<PAGE> 1
DRAFT IX - 2/25/97 EXHIBIT INDEX ON PAGE 51
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended: DECEMBER 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 1-5098
VORNADO REALTY TRUST
(Exact name of Registrant as specified in its charter)
MARYLAND 22-1657560
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
PARK 80 WEST, PLAZA II, SADDLE BROOK, NEW JERSEY 07663
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code: (201) 587-1000
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
Common Shares of beneficial New York Stock Exchange
interest, $.04 par value per share
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting shares held by non-affiliates of the
registrant, i.e. by persons other than officers and trustees of Vornado Realty
Trust as reflected in the table in Item 12 of this Annual Report, at March 7,
1997 was $1,085,100,000.
As of March 7, 1997, there were 26,547,680 shares of the registrant's shares
of beneficial interest outstanding.
Documents Incorporated by Reference
Part III: Proxy Statement for Annual Meeting of Shareholders to be held May 28,
1997.
Page 1 of 148
<PAGE> 2
Table of Contents
NOTE: Vornado Realty Trust and its consolidated subsidiaries are sometimes
referred to in this Annual Report on Form 10-K as "Vornado",
"Registrant" or the "Company".
Item Page
PART I. 1. Business 3
2. Properties 7
3. Legal Proceedings 12
4. Submission of Matters to a Vote of Security Holders 12
Executive Officers of the Registrant 13
PART II. 5. Market for the Registrant's Common Equity and Related
Stockholder Matters 14
6. Selected Consolidated Financial Data 15
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 17
8. Financial Statements and Supplementary Data 23
9. Changes in and Disagreements with Independent Auditors'
on Accounting and Financial Disclosure 23
PART III. 10. Directors and Executive Officers of the Registrant (1)
11. Executive Compensation (1)
12. Security Ownership of Certain Beneficial Owners
and Management (1)
13. Certain Relationships and Related Transactions (1)
PART IV. 14. Exhibits, Financial Statement Schedules, and 44
Reports on Form 8-K
SIGNATURES 45
- --------------------
(1) These items are omitted because the Registrant will file a definitive
Proxy Statement pursuant to Regulation 14A involving the election of
directors with the Securities and Exchange Commission not later than
120 days after December 31, 1996, which is incorporated by reference
herein. Information relating to Executive Officers of the Registrant
appears on page 13 of this Annual Report on Form 10-K.
-2-
<PAGE> 3
PART I
ITEM 1. BUSINESS
GENERAL
The Company is a fully-integrated real estate investment trust ("REIT")
which owns, leases, develops, redevelops and manages retail and industrial
properties primarily located in the Midatlantic and Northeast regions of the
United States. To date, the Company's primary focus has been on shopping
centers. The Company may expand its focus to take advantage of strategic
opportunities to diversify its real estate portfolio, both geographically and
by type of real estate.
On December 2, 1996, Michael D. Fascitelli became the President of the
Company and was elected to the Company's Board. Mr. Fascitelli was formerly the
Partner at Goldman Sachs & Co. in charge of its real estate practice. Mr.
Fascitelli also has been elected a director of Alexander's, Inc.
On March 12, 1997, the Company entered into a definitive agreement (the
"Agreement") to acquire interests in all or a portion of seven Manhattan office
buildings and certain management and leasing assets held by the Mendik Company
and certain of its affiliates. In conjunction with this transaction, the
Company will convert to an Umbrella Partnership REIT (UPREIT). The estimated
consideration for the transaction is approximately $654,000,000, including
$269,000,000 in cash, $168,000,000 in UPREIT limited partnership units and
$217,000,000 in indebtedness. The Agreement is subject to the consent of third
parties and other customary conditions. It is currently expected that the
proposed transaction would be consummated in the second quarter, but there can
be no assurance that the proposed transaction will be completed.
The Company's shopping centers are generally located on major regional
highways in mature densely populated areas. The Company believes its shopping
centers attract consumers from a regional, rather than a neighborhood,
marketplace because of their location on regional highways and the high
percentage of square feet dedicated to large stores. As of December 31, 1996,
the Company owned 57 shopping centers in seven states containing 10.0 million
square feet, including 1.2 million square feet built by tenants on land leased
from the Company. The Company's shopping centers accounted for 92% of the
Company's rental revenue for the years ended December 31, 1996 and 1995. The
occupancy rate of the Company's shopping center properties was 90% and 91% as of
February 1, 1997 and 1996, respectively, and has been over 90% in each of the
past five years.
Further, the Company owns eight warehouse/industrial properties in New
Jersey containing 2.0 million square feet and two office buildings containing
250,000 square feet. In addition, the Company owns 29.3% of the common stock of
Alexander's, Inc. ("Alexander's") which has nine properties in the New York
City region. See "Relationship with Alexander's" for a discussion of
Alexander's properties.
As of December 31, 1996, approximately 80% of the square footage of the
Company's shopping centers was leased to large stores (over 20,000 square feet)
and over 93% was leased to tenants whose businesses are national or regional in
scope. The Company's large tenants include destination retailers such as
discount department stores, supermarkets, home improvements stores, discount
apparel stores, membership warehouse clubs and "category killers." Category
killers are large stores which offer a complete selection of a category of items
(e.g., toys, office supplies, etc.) at low prices, often in a warehouse format.
The Company's large store tenants typically offer basic consumer necessities
such as food, health and beauty aids, moderately priced clothing, building
materials and home improvement supplies, and compete primarily on the basis of
price. The Company believes that this tenant mix mitigates the effects on its
properties of adverse changes in general economic conditions. Substantially all
of the Company's large store leases are long-term with fixed base rents and
provide for step-ups in rent typically occurring every five years.
In addition, the Company's leases generally provide for additional
rents based on a percentage of tenants' sales. Of the Company's $87,424,000 of
rental revenue in 1996, base rents accounted for approximately 99% and
percentage rents accounted for approximately 1%. The Company's leases generally
pass through to tenants the tenant's share of all common area charges (including
roof and structure, unless it is the tenant's direct responsibility), real
estate taxes and insurance costs and certain capital expenditures. As of
December 31, 1996, the average annual base rent per square foot for the
Company's shopping centers was $9.09.
From 1992 through 1996, the Company's property rentals from shopping
centers (including the effects of straight-lining of rents) were $56,900,000,
$61,900,000, $64,700,000, $74,300,000 and $80,000,000, respectively.
Straight-lining of rents averages the rent increases provided for in leases such
that property rentals for financial statement purposes is constant throughout
the term of the lease. This convention applies to leases entered into after
November 14, 1985.
-3-
<PAGE> 4
ITEM 1. BUSINESS - continued
As of December 31, 1996, no single shopping center property accounted
for more than 6.2% of the Company's total leasable area for its shopping center
properties or more than 5.8% of property rentals for its shopping center
properties. Bradlees, Inc. ("Bradlees") accounted for 22%, 21% and 19% of total
property rentals for the years ended December 31, 1996, 1995 and 1994,
respectively. Home Depot represented 5.5% and Sam's Wholesale/Wal*Mart, Shop
Rite, Pathmark, T.J. Maxx/Marshalls and Staples each accounted for approximately
3.0% of the total property rentals for the year ended December 31, 1996.
In June 1995, Bradlees filed for protection under Chapter 11 of the
U.S. Bankruptcy Code. The Company currently leases 17 locations to Bradlees. Of
these locations, 14 are fully guaranteed by Stop & Shop Companies, Inc. ("Stop &
Shop"), a wholly-owned subsidiary of Royal Ahold NV, a leading international
food retailer, and one is guaranteed as to 70% of the rent. Several of the
Company's other tenants, whose rents aggregated less than 3.0% of the Company's
total property rentals for the year ended December 31, 1996, have also filed for
protection under Chapter 11.
Vornado, Inc., the immediate predecessor to the Company, was merged
with the Company on May 6, 1993 in connection with the Company's conversion to a
REIT.
The Company administers all operating functions, including leasing,
management, construction, finance, legal, accounting and data processing, from
its executive offices (other than the leasing of the Company's three Texas
properties, which is done by an employee locally).
The Company's principal executive offices are located at Park 80 West,
Plaza II, Saddle Brook, New Jersey 07663; telephone (201) 587-1000.
RELATIONSHIP WITH ALEXANDER'S
In March 1995, the Company purchased all of the 1,353,468 shares of
common stock of Alexander's then owned by Citibank, N.A. ("Citibank"),
representing 27.1% of the outstanding shares of common stock of Alexander's, for
$40.50 per share in cash. As a result of the acquisition, the Company owns 29.3%
of the common stock of Alexander's. (See "Interstate Properties" for a
description of its ownership of the Company and Alexander's.) In addition, the
Company lent Alexander's $45,000,000.
Alexander's has nine properties (where its department stores were
formerly located) consisting of:
Operating properties:
(i) the Rego Park I property located in Queens, New York;
(ii) a 50% interest in the 427,000 square feet of mall stores at the
Kings Plaza Shopping Center (the "Kings Plaza Mall") in
Brooklyn, New York;
(iii) the Fordham Road property located in the Bronx, New York;
(iv) the Flushing property located in Flushing, New York; and
(v) the Third Avenue property in the Bronx, New York.
The occupancy rate of Alexander's operating properties was 95% and 69%
as of December 31, 1996 and 1995, respectively.
-4-
<PAGE> 5
ITEM 1. BUSINESS - continued
Non-operating properties to be redeveloped:
(vi) the Lexington Avenue property which comprises the entire square
block bounded by Lexington Avenue, East 59th Street, Third Avenue
and East 58th Street in Manhattan, New York. This Property is
owned by a limited partnership in which Alexander's is the
general partner and owns approximately 92% of the limited
partnership interests. Alexander's redevelopment plans include
razing the existing building and developing a large, multi-use
building, requiring capital expenditures in excess of $300
million. No development decisions have been finalized;
(vii) the Paramus property which consists of 39.3 acres of land,
including its former store building, located at the intersection
of Routes 4 and 17 in Paramus, New Jersey. Approximately 9 acres
located on the property's periphery are subject to condemnation
by the State of New Jersey. Alexander's and the New Jersey
Department of Transportation (the "DOT") are negotiating an
agreement, pursuant to which the DOT will pay approximately $14.7
million for the acreage subject to condemnation and grant
Alexander's the right to develop up to 550,000 square feet on the
remaining acreage. The agreement with the DOT is subject to
negotiation of final documentation and to certain municipal
approvals. Alexander's is considering razing the existing
building and developing a two or three level shopping center on
the site. The estimated total cost of such redevelopment is
between $60 million and $70 million. No development decisions
have been finalized;
(viii) the Kings Plaza Store, a 339,000 square foot anchor store, which
is one of the two anchor stores at the Kings Plaza Mall Shopping
Center. In January 1997, Sears leased 289,000 square feet at this
location for use as a full-line department store expected to open
in the last quarter of 1997, and
(ix) Rego Park II, comprising one and one-half blocks of vacant land
adjacent to the Rego Park I location.
Vornado expects to provide a portion of the financing required
for Alexander's redevelopment projects. None of the redevelopment plans
for the non-operating properties above have been finalized. See Item 2.
"Properties - Alexander's".
In September 1995, Caldor, which leases the Fordham Road and Flushing
properties from Alexander's, filed for protection under Chapter 11. Caldor
accounted for approximately 36% and 56% of Alexander's consolidated revenues for
the years ended December 31, 1996 and 1995, respectively. On February 11, 1997,
Caldor announced that, subject to Bankruptcy Court approval, it expects to close
its Fordham Road store in May 1997.
The Company manages, develops and leases the Alexander's properties
under a management and development agreement (the "Management Agreement") and a
leasing agreement (the "Leasing Agreement") pursuant to which the Company
receives annual fees from Alexander's.
Alexander's common stock is listed on the New York Stock Exchange under
the symbol "ALX".
Interstate Properties
As of December 31, 1996, Interstate Properties owned 24.4% of the
common shares of beneficial interest of the Company and 27.1% of Alexander's
common stock. Interstate Properties is a general partnership in which Steven
Roth, David Mandelbaum and Russell B. Wight, Jr. are partners. Mr. Roth is the
Chairman of the Board and Chief Executive Officer of the Company, the Managing
General Partner of Interstate Properties, and the Chief Executive Officer and a
director of Alexander's. Messrs. Mandelbaum and Wight are trustees of the
Company and are also directors of Alexander's. Effective March 2, 1995, for a
three-year period, the Company and Interstate Properties agreed not to own in
excess of two-thirds of Alexander's common stock or enter into certain other
transactions with Alexander's, without the consent of the independent directors
of Alexander's.
-5-
<PAGE> 6
ITEM 1. BUSINESS - continued
COMPETITION
The leasing of real estate is highly competitive. Demand for retail
space has been impacted by the recent bankruptcy of a number of retail companies
and a general trend toward consolidation in the retail industry which could
adversely affect the ability of the Company to attract or retain tenants. The
principal means of competition are price, location and the nature and condition
of the facility to be leased. The Company directly competes with all lessors and
developers of similar space in the areas in which its properties are located.
ENVIRONMENTAL REGULATIONS
See "Note 11 - Contingencies" to the Consolidated Financial Statements
at page 40.
EMPLOYEES
The Company employs 72 people.
SEGMENT DATA
The company operates in one business segment - real estate. See "Note 9
- - Leases" to the Consolidated Financial Statements at page 39 for information on
significant tenants. Vornado engages in no foreign operations.
-6-
<PAGE> 7
ITEM 2. VORNADO PROPERTIES
The Company leases 27,000 square feet in Saddle Brook, New
Jersey for use as it's executive offices
The following table sets forth certain information as of
December 31, 1996 relating to the properties owned by the
Company
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
--------------------
YEAR OWNED BY NUMBER AVERAGE PRINCIPAL LEASE
ORIGINALLY LAND OWNED/ TENANT ON OF ANNUALIZED TENANTS EXPIRATION/
DEVELOPED AREA LEASED BY LAND LEASED TENANTS BASE RENT PERCENT (OVER OPTION
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/96 PER SQ.FT.(1) LEASED 30,000 SQ.FT.) EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SHOPPING
CENTERS
NEW Atlantic City 1965 17.7 135,774 -- -- -- -- --
JERSEY
Bordentown 1958 31.2 178,678 -- 4 $6.54 100% Bradlees(2)(3) 2001/2021
Shop-Rite 2011/2016
Bricktown 1968 23.9 259,888 2,764 19 10.22 99% Caldor 2008/2028
Shop-Rite 2002/2017
Cherry Hill 1964 37.6 231,142 63,511 13 8.38 94% Bradlees(2)(3) 2006/2026
Drug Emporium 2002
Shop & Bag 2007/2017
Toys "R" Us 2012/2042
Delran 1972 17.5 167,340 1,200 5 5.32 95% Sam's Wholesale 2011/2021
Dover 1964 19.6 172,673 -- 12 5.87 97% Ames 2017/2037
Shop-Rite 2012/2022
East Brunswick 1957 19.2 219,056 10,400 7 11.45 100% Bradlees(3) 2003/2023
Shoppers World 2007/2012
T.J. Maxx 1999
East Hanover 1962 24.6 271,066 -- 16 10.21 97% Home Depot 2009/2019
Marshalls 2004/2009
Pathmark 2001/2024
Todays Man 2009/2014
Hackensack 1963 21.3 207,548 59,249 19 14.75 96% Bradkees(3) 2012/2017
Pathmark 2014/2024
Rickel Home 2003/2013
Center
Jersey City 1965 16.7 222,478 3,222 10 11.99 92% Bradlees(3) 2002/2022
Shop-Rite 2008/2028
Kearny 1959 35.3 41,518 62,471 4 6.47 89% Pathmark 2013/2033
Rickel Home 2008
Center
Lawnside 1969 16.4 145,282 -- 3 9.07 100% Home Deposit 2012/2027
Drug Emporium 2007
Lodi 1975 8.7 130,000 -- 1 8.50 100% National 2013/2023
Wholesale
Liquidators
Manalapan 1971 26.3 194,265 2,000 7 8.84 100% Bradlees(3) 2002/2022
Grand Union 2012/2022
Marlton 1973 27.8 173,238 6,836 10 8.29 100% Kohl's(2)(3) 2011/2031
Shop-Rite 1999/2009
Middletown 1963 22.7 179,584 52,000 21 12.25 96% Bradlees(3) 2002/2022
Grand Union 2009/2029
</TABLE>
-7-
<PAGE> 8
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
---------------------------
YEAR OWNED BY NUMBER AVERAGE
ORIGINALLY LAND OWNED/ TENANT ON OF ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED TENANTS BASE RENT
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/96 PER SQ. FT.(1)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Morris Plains 1985 27.0 171,493 1,000 18 11.04
North Bergen 1959 4.6 6,515 55,597 3 25.78
North Plainfield (4) 1989 28.7 217,360 - 16 8.71
Tolowa 1957 40.5 201,471 93,613 8 15.96
Turnersville 1974 23.3 89,453 6,513 3 5.98
Union 1962 24.1 257,045 - 12 17.48
Vineland 1966 28.0 143,257 - 4 6.95
Watchung 1959 53.8 49,979 115,660 6 17.80
Woodbridge 1959 19.7 232,755 3,614 10 13.00
NEW YORK 14th Street and Union
Square, Manhattan 1993 0.8 231,770 - 1 9.92
Albany (Menands) 1965 18.6 140,529 - 2 6.35
Buffalo (Amherst)(4) 1968 22.7 184,832 111,717 10 6.71
Coram (4) 1976 2.4 103,000 - 1 2.22
Freeport 1981 12.5 166,587 - 3 11.50
New Hyde Park (4) 1976 12.5 101,454 - 1 13.55
North Syracuse (4) 1976 29.4 98,434 - 1 2.74
Rochester 1971 15.0 147,812 - 1 5.86
(Henrietta)(4)
Rochester 1966 18.4 176,261 - 1 6.05
PENNSYLVANIA Allentown 1957 86.8 262,607 356,938 19 9.63
Bensalem 1972 23.2 208,174 6,714 13 7.49
<CAPTION>
PRINCIPAL LEASE
TENANTS EXPIRATION/
PERCENT (OVER OPTION
LEASED(1) 30,000 SQ. FT.) EXPIRATION
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Morris Plains 97% Caldor 2002/2023
Shop-Rite 2002
North Bergen 100% A & P 2012/2032
North Plainfield (4) 96% KMart 2006/2016
Pathmark 2001/2011
Tolowa 97% Bradlees (3) 2013/2028
Home Depot 2015/2025
Marshall's 2007/2012
Turnersville 100% Bradlees (2)(3) 2011/2031
Union 100% Bradlees (3) 2002/2022
Toys "R" Us 2015
Cost Cutter Drug 2000
Vineland 51% Rickel Home Center 2005/2010
Watchung 96% B J Wholesale 2024
Woodbridge 96% Bradlees (3) 2002/2022
Foodtown 2007/2014
Syms 2000
NEW YORK 14th Street and Union 100% Bradlees 2019/2029
Square, Manhattan
Albany (Menands) 100% Fleet Bank 2004/2014
Albany Public Mkts. (5) 2000
Buffalo (Amherst)(4) 96% Circuit City 2017
Media Play 2002/2017
MJ Design 2006/2017
Toys "R" Us 2013
TJ Maxx 1999
Coram (4) 100% May Department Stores (5) 2011
Freeport 100% Home Depot 2011/2021
Cablevision 2004
New Hyde Park (4) 100% Bradlees (6) 2019/2029
North Syracuse (4) 100% Reisman Properties 2014
Rochester 47% Hechinger (5) 2005/2025
(Henrietta)(4)
Rochester 41% Hechinger (5) 2005/2025
PENNSYLVANIA Allentown 98% Hechinger 2011/2031
Shop-Rite 2011/2021
Burlington Coat Factory 2017
Wal-Mart 2024/2094
Sam's Wholesale 2024/2094
TJ Maxx 1998/2008
Bensalem 89% (2) (3) 2011/2031
Shop-Rite 2011/2031
</TABLE>
-8-
<PAGE> 9
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
------------------------
YEAR OWNED BY NUMBER AVERAGE
ORIGINALLY LAND OWNED/ TENANT ON OF ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED TENANTS BASE RENT PERCENT
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/96 PER SQ. FT.(1) LEASED(1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bethlehem 1966 23.0 157,212 2,654 12 4.76 78%
Broomall 1966 21.0 145,776 22,355 5 8.31 100%
Glenolden 1975 10.0 101,235 -- 3 14.75 100%
Lancaster 1966 28.0 179,982 -- 7 4.28 50%
Levittown 1964 12.8 104,448 -- 1 5.98 100%
10th and Market
Streets, Philadelphia 1994 1.8 271,300 -- 2 7.94 62%
Upper Moreland 1974 18.6 122,432 -- 1 7.50 100%
York 1970 12.0 113,294 -- 3 4.64 100%
MARYLAND Baltimore (Belair Rd) 1962 16.0 205,723 -- 3 4.83 100%
Baltimore (Towson) 1968 14.6 146,393 6,800 7 9.62 100%
Baltimore (Dundalk) 1966 16.1 183,361 -- 17 6.48 97%
Glen Burnie 1958 21.2 117,369 3,100 4 5.90 78%
Hagerstown 1966 13.9 133,343 14,965 6 3.01 100%
CONNECTICUT Newington 1965 19.2 134,229 45,000 4 6.24 100%
Waterbury 1969 19.2 139,717 2,645 10 7.64 100%
MASSACHUSETTS Chicopee 1969 15.4 112,062 2,851 3 4.85 93%
Milford(4) 1976 14.7 83,000 -- 1 5.26 100%
Springfield 1966 17.4 8,016 117,044 2 11.25 100%
TEXAS Lewisville 1990 13.3 34,893 1,204 14 13.60 88%
Mesquite 1990 5.5 71,246 -- 14 13.90 95%
Dallas 1990 9.9 99,733 -- 8 9.25 80%
------- --------- --------- --- ----- ---
Total Shopping Centers 1,182.1 8,785,082 1,233,637 411 9.09 90%
------- --------- --------- --- ----- ---
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL LEASE
TENANTS EXPIRATION/
(OVER OPTION
LOCATION 30,000 SQ. FT.) EXPIRATION
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bethlehem Pathmark 2000/2023
Super Petz 2005/2015
Broomall Bradlees(2)(3) 2006/2026
Glenolden Bradlees(2)(3) 2012/2022
Lancaster Weis Markets 1998/2018
Levittown (2)(3) 2006/2026
10th and Market
Streets, Philadelphia Kimco Realty Corporation 2010/2035
Upper Moreland Sam's Wholesale(2) 2010/2015
York Builders Square 2009/2018
MARYLAND Baltimore (Belair Rd) Big B Food 1999/2004
Warehouse Y? Innovatyve 2002/2007
Baltimore (Towson) Staples 2004
Cost Saver Supermarket 2000/2020
Drug Emporium 1999/2004
Baltimore (Dundalk) A&P 1997/2017
Ollie's 1998/2008
Manor Shops 1998
Glen Burnie Pathmark Stores, Inc(5) 2005
Hagerstown Big Lots 2002/2012
Pharmhouse 2008/2012
Weis Markets 1999/2009
CONNECTICUT Newington (3) 2002/2022
The Wiz 2007/2027
Waterbury Toys "R" Us 2010
Shaws Supermarkets 2003/2018
MASSACHUSETTS Chicopee Bradlees(3) 2002/2022
Milford(4) Bradlees(3) 2004/2009
Springfield Wal*Mart 2018/2092
TEXAS Lewisville Albertson's(7) 2055
Mesquite
Dallas Albertson's(7) 2055
Total Shopping Centers
</TABLE>
-9-
<PAGE> 10
<TABLE>
<CAPTION>
LEASABLE BUILDING
SQUARE FOOTAGE
--------------------------
YEAR OWNED BY NUMBER AVERAGE
ORIGINALLY LAND OWNED/ TENANT ON OF ANNUALIZED
DEVELOPED AREA LEASED BY LAND LEASED TENANTS BASE RENT PERCENT
LOCATION OR ACQUIRED (ACRES) COMPANY FROM COMPANY 12/31/96 PER SQ. FT.(1) LEASED(1)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
WAREHOUSE/ E. Brunswick 1972 16.1 325,800 -- 2 2.17 97%
INDUSTRIAL
E. Hanover 1963-1967 45.5 941,429 -- 12 3.64 94%
Edison 1982 18.7 272,071 -- 1 2.75 100%
Garfield 1959 31.6 486,620 -- 3 3.46 38%
Total Warehouse' ------- ---------- --------- ------ ------ -------
Industrial 111.9 2,025,920 -- 18 3.19 81%
------- ---------- --------- ------ ------ -------
OTHER Paramus(4) 1987 3.4 118,225 -- 25 17.29 65%
PROPERTIES
Montclair 1972 1.6 16,928 -- 1 17.00 100%
Rahway(4) 1972 -- 32,000 -- 1 4.88 100%
Manhattan, NY(8) 1966 0.5 149,000 -- 1 7.65 100%
------- ---------- --------- ------ ------ -------
Total Other 5.5 316,153 -- 28 10.61 87%
Properties ------- ---------- --------- ------ ------ -------
Grand Total 1,299.5 11,127,155 1,233,637 457 $8.13 89%
======= ========== ========= ====== ====== ======
<CAPTION>
PRINCIPAL LEASE
TENANTS EXPIRATION/
(OVER OPTION
LOCATION 30,000 SQ. FT.) EXPIRATION
- ----------------------------------------------------------------------
<S> <C> <C> <C>
WAREHOUSE/ E. Brunswick Popsicle Playwear 2000/2005
INDUSTRIAL IFB Apparel 2001/2006
E. Hanover Various Tenants
Edison White Cons. Ind. 1998/2001
Garfield Popular Services 2007
of Various Tenants
Total Warehouse'
Industrial
OTHER Paramus(4)
PROPERTIES
Montclair
Rahway(4)
Manhattan, NY(8) American Broadcasting 1999
Companies
Total Other
Properties
Grand Total
</TABLE>
(1) Average annualized base rent per square foot does not include ground leases
(which leases are included in percent leased) or rent for leases which had
not commenced as of December 31, 1996.
(2) Montgomery Ward & Co., Inc. (a previous lessor) remains liable on such lease
including the rent it was obligated to pay -- approximately 70%.
(3) These leases are either fully guaranteed by Stop & Shop, a wholly-owned
subsidiary of Royal Ahold NV, or in the case of Totowa, guaranteed as to 70%
of rent .
(4) Ground and/or building leasehold interest.
(5) The tenant has ceased operations at these locations but continues to pay
rent.
(6) Bradlees received Bankruptcy Court approval in January 1997 to close this
store.
(7) Square footage excludes Albertson's which owns its land and building.
(8) The Company owns a 50% interest in this property.
-10-
<PAGE> 11
Item 2. ALEXANDER'S PROPERTIES
The following table shows the location, approximate size and
leasing status as of December 31, 1996 of each of Alexander's properties.
<TABLE>
<CAPTION>
APPROXIMATE
APPROXIMATE BUILDING SQUARE AVERAGE LEASE
LAND SQUARE FOOTAGE/ ANNUALIZED EXPIRATION/
FOOTAGE ("SF") NUMBER BASE RENT PERCENT OPTION
LOCATION OWNERSHIP OR ACREAGE OF FLOORS PER SQ. FOOT (1) LEASED TENANTS EXPIRATION
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
NEW YORK:
Rego Park - Queens Owned 4.8 acres 351,000/3 (2) $27.79 96% Bed Bath & (3)
Beyond
Circuit City (3)
Marshalls 2008/2021
Sears 2021
Kings Plaza Shopping Center 50% 24.3 acres 427,000/2 (2)(4) 31.19 84% 120 Tenants Various
& Marina (Kings Plaza Mall) Owned
Brooklyn
Fordham Road - Bronx Owned 92,211 SF 303,000/5 11.54 100% Caldor (5) 2013/2028
Flushing - Queens Leased 44,975 SF 177,000/4 (2) 16.35 100% Caldor 2027
Third Avenue - Bronx Owned 60,451 SF 173,000/4 4.33 100% An affiliate of 2023
1,431,000 Conway
REDEVELOPMENT PROPERTIES
Lexington Avenue-Manhattan 92% 84,420 SF 591,000/6 (6)
Owned
Kings Plaza Store-Brooklyn Owned Included in 339,000/4 Sears (3)
Shopping
Center
above
Rego Park II - Queens Owned 6.6 acres --
NEW JERSEY:
Paramus, New Jersey Owned 39.3 acres(7) 340,000/3 (6)
</TABLE>
(1) Average annualized base rent per square foot does not include rent for
leases which had not commenced as of December 31, 1996.
(2) Excludes parking garages operated for the benefit of Alexander's.
(3) The Circuit City and Bed Bath & Beyond leases are expected to commence in
the first half of 1997. The Sears lease is expected to commence in the
last quarter of 1997.
(4) Excludes approximately 150,000 square feet of enclosed, common area space.
(5) On February 11, 1997, Caldor announced that, subject to Bankruptcy Court
approval, it expects to close this store in May 1997.
(6) Alexander's is evaluating redevelopment plans for these sites which may
involve razing the existing buildings.
(7) Approximately 9 acres are subject to condemnation.
-11-
<PAGE> 12
INSURANCE
The Company carries comprehensive liability, fire, flood, extended
coverage and rental loss insurance with respect to its properties with policy
specifications and insured limits customarily carried for similar properties.
Management of the Company believes that the Company's insurance coverage
conforms to industry norms.
ITEM 3. LEGAL PROCEEDINGS
The Company is from time to time involved in legal actions arising in
the ordinary course of its business. In the opinion of management, after
consultation with legal counsel, the outcome of such matters will not have a
material effect on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of the year ended December 31, 1996.
-12-
<PAGE> 13
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the names, ages, principal occupations and
positions with Vornado of the executive officers of Vornado and the positions
held by such officers during the past five years. All executive officers of
Vornado have terms of office which run until the next succeeding meeting of the
Board of Trustees of Vornado following the Annual Meeting of Shareholders unless
they are removed sooner by the Board.
<TABLE>
<CAPTION>
Principal Occupation, Position and Office (current
and during past five years with Vornado unless
Name Age otherwise stated)
---- --- --------------------------------------------------
<S> <C> <C>
Steven Roth 55 Chairman of the Board, Chief Executive Officer and
Chairman of the Executive Committee of the Board; the
Managing General Partner of Interstate Properties, a
developer and operator of shopping centers and an investor
in securities and partnerships; Chief Executive Officer of
Alexander's, Inc. since March 2, 1995 and a Director since
1989; Director of Insituform Technologies, Inc.
Michael D. Fascitelli 40 President and a Trustee since December 2, 1996; Director of
Alexander's, Inc. since December 2, 1996; Partner at
Goldman, Sachs & Co. in charge of its real estate practice
from December 1992 to December 1996; and Vice President
at Goldman, Sachs & Co., prior to December 1992.
Richard T. Rowan 50 Vice President - Real Estate
Joseph Macnow 51 Vice President - Chief Financial Officer; Vice President -
Chief Financial Officer of Alexander's, Inc. since August
1995
</TABLE>
-13-
<PAGE> 14
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Vornado's common shares are traded on the New York Stock Exchange.
Quarterly price ranges of the common shares and dividends per share paid for the
years ended December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Quarter High Low Dividends High Low Dividends
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1st $38.38 $35.63 $.61 $36.25 $33.88 $.56
2nd 41.50 37.13 .61 36.00 32.63 .56
3rd 42.13 40.50 .61 39.00 34.75 .56
4th 52.88 40.50 .61 37.88 34.38 .56
- --------------------------------------------------------------------------------
</TABLE>
The approximate number of record holders of common shares of Vornado at
December 31, 1996, was 2,000.
-14-
<PAGE> 15
PART II
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
==================================================================================================================================
Year Ended December 31,
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING DATA (in thousands, except share and per share amounts)
<S> <C> <C> <C> <C> <C>
Revenues:
Property rentals $ 87,424 $ 80,429 $ 70,755 $ 67,213 $ 63,186
Expense reimbursements 26,644 24,091 21,784 19,839 17,898
Other income 2,819 4,198 1,459 1,738 913
- ----------------------------------------------------------------------------------------------------------------------------------
Total Revenues 116,887 108,718 93,998 88,790 81,997
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses:
Operating 36,412 32,282 30,223 27,994 27,587
Depreciation and amortization 11,589 10,790 9,963 9,392 9,309
General and administrative 5,167 6,687 6,495 5,890 4,612
Amortization of officer's deferred
compensation expense 2,083 -- -- -- --
Costs incurred in connection with the merger
Vornado, Inc. into Vornado Realty Trust -- -- -- 856 --
Cost incurred upon exercise of a stock option
by an officer and subsequent repurchase of
a portion of the shares -- -- -- -- 15,650
- ----------------------------------------------------------------------------------------------------------------------------------
Total Expenses 55,251 49,759 46,681 44,132 57,158
- ----------------------------------------------------------------------------------------------------------------------------------
Operating income 61,636 58,959 47,317 44,658 24,839
Income (loss) applicable to Alexander's:
Equity in income (loss) 1,679 (1,972) -- -- --
Depreciation (571) (417) -- -- --
Interest income on loan 6,848 6,343 -- -- --
Income from investment in and advances to
Vornado Management Corp. 1,855 788 -- -- --
Interest income on mortgage note receivable 2,579 -- -- -- --
Interest and dividend income 3,151 5,439 7,489 11,620 8,555
Interest and debt expense (16,726) (16,426) (14,209) (31,155) (33,910)
Net gain on marketable securities 913 294 643 263 2,779
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations before
income taxes 61,364 53,008 41,240 25,386 2,263
Provision (benefit) for income taxes -- -- -- (6,369) 1,080
- ----------------------------------------------------------------------------------------------------------------------------------
Income from continuing operations $ 61,364 $ 53,008 $ 41,240 $ 31,755 $ 1,183
==================================================================================================================================
Weighted average number
of shares outstanding 24,603,442 23,579,669 21,853,720 19,790,448 16,559,330
Income per share from
continuing operations $ 2.49 $ 2.25 $ 1.89 $ 1.60 $ .07
Cash dividends declared 2.44 2.24 2.00 1.50* 1.15
</TABLE>
* Does not include special dividend of $3.36 per share of accumulated earnings
and profits paid in June 1993.
<TABLE>
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
As at:
Total assets $ 565,204 $ 491,496 $ 393,538 $ 385,830 $ 420,616
Real estate, at cost 397,298 382,476 365,832 340,415 314,651
Accumulated depreciation 151,049 139,495 128,705 118,742 111,142
Debt 232,387 233,353 234,160 235,037 341,701
Shareholders' equity (deficit) 276,257 194,274 116,688 115,737 (3,242)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-15-
<PAGE> 16
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA - (continued)
<TABLE>
<CAPTION>
===========================================================================================================================
Year Ended December 31,
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OTHER DATA
Funds from operations (1):
Income from continuing operations before income
taxes $ 61,364 $ 53,008 $ 41,240 $ 25,386 $ 2,263
Depreciation and amortization of real property 10,583 10,019 9,192 8,842 8,778
Straight-lining of rental income (2,676) (2,569) (2,181) (2,200) (2,200)
Leasing fees received in excess of income recognized 1,805 1,052 -- -- --
Losses/(gains) on sale of securities available for sale -- 360 (51) (263) (846)
Proportionate share of adjustments to Alexander's income
(loss) to arrive at Alexander's funds from operations (1,760) 539 -- -- --
Costs incurred in connection with
the merger/upon exercise of a stock option -- -- -- 856 15,650
- ---------------------------------------------------------------------------------------------------------------------------
Funds from operations $ 69,316 $ 62,409 $ 48,200 $ 32,621 $ 23,645
===========================================================================================================================
Cash flow provided by (used in):
Operating activities $ 70,703 $ 62,882 $ 46,948 $ 27,725 $ 17,607
Investing activities $ 14,912 $(103,891) $ (15,434) $ 1,350 $ 14,800
Financing activities $ (15,046) $ 36,577 $ (32,074) $ (56,433) $ 4,384
===========================================================================================================================
</TABLE>
(1) Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs.
