shall have the meaning set forth in
Section 10.3(a) hereof.
"Regulations" shall mean the Treasury regulations promulgated
under the Code, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
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"Regulatory Allocations" has the meaning set forth in Section
7.3(g) of this Agreement.
"REIT" shall mean a real estate investment trust under
Section 856 of the Code.
"REIT Requirements" shall mean any and all requirements that
must be met to qualify as a REIT under the Code and the Regulations.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Surviving Partnership" shall have the meaning set forth in
Section 12.6(b) hereof.
"Trading Day" shall mean a day on which the principal
national securities exchange on which the Common Stock is listed or
admitted to trading is open for the transaction of business or, if the
Common Stock is not listed or admitted to trading on any national
securities exchange, any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized
or obligated by law or executive order to close.
"Unit Certificate" shall have the meaning set forth in
Section 6.2 hereof.
ARTICLE 2
CONTINUATION OF THE PARTNERSHIP
2.1 Continuation. The Partners hereby continue the
Partnership as a limited partnership formed under and pursuant to the
terms and provisions of the Act, and the rights and obligations of the
Partners shall be as provided therein except as otherwise expressly
provided in this Agreement. The Partners agree to execute such
certificates or documents and do such filings and recordings and all
other acts, including the filing or recording of an amendment to the
Certificate and any assumed name certificates in the appropriate
offices in the State of Delaware and any other applicable
jurisdictions as may be required to comply with applicable law. The
Partners agree that immediately after the admission of one Limited
Partner, the
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Organizational Limited Partner shall be deemed to have withdrawn from
the Partnership.
2.2 Entire Agreement. Each and every other agreement or
understanding, oral or written, relating in any way to the formation
or operation of the Partnership including, but not limited to, the
Original Agreement, is hereby superseded in its entirety. From and
after the execution of this Agreement, the same shall constitute the
only Agreement of Limited Partnership of the Partnership except as the
same may hereafter be amended pursuant to the provisions hereof. This
Agreement represents the entire agreement and understanding of the
parties hereto concerning the Partnership and their relationship as
Partners, and all prior or concurrent agreements, understandings,
representations and warranties in regard to the subject matter hereof
including, but not limited to, the Original Agreement, are and have
been merged herein.
ARTICLE 3
NAME AND OFFICES
3.1 Name. The business of the Partnership shall be conducted
under the name of "Philips International Realty, L.P.", or such other
name as the General Partner may from time to time designate upon
notice to the Limited Partners.
3.2 Principal and Registered Offices. The principal place of
business of the Partnership shall be located at c/o the General
Partner at 417 Fifth Avenue, New York, New York 10016. The registered
agent of the Partnership shall be United Corporate Services, Inc. The
registered office of the Partnership shall be 15 East North Street,
Dover, Kent County, Delaware 19901. The General Partner may from time
to time designate another registered agent or another location for the
registered office or principal place of business of the Partnership
upon notice to the other 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.
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ARTICLE 4
PURPOSE
4.1 Purpose. The purpose and nature of the business to be
conducted by the Partnership is (i) to conduct any business that may
be lawfully conducted by a limited partnership organized pursuant to
the Act; provided, however, that such business shall be limited to and
conducted in such a manner as to permit the General Partner at all
times to be classified as a REIT for federal income tax purposes,
unless the General Partner has determined to cease to qualify as a
REIT, (ii) to enter into any partnership, joint venture or other
similar arrangements to engage in any of the foregoing or the
ownership of interests in any entity engaged in any of the foregoing
and (iii) to do anything necessary or incidental to the foregoing. In
connection with the foregoing, and without limiting the General
Partner's right in its sole discretion to cease qualifying as a REIT,
the Partners acknowledge that the General Partner's status as a REIT
inures to the benefit of all of the Partners and not solely the
General Partner.
4.2 Powers. The Partnership is empowered to do any and all
acts and things necessary, appropriate, proper, advisable, incidental
to or convenient for the furtherance and accomplishment of the
purposes and business described herein and for the protection and
benefit of the Partnership; provided, that the Partnership shall not
take, or shall refrain from taking, any action which, in the judgment
of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the General Partner to continue to
qualify as a REIT, (ii) could subject the General Partner to any
additional taxes under Section 857 or Section 4981 of the Code or any
successor or newly enacted provisions of the Code imposing other
additional taxes or penalties on the General Partner, or (iii) could
violate any law or regulation of any governmental body or agency
having jurisdiction over the General Partner or its securities, unless
any such action (or inaction) under (i), (ii) or (iii) shall have been
specifically consented to by the General Partner in writing.
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ARTICLE 5
TERM AND FISCAL YEAR
5.1 Term. The term of the Partnership commenced on July 17,
1997, the date the Certificate was filed in the appropriate offices in
the State of Delaware, and shall continue until terminated pursuant to
the provisions of Article 14 of this Agreement.
5.2 Fiscal Year. The first fiscal year of the Partnership
shall terminate on December 31, 1997, and succeeding fiscal years
shall terminate on December 31 of each year thereafter, or such other
date as the Partnership shall terminate as herein provided.
ARTICLE 6
CAPITAL CONTRIBUTIONS, ADDITIONAL FUNDING AND CAPITAL ACCOUNTS
6.1 Capital Contributions of the General Partner and the
Interim Managing General Partner.
(a) Initial Capital Contribution of the General Partner.
Concurrent with the execution of this Agreement, the General Partner,
pursuant to the Contribution and Exchange Agreement, shall contribute
to the Partnership, directly or indirectly, as its initial Capital
Contribution, all of such General Partner's right, title and interest
in and to National Property. The General Partner shall initially be
issued and thereafter shall own Partnership Units in the amount set
forth opposite its name on Exhibit A, which number of Partnership
Units shall be adjusted on such Exhibit A from time to time by the
General Partner to the extent necessary to reflect accurately
issuances, exchanges, redemptions, Capital Contributions, or similar
events having an effect on a Partner's Partnership Units.
(b) Capital Contribution of the General Partner Upon
Completion of an Offering. Upon completion of any Offering, the
General Partner shall contribute the proceeds of the Offering to the
Partnership, which proceeds will be net of the underwriter's discount
and other expenses, and the General Partner shall be credited with
having made a Capital Contribution to the Partnership in the amount of
the net proceeds of the Offering. The Partners hereby acknowledge and
agree that the aggregate number of additional Partnership Units to be
issued to the
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General Partner upon completion of any Offering shall be exactly equal
to the number of shares of Common Stock issued in the Offering. Upon
any subsequent sales of shares of Common Stock pursuant to the
exercise of the over-allotment option in connection with the Offering,
the General Partner shall, subject to and in accordance with the terms
and conditions of this Section 6.1, contribute the proceeds of such
subsequent sale to the Partnership, and shall be issued additional
Partnership Units in an amount exactly equal to the number of shares
of Common Stock subsequently sold in connection with such
over-allotment option.
(c) Ownership Interest of the General Partner. The Partners
acknowledge and agree that the General Partner's ownership interest in
the Partnership (and therefore the number of Partnership Units owned
by it) shall at all times be equal to the fraction the numerator of
which is the number of issued and outstanding shares of Common Stock
of the General Partner (the "G.P. Shares") and the denominator of
which is the sum of the G.P. Shares plus the number of issued and
outstanding Partnership Units held by Partners other than the General
Partner; provided, however, that the foregoing shall only apply for so
long as the only class of Partnership Units is OP Units and the only
equity securities of the General Partner is Common Stock. If the
Common Stock of the General Partner (or any other class of stock)
undergoes any split or reverse split, then, without any further action
or consent by the General Partner or any Limited Partner, each
corresponding class of Partnership Unit that is convertible into such
stock shall similarly be split or combined by the same ratio as was
used to split or combine the stock. For example if the Common Stock
under a reverse 2 for 1 split (i.e. every two shares of old Common
Stock are converted into one share of new Common Stock) then the
corresponding class of Partnership Units shall undergo a similar
reverse split (i.e. every two old Partnership Units shall be converted
into one new Partnership Unit).
(d) Capital Contribution of the Interim Managing General
Partner. Concurrent with the execution of this Agreement, and subject
to Section 9.1 (b) hereof, the Interim Managing General Partner shall
contribute to the Partnership as its initial Capital Contribution such
amount necessary to give the Interim Managing General Partner a 0.001%
ownership interest in the Partnership. Upon consummation of Offerings
aggregating gross proceeds to the General Partner of at least $25
million, the
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Interim Managing General Partner shall automatically be entitled to a
return of its Capital Contribution, and shall automatically be deemed
to have withdrawn from the Partnership.
6.2 Capital Contributions of the Limited Partners. Concurrent
with the execution of this Agreement, each Limited Partner, pursuant
to the Contribution and Exchange Agreement, shall contribute to the
Partnership, directly or indirectly, as its initial Capital
Contribution, all of such Limited Partner's right, title and interest
in and to the Properties. Each Limited Partner shall initially be
issued and thereafter shall own Partnership Units in the amount set
forth opposite such Limited Partner's name on Exhibit A, which number
of Partnership Units on such Exhibit A shall be adjusted from time to
time by the General Partner to the extent necessary to reflect
accurately exchanges, redemptions, Capital Contributions, capital
stock changes of the General Partner or similar events having an
effect on such Partner's Partnership Units. The Partnership Units
issued to each Limited Partner shall be evidenced by the issuance of a
certificate (the "Unit Certificate") in substantially the form of
Exhibit B attached hereto, which Unit Certificate shall bear the
following legend:
"THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AGREEMENT OF LIMITED PARTNERSHIP OF PHILIPS INTERNATIONAL REALTY,
L.P., DATED AS OF DECEMBER 31, 1997, AS AMENDED (A COPY OF WHICH IS ON
FILE WITH THE PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH
AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE
PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT
THEREUNDER. IN ADDITION, THE UNITS ARE SUBJECT TO THE PROVISIONS OF
SECTION 19.1 OF A CERTAIN CONTRIBUTION AND EXCHANGE AGREEMENT DATED AS
OF AUGUST 11, 1997 (A COPY OF WHICH IS ON FILE WITH THE PARTNERSHIP)."
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On the date of admission of one or more Limited Partners to the
Partnership, the Organizational Limited Partner shall be entitled to a
return of its Capital Contribution, and shall be deemed to have
withdrawn from the Partnership.
6.3 General Partner Option to Contribute Additional Capital.
If the Partnership requires funds at any time or from time to time in
excess of funds available to the Partnership through borrowings and
prior or additional Capital Contributions, the General Partner may,
but shall not be required to, borrow such funds from a financial
institution or other lender or through public debt offerings and lend
such funds to the Partnership on the same terms and conditions as are
applicable to the General Partner. If, notwithstanding the foregoing,
the Partnership requires funds for any proper Partnership purpose in
excess of any other funds anticipated by the General Partner to be
available to the Partnership (including through borrowings and prior
Capital Contributions), or if the General Partner concludes that
borrowings are inappropriate, the General Partner may, but shall not
be required to, raise such additional funds pursuant to the issuance
of shares of its Common Stock (or New Securities subject to Section
6.4(b))(any such issuance which is made for the purpose of providing
additional funds to the Partnership shall be referred to herein as an
"Additional Issuance"). In the event any such Additional Issuance is
consummated, then (i) the General Partner shall contribute the net
amount of cash raised pursuant to such Additional Issuance to the
capital of the Partnership and (ii) the Partnership shall issue
additional Partnership Units ("Additional Partnership Units") to the
General Partner, on the date upon which such funds are contributed to
the Partnership, in an amount equal to that number of Partnership
Units which, if such
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Additional Partnership Units were redeemed as of their date of
issuance by the General Partner for shares of Common Stock pursuant to
Section 10.3 hereof, would result in the General Partner receiving
that number of shares of Common Stock equal to the number of shares of
Common Stock that were issued pursuant to such Additional Issuance. In
addition, in the event that the General Partner shall issue shares of
Common Stock (and/or pay cash out of the net proceeds of any
Additional Issuance) in connection with any subsequent merger,
consolidation or other acquisition, the General Partner shall
contribute the shares of stock, assets and/or other consideration
received by the General Partner in connection therewith to the capital
of the Partnership in exchange for Additional Partnership Units in an
amount equal to that number of Partnership Units which, if such
Additional Partnership Units were redeemed as of their date of
issuance by the General Partner for shares of Common Stock pursuant to
Section 10.3 hereof, would result in the General Partner receiving
that number of shares of Common Stock equal to the number of shares of
Common Stock that were issued in connection with such merger,
consolidation or other acquisition and/or such Additional Issuance.
Notwithstanding the foregoing sentence, the General Partner shall have
the right, in its sole discretion, to treat a contribution to the
capital of the Partnership in a manner other than as described above
if, upon the advice of counsel to the General Partner and/or the
Partnership, such alternative treatment will provide a more favorable
federal and/or state tax consequence to the General Partner and/or the
Partnership.
6.4 General Partner Option to Issue Additional Partnership
Units to Limited Partners.
(a) Issuance of Additional Partnership Units. At any
time after the date hereof without the consent of any Partner, but
subject to the provisions of Section 13.1 hereof, the General Partner
may, upon its determination, which shall be made in its sole and
absolute discretion, that the issuance of Additional Partnership Units
to new or existing limited partners is in the best commercial
interests of the Partnership, cause the Partnership to issue
Additional Partnership Units to and admit as a limited partner in the
Partnership, any Person (an "Additional Limited Partner" herein) in
exchange for the contribution by such Person of cash and/or property
desirable to further the purposes of the Partnership under Article 4
hereof. In the event that Additional Partnership Units are issued by
the Partnership pursuant to this Section 6.4, the amount of such
Partnership Units issued to each Additional Limited Partner shall,
unless otherwise determined by the General Partner in the exercise of
its sole discretion but subject to its fiduciary duty to all Limited
Partners (i) be fixed by agreement between the General Partner and
such Additional Limited Partner in the General Partner's sole
discretion or (ii) be equal to that number of Partnership Units which,
if such Additional Partnership Units were redeemed as of their date of
issuance by such Additional Limited Partner pursuant to Section 10.3
hereof, would result in such Additional Limited Partner receiving that
number of shares of Common Stock equal to (x) the Agreed Value of any
property (as determined by the General Partner, in its sole and
absolute discretion), plus the amount of any cash contributed by the
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Additional Limited Partner, as of the date of contribution to the
Partnership divided by (y) the Current Per Share Market Price
(computed as of the Trading Day immediately preceding the date of
contribution to the Partnership or such other date or average of
Trading Days as the General Partner may agree with such Additional
Limited Partner in the exercise of its sole discretion). In addition,
the General Partner is hereby authorized to cause the Partnership from
time to time to issue to the Partners (including the General Partner)
or other Persons additional Partnership Units or such other
Partnership Interests in one or more classes, or one or more series of
such classes, with such designations, preferences and relative,
participating, optional or other special rights, powers and duties,
including rights, powers and duties which may be senior, pari passu or
junior to OP Units, all as shall be determined by the General Partner
in its sole and absolute discretion subject to Delaware law,
including, without limitation, (i) the allocations of items of
Partnership income, gain, loss, deduction and credit to each 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 additional Partnership Units or
other Partnership Interests shall be issued to the General Partner
unless either (A)(1) the additional Partnership Interests are issued
in connection with the issuance of shares of Common Stock or other
shares by the General Partner, which shares have designations,
preferences and other rights such that the economic interests
attributed to such shares are substantially similar to the
designations, preferences and other rights of the additional
Partnership Interests issued to the General Partner in accordance with
this Section 6.4, and (2) the General Partner shall make a Capital
Contribution to the Partnership in an amount equal to the proceeds
raised in connection with the issuance of such shares of the General
Partner, or (B) the additional Partnership Units are issued to all the
Partners in proportion to their respective Percentage Interests. Any
Additional Limited Partner shall be issued a Unit Certificate
representing the amount of Partnership Units issued to such Additional
Limited Partner and, in the event the General Partner issues
Partnership Units other than OP Units, indicating the class, terms,
preferences and other restrictions or rights of such Partnership Unit.
The General Partner shall be authorized on behalf of each of the
Partners to amend this Agreement to reflect the issuance of Additional
Partnership Units (including,
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without limitation, the issuance of new classes of Partnership Units)
and/or the admission of any Additional Limited Partner(s) in
accordance with the provisions of this Section 6.4, and the General
Partner shall promptly deliver a copy of such amendment (which, in the
event that new classes of Partnership Units are issued, shall contain
the terms of such new classes of Partnership Units) to each Limited
Partner. Without limiting the foregoing, the General Partner is
expressly authorized to cause the Partnership to issue Partnership
Units for less than fair market value, so long as the General Partner
concludes in good faith that such issuance is in the interest of the
General Partner and the Partnership (for example, and not by way of
limitation, the issuance of Partnership Units pursuant to an employee
purchase plan providing for employee purchases of Partnership Units at
a discount from fair market value or employee options that have an
exercise price that is less than the fair market value of the
Partnership Units, either at the time of issuance or at the time of
exercise).
(b) Adjustments to Partnership Units. If the Common
Stock (or any other class of stock of the General Partner for which a
class of Partnership Units may be redeemed) undergoes any split or
reverse split, then without further action or consent by the General
Partner or any Limited Partner, each corresponding class of
Partnership Units that is redeemable for such stock shall be split or
combined in accordance with the same ratio used to split or combine
the stock. For example, if the Common Stock undergoes a reverse 2 for
1 split (i.e., every two shares of old Common Stock are converted into
one share of new Common Stock) then the corresponding class of
Partnership Units that are redeemable for such Common Stock shall
undergo a similar reverse split (i.e., every two old OP Units shall be
converted into one new OP Unit). Similarly, if any class of
Partnership Units into which another class of Partnership Units is
convertible undergoes any split or reverse split, then without further
action or consent by the General Partner or any Limited Partner, the
latter class of Partnership Units shall be split or combined in
accordance with the same ratio used to split or combine the first
class of Partnership Units.
(c) Fractional Units. The General Partner shall have
the right to issue fractional Partnership Units upon the conversion or
exchange of one class of Partnership Units for a second class of
Partnership Units; provided, however, that in accordance with Section
10.3(e) hereof no fractional shares of
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Common Stock of the General Partner shall be issued upon the
redemption of any class of Partnership Units for Common Stock.
(d) Issuance of New Securities. Following completion
of any Offering, the General Partner shall not issue any additional
shares of Common Stock (other than shares of Common Stock issued
pursuant to Section 10.3 hereof), or rights, options, warrants or
convertible or exchangeable securities containing the right to
subscribe for or purchase shares of capital stock (collectively, "New
Securities"), other than to all holders of shares of Common Stock,
unless (i) the General Partner shall cause 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 similar to those of the New Securities,
and (ii) the General Partner contributes to the Partnership the
proceeds from the issuance of such New Securities and from the
exercise of rights contained in such New Securities. Without limiting
the foregoing, the General Partner is expressly authorized to issue
New Securities for less than fair market value, and the General
Partner is expressly authorized to cause the Partnership to issue to
the General Partner corresponding Partnership Interests, so long as
(x) the General Partner concludes in good faith that such issuance is
in the interest of the General Partner and the Partnership (for
example, and not by way of limitation, the issuance of shares of
Common Stock and corresponding Units pursuant to an employee stock
purchase plan providing for employee purchases of shares of Common
Stock at a discount from fair market value or employee stock options
that have an exercise price that is less than the fair market value of
the shares of Common Stock, either at the time of issuance or at the
time of exercise), and (y) the General Partner contributes all
proceeds from such issuance and exercise to the Partnership.
6.5 Capital Accounts. A separate capital account (a "Capital
Account") shall be maintained for each Partner in accordance with the
Code and the Regulations promulgated thereunder including, but not
limited to, the rules regarding the maintenance of partners' Capital
Accounts set forth in Regulation Section 1.704-1. Subject to the
immediately preceding sentence, there shall be credited to each
Partner's Capital Account: (i) the amount of money contributed by the
Partner to the Partnership (subject, however, in the case of a Capital
Contribution by the General Partner upon completion of any Offering or
upon
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Additional Issuances (as defined in Section 6.3 above) of Common
Stock, pursuant to the provisions of Sections 6.1(b) and 6.3 hereof,
the net amount of Offering proceeds contributed to the Partnership),
(ii) the Agreed Value of any property contributed by the Partner to
the Partnership, (iii) the amount of any Partnership liabilities
assumed by such Partner (other than liabilities secured by property
distributed to such Partner that such Partner is considered to have
assumed or taken subject to under Section 752 of the Code), and (iv)
the Partner's share of income or gain (or items thereof), including
income and gain exempt from tax. There shall be charged against each
Partner's Capital Account: (w) the amount of money distributed to the
Partner by the Partnership, (x) the Agreed Value of any property
distributed to the Partner by the Partnership, (y) the amount of any
liabilities of such Partner assumed by the Partnership (other than
liabilities secured by property contributed to the Partnership by such
Partner that the Partnership is considered to have assumed or taken
subject to pursuant to Section 752 of the Code) and (z) the Partner's
share of loss and deduction (or items thereof). To the extent a
Partner's Capital Account is greater than zero, such excess is
hereinafter referred to as a "positive balance". To the extent a
Partner's Capital Account is less than zero, said amount is
hereinafter referred to as a "deficit balance".
6.6 Limited Liability. Notwithstanding anything in this
Agreement to the contrary, the personal liability of a Limited Partner
arising out of or in any manner relating to the Partnership shall be
limited to and shall not exceed such Limited Partner's Capital
Contribution made or required to be made pursuant to this Agreement
plus the amount of any deficit balances in its Capital Account such
Limited Partner is obligated to restore pursuant to the provisions of
Section 7.3 hereof. No Limited Partner shall have any personal
liability for liabilities or obligations of the Partnership, except to
the extent of its Capital Contribution, as aforesaid or as
specifically provided in Section 7.3.
6.7 Return of Capital. Except as otherwise provided herein,
(i) no Partner shall be required to make any further or additional
contributions to the capital of the Partnership or to lend or advance
funds to the Partnership for any purpose and (ii) no Partner shall be
entitled to the return of its capital, except to the extent, if any,
that distributions are made or deemed to
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be made to such Partner otherwise than out of Profits pursuant to this
Agreement.
6.8 No Interest on Capital Contributions. No interest or
additional share of Profits shall be paid or credited to the Partners
on their Capital Accounts, or on any undistributed Profits or funds
left on deposit with the Partnership; provided, however, that nothing
contained herein shall be construed to prevent or prohibit the payment
of interest on account of loans made by the Partners to the
Partnership. Any loans made to the Partnership by a Partner shall not
increase its Capital Contribution or interest in the Profits, Losses
or Net Cash Flow of the Partnership, but shall be a debt due from the
Partnership and repaid accordingly.
6.9 No Third Party Beneficiary. No creditor or other third
party having dealings with the Partnership shall have the right to
enforce the right or obligation of any Partner to make Capital
Contributions or loans or to pursue any other right or remedy
hereunder or at law or in equity, it being understood and agreed among
the parties hereto that the provisions of this Agreement shall be
solely for the benefit of, and may be enforced solely by, the parties
hereto and their respective successors and assigns. None of the rights
or obligations of the Partners herein set forth to make Capital
Contributions or loans to the Partnership shall be deemed an asset of
the Partnership for any purpose by any creditor or other third party,
nor may such rights or obligations be sold, transferred or assigned by
the Partnership or pledged or encumbered by the Partnership to secure
any debt or other obligation of the Partnership or of any of the
Partners.
6.10 Common Stock Option Plans. The Partners hereby
acknowledge that prior to the date hereof the General Partner has
adopted, and the Partners hereby acknowledge and agree that from and
after the date hereof the General Partner may adopt, without the
consent of any Limited Partner, one or more stock option or incentive
plans ("Stock Plans") pursuant to which officers, directors, trustees,
employees and/or consultants of the General Partner, the Partnership
or any Affiliate of either of them may acquire shares of Common Stock.
On each date on which the General Partner issues any shares of Common
Stock to a person pursuant to a Stock Plan (i) the consideration paid
for each such share of Common Stock shall, as soon as received by the
General Partner, be contributed to the capital of the Partnership and
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(ii) the General Partner shall be issued Partnership Units in an
amount equal to that number of Partnership Units which, if such
Partnership Units were redeemed as of their date of issuance by the
General Partner for shares of Common Stock pursuant to Section 10.3
hereof, would result in the General Partner receiving that number of
shares of Common Stock which are being issued to any such person
pursuant to the Stock Plan. For purposes of this Section 6.10 only,
shares of Common Stock issued subject to forfeiture or other similar
restrictions shall be deemed issued upon the lapse of such
restrictions. Notwithstanding anything herein to the contrary, the
mere grant of options to purchase shares of Common Stock pursuant to
any Stock Plan shall not constitute the grant or issuance of shares of
Common Stock for purposes of this Section 6.10.
ARTICLE 7
ALLOCATION OF PROFITS AND LOSSES
7.1 General Allocation of Profits and Losses. Except as
otherwise provided in this Article 7, after giving effect to any and
all allocations set forth in Section 7.4 below, all Profits and Losses
of the Partnership (including all items of income and expense entering
into the determination of such Profits and Losses), as finally
determined for Federal income tax purposes for each fiscal year of the
Partnership, shall be allocated to and among the Partners in
accordance with their respective Percentage Interests.
7.2 Allocations with Respect to Transferred Interests. Unless
otherwise required by the Code and/or the Regulations or as determined
by the General Partner, in its sole and absolute discretion, any
Profits or Losses allocable to an additional Partnership Interest
issued during any year or any fiscal quarter or to a Partnership
Interest which has been transferred during any year shall be allocated
among the Persons who were holders of such Partnership Interest during
such year in the manner described in Section 13.3(c) below.
7.3 Deficit Restoration Obligation. In the event that any
Limited Partner hereto enters into a "deficit restoration obligation"
to the Partnership pursuant to this Section 7.3, and such Limited
Partner has a deficit balance in its Capital Account following the
liquidation of its interest in the Partnership, as determined after
taking into account all Capital Account
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adjustments for the Partnership's taxable year during which the
liquidation occurs, such Limited Partner shall be unconditionally
obligated to restore the amount of such deficit balance to the
Partnership by the later of (i) the end of such taxable year, or (ii)
90 days after the date of the liquidation of the Limited Partner's
interest in the Partnership, which amount shall, upon liquidation of
the Partnership, be paid to creditors of the Partnership or
distributed to other Partners in accordance with their positive
Capital Account balances. For purposes hereof, a "deficit restoration
obligation" shall mean an unconditional agreement by a Limited Partner
to restore a deficit balance in its Capital Account (which may be
limited in amount) in the form thereof used by the Partnership. Any
Limited Partner may, but is not obligated to, enter into such an
agreement at any time during the term hereof but not more often than
annually.
7.4 Regulatory Allocations.
(a) Minimum Gain Chargeback. Notwithstanding any
other provision of this Agreement (except as provided in Section
7.4(b) below), if there is a net decrease in Minimum Gain for a
Partnership taxable year, each Partner shall be allocated, before any
other allocation of Partnership items for such taxable year, items of
income and gain for such year (and, if necessary, for subsequent
years) in proportion to, and to the extent of, the amount of such
Partner's share of the net decrease in Minimum Gain during such year.
The income allocated pursuant to this Section 7.4(a) in any taxable
year shall consist first of gains recognized from the disposition of
property subject to one or more nonrecourse liabilities of the
Partnership, and any remainder shall consist of a pro rata portion of
other items of income or gain of the Partnership.
