UNITED STATES
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
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 1-13274
CALI REALTY CORPORATION
(Exact Name of Registrant as specified in its charter)
Maryland 22-3305147
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11 Commerce Drive, Cranford, New Jersey 07016-3599
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(Address of principal executive offices) (Zip code)
(908) 272-8000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
(Title of Each Class) (Name of Each Exchange on Which Registered)
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Common Stock, $0.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
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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 the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. [ X ]
As of February 28, 1997, the aggregate market value of the voting stock
held by non-affiliates of the registrant was $1,304,410,000. The aggregate
market value was computed with references to the closing price on the New York
Stock Exchange on such date. This calculation does not reflect a determination
that persons are affiliates for any other purpose.
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As of February 28, 1997, 36,671,657 shares of common stock, $.01 par
value, of the Company (the "Common Stock") were outstanding.
LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part
IV herein on page number 121.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's
definitive proxy statement to be issued in conjunction with the registrant's
annual meeting of stockholders to be held on May 15, 1997, are incorporated by
reference in Part III of this Form 10-K.
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TABLE OF CONTENTS
FORM 10-K
PART I
Item 1 Business .....................................................
Item 2 Properties ....................................................
Item 3 Legal Proceedings..............................................
Item 4 Submission of Matters to a Vote of
Security Holders................................................
PART II
Item 5 Market for Registrant's Common Stock
and Related Stockholder Matters ................................
Item 6 Selected Financial Data........................................
Item 7 Management's Discussion and Analysis of
Financial Condition and Results of
Operations .....................................................
Item 8 Financial Statements and Supplementary
Data ...........................................................
Item 9 Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure............................................
PART III
Item 10 Directors and Executive Officers of
the Registrant ................................................
Item 11 Executive Compensation........................................
Item 12 Security Ownership of Certain
Beneficial Owners and Management...............................
Item 13 Certain Relationships and Related
Transactions ..................................................
PART IV
Item 14 Exhibits, Financial Statements, Schedules
and Reports on Form 8-K........................................
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PART I
ITEM I. BUSINESS
GENERAL
Cali Realty Corporation (together with its subsidiaries, the "Company") is a
fully-integrated real estate investment trust ("REIT") that owns and operates a
portfolio comprised primarily of Class A office and office/flex properties, as
well as commercial real estate leasing, management, acquisition, development and
construction businesses. At December 31, 1996, the Company owned 100 percent of
56 properties, consisting of 37 office properties (the "Year-End Office
Properties") and 19 office/flex properties (the "Year-End Office/Flex
Properties"), encompassing an aggregate of approximately 7.1 million square
feet, as well as one multi-family residential property (collectively, the
"Year-End Properties"). On January 31, 1997, the Company acquired substantially
all of the assets, consisting primarily of 65 properties (the "RM Properties")
of the Robert Martin Company, LLC and affiliates ("RM"), for approximately
$450.0 million. As of February 28, 1997, following the acquisition of RM (the
"RM Acquisition"), the Company owned 100 percent of 123 properties encompassing
approximately 11.4 million square feet (collectively the "Properties"). See
"Business -- Recent Developments." The Properties are comprised of 54 office
properties containing an aggregate of approximately 8.0 million square feet (the
"Office Properties"), 57 office/flex properties containing an aggregate of
approximately 3.0 million square feet (the "Office/Flex Properties"), six
industrial/warehouse properties containing an aggregate of approximately 400,000
square feet (the "Industrial/Warehouse Properties"), two multi-family
residential properties, two stand-alone retail properties, two land leases, and
land for the development of seven million square feet of office space. As of
December 31, 1996, the Year-End Office Properties and the Year-End Office/Flex
Properties, in the aggregate, were approximately 96.4 percent leased to
approximately 550 tenants. As of February 28, 1997, the Office Properties and
Office/Flex Properties, in the aggregate, were approximately 96.0 percent leased
to approximately 1,100 tenants. The Company believes that its Properties have
excellent locations and access and are well-maintained and professionally
managed. As a result, the Company believes that its Properties attract high
quality tenants and achieve among the highest rent, occupancy and tenant
retention rates within their markets.
The Company's strategy has been to focus its development and ownership of office
properties in sub-markets where it is, or can become, a significant and
preferred owner and operator. The Company will continue this strategy by
expanding, primarily through acquisitions, initially into sub-markets where it
has, or can achieve, similar status. Consistent with its growth strategy, during
1996, the Company acquired 15 office properties for an aggregate acquisition
cost of approximately $459.4 million, including the acquisition on November 4,
1996 of the 1.9 million square foot Harborside Financial Center in Jersey City,
Hudson County, New Jersey for approximately $292.7 million (the "Harborside
Acquisition"). Additionally, in January 1997 the Company completed the RM
Acquisition. See "Business -- Recent Developments." Management believes that the
recent trend towards increasing rental and occupancy rates in office buildings
in the Company's sub-markets continues to present significant opportunities for
growth. The Company may also develop properties in such sub- markets,
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particularly with a view towards potential utlitization of certain vacant land
recently acquired or on which the Company holds options. Management believes
that its extensive market knowledge provides the Company with a significant
competitive advantage which is further enhanced by its strong reputation for and
emphasis on delivering highly responsive management services, including direct
and continued access to the Company's senior management. See "Business -- Growth
Strategies."
The Company's ten largest office and office/flex tenants in the Year-End Office
Properties, based on actual December 1996 rent billings, are Donaldson, Lufkin &
Jenrette Securities Corp. ("DLJ"), Dow Jones Telerate Holdings, Inc., the
American Institute of Certified Public Accountants, NTT Data Communications
Corporation ("NTT"), Dean Witter Trust Company, Bank of Tokyo Information
Services Inc., Bankers Trust Harborside Inc., The United States Life Insurance
Company in New York City, SAP America, Inc. and Lonza, Inc. The average age of
the Year-End Office Properties and the Year-End Office/flex Properties is
approximately 10 years and 6 years, respectively.
Cali Associates, the entity to whose business the Company succeeded in 1994, was
founded by John J. Cali, Angelo R. Cali and Edward Leshowitz (the "Founders"),
who have been involved in the development, leasing, management, operation and
disposition of commercial and residential properties in Northern and Central New
Jersey for over 40 years and have been primarily focusing on office buildings
for the past fifteen years. In addition to the Founders, the Company's executive
officers at December 31, 1996 have been employed by the Company and its
predecessor for an average of approximately 10 years. The Company and its
predecessor have built approximately four million square feet of office space,
more than one million square feet of industrial facilities and over 5,500
residential units. As of February 28, 1997, officers and directors of the
Company and other former owners of interests in certain of the Properties (many
of whom are employees of the Company) owned approximately 10.0 percent of the
Company's outstanding shares of Common Stock (including Units redeemable for
shares of Common Stock). As used herein, the term "Units" refers to limited
partnership interests in Cali Realty, L.P. a Delaware limited partnership (the
"Operating Partnership" through which the Company conducts its real estate
activities.
The Company performs substantially all construction, leasing, management and
tenant improvements on an "in-house" basis and is self-administered and
self-managed.
The Company was incorporated on May 24, 1994. The Company's executive offices
are located at 11 Commerce Drive, Cranford, New Jersey 07016, and its telephone
number is (908) 272-8000. The Company has an internet Web address at
"http://www.calirealty.com".
GROWTH STRATEGIES
The Company's objectives are to maximize growth in Funds from Operations (as
defined in Item 6 below) and to enhance the value of its portfolio through
effective management, acquisition and development strategies. The Company
believes that opportunities exist to increase cash flow per share by: (i)
implementing operating strategies to produce increased effective rental and
occupancy rates and decreased concession and tenant installation costs as
vacancy rates in the Company's sub-markets continue to decline; (ii) acquiring
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properties with attractive returns in sub-markets where, based on its expertise
in leasing, managing and operating properties, it is, or can become, a
significant and preferred owner and operator; and (iii) developing properties
where such development will result in a favorable risk-adjusted return on
investment.
Based on its evaluation of current market conditions, the Company believes that
a number of factors will enable it to achieve its business objectives,
including: (i) the limited availability to competitors of capital for financing
development, acquisitions or capital improvements or for refinancing maturing
mortgages; (ii) the lack of new construction in the Company's markets providing
the Company with the opportunity to maximize occupancy levels at attractive
rental rates; and (iii) the large number of distressed sellers and inadvertent
owners (through foreclosure or otherwise) of properties in the Company's markets
creating enhanced acquisition opportunities. Management believes that the
Company is well positioned to exploit existing opportunities because of its
extensive experience in its markets and its proven ability to acquire, develop,
lease and efficiently manage properties.
The Company will focus on enhancing growth in cash flow per share by: (i)
maximizing cash flow from its existing properties through continued active
leasing and property management; (ii) managing operating expenses through the
use of in-house management, leasing, marketing, financing, accounting, legal,
construction management and data processing functions; (iii) emphasizing
programs of repairs and capital improvements to enhance the Properties'
competitive advantages in their markets; (iv) maintaining and developing
long-term relationships with a diverse tenant group; and (v) attracting and
retaining motivated employees by providing financial and other incentives to
meet the Company's operating and financial goals.
The Company will also seek to increase its cash flow per share by acquiring
additional properties that: (i) provide attractive initial yields with
significant potential for growth in cash flow from property operations; (ii) are
well located, of high quality and competitive in their respective sub-markets;
(iii) are located in its existing sub-markets or in sub-markets which lack a
significant owner or operator; and (iv) have been under-managed or are otherwise
capable of improved performance through intensive management and leasing that
will result in increased occupancy and rental revenues.
Consistent with its acquisition strategy, from January 1, 1996 through February
28, 1997, the Company has invested an aggregate of approximately $916.2 million
in the Harborside Acquisition, the RM Acquisition and the acquisition of 13
other office and office/flex properties (the "Individual Property
Acquisitions"), thereby increasing its portfolio by approximately 189 percent
(based upon total net rentable square feet). See "Business -- Recent
Developments." There can be no assurance, however, that the Company will be able
to improve the operating performance of any properties that are acquired.
The Company may also develop office, office/flex space, or certain vacant land
acquired in connection with various acquisitions or on which the Company holds
options, when market conditions support a favorable risk-adjusted return on such
development, primarily in stable submarkets where the demand for such space
exceeds available supply and where the Company is, or can become, a significant
owner and operator. The Company believes that opportunities exist for it to
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acquire properties in its sub-markets at less than replacement cost. Therefore,
the Company currently intends to emphasize its acquisition strategies over its
development strategies until market conditions change. To the extent that the
costs associated with implementing such acquisition and development strategies
are financed using the Company's cash flow, such costs may adversely affect the
Company's ability to make distributions.
The Company intends to maintain a ratio of debt to total market capitalization
(total debt of the Company as a percentage of the market value of issued and
outstanding shares of Common Stock, including interests redeemable therefor,
plus total debt) of approximately 50 percent or less, although the Company's
organizational documents do not limit the amount of indebtedness that the
Company may incur. As of December 31, 1996, the Company's total debt constituted
approximately 18.2 percent of the total capitalization of the Company, and as of
February 28, 1997, the Company's total debt constituted approximately 27.4
percent of the total capitalization of the Company. The Company will utilize the
most appropriate sources of capital for future acquisitions, development and
capital improvements, which may include undistributed funds from operations,
borrowings under its revolving credit facilities, issuances of equity securities
and/or other borrowings.
EMPLOYEES
As of December 31, 1996, the Company had 107 employees. As of February 28, 1997,
the Company had 186 employees.
COMPETITION
The leasing of real estate is highly competitive. The Company's Properties
compete for tenants with similar properties located in its markets primarily on
the basis of location, rent charged, services provided, and the design and
condition of the improvements. The Company also experiences competition when
attempting to acquire equity interests in desirable real estate, including
competition from domestic and foreign financial institutions, other REIT's, life
insurance companies, pension trusts, trust funds, partnerships and individual
investors.
REGULATIONS
Many laws and governmental regulations are applicable to the Properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
Under various laws and regulations relating to the protection of the
environment, an owner of real estate may be held liable for the costs of removal
or remediation of certain hazardous or toxic substances located on or in the
property. These laws often impose liability without regard to whether the owner
was responsible for, or even knew of, the presence of such substances. The
presence of such substances may adversely affect the owner's ability to rent or
sell the property or to borrow using such property as collateral and may expose
it to liability resulting from any release of, or exposure to, such substances.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances at another location may also be liable for the costs of removal or
remediation of such substances at the disposal or treatment facility, whether or
not such facility is owned or operated by such person. Certain environmental
laws impose liability for release of asbestos-containing materials into the air,
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and third parties may also seek recovery from owners or operators of real
properties for personal injury associated with asbestos- containing materials
and other hazardous or toxic substances. In connection with the ownership
(direct or indirect), operation, management and development of real properties,
the Company may be considered an owner or operator of such properties or as
having arranged for the disposal or treatment of hazardous or toxic substances
and, therefore, potentially liable for removal or remediation costs, as well as
certain other related costs, including governmental penalties and injuries to
persons and property.