Funds from operations should not be considered as an alternative to net
income as an indicator of the Company's operating performance or as an
alternative to cash flows as a measure of liquidity. The Company's
definition of funds from operations does not conform to the NAREIT
definition because the Company deducts the effect of the
straight-lining of property rentals.
-16-
<PAGE> 17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
================================================================================
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1996
AND DECEMBER 31, 1995
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income, were $116,887,000 in 1996, compared to
$108,718,000 in 1995, an increase of $8,169,000 or 7.5%.
Property rentals from shopping centers were $80,001,000 in 1996, compared to
$74,255,000 in 1995, an increase of $5,746,000 or 7.7%. Of this increase, (i)
$3,800,000 resulted from rental step-ups in existing tenant leases which are not
subject to the straight-line method of revenue recognition and (ii) $2,000,000
resulted from expansions and an acquisition. Property rentals received from new
tenants were approximately the same as property rentals lost from vacating
tenants. Percentage rent included in property rentals was $936,000 in 1996,
compared to $959,000 in 1995.
Property rentals from the remainder of the portfolio were $7,423,000 in 1996,
compared to $6,174,000 in 1995, an increase of $1,249,000 or 20.2%. Of this
increase, $650,000 resulted from the purchase of an office building in June
1996.
Tenant expense reimbursements were $26,644,000 in 1996, compared to $24,091,000
in 1995, an increase of $2,553,000. This increase reflects a corresponding
increase in operating expenses passed through to tenants.
Other income was $2,819,000 in 1996, compared to $4,198,000 in 1995, a decrease
of $1,379,000. This decrease resulted primarily from (i) including management
and development fee income from Alexander's in "Income from investment in and
advances to Vornado Management Corp." ("VMC") rather than in "Other income" for
a full year in 1996, compared to six months in 1995 and (ii) the recognition of
leasing fee income in the first quarter of 1995 from Alexander's of $915,000
applicable to 1993 and 1994 (no leasing fee income was recognized prior to 1995
because required conditions had not been met), partially offset by (iii) the
increase in management, development and leasing fees from Interstate Properties.
Operating expenses were $36,412,000 in 1996, compared to $32,282,000 in 1995, an
increase of $4,130,000. Of this increase, (i) $3,100,000 were passed through to
tenants and consisted of higher snow removal costs of $1,500,000, increased real
estate taxes of $1,000,000 and other common area maintenance expense increases
of $600,000 and (ii) $500,000 resulted from increases in rent expense and other
property expenses. In addition, in 1995 operating expenses were partially offset
by real estate tax refunds and other miscellaneous income of approximately
$500,000.
Depreciation and amortization expense increased by $799,000 in 1996, compared to
1995, as a result of expansions and an acquisition.
General and administrative expenses were $5,167,000 in 1996, compared to
$6,687,000 in 1995, a decrease of $1,520,000. This decrease resulted primarily
from a reduction in corporate office expenses caused by the third quarter 1995
assignment of the Company's Management and Development Agreement with
Alexander's to VMC.
In December 1996, the Company recognized an expense of $2,083,000, representing
one month's amortization of the $25,000,000 deferred payment due to the
Company's President. The balance of the deferred payment will be amortized in
1997.
Income applicable to Alexander's (loan interest income, equity in income
(loss) and depreciation) was $7,956,000 for the year ended December 31, 1996,
compared to $3,954,000 in the prior year, an increase of $4,002,000. This
increase resulted from (i) lower operating losses at Alexander's caused by the
commencement of rent at the Rego Park I property in March 1996, (ii) the
recognition of $2,053,000 of non-recurring income as a result of the reversal of
a liability which is no longer required and (iii) interest income on the loan
to Alexander's for a full year in 1996, compared to a ten month period in 1995.
The Company believes that its share of Alexander's losses (which are non-cash),
combined with its fee income and interest income, will not have a negative
effect on its results of operations, liquidity and financial condition.
-17-
<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
================================================================================
In July 1995, the Company assigned its Management Agreement with Alexander's to
VMC. In exchange, the Company received 100% of the non-voting preferred stock of
VMC which entitles it to 95% of the economic benefits of VMC through
distributions. In addition, the Company lent $5,000,000 to VMC for working
capital purposes under a three-year term loan bearing interest at the prime rate
plus 2%. VMC is responsible for its pro-rata share of compensation and fringe
benefits of employees and 30% of other expenses which are common to both Vornado
and VMC. Income from investment in and advances to VMC was $1,855,000 for the
year ended December 31, 1996, compared to $788,000 for the period from July 6th
to December 31, in 1995. Income from investment in and advances to VMC for the
year ended December 31, 1996 reflects additional fee income earned by VMC in the
first quarter of 1996 relating to the substantial completion of the
redevelopment of Alexander's Rego Park I property.
Investment income (interest income on mortgage note receivable, interest and
dividend income and net gains/(losses) on marketable securities) was $6,643,000
for 1996, compared to $5,733,000 in 1995, an increase of $910,000 or 15.9%. This
increase resulted from higher net gains on marketable securities and the yield
earned on the mortgage note receivable exceeding the yield earned on the
investment of such funds in 1995.
The Company operates in a manner intended to enable it to continue to qualify as
a REIT under Sections 856-860 of the Internal Revenue Code of 1986 as amended.
Under those sections, a REIT which distributes at least 95% of its REIT taxable
income as a dividend to its shareholders each year and which meets certain other
conditions will not be taxed on that portion of its taxable income which is
distributed to its shareholders. The Company has distributed to its shareholders
an amount greater than its taxable income. Therefore, no provision for Federal
income taxes is required.
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995
AND DECEMBER 31, 1994
The Company's revenues, which consist of property rentals, tenant expense
reimbursements and other income were $108,718,000 in 1995, compared to
$93,998,000 in 1994, an increase of $14,720,000 or 15.7%.
Property rentals from shopping centers were $74,255,000 in 1995, compared to
$64,665,000 in 1994, an increase of $9,590,000 or 14.8%. Of this increase, (i)
$6,067,000 resulted from expansions of shopping centers and acquisitions of
retail properties, (ii) $2,823,000 resulted from rental step-ups in existing
tenant leases which are not subject to the straight-line method of revenue
recognition and (iii) $628,000 resulted from property rentals received from new
tenants exceeding property rentals lost from vacating tenants. Percentage rent
included in property rentals was $959,000 in 1995, compared to $887,000 in 1994.
Property rentals from the remainder of the portfolio were $6,174,000 in 1995,
compared to $6,090,000 in 1994, an increase of $84,000 or 1.4%.
Tenant expense reimbursements were $24,091,000 in 1995, compared to $21,784,000
in 1994, an increase of $2,307,000. This increase reflects a corresponding
increase in operating expenses passed through to tenants.
Other income was $4,198,000 in 1995, compared to $1,459,000 in 1994, an increase
of $2,739,000. This increase resulted primarily from the fee income recognized
in connection with the Management Agreement and Leasing Agreement with
Alexander's including $915,000 applicable to 1993 and 1994 recognized in the
first quarter of 1995 (no leasing fee income was recognized prior to 1995
because required conditions had not been met). In addition to the Management
Agreement fee income included in other income in 1995, $2,250,000 of such fees
was earned in 1995 by VMC and is included in the caption "Income from investment
in and advances to Vornado Management Corp." in the Consolidated Statements of
Income.
-18-
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
================================================================================
Operating expenses were $32,282,000 in 1995, compared to $30,223,000 in 1994, an
increase of $2,059,000. Of this increase (i) $1,484,000 resulted from real
estate taxes from expansions and acquisitions, which were passed through to
tenants, and (ii) $258,000 resulted from bad debt expenses primarily due to
tenant bankruptcies.
Depreciation and amortization expense increased by $827,000 in 1995, compared to
1994, primarily as a result of property expansions.
General and administrative expenses were $6,687,000 in 1995, compared to
$6,495,000 in 1994, an increase of $192,000. This increase is the net of
increases from (i) payroll expenses of $1,017,000, (due to additions to staff
and bonuses), and (ii) professional fees and other corporate office expenses of
$305,000, offset by (iii) the reduction in expense of $1,130,000 resulting from
the assignment of the Company's Management Agreement with Alexander's to VMC in
the third quarter of 1995.
For the period from March 2, 1995 through December 31, 1995, Vornado's equity in
Alexander's losses amounted to $1,972,000. In addition, during the same period
the Company recognized interest income on its loan to Alexander's of $6,343,000
and fee income from its Management Agreement and Leasing Agreement with
Alexander's of $2,973,000 (excluding $2,250,000 earned by VMC).
Income from investment in and advances to VMC consists of dividend income of
$565,000 and interest income of $223,000.
Investment income was $5,733,000 for 1995, compared to $8,132,000 in 1994, a
decrease of $2,399,000 or 29.5%. This decrease was caused by (i) lower interest
income resulting from the use of cash for the Alexander's investment and (ii)
net gains on marketable securities being $349,000 less than in the prior year.
Interest and debt expense was $16,426,000 in 1995, compared to $14,209,000 in
1994, an increase of $2,217,000 or 15.6%. Of this increase, $1,046,000 resulted
from borrowings under the revolving credit facility to temporarily fund the
investment in Alexander's and $1,134,000 resulted from a decrease in interest
capitalized during construction.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 1996, 1995 AND 1994
Year Ended December 31, 1996
Cash flows provided by operating activities of $70,703,000 was comprised of (i)
net income of $61,364,000 and (ii) adjustments for non-cash items of $9,972,000,
less (iii) the net change in operating assets and liabilities of $633,000. The
adjustments for non-cash items are primarily comprised of depreciation and
amortization of $12,586,000 and amortization of deferred officers compensation
expense of $2,083,000, partially offset by the effect of straight-lining of
rental income of $2,676,000 and equity in income from Alexander's of $1,108,000.
The net change in "Leasing fees receivable" and "Deferred leasing fee income"
included in item (iii) above reflects a decrease of $1,717,000 resulting from
the rejection of a lease by an Alexander's tenant in March 1996 and an increase
of $1,738,000 resulting from the releasing of a portion of this space. "Leasing
fees receivable" of $2,500,000 were collected during this period.
Net cash provided by investing activities of $14,912,000 was comprised of (i)
proceeds from sale or maturity of securities available for sale of $46,734,000,
partially offset by (ii) the Company's investment in a mortgage note receivable
of $17,000,000 and (iii) capital expenditures of $14,822,000 (including
$8,923,000 for the purchase of an office building).
Net cash used in financing activities of $15,046,000 was primarily comprised of
(i) dividends paid of $59,558,000, (ii) the net repayment of borrowings on U.S.
Treasury obligations of $34,239,000, (iii) the net repayment on mortgages of
$966,000, partially offset by (iv) net proceeds from the issuance of common
shares of $73,060,000 and (v) the proceeds from the exercise of stock options of
$6,657,000.
-19-
<PAGE> 20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
================================================================================
Year Ended December 31, 1995
Cash flows provided by operating activities of $62,882,000 was comprised of: (i)
net income of $53,008,000 and (ii) adjustments for non-cash items of $11,305,000
less (iii) the net change in operating assets and liabilities of $1,431,000. The
adjustments for non-cash items are primarily comprised of depreciation and
amortization of $11,779,000, plus equity in loss of Alexander's of $2,389,000,
partially offset by the effect of straight-lining of rental income of
$2,569,000. Further, during this period in connection with the Alexander's
transaction, "Leasing fees and other receivables" increased by $7,656,000 and
"Deferred leasing fee income" correspondingly increased by $8,888,000. These
amounts have been included in "Changes in assets and liabilities: other" in the
Consolidated Statements of Cash Flows and are part of the net change in
operating assets and liabilities shown in item (iii) above.
Net cash used in investing activities of $103,891,000 was comprised of (i) the
Company's investment in and advances to Alexander's of $100,482,000, (ii)
capital expenditures of $16,644,000, (iii) a loan to VMC of $5,074,000 and (iv)
purchases of securities available for sale of $4,027,000, partially offset by
(v) the net proceeds from the sale of securities available for sale of
$22,336,000.
Net cash provided by financing activities of $36,577,000 was primarily comprised
of (i) net proceeds from issuance of common shares of $79,831,000, and (ii) net
borrowings on U.S. Treasury obligations of $9,600,000, partially offset by (iii)
dividends paid of $52,875,000.
Year Ended December 31, 1994
Cash flows provided by operating activities of $46,948,000 was comprised of: (i)
net income of $41,240,000, and (ii) adjustments for non-cash items of
$8,015,000, less (iii) the net change in operating assets and liabilities of
$2,307,000. The adjustments for non-cash items are primarily comprised of
depreciation and amortization of $10,839,000, partially offset by the effect of
straight-lining of rental income of $2,181,000.
Net cash used in investing activities of $15,434,000 was comprised of capital
expenditures of $25,417,000, partially offset by proceeds from the sale of
securities available for sale of $9,983,000.
Net cash used in financing activities of $32,074,000 was primarily comprised of
dividends paid of $43,236,000, partially offset by borrowings on U.S. Treasury
obligations of $11,428,000.
FUNDS FROM OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1996 AND 1995
Management considers funds from operations an appropriate supplemental measure
of the Company's operating performance. Funds from operations were $69,316,000
in 1996, compared to $62,409,000 in 1995, an increase of $6,907,000 or 11.1%.
The following table reconciles funds from operations and net income:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net income $ 61,364,000 $ 53,008,000
Depreciation and
amortization of real
property 10,583,000 10,019,000
Straight-lining of
property rentals (2,676,000) (2,569,000)
Leasing fees
received in excess
of income
recognized 1,805,000 1,052,000
Loss on sale of
securities available
for sale -- 360,000
Proportionate share
of adjustments
to Alexander's income
(loss) to arrive at
Alexander's funds
from operations (1,760,000) 539,000
------------ ------------
Funds from
operations * $ 69,316,000 $ 62,409,000
============ ============
</TABLE>
* The Company's definition of funds from operations does not conform to the
NAREIT definition because the Company deducts the effect of the straight-lining
of property rentals.
-20-
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
================================================================================
Funds from operations does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs. Funds from
operations should not be considered as an alternative to net income as an
indicator of the Company's operating performance or as an alternative to cash
flows as a measure of liquidity. Below are the cash flows provided by (used in)
operating, investing and financing activities:
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------
1996 1995
------------ -------------
<S> <C> <C>
Operating activities $ 70,703,000 $ 62,882,000
============ =============
Investing activities $ 14,912,000 $(103,891,000)
============ =============
Financing activities $(15,046,000) $ 36,577,000
============ =============
</TABLE>
Bradlees accounted for 22% of property rentals for the year ended December 31,
1996. In June 1995, Bradlees filed for protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company currently leases 17 locations to Bradlees. Of these
locations, 14 are fully guaranteed by Stop & Shop Companies, Inc. ("Stop &
Shop"), a wholly-owned subsidiary of Royal Ahold NV, a leading international
food retailer, and one is guaranteed as to 70% of the rent. During 1996,
Bradlees rejected three leases and assigned one lease to Kohl's Department
Stores, Inc. These four leases are fully guaranteed by Stop & Shop. In January
1997, Bradlees received Bankruptcy Court approval to close one of the two stores
whose leases are not guaranteed by Stop & Shop. Montgomery Ward & Co., Inc.
remains liable with respect to the rent it was obligated to pay as a previous
lessor on eight of the leases guaranteed by Stop & Shop - approximately 70% of
current rent.
In January 1996, the Company provided $17 million of debtor-in-possession
financing to Rickel which is operating under Chapter 11 of the Bankruptcy Code.
The loan is secured by 27 of Rickel's leasehold properties and has a remaining
term through January 1998, plus a one year extension, but is due not later than
the date on which Rickel's plan of reorganization is confirmed. The loan bears
interest at 13% per annum and at a fixed rate of LIBOR plus 7.50% for the
extension period. In addition, the Company receives a loan origination fee of 2%
for each year the loan is outstanding.
In June 1996, the Company entered into a joint venture (50% interest) to
purchase the 149,000 square foot office portion of a multi-use building in
midtown Manhattan, New York City. The space is 100% leased to a single tenant
whose lease expires in 1999. The Company advanced the $8,923,000 purchase price
and is entitled to an annual preferred return on its funds invested and the
return of its funds invested prior to the other joint venture partner receiving
any distributions. Vornado's consolidated financial statements include the
accounts of the joint venture since Vornado currently exercises control over its
operating and financial affairs.
Alexander's has disclosed in its annual report on Form 10-K for the year ended
December 31, 1996, that its current operating properties (five of its nine
properties) do not generate sufficient cash flow to pay all of its expenses, and
that its four non-operating properties (Lexington Avenue, Paramus, the Kings
Plaza Store and Rego Park II) are in various stages of redevelopment. As rents
commence from a portion of the redevelopment properties, Alexander's expects
that cash flow will become positive.
Alexander's estimates that the fair market values of its assets are
substantially in excess of their historical cost and that there is additional
borrowing capacity. Alexander's continues to evaluate its needs for capital,
which may be raised through (a) property specific or corporate borrowing, (b)
the sale of securities and (c) asset
-21-
<PAGE> 22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - (continued)
================================================================================
sales. Further, Alexander's may receive proceeds from condemnation proceedings
of a portion of its Paramus property. Although there can be no assurance,
Alexander's believes that these cash sources will be adequate to fund cash
requirements until its operations generate adequate cash flow. Vornado expects
to provide a portion of the financing required for Alexander's redevelopment
projects. None of the redevelopment plans for the non-operating properties have
been finalized.
At December 31, 1996, the Company had no borrowings outstanding under its
unsecured revolving credit facility which provides for borrowings of up to
$75,000,000. Average borrowings were $8,740,000 during 1996 and $12,500,000
during 1995. Borrowings bear annual interest, at the Company's election, at
LIBOR plus 1.35% or the higher of the federal funds rate plus .50% or the prime
rate.
On December 2, 1996, Michael D. Fascitelli became the President of the Company
and was elected to the Company's Board. Mr. Fascitelli signed a five year
employment contract under which, in addition to his annual salary, he received a
deferred payment consisting of $5,000,000 in cash and a $20,000,000 convertible
obligation payable at the Company's option in 459,770 of its Common Shares or
the cash equivalent of their appreciated value. Accordingly, cash of $5,000,000
and 459,770 Common Shares are being held in an irrevocable trust. The deferred
payment obligation to Mr. Fascitelli vests as of December 2, 1997. Further, Mr.
Fascitelli was granted options for 1,750,000 Common Shares of the Company.
On December 23, 1996, the Company completed the sale of 1,500,000 common shares
in a public offering, which net of expenses generated approximately $73,100,000.
$10,000,000 of the proceeds was used to repay debt under the Company's revolving
credit facility. The remaining proceeds will be used for general corporate
purposes.
The Company anticipates that cash from continuing operations, net liquid assets,
borrowings under its revolving credit facility and/or proceeds from the issuance
of securities under the Company's shelf registration statement will be adequate
to fund its business operations, capital expenditures, continuing debt
obligations and the payment of dividends.
ECONOMIC CONDITIONS
At December 31, 1996, approximately 80% of the square footage of the Company's
shopping centers was leased to large stores (over 20,000 square feet). The
Company's large store tenants typically offer basic consumer necessities such as
food, health and beauty aids, moderately priced clothing, building materials and
home improvement supplies, and compete primarily on the basis of price. The
Company believes that this tenant mix mitigates the effects on its properties of
adverse changes in general economic conditions. However, demand for retail space
continues to be impacted by the bankruptcy of a number of retail companies and a
general trend toward consolidation in the retail industry which could adversely
affect the ability of the Company to attract or retain tenants.
Substantially all of the Company's leases contain step-ups in rent. Such rental
increases are not designed to, and in many instances do not, approximate the
cost of inflation, but do have the effect of mitigating the adverse impact of
inflation. In addition, substantially all of the Company's leases contain
provisions that require the tenant to reimburse the Company for the tenant's
share of common area charges (including roof and structure, unless it is the
tenant's direct responsibility) and real estate taxes thus passing through to
the tenants the effects of inflation on such expenses.
Inflation did not have a material effect on the Company's results for the
periods presented.
-22-
<PAGE> 23
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements
Page
Independent Auditors' Report 24
Consolidated Balance Sheets as at December 31, 1996 and 1995 25
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994 27
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1996, 1995 and 1994 28
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994 29
Notes to Consolidated Financial Statements 30
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH INDEPENDENT AUDITORS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-23-
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Trustees
Vornado Realty Trust
Saddle Brook, New Jersey
We have audited the accompanying consolidated balance sheets of Vornado Realty
Trust and subsidiaries as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1996. Our audits also
included the financial statement schedules listed in the Index at Item 14. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on the
financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Vornado Realty Trust and
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
March 12, 1997
-24-
<PAGE> 25
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
===========================================================================================
(amounts in thousands except share amounts) DECEMBER 31, 1996 December 31, 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Real estate, at cost:
Land $ 61,278 $ 61,278
Buildings and improvements 327,485 314,265
Leasehold improvements and equipment 8,535 6,933
- -------------------------------------------------------------------------------------------
Total 397,298 382,476
- -------------------------------------------------------------------------------------------
Less accumulated depreciation and
amortization 151,049 139,495
- -------------------------------------------------------------------------------------------
Real estate, net 246,249 242,981
- -------------------------------------------------------------------------------------------
Cash and cash equivalents, including U.S.
government obligations under
repurchase agreements of $17,036 and $12,575 89,696 19,127
Marketable securities 27,549 70,997
Investment in and advances to Alexander's, Inc. 107,628 109,686
Investment in and advances to Vornado
Management Corp. 5,193 5,074
Due from officer 8,418 8,418
Accounts receivable, net of allowance for
doubtful accounts of $575 and $578 9,786 7,086
Officer's deferred compensation expense 22,917 --
Mortgage note receivable 17,000 --
Receivable arising from the straight-lining of rents 17,052 14,376
Other assets 13,716 13,751
- -------------------------------------------------------------------------------------------
$565,204 $491,496
===========================================================================================
</TABLE>
-25-
<PAGE> 26
CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
=============================================================================================
(amounts in thousands except share amounts) DECEMBER 31, 1996 December 31, 1995
- ---------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
Notes and mortgages payable $ 232,387 $ 233,353
Due for U.S. Treasury Obligations 9,636 43,875
Accounts payable and accrued expenses 9,905 6,545
Deferred leasing fee income 8,373 8,888
Officer's deferred compensation payable 25,000 --
Other liabilities 3,646 4,561
- ---------------------------------------------------------------------------------------------
Total liabilities 288,947 297,222
- ---------------------------------------------------------------------------------------------
Commitments and contingencies
Shareholders' equity:
Preferred shares of beneficial interest:
no par value per share; authorized,
1,000,000 shares; issued, none
Common shares of beneficial interest:
$.04 par value per share; authorized,
50,000,000 shares; issued, 26,547,680
and 24,246,913 shares 1,044 970
Additional capital 358,874 279,231
Deficit (77,574) (79,380)
- ---------------------------------------------------------------------------------------------
282,344 200,821
Unrealized (loss) on securities available
for sale (998) (1,362)
Due from officers for purchase of common
shares of beneficial interest (5,089) (5,185)
- ---------------------------------------------------------------------------------------------
Total shareholders' equity 276,257 194,274
- ---------------------------------------------------------------------------------------------
$565,204 $491,496
=============================================================================================
</TABLE>
See notes to consolidated financial statements.
-26-
<PAGE> 27
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
===============================================================================================
YEAR ENDED Year Ended Year Ended
(amounts in thousands DECEMBER 31, December 31, December 31,
except share amounts) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Property rentals $ 87,424 $ 80,429 $ 70,755
Expense reimbursements 26,644 24,091 21,784
Other income (including fee income
from related parties of $2,569,
$4,123 and $1,144) 2,819 4,198 1,459
- -----------------------------------------------------------------------------------------------
Total revenues 116,887 108,718 93,998
- -----------------------------------------------------------------------------------------------
Expenses:
Operating 36,412 32,282 30,223
Depreciation and amortization 11,589 10,790 9,963
General and administrative 5,167 6,687 6,495
Amortization of officer's deferred
compensation expense 2,083 -- --
- -----------------------------------------------------------------------------------------------
Total expenses 55,251 49,759 46,681
- -----------------------------------------------------------------------------------------------
Operating income 61,636 58,959 47,317
- -----------------------------------------------------------------------------------------------
Income/(loss) applicable to Alexander's:
Equity in income (loss) 1,679 (1,972) --
Depreciation (571) (417) --
Interest income on loan 6,848 6,343 --
Income from investment in and advances to
Vornado Management Corp. 1,855 788 --
Interest income on mortgage note receivable 2,579 -- --
Interest and dividend income 3,151 5,439 7,489
Interest and debt expense (16,726) (16,426) (14,209)
Net gain on marketable securities 913 294 643
- -----------------------------------------------------------------------------------------------
NET INCOME $ 61,364 $ 53,008 $ 41,240
- -----------------------------------------------------------------------------------------------
NET INCOME PER SHARE based on 24,603,442,
23,579,669, and 21,853,720 shares outstanding $ 2.49 $ 2.25 $ 1.89
===============================================================================================
</TABLE>
See notes to consolidated financial statements.
-27-
<PAGE> 28
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
=========================================================================================================================
Unrealized
Gain (loss) Total
(amounts in thousands on Securities Due Share-
except share amounts) Common Additional Available from holders'
Shares Capital Deficit for Sale Officers Equity
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1993 $ 864 $ 197,575 $ (77,517) $ -- $ (5,185) $ 115,737
Unrealized gains on securities
available for sale at
January 1, 1994 -- -- -- 8,565 -- 8,565
Net income -- -- 41,240 -- -- 41,240
Dividends paid ($2.00 per share) -- -- (43,236) -- -- (43,236)
Common shares issued under
employees' share plans 2 609 -- -- -- 611
Change in unrealized gains (losses)
on securities available for sale -- -- -- (6,229) -- (6,229)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1994 866 198,184 (79,513) 2,336 (5,185) 116,688
Net income -- -- 53,008 -- -- 53,008
Net proceeds from issuance of
common shares 100 79,731 -- -- -- 79,831
Dividends paid ($2.24 per share) -- -- (52,875) -- -- (52,875)
Common shares issued under
employees' share plans 4 1,316 -- -- -- 1,320
Change in unrealized gains (losses)
on securities available for sale -- -- -- (3,698)* -- (3,698)
- -------------------------------------------------------------------------------------------------------------------------
BALANCE, December 31, 1995 970 279,231 (79,380) (1,362) (5,185) 194,274
Net income -- -- 61,364 -- -- 61,364
Net proceeds from issuance of
common shares 60 73,000 -- -- -- 73,060
Dividends paid ($2.44 per share) -- -- (59,558) -- -- (59,558)
Common shares issued under
employee's share plans 14 6,643 -- -- -- 6,657
Change in unrealized gains (losses)
on securities available for sale -- -- -- 364 -- 364
Forgiveness of amount due from officers -- -- -- -- 96 96
- -------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1996 $ 1,044 $ 358,874 $ (77,574) $ (998) $ (5,089) $ 276,257
=========================================================================================================================
</TABLE>
* Includes $3,435 in unrealized gains attributable to the Company's investment
in the common stock of Alexander's, Inc. (see Note 3).
See notes to consolidated financial statements.
-28-
<PAGE> 29
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
===========================================================================================================
YEAR ENDED Year Ended Year Ended
DECEMBER 31, December 31, December 31,
(amounts in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 61,364 $ 53,008 $ 41,240
Adjustments to reconcile income to net cash
provided by continuing operations:
Depreciation and amortization (including
debt issuance costs) 12,586 11,779 10,839
Amortization of officer's deferred
compensation expense 2,083 -- --
Straight-lining of rental income (2,676) (2,569) (2,181)
Equity in (income) loss of Alexander's
including depreciation of $571 and $417 (1,108) 2,389 --
Net gain on marketable securities (913) (294) (643)
Changes in assets and liabilities:
Trading securities (2,009) (2,069) 1,485
Accounts receivable (2,700) (2,188) (699)
Accounts payable and accrued expenses 3,360 2,270 (3,920)
Other 716 556 827
- -----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 70,703 62,882 46,948
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in mortgage note receivable (17,000) -- --
Additions to real estate (14,822) (16,644) (25,417)
Investment in and advances to Alexander's -- (100,482) --
Investment in and advances to Vornado
Management Corp. -- (5,074) --
Purchases of securities available for sale -- (4,027) --
Proceeds from sale or maturity of securities
available for sale 46,734 22,336 9,983
- -----------------------------------------------------------------------------------------------------------
Net cash provided by (used by) investing activities 14,912 (103,891) (15,434)
- -----------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common shares 73,060 79,831 --
Proceeds from borrowings on U.S. Treasury obligations 10,000 40,000 11,428
Repayment of borrowings on U.S. Treasury obligations (44,239) (30,400) --
Proceeds from borrowings on revolving credit facility 10,000 60,000 --
Repayments on mortgages and revolving credit facility (10,966) (60,807) (877)
Costs of refinancing debt -- (492) --
Dividends paid (59,558) (52,875) (43,236)
Exercise of share options 6,657 1,320 611
- -----------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (15,046) 36,577 (32,074)
- -----------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents 70,569 (4,432) (560)
Cash and cash equivalents at beginning of year 19,127 23,559 24,119
- -----------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 89,696 $ 19,127 $ 23,559
- -----------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments for interest $ 15,695 $ 15,881 $ 14,915
- -----------------------------------------------------------------------------------------------------------
NON-CASH TRANSACTIONS:
Deferred officer's compensation expense and related liability $ 25,000 -- --
Unrealized (loss)gain on securities
available for sale $ 364 $ (3,698)* $ 2,336
===========================================================================================================
</TABLE>
* Reflects a reduction of $3,435 to the Company's investment in Alexander's as
a result of the change from fair value to the equity method of accounting.
See notes to consolidated financial statements.
-29-
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
1. ORGANIZATION AND BUSINESS
On May 6, 1993, Vornado, Inc. merged into Vornado Realty Trust, a Maryland real
estate investment trust ("REIT"). Vornado Realty Trust was formed on March 29,
1993, as a wholly-owned subsidiary of Vornado, Inc., specifically for the
purpose of the merger.
The Company is a fully-integrated REIT which owns, leases, develops, redevelops
and manages retail and industrial properties primarily located in the
Midatlantic and Northeast regions of the United States. In addition, the Company
owns 29.3% of the common stock of Alexander's, Inc. which has nine properties in
the New York City region.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
BASIS OF PRESENTATION: The accompanying consolidated financial statements
include the accounts of Vornado Realty Trust and its subsidiaries, all of which
are wholly-owned. All significant intercompany balances and transactions have
been eliminated.
The consolidated financial statements are prepared in conformity with generally
accepted accounting principles. Management has made estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
REAL ESTATE: Real estate is carried at cost, net of accumulated depreciation and
amortization. Betterments, major renewals and certain costs directly related to
the acquisition, improvement and leasing of real estate are capitalized.
Maintenance and repairs are charged to operations as incurred. Depreciation is
provided on a straight-line basis over the assets, estimated useful lives.
Additions to real estate include interest expense capitalized during
construction of $442,000 and $1,582,000 for the years ended December 31, 1995
and 1994.
The Company's policy is to assess any impairment in value by making a comparison
of the current and projected operating cash flows of each of its properties into
the foreseeable future on an undiscounted basis, to the carrying amount of such
property. Such carrying amount would be adjusted, if necessary, to reflect an
impairment in the value of the asset.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of highly liquid
investments purchased with original maturities of three months or less.
MARKETABLE SECURITIES: Marketable securities are carried at fair market value.
The Company has classified debt and equity securities which it intends to hold
for an indefinite period of time as securities available for sale and equity
securities it intends to buy and sell on a short term basis as trading
securities. Unrealized gains and losses are included in earnings for trading
securities and as a component of shareholder's equity for securities available
for sale. Realized gains or losses on the sale of securities are recorded based
on average cost.
REVENUE RECOGNITION: Base rents, additional rents based on tenants' sales volume
and reimbursement of the tenants' share of certain operating expenses are
generally recognized when due from tenants. The straight-line basis is used to
recognize base rents under leases entered into after November 14, 1985 which
provide for varying rents over the lease terms.
INCOME TAXES: The Company operates in a manner intended to enable it to continue
to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986
as amended. Under those sections, a REIT which distributes at least 95% of its
REIT taxable income as a dividend to its shareholders each year and which meets
certain other conditions will not be taxed on that portion of its taxable income
which is distributed to its shareholders. The Company has distributed to
shareholders an amount greater than its taxable income. Therefore, no provision
for Federal income taxes is required.
-30-
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - CONTINUED
The net basis of the Company's assets and liabilities for both financial
reporting purposes and tax purposes is approximately the same.
AMOUNTS PER SHARE: Amounts per share are computed based upon the weighted
average number of shares outstanding during the year and the dilutive effect of
stock options.
3. INVESTMENT IN AND ADVANCES TO
ALEXANDER'S
In March 1995, the Company purchased all of the 1,353,468 shares of common stock
of Alexander's then owned by Citibank, N.A. ("Citibank"), representing 27.1% of
the outstanding shares of common stock of Alexander's for $40.50 per share in
cash or $56,615,000 (including $1,800,000 of costs incurred in the purchase). As
a result of the acquisition, the Company owns 29.3% of the common stock of
Alexander's and has changed its accounting for its investment in Alexander's to
the equity method. This required a reduction of its investment by the unrealized
gain recorded in shareholders' equity at December 31, 1994, of $3,435,000. Prior
years' financial statements were not restated as a result of the change in
accounting for the Company's investment in Alexander's due to it not being
material. In accordance with purchase accounting, Vornado's investment in
Alexander's in excess of carrying amounts has been allocated two-thirds to land
and one-third to building. The building allocation in excess of Alexander's
carrying amount is being depreciated over a 35 year period.
Also, in March 1995, the Company lent Alexander's $45 million, the subordinated
tranche of a $75 million secured financing, the balance of which was funded by a
bank. The Company's loan has a three-year term and bears interest at 16.43% per
annum for the first two years and at a fixed rate for the third year of 992
basis points over the one-year Treasury bill rate. In addition, the Company
received a loan origination fee of $1,500,000 from Alexander's to be amortized
over the term of the loan.
Investment in and advances to Alexander's consists of:
<TABLE>
<CAPTION>
========================================================================================================
December 31, 1996 December 31, 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common stock, net of $989,000 and $417,000 of
accumulated depreciation of buildings (at fair value) $ 56,952,000 $ 58,693,000
Loan receivable 45,000,000 45,000,000
Deferred loan origination income (583,000) (1,083,000)
Leasing fees and other receivables 5,901,000 8,182,000
Equity in loss since March 2, 1995 (293,000) (1,972,000)
Deferred expenses 651,000 866,000
- -------------------------------------------------------------------------------------------------------
$ 107,628,000 $ 109,686,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
-31-
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
3. INVESTMENT IN AND ADVANCES TO ALEXANDER'S - CONTINUED
Below are summarized Balance Sheets and Statements of Operations of Alexander's:
<TABLE>
<CAPTION>
==============================================================================================================
December 31, December 31,
1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance Sheets:
Assets:
Real estate, net $ 181,005,000 $ 150,435,000
Cash 5,480,000 8,471,000
Other assets 25,100,000 39,635,000
------------- -------------
$ 211,585,000 $ 198,541,000
============= =============
Liabilities and Stockholders' Equity:
Debt $ 192,347,000 $ 182,883,000
Other liabilities 13,674,000 34,794,000
Stockholders' equity 5,564,000 (19,136,000)
------------- -------------
$ 211,585,000 $ 198,541,000
============= =============
</TABLE>
<TABLE>
<CAPTION>
==============================================================================================================
Year Ended Period from
December 31, March 2, 1995 to
1996 December 31, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Statements of Operations:
Revenues $ 21,833,000 $ 11,734,000
Expenses 12,092,000 9,255,000
------------ ------------
Operating income 9,741,000 2,479,000
Interest and debt expense (13,934,000) (11,330,000)
Interest and other income 2,918,000 1,651,000
Gain on reversal of liability for post-retirement
healthcare benefits 14,372,000 --
------------ ------------
Income (loss) from continuing operations before income tax benefit 13,097,000 (7,200,000)
Reversal of deferred taxes -- 469,000
------------ ------------
Income (loss) from continuing operations $ 13,097,000 $ (6,731,000)
============ ============
Vornado's 29.3% equity in income (loss) before adjustment $ 3,837,000 $ (1,972,000)
Adjustment for the portion of the reversal of a liability
previously considered in its purchase price allocation (2,158,000) --
------------ ------------
Vornado's 29.3% equity in income (loss) $ 1,679,000 $ (1,972,000)
============ ============
- -------------------------------------------------------------------------------------------------------------
</TABLE>
-32-
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
3. INVESTMENT IN AND ADVANCES TO
ALEXANDER'S - CONTINUED
In March 1995, the Company and Alexander's entered into a three-year management
and development agreement (the "Management Agreement"). The annual management
fee payable to the Company by Alexander's is $3,000,000, plus 6% of development
costs with a minimum guaranteed fee for the development portion of $1,650,000 in
the first year and $750,000 in each of the second and third years. On July 6,
1995, the Company assigned this Management Agreement to Vornado Management Corp.