(b) Exceptions to Section 7.4(a). The allocation
otherwise required pursuant to Section 7.4(a) shall not apply to a
Partner to the extent that: (a) such Partner's share of the net
decrease in Minimum Gain is caused by a guarantee, refinancing or
other change in the instrument evidencing a nonrecourse debt of the
Partnership which causes such debt to become a partially or wholly
recourse debt or a Partner Nonrecourse Debt, and such Partner bears
the economic risk of loss (within the meaning of Treasury Regulation
Section 1.752-2) for such changed debt; (b) such Partner's share of
the net decrease in Minimum Gain results from the repayment of a
nonrecourse liability of the Partnership, which repayment is made
using funds contributed by such Partner
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to the capital of the Partnership; (iii) the IRS, pursuant to Treasury
Regulation Section 1.704-2(f)(4), waives the requirement of such
allocation in response to a request for such waiver made by the
General Partner on behalf of the Partnership (which request the
General Partner may or may not make, in its sole discretion, if it
determines that the Partnership would be eligible therefor); or (iv)
additional exceptions to the requirement of such allocation are
established by revenue rulings issued by the IRS pursuant to Treasury
Regulation Section 1.704-2(f)(5), which exceptions apply to such
Partner, as determined by the General Partner in its sole discretion.
(c) Qualified Income Offset. Notwithstanding any
other provision of this Agreement, if a Partner unexpectedly receives
an adjustment, allocation or distribution described in Regulation
Section 1.704-1(b)(2)(ii)(d)(4),(5) or (6) that causes or increases an
Excess Deficit Capital Account Balance with respect to such Partner,
items of Partnership gross income and gain shall be specially
allocated to such Partner in an amount and manner sufficient to
eliminate such Excess Deficit Capital Account Balance as quickly as
possible.
(d) Gross Income Allocation. If at the end of any
Partnership taxable year, a Partner has an Excess Deficit Capital
Account Balance, such Partner shall be specially allocated items of
Partnership gross income or gain in an amount and manner sufficient to
eliminate such Excess Deficit Capital Account Balance as quickly as
possible, until all Excess Deficit Capital Account Balances have been
eliminated. To the extent that any class of Partnership Units that are
convertible into OP Units has received distributions at the end of any
Partnership taxable year (including any prior taxable year) in excess
of the amounts such class of Partnership Units would have received
during such taxable year or years if all of the Partnership Units of
such class had been converted into OP Units (such excess being
referred to hereinafter as "Excess Amounts"), such items of gross
income or gain shall then be allocated proportionately to and among
the holders of such class Partnership Units until such holders have
been allocated an amount equal to all Excess Amounts.
(e) Partner Nonrecourse Debt. Notwithstanding any
other provision of this Agreement, any item of Partnership Loss,
deduction or expenditures described in Code Section 705(a)(2)(B) that
is attributable to a Partner Nonrecourse Debt shall be
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allocated to those Partners that bear the economic risk of loss for
such Partner Nonrecourse Debt, and among such Partners in accordance
with the ratios in which they share such economic risk, determined in
accordance with Treasury Regulation Section 1.704-2(i). If there is a
net decrease for a Partnership taxable year in any Partner Nonrecourse
Debt Minimum Gain of the Partnership, each Partner with a share of
such Partner Nonrecourse Debt Minimum Gain as of the beginning of such
year shall be allocated items of gross income and gain in the manner
and to the extent provided in Treasury Regulation Section
1.704-2(i)(4).
(f) Interpretation. The foregoing provisions of this
Section 7.4 are intended to comply with Treasury Regulation Sections
1.704-1(b) and 1.704-2 and shall be interpreted consistently with this
intention. Any terms used in such provisions that are not specifically
defined in this Agreement shall have the meaning, if any, given such
terms in the Regulations cited above.
(g) Curative Allocations. If any allocation of gain,
income, loss, expense or any other item is made pursuant to Section
7.4(a), 7.4(c), 7.4(d) or 7.4(e) of this Agreement (the "Regulatory
Allocations") with respect to one or more Partners (the "Deficit
Partners"), then the balance of such items for the current and all
subsequent fiscal years shall be allocated among the Partners other
than the Deficit Partners as if such items were allocated among all
the Partners (including the Deficit Partners) without regard to this
Section 7.3, until the amount of such items that would have been
allocated to the Deficit Partners but for the Regulatory Allocations
equal the amount allocated to the Deficit Partners pursuant to the
Regulatory Allocations.
7.5 Special Allocations with Respect to Contributed or
Revalued Property. Notwithstanding anything contained herein to the
contrary, taxable income, gain, loss and deduction with respect to any
Partnership property that is contributed to the Partnership by a
Partner shall be shared among the Partners for income tax purposes
pursuant to Regulations promulgated under Section 704(c) of the Code,
so as to take into account the variation, if any, between the adjusted
tax basis of the property to the Partnership and its initial Gross
Asset Value. With respect to Partnership property that is initially
contributed to the Partnership upon its formation, such variation
between the adjusted tax basis and initial Gross Asset Value shall be
taken
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into account under the "traditional method" as described in Treasury
Regulation Section 1.704-3(b), unless otherwise determined by the
General Partner and the contributing Partner. With respect to
properties subsequently contributed to the Partnership, the
Partnership shall account for such variation under any method approved
under Section 704(c) of the Code and the applicable regulations as
chosen by the General Partner. In the event the Gross Asset Value of
any Partnership asset is adjusted pursuant to subparagraph (b) of the
definition of Gross Asset Value (as provided in Article 1 of this
Agreement), subsequent allocations of tax items with respect to such
asset shall take account of the variation, if any, between the
adjusted tax basis of such asset and its Gross Asset Value in the same
manner as under Section 704(c) of the Code and the applicable
regulations.
7.6 Allocations with Respect to Partnership Units other than
OP Units. In the event the General Partner issues additional classes
of Partnership Units other than OP Units, then the General Partner
shall determine, in its sole discretion, the Profits and Losses
attributable to each class and shall allocate to Profits and Losses of
each class of Partnership Units among the Partners in such class in
proportion to their respective Percentage Interests in such class,
after giving effect to any and all special allocations set forth in
Section 7.4 above.
ARTICLE 8
DISTRIBUTIONS
8.1 Distribution of Net Cash Flow. Net Cash Flow of the
Partnership, if any, shall be distributed to and among the Partners as
follows:
(a) If such Net Cash Flow has not arisen pursuant to
a Liquidation of the Partnership, such Net Cash Flow shall be
distributed to and among the Partners in accordance with their
respective Percentage Interests; or
(b) If such Net Cash Flow has arisen pursuant to a
Liquidation of the Partnership, such Net Cash Flow shall be
distributed to and among the Partners having positive balances in
their Capital Accounts (after taking into account any and all Capital
Account adjustments for the Partnership taxable year
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during which the Liquidation occurs), in proportion to and to the
extent of such positive balances.
Net Cash Flow shall be distributed to the Partners in such amounts and
at such intervals as the General Partner, in its sole discretion, may
determine, but no less frequently than quarterly. With respect to each
and every distribution of Net Cash Flow to the Partners hereunder, the
General Partner shall distribute such Net Cash Flow only to those
Partners who are Partners on the Partnership Record Date and whose
Partnership Units were outstanding during the period to which such
distribution relates and, with respect to those Partners who were
issued additional Partnership Units during such period, the General
Partner shall distribute Net Cash Flow (i) on a pro-rated basis based
upon the number of days during such period that such Partners held
such additional Partnership Units or (ii) on such other reasonable
basis as determined by the General Partner in its sole discretion;
provided, however, in no event may a Partner receive a distribution of
Net Cash Flow with respect to any particular Partnership Unit if such
Partner is entitled to receive a distribution out of such Net Cash
Flow with respect to one or more shares of Common Stock for which such
Partnership Unit has been redeemed. Notwithstanding the foregoing, the
General Partner shall take such reasonable efforts, as determined by
it in its sole and absolute discretion and consistent with its
qualification as a REIT, to cause the Partnership to distribute
sufficient amounts to enable the General Partner to pay stockholder
dividends that will (i) satisfy the REIT Requirements and (ii) avoid
any federal income or excise tax liability of the General Partner.
8.2 Distributions in Kind. No right is given to any Partner
to demand and receive property or cash. The General Partner may
determine, in its sole and absolute discretion, to make a distribution
in kind to the Partners of Partnership assets, and such assets shall
be distributed in such a fashion as to ensure that the fair market
value of such assets is distributed and allocated in accordance with
Section 8.1 hereof.
8.3 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 or reasonably believes that
the Partnership is required to withhold or pay with respect to any
amount distributable or allocable to
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such Limited Partner pursuant to this Agreement, including, without
limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Code Sections 1441, 1442, 1445 or 1446. Any
and all amounts withheld pursuant to this Section 8.3 with respect to
any allocation, payment or distribution to any Partner hereunder shall
be treated as amounts distributed to such Partner pursuant to Section
8.1 hereof for all purposes under this Agreement. If any amount is
withheld by the Partnership pursuant to this Section 8.3 with respect
to a particular Partner and such amount would not have been
distributed to such Partner pursuant to Section 8.1 hereof at any time
on or before the date it is withheld, then such Partner shall
contribute to the capital of the Partnership an amount equal to the
amount so withheld as soon as practicable after the delivery by the
General Partner to such Partner of a notice requesting such
contribution to the Partnership. The General Partner, on behalf of the
Partnership, shall have the right to offset any obligation of a
Partner to contribute additional funds to the Partnership pursuant to
the immediately preceding sentence of this Section 8.3 against any
future distributions due to such Partner under Section 8.1 hereof.
8.4 Distributions with Respect to Partnership Units other
than OP Units. Notwithstanding the foregoing provisions of this
Article 8, in the event the General Partner issues additional classes
of Partnership Units other than OP Units to Limited Partners, then the
General Partner shall determine, in its sole discretion, the amount of
distributions of Net Cash Flow attributable to each class and shall
distribute such Net Cash Flow to each class of Partnership Units among
the Partners in such class in proportion to their respective
Percentage Interests in such class or otherwise required pursuant to
the terms of such Partner's Unit Certificates.
ARTICLE 9
MANAGEMENT
9.1 Management of Partnership Affairs.
(a) General Partner. Except as otherwise
specifically provided in this Agreement, and subject to Section 9.1(b)
below, the General Partner shall have full, exclusive and complete
responsibility and discretion in the management and control of
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the business and affairs of the Partnership and shall make all
decisions affecting the Partnership's business and affairs. Subject to
the foregoing, the General Partner shall have all the rights, powers
and obligations of a general partner as provided in the Act, and,
except as otherwise provided, any action taken by the General Partner
(in its capacity as such) shall constitute the act of and serve to
legally bind the Partnership. Persons dealing with the Partnership
shall be entitled to rely conclusively on the power and authority of
the General Partner as set forth in this Agreement.
(b) Interim Managing General Partner. From the date
hereof until consummation of Offerings aggregating gross proceeds to
the General Partner of at least $25 million, the Interim Managing
General Partner shall, subject to the rights accorded the Limited
Partners hereunder and under the Act and subject to the prior consent
of the General Partner with respect to transactions with Affiliates of
the Interim Managing General Partner, have full, exclusive and
complete responsibility and discretion in the management and control
of the business and affairs of the Partnership and shall make all
decisions affecting the Partnership's business and affairs to the
extent otherwise granted to the General Partner hereunder, and the
General Partner shall have no such rights. Subject to the foregoing,
the Interim Managing General Partner shall have all the rights, powers
and obligations of a general partner as provided in the Act, and,
except as otherwise provided, any action taken by the Interim Managing
General Partner (in its capacity as such) shall constitute the act of
and serve to legally bind the Partnership. Persons dealing with the
Partnership shall be entitled to rely conclusively on the power and
authority of the Interim Managing General Partner as set forth in this
Agreement. The Partners agree that immediately upon consummation of
Offerings aggregating gross proceeds to the General Partner of at
least $25 million, the Interim Managing General Partner shall
automatically be deemed to have withdrawn from the Partnership, and
the General Partner shall be entitled to exercise in full the rights
and responsibilities hereunder accorded to the General Partner that it
would have received but for the rights accorded the Interim Managing
General Partner under this Section 9.1(b). Until consummation of
Offerings aggregating gross proceeds to the General Partner of at
least $25 million, references to the General Partner in this Agreement
shall be deemed to be references to the Interim Managing General
Partner, unless otherwise required by the context thereof; provided,
however,
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that references to the General Partner herein, including, without
limitation, those set forth in Articles 6, 7 and 8 and Section 10.3
hereof, shall always refer with respect to economic issues (as opposed
to management issues) to the General Partner.
9.2 Powers and Authorities of the General Partner. Except as
otherwise specifically provided in this Agreement, and subject to
Sections 9.1(b) and 9.3 hereof, the General Partner is hereby granted
the right, power and authority to do on behalf of the Partnership all
things which, in its best business judgment, are necessary, proper or
desirable to carry out its duties and responsibilities, including but
not limited to, the right, power and authority:
(a) To manage, control, invest, reinvest, acquire by
purchase, lease or otherwise, develop, expand, sell, contract to
purchase or sell, grant, obtain or exercise options to purchase,
options to sell or conversion rights, assign, transfer, convey,
deliver, endorse, exchange, pledge, mortgage, abandon, improve,
repair, maintain, insure, lease for any term and otherwise deal with
any and all property of whatsoever kind and nature, and wheresoever
situated, in furtherance of the purposes of the Partnership;
(b) To acquire, directly or indirectly, interests in
real estate of any kind and of any type, and any and all kinds of
interests therein, and to determine the manner in which title thereto
is to be held; to manage, insure against loss, protect and subdivide
any of the real estate, interests therein or parts thereof; to
improve, develop or redevelop and expand any such real estate; to
participate in the ownership and development of any property; to
dedicate for public use, to vacate any subdivisions or parts thereof,
to resubdivide, to contract to sell, to grant options to purchase or
lease, to sell on any terms; to convey, to mortgage, pledge or
otherwise encumber said property, or any part thereof; to lease said
property or any part thereof from time to time, upon any terms and for
any period of time, and to renew or extend leases, to amend, change or
modify the terms and provisions of any leases and to grant options to
lease and options to renew leases and options to purchase; to
partition or to exchange said real property, or any part thereof, for
other real or personal property; to grant easements or charges of any
kind; to release, convey or assign any right, title or interest in or
about or easement appurtenant to said property or any part thereof; to
construct and reconstruct,
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remodel, alter, repair, add to or take from buildings on said
premises; to insure any Person having an interest in or responsibility
for the care, management or repair of such property; to direct the
trustee of any land trust to mortgage, lease, convey or contract to
convey the real estate held in such land trust or to execute and
deliver deeds, mortgages, notes, and any and all documents pertaining
to the property subject to such land trust or in any matter regarding
such trust; to execute assignments of all or any part of the
beneficial interest in such land trust;
(c) To employ, engage or contract with or dismiss
from employment or engagement Persons to the extent deemed necessary
by the General Partner for the operation and management of the
Partnership business, including but not limited to, contractors,
subcontractors, engineers, architects, surveyors, mechanics,
consultants, accountants, attorneys, insurance brokers, real estate
brokers and others;
(d) To enter into contracts on behalf of the
Partnership;
(e) To borrow money, procure loans and advances from
any Person for Partnership purposes, and to apply for and secure, from
any Person, credit or accommodations; to contract liabilities and
obligations, direct or contingent and of every kind and nature with or
without security; and to repay, discharge, settle, adjust, compromise
or liquidate any such loan, advance, credit, obligation or liability;
(f) To pledge, hypothecate, mortgage, assign,
deposit, deliver, enter into sale and leaseback arrangements or
otherwise give as security or as additional or substitute security, or
for sale or other disposition any and all Partnership property,
tangible or intangible, including, but not limited to, real estate and
beneficial interests in land trusts, and to make substitutions
thereof, and to receive any proceeds thereof upon the release or
surrender thereof; to sign, execute and deliver any and all
assignments, deeds and other contracts and instruments in writing; to
authorize, give, make, procure, accept and receive moneys, payments,
property, notices, demands, vouchers, receipts, releases, compromises
and adjustments; to waive notices, demands, protests and authorize and
execute waivers of every kind and nature; to enter into, make,
execute, deliver and receive written agreements, undertakings and
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instruments of every kind and nature; to give oral instructions and
make oral agreements; and generally to do any and all other acts and
things incidental to any of the foregoing or with reference to any
dealings or transactions which any attorney may deem necessary, proper
or advisable;
(g) To acquire and enter into any contract of
insurance which the General Partner deems necessary or appropriate for
the protection of the Partnership, for the conservation of the
Partnership's assets or for any purpose convenient or beneficial to
the Partnership;
(h) To conduct any and all banking transactions on
behalf of the Partnership; to adjust and settle checking, savings, and
other accounts with such institutions as the General Partner shall
deem appropriate; to draw, sign, execute, accept, endorse, guarantee,
deliver, receive and pay any checks, drafts, bills of exchange,
acceptances, notes, obligations, undertakings and other instruments
for or relating to the payment of money in, into, or from any account
in the Partnership's name; to execute, procure, consent to and
authorize extensions and renewals of the same; to make deposits and
withdraw the same and to negotiate or discount commercial paper,
acceptances, negotiable instruments, bills of exchange and dollar
drafts;
(i) To demand, sue for, receive, and otherwise take
steps to collect or recover all debts, rents, proceeds, interests,
dividends, goods, chattels, income from property, damages and all
other property, to which the Partnership may be entitled or which are
or may become due to the Partnership from any Person; to commence,
prosecute or enforce, or to defend answer or oppose, contest and
abandon all legal proceedings in which the Partnership is or may
hereafter be interested; and to settle, compromise or submit to
arbitration any accounts, debts, claims, disputes and matters which
may arise between the Partnership and any other Person and to grant an
extension of time for the payment or satisfaction thereof on any
terms, with or without security;
(j) To make arrangements for financing, including
the taking of all action deemed necessary or appropriate by the
General Partner to cause any approved loans to be closed;
(k) To take all reasonable measures necessary to
insure compliance by the Partnership with applicable
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arangements, and other contractual obligations and arrangements entered into by
the Partnership from time to including periodic reports as required to lenders
and using all due diligence to insure that the Partnership is in compliance with
its contractual obligations;
(l) To maintain the Partnership's books and records; and
(m) To prepare and deliver, or cause to be prepared and
delivered by the Partnership's Accountants, all financial and other reports with
respect to the operations of the Partnership, and preparation and filing of all
Federal and state tax returns and reports.
Except as otherwise provided herein, to the extent the duties of the
General Partner require expenditures of funds to be paid to third parties, the
General Partner shall not have any obligations hereunder except to the extent
that Partnership funds are reasonably available to it for the performance of
such duties, and nothing herein contained shall be deemed to authorize or
require the General Partner, in its capacity as such, to expend its individual
funds for payment to third parties or to undertake any individual liability or
obligation on behalf of the Partnership.
9.3 Major Decisions. In addition to the requirements of Sections
12.6(a) and (b), if applicable, until such time prior to the first anniversary
date hereof as the General Partner owns sixty-seven percent (67%) of the
Partnership Units, and thereafter until such time as the General Partner owns
sixty percent (60%) of the Partnership Units, the General Partner shall not,
without the prior written consent of holders of at least fifty-one percent (51%)
of the Partnership Units held by the Limited Partners, taken as a single class,
on behalf of the Partnership, undertake any of the following actions:
(a) Engage in a Termination Transaction as defined in Section
12.6(a) hereof;
(b) Dissolve, liquidate or wind-up the Partnership;
(c) Change the nature of the business of the Partnership; or
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(d) Admit, remove or retain a general partner.
9.4 Restrictions on General Partner's Authority.
(a) The General Partner may not take any action in
contravention of this Agreement, including, without limitation:
(i) Take any action that would make it impossible to
carry on the ordinary business of the Partnership, except as
otherwise provided in this Agreement;
(ii) Admit a Person as a Partner, except as otherwise
provided in this Agreement;
(iii) Perform any act that would subject a Limited
Partner to liability as a general partner in any jurisdiction
or any other liability except as provided herein or under the
Act;
(iv) Enter into any contract, mortgage, loan or other
agreement that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited Partner
to exercise its Redemption Rights in full, except with the
written consent of such Limited Partner; or
(v) Possess Partnership property, assign any rights
in specific Partnership property, for other than a Partnership
purpose except as otherwise provided in this Agreement.
(b) The General Partner may not, except as otherwise permitted
in Sections 9.9 and 12.6 hereof, change its policy of holding its assets and
conducting its business substantially through the Partnership without the
consent of all the Limited Partners.
9.5 Engagements by the Partnership. The General Partner may engage, on
behalf and at the expense of the Partnership, such professional persons, firms
or corporations as the General Partner in its reasonable judgment shall deem
advisable for the conduct and operation of the business of the Partnership,
including, without limitation, brokers, mortgage bankers, lawyers, accountants,
architects, engineers, consultants, contractors and purveyors of other such
services for the
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Partnership on such terms and for such compensation or costs as
the General Partner, in its reasonable judgment, shall determine.
9.6 Engagement of Affiliates. The General Partner may, on behalf and at
the expense of the Partnership, engage the General Partner or a firm in which
the General Partner, a Limited Partner, or a Partner, officer, director,
stockholder or Affiliate of any of them, has an interest, to render services to
the Partnership and/or the assets of the Partnership, provided that the fees or
other compensation payable for such services are specifically authorized by the
terms of this Agreement or are comparable to those prevailing in arm's-length
transactions for similar services and are approved by the Board of Directors.
9.7 Liability of the General Partner. The General Partner and its
Affiliates, officers, directors, agents and employees shall not be liable,
responsible or accountable in damages or otherwise to the Partnership or any of
the Partners or their successors or assigns for any acts or omissions performed
or omitted within the scope of its authority as General Partner, or otherwise
conferred on the General Partner and such Affiliates, officers, directors,
agents and employees by this Agreement, provided that the General Partner or
such Affiliates, officers, directors, agents or employees shall act in good
faith and shall not be guilty of willful misconduct or gross negligence.
9.8 Reimbursement of Certain Expenses of the General Partner.
(a) Except as provided in this Section 9.8 and elsewhere in
this Agreement (including the provisions of Articles 7 and 8 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) 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 relating to the management and administration of any
Affiliates of the General
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Partner or the Partnership such as auditing expenses and filing fees); provided
that (1) 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 9.9 below and (ii)
any amount derived by the General Partner from any investments permitted in
Section 9.9 below and (2) any expenses that are determined by the General
Partner to be unrelated to the Partnership shall not be treated as Partnership
expenses for purposes of this Section 9.8(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
it's sole and absolute discretion deems fair and reasonable. 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.
9.9 Outside Activities of the General Partner. Notwithstanding anything
to the contrary contained herein, except as set forth in this Section 9.9, the
General Partner shall not, directly or indirectly, without the consent of a
majority in interest of the Limited Partners (excluding the General Partner),
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 in such
activities as are incidental to any of the foregoing. Without the consent of a
majority in interest of the Limited Partners (excluding the General Partner),
the assets of the General Partner shall be limited to Partnership Interests and
permitted debt obligations of the Partnership, so that Common Stock and OP Units
are completely fungible except as otherwise specifically provided herein;
provided, that the General Partner shall be permitted to hold (i) interests and
entities, including "Qualified REIT Subsidiaries"(which are defined in Section
856(i)(2) of the Code, as amended, as any corporation if 100% of the stock of
such corporation is held by the REIT at all times the corporation was in
existence), that hold no material assets; (ii) interests in Qualified REIT
Subsidiaries or other entities that are not taxed as corporations for federal
income tax purposes) that own only
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interests in the Partnership and/or interests in other Qualified REIT
Subsidiaries (or other entities that are not taxed as corporations for federal
income tax purposes) that either hold no assets or hold only interests in the
Partnership; (iii) assets and or interests in entities, including Qualified REIT
Subsidiaries, 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), provided that (X) the General Partner entity will apply the net income
from such assets (other than net income derived as a result of a Qualified REIT
Subsidiary ownership of an interest in the Partnership) to offset REIT expenses
before utilizing the distribution provisions of Section 8 hereof, (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 a Qualified REIT
Subsidiary ownership of an interest in the Partnership) to the Partnership
(after taking into account REIT 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 Qualified REIT Subsidiaries
and the Partnerships) to the Partnership or an entity controlled by the
Partnership as soon as such 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 Qualified REIT Subsidiary (or other entities that are not
taxed as corporations for federal income tax purposes), up to a one percent (1%)
interest in any partnership or limited liability company at least ninety-nine
(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 Partner
Partnership Interests and shall be entitled to exercise all rights of a Limited
Partner relating to such Partnership Interests.
9.10 Operation in Accordance with REIT Requirements. The Partners
acknowledge and agree that the Partnership shall be operated in a manner that
will enable the General Partner to (i) satisfy the REIT Requirements and (ii)
avoid the imposition of any federal income or excise tax liability. The
Partnership
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shall avoid taking any action which would result in the General Partner ceasing
to satisfy the REIT Requirements or would result in the imposition of any
federal income or excise tax liability on the General Partner.
9.11 Title Holder. To the extent allowable under applicable law, title
to all or any part of the properties of the Partnership may be held in the name
of the Partnership or any other individual, corporation, partnership, trust or
otherwise, 100% of the beneficial interest in which shall at all times be vested
in the Partnership except for de minimus interests held by qualified REIT
subsidiaries. Any such title holder shall perform any and all of its respective
functions to the extent and upon such terms and conditions as may be determined
from time to time by the General Partner.
ARTICLE 10
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RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
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10.1 No Participation in Management of Partnership; Rights of Limited
Partners to Certain Documents.
(a) The Limited Partners shall have such rights as are
enumerated as rights of limited partners under the Act. The Limited Partners, in
such capacity, shall not take part in, or interfere in any manner, with the
conduct or control of the Partnership's business and shall have no right or
authority to act for or bind the Partnership, said powers being vested solely
and exclusively in the General Partner. Except as specifically set forth in
Section 9.3 or otherwise in this Agreement, the Limited Partners, in their
capacities as such, shall not have any right or power whatsoever to take any
action with respect to the conduct or control of the Partnership or its business
including, but not limited to, any right to vote on, or otherwise approve, any
matters or decisions, whether material, major or otherwise, in connection with
the business of the Partnership.
(b) In addition to any other rights provided in this Agreement
or by the Act, and except as limited by Section 10.1(c) 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:
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(i) to obtain a copy of the most recent annual and
quarterly reports filed with the Securities and Exchange
Commission by the General Partner pursuant to the Securities
Exchange Act of 1934, as amended, and each report sent to the
stockholders of the General Partner;
(ii) to obtain a copy of the Partnership's federal,
state and local income tax returns for each fiscal year of the
Partnership;
(iii) to obtain a current list of the name and last
known business, residence or mailing address of each Partner;
(iv) to obtain a copy of this Agreement and the
Certificate and all amendments thereto, together with executed
copies of all powers of attorney pursuant to which this
Agreement, the Certificate and all amendments thereto have
been executed; and
(v) to obtain true and full information regarding the
amount of cash and a description and statement of any other
property or services contributed by each Partner and which
each Partner has agreed to contribute in the future, and the
date on which each became a Partner.
(c) Notwithstanding any other provisions of Section 10.1(b)
hereof, 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
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 the General Partner or (ii) the Partnership
or the General Partner is required by law or by agreements with unaffiliated
third parties to keep confidential.