The Company obtained Phase I Assessments of each of its original properties (the
"Original Properties") at the time of its initial public offering in August 1994
(the "IPO"). With the acquisition of each new property, the Company obtains a
new Phase I Assessment for such property. These Phase I Assessments have not
revealed any environmental liability that the Company believes would have a
material adverse effect on the Company's business, assets or results of
operations taken as a whole, nor is the Company aware of any such material
environmental liability. However, four of the Office Properties are located on
or adjacent to a former municipal landfill (closed in the 1950s) that was
redeveloped with the participation of the State of New Jersey Economic
Development Authority. The Company obtained all necessary landfill disruption
permits to build the projects (other than such permits the absence of which
would not be expected to have a material adverse effect on the Company's
business, assets or results of operations taken as a whole) and state
environmental authorities approved the work. Although there can be no assurance,
the Company believes that there will be no further requirements with respect to
the former landfill at these Properties. Nevertheless, it is possible that the
Company's assessments do not reveal all environmental liabilities and that there
are material environmental liabilities of which the Company is unaware.
In connection with the RM Acquisition, the Company's environmental consultant
undertook environmental audits of the properties, including sampling activities,
which identified certain environmental conditions at several of the properties
(the "Designated Properties") that will likely require further investigation
and/or remedial activities. RM retained the liability and responsibility for
remediation of the environmental conditions of the Designated Properties, and
has established an escrow in the amount of $1.5 million (the "Environmental
Escrow") as a clean-up fund. Any remediation costs for the Designated Properties
exceeding the Environmental Escrow will remain the responsibility of the
principals of RM. See "Business -- Recent Developments -- RM Acquisition."
There can be no assurance that (i) future laws, ordinances or regulations will
not impose any material environmental liability or (ii) the current
environmental condition of the Properties will not be affected by tenants, by
the condition of land or operations in the vicinity of the Properties (such as
the presence of underground storage tanks), or by third parties unrelated to the
Company. If compliance with the various laws and regulations, now existing or
hereafter adopted, exceeds the Company's budgets for such items, the Company's
ability to make expected distributions to stockholders could be adversely
affected.
There are no other laws or regulations which have a material effect on the
Company's operations, other than typical federal, state and local laws affecting
the development and operation of real property, such as zoning laws.
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INDUSTRY SEGMENTS
The Company operates in only one industry segment. The Company does not have any
foreign operations and its business is not seasonal.
RECENT DEVELOPMENTS
From January 1, 1996 through February 28, 1997, the Company completed the
Harborside Acquisition, the RM Acquisition and the Individual Property
Acquisitions and has improved the operating performance of its existing
portfolio by maintaining high occupancies and controlling costs. The Company's
Funds from Operations (after adjustment for the straight-lining of rents) for
the year ended December 31, 1996 was $45.2 million. As a result of the Company's
improved operating performance, in September 1996 the Company announced a 5.9
percent increase in its regular quarterly distribution, commencing with the
Company's distribution with respect to the third quarter of 1996, from $.425 per
share of Common Stock ($1.70 per share of Common Stock on an annualized basis)
to $.45 per share of Common Stock ($1.80 per share of Common Stock on an
annualized basis). Since the IPO, the Company has increased its regular
quarterly distribution by 11.4 percent.
From January 1, 1996 through February 28, 1997, the Company invested
approximately $916.2 million in the Harborside Acquisition, the RM Acquisition
and the Individual Property Acquisitions, increasing its portfolio by 189
percent (based upon total net rentable square feet). The cash portions of the
acquisition costs for such acquisitions (as more fully described below) were
obtained by the Company from (i) the net proceeds of the Company's two 1996
public offerings of Common Stock in August and November 1996 for net proceeds of
approximately $76.8 million and $441.2 million, respectively, (ii) borrowings
under the Company's credit facilities (see Item 2 below), and (iii) available
working capital. In addition, a significant portion of the acquisition costs for
the RM Acquisition and the Harborside Acquisition included the assumption or
incurrence of permanent indebtedness. See "Business -- Financing Activities
- --Permanent Indebtedness." Set forth below are summary descriptions of the RM
Acquisition, the Harborside Acquisition and the Individual Property
Acquisitions:
RM Acquisition.
On January 31, 1997, the Company acquired the RM Properties for a total cost of
approximately $450.0 million. The RM Properties consist of 16 office properties
(the "RM Office Properties"), 38 office/flex properties (the "RM Office/Flex
Properties"), six industrial/warehouse properties, two stand-alone retail
properties, two land leases, and a multi-family residential property. The RM
Acquisition was financed through the assumption of a $185.3 million mortgage,
approximately $220.0 million in cash, substantially all of which was obtained
from the Company's cash reserves, and the issuance of 1,401,225 Units.
In connection with the RM Acquisition, the Company assumed a $185.3 million
non-recourse mortgage held by Teachers Insurance and Annuity Association of
America, with interest only payable monthly at a fixed annual rate of 7.18
percent (the "TIAA Mortgage"). The TIAA Mortgage is secured and
cross-collateralized by 43 of the RM Properties and matures on December 31,
2003. The Company, at its option, may convert the TIAA Mortgage to unsecured
debt upon achievement by the Company of an investment credit rating of Baa3/BBB-
or better. The TIAA Mortgage is prepayable in whole or in part subject to
certain provisions, including yield maintenance.
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The RM Properties, which consist primarily of 54 office and office/flex
properties aggregating approximately 3.7 million square feet and six
industrial/warehouse properties aggregating approximately 400,000 square feet,
are located primarily in established business parks in Westchester County, New
York and Fairfield County, Connecticut. The Company has agreed not to sell
certain of the RM Properties for a period of seven years without the consent of
the RM principals, except for sales made under certain circumstance and/or
conditions.
In connection with the RM Acquisition, the Company was granted a three-year
option to acquire a 115,000 square foot office property and an 84,000 square
foot office/flex property (the "Option Properties") for an aggregate minimum
purchase price of $19.0 million and has granted RM the right to put such
properties to the Company between an aggregate purchase price of $11.6 to $21.3
million, under certain conditions. The purchase prices are subject to adjustment
based on different formulas and are payable in cash or Units.
In addition, the Company provided an $11.6 million non-recourse mortgage loan
("Mortgage Receivable") to entities controlled by the RM principals, bearing
interest at an annual rate of 450 basis points over the one-month London
Inter-bank Offered Rate (LIBOR). The Mortgage Receivable, which is secured by
the Option Properties and guaranteed by certain of the RM principals, matures on
February 1, 2000. In addition, the Company received a three percent origination
fee in connection with the Mortgage Receivable.
RM has made certain customary representations and warranties to the Company,
most of which survive the closing for a period of one year. RM has agreed to
maintain a minimum net worth of $25.0 million during such period.
As part of the RM Acquisition, Brad W. Berger, President and Chief Executive
Officer of RM, and Timothy M. Jones, Chief Operating Officer of RM, joined the
Company as Executive Vice-Presidents under three year employment agreements.
Berger and Jones were each issued warrants to purchase 170,000 shares of the
Company's Common Stock at a stock price of $33 per share, which vest equally
over a three-year period and expire on January 31, 2007.
Robert F. Weinberg, co-founder of RM, and Berger will serve on the Company's
Board of Directors for an initial term of three years. The Company will also
appoint two additional independent Board members, thereby increasing the size of
the Board from nine to thirteen members.
Harborside Acquisition.
On November 4, 1996, the Company acquired Harborside Financial Center
("Harborside"), a 1.9 million square foot office complex located in Jersey City,
Hudson County, New Jersey for an acquisition cost of approximately $292.7
million. The Harborside Acquisition, which is located on the Hudson River
waterfront directly across from downtown Manhattan, increased the Company's
total office and office/flex portfolio as of the acquisition date by
approximately 44 percent. The acquisition cost included the assumption of
existing and seller-provided financing aggregating approximately $150.0 million.
See "Business --Financing Activities -- Permanent Indebtedness." The balance of
the acquisition cost, totaling approximately $142.7 million, was paid primarily
in cash and was financed substantially through drawings from the Company's
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existing credit facilities (including the $80.0 million PCS Credit Facility, as
defined below). See "The Company -- Financing Activities -- Credit Facilities."
Harborside is located in the Exchange Place/Newport submarket of Jersey City,
adjacent to the Exchange Place Port Authority Trans-Hudson ("PATH") train
station. As of December 31, 1996, the property was approximately 97.1 percent
leased. Harborside's largest tenant is Bankers Trust Harborside, Inc., which
leases 385,000 square feet of space. Other major tenants include Dow Jones
Telerate Holdings, Inc., the American Institute of Certified Public Accountants
(AICPA), Dean Witter Trust Company and Bank of Tokyo.
As part of the Harborside Acquisition, the Company also acquired 11.3 acres of
land fully zoned and permitted for an additional 4.1 million square feet of
development and the water rights associated with 27.4 acres of land extending
into the Hudson River immediately east of Harborside, including two piers with
an area of 5.8 acres. The terms of the acquisition of the vacant parcels at
Harborside provide for payments (with an estimated net present value at the date
of acquisition of approximately $5.3 million) to be made to the seller for
development rights if and when the Company commences construction on the site
during the next several years. However, the agreement provides, among other
things, that even if the Company does not commence construction, the seller may
nevertheless require the Company to acquire these rights during the six-month
period after the end of the sixth year. After such period, the seller's option
lapses, but any development on years 7 through 30 will require a payment, on an
increasing scale, for the development rights.
Individual Property Acquisitions.
In addition to the RM Acquisition and the Harborside Acquisition, from January
1, 1996 through February 28, 1997, the Company has invested approximately $173.5
million in the acquisition of 13 office and office/flex properties.
On March 20, 1996, the Company sold its office building located at 15 Essex Road
in Paramus, Essex County, New Jersey ("Essex Road") and concurrently acquired a
96,000 square foot office building at 103 Carnegie Center in Princeton, Mercer
County, New Jersey (the "Princeton Property") with the net proceeds from the
sale of Essex Road of approximately $10.3 million. The concurrent transactions
qualified as a tax-free exchange, as the Company used substantially all of the
proceeds from the sale of Essex Road on March 12, 1996 to acquire the Princeton
Property.
On May 2, 1996, the Company acquired Rose Tree Corporate Center, a two-building
suburban office complex totaling approximately 260,000 square feet, located in
Media, Delaware County, Pennsylvania. The complex was acquired for approximately
$28.1 million, which was drawn from one of the Company's credit facilities.
On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two suburban
office buildings totaling approximately 115,000 square feet, located in Basking
Ridge, Somerset County, New Jersey. The buildings were acquired for
approximately $10.5 million, which was drawn from one of the Company's credit
facilities.
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On November 7, 1996, the Company acquired Five Sentry Parkway East & West ("Five
Sentry"), a two-building office complex comprised of approximately 130,000
square feet located in Plymouth Meeting, Montgomery County, Pennsylvania, for
approximately $12.5 million in cash, which was drawn from one of the Company's
credit facilities. Such borrowing was subsequently repaid from the net proceeds
received from the Company's public common stock offering of 17,537,500 shares
(the "November 1996 Offering") which was completed on November 22, 1996. See
"Business - Financing Activities - Equity Offerings."
On December 10, 1996, the Company acquired 300 Tice Boulevard ("Whiteweld"), a
230,000 square foot office building located in Woodcliff Lake, Bergen County,
New Jersey, for approximately $35.1 million in cash, made available from the net
proceeds received from the November 1996 Offering.
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 square
foot office building located in Fort Lee, Bergen County, New Jersey, for
approximately $26.9 million in cash, made available from the net proceeds
received from the November 1996 Offering.
On December 17, 1996, the Company acquired the International Court at Airport
Business Center ("Airport Center"), a three-building office complex comprised of
approximately 371,000 square feet located in Lester, Delaware County,
Pennsylvania for approximately $43.2 million in cash, made available from the
net proceeds received from the November 1996 Offering.
On January 28, 1997, the Company acquired 1345 Campus Parkway, a 76,000 square
foot office/flex property, located in Wall Township, Monmouth County, New Jersey
for approximately $6.8 million in cash, made available from the net proceeds
received from the November 1996 Offering. The property is located in the same
office park in which the Company previously acquired two office properties and
four office/flex properties in November 1995.
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Other Recent Developments.