The fee pursuant to the Management Agreement is in addition to the leasing fee
the Company receives from Alexander's under the leasing agreement (the "Leasing
Agreement") which has been in effect since 1992 and was extended to be
coterminous with the term of the Management Agreement. The Company recognized
leasing fee income of $695,000 and $1,448,000 in 1996 and 1995. The Leasing
Agreement provides for the Company to generally receive a fee of (i) 3% of sales
proceeds and (ii) 3% of lease rent for the first ten years of a lease term, 2%
of lease rent for the eleventh through the twentieth years of a lease term and
1% of lease rent for the twenty-first through thirtieth year of a lease term.
Subject to the payment of rents by Alexander's tenants, the Company is due
$5,565,000 at December 31, 1996. Such amount is receivable annually in an amount
not to exceed $2,500,000 until the present value of such installments
(calculated at a discount rate of 9% per annum) equals the amount that would
have been paid had it been paid on September 21, 1993, or at the time the
transactions which gave rise to the commissions occurred, if later.
During 1996, leasing fees receivable and deferred leasing fee income were
adjusted to reflect (i) a decrease of $1,717,000 resulting from the rejection of
a lease by an Alexander's tenant in March 1996 and (ii) an increase of
$1,738,000 resulting from the releasing of a portion of this space.
As of December 31, 1996, Interstate Properties owned 24.4% of the common shares
of the Company and 27.1% of Alexander's common stock. Steven Roth is the
Chairman of the Board and Chief Executive Officer of the Company, the Managing
General Partner of Interstate Properties and the Chief Executive Officer and a
director of Alexander's. Effective March 2, 1995, for a three-year period, the
Company and Interstate agreed not to own in excess of two-thirds of Alexander's
common stock or to enter into certain other transactions with Alexander's, other
than the transactions described above, without the consent of Alexander's
independent directors.
-33-
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
4. MARKETABLE SECURITIES
The aggregate cost and market value of securities held at December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
===============================================================================================
December 31, 1996 December 31, 1995
----------------- -----------------
Cost Market Cost Market
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S.treasury obligations $10,228,000 $10,247,000 $56,065,000 $56,621,000
Other equity and debt securities 10,811,000 9,794,000 10,802,000 8,884,000
- -----------------------------------------------------------------------------------------------
21,039,000 20,041,000 66,867,000 65,505,000
Trading securities - equity 7,260,000 7,508,000 5,384,000 5,492,000
- -----------------------------------------------------------------------------------------------
Total $28,299,000 $27,549,000 $72,251,000 $70,997,000
===============================================================================================
</TABLE>
Gross unrealized gains and losses at December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
==================================================================================================
December 31, 1996 December 31, 1995
----------------- -----------------
Gains (Losses) Gains (Losses)
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Securities available for sale:
U.S.treasury obligations $ 19,000 -- $ 556,000 --
Other equity and debt securities 339,000 $(1,356,000) 90,000 $(2,008,000)
- --------------------------------------------------------------------------------------------------
358,000 (1,356,000) 646,000 (2,008,000)
Trading securities - equity 248,000 -- 108,000 --
- --------------------------------------------------------------------------------------------------
Total $ 606,000 $(1,356,000) $ 754,000 $(2,008,000)
==================================================================================================
</TABLE>
The U.S. treasury obligations at December 31, 1996, $10,228,000 (market value
$10,247,000) mature in the fourth quarter of 1997.
U.S. treasury obligations with a fair market value of $10,247,000 and
$56,621,000 were held as collateral for amounts due for U.S. treasury
obligations at December 31, 1996 and 1995. Amounts due for U.S. treasury
obligations bear variable interest rates which averaged 5.79% and 6.08% for the
years ended December 31, 1996 and 1995.
-34-
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
5. MORTGAGE NOTE RECEIVABLE
In January 1996, the Company provided $17 million of debtor-in-possession
financing to Rickel Home Centers, Inc. ("Rickel"), which is operating under
Chapter 11 of the Bankruptcy Code. The loan is secured by 27 of Rickel's
leasehold properties and has a remaining term through January 1998, plus a one
year extension, but is due not later than the date on which Rickel's plan of
reorganization is confirmed. The loan bears interest at 13.2% per annum and at a
fixed rate of LIBOR plus 7.50% for the extension period. In addition, the
Company receives a loan origination fee of 2% for each year the loan is
outstanding.
6. FAIR VALUE OF FINANCIAL
INSTRUMENTS
The Company estimated the fair value of its financial instruments using the
following methods and assumptions: (1) quoted market prices are used to estimate
the fair value of marketable securities; (2) discounted cash flows at the
current rate at which similar loans would be made to borrowers with similar
credit ratings for the remaining term are used to estimate the fair value of the
loans receivable from Alexander's, the mortgage note receivable and mortgages
payable and (3) carrying amounts in the balance sheet approximate fair value for
cash and cash equivalents, marketable securities, due from officer and amounts
due for U.S. Treasury obligations.
<TABLE>
<CAPTION>
============================================================================================
December 31, 1996 December 31, 1995
----------------- -----------------
Carrying Fair Carrying Fair
Value Value Value Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loan receivable from Alexander's $45,000,000 $45,100,000 $45,000,000 $46,100,000
Mortgage note receivable 17,000,000 17,000,000 -- --
Notes and mortgages payable 232,387,000 227,100,000 233,353,000 233,900,000
============================================================================================
</TABLE>
7. NOTES AND MORTGAGES PAYABLE
Notes and mortgages payable at December 31, 1996 are comprised of $227,000,000
of secured notes due December 1, 2000, with interest at a fixed rate of 6.36%
per annum and three other mortgages aggregating $5,387,000.
Notes and mortgages by range of interest rates are as follows:
<TABLE>
<CAPTION>
================================================================================
Interest rate Principal amount
- --------------------------------------------------------------------------------
<S> <C>
5.25% $ 3,635,000
6.36% 227,000,000
8.00% 826,000
8.25% 926,000
================================================================================
</TABLE>
-35-
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The net carrying value of properties securing the notes and mortgages amounted
to $166,833,000 at December 31, 1996. As at December 31, 1996, the maturities
for the next five years are as follows:
<TABLE>
<CAPTION>
================================================================================
Year ending December 31: Amount
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 1,046,000
1998 870,000
1999 535,000
2000 227,295,000
2001 310,000
================================================================================
</TABLE>
On February 27, 1995, the Company entered into a three-year unsecured revolving
credit facility with a bank providing for borrowings of up to $75,000,000.
Borrowings bear annual interest, at the Company's election, at LIBOR plus 1.35%
or the higher of the federal funds rate plus .50% or the prime rate. At December
31, 1996 the Company had no borrowings outstanding under the facility.
8. EMPLOYEES' SHARE OPTION PLAN
Under the Omnibus Share Plan (the "Plan"), various officers and key employees
have been granted incentive share options and non-qualified options to purchase
common shares. Options granted are at prices equal to 100% of the market price
of the Company's shares at the date of grant, vest on a graduated basis,
becoming fully vested 27 months after grant (with the exception of 1,750,000
shares granted in connection with Mr. Fascitelli's employment agreement which
becomes fully vested after 60 months), and expire ten years after grant.
The Plan also provides for the award of Stock Appreciation Rights, Performance
Shares and Restricted Stock, as defined, none of which have been awarded as of
December 31, 1996.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation" (SFAS 123). SFAS 123 requires
expanded disclosures of stock-based compensation arrangements with employees,
and encourages, but does not require compensation cost to be measured based on
the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply Accounting Principles Board Opinion No. 25 ("APB
25"), which recognizes compensation cost based on the intrinsic value of the
equity instrument awarded. The Company will continue to apply APB 25 to its
stock-based compensation awards to employees.
If compensation cost for Plan awards had been determined based on fair value at
the grant dates, net income and income per share would have been reduced to the
pro-forma amounts below, for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
==============================================================================
DECEMBER 31, December 31,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Net income:
As reported $61,364,000 $53,008,000
Pro-forma 60,613,000 52,875,000
Net income per share:
As reported $ 2.49 $ 2.25
Pro-forma 2.46 2.24
==============================================================================
</TABLE>
The pro-forma effect of applying SFAS 123 is not necessarily indicative of the
effect on reported net income for future years.
-36-
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
The fair value of each option grant is estimated on the date of grant using the
Binomial option-pricing model with the following weighted-average assumptions
used for grants in the periods ending December 31, 1996 and 1995.
<TABLE>
<CAPTION>
==============================================================================
DECEMBER 31, December 31,
1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C>
Expected volatility 26% 26%
Expected life 5 years 5 years
Risk-free interest rate 5.6% 7.1%
Expected dividend yield 5.1% 6.0%
==============================================================================
</TABLE>
A summary of the Plan's status, and changes during the years then ended, is
presented below:
<TABLE>
<CAPTION>
===================================================================================================================================
DECEMBER 31, 1996 December 31, 1995
--------------------- -------------------
Weighted-Average Weighted-Average
Shares Exercise Price Shares Exercise Price
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Outstanding at January 1 539,940 $24.53 557,568 $21.35
Granted 1,870,750 46.27 75,000 35.50
Exercised (340,997) 19.51 (92,628) 14.30
- -----------------------------------------------------------------------------------------------------------------------------------
Outstanding at December 31 2,069,693 $45.01 539,940 $24.53
- -----------------------------------------------------------------------------------------------------------------------------------
Options exercisable at December 31 210,385 442,506
Weighted-average fair value of options granted during the
year ended December 31 (per option) $ 9.50 $ 7.24
===================================================================================================================================
</TABLE>
The following table summarizes information about options outstanding under the
Plan at December 31, 1996:
<TABLE>
<CAPTION>
============================================================================================================================
Options Outstanding Options Exercisable
------------------------------------------------------------- -----------------------------------
Number Weighted-Average Number
Range of Outstanding at Remaining Weighted-Average Exercisable at Weighted-Average
Exercise Prices December 31, 1996 Contractual Life Exercise Price December 31, 1996 Exercise Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$12 to $23 26,434 6.0 Years $22 26,434 $22
34 to 38 293,259 8.1 Years 36 183,951 35
47 1,750,000 10.0 Years 47 - -
- ----------------------------------------------------------------------------------------------------------------------------
$12 to $47 2,069,693 8.0 Years $45 210,385 $34
============================================================================================================================
</TABLE>
Shares available for future grant at December 31, 1996 were 882,066.
-37-
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
9. RETIREMENT PLAN
The Company's qualified retirement plan covers all full-time employees. The Plan
provides annual pension benefits that are equal to 1% of the employee's annual
compensation for each year of participation.
The funding policy is in accordance with the minimum funding requirements of
ERISA.
Pension expense includes the following components:
<TABLE>
<CAPTION>
==================================================================================================================
YEAR Year Year
ENDED Ended Ended
DECEMBER 31, December 31, December 31,
1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost -- benefits earned during the period $ 108,000 $ 70,000 $ 81,000
Interest cost on projected benefit obligation 544,000 573,000 558,000
Actual return on assets (179,000) (307,000) 130,000
Net amortization and deferral (59,000) 66,000 (359,000)
- ------------------------------------------------------------------------------------------------------------------
Net pension expense $ 414,000 $ 402,000 $ 410,000
- ------------------------------------------------------------------------------------------------------------------
Assumptions used in determining the net pension expense were:
==================================================================================================================
Discount rate 7-1/2% 7-1/4% 8-1/2%
Rate of increase in compensation levels 5-1/2% 6-1/2% 6-1/2%
Expected rate of return on assets 8% 8% 8%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth the Plan's funded status and the amount
recognized in the Company's balance sheet:
<TABLE>
<CAPTION>
====================================================================================
DECEMBER 31, December 31,
1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $ 7,590,000 $ 7,652,000
- ------------------------------------------------------------------------------------
Accumulated benefit obligation $ 7,657,000 $ 7,717,000
- ------------------------------------------------------------------------------------
Projected benefit obligation $ 8,028,000 $ 8,066,000
Plan assets at fair value 3,915,000 3,494,000
- ------------------------------------------------------------------------------------
Projected benefit obligation in excess of plan assets 4,113,000 4,572,000
Unrecognized net obligations (2,135,000) (2,122,000)
Adjustment required to recognize minimum liability 1,764,000 1,773,000
- ------------------------------------------------------------------------------------
Accrued pension costs $ 3,742,000 $ 4,223,000
====================================================================================
</TABLE>
Plan assets are invested in U.S. government obligations and securities backed by
U.S. government guaranteed mortgages.
- --------------------------------------------------------------------------------
-38-
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
10. LEASES
As lessor:
The Company leases properties to tenants. The lease terms range from less than
five years for smaller tenant spaces to as much as thirty years for major
tenants. Most of the leases provide for the payment of fixed base rentals
payable monthly in advance, and for the payment by the lessee of additional
rents based on a percentage of the tenants' sales as well as reimbursements of
real estate taxes, insurance and maintenance. As of December 31, 1996, future
base rental revenue under noncancellable operating leases, excluding rents for
leases with an original term of less than one year and rents resulting from the
exercise of renewal options, is as follows:
<TABLE>
<CAPTION>
================================================================================
Year ending December 31: Amount
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 85,477,000
1998 84,678,000
1999 80,532,000
2000 75,029,000
2001 70,697,000
Thereafter 522,152,000
- --------------------------------------------------------------------------------
</TABLE>
These amounts do not include rentals based on tenants' sales. These percentage
rents approximated $936,000, $959,000 and $887,000 for the years ended December
31, 1996, 1995 and 1994. Bradlees accounted for 22% of property rentals for the
year ended December 31, 1996. In June 1995, Bradlees filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. The Company currently leases 17
locations to Bradlees. Of these locations, 14 are fully guaranteed by Stop &
Shop Companies, Inc. ("Stop & Shop"), a wholly-owned subsidiary of Royal Ahold
NV, a leading international food retailer, and one is guaranteed as to 70% of
the rent. During 1996, Bradlees rejected three leases and assigned one lease to
Kohl's Department Stores, Inc. These four leases are fully guaranteed by Stop &
Shop. In January 1997, Bradlees received Bankruptcy Court approval to close one
of the two stores whose leases are not guaranteed by Stop & Shop. Montgomery
Ward & Co., Inc. remains liable with respect to the rent it was obligated to pay
as a previous lessor on eight of the leases guaranteed by Stop & Shop -
approximately 70% of current rent.
As lessee:
The Company is a tenant under leases for certain properties. These leases will
expire principally during the next twenty years. Future minimum lease payments
under operating leases at December 31, 1996, are as follows:
<TABLE>
<CAPTION>
================================================================================
Year ending December 31: Amount
- --------------------------------------------------------------------------------
<S> <C>
1997 $ 1,808,000
1998 1,819,000
1999 1,743,000
2000 1,578,000
2001 1,567,000
Thereafter 28,261,000
================================================================================
</TABLE>
Rent expense was $1,465,000, $1,395,000 and $1,313,000 for the years ended
December 31, 1996, 1995 and 1994.
-39-
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
11. CONTINGENCIES
In order to comply with environmental laws and with relevant health-based
standards, the Company has an active monitoring and maintenance program for
asbestos-containing materials ("ACMs") on its properties. The Company's program
to remove friable ACMs has been completed, except for one location. Pursuant to
the lease for this location, it is the tenant's responsibility to remove such
ACMs. The Company has received an estimate of $500,000 to remove such ACMs; if
the Company has to make such expenditure, it will not have a material adverse
effect on the Company's financial condition or results of operations.
The Company also has certain other existing and potential environmental
liabilities with respect to compliance costs relating to underground storage
tanks and cleanup costs relating to tanks at three Company sites at which
preexisting contamination was found.
The Company believes that known and potential environmental liabilities will not
have a material adverse effect on the Company's business, assets or results of
operation. However, there can be no assurance that the identification of new
areas of contamination, change in the extent or known scope of contamination,
the discovery of additional sites, or changes in cleanup requirements would not
result in significant costs to the Company.
At December 31, 1996, the Company had outstanding $600,000 of real estate
related standby letters of credit which were drawn under a $5,000,000 unsecured
line of credit with a bank bearing interest at prime.
From time-to-time, the Company has disposed of substantial amounts of real
estate to third parties for which, as to certain properties, it remains
contingently liable for rent payments or mortgage indebtedness.
There are various legal actions against the Company in the ordinary course of
business. In the opinion of management, after consultation with legal counsel,
the outcome of such matters will not have a material effect on the Company's
financial condition or results of operations.
12. REPURCHASE AGREEMENTS
The Company enters into agreements for the purchase and resale of U.S.
government obligations for periods of up to one week. The obligations purchased
under these agreements are held in safekeeping in the name of the Company by
various money center banks. The Company has the right to demand additional
collateral or return of these invested funds at any time the collateral value is
less than 102% of the invested funds plus any accrued earnings thereon.
-40-
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
13. VORNADO MANAGEMENT CORP.
In July 1995, the Company assigned its Management Agreement with Alexander's
(see Note 3) to Vornado Management Corp. ("VMC"). In exchange, the Company
received 100% of the non-voting preferred stock of VMC which entitles it to 95%
of the distributions by VMC to its shareholders. Steven Roth and Richard West,
Trustees of the Company, own the common stock of VMC. In addition, the Company
lent $5,000,000 to VMC for working capital purposes under a three-year term loan
bearing interest at the prime rate plus 2%. VMC is responsible for its pro-rata
share of compensation and fringe benefits of employees and 30% of other expenses
which are common to both Vornado and VMC. This entity is not consolidated and
accordingly, the Company accounts for its investment in VMC on the equity
method. Below is a summarized Statement of Operations of VMC:
<TABLE>
<CAPTION>
===================================================================================
Period from
Year Ended July 6, 1995 to
December 31, 1996 December 31, 1995
- -----------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Management fees from Alexander's $ 5,343,000 $ 2,250,000
Expenses:
General and administrative (2,691,000) (1,130,000)
Interest, net (282,000) (115,000)
- -----------------------------------------------------------------------------------
Income before income taxes 2,370,000 1,005,000
Income taxes (968,000) (411,000)
- -----------------------------------------------------------------------------------
Net income 1,402,000 594,000
Preferred dividends (1,332,000) (565,000)
- -----------------------------------------------------------------------------------
Net income available to common shareholders $ 70,000 $ 29,000
===================================================================================
Vornado's 95% equity in income $ 1,332,000 $ 565,000
===================================================================================
</TABLE>
14. RELATED PARTY TRANSACTIONS
On December 2, 1996, Michael D. Fascitelli became the President of the Company
and was elected to the Company's Board. Mr. Fascitelli signed a five-year
employment contract under which, in addition to his annual salary, he received a
deferred payment consisting of $5,000,000 in cash and a $20,000,000 convertible
obligation payable at the Company's option in 459,770 of its Common Shares or
the cash equivalent of their appreciated value. Accordingly, cash of $5,000,000
and 459,770 Common Shares (which are not considered outstanding for accounting
purposes) are being held in an irrevocable trust. The deferred payment
obligation to Mr. Fascitelli vests as of December 2, 1997. Further,
Mr. Fascitelli was granted options for 1,750,000 Common Shares of the Company.
At December 31, 1996, the loans due from Mr. Roth ($13,122,500), Mr. Rowan
($299,000) and Mr. Macnow ($268,000) in connection with their stock option
exercises aggregated $13,599,000 ($5,089,000 of which is shown as a reduction in
shareholders' equity). The loans bear interest at a
-41-
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
================================================================================
rate equal to the broker call rate (7.0% at December 31, 1996) but not less than
the minimum applicable federal rate provided under the Internal Revenue Code.
Interest on the loan to Mr. Roth is payable quarterly. Mr. Roth's loan is due on
December 29, 1997. The Company has agreed that on each January 1st (commencing
January 1, 1997) to forgive one-fifth of the amounts due from Mr. Rowan and Mr.
Macnow, provided that they remain employees of the Company.
The Company currently manages and leases the real estate assets of Interstate
Properties pursuant to a Management Agreement for which the Company receives a
quarterly fee equal to 4% of base rent and percentage rent and certain other
commissions. The Management Agreement has a term of one year and is
automatically renewable unless terminated by either of the parties on sixty
days' notice at the end of the term. Although the Management Agreement was not
negotiated at arms length, the Company believes based upon comparable fees
charged by other real estate companies, that its terms are fair to the Company.
For the years ended December 31, 1996, 1995 and 1994, $2,074,000, $1,150,000 and
$894,000 of management fees were earned by the Company pursuant to the
Management Agreement.
See Notes 3 and 13 for details on the Company's investment in and advances to
Alexander's and VMC.
15. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
The following summary represents the results of operations for each quarter in
1996 and 1995:
<TABLE>
<CAPTION>
================================================================================
Net
Net Income
Revenue Income Per Share
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1996 *
March 31 $28,610,000 $15,922,000 $ .65
June 30 29,245,000 15,120,000 .62
September 30 29,063,000 14,939,000 .61
December 31 29,969,000 15,383,000** .62**
1995
March 31 $26,216,000 $11,837,000 $ .54
June 30 27,056,000 13,185,000 .56
September 30 26,630,000 13,567,000 .56
December 31 28,816,000 14,419,000 .59
</TABLE>
* The total for the year differs from the sum of the quarters as a result of
weighting.
** In December 1996, the Company recognized an expense of $2,083,000,
representing one month's amortization of the $25,000,000 deferred payment
due to the Company's President. Also, the Company recognized $2,053,000 of
non-recurring income as a result of the reversal of a liability which is no
longer required by Alexander's (which Vornado accounts for on the equity
method).
================================================================================
16. DIVIDEND DISTRIBUTIONS
Dividends are characterized for Federal income tax purposes as follows:
<TABLE>
<CAPTION>
================================================================================
1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Ordinary income 100.0% 100.0% 96.0%
Return of capital (generally non-taxable) -- -- 4.0
- --------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
- --------------------------------------------------------------------------------
</TABLE>
17. SUBSEQUENT EVENT
On March 12, 1997, the Company entered into a definitive agreement
(the "Agreement") to acquire interests in all or a portion of seven Manhattan
office buildings and certain management and leasing assets held by the Mendik
Company and certain of its affiliates. In conjunction with this transaction,
the Company will convert to an Umbrella Partnership REIT (UPREIT).
The estimated consideration for the transaction is approximately $654,000,000,
including $269,000,000 in cash, $168,000,000 in UPREIT limited partnership
units and $217,000,000 in indebtedness. Pro forma revenue of the Mendik Company
and affiliates' interests being acquired was approximately $109,000,000 for the
year ended December 31, 1996.
The Agreement is subject to the consent of third parties and other customary
conditions. It is currently expected that the proposed transaction would be
consummated in the second quarter, but there can be no assurance that the
proposed transaction will be completed.
-42-
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information relating to trustees of the Registrant will be contained
in a definitive Proxy Statement involving the election of trustees which the
Registrant will file with the Securities and Exchange Commission pursuant to
Regulation 14A under the Securities Exchange Act of 1934 not later than 120 days
after December 31, 1996, and such information is incorporated herein by
reference. Information relating to Executive Officers of the Registrant appears
at page 13 of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation will be contained in
the Proxy Statement referred to above in Item 10, "Directors and Executive
Officers of the Registrant", and such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information relating to security ownership of certain beneficial
owners and management will be contained in the Proxy Statement referred to in
Item 10, "Directors and Executive Officers of the Registrant", and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information relating to certain relationships and related
transactions will be contained in the Proxy Statement referred to in Item 10,
"Directors and Executive Officers of the Registrant", and such information is
incorporated herein by reference.
-43-
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. The consolidated financial statements are set forth
in Item 8 of this Annual Report on Form 10-K.
2. Financial Statement Schedules.
The following financial statement schedules should be read in
conjunction with the financial statements included in Item 8 of this Annual
Report on Form 10-K.
<TABLE>
<CAPTION>
Pages in this
Annual Report
on Form 10-K
-------------
<S> <C>
Independent Auditors' Report
II - Valuation and Qualifying Accounts - years ended
December 31, 1996, 1995 and 1994 46
III - Real Estate and Accumulated Depreciation as of
December 31, 1996 47
</TABLE>
Schedules other than those listed above are omitted
because they are not applicable or the information required is included in the
consolidated financial statements or the notes thereto.
The consolidated financial statements of Alexander's,
Inc. for the year ended December 31, 1996 are hereby incorporated by reference
to Item 14(a)1 of the Annual Report on Form 10-K of Alexander's, Inc.
3. Exhibits. See the Exhibit Index at page 51 of this
Annual Report on Form 10-K. The following exhibits
listed on the Exhibit Index are filed with this
Annual Report on Form 10-K.
Exhibit No.
11 Statement Re Computation of Per Share Earnings.
12 Consolidated Ratios of Earnings to Fixed Charges and Combined
Fixed Charges and Preferred Share Dividend Requirements
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors to Incorporation by Reference.
27 Financial Data Schedule.
(b) Reports on Form 8-K
During the last quarter of the period covered by this Annual
Report on Form 10-K described below.
<TABLE>
<CAPTION>
Period Covered:
(Date of Earliest Event)
Report Items Reported Date of Report
------------------------ -------------- --------------
<S> <C> <C>
December 2, 1996 Other events - December 10, 1996
re: new President of Company
December 18, 1996 Other events - December 18, 1996
re: sale of Common Shares
</TABLE>
-44-
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
VORNADO REALTY TRUST
By: /s/ JOSEPH MACNOW
---------------------------------
Joseph Macnow, Vice President,
Chief Financial Officer
Date: March 12, 1997
-------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
By: /s/STEVEN ROTH Chairman of the Board of Trustees March 12, 1997
----------------------------- (Principal Executive Officer)
(Steven Roth)
By: /s/MICHAEL D. FASCITELLI President and Trustee March 12, 1997
-----------------------------
(Michael D. Fascitelli)
By: /s/JOSEPH MACNOW Vice President-Chief Financial March 12, 1997
----------------------------- Officer and Controller (Principal
(Joseph Macnow) Financial and Accounting Officer)
By: /s/DAVID MANDELBAUM Trustee March 12, 1997
-----------------------------
(David Mandelbaum)
By: /s/STANLEY SIMON Trustee March 12, 1997
-----------------------------
(Stanley Simon)
By: /s/RONALD G. TARGAN Trustee March 12, 1997
-----------------------------
(Ronald G. Targan)
By: /s/RUSSELL B. WIGHT, JR. Trustee March 12, 1997
-----------------------------
(Russell B. Wight, Jr.)
By: /s/RICHARD R. WEST Trustee March 12, 1997
-----------------------------
(Richard R. West)
</TABLE>
-45-
<PAGE> 46
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
- ------------------------------------------------------------------------------------------------------------------
(amounts in thousands)
Balance Additions Deductions Balance
at beginning charged against ------------------------------- at end
Description of year operations Description Amount of year
----------- ------- ---------- ---------------- ------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Deducted from accounts receivable Uncollectible accounts
allowance for doubtful accounts $ 578 $ 211 written-off $ 214 $ 575
======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1995:
Deducted from accounts receivable, Uncollectible accounts
allowance for doubtful accounts $ 457 $ 613 written-off $ 492 $ 578
======= ======= ======= =======
YEAR ENDED DECEMBER 31, 1994:
Deducted from accounts receivable, Uncollectible accounts
allowance for doubtful accounts $ 402 $ 385 written-off $ 330 $ 457
======= ======= ======= =======
</TABLE>
-46-
<PAGE> 47
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(amounts in thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -----------------------------------------------------------------------------------------------------------------------------
GROSS AMOUNT AT WHICH
INITIAL COST TO COMPANY(1) COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED ------------------------------------
BUILDINGS AND SUBSEQUENT BUILDINGS AND
DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS TO ACQUISITION LAND IMPROVEMENTS TOTAL(2)
- --------------------- ------------ ------- ------------- -------------- ------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Centers
New Jersey
----------
Atlantic City $ 2,135* $ 358 $ 2,143 $ 594 $ 358 $ 2,737 $ 3,095
Bordentown 3,276* 498 3,176 1,134 713 4,095 4,808
Bricktown 9,919* 929 2,175 9,179 929 11,354 12,283
Cherry Hill 9,706* 915 3,926 3,322 915 7,248 8,163
Delran 2,848* 756 3,184 2,037 756 5,221 5,977
Dover 3,635* 224 2,330 2,354 205 4,703 4,908
East Brunswick 8,205* 319 3,236 3,746 319 6,982 7,301
East Hanover 11,066* 376 3,063 3,439 477 6,401 6,878
Hackensack - 536 3,293 7,177 536 10,470 11,006
Jersey City 10,381* 652 2,962 1,798 652 4,760 5,412
Kearny(4) - 279 4,429 (1,295) 290 3,123 3,413
Lawnside 5,708* 851 2,222 1,313 851 3,535 4,386
Lodi 2,420* 245 2,315 957 245 3,272 3,517
Manalapan 6,397* 725 2,447 4,959 725 7,406 8,131
Marlton 5,398* 1,514 4,671 694 1,611 5,268 6,879
Middletown 7,761* 283 1,508 3,950 283 5,458 5,741
Morris Plains 6,600* 1,254 3,140 3,277 1,104 6,567 7,671
North Bergen(4) - 510 3,390 (955) 2,309 636 2,945
North Plainfield 3,879 500 13,340 329 500 13,669 14,169
Totowa 15,646* 1,097 5,359 11,796 1,097 17,155 18,252
Turnersville 2,116* 900 2,132 75 900 2,207 3,107
Union 15,975* 1,014 4,527 1,888 1,014 6,415 7,429
Vineland 2,358* 290 1,594 1,253 290 2,847 3,137
Watchung(4) - 451 2,347 6,733 4,200 5,331 9,531
Woodbridge 8,792* 190 3,047 709 220 3,726 3,946
-------- ------- ------- ------- ------- -------- --------
Total New Jersey 144,221 15,666 85,956 70,463 21,499 150,586 172,085
-------- ------- ------- ------- ------- -------- --------
New York
--------
14th Street and Union
Square, Manhattan - 12,566 4,044 3,457 12,581 7,486 20,067
Albany (Menands) - 460 1,677 2,908 460 4,585 5,045
Buffalo (Amherst) 4,863* 402 2,019 2,185 636 3,970 4,606
Freeport 8,021* 1,231 3,273 2,852 1,231 6,125 7,356
New Hyde Park 2,043* - - 122 - 122 122
North Syracuse - - - 23 - 23 23
Rochester (Henrietta) 2,203* - 2,124 1,173 - 3,297 3,297
Rochester 2,832* 443 2,870 635 443 3,505 3,948
-------- ------- ------- ------- ------- -------- --------
Total New York 19,962 15,102 16,007 13,355 15,351 29,113 44,464
-------- ------- ------- ------- ------- -------- --------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- -----------------------------------------------------------------------------------------------------
LIFE ON WHICH
ACCUMULATED DEPRECIATION IN LATEST
DEPRECIATION DATE OF DATE INCOME STATEMENT
DESCRIPTION AND AMORTIZATION CONSTRUCTION(3) ACQUIRED IS COMPUTED
- --------------------- ---------------- --------------- -------- ----------------------
<S> <C> <C> <C> <C>
Shopping Centers
New Jersey
----------
Atlantic City $ 1,820 1965 1965 14-40 Years
Bordentown 3,511 1958 1958 10-40 Years
Bricktown 3,946 1968 1968 27-40 Years
Cherry Hill 4,549 1964 1964 15-40 Years
Delrah 2,575 1972 1972 20-40 Years
Dover 2,537 1964 1964 16-40 Years
East Brunswick 4,592 1957 1957 13-33 Years
East Hanover 3,873 1962 1962 16-40 Years
Hackensack 3,828 1963 1963 17-40 Years
Jersey City 3,283 1965 1965 19-40 Years
Kearny(4) 909 1938 1959 28-40 Years
Lawnside 1,892 1969 1969 19-40 Years
Lodi 2,156 1935 1955 11-27 Years
Manalapan 3,185 1971 1971 18-40 Years
Marlton 3,534 1973 1973 21-40 Years
Middletown 2,376 1963 1963 27-40 Years
Morris Plains 3,738 1961 1985 14-19 Years
North Bergen(4) 58 1993 1959 30 Years
North Plainfield 3,464 1955 1989 26-30 Years
Totowa 5,068 1957 1957 22-40 Years
Turnersville 1,599 1974 1974 23-40 Years
Union 4,571 1962 1962 10-40 Years
Vineland 1,603 1966 1966 22-40 Years
Watchung(4) 377 1994 1959 30 Years
Woodbridge 2,689 1959 1959 11-40 Years
-------
Total New Jersey 71,733
-------
New York
--------
14th Street and Union
Square, Manhattan 413 1965 1993 40 Years
Albany (Menands) 1,739 1965 1965 27-40 Years
Buffalo (Amherst) 2,268 1968 1968 14-40 Years
Freeport 2,412 1981 1981 19-40 Years
New Hyde Park 122 1970 1976 6-7 Years
North Syracuse 23 1967 1976 11-12 Years
Rochester (Henrietta) 1,890 1971 1971 22-40 Years
Rochester 2,236 1966 1966 15-40 Years
-------
Total New York 11,103
-------
-----CONTINUED-----
</TABLE>
-47-
<PAGE> 48
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(amounts in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------------------------------------------------------------------------------------------
Gross amount at which carried
Initial cost to company(1) Costs at close of period
-------------------------- capitalized -----------------------------------
Buildings and subsequent Buildings and
Description Encumbrances Land Improvements to acquisition Land improvements Total(2)
- ----------- ------------ ---- ------------- -------------- ----- -------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Pennsylvania
Allentown 7,696 * 70 3,446 9,555 334 12,737 13,071
Bensalem 3,967 * 1,198 3,717 1,582 1,198 5,299 6,497
Bethlehem -- 278 1,806 3,634 278 5,440 5,718
Broomall 3,260 * 734 1,675 1,606 850 3,165 4,015
Glenolden 4,245 * 850 1,295 695 850 1,990 2,840
Lancaster 2,312 * 606 2,312 2,475 606 4,787 5,393
Levittown 2,283 * 193 1,231 105 193 1,336 1,529
10th and Market
Streets, Philadelphia -- 933 3,230 4,148 933 7,378 8,311
Upper Moreland 3,517 * 683 2,497 112 683 2,609 3,292
York 1,463 * 421 1,700 1,233 421 2,933 3,354
-------- ------ ------- ------- ------ ------- -------
Total Pennsylvania 28,743 5,966 22,909 25,145 6,346 47,674 54,020
-------- ------ ------- ------- ------ -------- -------
Maryland
Baltimore (Belait Rd) -- 785 1,333 2,978 785 4,311 5,096
Baltimore (Towson) 5,779 * 581 2,756 484 581 3,240 3,821
Baltimore (Dundalk) 4,084 * 667 1,710 2,952 667 4,662 5,329
Glen Burnie 2,299 * 462 1,741 522 462 2,263 2,725
Hagerstown -- 168 1,453 894 168 2,347 2,515
-------- ------ ------- ------- ------ ------- -------
Total Maryland 12,162 2,663 8,993 7,830 2,663 16,823 19,486
-------- ------ ------- ------- ------ ------- -------
Connecticut
Newington 3,042 * 502 1,581 525 502 2,106 2,608
Waterbury 3,889 * -- 2,103 1,341 667 2,777 3,444
-------- ------ ------- ------- ------ ------- -------
Total Connecticut 6,931 502 3,684 1,866 1,169 4,883 6,052
-------- ------ ------- ------- ------ ------- -------
Massachusetts
Chicopee 1,999* 510 2,031 358 510 2,389 2,899
Springfield(4) -- 505 1,657 857 2,586 433 3,019
-------- ------ ------- ------- ------ ------- -------
Total Massachusetts 1,999 1,015 3,688 1,215 3,096 2,822 5,918
-------- ------ ------- ------- ------ ------- -------
Texas
Dallas
Lewisville 764 * 2,433 2,271 676 2,469 2,911 5,380
Mesquite 3,445 * 3,414 4,704 1,134 3,414 5,838 9,252
Skillman 1,987 * 3,714 6,891 1,030 3,714 7,921 11,635
-------- ------ ------- ------- ------ ------- -------
Total Texas 6,196 9,561 13,866 2,840 9,597 16,670 26,267
-------- ------ ------- ------- ------ ------- -------
Total Shopping Centers 220,214 50,475 155,103 122,714 59,721 268,571 328,292
-------- ------ ------- ------- ------ ------- -------
<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- --------------------------------------------------------------------------------------------------------------------------------
Life on which
Accumulated depreciation in latest
depreciation Date of Date income statement
Description and amortization construction(3) acquired is computed
- ----------- --------------- --------------- -------- ---------------------
<S> <C> <C> <C> <C>
Pennsylvania
Allentown 4,059 1957 1957 24 - 42 Years
Bensalem 3,260 1972 1972 20 - 40 Years
Bethlehem 2,717 1966 1966 13 - 40 Years
Broomall 1,792 1966 1966 13 - 40 Years
Glenolden 946 1975 1975 23 - 40 Years
Lancaster 2,632 1966 1966 14 - 40 Years
Levittown 1,059 1964 1964 14 - 40 Years
10th and Market
Streets, Philadelphia 296 1977 1994
Upper Moreland 1,833 1974 1974 22 - 40 Years
York 1,555 1970 1970 19 - 40 Years
-------
Total Pennsylvania 20,149
-------
Maryland
Baltimore (Belait Rd) 2,743 1962 1962 26 - 33 Years
Baltimore (Towson) 1,931 1968 1968 19 - 40 Years
Baltimore (Dundalk) 2,301 1966 1966 16 - 40 Years
Glen Burnie 1,717 1958 1958 22 - 33 Years
Hagerstown 1,239 1966 1966 13 - 40 Years
-------
Total Maryland 9,931
-------
Connecticut
Newington 1,427 1965 1965 15 - 40 Years
Waterbury 1,669 1969 1969 23 - 40 Years
-------
Total Connecticut 3,096
-------
Massachusetts
Chicopee 1,694 1969 1969 20 - 40 Years
Springfield(4) 48 1993 1966 30 Years
-------
Total Massachusetts 1,742
-------
Texas
Dallas
Lewisville 624 1989 1990 28 - 30 Years
Mesquite 1,249 1988 1990 28 - 30 Years
Skillman 1,633 1988 1990 27 - 30 Years
-------
Total Texas 3,506
-------
Total Shopping Centers 121,260
-------
</TABLE>
--CONTINUED--
-48-
<PAGE> 49
w VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 1996
(amounts in thousands)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D
- --------------------------------------------------------------------------------
Initial cost to company(1) Costs
-------------------------- capitalized
Buildings and subsequent
Description Encumbrances Land improvements to acquisition
- ------------------- ------------ -------- -------------- --------------
<S> <C> <C> <C> <C>
Warehouse/Industrial
New Jersey
----------
East Brunswick -- -- 4,772 2,844
East Hanover 8,210 * 576 7,752 6,904
Edison 2,455 * 705 2,839 1,235
Garfield 1,249 96 8,068 3,808
-------- ------- -------- --------
Total Warehouse/
Industrial 11,914 1,377 23,431 14,791
-------- ------- -------- --------
Other Properties
New Jersey
----------
Paramus 1,225 -- 8,345 2,201
Montclair -- 66 470 329
Rahway -- -- -- 25
New York
--------
825 7th Ave. Manhattan -- -- 8,870 --
-------- ------- -------- --------
Total Other
Properties 1,225 66 17,685 2,555
-------- ------- -------- --------
Leasehold Improvements
and Equipment
TOTAL-DECEMBER 31, 1996 $233,353 $51,918 $196,219 $140,060
======== ======= ======== ========
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- ------------------------------------------------------------------------------------------------------------------------------------
Gross amount at which
carried at close of period Life on which
------------------------------------ Accumulated depreciation in latest
Buildings and depreciation Date of Date income statement
Description Land improvements Total(2) and amortization construction(3) acquired is compound
- ------------------- ------------ ------------- -------- ---------------- --------------- -------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Warehouse/financial
New Jersey
----------
East Brunswick 7,616 7,616 3,645 1972 1972 19 - 40 Years
East Hanover 691 14,541 15,232 8,159 1963 - 1967 1963 5 - 40 Years
Edison 704 4,075 4,779 1,821 1954 1982 17 - 25 Years
Garfield 96 11,876 11,972 8,088 1942 1959 17 - 33 Years
------ -------- -------- --------
Total Warehouse/
Industrial 1,491 38,108 39,599 21,713
------ -------- -------- --------
Other Properties
New Jersey
----------
Paramus -- 10,546 10,546 2,361 1967 1987 33 - 40 Years
Montclair 66 799 865 488 1972 1972 15 Years
Rahway -- 25 25 23 1972 1972 14 Years
New York
--------
825 7th Ave. Manhattan -- 8,870 8,870 129 1963 1996 39 Years
------ -------- -------- --------
Total Other
Properties 66 20,240 20,306 3,001
------ -------- -------- --------
Leasehold Improvements
and Equipment 9,101 9,101 5,075 3 - 20 Years
------ -------- -------- --------
TOTAL-DECEMBER 31, 1996 $61,278 $336,020 $397,298 $151,049
======= ======== ======== ========
</TABLE>
* These encumbrances are cross collateralized under a blanket mortgage in the
amount of $227,000,000 at December 31, 1996.