10.2 Withdrawal, Retirement, Death, Incompetency, Insolvency or
Dissolution of a Limited Partner. A Limited Partner shall have no right to
withdraw, retire or resign from the Partnership. The death, incompetency,
insolvency or dissolution of a Limited
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Partner shall not terminate the Partnership. Upon the death of a Limited
Partner, his or her executor, administrator or successor in interest shall have
all of the rights and duties of a Limited Partner for the purpose of settling
his or her estate.
10.3 Redemption Rights.
(a) Grant of Rights. The General Partner does hereby grant to
the Limited Partners and the Limited Partners do hereby accept the right, but
not the obligation (such right shall be referred to hereinafter sometimes as the
"Redemption Rights"), to require the Partnership to redeem all or part of their
Partnership Units for shares of Common Stock and/or cash, at any time or from
time to time after the date which is one (1) year after the date of the original
issuance by the Partnership to any Limited Partner of such Partnership Units, on
the terms and subject to the conditions and restrictions contained in this
Section 10.3.
(b) Delivery of Exercise Notices. Any one or more Limited
Partners ("Exercising Partners") may, subject to the limitations set forth in
this Section 10.3, deliver to the General Partner written notice in the form
attached to the Unit Certificate as Attachment 1 (the "Exercise Notice")
pursuant to which such Exercising Partners elect to exercise their Redemption
Rights with respect to all or any portion of their Partnership Units. The
Exercise Notice shall specify the specific number of Partnership Units which the
Limited Partner intends to require the Partnership to redeem for shares of
Common Stock and the specific number of Partnership Units which the Limited
Partner intends to require the Partnership to redeem for cash. Only whole
numbers of Partnership Units may be redeemed. Once delivered, the Exercise
Notice shall be irrevocable, subject to payment by the General Partner of shares
of Common Stock and/or cash in respect of such Partnership Units in accordance
with the terms hereof.
(c) Assumption by General Partner. Notwithstanding anything
contained herein to the contrary, the General Partner may, in its sole and
absolute discretion, assume directly the obligation with respect to and satisfy
an Exercising Partner's exercise of a Redemption Right by paying to the
Exercising Partner, at the General Partner's election, shares of Common Stock
and/or cash, as determined in accordance with the provisions of Section 10.3(e)
below, whereupon the General
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Partner shall acquire the Offered Units and shall be treated for all purposes of
this Agreement as the owner of such Offered Units. In the event the General
Partner shall exercise its right to satisfy the Redemption Right in the manner
described in the preceding sentence, the Partnership shall have no obligation to
pay any amount to the Exercising Partner with respect to such Exercising
Partner's exercise of the Redemption Right, and each of the Exercising Partner,
the Partnership and the General Partner shall treat the transaction between the
General Partner and the Exercising Partner as a sale of the Offered Units to the
General Partner for federal income tax purposes. Moreover, in the event the
General Partner shall exercise its right to satisfy the Redemption Right, any
such interests acquired by the General Partner shall be automatically converted
into General Partner Interests.
(d) Limitation on Exercise of Redemption Rights. Redemption
Rights may be exercised at any time and from time to time after the date which
is one (1) year after the date of the original issuance by the Partnership to
any Limited Partner of such Partnership Units, subject to the following
limitations:
(i) A Limited Partner may not exercise its Redemption
Rights pursuant to any one particular Exercise Notice for less
than One Thousand (1,000) Partnership Units or, if such
Limited Partner holds less than One Thousand (1,000)
Partnership Units, all of the Partnership Units held by such
Limited Partner;
(ii) A Limited Partner shall not have the right to
exercise its Redemption Rights hereunder if, in the opinion of
counsel selected by the General Partner, in its sole and
absolute discretion, such exercise and/or issuance of shares
of Common Stock may or would (A) violate the General Partner's
Articles of Incorporation, as amended from time to time, (B)
cause the General Partner to fail any one or more of the REIT
Requirements or (C) constitute a violation of applicable
securities laws; and
(iii) Each Limited Partner acknowledges and agrees
that the issuance of shares of Common Stock pursuant to the
Redemption Rights will not be registered under the Securities
Act or any state securities laws. Accordingly, shares of
Common Stock
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issued to such Limited Partner may be required to be held
indefinitely and the General Partner shall have no obligation
to register such shares under the Securities Act or any state
securities laws unless required to do so pursuant to a
separate written agreement entered into by the General Partner
at the time of the issuance. In addition, such Limited Partner
will be required to meet such other requirements and to
provide such other information and representations as the
General Partner may require, which are required in the opinion
of its counsel to lawfully allow it to issue such shares
without registration under the Securities Act and any
applicable state securities laws. Each Limited Partner
acknowledges that the certificates representing shares of
Common Stock issued will also bear a legend with respect to
any restrictions on transfer required in the opinion of
counsel for the General Partner. The General Partner
acknowledges that the Limited Partners have been granted the
right, in certain circumstances and subject to certain
limitations, to require the registration under the Securities
Act of the shares of Common Stock issued pursuant to the
Redemption Rights.
(e) Computation of Number of Exchange Shares and/or Cash To Be
Paid. Each Partnership Unit which is to be redeemed for shares of Common Stock
shall be redeemed for one share of Common Stock, as adjusted from time to time
as provided in Section 10.3(i). Upon an election to redeem Partnership Units for
shares of Common Stock, the General Partner shall cause the Partnership to
purchase such Common Stock for the redemption either (i) from the General
Partner, or (ii) on the open market. Each Partnership Unit which is to be
redeemed for cash shall be redeemed for an amount of cash equal to the Current
Per Share Market Price (determined as of the Trading Day immediately preceding
the date upon which the closing of the redemption of Offered Units is to occur).
Notwithstanding anything contained herein to the contrary, the General Partner,
in its sole and absolute discretion, shall have the right either (i) to deliver
shares of Common Stock to each Exercising Partner in lieu of all or any portion
of the cash requested by such Exercising Partner, the number of which shares of
Common Stock shall be determined pursuant to the first sentence of this Section
10.3(e) or (ii) to cause the Partnership to pay cash to each Exercising Partner
in lieu of all or any portion of the number of shares of Common
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Stock requested by such Exercising Partner, the amount of such cash per
Partnership Unit shall be determined pursuant to the second sentence of this
Section 10.3(e). The General Partner shall not be required to issue fractions of
shares of Common Stock in return for Partnership Units. If more than one
Partnership Unit shall be requested to be redeemed at the same time by the same
Limited Partner, the number of full shares of Common Stock that shall be
issuable upon the redemption thereof shall be computed on the basis of the
aggregate number of shares of Common Stock represented by the Partnership Units
so presented. If any fraction of a share of Common Stock would, except for the
provisions of this Section 10.3(e), be issuable on the redemption of any
Partnership Units (or specified portion thereof), the General Partner shall pay
an amount in cash equal to the Current Per Share Market Price (determined as of
the Trading Day immediately preceding the date upon the closing of the
Redemption of the Offered Units is to occur), multiplied by such fraction.
(f) Closing; Delivery of Election Notice. The closing of the
redemption of Offered Units shall, unless otherwise mutually agreed, be held at
the principal offices of the General Partner, on the date agreed to by the
General Partner and the Exercising Partners, which date shall in no event be
later than: (i) ten (10) business days after the date of delivery of the
Exercise Notice to the General Partner or (ii) the first date upon which all
legal and other conditions with respect to such redemption have been satisfied
(which shall include the expiration or termination of any applicable waiting
periods).
(g) Closing Deliveries. At the closing of the redemption of
Offered Units, (i) the Exercising Partners shall execute and deliver (A) proper
instruments of transfer and assignment of the Offered Units, (B) a Unit
Certificate or Unit Certificates representing the number of Offered Units to be
so redeemed and (C) representations and warranties with respect to their due
authority to sell all of the right, title and interest in and to such Offered
Units to the General Partner and, with respect to the status of the Offered
Units, that such Offered Units are free and clear of all liens, claims and
encumbrances whatsoever, and (ii) the General Partner shall (A) if shares of
Common Stock are to be issued, execute and deliver representations and
warranties with respect to its due authority to issue the shares of Common Stock
to be received in the exchange; deliver an opinion of counsel for the General
Partner,
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reasonably satisfactory to the Exercising Partners, to the effect that such
shares of Common Stock have been duly authorized, are validly issued, fully-paid
and non-assessable; and deliver a stock certificate or certificates evidencing
the shares of Common Stock to be issued and registered in the name(s) of the
Exercising Partner(s) or its or their designee(s), and/or (B) if cash is to be
paid for Partnership Units, deliver a check in the amount of any cash due to the
Exercising Partner(s) at such closing. If any Exercising Partner shall have
delivered a Unit Certificate or Unit Certificates representing a number of
Partnership Units in excess of the number of Offered Units, the Partnership
shall issue to such Exercising Partner, at the expense of the Partnership, a new
Unit Certificate covering the number of Partnership Units representing the
unredeemed portion of the Unit Certificate or Unit Certificates so surrendered,
which new Unit Certificate shall entitle the holder thereof to such rights of
ownership of Partnership Units to the same extent as if the Unit Certificate
covering such unredeemed Partnership Units had not been surrendered for
redemption.
(h) Restriction on Redemption of Partnership Units.
Notwithstanding anything in paragraphs (e) and (f) above, or any other provision
of this Section 10.3 to the contrary, after the earlier of January 1, 2006, or
the date on which the number of Partners exceeds 100, upon delivery of an
Exercise Notice, the General Partner shall notify the Limited Partner, within 10
days thereof, whether such Offered Units will be redeemed for cash or Common
Stock and the closing of the redemption of Offered Units shall not occur any
earlier than the later of (i) 10 days after such notification by the General
Partner or (ii) the fifteenth (15th) day after the date on which the Exercise
Notice for such Offered Units was delivered to the General Partner (or, if
later, in both cases (i) and (ii), the first date upon which all legal and other
conditions with respect to such redemption have been satisfied, which shall
include the expiration or termination of any applicable waiting periods), and in
no event shall the current Per Share Market Price of any such Offered Units be
determined as of any Trading Date prior to the fourteenth (14th) business day
after the date of delivery of the Exercise Notice; provided, however, that the
provisions of this Section 10.3(h) shall cease to apply and shall have no
further force or effect on the date, if any, on which the Partnership receives
either a ruling from the IRS or an unqualified opinion from the General
Partner's counsel to the effect that, under the original provisions of
paragraphs (e) and (f) prior to any modification
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thereof by this paragraph (h), the Partnership will not be treated as a
"publicly traded partnership" within the meaning of Section 7704 of the Code or
any successor provision.
(i) Term of Rights. Unless sooner terminated, the rights of
the parties with respect to the Redemption Rights shall commence as of the date
which is one (1) year after the date of this Agreement and lapse for all
purposes and in all respects upon the termination of the Partnership; provided,
however, that the parties hereto shall continue to be bound by an Exercise
Notice delivered to the General Partner prior to such termination.
(j) Covenants of the General Partner. To facilitate the
General Partner's ability to fully perform its obligations hereunder, the
General Partner covenants and agrees as follows:
(i) At all times during the pendency of the
Redemption Rights, the General Partner shall reserve for
issuance such number of shares of Common Stock as may be
necessary to enable the General Partner to issue such shares
in full exchange for all Partnership Units held by the Limited
Partners which are from time to time issued and outstanding;
(ii) During the pendency of the Redemption Rights,
each Limited Partner shall receive in a timely manner all
reports and/or other communications transmitted from time to
time by the General Partner to its stockholders generally; and
(iii) In case the General Partner shall issue rights
or warrants to all holders of shares of its Common Stock
entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the Current Per Share
Market Price as of the date immediately prior to the date of
such issuance, the General Partner shall also issue to each
holder of a Partnership Unit such number of rights or
warrants, as the case may be, as he would have been entitled
to receive had he required the Partnership to redeem his
Partnership Units immediately prior to the record date for
such issuance by the General Partner.
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(iv) In case the outstanding shares of Common Stock
shall be subdivided into a greater number of shares, the
number of shares of Common Stock for which each Partnership
Unit thereafter may be redeemed shall be increased
proportionately, and, conversely, in case outstanding shares
of Common Stock each shall be combined into a smaller number
of shares, the number of shares of Common Stock for which each
Partnership Unit thereafter may be redeemed shall be reduced
proportionately, such increase or reduction as the case may
be, to become effective immediately after the opening of
business on the Trading Day following the day upon which such
subdivision or combination becomes effective.
(v) In case shares of Common Stock shall be changed
into the same or a different number of shares of any class or
classes of shares of beneficial interest, whether by capital
reorganization, reclassification or otherwise (other than a
subdivision or combination of shares or a stock dividend
described in Section 10.3(i)(iv) above) then and in each such
event the Limited Partners shall have the right thereafter to
require the Partnership to redeem their Partnership Units for
the kind and amount of shares and other securities and
property which would have been received upon such
reorganization, reclassification or other change by holders of
the number of shares of Common Stock for which the Partnership
Units might have been redeemed immediately prior to such
reorganization, reclassification or change.
(vi) The General Partner may, but shall not be
required to, make such adjustments to the number of shares of
Common Stock issuable upon redemption of a Partnership Unit,
in addition to those required by paragraphs (iii), (iv) and
(v) of this Section 10.3(i), as the Board of Directors
considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock
rights shall not be taxable to the recipients. The Board of
Directors shall have the power to resolve any ambiguity or
correct any error in the adjustments made pursuant to this
Section 10.3(i) and its actions in so doing shall be final and
conclusive.
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(k) Limited Partners' Covenant. Each Limited Partner covenants
and agrees with the General Partner that all Offered Units tendered to the
General Partner in accordance with the exercise of Redemption Rights herein
provided shall be delivered to the General Partner free and clear of all liens,
claims and encumbrances whatsoever and should any such liens, claims and/or
encumbrances exist or arise with respect to such Offered Units, the General
Partner shall be under no obligation to acquire the same. 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 Offered Units to the General Partner
(or its designee), such Limited Partner shall assume and pay such transfer tax.
ARTICLE 11
----------
BANKING, RECORDS AND TAX MATTERS
--------------------------------
11.1 Partnership Funds. All funds of the Partnership shall be deposited
in its name in accounts (with banks, "money-market funds," or securities of the
United States government or like investment or depository media) designated by
the General Partner, and the General Partner or its designees shall have the
right to draw checks or other orders of withdrawal thereon and make, deliver,
accept and endorse negotiable instruments in connection with the Partnership
business.
11.2 Books and Records. The following books, records, and accounts
shall be maintained by the Partnership, showing its assets, liabilities,
transactions, and financial condition: a current list of the full name and last
known address of each Partner, separately identifying the General and Limited
Partners and set forth in alphabetical order and setting forth the amount of
cash or a description and statement of the Agreed Value of other property
contributed or agreed to be contributed by each partner; the date on which each
became a Partner; a copy of the Certificate and all amendments thereto; copies
of the Partnership's federal, state and local income tax returns and reports, if
any, for the six most recent years; copies of this Agreement and any amendments
thereto; and copies of any financial statements of the Partnership for the three
most recent years. The Partnership's books shall be maintained at the principal
office of the Partnership. Each Partner shall have the right to inspect and copy
such materials at all reasonable times and
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during ordinary business hours. The General Partner is not required to deliver
to any Limited Partner copies of the Certificate or any amendments thereto,
unless requested by such Limited Partner.
11.3 Financial Statements. Within ninety-five (95) days after the close
of each fiscal year of the Partnership, the General Partner shall cause to be
prepared (at the Partnership's expense) and furnished to each Person who was a
Partner during the fiscal year then ended, a balance sheet of the Partnership as
of the close of such fiscal year and statements of income or loss, and Net Cash
Flow, if any. Such statements shall be prepared in accordance with generally
accepted accounting principles and certified by the Accountants for the
Partnership, unless such certification is waived, in writing, by all of the
Partners.
11.4 Tax Returns. Within ninety (90) days following the close of each
fiscal year of the Partnership, the General Partner shall cause to be prepared
(at the Partnership's expense) a United States Partnership Return of Income and
cause to be furnished to each Person who was a Partner during the fiscal year a
schedule (a "K-1 Schedule") of each such Partner's share of income, credits, and
deductions on the form then prescribed by the IRS. All elections and options
available to, or determinations as to items of income or expense of, the
Partnership for federal or state income tax purposes shall be taken, rejected or
made by the Partnership in the sole discretion of the General Partner.
11.5 Section 754 Matters. The General Partner, on behalf of the
Partnership, shall file an election under Section 754 of the Code in accordance
with the procedures set forth in the applicable Regulations promulgated
thereunder, which shall be effective beginning with the first fiscal year of the
Partnership with respect to which the Partnership is eligible to make such
election, which election, for such fiscal year, may not be revoked for any
reason.
11.6 Tax Matter Partners. The General Partner is hereby appointed the
"tax matters partner" of the Partnership for all purposes pursuant to Sections
6221-6231 of the Code. The Partnership shall reimburse the tax matters partner
for any and all out-of-pocket costs and expenses (including attorneys' and
accountants' fees) incurred or sustained by it in its capacity as
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tax matters partner. The Partnership shall indemnify, defend and hold the tax
matters partner harmless from and against any loss, liability, damage, cost or
expense (including attorneys' and accountants' fees) sustained or incurred as a
result of any act or decision concerning the Partnership tax matters and within
the scope of its responsibility as tax matters partner.
11.7 Other Reports. The General Partner shall deliver to each Limited
Partner, in a timely manner, all reports and/or other communications transmitted
from time to time by the General Partner to its stockholders.
ARTICLE 12
----------
TRANSFER OF GENERAL PARTNER INTERESTS
\ -------------------------------------
12.1 Transfer of Interest of the General Partner. Except as provided in
Section 9.3 hereof, no General Partner may at any time sell, assign, transfer,
pledge or encumber any or all of its Partnership Interest in the Partnership or
withdraw or retire from the Partnership except as otherwise provided herein.
Retirement or withdrawal from the Partnership shall not relieve the General
Partner of any obligation theretofore incurred by it hereunder. Notwithstanding
anything contained herein to the contrary, the Limited Partners shall have no
right whatsoever to remove the General Partner from the Partnership.
12.2 Retirement of the General Partner. If a General Partner other than
the Interim Managing General Partner shall liquidate or dissolve, be adjudged
bankrupt, enter into an assignment for the benefit of creditors, have a receiver
appointed to administer its interest in the Partnership, be the subject of a
voluntary or involuntary petition for bankruptcy that is not dismissed or
vacated within ninety (90) days of filing, or have its interest in the
Partnership seized by a judgment creditor, or if there shall be an individual
general partner and he shall die, be adjudicated incompetent or become
permanently disabled (each of the foregoing events is referred to hereinafter as
an "Event of Retirement"), such General Partner, without further act or notice,
immediately shall be deemed to have retired as General Partner of the
Partnership. If the General Partner retires as General Partner of the
Partnership as aforesaid, (i) such General Partner (or its administrator,
executor, personal representative or successor) (a) shall become a
nonparticipating Limited Partner (a "Nonparticipating Limited
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Partner") retaining the General Partner's former interest in the Profits, Losses
and Net Cash Flow of the Partnership, but shall not acquire any right or
interest in any payment or distribution to the Limited Partners, as such,
pursuant hereto, (b) shall have no right to participate in the management of the
affairs of the Partnership, and (c) shall be disregarded in determining whether
any approval, consent, or other action has been given or taken by the Limited
Partners; and (ii) the surviving General Partner(s), if any, shall remain as
such and the Partners hereby agree and consent that the Partnership shall
continue in effect and shall not terminate, subject, however, to the provisions
of Section 12.5 hereof.
12.3 Transferee of the General Partner's Interest. Except for a
Termination Transaction within the meaning of Section 12.6 hereof, any Person,
other than the General Partner, who acquires, in any manner whatsoever (except
as herein otherwise provided) the interest, or any portion thereof, of the
General Partner, shall not be a General Partner, but shall be entitled to become
a Nonparticipating Limited Partner upon written acceptance and adoption of all
of the terms and provisions of this Agreement and compliance with the
requirements of Section 13.3 of this Agreement. Such Person shall, to the extent
of the interest acquired, be entitled only to the transferor General Partner's
rights, if any, in the Profits, Losses and Net Cash Flow of the Partnership, but
shall not acquire any right or interest in any payment or distribution to the
Limited Partners, as such, pursuant hereto. No such Person shall have any right
to participate in the management of the affairs of the Partnership, and the
interest acquired by such Person shall be disregarded in determining whether any
approval, consent or other action has been given or taken by the Limited
Partners.
12.4 Retirement of Last Remaining General Partner. If the last
remaining General Partner shall at any time withdraw or suffer an Event of
Retirement, the Limited Partners shall have the right, within ninety (90) days
thereafter, by a written consent executed and delivered by Limited Partners
owning a majority of the issued and outstanding Partnership Interests taken as a
single class, to appoint one or more new General Partners as replacement General
Partners, unless the Act requires a greater percentage of the Limited Partners
to consent to the continuation of the Partnership, in which case such higher
percentage shall be required for the continuation of the Partnership. In such
event, the Limited Partners shall create
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for such replacement General Partners such interest in the Partnership Profits,
Losses and Net Cash Flow as the Limited Partners may agree upon from among their
collective interests in the Partnership.
12.5 Continuation of Partnership. In the event of the timely
appointment of a replacement or new General Partner(s) pursuant to this Article
12, the relationship of the Partners shall be governed by the provisions of this
Agreement, the Partnership shall be continued, and the replacement or new
General Partner(s) shall have all of the management rights, duties,
responsibilities, authority and powers provided the General Partner in this
Agreement. If the Limited Partners fail to select a replacement or new General
Partner(s), whichever the case may be, within ninety (90) days following
retirement of the last remaining General Partner, the Partnership shall dissolve
and terminate.
12.6 Merger or Consolidation of the General Partner.
(a) Whether or not Section 9.3 hereof is applicable, the
General Partner shall not, unless Section 12.6(b) is applicable, engage in any
merger, consolidation or other combination with or into another person, sale of
all or substantially all of its assets or any reclassification, recapitalization
or similar transaction (each, a "Termination Transaction"), unless such
Termination Transaction is one in connection with which all Limited Partners
either will receive, or will have the right to elect to receive, for each
Partnership Unit, an amount of cash, securities, or other property equal to the
product of (i) the number of shares of Common Stock into which such Partnership
Unit is convertible and (ii) the greatest amount of cash, securities or other
property paid to a holder of one share of Common Stock in consideration of one
share of Common Stock pursuant to the terms of the Termination Transaction;
provided that; if, in connection with the Termination Transaction, a purchase,
tender or exchange offer shall have been made to and accepted by the holders of
the outstanding Common Stock, each 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 its right to Redemption (as set forth in Section 10.3) and received
Common Stock in exchange for its Partnership Units immediately prior to the
expiration of such purchase, tender or exchange offer and had thereupon accepted
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such purchase, tender or exchange offer and then such Termination Transaction
shall have been consummated.
(b) Whether or not Section 9.3 hereof is applicable, the
General Partner may merge, or otherwise combine its assets, with another entity
without satisfying the requirements of Section 12.6(a) hereof if: (i)
immediately after such merger or other combination, substantially all of the
assets directly or indirectly owned by the surviving entity, other than
Partnership Units held by such General Partner, are owned directly or indirectly
by the Partnership or another limited partnership or limited liability company
which is the survivor of a merger, consolidation or combination of assets with
the Partnership (in each case, the "Surviving Partnership"); (ii) the Limited
Partners own a percentage interest of the Surviving Partnership based on the
relative fair market value of the net assets of the Partnership (as determined
pursuant to Section 12.6(c)) and the relative fair market value of the other net
assets of the Surviving Partnership (as determined pursuant to Section 12.6(c))
immediately prior to the consummation of such transaction; (iii) the rights,
preferences and privileges of the Limited Partners in the Surviving Partnership
are at least as favorable as those in effect immediately prior to the
consummation of such transaction and as those applicable to any other limited
partners or non-managing members of the Surviving Partnership; and (iv) such
rights of the Limited Partners include the right to exchange their interests in
the Surviving Partnership for at least one of: (A) the consideration available
to such Limited Partners pursuant to Section 12.6(a), or (B) if the ultimate
controlling person of the Surviving Partnership has publicly traded common
equity securities, such common equity securities, with an exchange ration based
on the relative fair market value of such securities (as determined pursuant to
Section 12.6(c)) and the Common Stock.
(c) In connection with any transaction permitted by Section
12.6(a) or 12.6(b), the relative fair market values shall be reasonably
determined by the General Partner as of the time of such transaction and, to the
extent applicable, shall be no less favorable to the Limited Partners than the
relative values reflected in the terms of such transactions.
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ARTICLE 13
----------
TRANSFER OF LIMITED PARTNER INTERESTS
-------------------------------------
13.1 Transfer of Interest of a Limited Partner. Except as otherwise
specifically provided in this Agreement, no Limited Partner may sell, assign,
transfer, pledge, encumber or in any manner dispose of all or any part of its
Partnership Interest without the prior written consent of the General Partner,
which consent may not be unreasonably withheld. Notwithstanding the foregoing,
each Limited Partner shall have the right to (i) pledge or otherwise encumber
all or any portion of its Partnership Interest to an unrelated lender as
security for a bona fide obligation (subject, however, to applicable securities
laws) and/or (ii) transfer all or any portion of its Partnership Interest to
members of the Immediate Family of such Limited Partner and to one or more
trusts for the benefit of one or more members of the Immediate Family of such
Limited Partner for estate and/or gift tax purposes, upon prior written notice
to the General Partner. Without limiting the generality of the foregoing, in no
event shall the General Partner consent to an assignment of all or any portion
of the Partnership Interest of a Limited Partner in the Partnership if, in the
opinion of the General Partner (or of counsel satisfactory to the General
Partner), such assignment (i) will result in a termination of the Partnership
for federal income tax purposes or otherwise result in adverse tax consequences
to the Partnership or any Partner, (ii) will result in the Partnership failing
to qualify for an exemption from the registration requirements of the federal or
any applicable state securities laws, (iii) will result in the imposition of
fiduciary responsibility on the Partnership or any Partner under the Employee
Retirement Income Security Act of 1974, as amended from time to time, (iv) will
result in a violation of any provision of any mortgage or trust deed (or the
note or bond secured thereby) constituting a lien against any assets of the
Partnership, or other instrument, document or agreement to which the Partnership
is a party or otherwise bound, (v) represents a transfer of any component
portion of a Partnership Interest, such as the Capital Account, or rights to Net
Cash Flow, separate and apart from all other components of a Partnership
Interest, or (vi) will cause the General Partner to cease to comply with any and
all REIT Requirements. Subject to satisfaction of the conditions therefor set
forth or referred to herein, each Limited Partner hereby consents to the
substitution or admission of any assignee of a Limited Partner. Any sale,
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assignment, transfer, pledge, encumbrance, hypothecation or other disposition by
a Limited Partner of all or any part of its Partnership Interest in violation of
the provisions hereof shall be void ab initio and of no force or effect
whatsoever.
13.2 Assignee and Substitute Limited Partners. No Person shall be
admitted as an assignee or substituted Limited Partner under this Agreement
unless and until:
(a) An assignment is made in writing, signed by the assigning
Partner and accepted in writing by the assignee, and a duplicate original of
such assignment has been delivered to and approved by the General Partner;
(b) The General Partner has received an opinion of counsel
favorably covering the matters described in clauses (i) through (vi) of Section
13.1 above, or waived all or any portion of this requirement;
(c) The prospective admittee executes and delivers to the
General Partner a written agreement in form reasonably satisfactory to the
General Partner pursuant to which said Person agrees to be bound by and confirms
the obligations, representations, warranties and power of attorney contained in
this Agreement; and
(d) An appropriate amendment to this Agreement is executed.