During the second quarter of 1996, the Company completed its construction of
tenant improvements to 400 Alexander Park, a three story, 70,550 net rentable
square foot office building located in Princeton, Mercer County, New Jersey,
which the Company acquired in December 1995 and leased in its entirety to
Berlitz International Inc. ("Berlitz"). Also during the second quarter of 1996,
the Company entered into a lease agreement with Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") for an additional 73,200 square feet of office
space located at 95 Christopher Columbus Drive in Jersey City, increasing DLJ's
occupancy to approximately 66 percent of the property.
In December 1996, the Company completed the construction of two office/flex
properties on vacant land purchased in the Company's Totowa, Passaic County, New
Jersey office park acquired in November 1995. The two properties, which were 19
percent occupied at December 31, 1996, aggregated 47,100 square feet, and were
completed for a total cost of $2.7 million.
FINANCING ACTIVITIES
The Company utilizes the most appropriate sources of capital for acquisitions,
development, joint ventures and capital improvements, which sources may include
undistributed Funds from Operations, borrowings under its revolving credit
facilities, issuances of debt or equity securities and/or bank and other
institutional borrowings.
Credit Facilities.
After the consummation of the IPO, the Company obtained a $70.0 million
revolving credit facility (the "First Prudential Facility") from Prudential
Securities Credit Corp. ("PSC"), secured by a pledge of $74.5 million commercial
mortgage pay-through bonds held by the Company. The facility may be used to fund
acquisitions and new development projects and for general working capital
purposes, including capital expenditures and tenant improvements. The First
Prudential Facility bore interest at a floating rate equal to 150 basis points
over one-month LIBOR for January 1, 1996 through August 31, 1996. Effective
September 1, 1996, the interest rate was reduced to a floating rate equal to 125
basis points over one-month LIBOR. The First Prudential Facility is a recourse
liability of the Operating Partnership and is secured by a pledge of the $74.5
million commercial montage pay-through bonds held by the Company, which bonds
are, in turn, secured by underlying indebtedness incurred by certain of the
Company's subsidiaries. See "-- Permanent Indebtedness". The First Prudential
Facility requires monthly payments of interest only, with outstanding advances
and any accrued but unpaid interest due November 30, 1997 and is subject to
renewal at the lender's sole discretion. At December 31, 1996, $6.0 million was
outstanding under the First Prudential Facility. At February 28, 1997, $6.0
million remained outstanding under the First Prudential Facility.
On February 1, 1996, the Company obtained a credit facility (the "Bank
Facility") secured by certain of its properties in the amount of $75.0 million
from two participating banks. The Bank Facility has a three-year term and bears
interest at 150 basis points over one-month LIBOR. The terms of the Bank
Facility include certain restrictions and covenants which limit, among other
things, dividend payments and additional indebtedness and which require
compliance with specified financial ratios and other financial measurements. The
Bank Facility also requires a fee equal to one quarter of one percent of the
unused balance payable quarterly in arrears. At December 31, 1996, approximately
$23.8 million was outstanding under the Bank Facility. At February 28, 1997,
approximately $62.0 million was outstanding under the Bank Facility.
Page 11
<PAGE>
On November 4, 1996, the Company obtained a credit facility (the "Second
Prudential Facility") from PSC totaling $80.0 million which bears interest at
125 basis points over one-month LIBOR, and matures on January 15, 1998, unless
the Company or PSC elects to extend the maturity date to not earlier than June
30, 1998, or the facility is refinanced prior to such date at the election of
either the Company or PSC. The Second Prudential Facility is a recourse
liability of the Operating Partnership and is secured by the Company's equity
interest in Harborside. The terms of the Second Prudential Facility include
certain restrictions and covenants that limit, among other things, dividend
payments and additional indebtedness and that require compliance with specified
financial ratios and other financial measurements. At December 31, 1996 and at
February 28, 1997, the Company did not have any outstanding borrowings under the
Second Prudential Facility.
Permanent Indebtedness.
As of December 31, 1996, the Company had outstanding an aggregate balance of
approximately $232.9 million of long-term mortgage indebtedness, and as of
February 28, 1997, the Company had outstanding an aggregate balance of
approximately $418.1 million of long-term mortgage indebtedness (excluding
borrowings under the Company's credit facilities).
Concurrent with the IPO, the Company's initial operating subsidiaries, which own
the Original Properties, issued five-year mortgage notes with an aggregate
principal balance of $144.5 million, secured and cross-collateralized by the
Original Properties, to an affiliate ("PSI") of Prudential Securities Inc. PSI
then issued commercial mortgage pay-through bonds ("Bonds") collateralized by
the mortgage notes. Bonds with an aggregate principal balance of $70.0 million
were purchased by unrelated third parties. Bonds with an aggregate principal
balance of $74.5 million were purchased by the Company. As a result, the
Company's initial mortgage financing was $70.0 (the "Mortgage Financing").
Approximately $38.0 million of the Mortgage Financing is guaranteed under
certain conditions by certain partners of the partnerships which owned the
Original Properties. The Mortgage Financing requires monthly payments of
interest only, with all principal and any accrued but unpaid interest due in
August 1999. $46.0 million of the Mortgage Financing bears interest at a net
cost to the Company equal to a fixed rate of 8.02 percent per annum and the
remaining $24.0 million bears interest at a net cost to the Company equal to a
floating rate of 100 basis points over one-month LIBOR (5.53 percent at December
31, 1996) with a lifetime interest rate cap of 11.6 percent. Pursuant to the
terms of the Mortgage Financing, the Company is required to escrow approximately
$143,000 per month for tenant improvements and leasing commissions and $53,000
per month for capital improvements. In advance of the sale of Essex Road, on
March 12, 1996, the Company prepaid approximately $5.5 million ($1.7
million-fixed rate, $3.8 million-floating rate debt) of the Mortgage Financing,
resulting in outstanding balances of $44.3 million for the 8.02 percent fixed
rate debt and $20.2 million for the floating rate debt. See "Business -- Recent
Development -- Individual Property Acquisitions."
In connection with the acquisition of an office building in Fair Lawn, Bergen
County, New Jersey on March 3, 1995, the Company assumed an $18.8 million
non-recourse mortgage loan ("Fair Lawn Mortgage") bearing interest at a fixed
rate of 8.25 percent per annum. The loan requires payment of interest only
through March 15, 1996 and payment of principal and interest thereafter, on a
20-year amortization schedule, with the remaining principal balance due October
1, 2003. At December 31, 1996, the principal balance for the Fair Lawn Mortgage
was approximately $18.4 million, and at February 28, 1997, the balance was
approximately $18.3 million.
Page 12
<PAGE>
In connection with the Harborside Acquisition, on November 4, 1996, the Company
assumed existing mortgage debt and was provided with mortgage debt by the seller
aggregating $150.0 million. See "Business -- Recent Developments -- Harborside
Acquisition." The existing financing of approximately $107.5 million bears
interest at a fixed rate of 7.32 percent for a term of approximately nine years.
The seller-provided financing of approximately $42.5 million also has a term of
nine years and initially bears interest at a rate of 6.99 percent. The interest
rate on the seller-provided financing will be reset at the end of the third and
sixth loan years based on the yield of the three-year Treasury obligation at
that time, with spreads of 110 basis points in years four through six and 130
basis points in years seven through maturity.
In connection with the RM Acquisition on January 31, 1997, the Company assumed a
$185.3 million non-recourse mortgage loan with Teachers Insurance and Annuity
Association of America, with interest only payable monthly at a fixed annual
rate of 7.18 percent. The TIAA Mortgage is secured and cross-collateralized by
43 of the RM Properties and matures on December 31, 2003. The Company, at its
option, may convert the TIAA Mortgage to unsecured public debt upon achievement
by the Company of an investment credit rating of Baa3/BBB- or better. The TIAA
Mortgage is prepayable in whole or in part subject to certain provisions,
including yield maintenance
Interest Rate Swap Agreements.
On May 24, 1995, the Company entered into an interest rate swap agreement with a
commercial bank. The swap agreement fixes the Company's one-month LIBOR base to
a fixed 6.285 percent per annum on a notional amount of $24.0 million through
August 1999. On January 23, 1996, the Company entered into another interest rate
swap agreement with one of the participating banks in the Bank Facility. The
swap agreement has a three-year term and a notional amount of $26.0, which fixes
the Company's one-month LIBOR base to 5.265 percent on its floating rate credit
facilities. The Company is exposed to credit loss in the event of
non-performance by the other parties to the interest rate swap agreements.
However, the Company does not anticipate non-performance by either counterparty.
Equity Offerings and Shelf Registrations.
On May 13, 1996, the stockholders approved an increase in the number of
authorized shares of Common Stock of the Company from 25 million to 95 million.
On July 29, 1996, the Company filed a shelf registration statement (File No.
333- 09081) with the Securities and Exchange Commission ("SEC") for an aggregate
amount of $500.0 million in equity securities of the Company. The registration
statement was declared effective by the SEC on August 2, 1996.
On August 13, 1996, the Company sold 3,450,000 shares of its Common Stock
through a public stock offering (the "August 1996 Offering"), which included an
exercise of the underwriters over-allotment option of 450,000 shares. Net
proceeds from the August 1996 Offering (after offering costs) were approximately
$76.8 million. The offering was conducted using one underwriter and the shares
were issued from the Company's $250.0 million shelf registration statement (File
No. 33-96538).
Page 13
<PAGE>
On November 22, 1996, the Company completed an underwritten public offer and
sale of 17,537,500 shares of its Common Stock using several different
underwriters to underwrite such public offer and sale (which included an
exercise of the underwriters' over-allotment option of 2,287,500 shares). The
shares were issued from the Company's $500.0 million shelf registration
statement (File No. 333- 09081). The Company received approximately $441.2
million in net proceeds (after offering costs) from the November 1996 Offering,
and used such funds to acquire certain of the Company's property acquisitions in
November and December, pay down outstanding borrowings on its revolving credit
facilities, and invested the excess funds in Overnight Investments.
On December 31, 1996, the Company filed a shelf registration statement (File No.
333-19101) with the SEC for an aggregate amount of $1.0 billion in equity
securities of the Company. The registration statement was declared effective by
the SEC on January 7, 1997. The Company has not issued any securities under this
shelf registration.
ITEM 2. PROPERTIES
GENERAL
As of December 31, 1996, the Company owned 100 percent of 57 Properties ranging
from one to nineteen stories, including a multi-family residential property. As
of February 28, 1997, the Company owned 100 percent of 123 properties ranging
from one to nineteen stories, including two stand-alone retail properties, two
land leases and two multi-family residential properties. All of the Properties
are strategically located in a contiguous area from Philadelphia, Pennsylvania
to Stamford, Connecticut. The Properties are easily accessible from major
thoroughfares and are in close proximity to numerous amenities. The Properties
contain a total of approximately 11.4 million square feet, with the individual
Office Properties ranging from approximately 23,350 to 761,200 square feet, the
individual Office/Flex Properties ranging from 13,275 to 76,298 square feet and
the individual Industrial/Warehouse Properties ranging from 6,638 to 195,741
square feet.
The Properties, each managed by on-site employees, generally have attractively
landscaped sites, atriums and covered parking in addition to quality design and
construction. As of February 28, 1997, the Office Properties, Office/Flex
Properties and Industrial/Warehouse Properties were approximately 96 percent
leased to approximately 1,100 tenants. The Company's tenants include many
service sector employers, including a large number of professional firms and
national and international businesses. The Company believes that all of its
Properties are well-maintained and do not require significant capital
improvements.
The following property information is provided separately for the Year-End
Properties and the RM Properties. It should be noted that as the RM Properties
were acquired on January 31, 1997, certain information provided for the RM
Properties may not be indicative of the results that will occur following the
Company's acquisition of such properties.