Notes
1) Initial cost is cost as of January 30, 1982 (the date on which Vornado
commenced real estate operations) unless acquired subsequent to the date -
see Column H.
2) Aggregate cost is approximately the same for Federal income tax purposes.
3) Date of original construction - many properties have had substantial
renovation or additional construction - see Column D.
4) Building on these properties were demolished in 1993. As a result, the
cost of the buildings and improvements, net of accumulated depreciation,
were transferred to land. In addition, the cost of the land in Kearny is
net of a $1,615,000 insurance recovery.
-49-
<PAGE> 50
VORNADO REALTY TRUST
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
(amounts in thousands)
The following is a reconciliation of real estate assets and accumulated
depreciation:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1996 December 31, 1995 December 31, 1994
----------------- ----------------- -----------------
<S> <C> <C> <C>
Real Estate
Balance at beginning of period $382,476 $365,832 $340,415
Additions during the period:
Land -- 161 989
Buildings & improvements 14,822 16,635 24,428
-------- -------- --------
397,298 382,628 365,832
Less: Cost of assets written-off -- 152 -
-------- -------- --------
Balance at end of period $397,298 $382,476 $365,832
======== ======== ========
Accumulated Depreciation
Balance at beginning of period $139,495 $128,705 $118,742
Additions charged to operating expenses 11,589 10,790 9,963
-------- -------- --------
151,084 139,495 128,705
Less: Accumulated depreciation on assets
written-off 35 - -
-------- -------- --------
Balance at end of period $151,049 $139,495 $128,705
======== ======== ========
</TABLE>
-50-
<PAGE> 51
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page Number in
Sequential
Exhibit No. Numbering
----------- ---------
<S> <C> <C>
3(a) Amended and Restated Declaration of Trust of the Registrant, *
dated March 29, 1993 - Incorporated by reference from Form
S-4, filed April 15, 1993.
(b) By-laws of Vornado dated March 10, 1994 - Incorporated by *
reference from Annual Report on Form 10-K for the year
ended December 31, 1993, filed March 24, 1994.
4 Indenture dated as of November 24, 1993 between Vornado Finance *
Corp. and Bankers Trust Company, as Trustee - Incorporated by
reference from Current Report on Form 8-K dated November 24, 1993,
filed December 1, 1993.
10 First Amendment, dated as of July 30, 1996, to the Registrant's 1993 54
Omnibus Share Plan, as amended - Incorporated by reference to the
Registrant's Registration Statement on Form S-8, (File No. 333-09159).
10(a) 1 Master Agreement and Guaranty, between Vornado, Inc. and Bradlees *
New Jersey, Inc. dated as of May 1, 1992 - Incorporated by
reference from Quarterly Report on Form 10-Q for quarter ended
March 31, 1992, filed May 8, 1992.
(a) 2 Mortgage, Security Agreement, Assignment of Leases and Rents and *
Fixture Filing dated as of November 24, 1993 made by each of the
entities listed therein, as mortgagors to Vornado Finance Corp., as
mortgagee - Incorporated by reference from Current Report on Form
8-K dated November 24, 1993, filed December 1, 1993.
(b) 1 ** 1985 Stock Option Plan as amended - Incorporated by reference *
from Quarterly Report on Form 10-Q for quarter ended May 2, 1987,
filed June 9, 1987.
(b) 2 ** Form of Stock Option Agreement for use in connection with *
incentive stock options issued pursuant to Vornado, Inc.
1985 Stock Option Plan - Incorporated by reference from Quarterly
Report on Form 10-Q for quarter ended October 26, 1985,
filed December 9, 1985.
(b) 3 ** Form of Stock Option Agreement for use in connection with incentive *
stock options issued pursuant to Vornado, Inc. 1985 Stock Option
Plan - Incorporated by reference from Quarterly Report on Form 10-Q
for quarter ended May 2, 1987, filed June 9, 1987.
(b) 4 ** Form of Stock Option Agreement for use in connection with non- *
qualified options issued pursuant to Vornado, Inc. 1985 Stock Option
Plan - Incorporated by reference from Quarterly Report on Form 10-Q
for quarter ended October 26, 1985, filed December 9, 1985.
10(c) 1 ** Employment Agreement between Vornado, Inc. and Joseph Macnow *
dated January 1, 1992 - Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1991, filed March 30, 1992.
</TABLE>
- ----------
* Incorporated by reference
** Management contract or compensatory plan
-51-
<PAGE> 52
<TABLE>
<S> <C> <C>
10(c) 2 ** Employment Agreement between Vornado, Inc. and Richard Rowan *
dated January 1, 1992 - Incorporated by reference from Annual Report on
Form 10-K for the year ended December 31, 1991, filed March 30, 1992.
(c) 3 ** Employment Agreement between Vornado Realty Trust and Michael D. 55
Fascitelli dated December 2, 1996.
(d) 1 Promissory Notes from Steven Roth to Vornado, Inc. dated *
December 29, 1992 and January 15, 1993 - Incorporated by reference
from Annual Report on Form 10-K for the year ended December 31, 1992,
filed February 16, 1993. *
(d) 2 Registration Rights Agreement between Vornado, Inc. and Steven *
Roth dated December 29, 1992 - Incorporated by reference
from Annual Report on Form 10-K for the year ended December 31, 1992,
filed February 16, 1993.
(d) 3 Stock Pledge Agreement between Vornado, Inc. and Steven Roth *
dated December 29, 1992 - Incorporated by reference from Annual
Report on Form 10-K for the year ended December 31, 1992, filed
February 16, 1993.
(d) 4 Promissory Notes from Steven Roth to Vornado Realty Trust *
dated April 15, 1993 and June 16, 1993 - Incorporated by reference
from Annual Report on Form 10-K for the year ended December 31, 1993,
filed March 24, 1994.
(d) 5 Promissory Note from Richard Rowan to Vornado Realty Trust - *
Incorporated by reference from Annual Report on Form 10-K for the
year ended December 31, 1993, filed March 24, 1994.
(d) 6 Promissory Note from Joseph Macnow to Vornado Realty Trust - *
Incorporated by reference from Annual Report on Form 10-K for the
year ended December 31, 1993, filed March 24, 1994.
(e) 1 Management Agreement between Interstate Properties and Vornado, *
Inc. dated July 13, 1992 - Incorporated by reference from Annual
Report on Form 10-K for the year ended December 31, 1992,
filed February 16, 1993.
(f) 1 Real Estate Retention Agreement between Vornado, Inc., Keen Realty *
Consultants, Inc. and Alexander's, Inc., dated as of July 20, 1992
- Incorporated by reference from Annual Report on Form 10-K for
the year ended December 31, 1992, filed February 16, 1993.
(f) 2 Amendment to Real Estate Retention Agreement dated *
February 6, 1995 - Incorporated by reference from Annual Report
on Form 10-K for the year ended December 31, 1994, filed
March 23, 1995.
(f) 3 Stipulation between Keen Realty Consultants Inc. and Vornado Realty *
Trust re: Alexander's Retention Agreement - Incorporated by
reference from Annual Report on Form 10-K for the year ended
December 31, 1993, filed March 24, 1994.
</TABLE>
- ----------
* Incorporated by reference
** Management contract or compensatory plan
-52-
<PAGE> 53
<TABLE>
<S> <C> <C>
10(f) 4 Stock Purchase Agreement, dated February 6, 1995, among Vornado *
Realty Trust and Citibank, N.A. - Incorporated by reference from
Current Report on Form 8-K dated February 6, 1995, filed
February 21, 1995.
(f) 5 Management and Development Agreement, dated as of February 6, 1995 - *
Incorporated by reference from Current Report on Form 8-K dated
February 6, 1995, filed February 21, 1995.
(f) 6 Standstill and Corporate Governance Agreement, dated as of *
February 6, 1995 - Incorporated by reference from Current Report on
Form 8-K dated February 6, 1995, filed February 21, 1995.
(f) 7 Credit Agreement, dated as of March 15, 1995, among Alexander's, Inc., *
as borrower, and Vornado Lending Corp., as lender - Incorporated by
reference from Annual Report on Form 10-K for the year ended
December 31, 1994, filed March 23, 1995
(f) 8 Subordination and Intercreditor Agreement, dated as of March 15, 1995 *
among Vornado Lending Corp., Vornado Realty Trust and First Fidelity
Bank, National Association - Incorporated by reference from Annual
Report on Form 10-K for the year ended December 31 1994, filed
March 23, 1995.
(f) 9 Revolving Credit Agreement dated as of February 27, 1995 among *
Vornado Realty Trust, as borrower, and Union Bank of Switzerland,
as Bank and Administrative Agent - Incorporated by reference from Annual
Report on Form 10-K for the year ended December 31, 1994, filed
March 23, 1995.
11 Statement Re Computation of Per Share Earnings. 143
12 Consolidated Ratios of Earnings to Fixed Charges and Combined Fixed
Charges and Preferred Share Dividend Requirements 144
13 Not applicable.
16 Not applicable.
18 Not applicable.
19 Not applicable.
21 Subsidiaries of the Registrant. 145
22 Not applicable.
23 Consent of independent auditors to incorporation by reference. 147
25 Not applicable.
27 Financial Data Schedule. 148
29 Not applicable.
</TABLE>
- ----------
* Incorporated by reference
-53-
<PAGE> 54
EXHIBIT 10
AMENDMENT NO. 1
1993 OMNIBUS SHARE PLAN OF VORNADO REALTY TRUST
The 1993 Omnibus Share Plan of Vornado Realty Trust (the
"Plan") is hereby amended, pursuant to Section 15 of the Plan, as set forth
below:
1. Section 6 of the Plan is hereby amended by adding the following
sentence to the end of the second paragraph thereof:
"Such reload stock option grants shall not be treated as
Shares granted under the Plan in determining the aggregate
number of Shares available for the grant of awards pursuant to
the first sentence of Section 2."
2. Section 12 of the Plan is hereby amended to read in its entirety as
follows:
"Except as may otherwise be determined by the Committee with
respect to the transferability of stock options by a
Participant to such Participant's immediate family members (or
trusts, partnerships, or limited liability companies
established for such immediate family members), no award under
the Plan shall be assignable or transferable except by will or
the laws of descent and distribution, and no right or interest
of any Participant shall be subject to any lien, obligation or
liability of the Participant. For this purpose, immediate
family member means, except as otherwise defined by the
Committee, the Participant's children, stepchildren,
grandchildren, parents, stepparents, grandparents, spouse,
siblings (including half brothers and sisters), in-laws and
persons related by reason of legal adoption. Such transferees
may transfer a stock option only by will or the laws of
descent or distribution. A stock option transferred pursuant
to this Section 12 shall remain subject to the provisions of
the Plan, and shall be subject to such other other rules as
the Committee shall determine. Upon transfer of a stock
option, any related stock appreciation right shall be
cancelled. Except in the case of a holder's incapacity, an
award shall be exercisable only by the holder thereof."
-54-
<PAGE> 55
EXHIBIT 10(C)3
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of December 2, 1996, by and between
Vornado Realty Trust, a Maryland real estate investment trust, with its
principal offices at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663 (the
"Company") and Michael D. Fascitelli ("Executive").
IN CONSIDERATION of the premises and the mutual covenants set
forth below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ Executive
as the President of the Company, and Executive hereby accepts such employment,
on the terms and conditions hereinafter set forth.
2. Term. The period of employment of Executive by the Company
hereunder (the "Employment Period") shall commence on December 2, 1996 (the
"Commencement Date") and shall continue through November 30, 2001; provided,
that, commencing on December 1, 2000, and on each December 1 thereafter, the
Employment Period shall automatically be extended for one (1) additional year
unless either party gives written notice not to extend this Agreement prior to
three (3) months before such extension would be effectuated. The Employment
Period may be sooner terminated by either party in accordance with Section 6 of
this Agreement.
3. Position and Duties. During the Employment Period,
Executive shall serve as President of the Company, and shall report solely and
directly to Mr. Steven Roth; provided, that if Mr. Steven Roth is no longer
employed by the Company for any reason, Executive shall report, in respect of
his duties and responsibilities at the Company, solely and directly to the board
of trustees of the Company (the "Board"). Subject to the supervisory powers of
Mr. Steven Roth only, Executive shall have those powers and duties normally
associated with the position of President and trustee and such other powers and
duties as may be prescribed by Mr. Roth and the Board only, provided that such
other powers and duties are consistent with Executive's position as President
and trustee of the Company. Executive shall devote substantially all of his
working time, attention and energies during normal business hours (other than
absences due to illness or vacation) to the performance of his duties for the
Company. Notwithstanding the above, Executive shall be permitted, to the extent
such activities do not substantially interfere with the performance by Executive
of his duties and responsibilities hereunder or violate Section 10(a), (c) or
(d) of this Agreement, to (i) manage Executive's personal, financial and legal
affairs, and (ii) to serve on civic or charitable boards or committees (it being
expressly understood and agreed that Executive's continuing to serve on any such
board and/or committees on which Executive is serving, or with
-55-
<PAGE> 56
which Executive is otherwise associated, as of the Commencement Date (each of
which has been disclosed to the Company prior to the execution of this Agreement
or will be disclosed promptly thereafter), shall be deemed not to interfere with
the performance by Executive of his duties and responsibilities under this
Agreement). The Company acknowledges that Executive may provide consulting
services through December 31, 1996, to assist his former employer with
transitional matters in connection with Executive's former position. Executive
has been elected, effective as of the Commencement Date, to the Board and to the
board of directors of Alexander's, Inc. ("Alexander's").
4. Place of Performance. The principal place of employment of
Executive shall be at the Company's principal executive offices in Saddle Brook,
New Jersey.
5. Compensation and Related Matters.
(a) Base Salary. During the Employment Period the Company
shall pay Executive a base salary at the rate of not less than $600,000 per year
("Base Salary"). Executive's Base Salary shall be paid in approximately equal
installments in accordance with the Company's customary payroll practices. If
Executive's Base Salary is increased by the Company, such increased Base Salary
shall then constitute the Base Salary for all purposes of this Agreement.
(b) Company Share Option. The Company shall grant to
Executive a non-qualified share option (the "Company Share Option") to acquire
1,750,000 shares of the common shares of beneficial interest of the Company, par
value $.04 per share (the "Company Stock"), pursuant to the Company's 1993
Omnibus Share Plan (the "Company Option Plan"). The Company Share Option shall
be granted on December 3, 1996, and shall be granted at an exercise price per
share equal to the fair market value of the Company Stock on the date of grant
and shall be subject to the terms set forth in the share option agreement
attached to this Agreement as Exhibit A (the "Company Share Option Agreement")
and to the Company Option Plan. The Company hereby represents and warrants to
Executive that (a) the Company Option Plan has and will have sufficient shares
available to effect the grant and exercise of the Company Share Option and the
Company Option Plan has been approved by its shareholders, (b) the Company Share
Option shall be granted by the Board or by a compensation committee of the Board
satisfying the conditions for "non-employee directors" under Rule 16b-3,
promulgated under the Securities Exchange Act of 1934, as amended ("Rule
16b-3"), (c) the Company Share Option will be properly authorized and approved
by the Board and/or its compensation committee, (d) the Company Stock underlying
the Company Share Option has been registered on Form S-8 and (e) the Company
Stock underlying the Company Share Option has been listed on the New York Stock
Exchange. The Company hereby undertakes and agrees (at no cost to Executive) to
have an effective shelf-registration
-56-
<PAGE> 57
in place in favor of Executive in respect of the Company Stock underlying the
Company Share Option (the "Company Registration Statement") no later than
December 2, 1997. The Company Registration Statement shall be subject to the
terms set forth on Exhibit B hereto. For purposes of this Agreement, "fair
market value" of the Company Stock on any given date shall mean the average of
the high and low trading prices of the Company Stock on such date, as reported
on the New York Stock Exchange composite tape for such date.
(c) Alexander's Stock Option. Alexander's has resolved to
grant to Executive, subject to the execution of this Agreement, a non-qualified
stock option (the "Alexander's Stock Option") to acquire 350,000 shares of the
common stock of Alexander's, par value $1.00 per share (the "Alexander's
Stock"), pursuant to the Alexander's, Inc. Omnibus Stock Plan (the "Alexander's
Option Plan"). The Alexander's Option shall be granted on December 5, 1996, and
shall be granted at an exercise price per share equal to the fair market value
of the Alexander's Stock on the date of grant and shall be subject to the terms
set forth in the stock option agreement attached to this Agreement as Exhibit C
(the "Alexander's Stock Option Agreement") and to the Alexander's Option Plan.
The Company hereby represents and warrants to Executive that (a) the Alexander's
Stock Option Plan has sufficient shares available to effect the grant and
exercise of the Alexander's Option and the Alexander's Stock Option Plan has
been approved by its shareholders, (b) the Alexander's Option shall be granted
by the board of directors of Alexander's or by a compensation committee of the
board of directors of Alexander's satisfying the conditions for non-employee
directors under Rule 16b-3, (c) the Alexander's Option will be properly
authorized and approved by the board of directors of Alexander's and/or its
compensation committee, (d) the Alexander's Stock underlying the Alexander's
Stock Option has been registered on Form S-8, and (e) the Alexander's Stock
underlying the Alexander's Stock Option has been properly listed on the New York
Stock Exchange. The Company hereby undertakes and agrees (at no cost to
Executive) to use its best efforts to cause Alexander's to have an effective
shelf-registration in place in favor of Executive in respect of the Alexander's
Stock underlying the Alexander's Option (the "Alexander's Registration
Statement") no later than December 2, 1997. The Alexander's Registration
Statement shall be subject to the terms set forth on Exhibit B hereto. For
purposes of this Agreement, "fair market value" of Alexander's Stock on any
given date shall mean the average of the high and low trading prices of the
Alexander's Stock on such date, as reported on the New York Stock Exchange
composite tape for such date.
(d) Deferred Payment. Subject to the immediately succeeding
sentence, the Company shall provide to Executive upon the Commencement Date a
deferred payment equal to $5,000,000 (the "Deferred Payment"). Payment of the
Deferred Payment shall be deferred pursuant to the terms of the deferred
compensation agreement attached hereto as Exhibit D (the "Deferred Compensation
Agreement").
-57-
<PAGE> 58
(e) Convertible Units Agreement. The Company shall issue to
Executive upon the Commencement Date a deferred compensation arrangement in the
form of 459,770 convertible cash units (the "Convertible Units") pursuant to an
agreement in the form attached hereto as Exhibit E (the "Convertible Units
Agreement").
(f) Rabbi Trust Funding. In connection with the Deferred Payment
and the Convertible Units, the Company shall upon the Commencement Date
contribute (i) $5,000,000 in cash into an irrevocable "rabbi" trust of even date
herewith between the Company and The Chase Manhattan Bank, a New York banking
corporation (the "Rabbi Trust"), and (ii) a certificate for 459,770 shares of
Company Stock into the Rabbi Trust. The Rabbi Trust shall be in the form
attached hereto as Exhibit F.
(g) Conditions to Receipt of Deferred Payment and Convertible
Units. Notwithstanding anything in this Section 5 to the contrary, Executive
shall have no right to the amounts payable to Executive under Sections 5(d) and
5(e) of this Agreement in the event that, prior to December 2, 1997, he
voluntarily terminates employment hereunder (other than for Good Reason);
provided, that under no circumstances shall such amounts be forfeited upon
Executive's death or a termination of employment due to Executive's Disability.
(h) Automobile. The Company will provide Executive with an
automobile and driver, which automobile shall be a Lincoln Town Car or similar
model.
(i) Expenses. The Company shall promptly reimburse Executive for
all reasonable business expenses upon the presentation of reasonably itemized
statements of such expenses in accordance with the Company's policies and
procedures now in force or as such policies and procedures may be modified with
respect to all senior executive officers of the Company.
(j) Vacation. Executive shall be entitled to the number of weeks
of vacation per year provided to the Company's chief executive officer, but in
no event less than four (4) weeks annually.
(k) Services Furnished. During the Employment Period, the Company
shall furnish Executive with office space, stenographic and secretarial
assistance and such other facilities and services comparable to those provided
to the Company's chief executive officer.
(l) Company Loan. During the Employment Period, upon the written
request of Executive, the Company shall disburse to Executive (i) at any time,
one or more loans in an aggregate amount of up to $5,000,000, (ii) following
-58-
<PAGE> 59
December 2, 1997, one or more loans in an aggregate amount of up to $2,500,000,
and (iii) following December 2, 1998, one or more loans in an aggregate amount
of up to $2,500,000, for a potential aggregate loan amount of $10,000,000. Each
of such loans shall be on a revolving principal basis subject to the following
terms and conditions:
(i) each loan must be in an amount of at least $500,000;
(ii) the loans shall be full recourse to Executive;
(iii) the principal amount of each loan shall be due and
payable upon the first to occur of (A) Executive's Date of Termination,
(B) the fifth anniversary of the loan's date of disbursement or (C) the
final payment to Executive under the Convertible Units Agreement,
provided, that under no circumstances shall the aggregate principal
amount of outstanding loans exceed one-half (1/2) the product of (x)
the number of the outstanding Convertible Units and (y) $43.50 and in
the event such aggregate principal amount of outstanding loans does
exceed such value, such excess shall be due and payable immediately;
(iv) each loan shall be subject to interest at the
applicable Federal rate under Section 1274(d) of the Internal Revenue
Code of 1986, as amended, on the date the loan is made;
(v) interest on each loan shall be payable quarterly as
set forth in the agreements evidencing such loans (the intent of which
will be to approximate the timing of the Company's regular quarterly
dividend payments) and the dividend equivalent payments made pursuant
to the Convertible Units shall be applied by the Company to the extent
necessary to satisfy the next following quarterly interest payment as
of the date of payment of such dividend equivalents (pursuant to the
terms of the Convertible Unit Agreement), and Executive shall pay any
remaining interest owed on the loan, if any, after such application of
the dividend equivalents;
(vi) the agreements evidencing such loans shall contain
such additional terms and conditions as are reasonably acceptable to
the Executive in good faith;
(vii) Executive shall not be required to pledge or otherwise
hypothecate or encumber any of Executive's personal assets in
connection with any loan; and
(viii) it is the intention of the parties hereto that the
repayment of the amounts borrowed hereunder by Executive shall first be
-59-
<PAGE> 60
satisfied by an application of amounts due and payable to Executive
under the Convertible Units Agreement.
(m) Welfare, Pension and Incentive Benefit Plans. During the
Employment Period, Executive (and his spouse and dependents to the extent
provided therein) shall be entitled to participate in and be covered under all
the welfare benefit plans or programs maintained by the Company from time to
time for the benefit of its senior executives including, without limitation, all
medical, hospitalization, dental, disability, accidental death and dismemberment
and travel accident insurance plans and programs, other than any such benefits
provided solely to Mr. Steven Roth. The Company shall at all times provide to
Executive (and his spouse and dependents to the extent provided under the
applicable plans or programs) (subject to modifications affecting all senior
executive officers) the same type and levels of participation and benefits as
are being provided to Mr. Steven Roth (and his spouse and dependents to the
extent provided under the applicable plans or programs) on the Commencement
Date. In addition, during the Employment Period, Executive shall be eligible to
participate in all pension, retirement, savings and other employee benefit plans
and programs maintained from time to time by the Company for the benefit of its
senior executives, other than any such benefits provided solely to Mr. Steven
Roth or any annual incentive or long-term performance plans (other than those
specified or referred to in Section 5).
(n) Other Benefits. During the Employment Period, the Company
shall provide Executive with the benefits described below:
(i) a $3 million five-year renewable term life insurance
policy;
(ii) a Company-provided medical examination on an annual
basis at a medical clinic selected by Executive and reasonably
satisfactory to the Company's chief executive officer;
(iii) tax preparation and financial planning assistance up to
a maximum of $15,000 value per year; and
(iv) long-term disability insurance coverage with benefits
at a rate of 60% of Base Salary through age sixty-five (65), less any
disability benefits paid under any group long-term disability plan of
the Company.
(o) Offices. Executive shall serve, without additional
compensation, as a director or trustee of the Company or any of its wholly-owned
subsidiaries, Alexander's or any of its wholly-owned subsidiaries or any
entities spun off from the Company or Alexander's to their shareholders (and as
a member of any committees of the board of directors or trustees of any such
entities), and in one or
-60-
<PAGE> 61
more executive positions of any of such subsidiaries or spun-off entities,
provided that Executive is indemnified for serving in any and all such
capacities on a basis no less favorable than is then provided to any other
director or trustee of such entity.
(p) Adjustments to the Company Share Option, the Alexander's Stock
Option and the Convertible Units. In the event of a spin-off by the Company or
by Alexander's to its shareholders, Executive shall receive an appropriate
equitable adjustment to the Company Share Option and the Convertible Units (in
the case of a spin-off by the Company) or to the Alexander's Stock Option (in
the case of a spin-off by Alexander's) pursuant to the terms of Section 8(k) of
each of the Company Share Option Agreement, the Alexander's Stock Option
Agreement or the Convertible Units Agreement, as the case may be.
6. Termination. Executive's employment hereunder may be terminated
during the Employment Period under the following circumstances:
(a) Death. Executive's employment hereunder shall terminate upon
his death.
(b) Disability. If, as a result of Executive's incapacity due to
physical or mental illness, Executive shall have been substantially unable to
perform his duties hereunder for an entire period of six (6) consecutive months,
and within thirty (30) days after written Notice of Termination is given after
such six (6) month period, Executive shall not have returned to the substantial
performance of his duties on a full-time basis, the Company shall have the right
to terminate Executive's employment hereunder for "Disability", and such
termination in and of itself shall not be, nor shall it be deemed to be, a
breach of this Agreement.
(c) Cause. The Company shall have the right to terminate
Executive's employment for Cause, and such termination in and of itself shall
not be, nor shall it be deemed to be, a breach of this Agreement. For purposes
of this Agreement, the Company shall have "Cause" to terminate Executive's
employment upon Executive's:
(i) conviction of, or plea of guilty or nolo contendere to,
a felony; or
(ii) willful and continued failure to use reasonable best
efforts to substantially perform his duties hereunder (other than such
failure resulting from Executive's incapacity due to physical or mental
illness or subsequent to the issuance of a Notice of Termination by
Executive for Good Reason) after demand for substantial performance is
delivered by the Company in writing that specifically identifies the
manner in which the Company believes
-61-
<PAGE> 62
Executive has not used reasonable best efforts to substantially perform
his duties; or
(iii) willful misconduct (including, but not limited to, a
willful breach of the provisions of Section 10) that is materially
economically injurious to the Company or Alexander's or to any entity
in control of, controlled by or under common control with the Company
or Alexander's ("Affiliates").
For purposes of this Section 6(c), no act, or failure to act, by Executive shall
be considered "willful" unless committed in bad faith and without a reasonable
belief that the act or omission was in the best interests of the Company,
Alexander's or any Affiliates thereof. Cause shall not exist under paragraph
(ii) or (iii) above unless and until the Company has delivered to Executive a
copy of a resolution duly adopted by a majority of the Board (excluding
Executive for purposes of determining such majority) at a meeting of the Board
called and held for such purpose (after reasonable (but in no event less than
thirty (30) days) notice to Executive and an opportunity for Executive, together
with his counsel, to be heard before the Board), finding that in the good faith
opinion of the Board, Executive was guilty of the conduct set forth in paragraph
(ii) or (iii) and specifying the particulars thereof in detail. This Section
6(c) shall not prevent Executive from challenging in any court of competent
jurisdiction the Board's determination that Cause exists or that Executive has
failed to cure any act (or failure to act) that purportedly formed the basis for
the Board's determination.
(d) Good Reason. Executive may terminate his employment for "Good
Reason" within one hundred and twenty (120) days after Executive has actual
knowledge of the occurrence, without the written consent of Executive, of one of
the following events that has not been cured within thirty (30) days after
written notice thereof has been given by Executive to the Company:
(i) the failure of Executive to be appointed to the
position set forth in Section 3 or to be appointed as a member of the
Board or the board of directors of Alexander's;
(ii) the assignment to Executive of duties materially and
adversely inconsistent with Executive's status as President of the
Company or a material and adverse alteration in the nature of
Executive's duties and/or responsibilities, reporting obligations,
titles or authority;
(iii) a reduction by the Company in Executive's Base Salary
or a failure by the Company to pay any such amounts when due or any
amounts due under Sections 5(d) and 5(e);
-62-
<PAGE> 63
(iv) the relocation of the Company's principal executive
offices or Executive's own office location to a location more than
thirty (30) miles from New York City;
(v) any purported termination of Executive's employment
for Cause which is not effected pursuant to the procedures of Section
6(c) (and for purposes of this Agreement, no such purported termination
shall be effective);
(vi) the Company's failure to provide the Company Share
Option or the Company's material breach of the Company Share Option
Agreement, the Convertible Units Agreement or the Deferred Compensation
Agreement;
(vii) the Company's failure to provide the benefits set
forth in Section 5(n)(i) or 5(n)(iv) or the failure of the Company to
substantially provide any material employee benefits due to be provided
to Executive (other than any such failure not inconsistent with any
express provisions contained herein which failure affects all senior
executive officers, not including for this purpose benefits provided
solely to Mr. Steven Roth);
(viii) the Company's failure to provide in all material
respects the indemnification set forth in Section 11 of this Agreement;
(ix) the failure by Alexander's to provide the Alexander's
Stock Option or the material breach of the Alexander's Stock Option
Agreement by Alexander's;
(x) the failure by the Company or by Alexander's to
provide Executive, upon the spin-off or distribution of any property by
the Company or Alexander's to their shareholders, with an appropriate
equitable adjustment to the Company Share Option, the Alexander's Stock
Option or the Convertible Units pursuant to the terms of the Company
Share Option Agreement, the Alexander's Stock Option Agreement or the
Convertible Units Agreement, as applicable;
(xi) a Change in Control of the Company;
(xii) the failure of the Company or Alexander's (i) to list
(or to maintain such listing) for trading on the New York Stock
Exchange or (ii) to register (or to maintain pursuant to the terms of
Exhibit B such registration for) the stock underlying the Company Share
Option, the Alexander's Stock Option or the Convertible Units Agreement
pursuant to an effective shelf
-63-
<PAGE> 64
registration statement on Form S-3 in favor of Executive and the Rabbi
Trust trustee;
(xiii) the Company's material failure to disburse any loan
amounts in accordance with Section 5(l); or
(xiv) the Company's failure to contribute the annual Rabbi
Trust funding, to the extent such funding is required by the Rabbi
Trust agreement;
Executive's right to terminate his employment hereunder for Good Reason shall
not be affected by his incapacity due to physical or mental illness. Executive's
continued employment during the one hundred and twenty (120) day period referred
to above in this paragraph (d) shall not constitute consent to, or a waiver of
rights with respect to, any act or failure to act constituting Good Reason
hereunder.