13.3 Assignment. In the event an assignment is made in accordance with
the terms hereof, unless otherwise required by the Code:
(a) The effective date of such assignment shall be the date
the written instrument of assignment is delivered to the Partnership and
approved by the General Partner;
(b) The Partnership and the General Partner shall be entitled
to treat the assignor of the assigned interest as the absolute owner thereof in
all respects and shall incur no liability for allocations of Profits or Losses
and distributions of Net Cash Flow made in good faith to such assignor until
such time as the written instrument of assignment has been actually received and
approved by the General Partner, and recorded in the books of the Partnership;
and
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(c) The division and allocation of Profits or Losses, other
than Profits or Losses arising from a Liquidation of the Partnership,
attributable to the applicable Partnership Interests between the assignor and
assignee during any fiscal year of the Partnership shall be based upon the
length of time during such fiscal year, as measured by the effective date of
such assignment, that the assigned Partnership Interest was owned by each of
them and shall not be based upon the date or dates during such fiscal year in
which income was earned or losses were sustained by the Partnership; provided,
however, that the division and allocation of Profits or Losses resulting from a
Liquidation of the Partnership shall be based upon the date or dates such income
was earned or losses were sustained.
13.4 Cost of Admission. The cost of processing and perfecting an
admission contemplated by this Article 13 (including reasonable attorney's fees
incurred by the Partnership) shall be borne by the party seeking admission as a
Partner to the Partnership.
ARTICLE 14
----------
DISSOLUTION AND LIQUIDATION OF PARTNERSHIP
------------------------------------------
14.1 Dissolution of the Partnership. The Partnership shall be dissolved
upon the happening of any of the following:
(a) An election to dissolve and wind up the affairs of the
Partnership by the General Partner (subject to Section 9.3 hereof);
(b) The occurrence of an Event of Retirement to the last
remaining General Partner, unless the Limited Partners elect to continue the
business of the Partnership pursuant to the provisions of Sections 12.4 and 12.5
hereof;
(c) Any event that makes it unlawful for the Partnership
business to be continued;
(d) The sale, disposition, or abandonment of all or
substantially all of the assets of the Partnership unless the General Partner,
in compliance with Section 9.3 hereof, elects to continue the Partnership
business for the purpose of the receipt and the collection of indebtedness or
the collection of any other
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consideration to be received in exchange for the assets of the Partnership
(which activities shall be deemed to be part of the winding up of the affairs of
the Partnership);
(e) Dissolution required by operation of law; or
(f) December 31, 2097, unless a majority in interest of the
Partnership elects to continue the Partnership.
14.2 Winding Up of Affairs. In the event of the dissolution and
liquidation of the Partnership for any reason, the General Partner shall
commence to wind up the affairs of the Partnership and shall convert all of the
Partnership's assets to cash or cash equivalents within such reasonable period
of time as may be required to receive fair value therefor. All items of income,
gain, loss, deduction and credit during the period of liquidation shall be
allocated among the Partners in the same manner as before the dissolution. If
there is no General Partner to effect such Liquidation, then the Limited
Partners, pursuant to a vote of Limited Partners owning a majority of the issued
and outstanding Partnership Units owned by all Limited Partners, may designate
any person, firm or corporation, as a Liquidating Trustee, for that purpose who
shall have all of the rights, powers and authority of a General Partner stated
herein in connection therewith.
14.3 Accounting. In the case of the dissolution and termination of the
Partnership, prior to any distributions to Partners pursuant to Section 14.4(c)
below, a proper accounting shall be made of the Capital Accounts of the Partners
and of each item of income, gain, loss, deduction and credit of the Partnership
from the date of the last previous accounting to the date of dissolution. The
General Partner shall provide a copy of such accounting to all Partners.
14.4 Final Distribution of Partnership Property. Upon termination of
the Partnership, the General Partner shall apply and distribute the remaining
property of the Partnership, together with the proceeds of any sales of same, as
follows:
(a) first, all Partnership debts and liabilities shall be paid
and discharged, including debts owed to Partners and any Affiliates of Partners;
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<PAGE>
(b) second, to establish any reserve for any contingent or
unforeseen liabilities or obligations of the Partnership. Such funds shall be
placed in escrow by the General Partner for the purposes of disbursing such
funds in payment of any of the contingencies, liabilities or obligations, and,
at the expiration of such period as the General Partner shall deem advisable,
the balance then remaining shall be distributed pursuant to subsection (c) of
this Section 14.4; and
(c) third, to distribute the balance to the Partners in the
manner and priority set forth in Article 8 hereof, with any and all Net Cash
Flow arising pursuant to the sale and/or other liquidation of Partnership
property being distributed pursuant to Section 8.1(b) hereof.
Distributions upon liquidation of the Partnership (or any
Partner's interest in the Partnership) and related adjustments shall be made by
the end of the taxable year of such liquidation (or, if later, within 90 days
after the date of such liquidation) or as otherwise permitted by the
Regulations.
14.5 Certificate of Cancellation. Upon completion of the liquidation of
the Partnership and the distribution of all Partnership property, the
Partnership shall terminate and the General Partner shall have the authority to
execute and record one or more Certificates of Cancellation of the Partnership
as well as any and all other documents required or considered advisable by the
General Partner to effectuate the dissolution and termination of the
Partnership.
ARTICLE 15
----------
POWER OF ATTORNEY
-----------------
15.1 Power of Attorney. Each Partner, by its execution hereof,
irrevocably constitutes and appoints the General Partner, or any substitute or
replacement General Partner, with full power of substitution, as such Partner's
true and lawful attorney-in-fact, in its name, place and stead to make, execute,
sign, acknowledge, certify, deliver, file and record on its behalf and on behalf
of the Partnership, the following:
(a) This Agreement, all Certificates of Limited Partnership,
Certificates of Doing Business under an Assumed
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Name, amendments to any or all of the foregoing, and any other certificates or
instruments which may be required to be filed by the Partnership or the Partners
under the laws of the State of Delaware or any other jurisdiction;
(b) One or more Certificates of Cancellation of the
Partnership and such other instruments or documents as may be deemed necessary
or desirable by the General Partner upon termination of the Partnership
business;
(c) Any and all amendments to this Agreement and to the
instruments described in subsections (a) and (b) above, provided such amendments
are either required by law or have been authorized by the Partner(s) in
accordance with Article 16 and/or any other provision of this Agreement
(including, without limitation, any amendment to this Agreement and to the
Certificate to reflect the substitution or admission of a Limited Partner
pursuant to this Agreement); and
(d) Any and all such other documents and instruments as may be
deemed necessary or desirable by said attorney to carry out fully the provisions
of this Agreement in accordance with its terms.
15.2 Grant of Authority Irrevocable. The foregoing grant of authority
(a) is a special power of attorney coupled with an interest, is irrevocable and
shall survive the death or incapacity of a Partner who is a natural person or,
in the case of a Partner that is not a natural person, the merger, dissolution
or other termination of its existence of the Partner, (b) may be exercised by
the General Partner on behalf of each Partner, by a facsimile signature or by
listing all of the Partners executing any instrument with a single signature as
attorney-in-fact for all of them, and (c) shall survive the assignment by a
Partner of the whole or any portion of his or its interest in the Partnership.
ARTICLE 16
----------
AMENDMENT OF PARTNERSHIP AGREEMENT
----------------------------------
16.1 Amendments by Partners. Except as may be specifically provided
below in this Section 16.1 and in Section 16.2 hereof, this Agreement may only
be amended with the written concurrence of the General Partner and the written
consent of holders of at
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<PAGE>
least fifty-one percent (51%) of the Partnership Units held by the Limited
Partners, taken as a single class; provided, that if at any time prior to the
first anniversary date hereof the General Partner owns sixty-seven percent (67%)
of the Partnership Units, and thereafter if at any time as the General Partner
owns sixty percent (60%) of the Partnership Units, then in either case from such
time and thereafter the amendment may be effectuated only by the General Partner
and the Limited Partners need not be solicited but shall be informed of the
amendment,; provided, further, however, that absent the concurrence of the
General Partner and the approval of all of the Limited Partners no amendment
shall:
(a) increase the obligation of any Limited Partner to make
contributions to the capital of the Partnership;
(b) modify the order of allocation of distributions of the Net
Cash Flow or liquidating distributions, or the allocation of Profits and Losses
among the Partners (other than as specifically provided for herein, including
without limitation, modifications pursuant to Section 6.4 hereof);
(c) change the Partnership to a general partnership;
(d) reduce the percentage of Limited Partners required to
consent to any matter in this Agreement;
(e) amend Section 9.4(a)(iv) or 9.4(b) hereof or amend Section
10.3 hereof in any manner that prohibits or restricts, or has the effect of
prohibiting or restricting, the ability of a Limited Partner to exercise its
Redemption Rights in full;
(f) amend Section 12.6(a), (b) or (c) hereof; or
(g) amend this Article 16.
16.2 Amendment by the General Partner. Notwithstanding anything
contained in this Agreement to the contrary, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(a) To add to the obligations of the General Partner or
surrender any right or power granted to the General Partner or
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<PAGE>
any Affiliate of the General Partner for the benefit of the Limited Partners;
(b) To reflect the admission, substitution, termination or
withdrawal of Partners in accordance with this Agreement, including without
limitation, the issuance of additional classes of Partnership Units to Limited
Partners pursuant to Section 6.4 hereof;
(c) To reflect a change that is of an inconsequential nature
and does not adversely affect the Limited Partners in any material respect, or
to cure any ambiguity, correct or supplement any provision in this Agreement not
inconsistent with law or with other provisions, or make other changes with
respect to matters arising under this Agreement that will not be inconsistent
with law or with the provisions of this Agreement;
(d) To satisfy any requirements, conditions or guidelines
contained in any order, directive, opinion, ruling or regulation of a federal or
state agency or contained in federal or state law; and
(e) To amend the provisions of this Agreement that protect the
qualification of the General Partner as a REIT if such provisions are no longer
necessary because of a change in applicable law (or an authoritative
interpretation thereof), a ruling of the IRS, or if the General Partner has
determined to cease qualifying as a REIT.
The General Partner will provide notice to the Limited Partners when any action
under this Section 16.2 is taken.
16.3 Amendment of Certificate. If this Agreement shall be amended
pursuant to this Article 16, the General Partner shall cause the Certificate to
be amended, to the extent required by applicable law, to reflect such change.
The Partners shall be promptly notified of any amendments made under this
Article 16.
64
<PAGE>
ARTICLE 17
----------
INDEMNIFICATION
---------------
17.1 Indemnification.
(a) Except as provided in Section 17.1(c) hereof, the
Partnership shall indemnify, defend and hold harmless each Indemnitee from and
against any and all loss, damage, liability, cost or expense (including
reasonable attorneys' fees and expenses) sustained or incurred as a result of
any act or omission concerning the business or activities of the Partnership,
the General Partner or the Interim Managing General Partner; provided, that such
act or omission of the Indemnitee was not in violation of any term or provision
of this Agreement or any provision of law. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise for any indebtedness of the Partnership or any Affiliate
of the Partnership (including without limitation, any indebtedness which the
Partnership or any Affiliate of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 17.1 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 17.1 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership or otherwise
provide funds, to enable the Partnership to fund its obligations under this
Section 17.1. The foregoing indemnity shall not be enforceable against any
Limited Partner personally but solely from such Limited Partner's interest in
the Partnership.
(b) The provisions of this Section 17.1 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 17.1 or any provision hereof
shall be prospective only and shall not in any way affect the limitations on the
Partnership's liability to any Indemnitee under this Section 17.1 as in effect
immediately prior to such
65
<PAGE>
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.
(c) The Partners hereby acknowledge that, in conjunction with
the financing and the refinancing of any of the property owned by the
Partnership, the General Partner may agree to guarantee part or all of such
debt. The Partners understand that, pursuant to Regulation Section
l.752-(2)(b)(3)(i), such guaranty obligation would, absent the indemnification
provided hereinafter, serve to increase the General Partner's share of such debt
pursuant to Regulation Section 1.752-2(a). Inasmuch as, notwithstanding such
guaranty obligation, each of the Limited Partners desires to increase his share
of such debt and the General Partner desires to decrease its share of such debt
(for purposes of Regulations Section 1.752-2(a)), each of the Limited Partners,
to the extent provided in Exhibit D attached hereto, hereby agrees to indemnify
the General Partner in the event and to the extent that the General Partner both
is required to make a payment to the lender under any such guaranty obligation
and is unable to sell any or all of the assets of the Partnership for money or
moneys worth to make the General Partner whole on account of such payment. This
indemnification is effective only at the time, in the event and to the extent
that upon a dissolution and liquidation of the Partnership, the General Partner
is a creditor of the Partnership due to its guaranty of Partnership debt and the
proceeds of sale in such dissolution and liquidation are insufficient to
reimburse the General Partner for any amounts paid on such guaranty obligation
as contemplated in this Section 17.1(c). As provided in Exhibit D, this
indemnification is limited on a per Unit basis to Units owned by an indemnifying
Limited Partner at the time an indemnification is due to the General Partner as
provided by this Section 17.1(c), such that each Limited Partner's obligation is
reduced upon a redemption of Units as provided at Section 10.3 or upon any other
transfer or disposition of Units. In addition, any and all indemnification as
provided by this Section 17.1(c) shall terminate in full as to each and every
Limited Partner in the event that both (i) the General Partner receives from tax
counsel an opinion that the Outside Limited Partners will be allocated an amount
of excess nonrecourse liabilities under the provisions of Regulation Section
1.752-3(a)(3) equal to or greater than the amount of the indemnification
requirement indicated on Exhibit D, and (ii) upon the Consent of the Outside
Limited Partners to terminate the indemnification required by this Section
17.1(c).
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<PAGE>
17.2 Partner Indemnification of Partnership. In the event the
Partnership is made a party to any litigation or otherwise incurs any loss or
expense as a result of or in connection with any Partner's personal obligations
or liabilities unrelated to Partnership business, such Partner shall indemnify
and reimburse the Partnership for all such loss and expense incurred, including
reasonable attorneys' fees, and the interest of such Partner in the Partnership
may be charged therefor. The liability of a Partner under this Section 17.2
shall not be limited to such Partner's interest in the Partnership, but shall be
enforceable against such Partner personally.
ARTICLE 18
----------
MISCELLANEOUS PROVISIONS
------------------------
18.1 Notices. All notices and demands required or permitted under this
Agreement shall be in writing and may be delivered personally to the Person to
whom it is authorized to be given, or sent by registered, certified or first
class mail, or by overnight delivery, postage prepaid, and if intended for the
Partnership, addressed to the Partnership at the principal office of the
Partnership, and if intended for a Partner, addressed to the Partner at its
address on the signature pages hereof, or to such other person or at such other
address designated by written notice given to the Partnership. Any notice or
demand mailed as aforesaid shall be deemed to have been delivered two (2) days
after the date that such notice or demand is deposited in the mails.
18.2 Severability. If any provision of this Agreement or the
application of such provision to any Person or circumstance shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those as to which it is held invalid
shall not be affected.
18.3 Parties Bound. Any Person acquiring or claiming an interest in the
Partnership, in any manner whatsoever, shall be subject to and bound by all
terms, conditions and obligations of this Agreement to which his or its
predecessor in interest was subject or bound, without regard to whether such
Person has executed a counterpart hereof or any other document contemplated
hereby. No Person, including the legal representative, heir or legatee of a
deceased Partner, shall have any rights or obligations greater than those set
forth in this Agreement and no
67
<PAGE>
Person shall acquire an interest in the Partnership or become a Partner thereof
except as permitted by the terms of this Agreement. This Agreement shall be
binding upon the parties hereto, their successors, heirs, devisees, assigns,
legal representatives, executors and administrators.
18.4 Applicable Law. The Partnership and this Agreement shall be
governed by the laws of the State of Delaware.
18.5 Partition. Each Partner hereby irrevocably waives during the term
of the Partnership any right that he or it may have to maintain any action for
partition with respect to any property of the Partnership.
18.6 Computation of Accountants. Except with respect to matters as to
which the General Partner is granted discretion under this Agreement, the
opinion of the Accountants shall be final and binding with respect to all
allocations made under Article 7 or distributions made under Article 8 or
Section 14.4 hereof.
18.7 Headings. The headings in this Agreement are inserted for
convenience and identification only and are in no way intended to describe,
interpret, define or limit the scope, extent or intent of this Agreement or any
provision.
18.8 Counterparts. This Agreement may be executed in multiple
counterparts with separate signature pages, each such counterpart shall be
considered an original, but all of which together shall constitute one and the
same instrument.
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<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first set forth above, confirms his or its agreement to become a
General Partner, Interim Managing General Partner or Limited Partner, as the
case may be, of the Partnership, agrees to be bound by this Agreement and
acknowledges the appointment of attorneys-in-fact as set forth herein, and
swears that the statements set forth herein are true and correct.
GENERAL PARTNER:
PHILIPS INTERNATIONAL REALTY CORP.
a Maryland corporation
By: /s/ Louis J. Petra
---------------------------------
Name: Louis J. Petra
Title: President
INTERIM MANAGING GENERAL PARTNER:
PHILIPS INTERNATIONAL REALTY, LLC
a Delaware limited liability company
By: /s/ Philip Pilevsky
---------------------------------
Philip Pilevsky, Sole Member
LIMITED PARTNERS:
PHILIP PILEVSKY
/s/ Philip Pilevsky
------------------------------------
By: Philip Pilevsky
SHEILA LEVINE
/s/ Sheila Levine
------------------------------------
By: Sheila Levine
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<PAGE>
PL FOREST AVENUE U ASSOCIATES
/s/ Philip Pilevsky
------------------------------------
By: Philip Pilevsky
PALM MILE CORP.
/s/ Sheila Levine
------------------------------------
By: Sheila Levine
PL PALM SPRINGS L.P.
/s/ Philip Pilevsky
------------------------------------
By: Philip Pilevsky
MERRICK HOLIDAY LIMITED PARTNERSHIP
/s/ Philip Pilevsky
------------------------------------
By: Philip Pilevsky
MERRICK EQUITIES L.P.
/s/ Norman Stark
------------------------------------
By: Norman Stark
SP AVENUE U CORP.
/s/ Norman Stark
------------------------------------
By: Norman Stark
NORMAN STARK
/s/ Norman Stark
------------------------------------
By: Norman Stark
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<PAGE>
PL AVENUE U ASSOCIATES
/s/ Philip Pilevsky
------------------------------------
By: Philip Pilevsky
FRED PILEVSKY
/s/ Fred Pilevsky
------------------------------------
By: Fred Pilevsky
ALLEN PILEVSKY
/s/ Allen Pilevsky
------------------------------------
By: Allen Pilevsky
PHILIPS FREEPORT DEVELOPMENT CORP.
/s/ Philip Pilevsky
------------------------------------
By: Philip Pilevsky
BARAKA REALTY CO.
/s/ Joseph Chehebar
------------------------------------
By: Joseph Chehebar
CENTURY REALTY INC.
/s/ Ezra Sultan
------------------------------------
By: Ezra Sultan, CFO
JOSEPH WILF
/s/ Joseph Wilf
------------------------------------
By: Joseph Wilf
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<PAGE>
ESTATE OF HARRY WILF
/s/ Leonard Wilf
------------------------------------
By: Leonard Wilf, as Executor
GREGG SAUNDERS
/s/ Gregg Saunders
------------------------------------
By: Gregg Saunders
ALFRED S. FRIEDMAN
/s/ Alfred S. Friedman
------------------------------------
By: Alfred S. Friedman
MAURICE FRIEDMAN
/s/ Maurice Friedman
------------------------------------
By: Maurice Friedman
72
<PAGE>
EXHIBIT A
---------
Partners and Partnership Units
------------------------------
Name and Address of Partner Partnership Units
- --------------------------- -----------------
General Partner:
- ----------------
Philips International Realty Corp.
417 Fifth Avenue
New York, New York 10016
Interim Managing General Partner:
- ---------------------------------
Philips International Realty, LLC
417 Fifth Avenue
New York, New York 10016
Limited Partners:
- -----------------
Philip Pilevsky 473,435
417 Fifth Avenue
New York, NY 10016
Sheila Levine 26,128
417 Fifth Avenue
New York, NY 10016
PL Forest Avenue Associates LLC 105,125
417 Fifth Avenue
New York, NY 10016
Palm Mile Corp. 34,265
417 Fifth Avenue
New York, NY 10016
i
<PAGE>
Name and Address of Partner Partnership Units
- --------------------------- -----------------
PL Palm Springs L.P. 352,928
417 Fifth Avenue
New York, NY 10016
Merrick Holiday Limited Partnership 33,355
417 Fifth Avenue
New York, NY 10016
Merrick Equities L.P. 77,827
757 Third Avenue
New York, NY 10017
SP Avenue U Corp. 1,761
757 Third Avenue
New York, NY 10017
Norman Stark 88,051
757 Third Avenue
New York, NY 10017
PL Avenue U Associates 86,289
417 Fifth Avenue
New York, NY 10016
Fred Pilevsky 22,339
2555 Ocean Avenue
Brooklyn, NY 11229
Allen Pilevsky 22,339
2555 Ocean Avenue
Brooklyn, NY 11229
Philips Freeport Development Corp. 1,083
2555 Ocean Avenue
Brooklyn, NY 11229
ii
<PAGE>
Name and Address of Partner Partnership Units
- --------------------------- -----------------
Baraka Realty Co. 26,721
1000 Pennsylvania Avenue
Brooklyn, NY 11207
Century Realty Inc. 13,360
12 Cortland Street
New York, NY 10007
Joseph Wilf 6,680
820 Morris Turnpike
Short Hills, NJ 07078
Estate of Harry Wilf 6,680
820 Morris Turnpike
Short Hills, NJ 07078
Gregg Saunders 24,753
417 Fifth Avenue
New York, NY 10016
Alfred S. Friedman 39,681
736 Bryant Street
Woodmere, NY 11598
Maurice Friedman 7,200
548 Barnard Avenue
Woodmere, NY 11598
iii
<PAGE>
EXHIBIT B
---------
PHILIPS INTERNATIONAL REALTY, L.P. UNIT CERTIFICATE
---------------------------------------------------
* SEE RESTRICTIVE LEGENDS ON REVERSE *
PHILIPS INTERNATIONAL REALTY, L.P.
A DELAWARE LIMITED PARTNERSHIP
Number: Units:
------ -----------
This is to certify that ____________________ is the owner of
______________________________________________________ fully paid limited
Partnership Units of Philips International Realty, L.P., a Delaware limited
partnership (the "Partnership"), transferable only on the books of the
Partnership by the holder hereof in person or by the duly authorized Attorney
upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the General Partner of the Partnership
and the signatures of its duly authorized officers.
Dated:
--------------
- ------------------------------------ ------------------------------------
President Secretary
- -SEAL-
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<PAGE>
REVERSE OF
PHILIPS INTERNATIONAL REALTY, L.P. UNIT CERTIFICATE
---------------------------------------------------
THE UNITS REPRESENTED BY THIS CERTIFICATE OR INSTRUMENT MAY NOT BE
TRANSFERRED, SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF UNLESS SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION COMPLIES WITH THE PROVISIONS OF THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF PHILIPS
INTERNATIONAL REALTY, L.P., DATED AS OF APRIL 16, 1998 (A COPY OF WHICH
IS ON FILE WITH THE PARTNERSHIP). EXCEPT AS OTHERWISE PROVIDED IN SUCH
AGREEMENT, NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE UNITS REPRESENTED BY THIS CERTIFICATE MAY BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR (B) IF THE
PARTNERSHIP HAS BEEN FURNISHED WITH A SATISFACTORY OPINION OF COUNSEL
FOR THE HOLDER THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF
SECTION 5 OF THE ACT AND THE RULES AND REGULATIONS IN EFFECT
THEREUNDER. IN ADDITION, THE UNITS ARE SUBJECT TO THE PROVISIONS OF
SECTION 19.1 OF A CERTAIN CONTRIBUTION AND EXCHANGE AGREEMENT DATED AS
OF AUGUST 11, 1997 (A COPY OF WHICH IS ON FILE WITH THE PARTNERSHIP).
FOR VALUE RECEIVED, _________________ hereby sell, assign and transfer
unto __________________________________ _________________ limited Partnership
Units represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________ Attorney to transfer the said
limited Partnership Units on the books of the within named Partnership with full
power of substitution in the premises.
Dated:
---------------- ------------------------------------
In presence of:
- -------------------------------------
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<PAGE>
Attachment 1 to Unit Certificate
--------------------------------
EXERCISE NOTICE
---------------
To:
Reference is made to that certain Amended and Restated Agreement of
Limited Partnership of Philips International Realty, L.P. dated as of April 16,
1998 (the "Partnership Agreement"), pursuant to which Philips International
Realty Corp., a Maryland corporation, and certain other persons, including the
undersigned, continued the Delaware limited partnership known as Philips
International Realty, L.P. (the "Partnership"). Capitalized terms used but not
defined herein shall have the meanings set forth in the Partnership Agreement.
Pursuant to Section 10.3 of the Partnership Agreement, each of the undersigned,
being a limited partner of the Partnership (an "Exercising Partner"), hereby
elects to exercise its Redemption Rights as to a portion or portions of its
Partnership Units, as all specified opposite its signature below
(notwithstanding the foregoing, each of the undersigned hereby acknowledges and
agrees that the General Partner has the right, in its sole and absolute
discretion, to deliver shares of Common Stock to the undersigned in lieu of all
or any portion of the cash requested below by the undersigned, all in accordance
with Section 10.3 of the Partnership Agreement):
Dated:
----------------------------------
Number of Offered Units to be Number of Offered Units to be
Exercising Partner Redeemed for Shares Redeemed for Cash
- ------------------ ------------------- -----------------
- ----------------
- ----------------
- ----------------
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<PAGE>
EMPLOYMENT AGREEMENT
FOR
BRIAN J. GALLAGHER
<PAGE>
TABLE OF CONTENTS
PAGE
1. EMPLOYMENT. 2
2. SERVICES. 2
3. COMPENSATION AND BENEFITS. 3
4. TERMINATION OF EMPLOYMENT / CHANGE IN CONTROL. 7
5. CONFIDENTIAL INFORMATION / RETURN OF DOCUMENTS /
NONCOMPETE REMEDIES. 15
6. SUCCESSORS AND ASSIGNS. 18
7. TIMING OF AND NO DUPLICATION OF PAYMENTS. 19
8. MODIFICATION OR WAIVER. 19
9. NOTICES. 20
10. GOVERNING LAW AND RESOLUTION OF DISPUTES. 20
11. SEVERABILITY. 21
12. COUNTERPARTS. 21
13. HEADINGS. 21
14. ENTIRE AGREEMENT. 21
15. SURVIVAL OF AGREEMENTS. 22
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of
and is effective as of December 31, 1997 by and between Brian J. Gallagher, an
individual residing at 55 Grove Road, Bedford, New York 10506 ("Executive"), and
Philips International Realty Corp., a Maryland corporation with offices at c/o
Philips International, 417 Fifth Avenue, New York, New York 10016 ("New Reit").