Page 14
<PAGE>
Year-End Properties: Property Tables
The following tables set forth certain historical information relating to each
of the Year-End Office Properties and the Year-End Office/Flex Properties, which
are owned 100 percent by the Company as of December 31, 1996:
Page 15
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Year-End Office Properties
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive ......... 1973 56,000 100.0 941 814 1.27
11 Commerce Drive (6)..... 1981 90,000 95.8 1,219 1,099 1.64
20 Commerce Drive ........ 1990 176,600 100.0 3,677 2,936 4.95
65 Jackson Drive ......... 1984 82,778 86.4 953 895 1.28
CLARK, UNION COUNTY, NJ
100 Walnut Avenue ......... 1985 182,555 94.2 3,679 3,341 4.95
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive........... 1989 621,900 100.0 12,123 11,031 16.33
Harborside Financial Center(8)
Christopher Columbus Drive
Exchange Place & the
Hudson River
Plaza I ............... 1983(9) 400,000 100.0 516 516 0.69
Plaza II .............. 1990(9) 761,200 95.8 2,134 2,134 2.87
Plaza III ............. 1990(9) 725,600 97.0 2,391 2,391 3.22
Parking Agreement (10). N/A N/A 100.0 538 538 0.72
ROSELAND, ESSEX COUNTY, NJ
101 Eisenhower Parkway..... 1980 237,000 93.1 3,685 3,339 4.96
103 Eisenhower Parkway..... 1985 151,545 97.5 3,187 3,057 4.29
Page 16
<PAGE>
<CAPTION>
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
<S> <C> <C> <C>
Year-End Office Properties
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive ......... 16.80 14.54 Public Service Electric & Gas
Co. (18%), Excel Scientific
Protocols, Inc. (18%), Columbia
National, Inc. (13%)
11 Commerce Drive (6)..... 14.14 12.75 Public Service Electric & Gas Co.
(23%), Northeast
Administrators (23%)
20 Commerce Drive ........ 20.82 16.63 Public Service Electric & Gas Co.
(25%), Paychex, Inc. (12%)
65 Jackson Drive ......... 13.32 12.51 Kraft General Foods, Inc. (35%),
Allstate Insurance Co. (27%),
The Procter & Gamble Distribution
Co. Inc. (17%)
CLARK, UNION COUNTY, NJ
100 Walnut Avenue ......... 21.39 19.43 BDSI, Inc. (39%), The Equitable
Life Assurance Society of the
United States (15%)
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive........... 19.49 17.74 Donaldson, Lufkin & Jenrette
Securities Corp. (67%), NTT
Data Corp. (25%)
Harborside Financial Center(8)
Christopher Columbus Drive
Exchange Place & the
Hudson River
Plaza I ............... 1.29 1.29 Bankers Trust Harborside,Inc.(96%)
Plaza II .............. 2.93 2.93 Dow Jones Telerate Holdings, Inc. (44%),
Dean Witter Trust Co. (24%)
Plaza III ............. 3.40 3.40 American Institute of Certified
Public Accountants (34%), Bank of
Tokyo Information
Services, Inc. (19%)
Parking Agreement (10). N/A N/A Kinney Hackensack, Inc. (100%)
ROSELAND, ESSEX COUNTY, NJ
101 Eisenhower Parkway..... 16.70 15.13 Arthur Andersen LLP (29%),
Brach, Eichler, Rosenberg,
Silver, Bernstein & Hammer (13%)
103 Eisenhower Parkway..... 21.57 20.69 Ravin, Sarasohn, Cook, Baumgarten (18%), Lum,
Hoenes, Able (17%), Chelsea-GCA (15%)
Page 17
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Year-End Office Properties(cont.)
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard ......... 1984 235,000 99.0 4,611 3,954 6.21
300 Tice Boulevard (8)........ 1991 230,000 100.0 245 245 0.33
PARAMUS, BERGEN COUNTY, NJ
15 Essex Road ............. 1979 (7) (7) 261 224 0.35
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 ........... 1987 143,000 100.0 3,343 3,331 4.52
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (8) ...... 1981 200,000 90.7 174 174 0.24
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike ..... 1987 168,144 97.1 3,396 2,998 4.57
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road ....... 1978 96,000 99.4 1,471 1,444 1.98
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard ....... 1988 180,000 95.9 3,250 3,219 4.38
Page 18
<PAGE>
<CAPTION>
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
<S> <C> <C> <C>
Year-End Office Properties(cont.)
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard ......... 19.82 17.00 Syncsort, Inc. (22%)
300 Tice Boulevard (8)........ 1.07 1.07 Medco Containments
Services, Inc. (20%), Xerox
Corp. (13%), Chase Home
Mortgage Corp. (11%),
Comdisco, Inc. (11%)
PARAMUS, BERGEN COUNTY, NJ
15 Essex Road ............. (7) (7) (7)
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 ........... 23.38 23.29 Lonza, Inc. (63%), Chubb
Federal Insurance Co. (16%),
Boron-Lepone Assoc., Inc. (10%)
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (8) ...... 0.96 0.96 Broadview Associates LLP (16%),
Bozell Wordwide, Inc. (12%)
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike ..... 20.80 18.36 Bressler, Amery & Ross (24%),
General Motors Acceptance
Corp.(14%), Dun &
Bradstreet, Inc. (12%)
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road ....... 15.42 15.13 Metropolitan Life Insurance Co.
(36%), International Business
Machines (35%)
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard ....... 18.83 18.65 Allstate Insurance Co. (41%),
The Prudential Insurance Co. (21%),
Provident Savings F.A. (20%), John
Alden Life Insurance Co. of N.Y. (11%)
Page 19
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Year-End Office Properties (cont.)
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive ............ 1987 98,500 99.2 2,048 2,037 2.76
400 Alexander Park(8)...... 1987 70,550 100.0 971 840 1.31
103 Carnegie Center(8)..... 1984 96,000 91.9 1,299 1,299 1.75
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ........ 1983 75,000 69.2 780 679 1.05
Clifton,
Passaic County, NJ
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive ....... 1988 56,066 97.5 967 963 1.30
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway ....... 1988 23,350 87.9 390 375 0.53
1350 Campus Parkway ....... 1990 79,747 80.5 1,174 1,161 1.58
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66 ............. 1989 180,000 100.0 2,411 2,411 3.25
EGG HARBOR,
ATLANTIC COUNTY, NJ
100 Decadon Drive ......... 1987 40,422 100.0 772 772 1.04
200 Decadon Drive ......... 1991 39,922 94.1 604 596 0.81
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (8)...... 1986 49,000 100.0 191 191 0.26
233 Mt. Airy Road (8)...... 1987 66,000 100.0 336 336 0.45
Page 20
<PAGE>
<CAPTION>
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
<S> <C> <C> <C>
Year-End Office Properties (cont.)
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive ............ 20.96 20.85 U.S. Trust of N.J. (19%), Princeton
Venture Research Corp. (14%), Woodrow
Wilson (12%), Villeroy & Boch
Tableware Ltd. (11%)
400 Alexander Park(8)...... 13.76 11.91 Berlitz International Inc.(100%)
103 Carnegie Center(8)..... 14.72 14.72 Ronin Development Corp. (11%)
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ........ 15.03 13.08 Motorola Inc. (19%)
Clifton,
Passaic County, NJ
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive ....... 17.69 17.62 Bank of New York (55%), Bankers
Financial (16%), Commonwealth Land (11%)
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway ....... 18.27 Centennial Cellular Corp. (41%),
19.00 McClaughlin, Bennett, Gelson(25%),
Premier Dash (12%), NJ Natural
Energy(10%)
1350 Campus Parkway ....... 18.09 New Jersey National Bank (17%),
18.29 Stephen E. Gertier (17%),
Hospital Computer
Systems, Inc. (11%)
NEPTUNE, MONMOUTH COUNTY, NJ 13.39
3600 Route 66 ............. 13.39 The U.S. Life Insurance Company
in New York City (100%)
EGG HARBOR,
ATLANTIC COUNTY, NJ 19.10
100 Decadon Drive ......... 19.10 Computer Sciences Corp. (79%)
16.08
200 Decadon Drive ......... 15.87 Hughes STX (27%), Reliance
Healthcare Group (19%),
International Business
Machines (14%), Computer
Sciences Corp. (11%)
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (8)...... 3.90 3.90 Lucent Technologies Inc. (100%)
233 Mt. Airy Road (8)...... 5.09 5.09 A.T.& T. Corp. (100%)
Page 21
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Year-End Office Properties (cont.)
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East (8).. 1984 91,600 100.0 214 214 0.29
5 Sentry Parkway West (8).. 1984 38,400 100.0 95 95 0.13
MEDIA, DELAWARE COUNTY, PA
Rose Tree Coporate Center
Center I (8).............. 1986 100,000 96.1 1,221 1,221 1.64
Center II (8)............. 1990 160,000 99.0 1,847 1,846 2.49
LESTER, DELAWARE COUNTY, PA
Internationl Court at
Airport Business Center(8)
International Court I .. 1986 95,000 99.7 85 85 0.11
International Court II . 1987 208,000 99.8 153 153 0.21
International Court III. 1992 68,000 100.0 55 55 0.07
--------- ----- ------ ------ -----
Total Year-End Office Properties 6,372,879 97.0 67,407 63,009 90.78
--------- ----- ------ ------ -----
Page 22
<PAGE>
<CAPTION>
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
<S> <C> <C> <C>
Year-End Office Properties (cont.)
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East (8).. 2.34 2.34 Merck, Inc. (72%), Selas
Fluid Processing Corp. (22%)
5 Sentry Parkway West (8).. 2.47 2.47 Merck. Inc. (70%),
David Cutler Group (30%)
MEDIA, DELAWARE COUNTY, PA
Rose Tree Coporate Center
Center I (8).............. 12.71 12.71 General Services Administration
(13%), Erie Insurance
Company (11%)
Center II (8)............. 11.66 11.65 Barnett International (27%)
LESTER, DELAWARE COUNTY, PA
Internationl Court at
Airport Business Center(8)
International Court I .. 0.90 0.90 SAP America, Inc. (81%)
International Court II . 0.74 0.74 PNC Bank (51%), Mercy Health
Plan (34%)
International Court III. 0.81 0.81 SAP America, Inc. (38%), McLaren
Hart Environmental Engineering
Corp. (38%), Mercy Health
Plan(13%)
----- -----
Total Year-End Office Properties 19.00 (11) 17.54 (11)
----- -----
Page 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Year-End Office/Flex Properties
TOTOWA, PASSAIC COUNTY, NJ
11 Commerce Way ........... 1989 47,025 88.9 412 412 0.55
20 Commerce Way ........... 1992 42,540 100.0 467 467 0.63
29 Commerce Way ........... 1990 48,930 100.0 454 430 0.61
40 Commerce Way ........... 1987 50,576 100.0 426 416 0.57
45 Commerce Way ........... 1992 51,207 100.0 478 454 0.64
60 Commerce Way ........... 1988 50,333 100.0 292 273 0.39
80 Commerce Way (8)........ 1996 22,500 51.6 -- -- --
100 Commerce Way (8)....... 1996 24,600 -- -- -- --
120 Commerce Way ...... 1994 9,024 100.0 128 126 0.17
140 Commerce Way .......... 1994 26,881 100.0 210 210 0.28
Page 24
<PAGE>
<CAPTION>
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
<S> <C> <C> <C>
Year-End Office/Flex Properties
TOTOWA, PASSAIC COUNTY, NJ
11 Commerce Way ........... 9.86 9.86 Caremark Homecare (78%),
Quantum Health (11%),
20 Commerce Way ........... 10.98 10.98 Motorola Inc. (45%),
Siemens Electro-
Components (41%),
John Guest USA (14%)
29 Commerce Way ........... 9.28 8.79 Sandvik Sorting Systems,Inc.(44%),
Paterson Dental Supply Inc. (23%),
Fujitec America Inc. (22%),
Bell Atlantic
Meridian Systems(11%)
40 Commerce Way ........... 8.42 8.23 Thomson Electronics (35%),
Minolta Business
Systems Inc.(35%),
Snap-On, Inc. (14%),
Inchscape Testing Services (14%)
45 Commerce Way ........... 9.33 8.87 Ericsson Radio Systems Inc. (52%),
Woodward Clyde Consultants (27%),
Oakwood Corporate Housing (10%),
Sensormatic Electronics (10%)
60 Commerce Way ........... 5.80 5.42 Ericsson Inc. (43%),
Relectronic Service Corp. (43%),
Maxlite-S.K. America (14%)
80 Commerce Way (8)........ -- -- Hey Diddle Diddle Inc. (52%), Bell
Atlantic Communications (11.6%)
100 Commerce Way (8)....... -- --
120 Commerce Way ...... 14.18 13.96 Deerfield Healthcare (100%)
140 Commerce Way .......... 7.81 7.81 Advanced Images Systems Inc.(20%),
Philips Consumer (l9%), Holder
Group Inc. (11%), Showa Toll
USA Inc. (10%), Alpha Testing (10%),
Telsource Inc. (10%), Dairygold (10%),
Universal Hospital Services (10%)
Page 25
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
of 1996
Percentage Total Office
Net Leased 1996 1996 and Office/
Rentable as of Base Effective Flex Base
Property Year Area 12/31/96 Rent Rent Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) ($000)(3) (%)
-------- ----- --------- ------ --------- --------- ---
<S> <C> <C> <C> <C> <C> <C>
Year-End Office/Flex Properties(cont.)