(e) Without Cause. The Company shall have the right to terminate
Executive's employment hereunder without Cause by providing Executive with a
Notice of Termination, and such termination shall not in and of itself be, nor
shall it be deemed to be, a breach of this Agreement.
(f) Without Good Reason. Executive shall have the right to
terminate his employment hereunder without Good Reason by providing the Company
with a Notice of Termination, and such termination shall not in and of itself
be, nor shall it be deemed to be, a breach of this Agreement.
For purposes of this Agreement, a "Change in Control" of the Company
means the occurrence of one of the following events:
(1) individuals who, on the Commencement Date, constitute the
Board (the "Incumbent Trustees") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a
trustee subsequent to the Commencement Date whose election or
nomination for election was approved by a vote of at least two-thirds
of the Incumbent Trustees then on the Board (either by a specific vote
or by approval of the proxy statement of the Company in which such
person is named as a nominee for trustee, without objection to such
nomination) shall be an Incumbent Trustee; provided, however, that no
individual initially elected or nominated as a trustee of the Company
as a result of an actual or threatened election contest with respect to
trustees or as a result of any other actual or threatened solicitation
of proxies by or on behalf of any person other than the Board shall be
an Incumbent Trustee;
-64-
<PAGE> 65
(2) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange Act") and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes,
after the Commencement Date, a "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing 30% or more of the combined voting power of
the Company's then outstanding securities eligible to vote for the
election of the Board (the "Company Voting Securities"); provided,
however, that an event described in this paragraph (2) shall not be
deemed to be a Change in Control if any of following becomes such a
beneficial owner: (A) the Company or any majority-owned subsidiary
(provided, that this exclusion applies solely to the ownership levels
of the Company or the majority-owned subsidiary), (B) any
tax-qualified, broad-based employee benefit plan sponsored or
maintained by the Company or any majority-owned subsidiary, (C) any
underwriter temporarily holding securities pursuant to an offering of
such securities, (D) any person pursuant to a Non-Qualifying
Transaction (as defined in paragraph (3)), (E) Executive or any group
of persons including Executive (or any entity controlled by Executive
or any group of persons including Executive); or (F) (i) any of the
partners (as of the Commencement Date) in Interstate Properties
("Interstate") including immediate family members and family trusts or
family-only partnerships and any charitable foundations of such
partners (the "Interstate Partners"), (ii) any entities the majority of
the voting interests of which are beneficially owned by the Interstate
Partners, or (iii) any "group" (as described in Rule 13d-5(b)(i) under
the Exchange Act) including the Interstate Partners, provided, that the
Interstate Partners beneficially own a majority of the Company Voting
Securities beneficially owned by such group (the persons in (i), (ii)
and (iii) shall be individually and collectively referred to herein as,
"Interstate Holders");
(3) the consummation of a merger, consolidation, share
exchange or similar form of transaction involving the Company or any of
its subsidiaries, or the sale of all or substantially all of the
Company's assets (a "Business Transaction"), unless immediately
following such Business Transaction (i) more than 50% of the total
voting power of the entity resulting from such Business Transaction or
the entity acquiring the Company's assets in such Business Transaction
(the "Surviving Corporation") is beneficially owned, directly or
indirectly, by the Interstate Holders or the Company's shareholders
immediately prior to any such Business Transaction, and (ii) no person
(other than the persons set forth in clauses (A), (B), (C), or (F) of
paragraph (2) above or any tax-qualified, broad-based employee benefit
plan of the Surviving Corporation or its Affiliates beneficially owns,
directly or indirectly, 30% or more of the total voting power of the
Surviving Corporation (a "Non-Qualifying Transaction"); or
-65-
<PAGE> 66
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of the Company to
Executive under this Agreement, the Company Stock Option Agreement, the
Deferred Compensation Agreement, the Convertible Units Agreement and
the Rabbi Trust agreement.
7. Termination Procedure.
(a) Notice of Termination. Any termination of Executive's
employment by the Company or by Executive during the Employment Period (other
than termination pursuant to Section 6(a)) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 14.
For purposes of this Agreement, a "Notice of Termination" shall mean a notice
which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment under the
provision so indicated.
(b) Date of Termination. "Date of Termination" shall mean (i) if
Executive's employment is terminated by his death, the date of his death, (ii)
if Executive's employment is terminated pursuant to Section 6(b), thirty (30)
days after Notice of Termination (provided that Executive shall not have
returned to the substantial performance of his duties on a full-time basis
during such thirty (30) day period), and (iii) if Executive's employment is
terminated for any other reason, the date on which a Notice of Termination is
given or any later date (within thirty (30) days after the giving of such
notice) set forth in such Notice of Termination.
8. Compensation Upon Termination or During Disability. In the
event Executive is disabled or his employment terminates during the Employment
Period, the Company shall provide Executive with the payments and benefits set
forth below. Executive acknowledges and agrees that the payments set forth in
this Section 8 constitute liquidated damages for termination of his employment
during the Employment Period.
(a) Termination By Company without Cause or By Executive for
Good Reason. If Executive's employment is terminated by the Company without
Cause or by Executive for Good Reason:
(i) the Company shall pay to Executive (A) his Base Salary
and accrued vacation pay through the Date of Termination, as soon as
-66-
<PAGE> 67
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) for a period of three (3)
years following the Date of Termination; provided, that during the
second and third years following the Date of Termination the Company's
obligation to pay continued Base Salary shall be offset by the economic
value of any compensation actually received (or deferred) for services
rendered by Executive to any other entity;
(ii) the Company shall maintain in full force and effect,
for the continued benefit of Executive, his spouse and his dependents
for a period of three (3) years following the Date of Termination the
medical, hospitalization, dental, and life insurance programs
(including without limitation the life insurance policy set forth in
Section 5(n)(i), but for no longer than the five-year term of such
policy) in which Executive, his spouse and his dependents were
participating immediately prior to the Date of Termination at the level
in effect and upon substantially the same terms and conditions
(including without limitation contributions required by Executive for
such benefits) as existed immediately prior to the Date of Termination;
provided, that if Executive, his spouse or his dependents cannot
continue to participate in the Company programs providing such
benefits, the Company shall arrange to provide Executive, his spouse
and his dependents with the economic equivalent of such benefits which
they otherwise would have been entitled to receive under such plans and
programs ("Continued Benefits"), provided, that such Continued Benefits
shall terminate on the date or dates Executive receives equivalent
coverage and benefits, without waiting period or pre-existing condition
limitations, under the plans and programs of a subsequent employer
(such coverage and benefits to be determined on a coverage-by-coverage
or benefit-by-benefit, basis); and
(iii) the Company shall pay any deferred compensation payable
in accordance with the terms of the agreements referenced in Sections
5(d) and (e) of this Agreement;
(iv) the Company shall reimburse Executive pursuant to
Section 5(i) for reasonable expenses incurred, but not paid prior to
such termination of employment; and
(v) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
-67-
<PAGE> 68
(b) Cause or By Executive Without Good Reason. If Executive's
employment is terminated by the Company for Cause or by Executive (other than
for Good Reason):
(i) the Company shall pay Executive his Base Salary and, to
the extent required by law or the Company's vacation policy, his
accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination; and
(ii) the Company shall pay any deferred compensation payable
in accordance with the terms of the agreements referenced in Sections
5(d) and (e) of this Agreement;
(iii) the Company shall reimburse Executive pursuant to
Section 5(i) for reasonable expenses incurred, but not paid prior to
such termination of employment, unless such termination resulted from a
misappropriation of Company funds; and
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(c) Disability. During any period that Executive fails to perform
his duties hereunder as a result of incapacity due to physical or mental illness
("Disability Period"), Executive shall continue to receive his full Base Salary
set forth in Section 5(a) until his employment is terminated pursuant to Section
6(b). In the event Executive's employment is terminated for Disability pursuant
to Section 6(b):
(i) the Company shall pay to Executive (A) his Base Salary
and accrued vacation pay through the Date of Termination, as soon as
practicable following the Date of Termination, and (B) continued Base
Salary (as provided for in Section 5(a)) and Continued Benefits for the
longer of (i) six (6) months or (ii) the date on which Executive
becomes entitled to long-term disability benefits under the applicable
plan or program of the Company paying the benefits described in Section
5(n)(iv), up to a maximum of three (3) years of Base Salary
continuation; and
(ii) the Company shall pay any deferred compensation payable
in accordance with the terms of the agreements referenced in Sections
5(d) and (e) of this Agreement;
(iii) the Company shall reimburse Executive pursuant to
Section 5(i) for reasonable expenses incurred, but not paid prior to
such termination of employment; and
-68-
<PAGE> 69
(iv) Executive shall be entitled to any other rights,
compensation and/or benefits as may be due to Executive in accordance
with the terms and provisions of any agreements, plans or programs of
the Company.
(d) Death. If Executive's employment is terminated by his death:
(i) the Company shall pay in a lump sum to Executive's
beneficiary, legal representatives or estate, as the case may be,
Executive's Base Salary through the Date of Termination and one (1)
times Executive's annual rate of Base Salary, and shall provide
Executive's spouse and dependents with Continued Benefits for one (1)
year;
(ii) the Company shall pay any deferred compensation payable
in accordance with the terms of the agreements referenced in Sections
5(d) and (e) of this Agreement;
(iii) the Company shall reimburse Executive's beneficiary,
legal representatives, or estate, as the case may be, pursuant to
Section 5(i) for reasonable expenses incurred, but not paid prior to
such termination of employment; and
(iv) Executive's beneficiary, legal representatives or
estate, as the case may be, shall be entitled to any other rights,
compensation and benefits as may be due to any such persons or estate
in accordance with the terms and provisions of any agreements, plans or
programs of the Company.
(e) Failure to Extend. A failure to extend the Agreement pursuant
to Section 2 by either party shall not be treated as a termination of
Executive's employment for purposes of this Agreement.
(f) Alexander's Stock Option. Executive's termination of
employment under this Agreement shall not affect any existing rights he may have
under the Alexander's Stock Option, which rights shall be governed by the terms
of the Alexander's Stock Option Agreement.
9. Mitigation. 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 amounts due Executive under this Agreement on account
of subsequent employment except as specifically provided herein. Additionally,
amounts owed to Executive under this Agreement, the Deferred Compensation
Agreement or the Convertible Units Agreement shall not be offset by any claims
the Company may have against Executive (other than an offset for any due and
payable loan amounts under Section 5(l) excluding the Deferred Compensation
Agreement) and, except with
-69-
<PAGE> 70
respect to such loan amounts, as set forth above, the Company's obligation to
make the payments provided for in this Agreement, the Deferred Compensation
Agreement or the Convertible Units Agreement, and otherwise to perform its
obligations hereunder, shall not be affected by any other circumstances,
including, without limitation, any counterclaim, recoupment, defense or other
right which the Company may have against Executive or others.
10. Confidential Information, Ownership of Documents; Non-Competition.
(a) Confidential Information. Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets and confidential
information, knowledge or data relating to the Company and its businesses and
investments, which shall have been obtained by Executive during Executive's
employment by the Company and which is not generally available public knowledge
(other than by acts by Executive in violation of this Agreement). Except as may
be required or appropriate in connection with his carrying out his duties under
this Agreement, Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or any legal process, or as is
necessary in connection with any adversarial proceeding against the Company (in
which case Executive shall use his reasonable best efforts in cooperating with
the Company in obtaining a protective order against disclosure by a court of
competent jurisdiction), communicate or divulge any such trade secrets,
information, knowledge or data to anyone other than the Company and those
designated by the Company or on behalf of the Company in the furtherance of its
business or to perform duties hereunder.
(b) Removal of Documents; Rights to Products. All records, files,
drawings, documents, models, equipment, and the like relating to the Company's
business, which Executive has control over shall not be removed from the
Company's premises without its written consent, unless such removal is in the
furtherance of the Company's business or is in connection with Executive's
carrying out his duties under this Agreement and, if so removed, shall be
returned to the Company promptly after termination of Executive's employment
hereunder, or otherwise promptly after removal if such removal occurs following
termination of employment. Executive shall assign to the Company all rights to
trade secrets and other products relating to the Company's business developed by
him alone or in conjunction with others at any time while employed by the
Company.
(c) Protection of Business. During the Employment Period and until
the first anniversary of Executive's Date of Termination (but only in the event
Executive is terminated by the Company for Cause, Executive terminates
employment without Good Reason or Executive is terminated by the Company for
Disability), the Executive will not (i) engage, anywhere within the geographical
areas in which the Company, Alexander's or any of their Affiliates (the
"Designated Entities") are con-
-70-
<PAGE> 71
ducting their business operations or providing services as of the Date of
Termination, in any business which is being engaged in by the Designated
Entities as of the Date of Termination or pursue or attempt to develop any
project known to Executive and which the Designated Entities are pursuing,
developing or attempting to develop as of the Date of Termination, unless such
project has been inactive for over nine (9) months (a "Project"), directly or
indirectly, alone, in association with or as a shareholder, principal, agent,
partner, officer, director, employee or consultant of any other organization,
(ii) divert to any entity which is engaged in any business conducted by the
Designated Entities in the same geographic area as the Designated Entities, any
Project or any customer of any of the Designated Entities, or (iii) solicit any
officer, employee (other than secretarial staff) or consultant of any of the
Designated Entities to leave the employ of any of the Designated Entities.
Notwithstanding the preceding sentence, Executive shall not be prohibited from
owning less than one (1%) percent of any publicly traded corporation, whether or
not such corporation is in competition with the Company. If, at any time, the
provisions of this Section 10(c) shall be determined to be invalid or
unenforceable, by reason of being vague or unreasonable as to area, duration or
scope of activity, this Section 10(c) shall be considered divisible and shall
become and be immediately amended to only such area, duration and scope of
activity as shall be determined to be reasonable and enforceable by the court or
other body having jurisdiction over the matter; and Executive agrees that this
Section 10(c) as so amended shall be valid and binding as though any invalid or
unenforceable provision had not been included herein.
(d) Current Employer. Except as provided in Section 3, prior to
November 30, 1999, Executive shall not, without the written consent of the
Company, if he terminates employment without Good Reason or is terminated by the
Company for Cause, provide services, as an employee, partner or consultant, to
Goldman, Sachs & Co. or any successor thereof (or any entity with respect to
which Goldman, Sachs & Co. or any successor thereof (together with the partners
of Goldman, Sachs & Co.), directly or indirectly (i) own a majority of the
equity interest, (ii) may appoint a majority of its board of directors, (iii) is
the general partner, (iv) is the managing limited liability company member, or
(v) is a similar controlling entity).
(e) Injunctive Relief. In the event of a breach or threatened
breach of this Section 10, Executive agrees that the Company shall be entitled
to injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, Executive acknowledging that damages would be
inadequate and insufficient.
(f) Continuing Operation. Except as specifically provided in this
Section 10, the termination of Executive's employment or of this Agreement shall
have no effect on the continuing operation of this Section 10.
-71-
<PAGE> 72
11. Indemnification.
(a) General. The Company agrees that if Executive is made a party
or a threatened to be made a party to any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding"), by reason of
the fact that Executive is or was a trustee, director or officer of the Company,
Alexander's or any subsidiary of such entities or is or was serving at the
request of the Company, Alexander's or any subsidiary as a trustee, director,
officer, member, employee or agent of another corporation or a partnership,
joint venture, trust or other enterprise, including, without limitation, service
with respect to employee benefit plans, whether or not the basis of such
Proceeding is alleged action in an official capacity as a trustee, director,
officer, member, employee or agent while serving as a trustee, director,
officer, member, employee or agent, Executive shall be indemnified and held
harmless by the Company to the fullest extent authorized by Maryland law, as the
same exists or may hereafter be amended, against all Expenses incurred or
suffered by Executive in connection therewith, and such indemnification shall
continue as to Executive even if Executive has ceased to be an officer,
director, trustee or agent, or is no longer employed by the Company or
Alexander's and shall inure to the benefit of his heirs, executors and
administrators.
(b) Expenses. As used in this Agreement, the term "Expenses" shall
include, without limitation, damages, losses, judgments, liabilities, fines,
penalties, excise taxes, settlements, and costs, attorneys' fees, accountants'
fees, and disbursements and costs of attachment or similar bonds,
investigations, and any expenses of establishing a right to indemnification
under this Agreement.
(c) Enforcement. If a claim or request under this Agreement is not
paid by the Company or on its behalf, within thirty (30) days after a written
claim or request has been received by the Company, Executive may at any time
thereafter bring suit against the Company to recover the unpaid amount of the
claim or request and if successful in whole or in part, Executive shall be
entitled to be paid also the expenses of prosecuting such suit. All obligations
for indemnification hereunder shall be subject to, and paid in accordance with,
applicable Maryland law.
(d) Partial Indemnification. If Executive is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any Expenses, but not, however, for the total amount thereof, the
Company, shall nevertheless indemnify Executive for the portion of such Expenses
to which Executive is entitled.
(e) Advances of Expenses. Expenses incurred by Executive in
connection with any Proceeding shall be paid by the Company in advance upon
request of Executive that the Company pay such Expenses; but, only in the event
that Executive shall have delivered in writing to the Company (i) an undertaking
to
-72-
<PAGE> 73
reimburse the Company for Expenses with respect to which Executive is not
entitled to indemnification and (ii) an affirmation of his good faith belief
that the standard of conduct necessary for indemnification by the Company has
been met.
(f) Notice of Claim. Executive shall give to the Company notice of
any claim made against him for which indemnification will or could be sought
under this Agreement. In addition, Executive shall give the Company such
information and cooperation as it may reasonably require and as shall be within
Executive's power and at such times and places as are convenient for Executive.
(g) Defense of Claim. With respect to any Proceeding as to which
Executive notifies the Company of the commencement thereof:
(i) The Company will be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided below, to the extent that
it may wish, the Company will be entitled to assume the defense
thereof, with counsel reasonably satisfactory to Executive, which in
the Company's sole discretion may be regular counsel to the Company and
may be counsel to other officers and directors of the Company,
Alexander's or any subsidiary. Executive also shall have the right to
employ his own counsel in such action, suit or proceeding if he
reasonably concludes that failure to do so would involve a conflict of
interest between the Company and Executive, and under such
circumstances the fees and expenses of such counsel shall be at the
expense of the Company.
(iii) The Company shall not be liable to indemnify Executive
under this Agreement for any amounts paid in settlement of any action
or claim effected without its written consent. The Company shall not
settle any action or claim in any manner which would impose any penalty
or limitation on Executive without Executive's written consent. Neither
the Company nor Executive will unreasonably withhold or delay their
consent to any proposed settlement.
(h) Non-exclusivity. The right to indemnification and the payment
of expenses incurred in defending a Proceeding in advance of its final
disposition conferred in this Section 11 shall not be exclusive of any other
right which Executive may have or hereafter may acquire under any statute,
provision of the declaration of trust or certificate of incorporation or by-laws
of the Company, Alexander's or any subsidiary, agreement, vote of shareholders
or disinterested directors or trustees or otherwise.
-73-
<PAGE> 74
12. Legal Fees and Expenses. The Company shall reimburse
Executive promptly following the Commencement Date for all legal fees and
expenses reasonably incurred by Executive in connection with Executive and the
Company entering into this Agreement, the Company Share Option Agreement, the
Alexander's Stock Option Agreement, the Convertible Units Agreement, the Rabbi
Trust, and the Deferred Compensation Agreement, upon receipt of reasonable
written evidence of such fees and expenses. If any contest or dispute shall
arise between the Company or Alexander's and Executive regarding any provision
of this Agreement, the Rabbi Trust, the Company Registration Statement, the
Alexander's Registration Statement, or the Alexander's Stock Option Agreement,
the Company shall reimburse Executive for all legal fees and expenses reasonably
incurred by Executive in connection with such contest or dispute, but only if
Executive is successful in respect of substantially all of Executive's claims
brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the resolution of
such contest or dispute (whether or not appealed) to the extent the Company
receives reasonable written evidence of such fees and expenses.
13. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred except that the
Company will 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 the Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean the Company as herein before defined and any
successor to its business and/or assets (by merger, purchase or otherwise) which
executes and delivers the agreement provided for in this Section 13 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) Executive's Successors. No rights or obligations of
Executive under this Agreement may be assigned or transferred by Executive other
than his rights to payments or benefits hereunder, which may be transferred only
by will or the laws of descent and distribution. Upon Executive's death, this
Agreement and all rights of Executive hereunder shall inure to the benefit of
and be enforceable by Executive's beneficiary or beneficiaries, personal or
legal representatives, or estate, to the extent any such person succeeds to
Executive's interests under this Agreement. Executive shall be entitled to
select and change a beneficiary or beneficiaries to receive any benefit or
compensation payable hereunder following Executive's death by giving the Company
written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary(ies), estate or
other legal representative(s). If Executive should die following his Date of
Termination
-74-
<PAGE> 75
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 such person or persons so
appointed in writing by Executive, or otherwise to his legal representatives or
estate.
14. Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in this Agreement shall be in
writing and shall be deemed to have been duly given when delivered either
personally or by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to Executive:
Michael D. Fascitelli
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
with a copy to:
Stephen W. Skonieczny
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
If to the Company:
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Attention: both Chairman and Chief Financial Officer
with a copy to:
Janet T. Geldzahler
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
-75-
<PAGE> 76
15. Miscellaneous. No provisions of this Agreement may be
amended, modified, or waived unless such amendment or modification is agreed to
in writing signed by Executive and by a duly authorized officer of the Company,
and such waiver is set forth in writing and signed by the party to be charged.
No waiver by either party hereto at any time of any breach by the other party
hereto of any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not set forth
expressly in this Agreement. The respective rights and obligations of the
parties hereunder of this Agreement shall survive Executive's termination of
employment and the termination of this Agreement to the extent necessary for the
intended preservation of such rights and obligations. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of New York without regard to its conflicts of law
principles.
16. Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain in
full force and effect.
17. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
18. Entire Agreement. This Agreement, the Company Share Option
Agreement, the Alexander's Stock Option Agreement, the Convertible Units
Agreement, the Deferred Compensation Agreement, and the Rabbi Trust agreement
set forth the entire agreement of the parties hereto in respect of the subject
matter contained herein and supersede all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by any officer, employee or representative of any party hereto in
respect of such subject matter. Any prior agreement of the parties hereto in
respect of the subject matter contained herein is hereby terminated and
cancelled.
19. Shareholder Approval. The Company represents and warrants
to Executive that no shareholder approval is required for the Company to enter
into this Agreement and provide the benefits hereunder and to enter into the
agreements described in Section 5, and no shareholder approval is required for
Alexander's to grant the Alexander's Stock Option.
20. Withholding. All payments hereunder shall be subject to
any required withholding of Federal, state and local taxes pursuant to any
applicable law or regulation.
-76-
<PAGE> 77
21. Noncontravention. The Company represents that the Company
is not prevented from entering into, or performing this Agreement by the terms
of any law, order, rule or regulation, its by-laws or declaration of trust, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
22. New York Stock Exchange. For purposes of any references
hereunder to listing shares of Company Stock or Alexander's Stock, listing with
the New York Stock Exchange and trading on the National Association of
Securities Dealers Automated Quotation System shall be interchangeable.
23. Trustee. In the event any successor to the Company is a
corporation, all references herein to "trustee" or "Board of Trustees" shall
mean "director" or "Board of Directors", respectively.
24. Section Headings. The section headings in this Employment
Agreement are for convenience of reference only, and they form no part of this
Agreement and shall not affect its interpretation.
25. Acknowledgement. The Company hereby agrees to perform its
obligations under the last sentence of Section 6(d) of the Convertible Units
Agreement and Section 23 of the Company Share Option Agreement, and shall use
its best efforts to cause Alexander's to perform its obligations under Section
21 of the Alexander's Stock Option Agreement.
26. REIT Representations and Warranty. The Company hereby
represents and warrants to Executive that, if Executive (1) does not (x)
Beneficially Own (as such term is defined in the Amended and Restated
Declaration of Trust of the Company (the "Declaration)), hereafter come to
Beneficially Own, Constructively Own (as such term is defined in the
Declaration) or hereafter come to Constructively Own Common Equity Stock (as
such term is defined in the Declaration) of the Company other than Company Stock
received by Executive pursuant to the terms of the Company Share Option
Agreement or the Convertible Units Agreement or (y) Beneficially Own (as such
term is defined in the Amended and Restated Certificate of Incorporation of
Alexander's, Inc. (the "Certificate"), hereafter come to Beneficially Own,
Constructively Own (as such term is defined in the Certificate) or hereafter
come to Constructively Own Alexander's Stock other than Alexander's Stock
received by Executive pursuant to the terms of the Alexander's Stock Option
Agreement or Beneficially Owned or Constructively Owned as a result of
Executive's receipt of Company Stock under the Company Share Option Agreement or
the Convertible Units Agreement, (2) complies with the requirements for Existing
Constructive Holder status set forth in the Declaration at all times, if any,
that Executive Constructively Owns in excess of 9.9 percent of the Company's
outstanding Common Equity Stock, and (3) complies with the requirements for
Existing Constructive Holder status set
-77-
<PAGE> 78
forth in the Certificate at all times, if any, that Executive Constructively
Owns in excess of 9.9 percent of the Alexander's Stock, (a) any and all
issuances or transfers of shares of Company Stock to Executive under the Company
Share Option Agreement and the Convertible Units Agreement shall not be voided
pursuant to the Declaration and shall not result in (i) the receipt by Executive
of shares classified as or exchanged for Excess Stock (as defined in the
Declaration) or (ii) Executive not acquiring shareholder rights at all times
under such shares of the Company Stock to the fullest extent provided for in the
Declaration, the Amended and Restated By-Laws of the Company and Maryland law,
and (b) any and all issuances or transfers of shares of Alexander's Stock to
Executive under the Alexander's Stock Option Agreement shall not be void under
the Certificate and shall not result in (i) the receipt by Executive of Excess
Stock (as defined in the Certificate) or (ii) Executive not acquiring
stockholder rights under such shares of Alexander's Stock to the fullest extent
provided for in the Certificate, the Amended and Restated By-Laws of
Alexander's, Inc., and Delaware law.
27. Remedy Limited to Money Damages. Executive shall not be
entitled to specific performance for a breach of the representation and warranty
contained in paragraph 26 hereof and shall not be entitled to any other remedy
except for an action for money damages.
-78-
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first above written.
VORNADO REALTY TRUST
By: /s/ Steven Roth
------------------------
/s/ Michael D. Fascitelli
----------------------------
-79-
<PAGE> 80
Exhibit A
COMPANY SHARE OPTION AGREEMENT
AGREEMENT, dated as of December 3, 1996, by and between
Vornado Realty Trust, a Maryland real estate investment trust, with its
principal offices at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663 (the
"Company") and Michael D. Fascitelli (the "Optionee").
WHEREAS, the Company and the Optionee have entered into an
agreement (the "Employment Agreement"), dated as of December 2, 1996, pursuant
to which the Optionee will serve as President of the Company, on the terms and
conditions set forth and described therein; and
WHEREAS, the Company desires to grant to the Optionee the
option contemplated under the Employment Agreement under the Company's 1993
Omnibus Share Plan to acquire an aggregate of 1,750,000 (one million seven
hundred fifty thousand) common shares of beneficial interest of the Company, par
value $.04 per share (the "Common Stock"), on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined
herein shall have the meaning set forth in the Plan, unless otherwise indicated.
2. Grant of Option. The Optionee is hereby granted, as of
December 3, 1996 (the "Grant Date"), a nonqualified stock option (the "Option")
to purchase an aggregate of 1,750,000 (one million seven hundred fifty thousand)
shares of Common Stock, pursuant to the terms of this Agreement and the
provisions of the Plan.
3. Option Price. The exercise price of the Option shall be
$46.9375 per share of Common Stock issuable thereunder.
-80-
<PAGE> 81
4. Conditions to Exercisability.
(a) The Option shall become vested and exercisable as to
20% of the shares covered thereby on December 2, 1997, and as to an additional
20% of such shares on each of the next four (4) succeeding anniversaries of such
date.
(b) In addition, vesting and exercisability shall be
accelerated as follows:
(i) upon a "Change in Control of the Company" (as defined
in the Employment Agreement) or upon the Optionee's
termination of employment (A) by the Company without
"Cause" or (B) by the Optionee for "Good Reason" (as
each such term is defined in the Employment
Agreement), the Option shall become vested and
exercisable in full; and
(ii) upon the Optionee's death while employed by the
Company or the Optionee's termination of employment
for "Disability" (as defined in the Employment
Agreement) by the Company, the Option shall also
become vested and exercisable as to the portion of
the Option scheduled to vest on the next following
December 2nd.
5. Period of Option Exercisability. The vested portion
of the Option (including the portion that vests and becomes exercisable under
Section 4(b) above) shall expire and no longer be exercisable upon the first to
occur of the following:
(a) December 2, 2006; or
(b) ninety (90) days following the Optionee's termination
of employment by the Company for Cause; or
(c) two (2) years following the Optionee's termination of
employment with the Company for any reason other than
by the Company for Cause.
-81-
<PAGE> 82
The remaining unvested portion of the Option, if any, shall expire and no longer
be exercisable upon the Optionee's termination of employment.
6. Exercise of Option. (a) The Option shall be exercised, in
whole or in part, in the following manner: the Optionee, or the person or
persons having the right to exercise the Option upon the death or Disability of
the Optionee, shall deliver to the Company written notice specifying the number
of shares of Common Stock which he elects to purchase. The Optionee (or such
other person) must include with such notice full payment of the exercise price
for the Common Stock being purchased pursuant to such notice. Payment of the
exercise price must be made in cash, by certified or cashier's check, in shares
of Common Stock (provided such shares of Common Stock have at the time of
exercise been owned by the Optionee for at least six (6) months) having an
aggregate fair market value on the date of exercise equal to such exercise
price, or in such other consideration (or pursuant to a cashless exercise
procedure with a broker) as the Committee deems appropriate, or in any
combination thereof. For purposes of this Section 6, "fair market value" of the
Common Stock on the date of exercise shall mean the average of the high and low
trading prices of the Common Stock on the NYSE composite tape for such date of
exercise. The right to purchase shares of Common Stock under the Option shall be
cumulative, and if any shares available for purchase are not purchased, such
shares shall remain available for purchase until the Option is no longer
exercisable. Upon exercise of the Option and payment of the exercise price the
Company will promptly deliver the shares of the Common Stock.
(b) The Company may require that the Optionee pay to the
Company, or the Company may otherwise withhold, prior to delivery of any shares
of Common Stock upon the exercise of any portion of the Option, any Federal,
state and local taxes that shall be required to be withheld pursuant to any law
or regulation by reason of the exercise of the Option.
(c) If while employed by the Company, the Optionee exercises
the Option by tendering shares of Common Stock owned by the Optionee at the time
of exercise, the Optionee shall automatically be granted on the date of such
exercise a reload share option grant for the number of shares of Common Stock
used to exercise the Option. Such option shall have an exercise price equal to
the fair market value of the shares of Common Stock on such grant date. The
reload option shall be exercisable and vested upon grant, shall expire and no
longer be exercisable pursuant to the terms of Section 5 and shall be subject to
other terms and conditions pursuant to the Plan as determined by the Committee.
The grant of reload options under this Section 6(c) shall be conditioned upon
the amendment of the Plan to enable reload option grants not to count against
the Plan's maximum number of shares.
-82-
<PAGE> 83
(d) If any law or regulation requires the Company to take any
action regarding the Common Stock, before the Company issues certificates for
the Common Stock being purchased, the Company may delay delivering the
certificates for the Common Stock for the period necessary to take such action,
but shall use all reasonable efforts to resolve such problem. Notwithstanding
the foregoing, to the extent the Option remains outstanding, the Company shall
provide the Optionee, prior to December 2, 1997, with a shelf registration
pursuant to a registration statement subject to the terms set forth on Exhibit B
to the Employment Agreement, with respect to the shares of Common Stock subject
to the Option.
(e) The Optionee will not be deemed to be a holder of any
shares of Common Stock pursuant to exercise of the Option until the date the
Optionee satisfies the exercise and payment requirements hereunder, and the
Optionee shall not have any rights to dividends or any other rights of a
shareholder with respect to the shares covered by the Option until such shares
have been issued to him, which issuance shall not be unreasonably delayed.
7. Representations. The Company represents and warrants that
(i) this Agreement has been authorized by all necessary action of the Company
and is a valid and binding agreement of the Company enforceable against it in
accordance with its terms, (ii) the Option granted under this Agreement has been
approved by the Committee, (iii) the shares of Common Stock subject to the
Option are duly authorized, fully-paid and non-assessable shares, and have been
properly reserved under the Plan and listed with the NYSE, (iv) it is not
prevented from entering into or performing this Agreement by any law, order,
rule or regulation, its declaration of trust or by-laws, or the terms of any
other agreement to which it is a party, other than which would not have a
material adverse effect on the Company's ability to enter into or perform this
Agreement, and (v) it will file a Hart Scott Rodino application with respect to
the Optionee on a timely basis, if necessary, in connection with the acquisition
of Common Stock pursuant to the exercise of the Option.
8. Adjustment of and Changes in the Common Stock. (a) In the
event the outstanding shares of the Common Stock shall be changed into an
increased number of shares, through a share dividend or a split-up of shares, or
into a decreased number of shares, through a combination of shares, then
immediately after the record date for such change, the number of shares of
Common Stock then subject to the Option shall be proportionately increased, in
case of such share dividend or split-up of shares, or proportionately decreased,
in case of such combination of shares. In the event the Company shall issue any
of its shares of beneficial interest or other securities or property (other than
Common Stock which is covered by the preceding sentence), in a reclassification
of the Common Stock (including without
-83-
<PAGE> 84
limitation any such reclassification in connection with a consolidation or
merger in which the Company is the continuing entity), the Option shall be
adjusted so that the Optionee shall be entitled to receive upon exercise of the
Option the same kind and number of shares or other securities or property which
the Optionee would have owned or have been entitled to receive after the
happening of any of the events described above, had he owned the shares of the
Common Stock subject to the Option immediately prior to the happening of such
event or any record date with respect thereto, which adjustment shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
(b) In the event the Company shall distribute to all holders
of the Common Stock evidences of its indebtedness or assets (including leveraged
recapitalizations with special cash distributions, but excluding regular
quarterly cash dividends), then in each case the number of shares of Common
Stock thereafter subject to the Option shall be determined by multiplying the
number of shares theretofore subject to the Option by a fraction, (i) the
numerator of which shall be the then current market price per share of Common
Stock (as determined in paragraph (c) below) on the record date for such
distribution, and (ii) the denominator of which shall be the then current market
price per share of the Common Stock less the then fair value (as mutually
determined in good faith by the Board of Trustees of the Company and the
Optionee) of the portion of the assets or evidences of indebtedness so
distributed applicable to a share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of distribution retroactive to the record date for the determination of
shareholders entitled to receive such distribution.