RECITALS
WHEREAS, as set forth in the Contribution and Exchange Agreement by and
between the Property Partnerships (as defined therein), National Properties
Investment Trust, a Massachusetts business trust ("National"), Philips
International Realty, L.P., a Delaware limited partnership ("PRLP") and New Reit
dated August 11, 1997, the Property Partnerships, National and PRLP determined
that it was in the best interests of the parties' long term strategic growth to
combine their respective properties and related assets;
WHEREAS, in order to effectuate this combination, the Property
Partnerships and National agreed to contribute certain properties and other
assets located throughout the States of New York, New Jersey, Connecticut,
Massachusetts and Florida and owned or controlled by the Property Partnerships
or National (the "Property") to New Reit and New Reit agreed to contribute such
Property to PRLP in exchange for a general partnership interest therein, all as
of the closing (the "Closing");
WHEREAS, the Closing occurred and New Reit began operations in December
1997; and
<PAGE>
WHEREAS, New Reit desires to employ Executive, and Executive desires
to be employed by New Reit, pursuant to the terms set forth herein
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
1. Employment.
New Reit hereby agrees to employ Executive, and Executive
hereby agrees to be employed by New Reit, on a full-time basis for a term
commencing on the date hereof and expiring on December 31, 2000, unless this
Agreement shall be terminated earlier pursuant to the terms hereof, provided,
however, that commencing on December 31, 2000 and each December 31st thereafter,
the term of this Agreement shall be extended automatically for one (1)
additional year unless at least one hundred eighty (180) days prior to the
applicable expiration date either New Reit or Executive shall have given written
notice to the other party that such party does not wish to extend this Agreement
("Notice of Non-Extension"). The term of this Agreement during which Executive
shall be employed on a full-time basis is referred to herein as the "Employment
Period."
2. Services.
(a) Executive shall serve as Chief Financial Officer and
Director of Acquisitions of New Reit. Executive shall devote his best efforts
and substantially all of his business time, skill and attention to the business
of New Reit, and shall perform
2
<PAGE>
such duties as are customarily performed by such executive officers and as may
be more specifically enumerated from time to time by the Board of Directors of
New Reit (the "Board"), the Executive Committee of the Board, if any, the Chief
Executive Officer, President or Chief Operating Officer of New Reit. The
Executive's position and duties may be changed by the Chief Executive Officer,
President, or Chief Operating Officer of New Reit, provided, however, that he
shall retain an appropriate title, position and function as an Executive
Officer of New Reit.
It is understood that the foregoing is not intended to
preclude Executive from (i) owning and managing personal investments, including
real estate investments, subject to the restrictions set forth in Paragraph
5(e) hereof or (ii) engaging in charitable activities and community affairs,
provided that the performance of these activities referred to in clauses (i)
and (ii) does not prevent Executive from devoting substantially all of his
business time to New Reit.
(b) Executive shall be nominated for the Board of Directors
of New Reit at the first regularly scheduled annual shareholders meeting
following the initial sale for cash to the public of New Reit common stock, par
value $.01 per share ("Common Stock" or "New Reit Common Stock"). Such initial
sale of New Reit Common Stock is hereinafter referred to as the initial public
offering (the "IPO").
(c) Executive shall be based in New York, New York,
subject to reasonable travel requirements.
3. Compensation and Benefits.
During the Employment Period, New Reit shall pay Executive a
minimum annual base salary in the amount of $150,000 ("Annual Base Salary")
which may be
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increased but not decreased from time to time and shall be payable
in accordance with New Reit's normal payroll practices. In addition, Executive
shall receive a minimum of ten (10%) percent of any annual bonus pool. In
addition, Executive shall be offered participation in any stock-based
compensation or other incentive compensation plans or programs made generally
available to executives of New Reit. It is understood that any such annual bonus
pool or incentive programs will be determined by the Board each year in its sole
discretion.
New Reit shall deduct and withhold from compensation payments
all social security and other federal, state and local taxes and charges in the
minimum amounts (or such greater amounts as Executive may from time to time
request) which currently are or which hereafter may be required by law to be so
deducted and withheld, including withholding pursuant to bonus withholding
rates, as applicable. In addition to the compensation specified above, Executive
shall be entitled to the following benefits:
(a) health and hospitalization (family), life insurance,
disability, business travel accident, paid vacation
and any other compensated absences and any other
plans made generally available to other executive
officers of New Reit;
(b) a $400 monthly allowance which is intended to cover
local business-related travel expenses; and
(c) reimbursement for substantiated reasonable business
expenses including out-of-town travel expenses
incurred by Executive in furtherance of the interests
of New Reit.
In addition, the Board, in its sole discretion, may grant Executive restricted
share awards and options to purchase shares of Common Stock, in addition to the
Options discussed hereinafter.
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As further consideration for Executive agreeing to serve as an
Executive Officer of New Reit and entering into this Agreement upon the terms
set forth herein, including, without limitation, the terms relating to
non-competition set forth in Paragraph 5(e) below, New Reit shall:
(d) on January 1, 1998, issue to Executive options to
purchase 10,000 shares of Common Stock pursuant to
the New Reit 1997 Stock Option and Long-Term
Incentive Plan (the "Plan"), which Plan was adopted
by New Reit and approved by shareholders concurrent
with the Closing), at an exercise price equal to $50
per share of Common Stock which is the price of New
Reit Common Stock at the Closing (the "Options")
provided, however, that after taking into account
the Options and any dilution which may occur as a
result of the IPO with respect to the underlying
shares of New Reit Common Stock, upon the
consummation of the IPO, Executive shall have an
option to purchase 25,000 shares of New Reit Common
Stock at an exercise price equal to the price to the
public for shares of New Reit Common Stock sold in
the IPO. Executive's Options shall be evidenced by
an option grant agreement dated as of January 1,
1998 which agreement shall include, but not be
limited to, the following provisions: vesting,
subject to Executives continued employment with New
Reit and the provisions of Paragraphs 4(a), 4(b) and
4(c) below, over a three (3) year period with
one-third (1/3) of the Options vesting on each of
December 31, 1998, December 31, 1999, and the
balance vesting on December 31, 2000 (unless vesting
is otherwise accelerated pursuant to the terms and
conditions of this Agreement or the option grant
agreement); non-transferability and anti-dilution
provisions; and, provisions relating to the use of
the Options together with the underlying stock to
collateralize any funds necessary for exercise; and
(e) concurrently with the IPO or as soon as practicable
thereafter, loan on a non-recourse basis to
Executive $50,000 (the "Stock Acquisition Loan"),
with the loan proceeds to be used by Executive
simultaneously to purchase as many newly issued
shares of New Reit Common Stock, at the price to the
public for shares of New Reit Common Stock sold in
the IPO, as such Stock Acquisition Loan amount will
permit. Interest shall accrue on the Stock
Acquisition Loan at six (6%) percent per annum and
shall be payable, on the outstanding balance thereof
from time to time, quarterly in arrears. Dividends
on the New Reit Common Stock acquired by Executive,
subject to reduction for interest repayment
(interest payments shall first be made by the
withholding of
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dividends), shall be payable to Executive at such
times and in such amounts as may generally be
declared by the Board with respect to all shares of
New Reit Common Stock then outstanding without
regard to whether the Stock Acquisition Loan has
been repaid or forgiven. The Stock Acquisition Loan
is being granted and secured pursuant to the terms
and conditions of this Agreement, with the New Reit
Common Stock purchased with the proceeds of the
Stock Acquisition Loan and a Secured Non-Recourse
Promissory Note and Stock Pledge Agreement
evidencing and securing such Stock Acquisition Loan
as executed between New Reit and Executive. In the
event of a conflict between the aforementioned
documents and this Agreement, the terms of this
Agreement shall control.
It is the intention of the parties that the dividends
received by Executive on the New Reit Common Stock
purchased with the proceeds of the Stock Acquisition
Loan will equal or exceed the interest payable
thereon. Accordingly, New Reit hereby agrees to
timely pay Executive such additional cash
compensation as may be necessary for Executive to
maintain cash neutrality, giving appropriate
consideration to the taxability of any such
additional cash compensation, should the timing
and/or amount of dividends received by the Executive
be insufficient to fund interest payable on the Stock
Acquisition Loan.
The Stock Acquisition Loan shall be forgiven as
follows: subject to the provisions of Paragraphs
4(a), 4(b) and 4(c) below, $16,666 of the principal
shall be forgiven on January 1, 1999, (ii) $16,666 of
the principal shall be forgiven on January 1, 2000,
and (iii) the balance of the principal shall be
forgiven on December 31, 2000 provided Executive is
employed by New Reit on the day immediately preceding
each applicable forgiveness date.
The Stock Acquisition Loan shall be initially secured
by the shares of New Reit Common Stock purchased by
Executive from New Reit with the proceeds of the
Stock Acquisition Loan. On January 1, 1999, and
January 1, 2000, the outstanding balance of the Stock
Acquisition Loan shall be secured only by shares of
New Reit Common Stock having a Fair Market Value of
one hundred twenty-five (125%) percent of the
outstanding principal amount of the Stock Acquisition
Loan. On each of January 1, 1999 and January 1, 2000
( the "Determination Date"), New Reit shall
reasonably determine the aggregate Fair Market Value
of the collateral (the "Collateral Value") being
held. If on either Determination Date the Collateral
Value exceeds one hundred twenty-five (125%) percent
of the outstanding balance of the Stock Acquisition
Loan on such Determination Date after giving effect
to any loan forgiveness, as applicable (the "Secured
Loan Amount "), New Reit shall
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automatically release to Executive such portion of
the collateral the aggregate Fair Market Value of
which equals the Collateral Value less the Secured
Loan Amount, free and clear of any and all
encumbrances under the Stock Pledge Agreement.
Executive shall be required to execute the
aforementioned Stock Pledge Agreement and Secured
Non-Recourse Promissory Note. New Reit shall then
issue shares of New Reit Common Stock to Executive
in exchange for the Stock Acquisition Loan. New Reit
shall, upon receipt from Executive of the Stock
Pledge Agreement and Secured Non-Recourse Promissory
Note for New Reit Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt
delivery of the certificates evidencing ownership of
the shares of New Reit Common Stock to Executive,
subject to any requirements set forth in the Stock
Pledge Agreement; provided, however, that if any law
or regulation requires New Reit to take any action
with respect to such shares prior to the delivery
thereof, then the date of the delivery of the shares
shall be extended for the period necessary to
complete such action. As soon as practicable
following such time as New Reit is eligible to use
Form S-3 (or any successor form thereof) to register
such shares of New Reit Common Stock, New Reit shall
use its reasonable best efforts to register the
resale of such shares through a shelf registration
statement under the Securities Act of 1933, as
amended (the "Act"). The Company agrees that if at
any time after the IPO and prior to such
registration, the Company authorizes the filing of a
registration statement under the Act in connection
with the proposed offer of any of its securities by
the Company or any of its shareholders ("Subsequent
Registration Statement"), New Reit shall use its
reasonable best efforts to register the shares of
New Reit Common Stock purchased by Executive with
the proceeds of the Stock Acquisition Loan via the
Subsequent Registration Statement. Certificates for
shares of New Reit Common Stock, when released to
Executive, shall have restrictive legends applicable
to the Stock Pledge Agreement and any statements of
other applicable restrictions with respect thereto
removed.
4. Termination of Employment / Change in Control.
(a) Subject to the provisions of Paragraphs 4(b), 4(c) and
4(e) below as applicable, in the event New Reit terminates Executive's
employment during the Employment Period, (i) New Reit shall pay Executive any
unpaid salary accrued through and including the date of termination plus any
unpaid bonus pool amount due Executive for any prior year (the
"Accrued Amount"); (ii) New Reit
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shall pay an additional ten (10) month's base salary payable over the
immediately following ten (10) month period in accordance with the Company's
normal payroll practices plus (subject to the terms and conditions of this
Agreement) continued life, medical, dental and disability coverage for such ten
(10) month period which shall be identical to the coverage provided to active
employees during such period ("Applicable Severance"); (iii) the remaining
balance due under the Stock Acquisition Loan on date of termination of
Executive's employment pursuant to this Paragraph shall be forgiven as of the
date of Executive's termination and any remaining shares of New Reit Common
Stock held as collateral for the Stock Acquisition Loan shall be released to
Executive as soon as practicable after Executive's date of termination ("Stock
Acquisition Loan Forgiveness and Collateral Release"); (iv) Executive shall be
entitled to exercise any options, including the Options granted hereunder,
which have vested and are exercisable in accordance with the terms of this
Agreement, the applicable stock option agreement or the Plan within one year of
the date of Executive's termination of employment. Executive understands that
the effect of exercising any incentive stock options on a day that is more than
ninety (90) days after the date of termination of employment will be to cause
such incentive stock options to be treated as non-qualified stock options; (v)
Executive shall be entitled to retain any shares awarded to Executive which are
fully vested on the date of termination ("Vested Share Award"); (vi)
Executive shall be entitled to accelerated vesting in that portion of
Executive's Options, and any other options which have been granted to him which
are scheduled to vest on or by the December 31st immediately succeeding the
date of Executive's termination of employment which shall vest on the date of
such termination ("Accelerated Vesting"); and (vii) Executive shall be entitled
to a pro rata portion, based on the number of days in the period beginning
with January 1 of the calendar year in which such termination occurred and
ending with the date the Employment Period ends, of the average annual amount
of bonus pool payments paid to Executive each year of Executive's employment
hereunder (the "Pro Rata Bonus Payment"). Except for any rights which Executive
may have to the
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Accrued Amount, Applicable Severance, Stock Acquisition Loan Forgiveness and
Collateral Release, Accelerated Vesting, Pro Rata Bonus Payment and Vested
Share Awards or as otherwise required by law, New Reit shall have no, further
obligations hereunder following such termination.
(b) In the event of termination of Executive's employment as
a result of either Executive's death or Disability (as hereinafter defined)
during the Employment Period, New Reit shall pay or provide to Executive or his
heirs or estate as applicable (A) the Accrued Amount, (B) Applicable Severance
(provided, however, that in the event of death, life and disability coverage
shall cease) (C) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar year in which such termination
occurred and ending with the date the Employment Period ends (without extension
or further extension as applicable, and assuming such termination did not
occur) of the average annual amount of bonus pool payments paid to Executive
during each year of Executive's employment hereunder and (D) immediate Stock
Acquisition Loan Forgiveness and Collateral Release. In the event the
Executive's employment terminates for one of the reasons set forth in the first
sentence of this Paragraph 4(b) in the first year of employment, Executive
shall receive in respect of item (C) in the preceding sentence the full amount
of the annual bonus that would have otherwise been payable to Executive for
such year had his employment not terminated. The amounts due under this clause
4(b) shall be payable, at the option of Executive, his estate or his personal
representative, either (i) in full immediately upon such termination without
discount for early payment or (ii) monthly, in equal installments over the ten
(10) month period immediately following his termination of employment. In
addition, Executive shall have a fully-vested non-forfeitable right to the
Options and any
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other options or restricted stock awards previously granted to him. Executive
shall be entitled, at the option of Executive, his estate or his personal
representative, within one (1) year in the case of termination as a result of
Executive's death or Disability of the date of such termination, (i) to
exercise any options to purchase shares of Common Stock that have vested
(including, without limitation, by acceleration in accordance with the terms of
this Agreement) ("Option Exercise Period") and are exercisable in accordance
with the terms of either this Agreement, any stock option agreement or the
Plan, (ii) to retain any shares of Common Stock awarded to Executive which are
vested on the date of termination, and (iii) to require New Reit (upon written
notice delivered within one year hundred eighty (180) days following the date
of Executive's termination) to repurchase all or any portion of Executive's
vested options (including without limitation options, if any, which have vested
by acceleration in accordance with the terms of this Agreement, the Plan or
stock option agreement) to purchase shares of Common Stock at a price equal to
the difference between the Fair Market Value (as hereinafter defined) of the
shares of Common Stock for which the options to be repurchased are exercisable
and the exercise price of such option as of the date of such notice.
(c) (i) In the event of a Change in Control during the
Employment Period (as hereinafter defined) Executive shall be entitled to
vesting in all options and restricted stock awards and in the event of
termination of Executive's employment in connection with such Change in Control,
New Reit shall pay Executive and Executive shall be entitled to all the payments
and rights Executive would have had if Executive's employment had been
terminated on the date of the Change in Control due to Disability as set forth
in Paragraph 4(b) (including the Accrued Amount, Applicable Severance,
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Stock Acquisition Loan Forgiveness and Collateral Release, the Pro Rata Bonus
Payment and all benefits under this Agreement) except that Executive must
exercise any options which have vested pursuant to this Section 4(c) within one
year of his actual termination of employment. For purposes of this Agreement,
Executive's employment will be deemed to have terminated in connection with a
Change in Control if either (i) he voluntarily terminates employment within the
ninety (90) day period immediately following such Change in Control (if his
voluntary termination occurs within such ninety (90) day period, the provisions
of this Paragraph 4(c) and not Paragraph 4(e) shall be applicable), or (ii) his
employment is involuntarily terminated by New Reit or its successor, for any
reason within the one (1) year period immediately following such Change in
Control. Furthermore, all cash payments owed to Executive pursuant to this
Paragraph shall be paid to Executive in a single sum without discount for early
payment.
(ii) If the Change in Control is a change "in the ownership or effective
control" of New Reit or "in the ownership of a substantial portion of the
assets" of New Reit within the meaning of Section 280G of the Internal Revenue
Code of 1986, as amended, (the "Code") and the Executive is then, in any
taxable year, liable for the payment of an excise tax under Section 4999 of the
Code (or any successor provisions), with respect to any payment in the nature
of compensation made by New Reit to (or for the benefit of) Executive, New Reit
shall pay Executive an amount equal to X determined under the following
formula:
X = E x P
--------------------------------------
1 - [(FI x (1 - SLI)) + SLI + E + M]
where
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E = the rate at which the excise tax is assessed
under Section 4999 of the Code
P = the amount with respect to which such
excise tax is assessed, determined without
regard to this Section 4(c)(ii)
FI = the highest effective marginal rate of
income tax applicable to Executive under the
Code for the taxable year in question (taking
into account any phase-out or loss of
deductions, personal exemptions and other
similar adjustments);
SLI = the sum of the highest marginal rates of
income tax applicable to Executive under all
applicable state and local laws for the
taxable year in question (taking into account
any phase-out or loss of deductions, personal
exemptions and other similar adjustments);
and
M = the highest marginal rate of Medicare Tax
applicable to Executive under the Code for
the taxable year in question.
With respect to any payment in the nature of compensation that is made to (or
for the benefit of) Executive under the terms of this Agreement or otherwise and
on which an excise tax under Section 4999 of the Code will be assessed, the
payment determined under this Section 4(c)(ii) shall be made of the earlier of
the date New Reit is required to withhold such tax, or the date the tax is
required to be paid by Executive. It is the intention of the parties that New
Reit provide Executive with a full tax gross-up under the provisions of this
Paragraph, so that on a net after-tax basis, the result to Executive shall be
the same as if the excise tax under Section 4999 of the Code (or any successor
provisions) had not been imposed. The Excise Tax Gross Up shall be adjusted to
achieve a full gross-up if alternative minimum tax rules are applicable to
Executive.
(d) For purposes of this Agreement:
(i) "Disability" shall mean the determination by
New Reit, upon the advice of an independent
qualified physician,
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reasonably acceptable to Executive, that
Executive has become physically or
mentally incapable of performing his
duties under this Agreement and such
disability has disabled Executive for a
cumulative period of one hundred eighty
(180) days within a twelve (12) month
period.
(ii) "Fair Market Value" shall mean the average
of the closing price on the New York Stock
Exchange of the Common Stock on each of the
trading days within the thirty (30) days
immediately preceding the date of
termination of Executive's employment;
(iii) "Change in Control" shall mean, exclusive
of the IPO, that any of the following
events has occurred: (a) any "person" or
"group" of persons, as such terms are used
in Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the
"Exchange Act"), other than any employee
benefit plan sponsored by New Reit,
becomes the "beneficial owner", as such
term is used in Section 13 of the Exchange
Act, of thirty (30%) percent or more of
either (i) the Common Stock or (ii) the
units of limited partnership interests in
PRLP ("Units") issued and outstanding
immediately prior to such acquisition; (b)
any Common Stock is purchased pursuant to
a tender or exchange offer other than an
offer by New Reit; (c) the dissolution or
liquidation of New Reit or the
consummation of any merger or
consolidation of New Reit or any sale or
other disposition of all or substantially
all of its assets, if the shareholders of
New Reit immediately before such
transaction own, immediately after
consummation of such transaction, equity
securities (other than options and other
rights to acquire equity securities)
possessing less than thirty (30%) percent
of the voting power of the surviving or
acquiring company; or (d) both Philip
Pilevsky and Sheila Levine are no longer
executive officers or members of the Board
of Directors of the Company.
(e) In the event Executive elects to terminate his employment
at any time during the Employment Period with New Reit, (other than following a
Notice of Non-Extension) Executive shall be entitled to payment of the Accrued
Amount. In addition, in the event (i) Executive is no longer serving as the
Chief Financial Officer or Director of Acquisitions of New Reit or (ii) the
Company has materially breached any provision of this Agreement and such breach
has not been cured within 10 days following notice thereof by the Executive to
the Company, and if he terminates his employment,
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he shall be entitled to (i) payment of six (6) months' base salary payable
commencing with the date of his termination of employment plus continued life,
medical, dental and disability coverage for such period (the "Special Severance
Payment"); (ii) Accelerated Vesting; (iii) the Pro Rata Bonus Payment and (iv)
immediate Stock Acquisition Loan Forgiveness and Collateral Release. In
addition, Executive shall be entitled (i) to exercise any options, including the
Options granted hereunder, which have vested and are exercisable in accordance
with the terms of this Agreement within one year of the date of his termination
of employment, and (ii) to retain any shares awarded to Executive which are
fully vested on the date of termination. Except for any rights which Executive
may have to the Accrued Amount, the Special Severance Payment, the Pro Rata
Bonus Payment and the Stock Acquisition Loan Forgiveness and Collateral Release,
if applicable, vested options and vested share awards or as otherwise required
by law, New Reit shall have no further obligations hereunder following such
termination.
(f) In the event Executive terminates his employment with New
Reit following New Reit's issuance of a Notice of Non-Extension to Executive,
but prior to expiration of the one hundred eighty (180) day notice period,
Executive shall be entitled to the Accrued Amount, vesting in all options and
restricted stock awards, the Pro Rata Bonus Payment and Stock Acquisition Loan
Forgiveness and Collateral Release. Except for any rights which Executive may
have to the Accrued Amount, the Stock Acquisition Loan Forgiveness and
Collateral Release, and a fully vested non-forfeitable right to all options and
restricted stock awards previously granted to him, New Reit shall have no
further obligation hereunder following such termination.
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(g) Any termination of Executive's employment by New Reit or
any such termination by Executive (other than on account of death) shall be
communicated by written Notice of Termination to the other party hereto.
(h) Executive shall not be required to mitigate amounts
payable under this Agreement by seeking other employment or otherwise, and there
shall be no offset against cash amounts due Executive under this Agreement on
account of subsequent employment. In the event Executive obtains subsequent
employment and the Executive's new employer maintains a medical plan, dental
plan, life insurance and disability insurance plans, New Reit shall no longer
provide continued medical, dental, life and disability coverage for Executive at
New Reit's cost as of the date Executive first becomes eligible to participate
in his new employer's plans.
5. Confidential Information / Return of Documents / Noncompete /
Remedies.
(a) Executive understands and acknowledges that during his
employment with New Reit, he will be exposed to Confidential Information (as
defined below), all of which is proprietary and which will rightfully belong to
New Reit. Executive shall hold in a fiduciary capacity for the benefit of New
Reit such Confidential Information obtained by Executive during his employment
with New Reit and shall not, directly or indirectly, at any time, either during
or after his employment with New Reit, without New Reit's prior written consent,
use any of such Confidential Information or disclose any of such Confidential
Information to any individual or entity other than New Reit or its employees,
except as required in the performance of his duties for New Reit or as otherwise
required by law. Executive shall take all reasonable steps to safeguard
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such Confidential Information and to protect such Confidential Information
against disclosure, misuse, loss or theft.
(b) The term "Confidential Information" shall mean any
information not generally known in the relevant trade or industry or otherwise
not generally available to the public, which was obtained by Executive from New
Reit, the Partnership Properties, National or PRLP. For purposes of this
Paragraph 5, New Reit shall be deemed to include any entity which is controlled,
directly or indirectly, by New Reit and any entity of which a majority of the
economic interest is owned, directly or indirectly, by New Reit.
(c) The Executives agrees that for a period of two (2) years
following his termination of employment with New Reit, the Executive will not
directly or indirectly, solicit, recruit, hire or cause to be hired for
employment, any individual or individuals who are employed by New Reit or its
subsidiaries/affiliates on or after his date of termination. The foregoing shall
not prohibit the Executive from giving an unsolicited reference upon request.
(d) Except for such items which are of a personal nature to
Executive (e.g., daily business planner and roll-o-dex), all writings, records,
and other documents and things containing any Confidential Information shall be
the exclusive property of New Reit, shall not be copied, summarized, extracted
from, or removed from the premises of New Reit, except in pursuit of the
business of New Reit or at the direction of New Reit, and shall be delivered to
New Reit, without retaining any copies, upon the termination of Executive's
employment or at any time as requested by New Reit.
(e) Executive agrees that:
(A) During the Employment Period, Executive shall
not, directly or indirectly, within the States of New York, New Jersey,
Connecticut, Massachusetts or Florida engage in, or own, invest in, manage,
control, derive any compensation, or
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provide consulting services either directly or indirectly with respect to any
venture or enterprise engaged in any development, acquisition or management
activities with respect to retail shopping center properties, without regard to
whether or not such activities compete with New Reit. Nothing herein shall
prohibit Executive from being a passive owner of not more than one (1%) percent
of the outstanding stock of any class of securities of a corporation or other
entity engaged in such business which is publicly traded, so long as he has no
active participation in the business of such corporation or other entity.
(B) If, at the time of enforcement of this Paragraph
5(e), a court shall hold that the duration, scope, area or other restrictions
placed on Executive herein are unreasonable, the parties agree that without
further action on their parts reasonable maximum duration, scope, area or other
restrictions shall be substituted by such court for the stated duration, scope,
area or other restrictions.
(C) For purposes of this Paragraph 5(e), New Reit
shall be deemed to include any entity which is controlled, directly or
indirectly, by New Reit and any entity of which a majority of the economic
interest is owned, directly or indirectly, by New Reit.
(f) The parties hereto agree that New Reit would suffer
irreparable harm from a breach by Executive of any of the covenants or
agreements contained in Paragraph 5 of this Agreement. Therefore, in the event
of the actual or threatened breach by Executive of any of the provisions of
Paragraph 5 of this Agreement, New Reit may, in addition and supplementary to
other rights and remedies existing in its favor, apply to any court of law or
equity of competent jurisdiction for specific
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performance and/or injunctive or other relief in order to enforce or prevent
any violation of the provisions thereof.
6. Successors and Assigns.
(a) New Reit shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of New Reit, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that New Reit
would be required to perform it if no such succession had taken place. Failure
of New Reit to obtain such agreement prior to the effectiveness of a succession
shall be a breach of this Agreement and shall entitle Executive to compensation
from New Reit and such successor in the same amount and on the same terms as he
would be entitled to pursuant to Paragraph 4(c) above. Except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the date of termination. In the event of such a breach
of this Agreement, the Notice of Termination shall specify such date as the date
of termination. As used in this Paragraph, "New Reit" shall mean New Reit as
hereinbefore defined and any successor to all or substantially all of its
business and/or its assets as aforesaid which executes and delivers the
agreement provided for in this Paragraph 6 or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law. Any cash
payments owed to Executive pursuant to this Paragraph 6 shall be paid to
Executive in a single sum immediately prior to the consummation of the
transaction with such successor.