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1325 Campus Parkway ....... 1988 35,000 91.9 392 391 0.53
1340 Campus Parkway ....... 1992 72,502 88.9 600 600 0.81
1320 Wykoff Road .......... 1986 20,336 100.0 190 190 0.26
1324 Wykoff Road .......... 1987 21,168 100.0 206 206 0.28
1433 Highway 34 ........... 1985 69,020 94.7 563 549 0.76
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive ........ 1989 13,275 100.0 226 226 0.30
200 Horizon Drive ......... 1991 45,770 85.3 445 445 0.60
300 Horizon Drive ......... 1989 69,780 100.00 923 919 1.25
500 Horizon Drive ......... 1990 41,205 92.8 436 427 0.59
--------- ------ ------ ------ ------
Total Yr-End Office/Flex Prop. 761,672 91.5 6,848 6,741 9.22
--------- ------ ------ ------ ------
Total Year-End Properties 7,134,551 96.4 74,255 69,750 100.00
========= ==== ====== ====== ======
See footnotes on subsequent page.
Page 26
<PAGE>
<CAPTION>
1996 1996 Tenants Leasing
Average Average 10% or More
Base Rent Effective of Net
per Rent Per Rentable Area
Property Sq. Ft. Sq. Ft. per Property
Location ($)(4) ($)(5) as of 12/31/96(6)
-------- ------ ------ -----------------
<S> <C> <C> <C>
Year-End Office/Flex Properties(cont.)
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1325 Campus Parkway ....... 1988 12.19 12.16 American Press (71%)
1340 Campus Parkway ....... 1992 9.31 9.31 Groundwater & Environmental
Services(33%), Software Shop(22%),
Lincare/Omni (15%), Association
for Retarded Citizens (11%)
1320 Wykoff Road .......... 1986 9.34 9.34 Eastern Automation (71%),
A.T.&T. Corp. (29%)
1324 Wykoff Road .......... 1987 9.73 9.73 A.T.& T. Corp. (29%),
State of New Jersey (25%),
Supply Saver, Inc. (22%)
1433 Highway 34 ........... 1985 8.61 8.40 State Farm Mutual Auto
Insurance (22%), NJ
Natural Gas Co. (14%),
Beacon Tool Inc. (12%)
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive ........ 1989 17.02 17.02 H.I.P. of New Jersey Inc. (100%)
200 Horizon Drive ......... 1991 11.40 11.40 O.H.M. Remediation
Services Corp. (85%)
300 Horizon Drive ......... 1989 13.23 13.17 State of NJ/D.E.P (50%),
McFaul & Lyons (26%),
Fluor Daniel GTI (24%)
500 Horizon Drive ......... 1990 11.40 11.17 First Financial (30%),
Lakeview Child Center Inc.(19%),
SHL Systems House Corp. (18%),
NJ Consumer Water Co. (14%),
Diedre Moire Corp. (11%)
----- ------
Total Yr-End Office/Flex Prop. 10.00 (11) 9.84 (11)
----- ------
Total Year-End Properties 17.28 (11) 16.07 (11)
----- ------
See footnotes on subsequent page.
Page 27
<PAGE>
- -------------------------
(1) Based on all leases in effect as of December 31, 1996.
(2) Total base rent for 1996, determined in accordance with GAAP.
Substantially all of the leases provide for annual base rents plus
recoveries and escalation charges based upon the tenant's proportionate
share of and/or increases in real estate taxes and certain operating
costs, as defined, and the pass through of charges for electrical
usage.
(3) Total base rent for 1996 minus total 1996 amortization of tenant
improvements, leasing commissions and other concessions and costs,
determined in accordance with GAAP.
(4) Base rent for 1996 divided by net rentable square feet leased at
December 31, 1996. For those properties acquired by the Company during
1996, amounts presented reflected only that portion of the year during
which the Company owned the properties.
(5) Effective rent for 1996 divided by net rentable square feet leased at
December 31, 1996. For those properties acquired by the Company during
1996, base rent and effective rent amounts presented reflect only that
portion of the year during which the Company owned the properties.
(6) Excludes office space leased by the Company.
(7) 15 Essex Road was sold by the Company on March 20, 1996.
(8) As this Year-End Property was acquired or fully constructed by the
Company during 1996, the amounts represented in 1996 Base Rent and
Effective Rent as well as 1996 Average Base Rent per Sq.Ft. and 1996
Average Effective Rent per Sq.Ft. reflect only that portion of the year
during which the Company owned or placed the property in service during
the year. Accordingly, amounts may not be indicative of the property's
full year results.
(9) The Harborside Financial Center was completely reconstructed from 1983
through 1990, although the base structure was originally constructed in
1930.
(10) The Company has a lease agreement with a parking services company for
the use of certain land at Harborside to be used as a paid parking
area.
(11) Includes only those properties owned by the Company on January 1, 1996.
Page 28
</TABLE>
<PAGE>
RM Properties: Property Tables
The following tables set forth certain historical information relating to each
of the RM Office Properties, the RM Office/Flex Properties and the
Industrial/Warehouse properties which were owned 100 percent by RM as of
December 31, 1996.
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
100 Clearbrook Road(6) .... 1975 60,000 93.8 776 1.32
101 Executive Boulevard ... 1971 50,000 94.3 893 1.52
570 Taxter Road ........... 1972 75,000 94.2 1,483 2.52
HAWTHORNE,
WESTCHESTER COUNTY, NY
1 Skyline Drive ........... 1980 20,400 50.0 134 0.23
2 Skyline Drive ........... 1987 30,000 100.0 420 0.71
17 Skyline Drive .......... 1989 85,000 100.0 1,130 1.92
30 Saw Mill River Road .... 1982 248,400 100.0 4,471 7.59
</TABLE>
Page 29
<PAGE>
<TABLE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
Property per Rentable Area
Location Sq. Ft. per Property
-------- ($)(3) as of 12/31/96(4)
------ -----------------
<S> <C> <C>
RM Office Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
100 Clearbrook Road(6) .... 13.79 ANS (34%)
101 Executive Boulevard ... 18.92 Pennysaver Group (18%),
MCS Business Machines(11%),
Alcone Sim's O'Brien (12%)
570 Taxter Road ........... 20.99 Connecticut General (15%)
HAWTHORNE,
WESTCHESTER COUNTY, NY
1 Skyline Drive ........... 13.11 Childtime Childcare (50%)
2 Skyline Drive ........... 13.99 MW Samara (41%),
Perinin Construction (30%),
Boykoff & Bell (13%)
17 Skyline Drive .......... 13.29 IBM (100%)
30 Saw Mill River Road .... 18.00 IBM (100%)
Page 30
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office Properties(cont.)
YONKERS,
WESTCHESTER COUNTY, NY
1 Executive Boulevard...... 1982 112,000 82.5 1,958 3.32
3 Executive Boulevard...... 1987 58,000 95.0 1,100 1.87
TARRYTOWN,
WESTCHESTER COUNTY, NY
200 White Plains Road ..... 1982 89,000 91.3 1,588 2.69
220 White Plains Road...... 1984 89,000 96.2 1,772 3.01
WHITE PLAINS,
WESTCHESTER COUNTY, NY
1 Barker Avenue ........... 1975 68,000 100.0 1,461 2.48
3 Barker Avenue ........... 1983 65,300 98.9 1,216 2.06
1 Water Street ............ 1979 45,700 100.0 874 1.48
11 Martine Avenue ......... 1987 180,000 100.0 4,224 7.17
50 Main Street ............. 1985 309,000 96.7 7,039 11.95
--------- ------ ------- -----
Total RM Office Properties 1,584,800 95.9 30,539 51.84
--------- ------ ------- -----
Page 31
<PAGE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
<S> <C> <C>
RM Office Properties(cont.)
YONKERS,
WESTCHESTER COUNTY, NY
1 Executive Boulevard...... 21.19 Wise/Contact US (14%)
3 Executive Boulevard...... 19.97 GMAC/MIC (47%),
Metropolitan Life (22%)
TARRYTOWN,
WESTCHESTER COUNTY, NY
200 White Plains Road ..... 19.53 Independent Health (28%),
Allmerica Finance (17%),
NYS Dept. of
Environmental Services(13%)
220 White Plains Road...... 20.70 Stellare Management (11%)
WHITE PLAINS,
WESTCHESTER COUNTY, NY
1 Barker Avenue ........... 21.49 O'Connor, McGuinn (19%),
United Skys
Realty Corp. (19%)
3 Barker Avenue ........... 18.82 Bernard C. Harris (56%)
1 Water Street ............ 19.13 Trigen Energy (37%),
Stewart Title (15%)
11 Martine Avenue ......... 23.47 KPMG Peat Marwick (14%),
McCarthy Fingar (11%),
David Worby (11%)
50 Main Street ............. 23.57 National Economic
----- Research Assoc. Inc.(10%)
Total RM Office Properties 20.10
-----
</TABLE>
Page 32
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office/Flex Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Westchester Plaza ..... 1967 25,000 100.0 282 0.48
2 Westchester Plaza ..... 1968 25,000 100.0 387 0.66
3 Westchester Plaza ..... 1969 93,500 100.0 1,088 1.85
4 Westchester Plaza ...... 1969 44,700 86.6 520 0.88
5 Westchester Plaza ...... 1969 20,000 100.0 229 0.39
6 Westchester Plaza ...... 1968 20,000 76.5 196 0.33
7 Westchester Plaza ...... 1972 46,200 100.0 619 1.05
8 Westchester Plaza ...... 1971 67,200 68.5 711 1.21
Page 33
<PAGE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
<S> <C> <C>
RM Office/Flex Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Westchester Plaza ..... 11.30 KCI Therapeutic (40%),
Thin Film Concepts (20%),
RS Knapp(20%),
American Greeting (20%)
2 Westchester Plaza ..... 15.50 Board of Cooperation (78%),
Kin-Tronics (12%),
Squires Production (10%)
3 Westchester Plaza ..... 11.63 Apria Healthcare (32%),
Kangol Headware (27%),
V-Band Corp. (16%),
Dental Concepts (12%)
4 Westchester Plaza ...... 13.43 Metropolitan Life (38%),
EEV Inc. (34%)
5 Westchester Plaza ...... 11.45 Kramer Scientific (26%),
Rokonet Industries (25%),
UA Plumbers Education
(25%), Furniture
Etc. (13%), Fujitsu (13%)
6 Westchester Plaza ...... 12.80 Xerox (27%), Signacon
Control (27%), PC Technical
(23%), Girard Rubber
Co. (12%)
7 Westchester Plaza ...... 13.41 Emigrant Savings (56%),
Fire-End Croker (22%),
Health Maintenance (10%)
8 Westchester Plaza ...... 15.46 Westchester Library (19%),
Mamiya Amnerica (16%),
Self Powered
Lighting (13%)
Page 34
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office/Flex Properties(cont.)
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
11 Clearbrook Road ....... 1974 31,800 100.0 267 0.45
75 Clearbrook Road ....... 1990 32,720 100.0 665 1.13
150 Clearbrook Road ...... 1975 74,900 100.0 939 1.59
175 Clearbrook Road ...... 1973 98,900 97.6 1,191 2.02
200 Clearbrook Road ...... 1974 94,000 100.0 946 1.61
250 Clearbrook Road ...... 1973 155,000 84.1 1,206 2.05
50 Executive Boulevard ... 1969 45,200 98.1 386 0.66
77 Executive Boulevard ... 1977 13,000 100.0 169 0.29
85 Executive Boulevard ... 1968 31,000 100.0 287 0.49
Page 35
<PAGE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
<S> <C> <C>
RM Office/Flex Properties(cont.)
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
11 Clearbrook Road ....... 8.41 Eastern Jungle (27%),
Treetops Inc. (21%)
MCS Marketing (18%),
Creative Medical (14%),
Puig Perfumes (14%)
75 Clearbrook Road ....... 20.33 Evening Out (100%)
150 Clearbrook Road ...... 12.54 Court Sports I(24%),
Philips Medical (18%),
Transwestern Pub (12%)
175 Clearbrook Road ...... 12.34 Midland Avenue (35%),
Hypres (12%)
200 Clearbrook Road ...... 10.06 Midland Avenue (22%),
Proftech Corp. (20%),
IR Industries (18%),
Wyse Technology (14%)
250 Clearbrook Road ...... 9.25 AFP Imaging (42%),
The Artina Group (14%)
50 Executive Boulevard ... 8.71 MMO Music Group (69%),
Medical Billing (22%)
77 Executive Boulevard ... 13.03 Bright Horizons (55%),
WNN Corporation (35%)
85 Executive Boulevard ... 9.25 Vrex Inc. (49%), Westhab
Inc,. (18%), Saturn II
Systems (11%), John
Caulfields (13%)
Page 36
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office/Flex Properties(cont.)