(c) For the purpose of any computation under paragraph (b) of
this Section 8, the current market price per share of the Common Stock at any
date shall be deemed to be the average of the daily Closing Prices for 15
consecutive Trading Days commencing 20 Trading Days before the date of such
computation. "Closing Price" for each Trading Day shall be, if the Common Stock
is then listed or admitted to trading on the NYSE or other national securities
exchange, the last reported sale price, regular way, for the Common Stock as
reported in the securities listed or traded on the NYSE, or if the Common Stock
is not so listed or admitted on such exchange, then on the exchange which is the
principal exchange on which the Stock is not so admitted for trading on any
national securities exchange, the last sale price reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on if no
such last sale prices are reported, the average by NASDAQ. "Trading Day" shall
be each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which the Common Stock is not traded on the exchange or in the market which is
the principal United States market for the Common Stock.
-84-
<PAGE> 85
(d) Whenever the number of shares of Common Stock subject to
the Option is adjusted as herein provided, the exercise price per share of
Common Stock issuable thereunder shall be adjusted by multiplying such exercise
price immediately prior to such adjustment by a fraction, the numerator of which
shall be the number of shares of Common Stock subject to the Option immediately
prior to such adjustment, and the denominator of which shall be the number of
shares of Common Stock subject to the Option immediately thereafter.
(e) For the purpose of this Section 8, the term "Common Stock"
shall mean (i) the class of beneficial interest designated as the Common Stock
at the date of this Agreement, or (ii) any other equity interest resulting from
successive changes or reclassifications of such shares consisting solely of
changes in par value, or from par value to no par value, or from no par value to
par value. In the event that at any time, as a result of an adjustment made
pursuant to the second sentence of Section 8(a) above, the Optionee shall become
entitled to, upon exercise of the Option, any shares other than the Common
Stock, thereafter the number of such other shares issuable on exercise of the
Option and the exercise price per share of Common Stock issuable thereunder
shall be subject to adjustment from time to time in a manner and on the terms as
nearly equivalent as practicable to the provisions with respect to the shares
contained in this Section 8 and the provisions of this Agreement with respect to
the shares of Common Stock issuable on exercise of the Option shall apply on
like terms to any such other shares.
(f) In case of any consolidation of the Company or merger of
the Company with another corporation as a result of which Common Stock is
converted or modified or in case of any sale or conveyance to another
corporation of the property, assets and business of the Company as an entirety
or substantially as an entirety, the Company shall modify the Option so as to
provide the Optionee with an Option for the kind and amount of shares and other
securities and property that he would have owned or have been entitled to
receive immediately after the happening of such consolidation, merger, sale or
conveyance had the Option, immediately prior to such action, actually been
exercised for shares and, if applicable, other securities of the Company subject
to the Option. The provisions of this Section 8(f) shall similarly apply to
successive consolidations, mergers, sales or conveyances.
(g) If the Company distributes rights or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock at
a price per share less than the current market price per share on the record
date for the distribution, the number of shares thereafter subject to the Option
shall be adjusted in accordance with the formula:
-85-
<PAGE> 86
S' = S (X) O (+) N
-------------------
O (+) N (x) P
-------
M
where:
S' = the adjusted number of shares subject to the Option.
S = the current number of shares subject to the Option.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record date
(as defined pursuant to paragraph (c) above).
The adjustment shall become effective immediately after the record date for
determination of shareholders entitled to receive the rights or warrants.
(h) In case any event shall occur as to which the provisions
of this Section 8 are not applicable but the failure to make any adjustment
would not fairly protect the rights represented by the Option in accordance with
the essential intent and principles of this Section 8 (including without
limitation, directly or indirectly, the sale of Common Stock (or any security
convertible into or exercisable for Common Stock) by the Company or a subsidiary
at a price below fair value or the issuance by the Company or a subsidiary at a
price below fair value or the issuance by the Company or a subsidiary of other
securities not limited to a return that is fixed or determined with reference to
a specified index, but only with respect to sales or issuances, directly or
indirectly, to (i) Affiliates of the Company, (ii) the Interstate Holders (as
defined in the Employment Agreement), or (iii) affiliates of the Interstate
Holders (other than in all such cases wholly-owned subsidiaries of the Company)
(the persons in (i), (ii) and (iii) shall be individually and collectively
referred to herein, as the "Affiliated Entities"), then, in each such case, the
Company shall make an adjustment, if any, on a basis consistent with the
essential intent and principles established in this Section 8, necessary to
preserve, without dilution, the rights represented by the Option. The Company
will promptly notify the Optionee of any such proposed adjustment.
-86-
<PAGE> 87
(i) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 8 shall not apply to, and no adjustment is
required to be made in respect of, any of the following: (i) the issuance of
shares of Common Stock upon the exercise of any other rights, options or
warrants that entitle the holder to subscribe for or purchase such shares (it
being understood that the sole adjustment pursuant to this Section 8 in respect
of the issuance of shares of Common Stock upon exercise of rights, options or
warrants shall be made at the time of the issuance by the Company of such
rights, options or warrants, or a change in the terms thereof); (ii) the
issuance of shares of Common Stock to the Company's employees, directors or
consultants pursuant to bona fide benefit plans adopted by the Company's Board
of Trustees; (iii) the issuance of shares of Common Stock in a bona fide public
offering pursuant to a firm commitment offering; (iv) the issuance of shares of
Common Stock to any of the Affiliated Entities concurrently with an issuance of
shares described in clause (iii) above if such issuance results in the receipt
by the Company of at least the same net proceeds per share as the issuance
described in such provision and if such Affiliated Entities have the right to
participate in such issuance pro rata with their equity interest in the Company;
(v) the issuance of shares of Common Stock pursuant to any dividend reinvestment
or similar plan adopted by the Company's Board of Trustees to the extent that
the applicable discount from the current market price for shares issued under
such plan does not exceed 5%; and (vi) the issuance of shares of Common Stock in
any arm's length transaction, directly or indirectly, to any party which is not
one of the Affiliated Entities.
(j) Notwithstanding anything in this Agreement to the
contrary, under no circumstances will there be an adjustment under this Section
8 for any distributions or issuances made in connection with the creation of a
general partnership interest for any limited partnership that is spun-off from
either the Company or Alexander's, Inc.
(k) Notwithstanding anything in this Agreement to the
contrary, (i) in the event of a spin-off by the Company to its shareholders, the
adjustment of the Option shall be determined in an appropriate and equitable
manner, and it is the intention of the parties hereto that, to the extent
practicable, such adjustment shall include an option grant to acquire an equity
interest in the spun-off entity, and (ii) no adjustments under this Section 8(k)
shall be made which would reasonably be expected to adversely affect the
Company's status as a real estate investment trust.
(l) In the event the parties hereto cannot agree upon an
appropriate and equitable adjustment to the Option, the services of an
independent investment banker mutually acceptable to Optionee and the Company
shall (at the sole expense of the Company) be retained to determine an
appropriate and equitable adjustment, and such determination shall be binding
upon the parties.
-87-
<PAGE> 88
(m) For purposes of this Agreement, "Affiliate" of the Company
means any person, directly or indirectly, controlling, controlled by or under
common control with the Company.
9. No Right to Employment. Nothing in this Agreement or in
the Plan shall confer upon the Optionee the right to remain in employ of the
Company or any subsidiary of the Company.
10. Nontransferability. The Option shall not be transferable
otherwise than by will or by the laws of descent and distribution, and the
Option may be exercised during the lifetime of the Optionee only by him. More
particularly, but without limiting the generality of the foregoing, the Option
may not be assigned, transferred (except as provided in the preceding sentence),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions of the Plan or this Agreement, and any
levy of any attachment or similar process upon the Option, shall be null and
void and without effect.
11. Entire Agreement. This Agreement and the Employment
Agreement contain all the understandings between the parties hereto pertaining
to the matters referred to herein, and supersedes all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto.
12. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment or
modification is agreed to in writing, signed by the Optionee and by a duly
authorized officer of the Company, and such waiver is set forth in writing and
signed by the party to be charged. No waiver by any party hereto of any breach
by another party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, any prior time or any
subsequent time. No amendment or termination of the Plan shall be effective
against the Optionee, without the Optionee's consent, if such amendment or
termination adversely affects the Option or the Optionee.
13. Legal Fees and Expenses. If any contest or dispute shall
arise between the Company and the Optionee regarding any provision of this
Agreement, the Company shall reimburse the Optionee for all legal fees and
expenses reasonably incurred by the Optionee in connection with such contest or
dispute, but only if the Optionee is successful in respect of substantially all
of the Optionee's claims brought
-88-
<PAGE> 89
and pursued in connection with such contest or dispute. Such reimbursement shall
be made as soon as practicable following the resolution of such contest or
dispute (whether or not appealed) to the extent the Company receives reasonable
written evidence of such fees and expenses.
14. Notices. Any notice to be given hereunder shall be in
writing and shall be deemed given when delivered personally, sent by courier or
telecopy or registered or certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice of hereunder in
writing:
To the Optionee:
Michael D. Fascitelli
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
with a copy to:
Stephen W. Skonieczny
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
To the Company:
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Attention: both Chairman and Chief
Financial Officer
-89-
<PAGE> 90
with a copy to:
Janet T. Geldzahler
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Any notice delivered personally or by courier under this
Section 14 shall be deemed given on the date delivered and any notice sent by
telecopy or registered or certified mail, postage prepaid, return receipt
requested, shall be deemed given on the date telecopied or delivered.
15. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances, other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
16. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement or the Plan to
the extent necessary to the intended preservation of such rights and
obligations.
17. Successors. This Agreement shall inure to the benefit of
and be binding upon the Optionee's beneficiaries, legal representatives or
estate, as the case may be, and each successor of the Company.
18. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Maryland, without regard
to its conflicts of laws principles.
19. Trustees. In the event any successor to the Company is a
corporation, all references herein to "trustee" or "Board of Trustees" shall
mean "director" or "Board of Directors", respectively.
-90-
<PAGE> 91
20. Headings. All descriptive headings of sections and
paragraphs in this Agreement are for convenience of reference only, and they
form no part of this Agreement and shall not affect its interpretation.
21. Construction. Except as would be in conflict with any
specific provision herein, this Agreement is made under and subject to the
provisions of the Plan as in effect on the Commencement Date and, except as
would conflict with the provisions of this Agreement, all of the provisions of
the Plan as in effect on the Commencement Date are hereby incorporated herein as
provisions of this Agreement.
22. New York Stock Exchange. For purposes of any references
hereunder to listing shares of Common Stock, listing with the NYSE and trading
on NASDAQ shall be interchangeable.
23. REIT Agreement. The Company hereby agrees that, in the
event that a transfer of Common Stock to the Optionee under this Agreement would
be void or would result in the Optionee's receipt of Shares (as defined in the
Amended and Restated Declaration of Trust of the Company (the "Declaration"))
classified as or exchanged for Excess Stock, then the Company shall make a cash
payment to the Optionee equal to the aggregate fair market value of the Common
Stock that would otherwise have been transferred (less any aggregate applicable
exercise price); provided, however, that the Company shall have no obligation to
make such cash payment if (i) the Optionee Beneficially Owns (as such term is
defined in the Declaration), hereafter comes to Beneficially Own, Constructively
Owns (as such term is defined in the Declaration) or hereafter comes to
Constructively Own Common Equity Stock (as defined in the Declaration) of the
Company other than Common Stock received by the Optionee pursuant to this
Agreement or the Convertible Units Agreement, dated as of December 2, 1996
between the Optionee and the Company, or (ii) the Optionee fails to comply with
the requirements for Existing Constructive Holder status set forth in the
Declaration at all times, if any, when the Optionee would Constructively Own in
excess of 9.9 percent of the Company's outstanding Common Equity Stock.
24. REIT Representations and Warranty. If (i) the Optionee
does not Beneficially Own, hereafter come to Beneficially Own, Constructively
Own, or hereafter come to Constructively Own Common Equity Stock of the Company
other than Common Stock received by the Optionee pursuant to this Agreement or
the Convertible Units Agreement, dated as of December 2, 1996 between the
Optionee and the Company, and (ii) the Optionee complies with the requirements
for Existing Constructive Holder status set forth in the Declaration at all
times, if any, that the Optionee Constructively Owns in excess of 9.9 percent of
the Company's outstanding
-91-
<PAGE> 92
Common Equity Stock, the Company hereby represents and warrants to the Optionee
that any and all issuances or transfers of shares of the Common Stock to the
Optionee under this Agreement shall not be voided pursuant to the Declaration
and shall not result in (i) the receipt by the Optionee of shares classified as
or exchanged for Excess Stock or (ii) the Optionee not acquiring rights at all
times under such shares of Common Stock to the fullest extent provided for in
the Declaration, the Amended and Restated By-Laws of the Company and Maryland
law.
25. Remedy Limited to Money Damages. The Optionee shall not be
entitled to specific performance for a breach of the agreement set forth in
paragraph 23 hereof or the representation and warranty contained in paragraph 24
hereof and shall not be entitled to any other remedy except for an action for
money damages.
26. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-92-
<PAGE> 93
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
VORNADO REALTY TRUST
/s/Steven Roth
---------------------------
By:
/s/Michael D. Fascitelli
---------------------------
-93-
<PAGE> 94
Exhibit B
Registration Under the Securities Act.
1. Registration for Vornado Registrable Securities Underlying
Share Options or Convertible Units. The Company agrees to
file a "shelf" registration statement, providing for the
registration of, and the sale on a continuous or delayed basis
by the Executive in accordance with the methods of distribu-
tion specified by the Executive or the rabbi trustee of the
Rabbi Trust (the "Rabbi Trustee") and consistent with the
terms and provisions hereof, of Vornado Registrable Securities
pursuant to Rule 415 under the Securities Act of 1933, as
amended (the "Securities Act"), and/or any similar rule that
may be adopted by the Securities and Exchange Commission (the
"Commission"), and to use its best efforts to cause such
registration statement to be declared effective by the
Commission under the Securities Act not later than December 2,
1997, or within a reasonable period of time following the
Executive's earlier termination of employment (other than as
result of a voluntary termination of employment by the
Executive without Good Reason). The Company further agrees to
maintain the effectiveness of such registration statement or
registration statements until the securities registered
thereunder cease to be Vornado Registrable Securities.
2. Registration for Alexander's Registrable Securities Underlying
Stock Options. The Company agrees to use its best efforts to
cause Alexander's to file a "shelf" registration statement,
providing for the registration of, and the sale on a
continuous or delayed basis by the Executive, of Alexander's
Registrable Securities pursuant to Rule 415 under the Securi-
ties Act, and/or any similar rule that may be adopted by the
Commission, and to use its best efforts to cause Alexander's
to cause, such registration statement to be declared effective
by the Commission under the Securities Act not later than
December 2, 1997. The Company further agrees to use its best
efforts to maintain, or to cause Alexander's to maintain, the
effectiveness of such registration statement or registration
statements until the securities registered thereunder cease to
be Alexander's Registrable Securities.
3. Registration Procedures. In connection with any shelf regis-
tration statement contemplated hereby, the following provisions
shall apply:
(a) The Company shall furnish to the Executive, prior to the
filing thereof with the Commission, a copy of such shelf registration
statement, and each amendment thereto and each amendment or supplement,
if any, to the prospectus included therein and, subject to Paragraph 1
above, shall use its best
-94-
<PAGE> 95
efforts to reflect in each such document, when so filed with the
Commission, such comments as the Executive reasonably may propose;
provided, however, that the Company shall not be obligated to include
in any such shelf registration statement, prospectus, prospectus
supplement or amendment to such shelf registration statement any
requested information that is unreasonable in scope taking into account
the Company's most recent prospectus or prospectus supplement used in
connection with a primary or secondary offering of equity securities by
the Company.
(b) The Company shall take such action as may be
necessary so that (i) such shelf registration statement and any
amendment thereto and any prospectus forming part thereof and any
amendment or supplement thereto (and each report or other document
incorporated therein by reference in each case) complies in all
material respects with the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and the respective rules
and regulations thereunder, (ii) such shelf registration statement and
any amendment thereto does not, when it becomes effective, contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading and (iii) such prospectus forming part of any
shelf registration statement, and any amendment or supplement to such
prospectus, does not include an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements, in the light of the circumstances under which they were
made, not misleading.
(c) (1) The Company shall advise the Executive:
(i) when such shelf registration statement and any
amendment thereto has been filed with the Commission and when
such shelf registration statement or any post-effective
amendment thereto has become effective;
(ii) of any request by the Commission for amendments
or supplements to such shelf registration statement or the
prospectus included therein or for additional information.
(iii) of the issuance by the Commission of any stop
order suspending effectiveness of such shelf registration
statement or the initiation of any proceedings for that
purpose;
(iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification of the securities included in such shelf
registration statement for sale in any jurisdiction or the
initiation of any proceeding for such purpose; and
-95-
<PAGE> 96
(v) upon the receipt of a Request for Sale under
paragraph 3(f), of the existence of any circumstances or the
happening of any events that would require the making of any
changes in such shelf registration statement or the prospectus
so that, as of such date, such shelf registration statement
and the prospectus would not contain an untrue statement of a
material fact and would not omit to state a material fact
required to be stated therein or necessary to make the
statements therein (in the case of the prospectus, in light of
the circumstances under which they were made) not misleading
(which advice shall be accompanied by an instruction to
suspend the use of the prospectus until the requisite changes
have been made).
(d) The Company shall use its best efforts to prevent the
issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of such shelf registration statement at
the earliest possible time.
(e) The Company shall furnish to the Executive, without
charge, as many copies of the prospectus (including each preliminary
prospectus) included in such shelf registration statement and any
amendment or supplement thereto as the Executive may reasonably
request; and the Company consents (except during the continuance of any
event described in Paragraph 3(c)(v) above) to the use of the
prospectus and any amendment or supplement thereto by the Executive in
connection with the offering and sale of the Vornado Registrable
Securities covered by the prospectus and any amendment or supplement
thereto until such time as the Vornado Securities so covered cease be
Vornado Registrable Securities.
(f) The Executive shall notify the Company (and, in connection
with a registration statement contemplated pursuant to Paragraph 2
above, Alexander's) in writing of his intention to sell securities
registered pursuant to any registration statement filed pursuant to
Paragraph 1 or 2 above (any such notice, a "Request for Sale") not less
than 10 days prior to the proposed Trade Date of any such sale, which
Request for Sale shall include a request from the Executive or (if
applicable) a managing underwriter to prepare and file an amendment or
supplement to such shelf registration statement or the prospectus
contained therein. "Trade Date" shall mean the date the Executive
enters into any underwriting, agency or other purchase agreement or
understanding for the sale of, or otherwise agrees to sell, securities
registered pursuant to such registration statement. No such
notification shall obligate the Executive to consummate any such sale.
(g) Prior to any offering of Vornado Registrable Securities
pursuant to such shelf registration statement, the
-96-
<PAGE> 97
Company shall register or qualify or cooperate with the Executive in
connection with the registration or qualification of such Vornado
Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as the Executive reasonably requests in
writing and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdictions of the Vornado
Registrable Securities covered by such shelf registration statement;
provided, however, that in no event shall the Company be obligated to
(i) qualify as a foreign corporation or as a dealer in securities in
any jurisdiction where it would not otherwise be required to so qualify
but for this Paragraph 3(g) or (ii) file any general consent to service
of process in any jurisdiction where it is not as of the date hereof so
subject.
(h) The Company shall cooperate with the Executive to
facilitate the timely preparation and delivery of certificates
representing Vornado Registrable Securities to be sold pursuant to such
shelf registration statement free of any restrictive legends and in
such permitted denominations and registered in such names the Executive
may request in connection with the sale of Vornado Registrable
Securities pursuant to such shelf registration statement.
(i) Subject to Paragraph 11 below, upon the occurrence of any
event contemplated by Paragraph 3(c)(v) above, the Company shall
promptly prepare a post-effective amendment to such shelf registration
statement or an amendment or supplement to the related prospectus or
file any other required document so that, as thereafter delivered to
purchasers of the Vornado Registrable Securities included therein, the
prospectus will not include an untrue statement of a material fact or
omit to state any material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading. If the Company notifies the Executive of the occurrence
of any event contemplated by Paragraph 3(c)(v) above or of a delay
pursuant to Paragraph 11 below, the Executive shall suspend the use of
the prospectus and any proposed sales of securities registered pursuant
to such registration statement until the requisite changes to the
prospectus have been made or the Company has notified the Executive
that the reason for such delay no longer exists, as the case may be.
(j) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders or otherwise provide in
accordance with Section 11(a) of the Securities Act as soon as
practicable after the effective date of such shelf registration
statement an earnings statement
-97-
<PAGE> 98
satisfying the provisions of Section 11(a) of the Securities Act.
(k) The Company may require the Executive to furnish to
the Company such information regarding the Executive and the
distribution of such Vornado Registrable Securities as may be required
by applicable law or regulation for inclusion in such shelf
registration statement.
(l) The Company shall, if requested, promptly include or
incorporate in a prospectus supplement or post-effective amendment to
such shelf registration statement, such information as the managing
underwriters reasonably agree should be included therein and to which
the Company does not reasonably object and shall make all required
filings of such prospectus supplement or post-effective amendment as
soon as practicable after they are notified of the matters to be
included or incorporated in such prospectus supplement or
post-effective amendment; provided, however, that the Company shall not
be obligated to include in any such prospectus supplement or
post-effective amendment to such shelf registration statement any
requested information that is unreasonable in scope taking into account
the Company's most recent prospectus or prospectus supplement used in
connection with a primary or secondary offering of equity securities by
the Company.
(m) The Company shall enter into such customary
agreements (including an underwriting agreement in customary form in
the event of an underwritten offering as set forth in Paragraph 10
hereof) to take all other appropriate actions in order to expedite or
facilitate the registration and the disposition of the Vornado
Registrable Securities, and in connection therewith, if an underwriting
agreement is entered into, cause the same to contain indemnification
provisions and procedures substantially identical to those set forth in
Paragraph 7 below with respect to the underwriters and controlling
persons of the underwriters.
(n) The Company shall:
(i) make reasonably available for inspection by the
Executive, any underwriter participating in any disposition
pursuant to such shelf registration statement, and any
attorney, accountant or other agent retained by the Executive
any such underwriter all relevant financial and other records,
pertinent corporate documents and properties of the Company
and its subsidiaries;
(ii) cause the Company's officers, directors and
employees to make reasonably available for inspection all
relevant information reasonably requested by the Executive or
any such underwriter, attorney, accountant
-98-
<PAGE> 99
or agent in connection with any shelf registration statement,
in each case, as is customary for similar due diligence
examinations; provided, however, that any information that is
designated in writing by the Company, in good faith, as
confidential at the time of delivery of such information shall
be kept confidential by the Executive or any such underwriter,
attorney, accountant or agent, unless such disclosure is made
in connection with a court proceeding or required by law, or
such information becomes available to the public generally or
through a third party without an accompanying obligation of
confidentiality;
(iii) make such representations and warranties to the
Executive and the managing underwriters, if any, in form,
substance and scope as are customarily made by the Company to
underwriters in primary underwritten offerings and covering
matters including, but not limited to, those set forth in
Paragraph 5 below;
(iv) obtain opinions of counsel to the Company (which
counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any)
addressed to the Executive and underwriters, if any, covering
such matters as are customarily covered in opinions requested
in underwritten offerings; provided, however, that the Company
shall not be obligated to obtain such opinions in connection
with any sale (other than in an underwritten offering) of
securities by the Executive more than twice during any 12
consecutive month period;
(v) obtain "cold comfort" letters from the independent
public accountants of the Company addressed to the Executive
and the underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort"
letters in connection with primary underwritten offerings;
provided, however, that the Company shall not be obligated to
obtain such letters in connection with any sale (other than in
an underwritten offering) of securities by the Executive more
than twice during any 12 consecutive month period;
(vi) deliver such documents and certificates as may be
reasonably requested by managing underwriters, if any, and in
accordance with customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company.
(o) The Company shall use its best efforts to take all
other steps necessary to effect the registration, offering and
-99-
<PAGE> 100
sale of the Vornado Registrable Securities covered by such shelf
registration statement contemplated hereby.
4. Expenses. The Company agrees to pay all Vornado Registration
Expenses in connection with any registration pursuant to
Paragraph 1 above. The Company agrees to pay, or to cause
Alexander's to pay, all Alexander's Registration Expenses in
connection with any registration pursuant to Paragraph 2
above.
5. Representations. The Company represents and warrants to, and
agrees with, the Executive that:
a. Any registration statement and each prospectus
contained therein filed pursuant to Paragraph 1 above and any further
amendments or supplements to any such registration statement or
prospectus, when it becomes effective or is filed with the Commission
and, in the case of an underwritten offering of Vornado Registrable
Securities, at the time of the closing under the underwriting agreement
relating thereto, will conform in all material respects to the
requirements of the Securities Act and will not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information set forth in a questionnaire (or any
other written information) furnished to the Company by the Executive.
b. Any documents incorporated by reference in any
Prospectus referred to in Paragraph 4(a) above, when they become or
became effective or are or were filed with the Commission, as the case
may be, will conform or conformed in all material respects to the
requirements of the Securities Act or the Exchange Act, as applicable,
and none of such documents will contain or contained an untrue
statement of a material fact or will omit or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
c. No person has been or shall be granted
registration rights inconsistent with this Agreement; provided,
however, that the Company and Alexander's may permit any registration
statement filed pursuant hereto to include securities of
securityholders other than the Executive. Notwithstanding the
foregoing, the Company agrees that no other securityholder of the
Company or Alexander's shall be granted any "piggyback" rights with
respect to any underwritten offering of securities being made by the
Executive in accordance with the terms hereof.
-100-
<PAGE> 101
6. Alexander's Representations and Registration Procedures. The
Company agrees to use its best efforts to cause Alexander's to
make to the Executive representations and warranties
substantially similar to those set forth in Paragraph 5 above,
and to comply with registration procedures substantially
similar to those set forth in Paragraph 3 above, with respect
to any registration statement filed by Alexander's as
contemplated by Paragraph 2 above.
7. Indemnification.
a. Upon the registration of the Vornado Registrable
Securities pursuant to a registration statement filed as contemplated
by Paragraph 1 hereof (a "Vornado Registration Statement"), the Company
shall, and it hereby agrees to, indemnify and hold harmless the
Executive against any losses, claims, damages or liabilities to which
the Executive may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions
(pending or threatened) in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any such Vornado Registration Statement under which such
Vornado Registrable Securities were registered under the Securities
Act, or any prospectus contained therein or furnished by the Company to
the Executive, or any amendment or supplement thereto, or arise out of
or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and the Company shall, and it hereby
agrees to, reimburse the Executive for any legal or other expenses
reasonably incurred by him in connection with investigating or
defending any such action or claim; provided, however, that the Company
shall not be liable to the Executive in any such case to the extent
that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in such Vornado Registration Statement or
prospectus, or amendment or supplement, in reliance upon and in
conformity with any written information (including without limitation,
any questionnaire) furnished to the Company by the Executive expressly
for use therein.
b. The Company may require, as a condition to filing
any Vornado Registration Statement, that the Company shall have
received an undertaking reasonably satisfactory to it from the
Executive to (i) indemnify and hold harmless the Company, its
directors, officers who sign any Vornado Registration Statement, each
person, if any, who controls the Company within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act, and
any other holder of Vornado Common Shares that are included in such
Vornado Registration Statement against any losses,
-101-
<PAGE> 102
claims, damages or liabilities to which the Company or such other
persons may become subject, under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in such Vornado
Registration Statement, or any prospectus contained therein or
furnished by the Company to any such holder or underwriter, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein 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 in writing to the Company by the
Executive expressly for use therein (including, without limitation, any
questionnaire), and (ii) reimburse the Company for any legal or other
expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim;
c. Promptly after receipt by an indemnified party
under Paragraph 6(a) or (b) above of written notice of the commencement
of any action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Paragraph 6,
notify such indemnifying party in writing of the commencement of such
action; but the omission to so notify the indemnifying party shall not
relieve it from any liability which it may have to any indemnified
party other than under the indemnification provisions of or
contemplated by Paragraph 6(a) or (b) above, and then only to the
extent that the indemnifying party is actually prejudiced thereby. In
case any such action shall be brought against any indemnified party and
it shall notify an indemnifying party of the commencement thereof, such
indemnifying party shall be entitled to participate therein and (unless
the indemnified party reasonably concludes that such representation
would involve a conflict of interest), to the extent that it shall
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and, after
notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, such indemnifying party
shall not be liable to such indemnified party for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred
by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying
-102-
<PAGE> 103
party shall, without the written consent of the indemnified party,
effect the settlement or compromise of, or consent to the entry of any
judgment with respect to, any pending or threatened action or claim in
respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the
indemnified party from all liability arising out of such action or
claim and (ii) does not include a statement as to, or an admission of,
fault, culpability or a failure to act, by or on behalf of any
indemnified party. An indemnifying party will not be liable for any
settlement of any action or claim effected without its written consent
(which shall not be unreasonably withheld).
d. Each party hereto agrees that, if for any reason
the indemnification provisions contemplated by Paragraph 6(a) or (b)
are unavailable to or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages or liabilities (or
actions in respect thereof) referred to therein, then each indemnifying
party 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 the relative fault of the indemnifying party and
the indemnified party in connection with the statements or omissions
which resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact relates
to information supplied by such indemnifying party or by such
indemnified party, and the parties' relative intent, knowledge, access
to information and opportunity to correct or prevent such statement or
omission. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Paragraph 6(d) were
determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to
in this Paragraph 6(d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
indemnified party in connection with investigating or defending any
such action or claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be
entitled to contribution
-103-
<PAGE> 104
from any person who was not guilty of such fraudulent
misrepresentation.
8. Alexander's Indemnification. The Company agrees to use its best efforts
to cause Alexander's to indemnify the Executive on substantially the
same terms and conditions as those set forth in Paragraph 6 above with
respect to any registration statement filed by Alexander's as
contemplated by Paragraph 2 prior to the filing of such registration
statement.
9. Definitions.
a. "Alexander's Registrable Securities" shall mean the 350,000
shares of common stock, par value $1.00 per share, of Alexander's and any
securities into which such shares are exchanged or reclassified ("Alexander's
Common Stock") issuable upon exercise of the Alexander's Options to be granted
by Alexander's to the Executive pursuant to Section 5(c) of the Agreement and
any securities issued as a distribution on or acquired upon exercise of rights
distributed with respect to such Alexander's Common Stock (collectively with the
Alexander's Common Stock, the "Alexander's Securities"); provided that such
Alexander's Securities shall cease to be Alexander's Registrable Securities when
such Alexander's Securities (i) have been sold or otherwise transferred by the
Executive, whether pursuant to an effective registration statement or otherwise
or (ii) have become eligible for sale pursuant to Rule 144(k) (or any similar
provision then in force) under the Securities Act.
b. "Alexander's Registration Expenses" means all expenses
incident to Alexander's performance of or compliance with its obligations
hereunder, including without limitation, (a) all Commission and any NASD
registration and filing fees and expenses, (b) all fees and expenses in
connection with the qualification of the Alexander's Registrable Securities for
offering and sale under the State securities and blue sky laws of such States as
may be reasonably requested by the Executive (provided, however, that nothing
herein shall require Alexander's to qualify as a foreign corporation in any
jurisdiction where it would not otherwise be required to qualify but for such
qualification, to consent to general service of process or taxation in any such
jurisdiction or to make any changes to Alexander's certificate of incorporation
or bylaws or any agreement between Alexander's and its stockholders), (c) all
expenses relating to the preparation, printing, distribution and reproduction of
any registration statement required to be filed as contemplated herein, each
prospectus included therein or prepared for distribution, each amendment or
supplement to the foregoing, the certificates representing the Alexander's
Securities and all other documents relating there, (d) messenger and delivery
expenses, (e) internal expenses (including, without limitation, all salaries and
expenses of Alexander's officers and employees performing legal or accounting
duties), (f)
-104-
<PAGE> 105
fees, disbursements and expenses of counsel and independent certified public
accountants of Alexander's and (g) reasonable fees, disbursements and expenses
of one counsel for the Executive retained in connection with such registration
and reasonable fees and disbursements of underwriters and distribution
participants customarily paid by the issuer. To the extent that any Alexander's
Registration Expenses are incurred, assumed or paid by the Executive,
Alexander's shall reimburse such person for the full amount of the Alexander's
Registration Expenses so incurred, assumed or paid promptly after receipt of a
request therefor. Notwithstanding the foregoing, the Executive shall pay all
agency fees and commissions and underwriting discounts and commissions, if any,
attributable to the sale of such Alexander's Registered Securities and the fees
and disbursements of any counsel or other advisors or experts retained by the
Executive, other than those specifically referred to above.
c. "Vornado Registrable Securities" shall mean (i) the
1,750,000 common shares of beneficial interest, par value $0.04 per share, of
the Company and any securities into which such shares are exchanged or
reclassified ("Vornado Common Shares") issuable upon exercise of the Company
Options to be granted by the Company to the Executive pursuant to Section 5(b)
of the Agreement and (ii) the 459,770 Vornado Common Shares to be held by the
Rabbi Trustee pursuant to the Rabbi Trust and, in each case, any securities
issued as a distribution on or acquired upon exercise of rights distributed with
respect to such Vornado Common Shares (collectively with the Vornado Common
Shares, the "Vornado Securities"); provided that such Vornado Securities shall
cease to be Vornado Registrable Securities when such Vornado Securities (i) have
been sold or otherwise transferred by the Executive, whether pursuant to an
effective registration statement or otherwise or (ii) have become eligible for
sale pursuant to Rule 144(k) (or any similar provision then in force) under the
Securities Act.
d. "Vornado Registration Expenses" means all expenses incident
to the Company's performance of or compliance with its obligations hereunder,
including without limitation, (a) all Commission and any NASD registration and
filing fees and expenses, (b) all fees and expenses in connection with the
qualification of the Vornado Registrable Securities for offering and sale under
the State securities and blue sky laws of such States as may be reasonably
requested by the Executive (provided, however, that nothing herein shall require
the Company to qualify as a foreign corporation in any jurisdiction where it
would not otherwise be required to qualify but for such qualification, to
consent to general service of process or taxation in any such jurisdiction or to
make any changes to the Company's certificate of trust or bylaws or any
agreement between Alexander's and its stockholders), (c) all expenses relating
to the preparation, printing, distribution and reproduction of any registration
statement required to be filed as contemplated herein, each prospectus included
therein or prepared
-105-
<PAGE> 106
for distribution, each amendment or supplement to the foregoing, the
certificates representing the Vornado Securities and all other documents
relating there, (d) messenger and delivery expenses, (e) internal expenses
(including, without limitation, all salaries and expenses of the Company
officers and employees performing legal or accounting duties), (f) fees,
disbursements and expenses of counsel and independent certified public
accountants of the Company and (g) reasonable fees, disbursements and expenses
of one counsel for the Executive retained in connection with such registration
and reasonable fees and disbursements of underwriters and distribution
participants customarily paid by the issuer. To the extent that any Vornado
Registration Expenses are incurred, assumed or paid by the Executive, the
Company shall reimburse such person for the full amount of the Vornado
Registration Expenses so incurred, assumed or paid promptly after receipt of a
request therefor. Notwithstanding the foregoing, the Executive shall pay all
agency fees and commissions and underwriting discounts and commissions, if any,
attributable to the sale of such Vornado Registered Securities and the fees and
disbursements of any counsel or other advisors or experts retained by the
Executive, other than those specifically referred to above.