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(b) This Agreement and all rights of Executive hereunder shall
inure to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other designee or, if there be no
such designee, to Executive's estate.
7. Timing of and No Duplication of Payments.
All payments payable to Executive pursuant to this Agreement
shall be paid as soon as practicable after such amounts have become fully vested
and determinable. In the event any amount becomes vested or payable under more
than one provision of this Agreement, Executive shall not be entitled to receive
a duplicate payment of any such amount.
8. Modification or Waiver.
No amendment, modification, waiver, termination or
cancellation of this Agreement shall be binding or effective for any purpose
unless it is made in a writing signed by the party against whom enforcement of
such amendment, modification, waiver, termination or cancellation is sought. No
course of dealing between or among the parties to this Agreement shall be deemed
to affect or to modify, amend or discharge any provision or term of this
Agreement. No delay on the part of New Reit or Executive in the exercise of any
of their respective rights or remedies shall operate as a waiver thereof, and no
single or partial exercise by New Reit or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or
19
<PAGE>
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right or remedy on any other occasion.
9. Notices.
All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to New Reit or Executive, as applicable, at the address
set forth above (or to such other address as shall have been previously provided
in accordance with this Paragraph 9).
10. Governing Law and Resolution of Disputes.
This agreement will be governed by and construed in accordance
with the laws of the State of New York, without regard to principles of
conflicts of laws thereunder. Any claim for damages arising out of or related to
this Agreement except for any claims arising out of or related to Paragraph 5
hereof shall be settled by arbitration in accordance with the Commercial
Arbitration Rules of the American Arbitration Association, provided, however,
that the arbitration shall take place in New York and the arbitrators shall
apply New York law. Each party to the Agreement may select one arbitrator. The
selected arbitrators shall in turn appoint a third arbitrator, and the three so
chosen shall comprise the arbitration panel. All arbitrators shall be
independent third parties. The decision of the arbitration panel shall be final
and binding on the parties, and judgment upon the award rendered by the
arbitration panel may be entered by any court having jurisdiction thereof. This
Paragraph shall not be construed to prevent New Reit from seeking injunctive
relief with respect to any and all
20
<PAGE>
disputes arising out of or related to Paragraph 5 hereof which shall be
adjudicated by a court of competent jurisdiction.
11. Severability.
Whenever possible, each provision and term of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision or term of this Agreement shall be held to
be prohibited by or invalid under such applicable law, then, subject to the
provisions of Paragraph 5(e)(B), such provision or term shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
affecting in any manner whatsoever the remainder of such provisions or term or
the remaining provisions or terms of this Agreement.
12. Counterparts.
This Agreement may be executed in separate counterparts, each
of which is deemed to be an original and both of which taken together shall
constitute one and the same agreement.
13. Headings.
The headings of the Paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof and
shall not affect the construction or interpretation of this Agreement.
14. Entire Agreement.
This Agreement constitutes the entire agreement of the parties
with respect to the subject matter hereof and supersedes all other prior
agreements and
21
<PAGE>
undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
15. Survival of Agreements.
The covenants made in Paragraph 4 and Paragraph 5 shall
survive the termination of this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
22
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ Louis J. Petra
-----------------------------------------
Name: Louis J. Petra
Title: President
EXECUTIVE
/s/ Brian J. Gallagher
--------------------------------------
Brian J. Gallagher
23
<PAGE>
PRUDENTIAL SECURITIES CREDIT CORPORATION
One New York Plaza
New York, New York 10128
CONFIDENTIAL
April 16, 1997
Mr. Philip Pilevsky
Chairman and Chief Executive Officer
Philips International Realty Corp.
417 Fifth Avenue
New York, New York 10016
Dear Mr. Pilevsky:
Philips International Realty Corp. ("Philips") has requested that
Prudential Securities Credit Corporation or one of its affiliates
(collectively, "PSC") provide Philips International Realty, L.P. (the
"Borrower") with a $100,000,000 senior secured revolving credit facility (the
"Facility"). The proceeds will be used by the Borrower (i) to fund certain of
the Borrower's acquisition, Redevelopment (as defined in Exhibit A) and
development activities that (a) satisfy the applicable conditions precedent
and covenants set forth herein and in Exhibit A and Exhibit B and (b) are
generally consistent with Borrower's existing properties and (ii) to fund up
to $10,000,000 of the costs incurred in connection with Borrower's general
corporate purposes. Payment and performance of the Borrower's obligations
under the Facility shall be guaranteed, subject to the conditions set forth in
Exhibit A, by Philips Forest Associates, L.P. ("Forest"), Philips Meadowbrook
Associates, L.P. ("Meadowbrook"), Philips Branhaven Associates, L.P.
("Branhaven") and Palm Springs Mile Associates, Ltd. ("Hialeah") and Philips
(Forest, Meadowbrook, Branhaven, Hialeah and Philips are hereinafter
collectively referred to as the "Guarantors").
We are pleased to advise you that PSC is prepared to make the
commitment subject to PSC underwriting the Facility for the purposes set forth
above, upon the terms and conditions set forth or referred to herein. The
terms and conditions of the Facility are substantially set forth in Exhibit A
and Exhibit B to this letter, which Exhibit A and Exhibit B are made a part of
this commitment letter. The parties hereto hereby acknowledge and agree that
contemporaneously with and as a condition to the closing of the transaction
contemplated by this commitment letter, Philips will complete an initial
public offering of 7,200,000 million shares of common stock (the "Offering").
<PAGE>
Philips hereby represents and covenants that all information and data
(the "Information") concerning the Borrower, the Guarantors and each of their
respective subsidiaries which has been, is now or shall be hereafter made
available to PSC by the Borrower, the Guarantors and each of their respective
subsidiaries will be complete, true and correct in all material respects and
will not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements are made.
By executing this letter, the Borrower agrees to indemnify and hold
harmless PSC and its affiliates, and each of their respective officers,
directors, employees, affiliates, agents, and controlling persons (each, an
"Indemnified Party") from and against any and all losses, claims, assessments,
damages, liabilities, costs and expenses, including, without limitation, the
reasonable fees and disbursements of legal counsel, to which any such
Indemnified Party may become subject to arising out of, relating to or in
connection with any demand, claim, action, litigation, investigation or
proceeding relating to this letter, or the proposed Facility (including the
use of proceeds thereof), and to reimburse each Indemnified Party upon demand
for all reasonable legal and other costs and expenses in connection with
investigating or defending any of the foregoing; provided that the foregoing
indemnity will not, as to the Indemnified Party, apply to losses, claims,
damages, liabilities, or related expenses to the extent arising solely from
the willful misconduct or negligence of such Indemnified Party as determined
by a final judicial determination. No Indemnified Party shall be responsible
or liable to the Borrower or any other person for any consequential, indirect,
special treble or punitive damages which may be alleged as a result of this
letter or the transactions contemplated hereby or thereby. Your obligations
under this paragraph shall survive any termination of this letter and shall be
effective whether or not a definitive financing agreement is executed.
PSC shall have the right to review and approve all public
announcements and filings made by the Borrower or the Guarantors relating to
the Facility which refer to PSC or any other financial institution or bank
before they are made (except for filings required by law).
By executing this commitment letter you agree that it, the attached
Exhibit A and Exhibit B are for your confidential use only and will not be
disclosed by you or any of your representatives, without our prior consent, to
any persons other than your shareholders, accountants, attorneys, and other
advisors, and then only in connection with the transaction contemplated hereby
and on a confidential basis, except that, following your acceptance hereof,
you may make such disclosures as you are required by law to make.
PSC's obligations with respect to the Facility are subject to
negotiation, execution and delivery of a definitive credit agreement and other
relevant documentation, satisfactory to PSC. Such documentation shall contain,
in addition to the matters specifically described above and in the attached
Exhibit A and Exhibit B, such indemnities, covenants, representations and
warranties, events of default, conditions precedent and other terms and
conditions as are customary in financing of this nature.
2
<PAGE>
PSC may terminate its obligations hereunder to provide the Facility
if: (i) any Information submitted to PSC is inaccurate, incomplete or
misleading in any material respect, (ii) any change occurs, or any additional
information is disclosed to or discovered by PSC which is materially adverse
in respect of the condition (financial or otherwise), business, operation,
assets, nature of assets, liabilities or prospects of the Borrower or any of
the Guarantors, (iii) PSC becomes aware of any fact, circumstance or condition
relating to the Borrower, any Guarantor or any Mortgaged Property (as defined
in Exhibit A) or PSC otherwise makes a determination, which, in its sole
discretion, could make the consummation of the transactions described herein
unwise or detrimental to PSC's interests or (iv) PSC does not receive all
internal corporate approvals necessary to enter into the Facility.
The Borrower hereby agrees to reimburse PSC for all costs and
expenses (including reasonable fees and disbursements of counsel) incurred in
connection with PSC's activities conducted pursuant to this commitment letter,
Exhibit A and Exhibit B, the preparation of the definitive documentation, all
closing costs of the Facility, each drawing thereunder and any costs incurred
in connection with underwriting, reviewing and encumbering additional
collateral offered by Borrower or any Guarantor in order to increase the
amount which may be drawn under the Facility (including, but not limited to,
filing and searches and the recording of UCC-1's, mortgages and other
appropriate security documents, title insurance, perfecting PSC's security in
and liens upon the Collateral (as defined in Exhibit A), or any additional
collateral and expenses related to structuring, documenting, closing,
monitoring, or enforcing the agreements), regardless of whether the Facility
or the transactions contemplated by this commitment letter are consummated.
The provisions of this paragraph shall survive the expiration of this
commitment letter.
In the event the definitive documentation for the Facility is not
duly executed and delivered by all parties thereto on the date on which the
Offering occurs (which date shall in no event be later than May 29, 1998)
PSC's commitment contained herein shall expire provided, however, that. the
indemnification and remibursement provisions hereof and in Exhibit A and
Exhibit B shall survive any termination hereof as the Borrower's and the
Guarantor's sole liability hereunder. All fees paid hereunder or in connection
with the Facility shall be deemed fully earned upon payment, and shall not be
subject to refund or rebate unless otherwise expressly stated therein.
This commitment letter (including Exhibit A and Exhibit B) shall be
governed by, and contrued in accordance with, the substantive laws of the
State of New York without regard for its choice of law rules. This commitment
letter may be signed in counterparts which shall be deemed to be one and the
same document.
3
<PAGE>
This commitment letter supersedes and replaces all prior
understandings with respect to the commitment and the Facility. If the
foregoing correctly sets forth our agreement, please indicate the Borrower's
and each Guarantors' acceptance of the terms hereof and of Exhibit A and
Exhibit B by signing in the appropriate space provided below and returning to
PSC the enclosed duplicate original of this commitment letter no later than
5:00 p.m. (New York City time) on April 17, 1998. This letter will expire at
such time in the event PSC does not receive your acceptance in accordance with
the immediately preceding sentence.
Very Truly Yours,
PRUDENTIAL SECURITIES CREDIT CORPORATION
By: /s/ Jeff K. Frank
-------------------------------------
Name:
Title:
Accepted And Agreed To:
PHILIPS INTERNATIONAL REALTY CORP.
By: /s/ Philip Pilevsky
----------------------------------------------
Name: Philip Pilevsky
Title: Chairman of the Board and Chief Executive Officer
PHILIPS INTERNATIONAL REALTY, L.P.
By: Philips International Realty, LLC,
its Interim Managing General Partner
By: /s/ Philip Pilevsky
----------------------------------------------
Name: Philip Pilevsky
Title: Sole Managing Member
See following page for additional signatures
4
<PAGE>
PHILIPS FOREST ASSOCIATES, L.P.
By: Philips Forest Realty, LLC
By: /s/ Philip Pilevsky
----------------------------------------------
Name: Philip Pilevsky
Title: Sole Managing Member
By: Philips Forest Sub-I, Inc.
By: /s/ Louis J. Petra
----------------------------------------------
Name: Louis J. Petra
Title: President
PHILIPS MEADOWBROOK ASSOCIATES, L.P.
By: Philips Meadowbrook Realty, LLC
By: /s/ Philip Pilevsky
----------------------------------------------
Name: Philip Pilevsky
Title: Sole Managing Member
By: Philips Meadowbrook Sub-V, Inc.
By: /s/ Louis J. Petra
----------------------------------------------
Name: Louis J. Petra
Title: President
PHILIPS BRANHAVEN ASSOCIATES, L.P.
By: Philips Branhaven Realty, LLC
By: /s/ Philip Pilevsky
----------------------------------------------
Name: Philip Pilevsky
Title: Sole Managing Member
By: Philips Branhaven Sub-III, Inc.
By: /s/ Louis J. Petra
----------------------------------------------
Name: Louis J. Petra
Title: President
See following page for additional signatures
5
<PAGE>
PALM SPRINGS MILE ASSOCIATES, LTD.
By: Philips Palm Springs Realty, LLC
By: /s/ Philip Pilevsky
----------------------------------------------
Name: Philip Pilevsky
Title: Sole Managing Member
By: Philips Palm Springs Sub-VIII, Inc.
By: /s/ Louis J. Petra
----------------------------------------------
Name: Louis J. Petra
Title: President
6
<PAGE>
Exhibit A
PHILIPS INTERNATIONAL REALTY CORP.
$100 MILLION CREDIT FACILITY - TERM SHEET
Lender: Prudential Securities Credit Corporation, or one
of its affiliates (collectively, "PSC").
Borrower: Philips International Realty, L.P.
Guarantors: Philips, Forest Avenue, Branhaven, Hialeah and
Meadowbrook will Guaranty full payment and
performance of the Borrower's obligations under
the Loan Documents (as defined in Exhibit B).
The guaranty by Hialeah will be limited to
$23,811,758.
Type and Amount of $100,000,000 senior secured revolving credit
Facility: loan (the "Loan"). The loan outstanding under
the facility to the value to value ratio,
expressed as a percentage (the "LTV"), of the
amount of the Collateral shall not at any time
exceed 75%. The Borrower may increase the
borrowings available under the facility upon
delivery of sufficient additional collateral to
ensure that the LTV remains less than or equal
to 75% at all times. PSC shall determine, in its
sole discretion, the value of each property
offered as additional collateral and PSC shall
determine, in its sole discretion, the amount by
which the borrowings under the Facility may be
increased as a result of the contribution of
such additional collateral.
Closing Date: The date of execution of definitive documents for
the Facility, which shall occur on date on which
the Offering occurs (the "Closing Date") provided,
however, that PSC shall have no obligation
hereunder in the event that the Closing Date has
not occurred by May 29, 1998.
Maturity of The earlier of (i) the consummation of a
Facility: Recapitalization Event (as hereinafter defined)
of the Borrower, or (ii) the day prior to the
second anniversary of the Closing Date (the
1
<PAGE>
"Maturity Date") provided, however that upon
notice delivered to Borrower no later than
ninety (90) days prior to the first anniversary
of the Closing Date, PSC, in its sole
discretion, shall have the right to designate as
the Maturity Date the day prior to the first
anniversary of the Closing Date. As used herein,
a "Recapitalization Event" of the Borrower shall
mean the earliest to occur of (i) the sale of a
substantial portion of the properties of the
Borrower (any transaction in excess of
$100,000,000.00 shall be deemed to be
substantial), (ii) any merger, consolidation or
other business combination of the Borrower with
or into one or more persons in which the person
other than the Borrower is the survivor,
including, without limitation, a reverse
subsidiary merger in which the holders of the
ownership interest in the Borrower immediately
prior to such merger, consolidation or other
business combination receive cash or non-cash
consideration, or (iii) the voluntary or
involuntary bankruptcy, insolvency,
reorganization or any similar proceeding,
dissolution, liquidation or winding up of the
affairs of the Borrower or any of the
Guarantors.
Interest Rate: The Loan shall bear interest at a rate equal to
the sum of the 30-day LIBOR plus (i) 125 basis
points if the ratio of Philip's Total
Liabilities-to-Total Assets (each as defined
below), expressed as a percentage, is less than
or equal to 40%, (ii) 150 basis points if the
ratio of Philip's Total Liabilities-to-Total
Assets, expressed as a percentage, is greater
than 40% and less than or equal to 50% and (iii)
175 basis points if the ratio of Philip's Total
Liabilities-to-Total Assets, expressed as a
percentage, is greater than 50% and less than or
equal to 60% (the interest rate applicable in
any interest period is hereinafter referred to
as the "Interest Rate"; the difference between
the 30-day LIBOR and the Interest Rate in any
interest period is hereinafter referred to as
the "Spread"). The initial 30-day LIBOR will be
determined by PSC on the business day of the
first draw and will be adjusted on each interest
payment date thereafter (as described below).
With respect to subsequent draws, the 30-day
LIBOR for each draw will be determined by PSC on
the business day of such draw and will be
adjusted on the interest payment date (as
described below). On or before the forty-fifth
(45th) day of each quarter, provided that
Borrower and Guarantors shall have timely
delivered a Compliance Certificate (as defined
below), PSC shall determine the Spread,
effective as of the forty-sixth (46th) day of
each quarter (the "Reset Date"), on which the
Interest Rate will be based for each subsequent
interest period until the next Reset Date.
2
<PAGE>
Interest Payments: Interest payments will be payable monthly in
arrears and due on the last business day of each
month. Interest will be calculated on the basis
of a 360-day year and actual days elapsed.
Default Rate: The sum of the Interest Rate then applicable
plus 400 basis points.
Principal Payments: No principal payments will be required during
the term of the facility until the Maturity Date
when the entire outstanding balance, together
with accrued and unpaid interest thereon will be
due.
Prepayment: All or a portion of any outstanding borrowings
can be prepaid at anytime and from time to time
upon two business days written notice to PSC,
provided that the Borrower pay any breakage fees
incurred by PSC in reversing its LIBOR hedge.
Fees: On the Closing Date, Borrower shall pay PSC a
non-refundable, non-creditable fee equal to .5%
of the principal amount of the Facility
($500,000).
Use of Proceeds: The proceeds will be used by the Borrower (i) to
fund certain of the Borrower's acquisition,
Redevelopment and development activities that
(a) satisfy the applicable conditions precedent
and covenants set forth in the commitment
letter, herein or in Exhibit B and (b) are
generally consistent with Borrower's existing
properties and (ii) to fund up to $10,000,000 of
the costs incurred in connection with Borrower's
general corporate purposes.
Collateral: The obligations of the Borrower will be secured
by (i) a first and only mortgage interest in
Forest Avenue Shoppers Town, located in Staten
Island New York (the "Forest Property"), which
secures Forest's obligations under its guaranty,
the amount of which mortgage shall be limited to
$24,000,000, (ii) a first and only mortgage
interest in Meadowbrook Commons, located in
Freeport, New York (the "Meadowbrook Property"),
which secures Meadowbrook's obligations under
its guaranty, the amount of which mortgage shall
be limited to $_____________, (iii) a first and
only mortgage interest in Branhaven Plaza,
located in Branford, Connecticut (the "Branhaven
Property"), which secures Branhaven's
obligations under its guaranty and (iv) a first
and only mortgage interest in The Shops at 49th
Street and Philips
3
<PAGE>
Plaza, known as components 3 and 4, each located
in Hialeah, Florida (collectively, the "Hialeah
Properties"), which secures Hialeah's
obligations under its guaranty, the amount of
which mortgage shall be limited to $23,811,758.
The Forest Property, the Meadowbrook Property,
the Branhaven Property and the Hialeah
Properties are hereinafter collectively referred
to as the "Initially Mortgaged Properties"). In
the event that the Borrower or any of the
Guarantors elect to grant to PSC a security
interest in any additional property in order to
increase the amount of funds which may be
borrowed under the Facility, the Borrower or the
Guarantor, as the case may be, shall grant to
PSC with respect to such property (an
"Additional Mortgaged Property") a first and
only mortgage interest in such Additional
Mortgaged Property. PSC shall reasonably
cooperate with Borrower and/or Guarantors in
connection with any Additional Mortgaged
Property to the extent that Borrower and/or such
Guarantor, as the case may be, desires PSC to
take by assignment an existing mortgage on such
Additional Mortgaged Property. Any Additional
Mortgaged Property shall be consistent with the
Initially Mortgaged Properties, the other
existing properties owned by the Borrower and
shall comply with the terms and covenants set
forth herein. The Initially Mortgaged
Properties, together with any Additional
Mortgaged Properties, are hereinafter sometimes
collectively referred to as the "Mortgaged
Properties" Each of the foregoing mortgages
shall be in form and substance satisfactory to
PSC, and shall be accompanied by an assignment
of all leases and rents and such other security
interests and encumbrances as are set forth on
Exhibit B to the Commitment Letter. Upon
repayment of the Loan in full or, in the event
that PSC agrees, in its sole discretion, upon
partial prepayment or otherwise, to release its
lien on any Mortgaged Property, PSC shall
reasonably cooperate with Borrower or any
Guarantor, as the case may be, should Borrower
or such Guarantor desire PSC to assign such lien
to a third party rather than issue a
satisfaction thereof, provided however, that
Borrower or such Guarantor pays all costs and
expenses incurred by PSC in connection
therewith.
Recourse: All obligations will be with full recourse to the
Borrower.
4
<PAGE>
Conditions to
Funding:
(I) PSC's obligation to the initial advance of funds
will be subject to satisfaction of all
requirements with respect to all Collateral
including:
(a) PSC's receipt and satisfactory review of:
(i) the Form 10K filed by Philips with the
Securities and Exchange Commission (the "SEC")
for the year 1997 (ii) unaudited operating
statements for each Mortgaged Property for the
calendar year 1997 and the first quarter of
1998, (iii) a reasonable opportunity to review
the Borrower's, each Guarantors' and their
respective subsidiaries' books and records, and
PSC has received for its review copies of all
rent rolls, leases and abstracts; if any, and
(iv) the pro forma balance sheet of the Borrower
and the Guarantors, on a consolidated basis, as
of Closing Date and after giving effect to the
transactions contemplated herein;
(b) the successful completion of the Offering;
(c) the satisfaction of the conditions precedent
set forth in Exhibit B to the Commitment Letter;
(d) finalization, execution, delivery and
recording of all the Loan Documents set forth in
Exhibit B to the Commitment Letter and required
by PSC, in form and substance satisfactory to
PSC and its counsel in their sole discretion
(collectively the "Loan Documents");
(e) no material adverse change in the financial
condition, assets, operation or prospects of the
Borrower, any Guarantor and/or their respective
subsidiaries shall have occurred, and no
representation made or information supplied to
PSC shall have proven to be inaccurate or
misleading in any material respect;
(f) PSC, its counsel and its accountants shall
have completed their business and legal due
diligence investigation (including, without
limitation, their environmental due diligence,
as requested by PSC) of the Borrower, the
Guarantors, their respective subsidiaries and
the Mortgaged Properties to PSC's satisfaction;
and PSC shall not have discovered any fact,
circumstance or condition, nor otherwise made a
determination, which, in its sole discretion,
could make the consummation of the transactions
described herein unwise or
5
<PAGE>
detrimental to PSC's interests in any way; and
(g) the delivery of satisfactory board
resolutions, certificates of incorporation and
by-laws or other appropriate charter and
organizational documents, together with all
appropriate certificates from authorized
persons.
(II) PSC's obligation to any advance of funds
(including the initial advance) will be subject
to satisfaction of all requirements with respect
to all Collateral including:
(a) the satisfaction of the conditions
precedent set forth in Exhibit B to
the Commitment Letter;
(b) finalization, execution, delivery and
recording of all Loan Documents
required by PSC, in form and substance
satisfactory to PSC and its counsel in
their sole discretion;
(c) PSC's receipt and satisfactory review
of: (i) detailed historical operating
statements of each real property which
is a part of the Collateral; (ii) the
Borrower's and the Guarantors' cash
flow projections relating to each real
property which is to be offered as
additional collateral in order to
increase the borrowings available
under the Facility; (iii) all
applicable detailed rent rolls
relating to each real property which
is to be offered as additional
collateral in order to increase the
borrowings available under the
Facility; (iv) an opportunity to
review the Borrower's and the
Guarantors' books and records relating
to each real property which is or is
to be included as a part of the
Collateral and copies of all leases
and abstracts, if any, and (v) all
third party reports requested by PSC
relating to each real property which
is a part of the Collateral,
including, without limitation,
environmental audits,
architectural/engineering and seismic/
soils reports;
(d) the receipt and satisfactory review by
PSC of a breakdown of all uses of
proceeds, including
6
<PAGE>
fees and expenses;
(e) the payments of all fees and expenses
then due to PSC and its counsel;
(f) PSC shall receive a favorable legal
opinion of the Borrower's and the
Guarantor's counsel as to the due
execution, authorization and
enforceability of any mortgage which
shall encumber an Additional Mortgaged
Property and, in connection therewith,
such matters as PSC may reasonably
require;
(g) the representations and warranties of
the Borrower and each of the
Guarantors in the Loan Documents to
which it is a party shall be true and
correct in all material respects as
though made on and as of the date of
such Loan;
(h) each of the Borrower, the Guarantors
and their respective subsidiaries are
then in compliance with all the terms
and provisions of the Loan Documents
to which it is a party and the
Mortgaged Properties satisfy the
Financial Covenants and other criteria
set forth herein and in the Loan
Documents;
(i) no default or event of default under
the Loan Documents has occurred and is
continuing;
(j) no material adverse change in the
financial condition, assets, operation
or prospects of the Borrower, any
Guarantor and/or any of their
respective subsidiaries shall have
occurred, and no representation made
or information supplied to PSC shall
have proven to be inaccurate or
misleading in any material respect;
and
(k) PSC shall have received notice of any
request to advance funds at least two
(2) business days prior to the date on
which the Borrower desires to receive
funds.
7
<PAGE>
Affirmative
Covenants: Those affirmative covenants customarily found in
PSC's documentation for similar financings and such
additional covenants as may be appropriate to the
proposed transaction, including, without
limitation, appropriate affirmative undertakings
to: (a) notify PSC of events of default; (b)
maintain corporate existence; (c) provide (i)
quarterly detailed operating statements and rent
rolls relating to each Mortgaged Property within 45
days after the end of each quarter, and (ii) such
other financial information as PSC may reasonably
request from time to time; (d) provide promptly,
upon filing thereof, copies of all registration
statements and reports on Form 10-K and 10-Q which
Philips shall have filed with the Securities and
Exchange Commission, together with any and all
amendments thereof, (e) deliver to PSC, within 45
days after the end of each quarter, a Compliance
Certificate; (f) ensure prudent conduct of the
Borrower's, each Guarantors' and their respective
subsidiaries' respective businesses, including
maintenance of insurance and environmental audit
reports; (g) ensure compliance with applicable laws
and ERISA requirements; (h) promptly pay all
indebtedness and taxes; and such other affirmative
covenants as deemed appropriate by PSC or its
counsel.
Negative
Covenants: Those negative covenants customarily found in PSC's
documentation for similar financings and such
additional covenants as may be appropriate to the
proposed transaction, including, without
limitation, restrictions and/or prohibitions on:
loans and other transactions with affiliates;
undertaking any additional debt, guarantees (both
senior and subordinated) or contingent obligations
other than the Facility contemplated hereby (with
the exception that Philips and PIRLP may combine to
assume recourse indebtedness and guaranty
obligations with respect to recourse indebtedness
that, in the aggregate, is less than or equal to
$30,000,000); the granting of additional liens or
similar encumbrances against the Collateral;
fundamental changes of business; asset sales of
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any Collateral (the proceeds of which are not
applied against the Facility) or which constitute a
Recapitalization Event or; changes of charter
documents and fiscal year; the change of ownership
or management of the Borrower, any Guarantor or
their respective subsidiaries; intercompany
transfers and advances (except as agreed to by PSC
and subject to a subordination agreement, in form
and substance satisfactory to PSC, with PSC;
notwithstanding the foregoing, Borrower shall be
permitted to transfer and advance funds to
subsidiaries in connection with acquisitions of
properties and working capital purposes); and such
other negative covenants as deemed appropriate by
PSC or its counsel.