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
300 Executive Blvd ....... 1970 60,000 100.0 514 0.87
350 Executive Blvd ....... 1970 15,400 100.0 238 0.40
399 Executive Blvd ....... 1962 80,000 100.0 926 1.57
400 Executive Blvd ....... 1970 42,200 100.0 550 0.93
500 Executive Blvd ....... 1970 41,600 100.0 566 0.96
525 Executive Blvd ....... 1972 61,700 100.0 752 1.28
HAWTHORNE,
WESTCHESTER COUNTY, NY
4 Skyline Drive ........... 1987 80,600 100.0 1,082 1.84
8 Skyline Drive ........... 1985 50,000 100.0 487 0.83
10 Skyline Drive .......... 1985 20,000 81.0 215 0.36
Page 37
<PAGE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
<S> <C> <C>
RM Office/Flex Properties(cont.
ELMSFORD,
WESTCHESTER COUNTY, NY(cont.)
300 Executive Blvd ....... 8.57 Varta Batteries (44%),
Princeton Ski Outlet (43%),
LMG International (12%)
350 Executive Blvd ....... 15.45 Ikon Office (100%)
399 Executive Blvd ....... 11.57 American Banknote (72%),
Kaminstein Imports (28%)
400 Executive Blvd ....... 13.03 Baker Engineering (38%),
North American Van
Lines (24%)
500 Executive Blvd ....... 13.61 Singer Holding Corp. (36%),
Dover Elevator (16%),
Commerce Overseas(16%),
Charles Martine (13%),
Olsten Home Health (13%)
525 Executive Blvd ....... 12.18 Vie de France (57%),
New York Blood Center
(21%)
HAWTHORNE,
WESTCHESTER COUNTY, NY
4 Skyline Drive ........... 13.43 GEC Alsthom (50%),
RMI Direct Marketing (10%)
8 Skyline Drive ........... 9.75 Cityscape (51%),
Reveco Inc. (29%),
Stratasys Inc. (12%)
10 Skyline Drive .......... 13.27 DX Communications (65%),
Galston Corp. (17%)
Page 38
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office/Flex Properties(cont.)
HAWTHORNE,
WESTCHESTER COUNTY, NY(cont.)
11 Skyline Drive .......... 1989 45,000 100.0 679 1.15
15 Skyline Drive .......... 1989 55,000 100.0 902 1.53
200 Saw Mill River Road ... 1965 51,100 100.0 611 1.04
YONKERS,
WESTCHESTER COUNTY, NY
100 Corporate Boulevard ... 1987 78,000 100.0 1,260 2.14
4 Executive Plaza ......... 1986 80,000 83.6 704 1.19
6 Executive Plaza ......... 1987 80,000 100.0 962 1.63
1 Odell Plaza ............. 1980 106,000 98.2 1,099 1.87
5 Odell Plaza ............. 1983 38,400 100.0 439 0.74
7 Odell Plaza............. 1984 42,600 100.0 587 1.00
Page 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
------ -----------------
<S> <C> <C>
RM Office/Flex Properties(cont.)
HAWTHORNE,
WESTCHESTER COUNTY, NY(cont.)
11 Skyline Drive .......... 15.09 Cube Computer (40%), Steri
Pharmacy (19%), Bowthorpe
Holdings (18%), Planned
Parenthood (11%)
15 Skyline Drive .......... 16.40 United Parcel Service (61%),
Emisphere Technology (23%),
Minolta Copier (16%)
200 Saw Mill River Road ... 11.96 Walter Degruyter (21%),
Xerox (17%), Argents Air
Express(12%), SI Industrial
(10%), AAR Hardware (10%)
YONKERS,
WESTCHESTER COUNTY, NY
100 Corporate Boulevard ... 16.15 Bank of New York (28%),
Montefore (19%), Xerox
(13%), Quality Lifestyle
(12%), Medigene (11%)
4 Executive Plaza ......... 10.52 O K Industries (43%),
Minami International (11%)
6 Executive Plaza ......... 12.02 Cablevision System (39%),
KVL Audio Visual (12%),
Empire Managed (10%)
1 Odell Plaza ............. 10.55 Court Sports II (19%),
Gannett Satellite (11%),
Crown Trophy (10%)
5 Odell Plaza ............. 11.42 Voyetra Technology (45%),
Photo Fili Inc. (34%),
Premier Pharmacy (22%)
7 Odell Plaza............. 13.78 US Post Office (41%),
Bright Horizons (16%),
TT Systems Corp. (12%),
CP Bourg Inc. (12%)
Page 40
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
RM Office/Flex Properties(cont.)
STAMFORD,
FAIRFIELD COUNTY, CT
419 West Avenue ........... 1986 88,000 100.0 1,333 2.26
500 West Avenue ........... 1988 25,000 100.0 320 0.54
550 West Avenue ........... 1990 54,000 100.0 721 1.22
--------- ------ ------- -----
Total RM Office/Flex Properties 2,112,720 96.3 25,035 42.49
--------- ------ ------- -----
Page 41
<PAGE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96(4)
-------- ------ -----------------
<S> <C> <C>
RM Office/Flex Properties(cont.)
STAMFORD,
FAIRFIELD COUNTY, CT
419 West Avenue ........... 15.15 Lear Siegal Inc. (81%)
500 West Avenue ........... 12.80 TNT Skypac (26%), Stamford
Associates (26%), Lead
Trackers(21%), Delecor
USA (17%), M. Cohen &
Sons (11%)
550 West Avenue ........... 13.35 Lifecodes Corp. (44%),
Davidoff of Geneva (39%)
-----
Total RM Office/Flex Properties 12.31
-----
Page 42
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Percentage
Of 1996
Total Office,
Percentage Office/Flex,
Net Leased 1996 & Industrial/
Rentable as of Base Warehouse
Property Year Area 12/31/96 Rent Base Rent
Location Built (Sq. Ft.) (%)(1) ($000)(2) (%)
-------- ----- --------- ------ --------- -------------
<S> <C> <C> <C> <C> <C>
Industrial/Warehouse Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Warehouse Lane .......... 1957 6,600 100.0 42 0.07
2 Warehouse Lane .......... 1957 10,900 95.9 109 0.19
3 Warehouse Lane .......... 1957 77,200 100.0 249 0.42
4 Warehouse Lane .......... 1957 195,500 80.0 1,758 2.99
5 Warehouse Lane .......... 1957 75,100 100.0 737 1.25
6 Warehouse Lane .......... 1982 22,100 100.0 445 0.75
--------- ----- ------- ------
Total Industrial/Warehouse Prop. 387,400 89.8 3,340 5.67
--------- ----- ------- ------
Total RM Office, Office/Flex and
Industrial/Warehouse Properties 4,084,920 95.5 58,914 100.00
========= ===== ======= ======
See footnotes on subsequent page.
Page 43
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1996 Tenants Leasing
Average 10% or More
Base Rent of Net
per Rentable Area
Property Sq. Ft. per Property
Location ($)(3) as of 12/31/96 (4)
-------- ------ --------------
<S> <C> <C>
Industrial/Warehouse Properties
ELMSFORD,
WESTCHESTER COUNTY, NY
1 Warehouse Lane .......... 6.38 JP Trucking Service(100%)
2 Warehouse Lane .......... 10.48 RJ Bruno Roofing (55%),
Savin Engineering (41%)
3 Warehouse Lane .......... 3.23 United Parcel Service Inc. (100%)
4 Warehouse Lane .......... 11.24 San Mar Laboratory (55%),
Marcraft Clothes (18%),
2 Westchester Medical
(11%)
5 Warehouse Lane .......... 9.82 Metbev Inc. (42%), E&H
Tire Buying (19%),
Backstage Exclusive
Knitwear (16%),
Conway Import Co. (10%)
6 Warehouse Lane .......... 20.12 Conway General (96%)
-----
Total Industrial/Warehouse Prop. 9.60
-----
Total RM Office, Office/Flex and
Industrial/Warehouse Properties 15.10
-----
See footnotes on subsequent page.
Page 44
<PAGE>
- -------------------------
(1) Based on all leases in effect as of December 31, 1996.
(2) Total base rent for RM, as recorded in 1996, determined in accordance with
GAAP. Substantially all of the leases provide for annual base rents plus
recoveries and escalation charges based upon the tenant's proportionate
share of and/or increases in real estate taxes and certain operating costs,
as defined, and the pass through of charges for electrical usage.
(3) Base rent for 1996 divided by net rentable square feet leased at December
31, 1996.
(4) Excludes office space leased by RM as of December 31, 1996.
</TABLE>
Retail Properties.
The Company owns two stand-alone retail properties as of February 28, 1997, both
acquired in the RM Acquisition.
The Company owns an 8,000 square foot restaurant, constructed in 1986, located
in the South Westchester Executive Park in Yonkers, Westchester County, New
York. The restaurant is 100 percent leased to Magic at Yonkers, Inc. for use as
a Red Robin restaurant under a 25-year lease. The lease currently provides for
fixed annual rent of $230,000, with fully-reimbursed real estate taxes, and
operating expenses escalated based on CPI over a base year CPI. The lease, which
expires on June 30, 2012, includes scheduled rent increases in July 1997 to
approximately $265,000 annually, and in July 2002 to approximately $300,000
annually. The lease also provides for additional rent calculated as a percentage
of sales over a specified sales amount, as well as for two five-year renewal
options. 1996 base rental revenue, calculated in accordance with GAAP, to RM was
approximately $198,000.
The Company also owns a 9,300 square foot restaurant, constructed in 1984,
located at 230 White Plains Road, Tarrytown, Westchester County, New York. The
restaurant is 100 percent leased to TGI Fridays under a 10-year lease which
provides for fixed annual rent of approximately $195,000, with fully-reimbursed
real estate taxes, and operating expenses escalated based on CPI over a base
year CPI. The lease, which expires on August 31, 2004, also provides for
additional rent calculated as a percentage of sales over a specified sales
amount, as well as for four five-year renewal options. 1996 base rental revenue,
calculated in accordance with GAAP, to RM was approximately $195,000.
Land Leases.
The Company owns two land leases as of February 28, 1997, both acquired in the
RM Acquisition.
Page 45
<PAGE>
The Company has land leased to Star Enterprises, where a 2,264 square foot
Texaco Gas Station was constructed, located at 1 Enterprise Boulevard in
Yonkers, Westchester County, New York. The 15-year, triple-net land lease
provides for annual rent of approximately $125,000 through January 1998, with an
increase to approximately $145,000 annual rent through April 30, 2005. The lease
also provides for two five-year renewal options. 1996 base rental revenue,
calculated in accordance with GAAP, to RM was approximately $135,000.
The Company also leases five acres of land to Rake Realty, where a 103,500
office building exists, located at 700 Executive Boulevard, Elmsford,
Westchester County, New York. The 22-year, triple-net land lease provides for
fixed annual rent plus a CPI adjustment every five years, and expires on
November 30, 2000. RM's 1996 base rent, calculated in accordance with GAAP,
under this lease was approximately $97,000. The lease also provides for several
renewal options which could extend the lease term for an additional 30 years.
Multi-family Residential Properties.
As of February 28, 1997, the Company owned two multi-family residential
properties, described below:
Tenby Chase Apartments, Delran, Burlington County, New Jersey
The Company's multi-family residential property, known as the Tenby Chase
Apartments, was built in 1970. The property contains 327 units, comprised of 196
one-bedroom units and 131 two-bedroom units, with an average size of
approximately 1,235 square feet per unit. The property had an average monthly
rental rate of approximately $713 per unit during 1996 and was approximately 97
percent leased as of December 31, 1996. The property had 1996 total base rent of
approximately $2.7 million which represented approximately 3.5 percent of the
Company's 1996 total base rent. The average occupancy rate for the Property in
each of 1996, 1995, and 1994, was 95.3 percent, 93.6 percent, and 94.8 percent
respectively.
25 Martine Avenue, White Plains, Westchester County, New York
The Company's multi-family residential property, acquired in the RM Acquisition
and known as 25 Martine Avenue, was completed in 1987. The property contains 124
units, comprised of 18 studio units, 71 one-bedroom units and 35 two-bedroom
units, with an average size of approximately 722 square feet per unit. The
property had an average monthly rental rate of approximately $1,488 per unit
during 1996 and was 100.0 percent leased as of December 31, 1996. The property
had 1996 total base rent to RM of approximately $2.1 million which represented
approximately 3.5 percent of the RM Properties' 1996 total base rent of RM. The
average occupancy rate for the property in each of 1996, 1995 and 1994 was 96.4
percent, 98.3 percent and 97.6 percent, respectively.