10. Underwritten Offering. The Executive, if he so desires, may sell Vornado
Registrable Securities or Alexander's Registrable Securities in an underwritten
offering. In any such underwritten offering, the investment banker or bankers
and manager or managers that will administer the offering will be selected by,
and the underwriting arrangements with respect thereto will be approved by the
Executive; provided, however, that (i) such investment bankers and managers and
underwriting arrangements must be reasonably satisfactory to the Company or
Alexander's, as applicable, such satisfaction not to be unreasonably withheld,
(ii) the Company or Alexander's, as applicable, shall not be obligated to
arrange for more than one underwritten offering during any consecutive twelve
month period and (iii) the greater of (x) at least 20% of the outstanding
Vornado Registrable Securities or Alexander's Registrable Securities, as the
case may be, or (y) at least 250,000 Vornado Common Shares or 250,000 shares of
Alexander's Common Stock, as the case may be (or the equivalent thereof), are
included in such underwritten offering. In connection with any such underwritten
offering of securities with an aggregate public offering price of at least
$50,000,000, the Company will agree or, with respect to an offering of
Alexander's Registrable Securities, will use its best efforts to cause
Alexander's to agree, to customary restrictions on the ability of the Company or
Alexander's, as the case may be, to sell securities substantially similar to the
Vornado Registrable Securities or the Alexander's Registrable Securities for a
period not to exceed 90 days from the date of the related prospectus supplement.
11. Suspension. Notwithstanding anything contained herein, upon receipt of a
Request for Sale from the Executive or a managing
-106-
<PAGE> 107
underwriter, the Company or Alexander's, as the case may be, may delay the
filing of any such amendment or supplement if the Company or Alexander's, as the
case may be, in good faith has a valid business reason for such delay, including
without limitation, (i) that the filing of such amendment or supplement would
require the Company or Alexander's to include therein material information that
has not theretofore been made public and which the Company or Alexander's, as
the case may be, is not then prepared to disclose or (ii) that the offering and
sale of Vornado Registrable Securities or Alexander's Registrable Securities, as
the case may be, by the Executive at such time will adversely affect any
offering by the Company or Alexander's, as the case may be, of its securities
then contemplated or pending.
-107-
<PAGE> 108
Exhibit C
ALEXANDER'S STOCK OPTION AGREEMENT
AGREEMENT, dated as of December 5, 1996, by and between
Alexander's, Inc. a Delaware corporation (the "Company"), and Michael D.
Fascitelli (the "Optionee").
WHEREAS, Vornado Realty Trust, a Maryland real estate
investment trust ("Vornado"), and the Optionee have entered into an agreement
(the "Employment Agreement"), dated as of December 2, 1996, which contemplates
the grant of an option by the Company to the Optionee to purchase 350,000 (three
hundred fifty thousand) shares of the Company's common stock, par value $1.00
per share (the "Common Stock"); and
WHEREAS, the Company desires to grant to the Optionee the
option contemplated by the Employment Agreement under the Company's Omnibus
Stock Plan (the "Plan") on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Plan, unless otherwise indicated.
2. Grant of Option. The Optionee is hereby granted, as of
December 5, 1996 (the "Grant Date"), a nonqualified stock option (the "Option")
to purchase an aggregate of 350,000 (three hundred fifty thousand) shares of
Common Stock, pursuant to the terms of this Agreement and the provisions of the
Plan.
3. Option Price. The exercise price of the Option shall be
$_____ per share of Common Stock issuable thereunder, the average of the high
and low trading prices of the Common Stock on the New York Stock Exchange (the
"NYSE") composite tape for the Grant Date.
4. Conditions to Exercisability.
(a) The Option shall become vested and exercisable as to 20%
of the shares covered thereby on December 2, 1997, and as to an additional 20%
of such shares on each of the next four (4) succeeding anniversaries of such
date.
-108-
<PAGE> 109
(b) In addition, vesting and exercisability shall be
accelerated as follows:
(i) upon a "Change in Control of the Company" or upon the
Optionee's termination of employment with Vornado (A)
by Vornado without "Cause" or (B) by the Optionee for
"Good Reason" (as each such term is defined in the
Employment Agreement), the Option shall become vested
and exercisable in full; and
(ii) upon the Optionee's death while employed by Vornado
or the Optionee's termination of employment for
"Disability" (as defined in the Employment Agreement)
by Vornado, the Option shall also become vested and
exercisable as to the portion of the Option scheduled
to vest on the next following December 2nd.
(c) For purposes of this Agreement, a "Change in Control of
the Company" means the occurrence of one of the following events:
(1) individuals who, on December 2, 1996, constitute
the Board (the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that any person
becoming a director subsequent to December 2, 1996 whose election or
nomination for election was approved by a vote of at least two-thirds
of the Incumbent Directors then on the Board (either by a specific vote
or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company
as a result of an actual or threatened election contest with respect to
directors or as a result of any other actual or threatened solicitation
of proxies by or on behalf of any person other than the Board shall be
an Incumbent Director;
(2) any "person" (as such term is defined in Section
3(a)(9) of the Securities Exchange Act of 1934 (the "Exchange Act") and
as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or
becomes, after December 2, 1996, a "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined
voting power of the Company's then outstanding securities eligible to
vote for the election of the Board (the "Company Voting Securities");
provided, however, that an event described in this paragraph (2) shall
not be deemed to be a Change in Control if any of the following becomes
such a beneficial owner: (A) the Company or any majority-owned
subsidiary (provided, that this exclusion applies solely to the
ownership levels of the Company or the majority-owned subsidiary), (B)
any tax-qualified, broad-based employee benefit plan sponsored or
maintained by the Company or any majority-owned subsidiary, (C) any
underwriter temporarily holding
-109-
<PAGE> 110
securities pursuant to an offering of such securities, (D) any person
pursuant to a Non-Qualifying Transaction (as defined in paragraph (3)),
(E) Executive or any group of persons including Executive (or any
entity controlled by Executive or any group of persons including
Executive); or (F) (i) any of the partners (as of the Commencement
Date) in Interstate Properties ("Interstate") including immediate
family members and family trusts or family-only partnerships and any
charitable foundations of such partners (the "Interstate Partners"),
(ii) any entities the majority of the voting interests of which are
beneficially owned by the Interstate Partners or Vornado, (iii) any
"group" (as described in Rule 13d-5(b)(i) under the Exchange Act)
including the Interstate Partners and/or Vornado, provided, that the
Interstate Partners and/or Vornado beneficially own a majority of the
Company Voting Securities beneficially owned by such group (the persons
in (i), (ii) and (iii) shall be individually and collectively referred
to herein as, "Interstate Holders") or (iv) Vornado (all references to
Vornado in this paragraph 2 shall include Vornado's majority-owned
subsidiaries);
(3) the consummation of a merger, consolidation, share
exchange or similar form of corporate transaction involving the Company
or any of its subsidiaries, or the sale of all or substantially all of
the Company's assets (a "Business Transaction"), unless (A) immediately
following such Business Transaction (i) more than 50% of the total
voting power of the entity resulting from such Business Transaction or
the entity acquiring the Company's assets in such Business Transaction
(the "Surviving Corporation"), is beneficially owned, directly or
indirectly, by the Interstate Holders and/or Vornado or by the
Company's shareholders immediately prior to any such Business
Transaction, and (ii) no person (other than the persons set forth in
clauses (A), (B), (C), or (F) of paragraph (2) above or any
tax-qualified, broad-based employee benefit plan of the Surviving
Corporation or any entity in control of, controlled by or under common
control with the Surviving Corporation) beneficially owns, directly or
indirectly, 30% or more of the total voting power of the Surviving
Corporation or (B) the Business Combination is, directly or indirectly,
with Vornado (each of (A) and (B), a "Non-Qualifying Transaction"); or
(4) Board approval of a liquidation or dissolution of the
Company, unless the voting common equity interests of an ongoing entity
(other than a liquidating trust) are beneficially owned, directly or
indirectly, by the Company's shareholders in substantially the same
proportions as such shareholders owned the Company's outstanding voting
common equity interests immediately prior to such liquidation and such
ongoing entity assumes all existing obligations of this Agreement.
5. Period of Option Exercisability. The vested portion of the
Option (including the portion that vests and becomes exercisable under Section
4(b) above) shall expire and no longer be exercisable upon the first to occur of
the following:
(a) December 2, 2006; or
-110-
<PAGE> 111
(b) ninety (90) days following the Optionee's termination
of employment by Vornado for Cause; or
(c) two (2) years following the Optionee's termination of
employment with Vornado for any reason other than by
Vornado for Cause.
The remaining unvested portion of the Option, if any, shall expire and no longer
be exercisable upon the Optionee's termination of employment from Vornado.
6. Exercise of Option. (a) The Option shall be
exercised, in whole or in part, in the following manner: the Optionee, or the
person or persons having the right to exercise the Option upon the death or
Disability of the Optionee, shall deliver to the Company written notice
specifying the number of shares of Common Stock which he elects to purchase. The
Optionee (or such other person) must include with such notice full payment of
the exercise price for the Common Stock being purchased pursuant to such notice.
Payment of the exercise price must be made in cash, by certified or cashier's
check, in shares of Common Stock (provided such shares of Common Stock have at
the time of exercise been owned by the Optionee for at least six (6) months)
having an aggregate fair market value on the date of exercise equal to such
exercise price, or in such other consideration (or pursuant to a cashless
exercise procedure with a broker) as the Committee deems appropriate, or in any
combination thereof. For purposes of this Section 6, "fair market value" of the
Common Stock on the date of exercise shall mean the average of the high and low
trading prices of the Common Stock on the NYSE composite tape for such date of
exercise. The right to purchase shares of Common Stock under the Option shall be
cumulative, and if any shares available for purchase are not purchased, such
shares shall remain available for purchase until the Option is no longer
exercisable. Upon exercise of the Option and payment of the exercise price the
Company will promptly deliver the shares of the Common Stock.
(b) The Company may require that the Optionee pay to the
Company, or the Company may otherwise withhold, prior to delivery of any shares
of Common Stock upon the exercise of any portion of the Option, any Federal,
state and local taxes that shall be required to be withheld pursuant to any law
or regulation by reason of the exercise of the Option.
(c) If, while employed by Vornado or the Company, the
Optionee exercises the Option by tendering shares of Common Stock owned by the
Optionee at the time of exercise, the Optionee shall automatically be granted on
the date of such exercise a reload stock option grant for the number of shares
of Common Stock used to exercise the Option. Such option shall have an exercise
price equal to the fair market value of the shares of Common Stock on such grant
date. The reload option shall be exercisable and vested upon grant, shall expire
and no longer be exercisable pursuant to the terms of Section 5 and shall be
subject to other terms and conditions pursuant to the Plan as determined by the
-111-
<PAGE> 112
Committee. The grant of reload options under this Section 6(c) shall be
conditioned upon the amendment of the Plan to enable reload option grants not to
count against the Plan's maximum number of shares.
(d) If any law or regulation requires the Company to take any
action regarding the Common Stock, before the Company issues certificates for
the Common Stock being purchased, the Company may delay delivering the
certificates for the Common Stock for the period necessary to take such action,
but shall use all reasonable efforts to resolve such problem. Notwithstanding
the foregoing, to the extent the Option remains outstanding, the Company shall
provide the Optionee, prior to December 2, 1997, with a shelf registration
pursuant to a registration statement subject to the terms set forth on Exhibit B
to the Employment Agreement, with respect to the shares of Common Stock subject
to the Option.
(e) The Optionee will not be deemed to be a holder of any
shares of Common Stock pursuant to exercise of the Option until the date the
Optionee satisfies the exercise and payment requirements hereunder, and the
Optionee shall not have any rights to dividends or any other rights of a
shareholder with respect to the shares covered by the Option until such shares
have been issued to him, which issuance shall not be unreasonably delayed.
7. Representations. The Company represents and warrants that
(i) this Agreement has been authorized by all necessary corporate action of the
Company and is a valid and binding agreement of the Company enforceable against
it in accordance with its terms, (ii) the Option granted under this Agreement
has been approved by the Committee, (iii) the shares of Common Stock subject to
the Option are duly authorized, fully-paid and non-assessable shares, and have
been properly reserved under the Plan and listed with the NYSE, (iv) it is not
prevented from entering into or performing this Agreement by any law, order,
rule or regulation, its certification of incorporation or by-laws, or by the
terms of any other agreement to which it is a party, other than which would not
have a material adverse effect on the Company's ability to enter into or perform
this Agreement and (v) it will file a Hart Scott Rodino application with respect
to the Optionee on a timely basis, if necessary, in connection with the
acquisition of Common Stock pursuant to the exercise of the Option.
8. Adjustment of and Changes in the Common Stock. (a) In the
event the outstanding shares of the Common Stock shall be changed into an
increased number of shares, through a stock dividend or a split-up of shares, or
into a decreased number of shares, through a combination of shares, then
immediately after the record date for such change, the number of shares of
Common Stock then subject to the Option shall be proportionately increased, in
case of such stock dividend or split-up of shares, or proportionately decreased,
in case of such combination of shares. In the event the Company shall issue any
of its shares of capital stock or other securities or property (other than
Common Stock which is covered by the preceding sentence), in a reclassification
of the Common Stock (including without limitation any such reclassification in
connection with a
-112-
<PAGE> 113
consolidation or merger in which the Company is the continuing corporation), the
Option shall be adjusted so that the Optionee shall be entitled to receive upon
exercise of the Option the same kind and number of shares or other securities or
property which the Optionee would have owned or have been entitled to receive
after the happening of any of the events described above, had he owned the
shares of the Common Stock subject to the Option immediately prior to the
happening of such event or any record date with respect thereto, which
adjustment shall become effective immediately after the effective date of such
event retroactive to the record date, if any, for such event.
(b) In the event the Company shall distribute to all holders
of the Common Stock evidences of its indebtedness or assets (including leveraged
recapitalizations with special cash distributions, but excluding regular
quarterly cash dividends), then in each case the number of shares of Common
Stock thereafter subject to the Option shall be determined by multiplying the
number of shares theretofore subject to the Option by a fraction, (i) the
numerator of which shall be the then current market price per share of Common
Stock (as determined in paragraph (c) below) on the record date for such
distribution, and (ii) the denominator of which shall be the then current market
price per share of the Common Stock less the then fair value (as mutually
determined in good faith by the Board and the Optionee) of the portion of the
assets or evidences of indebtedness so distributed applicable to a share of
Common Stock. Such adjustment shall be made whenever any such distribution is
made, and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) For the purpose of any computation under paragraph (b) of
this Section 8, the current market price per share of the Common Stock at any
date shall be deemed to be the average of the daily Closing Prices for 15
consecutive Trading Days commencing 20 Trading Days before the date of such
computation. "Closing Price" for each Trading Day shall be, if the Common Stock
is then listed or admitted to trading on the NYSE or other national securities
exchange, the last reported sale price, regular way, for the Common Stock as
reported in the securities listed or traded on the NYSE, or if the Common Stock
is not so listed or admitted on such exchange, then on the exchange which is the
principal exchange on which the Stock is not so admitted for trading on any
national securities exchange, the last sale price reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on if no
such last sale prices are reported, the average by NASDAQ. "Trading Day" shall
be each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which the Common Stock is not traded on the exchange or in the market which is
the principal United States market for the Common Stock.
(d) Whenever the number of shares of Common Stock subject to
the Option is adjusted as herein provided, the exercise price per share of
Common Stock issuable thereunder shall be adjusted by multiplying such exercise
price immediately prior to such adjustment by a fraction, the numerator of which
shall be the number of shares of Common Stock subject to the Option immediately
prior to such adjustment, and the denominator of
-113-
<PAGE> 114
which shall be the number of shares of Common Stock subject to the Option
immediately thereafter.
(e) For the purpose of this Section 8, the term "Common Stock"
shall mean (i) the class of stock designated as the Common Stock at the date of
this Agreement, or (ii) any other equity interest resulting from successive
changes or reclassifications of such shares consisting solely of changes in par
value, or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant to the
second sentence of Section 8(a) above, the Optionee shall become entitled to,
upon exercise of the Option, any shares other than the Common Stock, thereafter
the number of such other shares issuable on exercise of the Option and the
exercise price per share of Common Stock issuable thereunder shall be subject to
adjustment from time to time in a manner and on the terms as nearly equivalent
as practicable to the provisions with respect to the shares contained in this
Section 8 and the provisions of this Agreement with respect to the shares of
Common Stock issuable on exercise of the Option shall apply on like terms to any
such other shares.
(f) In case of any consolidation of the Company or merger of
the Company with another corporation as a result of which Common Stock is
converted or modified or in case of any sale or conveyance to another
corporation of the property, assets and business of the Company as an entirety
or substantially as an entirety, the Company shall modify the Option so as to
provide the Optionee with an Option for the kind and amount of shares and other
securities and property that he would have owned or have been entitled to
receive immediately after the happening of such consolidation, merger, sale or
conveyance had the Option, immediately prior to such action, actually been
exercised for shares and, if applicable, other securities of the Company subject
to the Option. The provisions of this Section 8(f) shall similarly apply to
successive consolidations, mergers, sales or conveyances.
(g) If the Company distributes rights or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock at
a price per share less than the current market price per share on the record
date for the distribution, the number of shares thereafter subject to the Option
shall be adjusted in accordance with the formula:
O (+) N
S' = S (X)------------------
O (+) N (x) P
--------
M
where:
S' = the adjusted number of shares subject to the Option.
S = the current number of shares subject to the Option.
O = the number of shares of Common Stock outstanding on the record date.
-114-
<PAGE> 115
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record date (as
defined pursuant to paragraph (c) above).
The adjustment shall become effective immediately after the record date for
determination of stockholders entitled to receive the rights or warrants.
(h) In case any event shall occur as to which the provisions
of this Section 8 are not applicable but the failure to make any adjustment
would not fairly protect the rights represented by the Option in accordance with
the essential intent and principles of this Section 8 (including without
limitation, directly or indirectly, the sale of Common Stock (or any security
convertible into or exercisable for Common Stock) by the Company or a subsidiary
at a price below fair value or the issuance by the Company or a subsidiary at a
price below fair value or the issuance by the Company or a subsidiary of other
securities not limited to a return that is fixed or determined with reference to
a specified index, but only with respect to sales or issuances, directly or
indirectly, to (i) Affiliates of the Company, (ii) the Interstate Holders, (iii)
affiliates of the Interstate Holders or (iv) Vornado (other than in all such
cases wholly-owned subsidiaries of the Company) (the persons in (i), (ii), (iii)
and (iv) shall be individually and collectively referred to herein, as the
"Affiliated Entities"), then, in each such case, the Company shall make an
adjustment, if any, on a basis consistent with the essential intent and
principles established in this Section 8, necessary to preserve, without
dilution, the rights represented by the Option. The Company will promptly notify
the Optionee of any such proposed adjustment.
(i) Notwithstanding anything to the contrary contained herein,
the provisions of this Section 8 shall not apply to, and no adjustment is
required to be made in respect of, any of the following: (i) the issuance of
shares of Common Stock upon the exercise of any other rights, options or
warrants that entitle the holder to subscribe for or purchase such shares (it
being understood that the sole adjustment pursuant to this Section 8 in respect
of the issuance of shares of Common Stock upon exercise of rights, options or
warrants shall be made at the time of the issuance by the Company of such
rights, options or warrants, or a change in the terms thereof); (ii) the
issuance of shares of Common Stock to the Company's employees, directors or
consultants pursuant to bona fide benefit plans adopted by the Company's Board
of Directors; (iii) the issuance of shares of Common Stock in a bona fide public
offering pursuant to a firm commitment offering; (iv) the issuance of shares of
Common Stock to any of the Affiliated Entities concurrently with an issuance of
shares described in clause (iii) above if such issuance results in the receipt
by the Company of at least the same net proceeds per share as the issuance
described in such provision and if such Affiliated Entities have the right to
participate in such issuance pro rata with their equity interest in the Company;
(v) the issuance of shares of Common Stock pursuant to any dividend reinvestment
or similar plan adopted by the Company's Board of Directors to the extent that
the applicable discount from the current market price for shares issued under
such
-115-
<PAGE> 116
plan does not exceed 5%; and (vi) the issuance of shares of Common Stock in any
arm's length transaction, directly or indirectly, to any party which is not one
of the Affiliated Entities.
(j) Notwithstanding anything in this Agreement to the
contrary, under no circumstances will there be an adjustment under this Section
8 for any distributions or issuances made in connection with the creation of a
general partnership interest for any limited partnership that is spun-off from
either the Company or Vornado.
(k) Notwithstanding anything in this Agreement to the
contrary, (i) in the event of a spin-off by the Company to its shareholders, the
adjustment of the Option shall be determined in an appropriate and equitable
manner, and it is the intention of the parties hereto that, to the extent
practicable, such adjustment shall include an option grant to acquire an equity
interest in the spun-off entity and (ii) no adjustments under this Section 8(k)
shall be made which would reasonably be expected to adversely affect the
Company's status as a real estate investment trust.
(l) In the event the parties hereto cannot agree upon an
appropriate and equitable adjustment to the Option, the services of an
independent investment banker mutually acceptable to Optionee and the Company
shall (at the sole expense of the Company) be retained to determine an
appropriate and equitable adjustment, and such determination shall be binding
upon the parties.
(m) For purposes of this Agreement, "Affiliate" of the Company
means any person, directly or indirectly, controlling, controlled by or under
common control with the Company.
9. No Right to Employment. Nothing in this Agreement or in
the Plan shall confer upon the Optionee the right to remain in employ of Vornado
or any subsidiary of Vornado or to become an employee of the Company or any
subsidiary of the Company.
10. Nontransferability. The Option shall not be transferable
otherwise than by will or by the laws of descent and distribution, and the
Option may be exercised during the lifetime of the Optionee only by him. More
particularly, but without limiting the generality of the foregoing, the Option
may not be assigned, transferred (except as provided in the preceding sentence),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Option contrary to the provisions of the Plan or this Agreement, and any
levy of any attachment or similar process upon the Option, shall be null and
void and without effect.
11. Entire Agreement. This Agreement and the Employment
Agreement contain all the understandings between the parties hereto pertaining
to the matters referred to
-116-
<PAGE> 117
herein, and supersedes all undertakings and agreements, whether oral or in
writing, previously entered into by them with respect thereto.
12. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment or
modification is agreed to in writing, signed by the Optionee and by a duly
authorized officer of the Company, and such waiver is set forth in writing and
signed by the party to be charged. No waiver by any party hereto of any breach
by another party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, any prior time or any
subsequent time. No amendment or termination of the Plan shall be effective
against the Optionee, without the Optionee's consent, if such amendment or
termination adversely affects the Option or the Optionee.
13. Notices. Any notice to be given hereunder shall be in
writing and shall be deemed given when delivered personally, sent by courier or
telecopy or registered or certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice of hereunder in
writing:
If to the Optionee:
Michael D. Fascitelli
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
with a copy to:
Stephen W. Skonieczny
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
If to the Company:
Alexander's, Inc.
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Attention: both Chairman and Chief Financial Officer
-117-
<PAGE> 118
Any notice delivered personally or by courier under this
Section 13 shall be deemed given on the date delivered and any notice sent by
telecopy or registered or certified mail, postage prepaid, return receipt
requested, shall be deemed given on the date telecopied or delivered.
14. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
15. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement or the Plan to
the extent necessary to the intended preservation of such rights and
obligations.
16. Successors. This Agreement shall inure to the benefit of
and be binding upon the Optionee's beneficiaries, legal representatives or
estate, as the case may be, and each successor of the Company.
17. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to its conflicts of laws principles.
18. Headings. All descriptive headings of sections and
paragraphs in this Agreement are for convenience of reference only, and no
provision of this Agreement is to be construed by reference to the heading of
any section or paragraph.
19. Construction. Except as would be in conflict with any
specific provision herein, this Agreement is made under and subject to the
provisions of the Plan as in effect on the Commencement Date and, except as
would conflict with the provisions of this Agreement, all of the provisions of
the Plan as in effect on the Commencement Date are hereby incorporated herein as
provisions of this Agreement.
20. New York Stock Exchange. For purposes of any references
hereunder to listing shares of Common Stock, listing with the NYSE and trading
on NASDAQ shall be interchangeable.
21. REIT Agreement. The Company hereby agrees that, in the
event that a transfer of Common Stock to the Optionee under this Agreement would
be void or would result in the Optionee's receipt of Common Stock classified as
or exchanged for Excess Stock (as defined in the Amended and Restated
Certificate of Incorporation of Alexander's (the
-118-
<PAGE> 119
"Certificate")) then the Company shall make a cash payment to the Optionee equal
to the aggregate fair market value of the Common Stock that would otherwise have
been transferred (less any aggregate applicable exercise price); provided,
however, that the Company shall have no obligation to make such cash payment if
(i) the Optionee Beneficially Owns (as such term is defined in the Certificate),
hereafter comes to Beneficially Own, Constructively Owns (as such term is
defined in the Certificate) or hereafter comes to Constructively Own Common
Stock of the Company other than Common Stock received by the Optionee pursuant
to this Agreement or Beneficially Owned or Constructively Owned as a result of
the Optionee's Beneficial Ownership or Constructive Ownership of Shares (as
defined in the Amended and Restated Declaration of Trust of Vornado (the
"Declaration")) of Vornado received pursuant to the terms of the Company Share
Option Agreement, dated as of December 3, 1996, between the Optionee and Vornado
or the Convertible Units Agreement, dated as of December 2, 1996, between the
Optionee and Vornado, or (ii) the Optionee fails to comply with the requirements
for Existing Constructive Holder status set forth in the Certificate at all
times, if any, when the Optionee would Constructively Own in excess of 9.9
percent of the Company's outstanding Common Stock.
22. REIT Representations and Warranty. If (i) the Optionee
does not Beneficially Own, hereafter come to Beneficially Own, Constructively
Own, or hereafter come to Constructively Own Common Stock of the Company other
than Common Stock received by the Optionee pursuant to this Agreement or
Beneficially Owned or Constructively Owned as a result of the Optionee's
Beneficial Ownership or Constructive Ownership of Shares (as defined in the
Declaration) of Vornado received pursuant to the terms of the Company Share
Option Agreement, dated as of December 3, 1996, between the Optionee and Vornado
or the Convertible Units Agreement, dated as of December 2, 1996 between the
Optionee and Vornado, and (ii) the Optionee complies with the requirements for
Existing Constructive Holder status set forth in the Certificate at all times,
if any, that the Optionee Constructively Owns in excess of 9.9 percent of the
Company's outstanding Common Stock, the Company hereby represents and warrants
to the Optionee that any and all issuances or transfers of shares of the
Company's Common Stock to the Optionee under this Agreement shall not be voided
pursuant to the Certificate and shall not result in (i) the receipt by the
Optionee of the Company's Excess Common Stock (as defined in the Certificate) or
the Company's Excess Preferred Stock (as defined in the Certificate) or (ii) the
Optionee not acquiring stockholder rights under such shares of the Company's
Common Stock to the fullest extent provided for in the Certificate, the Amended
and Restated By-Laws of Alexander's, Inc. and Delaware law.
23. Remedy Limited to Money Damages. The Optionee shall not be
entitled to specific performance for a breach of the agreement set forth in
paragraph 21 hereof or the representation and warranty contained in paragraph 22
hereof and shall not be entitled to any other remedy except for an action for
money damages.
-119-
<PAGE> 120
24. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-120-
<PAGE> 121
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
ALEXANDER'S, INC.
/s/Steven Roth
-----------------------------------
By:
/s/Michael D. Fascitelli
-----------------------------------
-121-
<PAGE> 122
Exhibit D
DEFERRED COMPENSATION AGREEMENT
AGREEMENT, dated as of December 2, 1996, by and between
Vornado Realty Trust, a Maryland real estate investment trust, with its
principal offices at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663 (the
"Company") and Michael D. Fascitelli (the "Executive").
WHEREAS, the Executive and the Company desire to enter into an
agreement setting forth the terms under which the Executive will defer the
receipt of certain compensation in connection with the Executive's agreeing to
be employed as a senior executive of the Company pursuant to the employment
agreement, dated as of December 2, 1996, by and between the Company and the
Executive (the "Employment Agreement").
NOW, THEREFORE, the Executive and the Company agree as
follows:
1. Deferred Compensation Amounts. The Executive irrevocably
elects, and the Company agrees, as of the date of this Agreement, to defer the
receipt of the Executive's $5,000,000 (five million dollars) deferred payment
under Section 5(d) of the Employment Agreement (the "Deferred Compensation").
2. Payment of the Account. Except as otherwise provided in
this Agreement, the entire value of the Account (as defined below in Section 3)
shall be payable by the Company to the Executive in cash upon the first to occur
of (a) the Executive's termination of employment with the Company for any reason
or (b) November 30, 2001 (the "Payment Date"). Except as otherwise provided in
this Agreement, the Executive shall have no right to demand payment from the
Company of the Account, prior to the Payment Date. Notwithstanding the
foregoing, if the Executive voluntarily terminates employment with the Company
(other than for Good Reason (as defined in the Employment Agreement)) prior to
December 2, 1997, the Deferred Compensation shall be forfeited and the Executive
shall have no right or claim to any portion of the Account (as defined below);
provided that under no circumstances shall the Deferred Compensation be
forfeited upon Executive's death or a termination due to Executive's Disability.
3. Deferred Compensation Account. The Deferred Compensation
shall be credited to a deferred compensation bookkeeping account (the "Account")
maintained by the Company for the Executive's benefit. The Deferred Compensation
amounts credited to the Account shall be hypothetically invested in securities
listed on any national stock exchange or traded on the National Association of
Securities
-122-
<PAGE> 123
Dealers Automated Quotation System, or in any mutual fund, as selected by the
Executive beginning on December 2, 1996, and subject to the immediately
following paragraph; provided, that no investment selected by the Executive
shall be credited to the Account unless it has been approved by the Chief
Financial Officer of the Company (the "CFO"). The CFO shall reject any proposed
investment that the CFO determines in good faith would, if invested in by the
"rabbi" trust referred to below, create a reasonable likelihood that (i) the
Company would fail to qualify as a real estate investment trust (a "REIT") for
federal income tax purposes in any taxable year, (ii) the Company would be
subject to an excise tax, including the excise tax on "prohibited transactions"
described in Section 857(a) of the Internal Revenue Code of 1986, as amended
(the "Code"), or (iii) an excess inclusion would be allocated to the Company's
shareholders under Section 860E(d) of the Code. The CFO shall have the authority
to require the prompt divestiture and reinvestment of any hypothetical
investment if the CFO determines in good faith that the continued ownership of
such investment by the rabbi trust would create a reasonable likelihood of the
occurrence of an event described in (i), (ii) or (iii).
The Company shall establish a rabbi trust to which it shall
pay the amount of Deferred Compensation initially credited to the Account upon
the execution of the Employment Agreement. The initial trustee of the rabbi
trust (the "Trustee") shall be The Chase Manhattan Bank, a New York banking
corporation, and the rabbi trust shall be irrevocable and maintained as long as
there remain amounts to be paid to the Executive under this Agreement. To the
extent provided in the rabbi trust agreement, the Trustee shall have discretion
with respect to the investments of the Trust corpus. No hypothetical investment
shall be made in the Account unless and until the Trustee makes the same
investment with respect to the Trust corpus.
Interest and dividend income on the hypothetical investments
shall be paid to the Executive monthly by the Company. The aggregate value of
the Deferred Compensation credited to the Account shall, from time to time,
increase or decrease in accordance with the experience of the Executive's
hypothetical investment of the Account. The Account shall be valued in the
aggregate by the Company as of the last day of each month (a "Valuation Date")
and a report setting forth that valuation shall be provided on a monthly basis
to the Executive by the Company for the Executive's review.
4. Payment Date. Following the Payment Date, the entire value
of the Account, determined as of the Payment Date, shall be paid in cash by the
Company in one lump sum to the Executive, the Executive's estate, the
Executive's designated beneficiaries, or his legal representatives, as the case
may be, as soon as practicable after the Payment Date, but in no case more than
seven (7) business days after the Payment Date.
-123-
<PAGE> 124
5. Hardship Withdrawals. The Executive may also request in
writing prior to the Payment Date, that payment of some or all of the value of
the Account, determined as of the Valuation Date next succeeding the receipt of
such written request, be paid to the Executive in the case of an "unforeseeable
emergency." For purposes of this Agreement, an "unforeseeable emergency" means
an unanticipated emergency that is caused by an event beyond the control of the
Executive and which would result in severe financial hardship to the Executive
if early payment of some or all of the aggregate value of the Account were not
permitted. Any such hardship withdrawal request shall be in writing, shall be
reviewed by the Board of Trustees of the Company in good faith and, if approved
by the Board of Trustees of the Company, shall be limited to the amount
necessary to meet the emergency. In determining whether any hardship payment
shall be made the Board of Trustees of the Company shall follow the principles
and guidelines set forth in Treas. Reg. Section 1.457- 2(h)(4), as promulgated
under Section 457 of the Code.
6. Additional Deferrals. The Executive and the Company reserve
the right to agree subsequently to further defer any amounts payable under this
Agreement (prior to such amounts becoming due and payable hereunder) to a date
later than the date on which those amounts would otherwise be due and payable.
7. Form and Source of Payments. Deferred Compensation amounts,
including without limitation interest and dividend income, shall be paid by the
Company to the Executive in cash when due or from the rabbi trust. The
Executive's right to receive payment of any amounts under this Agreement shall
be an unfunded entitlement and shall be an unsecured claim against the general
assets of the Company. The Executive has only the status of a general unsecured
creditor hereunder, and this Agreement constitutes only a mere promise by the
Company to pay the value of the Account on any required payment due. The Company
may withhold from any amounts payable under this Agreement such Federal, state
and local taxes as shall be required to be withheld pursuant to any applicable
law or regulation.
8. Nontransferability. This Agreement shall not be assignable
or transferable by the Executive (otherwise than by will or the laws of descent
and distribution) or by the Company (other than to successors of the Company)
and no amounts deferred under this Agreement, or any rights therein, shall be
subject in any manner to any anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance, levy, lien, attachment, garnishment, debt or
other charge or disposition of any kind.
9. No Right to Employment. Nothing in this Agreement shall
confer upon Executive the right to remain in employ of the Company or any
subsidiary of the Company.
-124-
<PAGE> 125
10. Entire Agreement. This Agreement and the Employment
Agreement contain all the understandings between the parties hereto pertaining
to the matters referred to herein, and supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto.
11. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment or
modification is agreed to in writing, signed by the Executive and by a duly
authorized officer of the Company, and such waiver is set forth in writing and
signed by the party to be charged. No waiver by any party hereto of any breach
by another party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, any prior time or any
subsequent time.
12. Notices. Any notice to be given hereunder shall be in
writing and shall be deemed given when delivered personally, sent by courier or
telecopy or registered or certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice of hereunder in
writing:
To the Executive:
Michael D. Fascitelli
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
with a copy to:
Stephen W. Skonieczny
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
To the Company:
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Attention: both Chairman and Chief Financial Officer
-125-
<PAGE> 126
with a copy to:
Janet T. Geldzahler
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Any notice delivered personally or by courier under this
Section 12 shall be deemed given on the date delivered and any notice sent by
telecopy or registered or certified mail, postage prepaid, return receipt
requested, shall be deemed given on the date telecopied or mailed.
13. Legal Fees and Expenses. If any contest or dispute shall
arise between the Company or Executive regarding any provision of this
Agreement, the Company shall reimburse Executive for all legal fees and expenses
reasonably incurred by Executive in connection with such contest or dispute, but
only if Executive is successful in respect of substantially all of Executive's
claims brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the resolution of
such contest or dispute (whether or not appealed) to the extent the Company
receives reasonable written evidence of such fees and expenses.
14. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances, other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
15. Noncontravention. The Company represents that the Company
is not prevented from entering into or performing this Agreement by the terms of
any law, order, rule, or regulation, its declaration of trust or by-laws, or any
other agreement to which it is a party, other than which would not have a
material adverse effect on the Company's ability to execute or perform this
Agreement.
16. Successors. This Agreement shall inure to the benefit of
and be binding upon each successor of the Company, and upon the Executive's
beneficiaries, legal representatives or estate, as the case may be.
17. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
-126-
<PAGE> 127
18. Governing Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflict of law principles.
19. Headings. All descriptive headings of sections and
paragraphs in this Agreement are intended for convenience of reference only, and
they form no part of this Agreement and shall not affect its interpretation.
20. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-127-
<PAGE> 128
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
VORNADO REALTY TRUST
By:/s/Steven Roth
------------------------
/s/Michael D. Fascitelli
---------------------------
-128-
<PAGE> 129
Exhibit E
CONVERTIBLE UNITS AGREEMENT
AGREEMENT, dated as of December 2, 1996, by and between
Vornado Realty Trust, a Maryland real estate investment trust with its principal
offices at Park 80 West, Plaza II, Saddle Brook, New Jersey 07663 (the
"Company") and Michael D. Fascitelli ("Executive").
WHEREAS, the Company and Executive have entered into an
agreement (the "Employment Agreement"), dated as of December 2, 1996, pursuant
to which Executive will serve as President of the Company, on the terms and
conditions set forth and described therein; and
WHEREAS, pursuant to the Employment Agreement the Company has
agreed to grant to Executive an aggregate of 459,770 units (the "Units")
representing an equal number of common shares of beneficial interest of the
Company, par value $.04 per share ("Common Stock"), on the terms set forth
herein.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. Capitalized terms not otherwise defined herein
shall have the meaning set forth in the Employment Agreement, unless otherwise
indicated.
2. Grant of Units. Executive is hereby granted, as of December
2, 1996, deferred compensation in the form of 459,770 (four hundred fifty nine
thousand seven hundred and seventy) Units pursuant to the terms of this
Agreement. Units may be either "Phantom Share Units" or "Cash Units", as
described in Section 3, but shall be treated as Cash Units only prior to
conversion into Phantom Share Units pursuant to Section 4. The Units shall be
non-forfeitable, except as otherwise provided in Section 10 only.
3. Convertibility. Each Cash Unit shall have a value of
$43.50, subject to adjustment under Section 8, and be convertible by Executive
(pursuant to Section 4) into one (1) phantom share of Common Stock (a "Phantom
Share Unit"). In the event a Unit is not converted or deemed converted by
Executive into a Phantom Share Unit, it shall remain a "Cash Unit", and have a
value of $43.50, subject to adjustment under Section 8. Each Phantom Share Unit
shall have a value equal to the fair market value of one share of the Company
Stock. Cash Units shall be convertible into Phantom Share Units automatically
and immediately upon the delivery by Executive (or the person or persons having
the right to convert such Units upon the death of Executive) of a written notice
in accordance with Section 16 below to the Company specifying the number of Cash
Units which he is electing to convert into Phantom Share Units; provided, that
Cash Units may be converted into Phantom
-129-
<PAGE> 130
Share Units pursuant to Section 6(b). Executive shall have the right to appoint
a legal representative or representatives, by power of attorney or otherwise, to
effect conversions under this Agreement (provided the Cash Units would be
convertible by Executive himself) on his behalf and the Company shall accept a
written notice of conversion from such legal representative(s) and shall give
such notice the same effect as if received directly from Executive.
4. Conditions to Convertibility. Cash Units shall become
convertible into Phantom Share Units pursuant to the following schedule:
(a) One-third (1/3) of the aggregate Cash Units granted under
Section 2 (as may be adjusted under Section 8) shall become convertible into
Phantom Share Units on December 2, 1997, and an additional one-third (1/3) of
such Cash Units shall become convertible into Phantom Share Units on each of the
next two (2) succeeding anniversaries of such date. Once convertible, Cash Units
shall remain convertible at all times until actually converted by the Executive
(or his legal representative or estate) into Phantom Share Units.
(b) In addition, the convertibility of Cash Units into Phantom
Share Units shall be immediately accelerated as follows:
(i) upon the earlier to occur of (A) a Change in Control
of the Company or (B) upon the Executive's
termination of employment (1) by the Company without
Cause or (2) by the Executive for Good Reason, in any
such case, all Cash Units shall immediately and
automatically become convertible into Phantom Share
Units; and
(ii) upon the Executive's death while employed by the
Company or the Executive's termination of employment
by the Company for Disability, the Cash Units
scheduled to become convertible pursuant to Section
4(a) on the next following December 2nd shall also
become convertible into Phantom Share Units.
5. Dividend Equivalents. Executive shall be paid, on a
quarterly basis with respect to all outstanding Units (as such Units may be
adjusted under Section 8), dividend equivalent amounts equal to the regular
quarterly cash dividend payable to holders of Common Stock as if Executive were
an actual shareholder with respect to the number of shares of Common Stock equal
to his outstanding Units. Such dividend equivalents shall be paid on the same
date as the regular quarterly cash dividend is paid by the Company in respect of
the Common Stock. Notwithstanding the foregoing, prior to actual payment to
Executive of any such dividend equivalent amounts, the dividend equivalent
amount shall be reduced by the Company in an amount equal to Executive's next
following quarterly interest payment obligation on
-130-
<PAGE> 131
any loan made to Executive by the Company pursuant to Section 5(f) of the
Employment Agreement, and the quarterly interest payment shall be deemed to be
paid by Executive, but only to the extent of such dividend equivalent, with any
interest payment balance to be paid by Executive. The balance of the dividend
equivalent, if any, shall be paid to Executive.
6. Payments of Units. (a) The aggregate value of the Units
shall be paid out to Executive as of the first to occur of (i) Executive's
termination of employment with the Company or (ii) November 30, 2001 (the
"Payment Date"). Payment by the Company with respect to the Units shall be made
no later than seven (7) business days following the applicable Payment Date.
Upon receipt by Executive of payment of the value of a Unit, such Unit shall be
cancelled and shall no longer be outstanding.
(b) If any Cash Unit has not been converted into a Phantom
Share Unit as of the Payment Date for such Unit, such Unit shall remain a Cash
Unit and Executive shall be paid an amount per Unit equal to $43.50 with respect
to such Unit, subject to adjustment under Section 8; provided, however, that if
as of the Payment Date the aggregate value of the Units upon conversion into
Phantom Share Units would be greater than their aggregate value if the Units had
remained Cash Units, the Units will be automatically deemed to be converted,
without action by Executive, into Phantom Share Units.
(c) If Executive has converted a Cash Unit into a Phantom
Share Unit or such Cash Unit is automatically converted into a Phantom Share
Unit pursuant to Section 6(b), the value of each such Unit shall be the fair
market value of the Common Stock on the Payment Date. For purposes of this
Agreement, "fair market value" of the Common Stock on any given date shall mean
the average of the high and low trading prices of the Common Stock on the NYSE
composite tape on such date or, if such date is not a trading date, the
immediately preceding trading date.
(d) The compensation committee of the Board of Trustees of the
Company (the "Committee"), in its sole discretion, shall determine, within five
(5) business days after the Payment Date, whether the payment with respect to
the Units shall be made all or in part in shares of Common Stock or in cash;
provided, that in the absence of shareholder approval the Company shall not
deliver to Executive under this Agreement newly-issued shares of Common Stock in
violation of any listing requirement of the New York Stock Exchange (the "NYSE")
provided, however, that this shall not reduce the obligation of the Company to
pay Executive the amounts set forth in this Agreement. In determining the number
of actual shares to be delivered to Executive to satisfy the Company's payment
obligation under this Section 6, the amount of such payment the Company
determines to satisfy with shares of Common Stock shall be divided by the fair
market value of Common Stock on the date of actual delivery of the shares, and
not the Payment Date. Any shares of Common
-131-
<PAGE> 132
Stock to be delivered shall be deposited in an account designated by Executive
and maintained at a brokerage house selected by Executive. Any such shares of
Common Stock shall be duly authorized, fully paid and non-assessable shares,
listed with the NYSE and registered on the Company Registration Statement. If
the Company fails to specify, within the five (5) business day period set forth
above, by written notice to Executive whether payment shall be made in cash or
shares of Common Stock or if the Company is not permitted to make payment in the
form of Common Stock as a result of the last sentence of this paragraph (d), the
Company shall be obligated to pay the value of the Units in cash. All cash
payments to Executive shall be effected by same day wire transfer to an account
designated by Executive. Notwithstanding anything herein to the contrary, if
Executive (x) does not Beneficially Own (as such term is defined in the Amended
and Restated Declaration of Trust of the Company (the "Declaration")), hereafter
come to Beneficially Own, Constructively Own (as such term is defined in the
Declaration), or hereafter come to Constructively Own Common Equity Stock (as
such term is defined in the Declaration) of the Company other than Common Stock
received by Executive pursuant to this Agreement or the Company Share Option
Agreement, and (y) complies with the requirements for Existing Constructive
Holder status set forth in the Declaration at all times, if any, that Executive
Constructively Owns in excess of 9.9 percent of the Company's outstanding Common
Equity Stock, the Company shall not pay all or any part of the value of the
Units to Executive in the form of shares of Common Stock to the extent that to
do so would, or would be reasonably likely to, result in (x) any of such Common
Stock issued to Executive being void under the Declaration or classified as or
exchanged for Excess Stock (as defined in the Declaration) or (y) Executive not
having shareholder rights at all times in respect of such Common Stock to the
fullest extent provided for in the Declaration, the Amended and Restated By-Laws
of the Company and Maryland law.
(e) The Company shall provide Executive and the trustee of the
trust described in Section 12, prior to the first date on which any Unit is
convertible, with, and maintain, an effective shelf registration pursuant to the
terms and conditions set forth on Exhibit B to the Employment Agreement.
(f) Except as otherwise provided in this Agreement, Executive
shall not be deemed to be a holder of any Common Stock pursuant to a Unit until
the date of the issuance of a certificate to him for such shares and, except as
otherwise provided in this Agreement, Executive shall not have any rights to
dividends or any other rights of a shareholder with respect to the shares of
Common Stock covered by a Unit until such shares of Common Stock have been
issued to him, which issuance shall not be unreasonably delayed.
(g) The Company may require that Executive pay to the Company,
or the Company may otherwise withhold, at the time of payment of the value of a
Unit,
-132-
<PAGE> 133
any such amount as is required by law or regulation to be withheld for Federal,
state or local income tax or any other taxes incurred by reason of the payment.
(h) Executive's right to receive payment of any amounts under
this Agreement shall be an unfunded entitlement and shall be an unsecured claim
against the general assets of the Company.
7. Representations. The Company represents and warrants that
this Agreement has been authorized by all necessary action of the Company, has
been approved by the Board and is a valid and binding agreement of the Company
enforceable against it in accordance with its terms and that the shares of
Common Stock described in Section 12 of this Agreement will be promptly listed
on the NYSE after the execution of this Agreement, and are validly issued, fully
paid and non-assessable shares. The Company further represents and warrants that
the grant of Units under this Agreement has been approved by the Committee and
that the Company will file a Hart Scott Rodino application with respect to
Executive on a timely basis, if necessary, in connection with the acquisition of
Common Stock by Executive under this Agreement. If (i) Executive does not
Beneficially Own, hereafter come to Beneficially Own, Constructively Own, or
hereafter come to Constructively Own Common Equity Stock of the Company other
than Common Stock received by Executive pursuant to this Agreement or pursuant
to the terms of the Company Share Option Agreement, and (ii) Executive complies
with the requirements for Existing Constructive Holder status set forth in the
Declaration at all times, if any, that Executive Constructively Owns in excess
of 9.9 percent of the Company's outstanding Common Equity Stock, the Company
represents and warrants that no shares of Common Stock issued or to be issued
under this Agreement shall be voided under the Declaration or classified as or
exchanged for Excess Stock and that Executive shall have shareholder rights at
all times under such shares of Common Stock to the fullest extent provided for
in the Declaration, the Amended and Restated By-Laws of the Company and Maryland
law.
8. Changes in the Common Stock and Adjustment of Units. (a) In
the event the outstanding shares of the Common Stock shall be changed into an
increased number of shares, through a share dividend or a split-up of shares, or
into a decreased number of shares, through a combination of shares, then
immediately after the record date for such change, the number of Units then
subject to this Agreement shall be proportionately increased, in case of such
share dividend or split-up of shares, or proportionately decreased, in case of
such combination of shares. In the event the Company shall issue any of its
shares of beneficial interest or other securities or property (other than Common
Stock which is covered by the preceding sentence), in a reclassification of the
Common Stock (including without limitation any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
entity), the kind and number of Units subject to this Agreement immediately
prior thereto shall be adjusted so that the Executive shall be
-133-
<PAGE> 134
entitled to receive the same kind and number of shares or other securities or
property which the Executive would have owned or have been entitled to receive
after the happening of any of the events described above, had he owned the
shares of the Common Stock represented by the Units under this Agreement
immediately prior to the happening of such event or any record date with respect
thereto, which adjustment shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such event.
(b) In the event the Company shall distribute to all holders
of the Common Stock evidences of its indebtedness or assets (including leveraged
recapitalizations with special cash distributions, but excluding regular
quarterly cash dividends), then in each case the number of Units thereafter
subject to this Agreement shall be determined by multiplying the number of Units
theretofore subject to this Agreement by a fraction, (i) the numerator of which
shall be the then current market price per share of Common Stock (as determined
in paragraph (c) below) on the record date for such distribution, and (ii) the
denominator of which shall be the then current market price per share of the
Common Stock less the then fair value (as mutually determined in good faith by
the Board of Trustees of the Company and the Executive) of the portion of the
assets or evidences of indebtedness so distributed applicable to a share of
Common Stock. Such adjustment shall be made whenever any such distribution is
made, and shall become effective on the date of distribution retroactive to the
record date for the determination of shareholders entitled to receive such
distribution.
(c) For the purpose of any computation under paragraph (b) of
this Section 8, the current market price per share of the Common Stock at any
date shall be deemed to be the average of the daily Closing Prices for 15
consecutive Trading Days commencing 20 Trading Days before the date of such
computation. "Closing Price" for each Trading Day shall be, if the Common Stock
is then listed or admitted to trading on the NYSE or other national securities
exchange, the last reported sale price, regular way, for the Common Stock as
reported in the securities listed or traded on the NYSE, or if the Common Stock
is not so listed or admitted on such exchange, then on the exchange which is the
principal exchange on which the Stock is not so admitted for trading on any
national securities exchange, the last sale price reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") on if no
such last sale prices are reported, the average by NASDAQ. "Trading Day" shall
be each Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on
which the Common Stock is not traded on the exchange or in the market which is
the principal United States market for the Common Stock.
(d) Whenever the number of Units subject to this Agreement is
adjusted as herein provided, the Cash Unit value of each Unit shall be adjusted
by multiplying such Cash Unit value immediately prior to such adjustment by a
fraction,
-134-
<PAGE> 135
the numerator of which shall be the number of Units subject to this Agreement
immediately prior to such adjustment, and the denominator of which shall be the
number of Units subject to this Agreement immediately thereafter. The effect of
this paragraph (d) shall be that if none of the Cash Units are converted into
Phantom Share Units, Executive would receive hereunder a payment equal to
$20,000,000, plus any dividend equivalents paid under Section 5.
(e) For the purpose of this Section 8, the term "Common Stock"
shall mean (i) the class of beneficial interest designated as the Common Stock
at the date of this Agreement, or (ii) any other class of equity interest
resulting from successive changes or reclassifications of such shares consisting
solely of changes in par value, or from par value to no par value, or from no
par value to par value. In the event that at any time, as a result of an
adjustment made pursuant to the second sentence of Section 8(a) above, the
Executive shall become entitled to Units representing any shares other than the
Common Stock, thereafter the number of such other shares represented by a Unit
and the Cash Unit value of the Unit shall be subject to adjustment from time to
time in a manner and on the terms as nearly equivalent as practicable to the
provisions with respect to the shares contained in this Section 8, and the
provisions of this Agreement with respect to the shares of Common Stock
represented by the Units shall apply on like terms to any such other shares.
(f) In case of any consolidation of the Company or merger of
the Company with another corporation as a result of which Common Stock is
converted or modified, or in case of any sale or conveyance to another
corporation of the property, assets and business of the Company as an entirety
or substantially as an entirety, the Company shall modify the Units so as to
provide the Executive with Units reflecting the kind and amount of shares and
other securities and property that he would have owned or have been entitled to
receive immediately after the happening of such consolidation, merger, sale or
conveyance had his Units immediately prior to such action actually been shares
and, if applicable, other securities of the Company represented by those Units.
The provisions of this Section 8(f) shall similarly apply to successive
consolidations, mergers, sales or conveyances.
(g) If the Company distributes rights or warrants to all
holders of its Common Stock entitling them to purchase shares of Common Stock at
a price per share less than the current market price per share on the record
date for the
-135-
<PAGE> 136
distribution, the number of Units thereafter subject to this Agreement shall be
adjusted in accordance with the formula:
U' = U (X) O (+) N
------------------
O (+) N (x) P
----------
M
where:
U' = the adjusted number of Units.
U = the current number of Units.
O = the number of shares of Common Stock outstanding on the record date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the record date (as
defined pursuant to paragraph (c) above).
The adjustment shall become effective immediately after the record date for
determination of shareholders entitled to receive the rights or warrants.
(h) In case any event shall occur as to which the provisions
of this Section 8 are not applicable but the failure to make any adjustment
would not fairly protect the rights represented by the Units in accordance with
the essential intent and principles of this Section 8 (including without
limitation, directly or indirectly, the sale of Common Stock (or any security
convertible into or exercisable for Common Stock) by the Company or a subsidiary
at a price below fair value or the issuance by the Company or a subsidiary at a
price below fair value or the issuance by the Company or a subsidiary of other
securities not limited to a return that is fixed or determined with reference to
a specified index, but only with respect to sales or issuances, directly or
indirectly, to (i) Affiliates of the Company, (ii) the Interstate Holders or
(iii) affiliates of the Interstate Holders (other than in all cases such
wholly-owned subsidiaries of the Company) (the persons in (i), (ii) and (iii)
shall be individually and collectively referred to herein, as the "Affiliated
Entities") then, in each such case, the Company shall make an adjustment, if
any, on a basis consistent with the essential intent and principles established
in this Section 8, necessary to preserve, without dilution, the rights
represented by the Units. The Company will promptly notify the Executive of any
such proposed adjustment.
-136-
<PAGE> 137
(i) Notwithstanding anything to the contrary contained herein,
the provisions of Section 8 shall not apply to, and no adjustment is required to
be made in respect of, any of the following: (i) the issuance of shares of
Common Stock upon the exercise of any other rights, options or warrants that
entitle the holder to subscribe for or purchase such shares (it being understood
that the sole adjustment pursuant to this Section 8 in respect of the issuance
of shares of Common Stock upon exercise of rights, options or warrants shall be
made at the time of the issuance by the Company of such rights, options or
warrants, or a change in the terms thereof); (ii) the issuance of shares of
Common Stock to the Company's employees, directors or consultants pursuant to
bona fide benefit plans adopted by the Company's Board of Trustees; (iii) the
issuance of shares of Common Stock in a bona fide public offering pursuant to a
firm commitment offering; (iv) the issuance of shares of Common Stock to any of
the Affiliated Entities concurrently with an issuance of shares described in
clause (iii) above if such issuance results in the receipt by the Company of at
least the same net proceeds per share as the issuance described in such
provision and if such Affiliated Entities have the right to participate in such
issuance pro rata with their equity interest in the Company; (v) the issuance of
shares of Common Stock pursuant to any dividend reinvestment or similar plan
adopted by the Company's Board of Trustees to the extent that the applicable
discount from the current market price for shares issued under such plan does
not exceed 5%; and (vi) the issuance of shares of Common Stock in any arm's
length transaction, directly or indirectly, to any party which is not one of the
Affiliated Entities.
(j) Notwithstanding anything in this Agreement to the
contrary, under no circumstances will there be an adjustment under this Section
8 in connection with the creation of a general partnership interest for any
limited partnership that is spun off from either the Company or Alexander's Inc.
(k) Notwithstanding anything in this Agreement to the
contrary, (i) in the event of a spin-off by the Company to its shareholders,
Executive's participation in such spin-off with respect to the Units and the
adjustment of the Units shall be determined in an appropriate and equitable
manner, and it is the intention of the parties hereto that, to the extent
practicable, such adjustment shall include an equity interest in the spun-off
entity, and (ii) no adjustments under this Section 8(k) shall be made which
would reasonably be expected to adversely affect the Company's status as a real
estate investment trust.
(l) In the event the parties hereto cannot agree upon an
appropriate and equitable adjustment to the Units, the services of an
independent investment banker mutually acceptable to Executive and the Company
shall (at the sole expense of the Company) be retained to determine an
appropriate and equitable adjustment, and such determination shall be binding
upon the parties.
-137-
<PAGE> 138
(m) For purposes of this Agreement, "Affiliate" of the Company
means any person, directly or indirectly, controlling, controlled by or under
common control with the Company.
9. No Right to Employment. Nothing in this Agreement shall
confer upon Executive the right to remain in employ of the Company or any
subsidiary of the Company.
10. Termination of Units. Notwithstanding anything in this
Agreement to the contrary, in the event that prior to December 2, 1997,
Executive voluntarily terminates his employment with the Company without Good
Reason, this Agreement shall be void and Executive shall have no further rights
to the Units or any other payments under this Agreement, excluding any dividend
equivalent amounts already paid to Executive; provided, that under no
circumstances shall the Units be forfeited in the event of Executive's death or
a termination due to Disability.
11. Nontransferability. This Agreement shall not be assignable
or transferable by the Company (other than to successors of the Company) and
this Agreement and the Units shall not be assignable or transferable by the
Executive otherwise than by will or by the laws of descent and distribution, and
the Units may be paid out during the lifetime of the Executive only to him. More
particularly, but without limiting the generality of the foregoing, the Units
may not be assigned, transferred (except as provided in the preceding sentence),
pledged, or hypothecated in any way (whether by operation of law or otherwise),
and shall not be subject to execution, attachment or similar process. Any
attempted assignment, transfer, pledge, hypothecation or other disposition of
the Units contrary to the provisions of this Agreement, and any levy of any
attachment or similar process upon the Units, shall be null and void and without
effect.
12. Funding of Rabbi Trust. Upon the Commencement Date, the
Company shall establish a "rabbi" trust, shall fund such trust with 459,770
shares of Common Stock, and shall, subsequent to such initial funding, continue
to fund the rabbi trust with respect to the Units, all in the manner set forth
in the rabbi trust agreement, attached as Exhibit E to the Employment Agreement.
Amounts may be paid out of the rabbi trust in accordance with payment
instructions given to the trustee (as provided therein), pursuant to the
specific terms of the trust.
13. Legal Fees and Expenses. If any contest or dispute shall
arise between the Company and Executive regarding any provision of this
Agreement, the Company shall reimburse Executive for all legal fees and expenses
reasonably incurred by Executive in connection with such contest or dispute, but
only if Executive is successful in respect of substantially all of Executive's
claims brought and pursued in connection with such contest or dispute. Such
reimbursement shall be made as soon as practicable following the resolution of
such contest or dispute
-138-
<PAGE> 139
(whether or not appealed) to the extent the Company receives reasonable written
evidence of such fees and expenses.
14. Entire Agreement. This Agreement and the Employment
Agreement contain all the understandings between the parties hereto pertaining
to the matters referred to herein, and supersede all undertakings and
agreements, whether oral or in writing, previously entered into by them with
respect thereto. The Executive represents that, in executing this Agreement, he
does not rely and has not relied upon any representation or statement not set
forth herein made by the Company with regard to the subject matter, bases or
effect of this Agreement or otherwise.
15. Amendment or Modification; Waiver. No provision of this
Agreement may be amended, modified or waived unless such amendment or
modification is agreed to in writing, signed by the Executive and by a duly
authorized officer of the Company, and such waiver is set forth in writing and
signed by the party to be charged. No waiver by any party hereto of any breach
by another party hereto of any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same time, any prior time or any
subsequent time.
16. Notices. Any notice to be given hereunder shall be in
writing and shall be deemed given when delivered personally, sent by courier or
telecopy or registered or certified mail, postage prepaid, return receipt
requested, addressed to the party concerned at the address indicated below or to
such other address as such party may subsequently give notice of hereunder in
writing:
To the Executive:
Michael D. Fascitelli
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
with a copy to:
Stephen W. Skonieczny
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
-139-
<PAGE> 140
To the Company:
Vornado Realty Trust
Park 80 West, Plaza II
Saddle Brook, New Jersey 07663
Attention: both Chairman and Chief Financial Officer
with a copy to:
Janet T. Geldzahler
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Any notice delivered personally or by courier under this
Section 16 shall be deemed given on the date delivered and any notice sent by
telecopy or registered or certified mail, postage prepaid, return receipt
requested, shall be deemed given on the date telecopied or mailed.
17. Severability. If any provision of this Agreement or the
application of any such provision to any party or circumstances shall be
determined by any court of competent jurisdiction to be invalid and
unenforceable to any extent, the remainder of this Agreement or the application
of such provision to such person or circumstances, other than those to which it
is so determined to be invalid and unenforceable, shall not be affected thereby,
and each provision hereof shall be validated and shall be enforced to the
fullest extent permitted by law.
18. Noncontravention. The Company represents that the Company
is not prevented from entering into, or performing, this Agreement by the terms
of any law, order, rule or regulation, its declaration of trust or by-laws, or
any agreement to which it is a party, other than which would not have a material
adverse effect on the Company's ability to enter into or perform this Agreement.
19. Survivorship. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
20. Successors. This Agreement shall inure to the benefit of
and be binding upon each successor of the Company, and upon the Executive's
beneficiaries, legal representatives or estate, as the case may be.
-140-
<PAGE> 141
21. Governing Law. This agreement will be governed by and
construed in accordance with the laws of the State of New York, without regard
to its conflicts of laws principles.
22. Trustees. In the event any successor to the Company is a
corporation, all references to "trustee" or "Board of Trustees" shall mean
"directors" or "Board of Directors", respectively.
23. New York Stock Exchange. For purposes of any references
hereunder to listing shares of Common Stock, listing with the NYSE and trading
on NASDAQ shall be interchangeable.
24. Headings. All descriptive headings of sections and
paragraphs in this Agreement are for convenience of reference only, and they
form no part of this Agreement and shall not affect its interpretation.
25. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-141-
<PAGE> 142
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
VORNADO REALTY TRUST
By: /s/Steven Roth
-----------------------------------
/s/Michael D. Fascitelli
--------------------------------------
-142-
<PAGE> 143
EXHIBIT INDEX
Exhibit No.
11 Statement Re Computation of Per Share Earnings.
12 Consolidated Ratios of Earnings to Fixed Charges and Combined
Fixed Charges and Preferred Share Dividend Requirements
21 Subsidiaries of the Registrant.
23 Consent of Independent Auditors to Incorporation by Reference.
27 Financial Data Schedule.
<PAGE> 1
EXHIBIT 11
VORNADO REALTY TRUST
STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Weighted average number of
shares outstanding 24,427,416 23,382,809 21,619,312
Common share equivalents for
options after applying treasury
stock method 176,026 196,860 234,408
----------- ----------- -----------
Weighted average number of shares
and common stock equivalents
outstanding 24,603,442 23,579,669 21,853,720
=========== =========== ===========
Net income $61,364,000 $53,008,000 $41,240,000
=========== =========== ===========
Net income per share $ 2.49 $ 2.25 $ 1.89
=========== =========== ===========
</TABLE>
-143-
<PAGE> 1
EXHIBIT 12
VORNADO REALTY TRUST
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES AND
COMBINED FIXED CHARGES AND PREFERRED SHARE DIVIDEND REQUIREMENTS
<TABLE>
<CAPTION>
(Amounts in thousands except ratios) Year Ended
--------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Income from continuing operations
before income taxes $61,364 $53,008 $41,240 $25,386 $ 2,263
Fixed charges 17,214 17,333 14,647 31,610 34,392
------- ------- ------- ------- -------
Income from continuing operations
before income taxes and
fixed charges $78,578 $70,341 $55,887 $56,996 $36,655
======= ======= ======= ======= =======
Fixed charges:
Interest and debt expense $16,726 $16,426 $14,209 $31,155 $33,910
1/3 of rent expense -
interest factor 488 465 438 455 482
------- ------- ------- ------- -------
17,214 16,891 14,647 31,610 34,392
Capitalized interest -- 442 1,582 282 --
------- ------- ------- ------- -------
$17,214 $17,333 $16,229 $31,892 $34,392
======= ======= ======= ======= =======
Ratio of earnings to fixed charges 4.56 4.06 3.44 1.79 1.07
Note: For purposes of this calculation, earnings before fixed charges consist
of earnings before income taxes plus fixed charges. Fixed charges
consist of interest expense on all indebtedness (including amortization
of deferred debt issuance costs) and the portion of operating lease
rental expense that is representative of the interest factor (deemed to
be one third of operating lease rentals).
Rent Expense $ 1,465 $ 1,395 $ 1,313 $ 1,366 $ 1,446
======= ======= ======= ======= =======
</TABLE>
-144-
<PAGE> 1
EXHIBIT 21
<TABLE>
<CAPTION>
STATE OF PERCENTAGE
NAME OF SUBSIDIARY ORGANIZATION OF OWNERSHIP
------------------ ------------ ------------
<S> <C> <C>
14th Street Acquisition Corporation New York 100%
825 Seventh Avenue Holding Corporation New York 100%
Amherst Holding Corporation New York 100%
Amherst Industries, Inc. New York 100%
Atlantic City Holding Corporation New Jersey 100%
Bensalem Holding Company Pennsylvania 100%
Bethlehem Holding Company Pennsylvania 100%
Bordentown Holding Corporation New Jersey 100%
Brentwood Development Corp. New York 100%
Bridgeland Warehouses, Inc. New Jersey 100%
Brooklyn Junction Holding Corporation New York 100%
Camden Holding Corporation New Jersey 100%
Chicopee Holding Corporation Massachusetts 100%
Clementon Holding Corporation New Jersey 100%
Cross Avenue Broadway Corporation New York 100%
Cumberland Holding Corporation New Jersey 100%
Dallas Skillman Abrams Crossing Corporation Texas 100%
Delran Holding Corporation New Jersey 100%
Dover Holding Corporation New Jersey 100%
Dundalk Stores Corporation Maryland 100%
Durham Leasing Corp. New Jersey 100%
Eudowood Holding Corporation Maryland 100%
Evesham Holding Corporation New Jersey 100%
Gallery Market Holding Company Pennsylvania 100%
Glen Burnie Shopping Plaza, Inc. Maryland 100%
Greenwich Holding Corporation New York 100%
Hackbridge Corporation New Jersey 100%
Hagerstown Holding Corporation Maryland 100%
Hanover Holding Corporation New Jersey 100%
Hanover Industries, Inc. New Jersey 100%
Hanover Leasing Corporation New Jersey 100%
Hanover Public Warehousing, Inc. New Jersey 100%
Henrietta Holding Corp. New York 100%
HEP Acquisition Corporation Delaware 100%
Jersey City Leasing Corporation New Jersey 100%
Kearny Holding Corp. New Jersey 100%
Kearny Leasing Corporation New Jersey 100%
Lancaster Holding Company Pennsylvania 100%
Landthorp Enterprises, Inc. Delaware 100%
Lawnside Holding Corporation New Jersey 100%
Lawnside Leasing Corporation New Jersey 100%
Lawnwhite Holding Corporation New Jersey 100%
Lewisville Town Centre Corporation Texas 100%
Littleton Holding Corporation New Jersey 100%
Lodi Industries Corp. New Jersey 100%
Lodi Leasing Corporation New Jersey 100%
</TABLE>
-145-
<PAGE> 2
<TABLE>
<CAPTION>
STATE OF PERCENTAGE
NAME OF SUBSIDIARY ORGANIZATION OF OWNERSHIP
------------------ ------------ ------------
<S> <C> <C>
Manalapan Industries, Inc. New Jersey 100%
Marple Holding Company Pennsylvania 100%
Menands Holding Corporation New York 100%
Mesquite Crossing Corporation Texas 100%
Middletown Holding Corporation New Jersey 100%
Montclair Holding Corporation New Jersey 100%
Morris Plains Leasing Corp. New Jersey 100%
National Hydrant Corporation New York 100%
New Hanover, Inc. New Jersey 100%
Newington Holding Corporation Connecticut 100%
New Woodbridge, Inc. New Jersey 100%
North Bergen Stores, Inc. New Jersey 100%
North Plainfield Holding Corporation New Jersey 100%
Oak Trading Company New Jersey 100%
Philadelphia Holding Company Pennsylvania 100%
Phillipsburg Holding Corporation New Jersey 100%
Pike Holding Company Pennsylvania 100%
Princeton Corridor Holding Corporation New Jersey 100%
Rahway Leasing Corporation New Jersey 100%
RMJ Company, Inc. New Jersey 100%
Rochester Holding Corporation New York 100%
Silver Lane Properties, Inc. Connecticut 100%
Springfield Holding Corporation Massachusetts 100%
Star Universal Corporation New Jersey 100%
T.G. Hanover, Inc. New Jersey 100%
T.G. Stores, Inc. Maryland 100%
Terrill Holding Corporation New Jersey 100%
The Second Lawnside Corporation New Jersey 100%
The Second Rochester Corporation New York 100%
Turnersville Holding Corporation New Jersey 100%
Two Guys - Conn., Inc. Connecticut 100%
Two Guys - Mass., Inc. Massachusetts 100%
Two Guys from Harrison, Inc. New Jersey 100%
Two Guys from Harrison Company Pennsylvania 100%
Two Guys from Harrison - N.Y., Inc. New York 100%
Unado Corp. New Jersey 100%
Upper Moreland Holding Company Pennsylvania 100%
Vornado, Inc. New York 100%
Vornado Acquisition Corporation Delaware 100%
Vornado Finance Corp. Delaware 100%
Vornado Holding Corporation Delaware 100%
Vornado Investments Corporation Delaware 100%
Vornado Lending Corp. New Jersey 100%
Watchung Holding Corporation New Jersey 100%
Watchung Mountain Corporation New Jersey 100%
White Horse Lawnside Corporation New Jersey 100%
West Windsor Holding Corporation New Jersey 100%
York Holding Company Pennsylvania 100%
</TABLE>
-146-
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Amendment No. 4 to Registration
Statement No. 33-62395 and Amendment No. 1 to Registration Statement No.
33-52441 both on Form S-3 and Amendment No. 1 to Registration Statement No.
33-62344 and Registration Statement 333-09159 both on Form S-8 of Vornado Realty
Trust of our report dated March 12, 1997, appearing in this Annual Report on
Form 10-K of Vornado Realty Trust for the year ended December 31, 1996.
Parsippany, New Jersey
March 12, 1997
-147-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's audited financial statements for the year ended December 31, 1996 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 89,696
<SECURITIES> 27,549
<RECEIVABLES> 9,786
<ALLOWANCES> 575
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 397,298
<DEPRECIATION> 151,049
<TOTAL-ASSETS> 565,204
<CURRENT-LIABILITIES> 0
<BONDS> 232,387
0
0
<COMMON> 1,044
<OTHER-SE> 275,213
<TOTAL-LIABILITY-AND-EQUITY> 565,204
<SALES> 0
<TOTAL-REVENUES> 116,887
<CGS> 0
<TOTAL-COSTS> 36,412
<OTHER-EXPENSES> 18,839
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,726
<INCOME-PRETAX> 61,364
<INCOME-TAX> 0
<INCOME-CONTINUING> 61,364
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,364
<EPS-PRIMARY> 2.49
<EPS-DILUTED> 2.49
</TABLE>