Financial
Covenants: Within 45 days after the end of each quarter,
Borrower shall deliver to PSC a certificate (a
"Compliance Certificate"), executed by the chief
financial officer of each of Philips and PIRLP,
which certifies that the Borrower, the Guarantors
and their respective subsidiaries, on a
consolidated basis, are in compliance with the
Financial Covenants set forth below. Such
Compliance Certificate shall include the Borrower's
calculation of each covenant, and shall set forth
the Borrower's determination of the Spread, as
determined in accordance with paragraph (d) of this
section.
(a) At any given time, (i) the aggregate
LTV of all of the Mortgaged Properties
shall not exceed 75%, as determined by
PSC in its sole discretion.
(b) The debt service coverage ratio
(definition to be agreed upon by the
Borrower and PSC) shall not at any
time be less than 1.25 to 1.0, as
determined by PSC in its sole
discretion.
(c) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of EBITDA to Fixed Charges that
equals or exceeds 1.75 to 1.0,
measured at the end of each quarter
and determined in accordance with
generally accepted accounting
principles in the United States of
America which are consistently applied
in form and substance.
(d) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of Total Liabilities-to-Total
Assets, expressed as a percentage, of
no more than 60%, measured at the end
of
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each quarter and determined in
accordance with generally accepted
accounting principles in the United
States of America which are
consistently applied in form and
substance.
(e) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of dividends-to-funds from
operations, expressed as a percentage,
of no more than 95% (or such other
number as may be necessary for Philips
to maintain its status as a Real
Estate Investment Trust for purposes
of taxation), measured at the end of
each quarter, based on the two (2)
preceding quarters, and determined in
accordance with procedures established
by the National Association of Real
Estate Investment Trusts.
(f) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of (i) the total budgeted cost
of developments in progress ("TBCD")
to (ii) Total ---- Assets plus TBCD,
less construction in progress related
to Real Estate Assets (as defined
below), expressed as a percentage, of
no more than 40%, measured at the end
of each quarter and determined in
accordance with generally accepted
accounting principles in the United
States of America which are
consistently applied in form and
substance.
(g) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of (i) the total budgeted cost
of all Redevelopments in progress
("TBCR") to (ii) Total Assets
expressed as a percentage, of no more
than 20%, measured at the end of each
quarter and determined in accordance
with generally accepted accounting
principles in the United States of
America which are consistently applied
in form and substance.
(h) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of (i) the aggregate amount of
all sums invested, or required to be
invested, in joint ventures in which
the Borrower, Guarantors and/or their
subsidiaries, as the case may be, hold
a controlling interest, to (ii) Total
Assets, expressed as a percentage, of
no more than 20%, measured at the end
of each quarter and determined in
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accordance with generally accepted
accounting principles in the United
States of America which are
consistently applied in form and
substance.
(i) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
ratio of (i) the value of all owned
and undeveloped land to (ii) Total
Assets, expressed as a percentage, of
no more than 10%, measured at the end
of each quarter and determined in
accordance with generally accepted
accounting principles in the United
States of America which are
consistently applied in form and
substance.
(j) The Borrower, the Guarantors and their
respective subsidiaries, on a
consolidated basis, must maintain a
minimum Tangible Net Worth equal to or
greater than the sum of (i)
$100,000,000, plus (ii) an amount
equal to 75% of any funds raised
pursuant to future offerings of
equity, measured at the end of each
quarter and determined in accordance
with generally accepted accounting
principles in the United States of
America which are consistently applied
in form and substance.
As used herein: the term "EBITDA" shall mean the
Borrower's, the Guarantors' and their subsidiaries'
earnings before interest, taxes, depreciation and
amortization as determined on a consolidated basis in
accordance with generally accepted accounting
principles, except that rental income shall be
determined without straight line revenue recognition;
the term "Fixed Charges" shall mean, with respect to
any fiscal period of the Borrower, the Guarantors and
their respective subsidiaries, an amount determined on
a consolidated basis equal to the sum of (i) total
interest expense, accrued in accordance with generally
accepted accounting principles, (ii) all capitalized
interest determined in accordance with generally
accepted accounted principles, (iii) the amortization
of deferred financing costs, (iv) regularly scheduled
installments of principal payable with respect to all
indebtedness and (v) all distributions paid during
such period to the holders of any preferred shares or
preferred units; the term "Real Estate Assets" shall
mean those fixed and tangible properties consisting of
land, buildings and/or other improvements, at the
relevant time of reference thereto,
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owned by the Borrower, any Guarantor, their respective
subsidiaries or by any entity, in which any of the
foregoing have any direct or indirect ownership
interest, which owns or proposes to develop commercial
properties; the term "Redevelopment" shall mean any
project where the total budgeted cost for improvements
is 20% or more of the cost of acquiring the project;
the term "Tangible Net Worth" shall mean Total Assets
minus Total Liabilities minus all intangibles
determined in accordance with generally accepted
accounting principles; the term "Total Assets" shall
mean the aggregate book value of all assets of the
Borrower, the Guarantors and their subsidiaries, on a
consolidated basis, and determined in accordance with
generally accepted accounting principles, plus
accumulated depreciation and amortization related to
Real Estate Assets; the term "Total Liabilities" shall
mean the sum of all obligations, contingent and
otherwise, of the Borrower, the Guarantors and their
subsidiaries, on a consolidated basis, that, in
accordance with generally accepted accounting
principles in the United States of America
consistently applied, should be classified upon the
obligor's balance sheet as liabilities, or to which
reference should be made by footnotes thereto,
including, in any event, the following whether or not
so classified (a) all debt and similar monetary
obligations for borrowed money, whether direct or
indirect, (b) all liabilities secured by any mortgage,
pledge, negative pledge, security interest, lien,
negative lien, charge or other encumbrance existing on
property owned or acquired subject thereto, whether or
not the liability secured thereby shall have been
assumed, (c) all guarantees, endorsements and other
contingent obligations, whether direct or indirect in
respect of indebtedness or obligations of others,
including the balance available for drawing under
letters of credit issued for the account of the
Borrower, any Guarantor and/or any of their
subsidiaries and (d) joint venture and partnership
obligations, contingent or otherwise.
Representations
and Warranties: The Borrower and each Guarantor will make such
representations andsimilar financings and such
additional warranties to PSC as are customarily found
in PSC's documentation for representations and
warranties as may be appropriate in light of the
proposed transaction and the general circumstances of
the Borrower, each Guarantor and their respective
subsidiaries, including, without limitation,
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<PAGE>
representations and warranties relating to the
existence, good standing, and authority of the
Borrower and each Guarantor; the due authorization of
all loan documentation; the receipt of all necessary
approvals and authorization; the fair presentation of
financial statements; the absence of material
litigation; the payment of taxes and other material
obligations; the ownership by the Borrower and each
Guarantor of its properties and assets pledged as
collateral to PSC and the absence of liens or similar
encumbrances thereon; the use of proceeds; any
material adverse change in the Borrower's, any
Guarantors' or their respective subsidiaries'
operations or financial condition; the solvency of the
Borrower, any Guarantor and their respective
subsidiaries; the validity of all requisite license,
permits, patents, trademarks, copyrights or other
franchises of the Borrower, any Guarantor and their
respective subsidiaries; and compliance with all
applicable laws and regulations.
Events of Default: Those events of default customarily found in PSC's
documentation for similar financings, including,
without limitation, non-payment of principal or
interest when due; breach of any covenant; failure to
timely deliver a Compliance Certificate; default under
other agreements including any agreements governing
borrowed money; the invalidity of any security
interest or default under any security document;
judgments in excess of a pre-determined amount; any
representation or warranty that is materially
incorrect; ERISA defaults; voluntary or involuntary
bankruptcy with respect to the Borrower, any Guarantor
and their respective subsidiaries; a change of
ownership of the Borrower, any Guarantor or their
respective subsidiaries; the insolvency,
reorganization or any similar proceeding with respect
to the Borrower, any Guarantor or any of their
respective subsidiaries; a material adverse change in
the financial condition, assets, operation or
prospects of the Borrower, any Guarantor and their
respective subsidiaries.
Transferability: PSC may at any time, in whole or in part, freely
transfer, assign (by novation or otherwise),
participate or syndicate (collectively, a "Transfer")
its interest in the Facility (either before or after
execution of the Loan Documents) to any person. The
Borrower will cooperate with PSC in order to
effectuate such Transfer and execute such documents or
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<PAGE>
certificates as PSC shall reasonably request.
Expenses: Closing costs, including all out-of-pocket expenses,
including legal and other costs and expenses
(including, but not limited to, filing and searches
and the recording of UCC-1's, mortgages and other
appropriate security documents, title insurance,
perfecting PSC's security in and liens upon the
collateral and any additional collateral offered by
the Borrower or any Guarantor to increase the amount
of the borrowings available under the Facility, and
expenses related to structuring, documenting, closing,
monitoring, or enforcing the agreements), whether or
not the Facility is closed, shall be for the account
of the Borrower. The provisions of this paragraph
shall survive the expiration of this Term Sheet.
Governing Law: The substantive law of the State of New York,
without regard for its choice of law rules, provided,
however, that the law which governs each mortgage
shall be the law of the state in which the Mortgaged
Property it encumbers is located.
Miscellaneous: Provisions regarding waiver of jury trial and
consequential, indirect, special, treble or punitive
damages.
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Exhibit B
PHILIPS INTERNATIONAL REALTY CORP.
GENERAL CONDITIONS TO COMMITMENT
1. Conditions To Closing. Not less than ten (10) business days prior to
the closing date of the Loan, PSC shall have received the following:
(a) Title Policy. An ALTA extended coverage mortgagee form of title
insurance, with a deletion of the creditor's rights exception and otherwise
conforming to PSC's title insurance requirements set forth in Schedule I
attached hereto, together with such reinsurance as PSC may require from title
insurance companies acceptable to PSC insuring the first mortgage liens on the
Mortgaged Properties, subject only to matters acceptable to PSC.
(b) Survey. A survey of each of the Mortgaged Properties dated or
re-dated to within 60 days of the Closing Date which was (i) prepared by a
surveyor registered or licensed in the jurisdiction in which such property is
located, containing the legal description of the property and a certification
from the surveyor to PSC and the title insurance company in form and substance
reasonably satisfactory to PSC, (ii) substantially conforms to PSC's survey
requirements set forth in Schedule II attached hereto, and (iii) is otherwise
in form and substance reasonably satisfactory to PSC.
(c) Metes/Bounds Description. Metes and bounds descriptions of each of
the Mortgaged Properties acceptable to PSC.
(d) Legal Compliance. Evidence, in form and substance satisfactory to
PSC and its counsel, confirming that the improvements on the Mortgaged
Properties and the use thereof are in full compliance with the applicable
zoning, subdivision, environmental protection, toxic waste, asbestos and all
other applicable federal, state or local laws and ordinances, and all rules,
regulations and requirements of any and all governmental or quasi-governmental
authorities having jurisdiction over the Mortgaged Properties with respect to
the foregoing. The evidence shall include any and all certificates, licenses,
permits, approvals or consents therefor, including certificates of occupancy
or their legal equivalents permitting the use and occupancy of the Mortgaged
Properties for the then present use and as intended by this commitment letter,
a violations search of all applicable municipal agencies and departments and,
in addition, if required by PSC's counsel and opinion of the Borrower's
counsel or architect as to the foregoing. Such evidence shall be based on the
ownership of the Mortgaged Properties without reference to easements or other
interests in real properties. If PSC determines that any Mortgaged Property is
not in compliance with applicable access laws, PSC may impose additional
conditions, require monetary reserves, change the amount of the Loan or
decline to make the Loan.
(e) Service Contracts. Any and all management, operating and/or service
agreements covering the Mortgaged Properties shall be satisfactory in form and
substance to PSC and shall
<PAGE>
be in full force and effect and free from default by either party on the date
of closing. All such agreements shall be assigned to PSC. PSC, at its option,
may require the parties to any such agreement to enter into an agreement with
PSC which shall provide as follows:
(i) copies of all notices given or received under any such
agreement shall be sent to PSC;
(ii) PSC shall have the right but not the obligation to perform any
term, condition or agreement of the Borrower under any such
agreement and to cure any default of the Borrower under any
such agreement within specified additional time periods; and
(iii) such other provisions as PSC may require.
(f) Insurance. Insurance policies or certificates satisfactory to PSC as
to amounts, types of coverage and the companies by whom such policies are
underwritten.
(i) Policies of insurance issued by carriers and containing terms
satisfactory to PSC in its sole discretion shall be delivered
to PSC in accordance with the following requirements:
(A) comprehensive all risk insurance on the improvements and
the personal property located on the Mortgaged Properties,
including contingent liability from operation of building laws,
demolition costs and increased cost of construction
endorsements, in each case (I) in an amount equal to 100% of
the "full replacement cost," which for purposes of this Exhibit
B shall mean actual replacement value with a waiver of
depreciations; (II) containing an agreed amount endorsement
with respect to the improvements and personal property located
on the Mortgaged Properties waiving all co-insurance
provisions; (III) providing for no deductible in excess of
$100,000; and (IV) containing an "ordinance or law coverage" or
"enforcement" endorsement if any of the improvements or the use
of the Mortgaged Properties shall constitute legal
non-conforming structures or uses. The full replacement cost
shall be determined by an appraiser or contractor designated
and paid by the Borrower and approved by PSC, or by an engineer
or appraiser in the regular employ of the insurer.
(B) commercial general liability insurance against claims for
personal injury, bodily injury, death or property damage
occurring upon, in or about each of the Mortgaged Properties,
such insurance (I) to be on the so-called "occurrence" form
with a combined single limit of not less than $2,000,000; (II)
to continue at not less than the aforesaid limit until required
to be changed by PSC in writing by reason of changed economic
conditions making such protection inadequate; and (III) to
cover at least
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<PAGE>
the following hazards: (1) premises and operations; (2)
products and completed operations on an "if any" basis; (3)
independent contractors; (4) blanket contractual liability for
all written and oral contracts; and (5) contractual liability
covering the indemnities contained in the Loan Documents (as
hereinafter defined) to the extent the same is available.
(C) business income insurance (I) with loss payable to PSC;
(II) covering all risks required to be covered by the insurance
provided for in clause (A) above; (III) containing an extended
period of indemnity endorsement which provides that after the
physical loss to the improvements and personal property located
on the Mortgaged Properties has been repaired, the continued
loss of income will be insured until such income either returns
to the same level it was prior to the loss, or the expiration
of twelve (12) months from the date of the loss, whichever
first occurs, and notwithstanding that the policy may expire
prior to the end of such period; and (IV) in an amount equal to
100% of the projected gross income from the Mortgaged
Properties for a period of twelve (12) months. The amount of
such business income insurance shall be determined by PSC based
on the Borrower's reasonable estimate of the gross income from
the Mortgaged Properties for the succeeding twelve-month
period.
(D) Flood hazard insurance if any portion of the improvements
to the Mortgaged Properties is located in a federally
designated "special flood hazard area" and in which flood
insurance has been made available under the National Flood
Insurance Act of 1968, as amended. In lieu thereof, PSC will
accept proof satisfactory to it in its sole discretion that
such improvements do not fall within the boundaries of the
above designated area.
(E) at all times during which structural construction, repairs
or alterations are being made with respect to the improvements
to the Mortgaged Properties (I) owner's contingent or
protective liability insurance covering claims not covered by
or under the terms or provisions of the above mentioned
commercial general liability insurance policy; and (II) the
insurance provided for in clause (A) above written in a
so-called builder's risk completed value form (1) on a
non-reporting basis, (2) against all risks insured against
pursuant to clause (A) above, (3) including permission to
occupy the Mortgaged Properties, and (4) with an agreed amount
endorsement waiving co-insurance provisions.
(F) Workers' compensation, subject to the statutory limits of
the state in which the Mortgaged Properties is located, and
employer's liability insurance with a limit of at least
$1,000,000 per accident and per disease per employee, and
$1,000,000 for disease aggregate in respect of any work
3
<PAGE>
or operations on or about the Mortgaged Properties, or in
connection with the Mortgaged Properties or its operation (if
applicable).
(G) Comprehensive boiler and machinery insurance, if
applicable, in amounts as shall be reasonably required by PSC.
(H) earthquake insurance, in such amounts and having such terms
and conditions as shall be required by PSC.
(I) The Borrower and each Guarantor will maintain for itself
and their respective subsidiaries, insurance that encompasses
employee dishonesty, forgery or alteration, theft,
disappearance and destruction, robbery and safe burglary,
property (other than money and securities) and computer fraud
in an amount of at least $1,000,000 and shall name PSC as loss
payee.
(J) such other insurance as PSC may require.
(ii) PSC's interest must be clearly stated by endorsement in the
above identified insurance policies as follows:
(A) The policies of insurance referenced in subsections (i)(A),
(D), (E), (G) and (I) above shall identify the following entity
and address under the New York Standard Mortgagee Clause
(non-contributory) endorsement:
Prudential Securities Credit Corp., its
successors and/or assigns, as their
interests may appear, as first mortgagee
One New York Plaza
New York, New York 10292
Mortgage No. ___________________
(B) The insurance policy referenced in Subsections (i)(A), (B),
(D), (E), (F), (G), and (H) above shall provide for at least
thirty (30) days' written notice in the event of policy
cancellation and/or material change, and with respect to
Subsection (i)(B) above only, naming PSC as an additional
insured.
(C) The insurance policy referenced in Subsection (i)(C) above
shall provide for at least thirty (30) days' written notice in
the event of policy cancellation and/or material change and
shall contain a Loss Payable endorsement attached to the policy
identifying the following entity and address:
Prudential Securities Credit Corp., its
successors and/or assigns, as their
interests may appear
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<PAGE>
One New York Plaza
New York, New York 10292
Mortgage No. ___________________
(iii) All the insurance companies must be authorized to do business
in New York State and the State where the Mortgaged Properties
is located and be approved by PSC. The insurance companies must
have a general policy rating of A or better and a financial
class of VI or better by A.M. Best Company. The Borrower shall
deliver evidence satisfactory to PSC of payment of premiums due
under the insurance policies.
(iv) The Borrower shall be required to continue to provide PSC with
original renewals or replacements of such insurance policies or
certificates during the entire term of the Facility.
(g) Rent Roll and Operating Statement. A recent operating statement and
a current rent roll listing each and every lease, identifying the leased
Mortgaged Properties, names of all tenants, square footage or other
identification of space leased, monthly rental and all other charges payable
under the lease, date to which paid, term of lease, date of occupancy, date of
expiration, rent arrears, amounts taken in settlement of outstanding arrears,
collections of rent for more than one (1) month in advance, any and every
special provision, concession or inducement granted to tenants and such other
information as is reasonably requested by PSC. The Borrower shall sign, date,
and certify the operating statement and the rent roll as true, correct and
complete.
(h) Estoppel Certificates and SNDA. To the extent required by PSC, all
tenants under Major Leases (as defined below) and at least 50% of all other
tenants at the Mortgaged Properties shall execute and deliver an estoppel
certificate substantially in the form attached hereto as Schedule III and a
subordination and non-disturbance agreement substantially in the form annexed
hereto as Schedule IV. To the extent that estoppel certificates are not
delivered for certain tenants, PSC may, in its sole discretion, accept an
estoppel letter from Borrower with respect to such tenant's occupancy at the
Mortgaged Properties certified by Borrower as being true and correct. As used
herein, the term "Major Lease" shall mean any lease of space in a Mortgaged
Property which demises 10,000 rentable square feet or more.
(i) U.C.C. Searches. U.C.C., tax and judgment searches against such
parties and in such jurisdictions as PSC may require showing that each
Mortgaged Property is owned by the appropriate Guarantor free from any liens
and encumbrances.
(j) Environmental Site Assessment. The environmental site assessment
shall include an analysis with respect to the following environmental
conditions at the Mortgaged Properties, which shall be prepared by independent
qualified environmental professionals selected and engaged by PSC:
(i) A Phase I environmental site assessment assessing the presence
of environmental contaminants, PCBs or storage tanks at the
Mortgaged
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Properties conducted in accordance with ASTM Standard E
1527-93, or any successor thereto published by ASTM;
(ii) An asbestos survey of the Mortgaged Properties which shall
include random sampling of materials and air quality testing;
and
(iii) Such further site assessments as PSC may require due to the
results obtained in (i) or (ii) above.
The Borrower shall obtain permission for such environmental professional
to enter upon the Mortgaged Properties for the purpose of conducting such
environmental assessment. At least twelve business days prior to the closing
of the Loan, the environmental professional shall telephone PSC's
environmental technical staff to provide an oral report, prior to submitting
the written environmental report. The Environmental Report shall meet PSC's
requirements and PSC and its successors and assigns shall be entitled to rely
on such environmental assessment and such environmental report.
The Borrower acknowledges and agrees that, based on any information in
such environmental report or any uncertainties raised thereby, PSC reserves
the absolute right, in its sole and exclusive discretion, to decline to fund
the Loan, to impose additional conditions that must be met prior to or after
the closing of the Loan (including but not limited to requiring additional
investigation into environmental conditions in connection with the Mortgaged
Properties, testing and sampling of soil, water, air, building materials, or
other substances or materials), and/or to change any terms and conditions of
the Loan, including but not limited to the principal amount thereof, the
interest rate, representations and warranties, covenants, guaranties,
indemnities, and/or other terms and conditions of the Loan.
(k) Building Condition Reports. An engineer's building condition report
in form and substance satisfactory to PSC, prepared by a consulting engineer
selected and engaged by PSC, and any additional or supplemental reports that
may be required by PSC. The reports shall evaluate the physical condition of
the Mortgaged Properties, identifying conditions requiring immediate or near
term attention and estimate the approximate cost of remediation (the "Building
Condition Report") and shall include, without limitation, information
regarding compliance with the Americans with Disabilities Act and evaluation
of the seismic condition of each Mortgaged Properties. All fees and expenses
in connection with the Building Condition Report shall be paid by the
Borrower.
(l) Mortgaged Properties Matters. Evidence satisfactory to PSC of the
following:
(i) that the Mortgaged Properties are served by all utilities
required for the current or contemplated use thereof. All
utility service is provided by public utilities and the
Mortgaged Properties have accepted or is equipped to accept
such utility service;
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(ii) that all public roads and streets necessary for service of and
access to the Mortgaged Properties for the current or
contemplated use thereof have been completed, are serviceable
and all-weather and are physically and legally open for use by
the public; and
(iii) that the Mortgaged Properties are served by public water and
sewer systems.
(m) Loan Documentation. The Borrower shall have executed, acknowledged
(where appropriate) and delivered to PSC, and Borrower shall have caused
Philips and each Guarantor, as applicable, to execute, acknowledge (where
appropriate) and deliver to PSC the following loan documents in form and
substance satisfactory to PSC and its counsel (collectively, the "Loan
Documents"):
(i) the Revolving Credit Agreement;
(ii) the $100,000,000 Revolving Credit Note;
(iii) the Guaranty made by each of Philips, Forest, Meadowbrook,
Branhaven and Hialeah;
(iv) a Mortgage and Security Agreement, or Deed of Trust, as
applicable, made by each of Forest, Meadowbrook, Branhaven and
Hialeah;
(v) an Assignment of Leases and Rents made by each of Forest,
Meadowbrook, Branhaven and Hialeah;
(vi) Assignments of Property Management Agreements made by each of
Forest, Meadowbrook, Branhaven and Hialeah;
(vii) an Assignment of Security of Deposits made by each of Forest,
Meadowbrook, Branhaven and Hialeah;
(viii) Security Agreement made by each of Forest, Meadowbrook,
Branhaven and Hialeah;
(ix) An Environmental Indemnity Agreement made by each of Philips,
Forest, Meadowbrook, Branhaven and Hialeah;
(x) the appropriate UCC-1 Financing Statements;
(xi) the Assignments of Borrower's and Guarantor's interests in any
contracts and agreements, and other rights relating to the
Mortgaged Properties; and
(xii) such other documents, agreements, evidence, information and
material as PSC or its counsel may require.
7
<PAGE>
2. Loan Documentation. The Loan Documents shall contain, among other
things, the following provisions:
(a) Late Payment. In the event any payment is not made prior to the 10th
day after its due date, a late charge of 5% of the total payment due will be
charged for the late payment.
(b) Due on Sale/Encumbrance. Any sale, assignment, encumbrance,
including, without limitation, subordinate financing or other transfer of any
portion of the Mortgaged Properties, and any sale, transfer or hypothecation
of any interest in the Borrower or any Guarantor, or any partner, member or
shareholder of Borrower or any Guarantor without PSC's prior written consent,
shall be a default under the Loan Document.
(c) Default Rate. The Borrower will pay, from the date an event of
default occurs under the Loan Documents (and "Event of Default") through the
earlier of the date upon which the Event of Default is cured or the date upon
which the Facility is paid in full, interest on the unpaid principal balance
of the Note at a per annum rate equal to the lesser of (a) four percent (4%)
plus the Interest Rate and (b) the maximum interest rate which Borrower may by
law pay or PSC may charge and collect (the "Default Rate").
(d) Leases. All Major Leases shall have been approved by PSC and shall
provide that such Major Lease is subordinate to the Loan Documents. All
renewals of existing Major Leases and all proposed leases shall provide for
rental rates and terms comparable to existing local market rates and terms and
shall be arms-length transactions with bona fide, independent third party
tenants and shall be submitted to PSC for approval or disapproval by PSC and
its counsel at the Borrower's expense before execution. The Borrower shall
not, without the prior written consent of PSC: (i) alter, modify or change the
terms of the Major Leases, or cancel or terminate such Major Leases or accept
a surrender thereof or convey or transfer or permit a conveyance or transfer
of the Mortgaged Properties or any interest therein so as to effect a merger
of the estates and rights of, or a termination or diminution of the
obligations of, lessees thereunder, (ii) alter, modify or change the terms of
any guaranty, letter of credit or other credit support with respect to the
Major Leases (a "Lease Guaranty"), or cancel or terminate such Lease Guaranty,
or (iii) consent to any assignment or subletting under the Major Leases not in
accordance with their terms.
(e) Right of Redemption. If the statutes of the jurisdictions in which
the Mortgaged Properties are located provide for a right of redemption but
permit the Borrower to waive that right, such provisions shall be incorporated
in the Loan Documents. All parties necessary to join in the Loan Documents to
release any marital interest(s) in the Mortgaged Properties shall do so.
(f) Environmental Matters. The Borrower shall represent, warrant and
covenant with respect to the items set forth in Section 2(g) of this Exhibit B
and shall additionally represent, warrant and covenant that:
8
<PAGE>
(i) there are no hazardous or toxic substances in, on or under the
Mortgaged Properties, except those that are in compliance with
applicable federal, state and local environmental laws;
(ii) there are no environmental permits required for current or
anticipated uses of the Mortgaged Properties; and
(iii) The Borrower shall, at its cost and expense, comply with all
written requests of PSC to effectuate remediation of any
condition in, on, under or from the Mortgaged Properties or any
directive from any governmental authority.