Page 46
<PAGE>
Year-End Office Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the
Year-End Office Properties beginning January 1, 1997, assuming that none of the
tenants exercises renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
1997 ............ 80 446,492 7.49 8,335 18.67
1998 ............ 93 963,384 16.17 13,883 14.41
1999 ............ 109 755,273 12.68 14,383 19.04
2000 ............ 84 1,132,727 19.01 21,036 18.57
2001 ............ 57 579,496 9.73 11,831 20.42
2002 ............ 26 275,143 4.62 6,416 23.32
2003 ............ 15 367,381 6.17 6,363 17.32
2004 ............ 6 67,411 1.13 1,480 21.95
2005 ............ 6 126,663 2.13 2,005 15.83
2006 ............ 8 147,911 2.48 3,072 20.77
2007 & Thereafter 16 1,096,443 18.39 22,837 20.83
--- --------- ------ ------- -----
Total/Weighted
Average ........ 500 5,958,324 100.00 111,641 18.74
=== ========= ====== ======= -----
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent, determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
Page 47
</TABLE>
<PAGE>
Year-End Office/Flex Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the
Year-End Office/Flex Properties, beginning January 1, 1997, assuming that none
of the tenants exercises renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
1997 ............ 17 149,866 21.68 1,380 9.21
1998 ............ 9 89,266 12.91 864 9.68
1999 ............ 13 97,601 14.12 1,039 10.65
2000 ............ 13 176,531 25.53 1,963 11.12
2001 ............ 9 85,987 12.44 854 9.93
2002 ............ 2 13,824 2.00 135 9.77
2003 ............ 1 9,024 1.31 128 14.18
2004 ............ 1 39,060 5.65 445 11.39
2005 ............ 1 7,225 1.05 71 9.83
2007 & Thereafter 2 22,844 3.31 230 10.07
-- ------- ------ ------- -----
Total/Weighted
Average ........ 68 691,228 100.00 7,109 10.28
== ======= ====== ======= -----
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office tenants. Some tenants have multiple
leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
Page 48
</TABLE>
<PAGE>
RM Office Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the RM
Office Properties beginning January 1, 1997, assuming that none of the tenants
exercises renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
1997 ............ 76 262,279 17.77 5,422 20.67
1998 ............ 51 204,357 13.85 4,473 21.89
1999 ............ 61 185,156 12.55 3,840 20.74
2000 ............ 29 468,778 31.77 8,282 17.67
2001 ............ 28 193,965 13.14 4,237 21.85
2002 ............ 10 49,716 3.37 1,034 20.79
2003 ............ 6 61,267 4.15 1,349 22.02
2004 ............ 2 5,470 0.37 124 22.62
2005 ............ 4 37,015 2.51 840 22.71
2006 ............ 1 6,108 0.41 153 25.00
2007 & Thereafter 1 1,667 0.11 31 18.50
--- --------- ------ ------ -----
Total/Weighted
Average ........ 269 1,475,778 100.00 29,785 20.18
=== ========= ====== ====== -----
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate historical base rent to RM, determined in accordance
with GAAP, including all leases dated on or before December 31, 1996.
Page 49
</TABLE>
<PAGE>
RM Office/Flex Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the RM
Office/Flex Properties, beginning January 1, 1997, assuming that none of the
tenants exercises renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ---------- ----------- --------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C>
1997 ............ 37 215,598 10.70 2,528 11.73
1998 ............ 61 349,817 17.37 4,319 12.35
1999 ............ 45 290,765 14.44 3,329 11.45
2000 ............ 34 344,358 17.10 4,190 12.17
2001 ............ 41 450,701 22.38 5,481 12.16
2002 ............ 15 168,364 8.36 2,038 12.10
2003 ............ 2 31,871 1.58 422 13.23
2006 ............ 4 88,699 4.40 1,351 15.23
2007 & Thereafter 2 73,934 3.67 1,080 14.61
--- --------- ------ --------- ---------
Total/Weighted
Average ........ 241 2,014,107 100.00 24,738 12.28
=== ========= ====== ========= ---------
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office tenants. Some tenants have multiple
leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent to RM determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
Page 50
</TABLE>
<PAGE>
RM Industrial/Warehouse Properties: Schedule of Lease Expirations
The following table sets forth a schedule of the lease expirations for the RM
Industrial/Warehouse Properties, beginning January 1, 1997, assuming that none
of the tenants exercises renewal options:
<TABLE>
<CAPTION>
Average Annual
Percentage of Rent per Net
Net Rentable Total Leased Annual Base Rentable
Area Subject Square Feet Rent Under Square Foot
Number of to Expiring Represented by Expiring Represented
Year of Leases Leases Expiring Leases By Expiring
Expiration Expiring(1) (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
<S> <C> <C> <C> <C> <C>
1997 ......... 4 31,500 9.18 272 8.65
1998 ......... 5 150,803 43.94 923 6.12
2000 ......... 2 18,504 5.39 207 11.18
2001 ......... 3 33,778 9.84 592 17.52
2004 ......... 1 108,600 31.65 1,112 10.24
-- ------- ------ ------- -----
Total/Weighted
Average ..... 15 343,185 100.00 3,106 9.05
== ======= ====== ======== -----
(1) Includes industrial/warehouse tenants only. Excludes leases for amenity,
retail, parking and month-to-month office tenants. Some tenants have
multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate historical base rent to RM, determined in accordance
with GAAP, including all leases dated on or before December 31, 1996.
Page 51
</TABLE>
<PAGE>
95 Christopher Columbus Drive, Jersey City, Hudson County, NJ
As the 1996 revenues of 95 Christopher Columbus Drive, Jersey City ("Grove
Street") was in excess of 10 percent of the Company's consolidated total
revenues for the year ended December 31, 1996, additional information regarding
Grove Street is provided below.
Grove Street is located in the Waterfront Region submarket of Hudson County,
which includes Hoboken, Jersey City and Weehawken. The building, built in 1989,
is located on approximately 1.8 acres and has 36,600 square feet on each of the
first 18 floors and 24,000 square feet on the 19th floor. On April 9, 1996, DLJ,
a significant tenant that previously leased approximately 55 percent of the
space at Grove Street, signed a lease with the Company for an additional 73,200
square feet of office space and on December 31, 1996, DLJ signed a lease for an
additional 6,507 square feet of space, which, in the aggregate, increased DLJ's
occupancy to approximately 67 percent of the property as of December 31, 1996.
The building currently contains 621,900 net rentable square feet and was 100%
leased as of December 31, 1996. The building has 13 passenger and two freight
elevators and offers 24-hour card access. Other amenities include fiber optics
telecommunications, a separate power source for the most sophisticated computer
systems, building life safety systems connected to an uninterruptable power
source, extra height ceilings to accommodate raised floors, five-story skylit
atrium with waterfall and reflecting pool, multiple on-premises retail services,
six level attached parking deck with 485 spaces and an elevator and direct
access to the Grove Street PATH subway station. The Grove Street PATH subway
station provides direct access to midtown and downtown Manhattan.
The following table sets forth certain information (on a per net rentable square
foot basis unless otherwise indicated) about 95 Christopher Columbus Drive,
Jersey City since January 1, 1992 (based upon an average of all lease
transactions during the respective periods):
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1992 1993 1994 1995 1996
------ ----- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of leases signed during period(1) ......... 1 1 2 1 2
Rentable square footage leased during period(1) .. 36,600 24,379 29,810 5,004 79,707
Base rent($)(1)(2) ............................... 19.31 17.80 15.87 13.50 18.42
Tenant improvements($)(3) ........................ 31.25 11.03 11.42 24.00 39.18
Leasing commissions($)(4) ........................ 2.54 7.21 6.27 2.47 2.56
Other concessions($)(5) .......................... -- -- -- -- --
Effective rent($)(6) ............................. 17.00 15.12 12.89 9.09 15.23
Expense stop($)(7) ............................... -- -- -- -- --
Effective equivalent triple net rent($)(8) ....... 17.00 15.12 12.89 9.09 15.23
Occupancy rate at end of period(%)(1) ............ 76.35 83.76 86.70 88.00 100.00
See footnotes on subsequent page.
Page 52
<PAGE>
(1) Includes only office tenants with lease terms of 12 months or longer.
Excludes leases for amenity, parking, retail and month-to-month office
tenants.
(2) Equals aggregate base rent received over their respective terms from all
lease transactions during the period, divided by the terms in months for
such leases during the period, multiplied by 12, divided by the total net
rentable square feet leased under all lease transactions during the period.
(3) Equals work letter cost net of estimated provision for profit and overhead,
or costs incurred by the Company in connection with tenant improvements
allowances per the respective lease agreement. Actual cost tenant
improvements may differ from estimated work letter costs.
(4) Equals an aggregate of leasing commissions payable to employees and third
parties based on standard commission rates and excludes negotiated
commission discounts obtained from time to time.
(5) Includes moving expenses, furniture allowances and other concessions.
(6) Equals aggregate base rent received over their respective terms from all
lease transactions during the period minus all tenant improvements, leasing
commissions and other concessions from all lease transactions during the
period, divided by the terms in months for such leases, multiplied by 12,
divided by the total net rentable square feet leased under all lease
transactions during the period.
(7) All leases in this Property are triple net leases. Tenants pay their
proportionate share of real estate taxes, operating costs and utility
costs.
(8) Equals effective rent minus expense stop.
</TABLE>
Page 53
<PAGE>
The following table sets forth the average percentage leased and average annual
rental per leased square foot (excluding storage space) for the past five years
for 95 Christopher Columbus Drive, Jersey City. All of the leases at 95
Christopher Columbus Drive, Jersey City are triple net leases (i.e., tenants pay
their proportionate share of real estate taxes, insurance and operating
expenses).
<TABLE>
<CAPTION>
Average Average Annual
Percentage Rental per Leased
Year Leased(%)(1) Square Foot($)(2)
---- ------------ ------------------
<S> <C> <C>
1996 94.0 20.74
1995 87.4 20.70
1994 85.8 20.31
1993 80.1 20.92
1992 76.4 20.74
- -------------------
(1) Average of beginning and end of year aggregate percentage leased.
(2) Total base rents for the year, determined in accordance with GAAP,
divided by average of beginning and end of year aggregate net rentable
area leased.
</TABLE>
Two tenants at Grove Street occupy approximately 92 percent of the net rentable
square feet in the aggregate at December 31, 1996. As of December 31, 1996, DLJ,
a national securities firm, occupied 413,852 square feet (approximately 67
percent of the net rentable square feet of Grove Street) pursuant to four leases
which expire July 13, 2009, with two five-year renewal options. Total rental
income from DLJ in 1996, including escalations and recoveries, was approximately
$11.5 million (excluding lobby and storage space). The DLJ leases provide for,
among other things, annual rental rate increases of approximately $1.3 million
in July 1999 and approximately $1.6 million in July 2004. NTT, an international
communications firm, occupies 137,000 square feet (approximately 22 percent of
the net rentable square feet of Grove Street) pursuant to a lease which expires
September 30, 2000, with three five-year renewal options. NTT's billed rent for
1996 was approximately $3.0 million (excluding lobby space).
Page 54
<PAGE>
The following table sets forth a schedule of the lease expirations for Grove
Street, assuming that none of the tenants exercises renewal options or
termination rights:
<TABLE>
<CAPTION>
Average
Annual Rent
Percentage of Per Net
Total Leased Annual Base Rentable
Net Rentable Square Feet Rent Under Square Foot
Number of Area Subject Represented Expiring Represented
Year of Leases to Expiring By Expiring Leases By Expiring
Expiration Expiring(1) Leases (Sq. Ft.) Leases(%)(2) ($000)(3) Leases($)
- ----------------- ----------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
1999 ............. 1 21,749 3.60 348 16.00
2000 ............. 4 161,339 26.69 3,159 19.58
2001 ............. 2 6,019 1.00 84 14.09
2002 ............. 1 8,061 1.33 125 15.52
2009 ............. 4 407,345 67.38 8,387 20.59
-- ------- ------ ------- -----
Total/Weighted
Average....... 12 604,513 100.00 12,103 20.02
== ======= ====== ======= -----
(1) Includes office tenants only. Excludes leases for amenity, retail, parking
and month-to-month office tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent determined in accordance with GAAP,
including all leases dated on or before December 31, 1996.
</TABLE>
The aggregate tax basis of depreciable real property at Grove Street for federal
income tax purposes was approximately $74 million as of December 31, 1996.
Depreciation and amortization are computed on the declining balance and
straight-line methods over the estimated useful life of the real property which
range from 31.5 to 39 years. The aggregate tax basis of depreciable personal
property associated with Grove Street for federal income tax purposes was
approximately $15,000 as of December 31, 1996. Depreciation and amortization are
computed on the double declining balance method over the estimated useful life
of the personal property of five to seven years.
Grove Street has been granted an abatement under the Fox-Lance program by Jersey
City, which establishes the payment to the City of Jersey City for municipal
services to be paid in lieu of conventional real estate taxes. The abatement
program is in effect for the 15-year period from completion of the project (1989
through 2004). The total annual charge in lieu of real estate taxes has been
designated by the program at two percent of the project cost (i.e., $1,131,000
per annum) for the first ten years and 2.5 percent (i.e., $1,413,750 per annum)
for years 11 through 15.