(g) Environmental Representations. The Borrower and each Guarantor
represents, warrants and covenants as of the date of this commitment letter
and as of the date of the Borrower's acceptance of this commitment letter,
that:
(i) None of the Mortgaged Properties are currently used in a
manner, and to the best of the Borrower's and such Guarantors'
knowledge no prior use (by the Borrower, such Guarantor or any
prior owner) has occurred, which violates applicable federal,
state or local environmental laws;
(ii) neither the Borrower, any Guarantor nor any tenant has received
any notice from a government agency for a violation of such
laws and if such notice is received, the Borrower or such
Guarantor, as the case may be, shall immediately notify PSC;
and
(iii) neither the Borrower nor any Guarantor shall cause nor permit
any tenant to cause a violation of any applicable federal,
state or local environmental laws, nor permit any environmental
liens to be placed on any Mortgaged Property.
(h) Indemnification. The Borrower, Philips and each Guarantor shall indemnify
PSC for all costs incurred by PSC in connection with the removal of hazardous
wastes from the Mortgaged Properties, regardless of whether the Borrower caused
the presence of such hazardous substance; and shall indemnify PSC against any
loss, cost, damage or expense that PSC may incur, directly or indirectly, as a
result of or in connection with the assertion against PSC of any claim relating
to the presence or removal of any hazardous substance on the Mortgaged
Properties. The Loan Documents shall also contain an indemnity from the Borrower
with respect to its obligations under certain provisions of ERISA. In addition,
the Borrower, Philips and each Guarantor shall indemnify PSC against any loss,
costs, damage, or expense that PSC may incur arising out of the following: (i)
its ownership of the Mortgaged Properties; (ii) the Loan Documents or any
enforcement action taken by PSC in connection therewith; (iii) any accident or
injury occurring on the Mortgaged Properties; (iv) any claims asserted against
PSC by reason of its alleged obligations under any lease; (v) the payment of any
brokerage commission to anyone in connection with funding the Loans; or (vi) any
misrepresentation made
9
<PAGE>
by the Borrowers or any Guarantor to PSC in the Loan Documents. The
indemnifications contained in the Loan Documents with respect to the presence
of hazardous substances at the Mortgaged Properties and the Borrower's
obligations with respect to ERISA shall survive the satisfaction, termination
or assignment of the Loan Documents.
3. No Oral Change. This commitment letter may not be modified, amended,
waived, extended, changed, discharged or terminated orally, or by any act or
failure to act on the part of PSC or the Borrower, but only by an agreement in
writing signed by the party against whom the enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.
4. Non-Assignability. This commitment letter and the proceeds thereof
are not assignable by the Borrower to any other person, corporation,
partnership or limited liability company without PSC's consent in writing. For
the purposes of this Section, an assignment shall be deemed to include (i) if
the Borrower is a corporation, the voluntary or involuntary sale, conveyance
or transfer of the Borrower's stock (or the stock of any corporation directly
or indirectly controlling the Borrower by operation of law or otherwise) or
the creation or issuance of a new stock by which an aggregate of more that 10%
of the Borrower's stock shall be vested in a party or parties who are not now
stockholders, (ii) if the Borrower is a partnership, the change, removal or
resignation of a general partner or managing partner, or (iii) if the Borrower
is a limited liability company, the change, removal or resignation of a
managing member.
5. Obligations To Fund. If, on or before the Closing Date, any of the
following shall have occurred, PSC shall have no obligation to close and fund
the Loans under this commitment letter:
(a) Casualty/Damage. Any of the Mortgaged Properties shall have been
damaged and not repaired to PSC's satisfaction or been taken in condemnation
or other similar proceeding, or any such proceeding shall be pending;
(b) Structural Damage. If there shall have been a structural change in
the physical condition of any portion of any of the Mortgaged Properties;
(c) Violations. Any notice of violations of any municipal ordinances
shall have been filed against any of the Mortgaged Properties by any municipal
department;
(d) Bankruptcy. If Borrower, Philips or any Guarantor, or any tenant
under any Major Lease or any guarantor of any Major Lease shall be the subject
of any bankruptcy, reorganization, insolvency or similar proceeding;
(e) Environmental. Discovery of any environmental conditions at the
Mortgaged Properties unacceptable to PSC;
(f) Site Inspection. An unsatisfactory engineer's report or site
inspection conducted by PSC or any engineering firm retained by PSC;
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<PAGE>
(g) Adverse Financial Change. The income and expenses of the Mortgaged
Properties, the leases, the occupancy of the Mortgaged Properties and all
other features of the transaction, including the financial condition of the
Borrower, Philips, any Guarantor and any of their respective subsidiaries, as
represented in this commitment letter, in any loan application or in any other
documents and communications presented to PSC in order to induce PSC to make
the Loan shall have materially changed;
(h) General Legal Compliance. Any action, suit or proceeding, judicial,
administrative or otherwise is pending against or affecting Borrower, any
Guarantor, any of their respective subsidiaries or any of the Mortgaged
Properties;
(i) Representations and Warranties. If the representations and
warranties contained in the Loan Documents are false or incorrect in any
respect; or
(j) Default. If any condition occurs or shall have occurred which would
be deemed a default or an event of default under the Loan Documents if they
were in effect.
6. Broker Indemnification. The Borrower represents that it shall pay any
and all brokerage commissions owed to any broker in this transaction. It is
understood and agreed that any broker is the agent for the Borrower and that
no statement, acts or representations on the part of it or its agents shall be
considered binding upon PSC. It is further understood and agreed that by PSC's
issuance of the commitment letter it shall be under no obligation for payment
of any brokerage commission or fee of any kind with respect to the Commitment
and that by PSC's issuance of the commitment letter to the Borrower, the
Borrower agrees to pay the fee and commission of any broker and to indemnify,
save harmless and defend PSC from and against any and all claims asserted by
any broker for brokers' or finders' fees and commissions in connection with
the negotiation, execution and consummation of the Facility, the commitment
letter, such indemnity to include PSC's counsel fees and disbursements.
7. Sole Discretion of PSC. Wherever pursuant to the commitment letter
(a) PSC exercises any right given to it to approve or disapprove, (b) any
arrangement or term is to be satisfactory to PSC, or (c) any other decision or
determination is to be made by PSC, the decision of PSC to approve or
disapprove, all decisions that arrangements or terms are satisfactory or not
satisfactory and all other decisions and determinations made by PSC, shall be
in the sole and absolute discretion of PSC and shall be final and conclusive,
except as may be otherwise expressly and specifically provided herein.
8. Counsel. Messrs. Pryor, Cashman, Sherman & Flynn, 410 Park Avenue,
New York, New York 10022 (212) 421-4100, Attn: Stephen Epstein, Esq. will act
as PSC's counsel in this transaction and the Borrower or its counsel is
requested to contact said firm promptly after accepting the commitment letter
to confirm their closing requirements and to arrange for the closing. The
closing shall take place at PSC's counsel's offices in New York, New York or
as otherwise determined by PSC on a date mutually agreed upon by the
respective counsel after all closing requirements are satisfied. No broker,
agent, or other person is authorized to represent
11
<PAGE>
PSC in any way in connection with this transaction, except PSC's authorized
officers and such counsel acting in the State of New York.
12
<PAGE>
SCHEDULE I
TITLE INSURANCE REQUIREMENTS
1. The Title Insurance Company should provide a commitment to issue to ,
and their respective successors and assigns, an ALTA Lender Policy - 1970
form (amended 10/17/70 and 10/17/84) in the full amount of the loan, with
no "standard exceptions" or any "creditor's rights exception", and
including the required endorsements (as described below), and any other
endorsements applicable to the particular loan. If such form is
prohibited in your jurisdiction, will consider accepting:
- the 1992 form of ALTA Lender's Policy if the "creditor's rights
exclusion" and "arbitration provision" are deleted by special
endorsement; or
- a state approved form of lender's title insurance policy, the
form and substance of which has been approved by
2. All easements and other rights appurtenant to the subject property must
be included in the legal description as separate insured parcels.
3. The Title Insurance Company should provide to lender and lender's counsel
for review three (3) copies of the title insurance commitment and three
(3) copies of all documents (including surveys, plats or maps) referred
to in any title exception.
4. A copy of the most recent tax bill applicable to the property must be
provided to
- Any exception contained in final title insurance policy for
any taxes, charges and assessments currently due and payable with
respect to the property must relate only to those due and
payable in the future.
5. The following endorsements to the Lender's Policy are required:
- ALTA Form 3.1 Zoning Endorsement, revised to also include
affirmative insurance over the current use of the subject
property and over violations of parking requirements
- ALTA Form 9 Comprehensive Endorsement (Restrictions,
Encroachments, Minerals)
- Survey/Location Endorsement
6. The following endorsements are required where appropriate:
- ALTA Form 8.1 Environmental Endorsement
- ALTA Form 4.1 Condominium Endorsement
<PAGE>
- ALTA Form 5.1 Planned Unit Development Endorsement
- ALTA Form 6, 6.1 or 6.2 Variable Rate Mortgage Endorsement
- Contiguity Endorsement
- Endorsements required to insure over special exceptions
- Other endorsements customary in the jurisdiction in which the
property is located
7. The Lender's Policy, when issued, should have all standard exceptions
deleted and should contain only those special exceptions which have been
approved by
8. Any special exception in the final Lender's Policy related to taxes and
assessments must be in the following form:
"All taxes and assessments, general and special, for the year [INSERT
YEAR IN WHICH THE LOAN CLOSES] and subsequent years, none now due and
payable. For informational purposes, the amount of such taxes and
assessments for the year [INSERT YEAR IN WHICH THE LOAN CLOSES] is
__________________."
9. Any special exception in the final Lender's Policy related to the rights
of any tenants must specifically list all such tenants and contain a note
or separate endorsement containing affirmative insurance that none of
such tenants possess any unrecorded deeds, purchase contracts, purchase
options, rights of first refusal or similar rights with respect to all or
any part of the land.
10. A pro forma/specimen title policy, exactly in the form of the final title
insurance policy expected to be issued by the title insurance company
after the closing is completed, i.e., with all appurtenant easements
listed as insured parcels, with all "standard exceptions" deleted,
containing only those special exceptions which have been approved by ,
including any applicable endorsements, and with blanks for the dates and
recording information for all documents to be recorded in connection with
the closing, must be issued by the title insurance company and approved
by at least ten (10) days prior to the anticipated closing date.
11. Where not prohibited by law, a closing protection letter will be required
from the title insurance company prior to closing. Additionally, in those
instances where the borrower's counsel is also the title insurance
company's approved attorney, a "dual capacity" letter should also be
obtained from the title insurance company.
2
<PAGE>
SCHEDULE II
SURVEY REQUIREMENTS
1. The Survey must meet currently adopted ALTA/ASCM Minimum Standard Detail
Requirements applicable to the type of property which is the subject of
the loan, including Items 1, 2, 3, 4, 6, 7, 8, 9, 10 and 11 from Table A
of such Requirements, and meet the other requirements set forth herein.
Unless otherwise specifically stated, it should be assumed in all
instances that the property is urban and that the ALTA/ASCM Urban Land
Title Survey requirements are applicable.
2. The survey must be certified to , their respective successors and
assigns, and the title insurance company issuing the title insurance
policy, by a registered land surveyor using the attached certification.
The survey must have the surveyor's original signature and seal affixed.
The survey must reflect a current date within forty-five (45) days of the
anticipated closing date. Older surveys will be acceptable if they meet
all other Survey Requirements and are updated or re-certified to a date
within forty-five (45) days of the anticipated closing date. Aerial
surveys are not acceptable.
3. The legal description must be identical to that to be contained in the
final title policy (including any appurtenant easements). If the property
is identified by reference to a recorded map or plat, the surveyor must
state that any land which has been platted or mapped is the same as that
described on the survey. Any parcel(s) subject to a Ground Lease must be
specifically shown and identified as being subject to the Ground Lease.
4. All exceptions shown on the title commitment as affecting the property
(including exceptions affecting any appurtenant easements) must be shown
on the survey. All exceptions which can be plotted must be identified by
recording information or reference to a recorded map or plat, as
applicable. The purpose for the exception(s) must be indicated on the
survey. If an exception cannot be plotted, the survey must indicate the
reason(s) why the exception cannot be plotted, and must include a
description of such exception in a survey note.
5. The survey must show the square footage or acreage of the property as a
whole.
6. The survey must show all buildings, structures and improvements on the
property, including curb cuts, driveways, fences, major trees and
shrubbery, sidewalks, stoops, overhangs and paved areas. The survey
should show the number of stories of all buildings and, if apartment
buildings, the number of units.
7. The survey must specify the total number of parking spaces on the
property.
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<PAGE>
8. The survey should identify all utility lines, indicate whether they are
above or below grade, and show any utility meters or transformers which
service the property and improvements. To the extent that any
transformers are labeled as containing PCB's, they must be noted.
9. The survey must note whether some or all of the property lies within a
flood hazard area, state the flood zone classification, the applicable
map and the community panel number.
10. The survey must show any visible evidence of the location of any
underground or above ground storage tanks, wells (whether or not
filled-in or abandoned) and all railroad tracks, spur tracks and sidings.
11. Copies of the initial drafts of the survey must be provided to the
following:
12. Duplicate originals of the final survey must be provided to the
following:
2
<PAGE>
SCHEDULE III
------------------
(Tenant)
to
(Lender)
ESTOPPEL CERTIFICATE
Dated: ________________, 1995
Location: ______________________
RECORD AND RETURN TO:
Loan No.:
<PAGE>
ESTOPPEL CERTIFICATE
The undersigned hereby certifies to _________________and its affiliates
and their respective successors and assigns ("Lender") that, as of __________,
1995:
1. __________________________, a _________________________ (the
"Tenant") is the tenant under the lease (the "Original Lease") dated
_____________, 19___, by and between Tenant and ________________________(the
"Landlord"), as landlord, affecting premises commonly known as
____________________________________________________ (the "Demised Premises").
2. Tenant has accepted possession of and is currently open for business
in the Demised Premises and acknowledges that Landlord has completed all of
the improvements required to be made by it, to Tenant's satisfaction. No one
other than Landlord, Tenant and Tenant's employees occupies or has any right
to occupy, through Tenant, any part of the Demised Premises.
3. A true and complete copy of the Original Lease and all amendments
thereto is attached hereto as Exhibit A. The Original Lease has not been
modified or amended, except as shown on Exhibit A (the Original Lease, as so
amended, is called the "Lease").
4. The date upon which the term of the Lease actually commenced was
______________, 19___. The Lease is in full force and effect and is the only
agreement between Landlord and Tenant relating in any way to the Demised
Premises.
5. All conditions to Tenant's obligation to pay all rents and other
payments required under the Lease have been satisfied. No such rents or other
payments have been paid more than one (1) month in advance of their due date.
6. There is no existing default or claimed default by either Landlord or
Tenant under the Lease. No event has occurred which, with the passage of time
or the giving of notice, or both, would constitute a default by either
Landlord or Tenant under the Lease. Tenant has no existing defenses or offsets
against Landlord's enforcement of the Lease.
7. No actions, voluntary or otherwise, are pending against Tenant or any
of its general partners under any bankruptcy, receivership, insolvency or
similar laws of the United States or any state thereof.
8. To the best of Tenant's knowledge, its use, maintenance and operation
of the Demised Premises complies with, and will at all times comply with, all
applicable federal, state, county or local statutes, laws, rules and
regulations of any governmental authorities relating to environmental, health
or safety matters. Tenant does not and will not engage in any activity which
would involve the use of the Demised Premises for the storage, generation,
use, treatment, transportation or disposal of any chemical material or
substance which is regulated as toxic or
<PAGE>
hazardous or exposure to which is prohibited, limited or regulated by any
federal, state, county, regional, local or other governmental authority or
which, even if not so regulated, may or could pose a hazard to the health and
safety of the other tenants and occupants of Landlord's property.
9. Anything in the Lease to the contrary notwithstanding, Tenant agrees
to give to Lender, by certified mail addressed to:
or such other address as Lender may specify to Tenant, a copy of any notice of
default served upon Landlord under the Lease. Tenant agrees that if Landlord
fails to cure such default within the time provided for in the Lease, then
Lender shall have an additional sixty (60) days within which to cure such
default, or if such default cannot be cured within that time, then such
additional time as may be necessary to cure such default if within such sixty
(60) days Lender has commenced and is diligently pursuing the remedies
necessary to cure such default (including, without limitation commencement of
foreclosure proceedings), in which event and while such remedies are being
diligently pursued by Lender, Tenant shall not declare a default under the
Lease or exercise any of its rights and remedies (including any rights of
self-help except in an emergency situation) under the Lease nor shall the
Lease be terminated.
10. Tenant agrees to pay, from and after receipt of notice from Lender
that Borrower has defaulted under Lender's loan, all rents and other sums
owing under the Lease directly to Lender at the address set forth above or at
such other address as Lender may specify.
The undersigned Tenant acknowledges that Lender will rely on this
Estoppel Certificate in making a loan to Landlord.
"TENANT"
a
---------------------------------------
By:
---------------------------------------
Print Name:
-------------------------------
Title:
-----------------------------------
2
<PAGE>
EXHIBIT A
Copy of Original Lease and All Amendments
3
<PAGE>
SCHEDULE IV
------------------
(Tenant)
to
(Lender)
SUBORDINATION, NON-DISTURBANCE AND
ATTORNMENT AGREEMENT
Dated: ________________, 1995
Location: ______________________
RECORD AND RETURN TO:
Loan No.:
<PAGE>
THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"Agreement") is made as of ____________, 1995, between _______________, a
________________ ("Tenant"), having an address at
________________________________________ and ________________________________
("Lender"), having its principal place of business at ________________________.
W I T N E S S E T H:
WHEREAS, Tenant is the tenant under that certain lease (the "Original
Lease") dated _____________, 19___, by and between Tenant and
______________________ (the "Landlord"), as landlord, as amended by those
instruments described in Exhibit A attached hereto and made part hereof (the
Original Lease, as so amended, is herein called the "Lease"), wherein Landlord
leased to Tenant certain premises known as ___________________________ (the
"Premises") and located on that certain land described in Exhibit B attached
hereto and made part hereof (the "Land"); and
WHEREAS, Landlord is about to make, execute and deliver its Promissory
Note ("Note") to Lender which Note shall be secured by, among other security,
a lien encumbering the Land pursuant to either a Mortgage, Security Agreement
and Assignment of Leases and Rents/Deed of Trust, Security Agreement and
Assignment of Leases and Rents (as thereafter amended and modified, the
"Mortgage") (the Mortgage and all other instruments securing the Note are
herein collectively called the "Security Documents"); and
WHEREAS, Lender and Tenant desire to confirm their agreements with
respect to the Lease and the Security Documents.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, Lender and Tenant hereby agree and covenant as follows:
1. Subordination. The Lease and all right, title and interest in the
Land created thereby (including without limitation, any purchase options,
rights of first refusal, lease renewal rights, etc.) are, shall be and shall
at all times remain and continue to be subject and subordinate in all respects
to the liens, terms, covenants, provisions and conditions of the Security
Documents.
2. Non-Disturbance. So long as the Lease is in full force and effect and
Tenant is not in default under the Lease (beyond any period given Tenant to
cure such default) or under this Agreement:
(a) Tenant's possession of the Premises and Tenant's rights and
privileges under the Lease shall not be diminished or interfered with by
Lender, and Tenant's occupancy of the Premises shall not be disturbed by
Lender for any reason whatsoever during the term of the Lease or any
extensions or renewals thereof; and
<PAGE>
(b) Lender will not join Tenant as a party defendant in any action
or proceeding to foreclose the Mortgage or to enforce any rights or
remedies of Lender under the Mortgage which would cut-off, destroy,
terminate or extinguish the Lease or Tenant's interest and estate under
the Lease.
Notwithstanding the foregoing provisions of this paragraph, if it would be
procedurally disadvantageous for Lender not to name or join Tenant as a party
in a foreclosure proceeding with respect to the Mortgage, Lender may so name
or join Tenant without in any way diminishing or otherwise affecting the
rights and privileges granted to, or inuring to the benefit of, Tenant under
this Agreement.
3. Attornment.
(a) After notice is given by Lender that a default has occurred
under the Mortgage and that the rentals and all other payments to be made
by Tenant under the Lease should be paid to Lender, Tenant will attorn to
Lender and pay to Lender, or in accordance with the directions of Lender,
all rentals and other monies due and to become due to Landlord under the
Lease or otherwise in respect to the Premises; such payments will be made
regardless of any right of set-off, counterclaim or other defense which
Tenant may have against Landlord, whether as tenant under the Lease or
otherwise; and
(b) In addition, if Lender (or its nominee or designee) shall
succeed to the rights of Landlord under the Lease through possession or
foreclosure action, delivery of a deed or otherwise, or another person
purchases the Premises upon or following foreclosure of the Mortgage,
then at the request of Lender (or its nominee or designee) or such
purchaser (Lender, its nominees and designees, and such purchaser, each
being a "Successor-Landlord"), Tenant shall attorn to and recognize
Successor-Landlord as Tenant's landlord under the Lease and shall
promptly execute and deliver any instrument that Successor-Landlord may
reasonably request to evidence such attornment. Upon such attornment, the
Lease shall continue in full force and effect as, or as if it were, a
direct lease between Successor-Landlord and Tenant upon all terms,
conditions and covenants as are set forth in the Lease, except that
Successor-Landlord shall not:
i) be liable for any previous act or omission of Landlord under the
Lease;
ii) be subject to any off-set, defense or counterclaim which shall
have previously accrued to Tenant against Landlord;
iii) be bound by any modification of the Lease or by any previous
prepayment of rent or additional rent for more than one month which
Tenant might have paid to Landlord, unless such modification or
prepayment shall have been expressly approved in writing by Lender;
or
iv) be liable for any security deposited under the Lease unless such
security has been physically delivered to Lender.
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<PAGE>
4. Lease Modifications. Tenant agrees that without the prior written
consent of Lender, it shall not: (a) amend, modify, terminate or cancel the
Lease or any extensions or renewals thereof; (b) tender a surrender of the
Lease or make a prepayment of any rent or additional rent in excess of one (1)
month; or (c) subordinate or permit the subordination of the Lease to any lien
subordinate to the Mortgage. Any such purported action without such consent
shall be void as against the holder of the Mortgage.
5. Notice of Default; Opportunity to Cure.
(a) Any notice required or permitted to be given by Tenant to
Landlord shall be simultaneously given also to Lender, and any right of
Tenant dependent upon notice shall take effect only after such notice to
Lender is so given. Performance by Lender shall satisfy any conditions of
the Lease requiring performance by Landlord, and Lender shall have a
reasonable time to complete such performance as provided in section (b)
below.
(b) Without limiting the generality of the foregoing, Tenant shall
promptly notify Lender of any default, act or omission of Landlord which
would give Tenant the right, immediately or after the lapse of a period
of time, to cancel or terminate the Lease or to claim a partial or total
eviction (a "Landlord Default"). In the event of a Landlord Default,
Tenant shall not exercise any rights available to it: i) until it has
given written notice of such Landlord Default to Lender; and ii) unless
Lender has failed, within sixty (60) days after Lender receives such
notice, to cure or remedy the Landlord Default or, if the same is not
reasonably capable of being remedied by Lender within such sixty (60) day
period, until a reasonable period for remedying such Landlord Default has
elapsed following the giving of such notice and following the time when
Lender shall have become entitled under the Security Documents to remedy
the same (which reasonable period shall in no event be less than the
period to which Landlord would be entitled under the Lease or otherwise,
after similar notice, to effect such remedy); provided that Lender shall
with due diligence commence and prosecute a remedy for such Landlord
Default. If Lender cannot reasonably remedy a Landlord Default until
after Lender obtains possession of the Land, Tenant may not terminate or
cancel the Lease or claim a partial or total eviction by reason of such
Landlord Default until the expiration of a reasonable period necessary
for the remedy after Lender institutes proceedings to obtain possession
of the Land through a foreclosure or otherwise, or for the appointment of
a receiver for the Land, provided that Lender institutes and prosecutes
such proceedings with due diligence. Lender shall have no obligation
hereunder to remedy any Landlord Default.
6. Notice of Lien. To the extent that the Lease entitles Tenant to
notice of the existence of any mortgage and the identity of any lender, this
Agreement shall constitute such notice to Tenant with respect to the Mortgage.
7. Remedies. Upon and after the occurrence of a default under the
Mortgage, Lender shall be entitled, but no obligated, to exercise the claims,
rights, powers, privileges and remedies of Landlord under the Lease and shall
be further entitled to the benefits of, and to
3
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receive and enforce performance of, all of the covenants to be performed by
Tenant under the Lease as though Lender were named therein as Landlord.
8. Limitation of Liability. Except as specifically provided in this
Agreement, Lender shall not, by virtue of this Agreement, the Mortgage or any
other instrument to which Lender may be a party, be or become subject to any
liability or obligation to Tenant under the Lease or otherwise.
9. Priority.
(a) Tenant acknowledges and agrees that this Agreement supersedes
(but only to the extent inconsistent with) any provisions of the Lease
relating to the priority or subordination of the Lease and the interests
or estates created thereby to the Mortgage.
(b) Tenant agrees to enter into a subordination, non-disturbance and
attornment agreement with any entity which shall succeed Lender with
respect to the Land, or any portion thereof, provided such agreement is
substantially similar to this Agreement.
10. Notices. Any notice, consent, request or other communication
required or permitted to be given hereunder shall be in writing and shall be:
(a) personally delivered; (b) delivered Federal Express or other comparable
overnight delivery service; or (c) transmitted by postage prepaid registered
or certified mail, return receipt requested. All such notices, consents,
requests or other communications shall be addressed to Tenant or Lender at the
address for such party previously set forth in this Agreement, or to such
other address as Tenant or Lender shall in like manner designate in writing.
All notices and other communications shall be deemed to have been duly given
on the first to occur of actual receipt of the same or: (i) the date of
delivery if personally delivered; (ii) one (1) business day after depositing
the same with the delivery service if by overnight delivery service; and (iii)
three (3) days following posting if transmitted by mail. Any party may change
its address for purposes hereof by notice to the other parties given in
accordance with the provisions hereof.
11. General. This Agreement may not be modified or terminated orally.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto, their successors and assigns. The term "Lender" shall mean the then
holder of any interest in the Mortgage. The term "Landlord" shall mean the
then holder of the lessor's interest in the Lease. The term "person" shall
mean any individual, joint venture, corporation, partnership, trust,
unincorporated association or other entity. All references herein to the Lease
shall mean the Lease as modified by this Agreement and any amendments or
modifications to the Lease which are consented to in writing by the Lender.
Any inconsistency between the Lease and the provisions of this Agreement shall
be resolved in favor of this Agreement.
12. Waivers. Both Tenant and Lender hereby irrevocably waive all right
to trial by jury in any action, proceeding or counterclaim arising out of or
relating to this Agreement.
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13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State in which the Land is located.
IN WITNESS WHEREOF, the parties hereto have executed this Subordination,
Non-Disturbance and Attornment Agreement to be effective as of the day and
year first stated above.
"LENDER"
"TENANT"
------------------------------------------
a
---------------------------------------
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
-------------------------------------
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AGREED AND CONSENTED TO:
"BORROWER"
------------------------------------------
a
---------------------------------------
By:
---------------------------------------
Printed Name:
-----------------------------
Title:
-------------------------------------
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ACKNOWLEDGMENTS
[Insert appropriate state acknowledgments]
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EXHIBIT A
Description of Lease Amendments
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EXHIBIT B
Legal Description
The real property situated in the County of _____________, State of
____________, described as follows:
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