Page 55
<PAGE>
Harborside Financial Center, Jersey City, Hudson County, NJ
As the book value of Harborside was in excess of 10 percent of the Company's
total assets at December 31, 1996, additional information regarding the property
is provided below.
Harborside, acquired by the Company on November 4, 1996, is a completely
redeveloped, three-building office complex containing 1,886,800 square feet of
net rentable area located in the Exchange Place Newport Center submarket of
Jersey City, New Jersey. This submarket is a satellite office market of
Manhattan and is occupied primarily by the support and technical operations of
New York City-based financial institutions. The buildings, known as Plazas I, II
and III were developed as a complete reconstruction of existing buildings in two
phases, the first completed in 1983 and the second in 1990. The buildings are
connected via an enclosed 1,000 foot waterfront promenade featuring restaurants,
service retail shops and a food court, as well as an atrium lobby. The promenade
includes various retail operations such as restaurants, a bank, and a dry
cleaner. The property is situated on 47.98 acres for the existing building
complex, 11.29 acres of undeveloped land, 5.78 acres of piers and 21.61 acres of
underwater land (excluding piers).
Plaza I is served by six passenger elevators as well as a 15,000 lb. freight
car. Plazas II and III are each served by ten passenger elevators and have seven
oversized freight elevators in total. In addition, there are large shafts where
freight elevators have been removed which enable tenants to bring significant
electric telecommunications cabling to their space at minimal cost.
The property leases space to a parking operator and provides for approximately
1,685 parking spaces including 200 spaces on the south pier. Public
transportation to the property is available through the Exchange Place PATH rail
station which is immediately adjacent to the property and links Harborside to
downtown Manhattan in approximately four minutes. The PATH also provides access
to midtown Manhattan, Newark and Hoboken in less than twenty minutes. The
property is also connected to Manhattan by road via a three mile drive to the
Holland Tunnel and a five-mile drive to the Lincoln Tunnel. Interstates 78 and
495, US Routes 1, 9 and 440, and NJ Route 3 connect the property to locations
throughout northern New Jersey.
Page 56
<PAGE>
The following table sets forth certain information (on a per rentable square
foot basis unless otherwise indicated) about the property since January 1, 1992
(based upon an average of all lease transactions during the respective periods):
<TABLE>
<CAPTION>
Year Ended December 31, 1996
-------------------------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Number of leases signed
during period (1) ...... 4 3 9 5 8
Rentable sq. footage leased
during period (1) ...... 192,278 12,143 201,933 50,806 186,133
Base rent ($) (2) ......... 18.18 20.35 16.04 22.33 20.41
Tenant improvements (3) ... 39.82 24.31 17.69 19.21 13.38
Leasing commissions (4) ... 14.60 8.68 10.28 4.71 10.45
Other concessions (5) ..... -- -- -- -- --
Effective rent ($) (6) .... 14.41 13.86 13.91 19.95 18.07
Expense stop ($) (7) ...... 0.98 3.42 3.91 2.52 4.34
Effective equivalent triple
net rent ($) (8) ........ 13.43 10.44 10.00 17.43 13.73
Occupancy rate at end of
period (%) (1) .......... 78.60 88.10 93.30 96.10 98.80
See footnotes on subsequent page.
Page 57
<PAGE>
(1) Includes only office tenants with lease terms of 12 months or longer.
Excludes leases for amenities, parking, retail and month-to-month
office tenants.
(2) Equals aggregate base rent received over their respective terms from
all lease transactions during the period, divided by the terms in
months for such leases during the period, multiplied by 12, divided by
the total net rentable square feet leased under all lease transactions
during the period.
(3) Equals work letter costs net of estimated provision for profit and
overhead. Actual cost tenant improvements may differ from estimated
work letter costs.
(4) Equals an aggregate of leasing commissions payable to employees and
third parties based on standard commission rates and excludes
negotiated commission discounts obtained from time to time.
(5) Includes moving expenses, furniture allowances and other concessions.
(6) Equals aggregate base rent received over their respective terms from
all lease transactions during the period minus all tenant improvements,
leasing commissions and other concessions from all lease transactions
during the period, divided by the terms in months for such leases,
multiplied by 12, divided by the total net rentable square feet under
all lease transactions during the period.
(7) Equals the aggregate of each base year tax and common area maintenance
pool multiplied by the respective pro rata share for all lease
transactions during the period, divided by the total net rentable
square feet leased under all lease transactions during the period.
(8) Equals effective rent minus expense stop.
</TABLE>
The following schedule sets forth the average percent leased and average annual
rental per leased square foot for the years ended December 31, 1992 through 1996
for Harborside:
<TABLE>
<CAPTION>
Average Annual
Average Rental Per
Percentage Leased Square
Year Leased(%)(1) Foot ($) (2)
---- ------------ ------------
<S> <C> <C>
1996 97.50 $16.23
1995 94.70 15.99
1994 90.70 15.26
1993 83.40 16.36
1992 73.50 14.69
(1) Average of beginning and end of year aggregate percentage leased.
(2) Total base rents for the year, determined in accordance with generally
accepted accounting principles, divided by average of beginning and end
of year aggregate net rentable area leased.
</TABLE>
Page 58
<PAGE>
Four tenants at Harborside occupy approximately 63 percent of the net rentable
square feet in the aggregate as of December 31, 1996, as follows:
Bankers Trust Harborside, Inc., a commercial bank, occupied 385,000 square feet
(approximately 21 percent of the net rentable square feet of Harborside) at
December 31, 1996, pursuant to a triple net lease which expires March 31, 2003,
with a five-year renewal option. Total rental income from Bankers Trust,
including escalations and recoveries, was approximately $548,000 for the period
November 4 through December 31, 1996. The lease provides, among other things,
for an annual rent increase of $770,000 to an annual rent of $3,272,500
beginning on April 1, 1998.
Dow Jones Telerate Holdings, Inc., a telecommunications firm, occupied 378,232
square feet at December 31, 1996 (approximately 20 percent of the net rentable
square feet of Harborside) pursuant to various leases expiring June 30, 1999
through March 31, 2001, with two five-year renewal options on 187,817 square
feet of the space and one five-year option on 45,187 square feet of the space.
Total rental income from Dow Jones Telerate Holdings, Inc., including
escalations and recoveries was approximately $1,483,000 for the period November
4 through December 31, 1996. Certain of the leases provide for annual rental
increases totaling approximately $181,000 beginning in June 2001.
AICPA, a professional organization, occupied approximately 250,000 square feet
(approximately 13 percent of the net rentable square feet of Harborside) at
December 31, 1996, pursuant to a lease which expires July 31, 2012, with a
ten-year renewal option. Total rental income from the AICPA, including
escalations and recoveries, was approximately $1,153,000 for the period November
4 through December 31, 1996. The AICPA lease provides for, among other things,
annual rental increases of approximately $836,000 in July 2002 and $836,000 in
July 2007.
Dean Witter Trust Company, a securities firm, occupied 179,131 square feet
(approximately 9.5 percent of the net rentable square feet of Harborside) at
December 31, 1996, pursuant to a lease which expires February 8, 2008, with
ten-year and five-year renewal options. Total rental income from Dean Witter,
including escalations and recoveries, was approximately $796,000 for the period
November 4, 1996 through December 31, 1996. The lease provides for, among other
things, annual rental increases of approximately $221,000 beginning in February
1998, $30,000 in September 2000, $473,000 in February 2003, and $64,000 in
September 2005.
Page 59
<PAGE>
The following table sets forth a schedule of the lease expirations for
Harborside, beginning January 1, 1997, assuming that none of the tenants
exercise renewal options:
<TABLE>
<CAPTION>
Percentage Annual Avg. Annual
Net of Total Base Rent Rent Per Net
Number of Rentable Area Leased Sq. Ft. Under Expiring Rentable Sq. Ft.
Year of Leases Subject to Expiring Represented Leases Represented by
Expiration Expiring(1) Leases (Sq.Ft.) Leases (%.)(2) ($000) (3) Expir.Leases
---------- ----------- --------------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
1997 2 19,540 1.16 428 $21.90
1998 5 415,233 24.65 3,222 7.76
1999 7 85,209 5.06 1,986 23.31
2000 8 296,057 17.58 5,921 20.00
2001 2 69,996 4.16 1,679 23.99
2003 1 6,299 0.37 166 26.35
2004 1 24,729 1.47 590 23.86
2005 4 114,641 6.81 1,688 14.72
2006 5 85,389 5.07 1,740 20.38
2007 and Thereafter 8 567,392 33.67 12,188 21.48
-- --------- ------ ------ -------
Total/Weighted
Average 43 1,684,485 100.00 29,608 17.58
== ========= ====== ====== -------
- -------------------------------------
(1) Includes office tenants only. Excludes leases for amenities, retail, parking
and month-to-month office tenants.
(2) Excludes all space vacant as of December 31, 1996.
(3) Based upon aggregate base rent, calculated in accordance with GAAP,
including all leases dated on or before December 31, 1996.
</TABLE>
The aggregate tax basis of depreciable real property at Harborside for federal
income tax purposes was approximately $254 million as of December 31, 1996.
Depreciation and amortization are computed on the declining balance and
straight-line methods over the estimated useful life of the real property which
range from 31.5 to 39 years. There is no depreciable personal property
associated with Harborside for federal income tax purposes as of December 31,
1996. Depreciation and amortization are computed on the double declining balance
method over the estimated useful life of the personal property of five to seven
years.
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<PAGE>
Tax abatements for Harborside were obtained in 1988 by the former owner of the
property from the City of Jersey City under the Fox-Lance Program and were
assumed by the Company as part of the acquisition of Harborside on November 4,
1996. The abatements, which commenced in 1990, are for a term of 15 years. The
Company is required to pay municipal services equal to two percent of Total
Project Costs, as defined, in year one and increase by $75,000 per annum through
year fifteen. Total Project Costs, as defined, are $148.7 million. The service
charges for the remaining undeveloped parcels will be equal to two percent of
Total Project Costs for each unit in year one and increase to three percent by
year fifteen.
The Company's Real Estate Markets.
The Company's Properties are strategically located in a contiguous area from
Philadelphia, Pennsylvania to Stamford, Connecticut. The following is a
discussion of the markets within which the Company's properties are located:
Northern New Jersey: The Northern New Jersey market consists of Bergen, Essex,
Hudson, Morris and Passaic Counties. Northern New Jersey's five counties are
part of the greater New York metropolitan area, are less than a 45 minute drive
from Manhattan, and are widely regarded as major centers for corporate and
international business. The region has direct access to New York City by public
transportation and extensive road networks. In addition to being home to the two
largest cities in New Jersey, Newark and Jersey City, Newark International
Airport and the New York/New Jersey Harbor are also located within the
five-county boundary.
Overall vacancy rates have declined in the Northern New Jersey market for the
fourth consecutive year as a direct result of an increase in leasing activity
and net absorption levels. Although some built-to-suit activity is present,
speculative construction remains virtually nonexistent. The Company owns and
operates approximately 4.5 million square feet of office and office/flex space
in Northern New Jersey.
Central New Jersey: The Central New Jersey market consists of Union, Somerset,
Hunterdon, Middlesex, Mercer and Monmouth Counties. Encompassing approximately
2,000 square miles in six counties, Central New Jersey is notable for its
proximity to major highway arteries like Interstates 78 and 287, Route 1, the
Garden State Parkway and the New Jersey Turnpike. This market continues to be a
prime location for Fortune 500 headquarters, research & development operations
and financial, insurance and real estate (FIRE) sector businesses.
Central New Jersey vacancy rates are decreasing while average asking rents are
increasing. This is, in part, attributable to the increase in demand, measured
by leasing activity, which rose predominantly due to corporate expansions. The
Company owns and operates approximately 1.6 million square feet of office and
office/flex space in the Central New Jersey Counties of Union, Somerset, Mercer
and Monmouth.
Southern New Jersey: The Southern New Jersey market consists of Burlington,
Camden, Atlantic, Ocean, Gloucester, Salem, Cumberland and Cape May Counties.
This market has extensive geographic boundaries, stretching from the Delaware
River and Philadelphia, to the Atlantic Ocean and Atlantic City. The region is
mainly suburban, with the exception of Camden County, which is home to many
affluent communities, and Atlantic City, one of the nation's largest centers for
gaming/tourism.
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<PAGE>
The Company owns and operates 80,000 square feet of office space in Atlantic
County and a 327-unit multi family residential complex in Burlington County.
Suburban Philadelphia, Pennsylvania: The Suburban Philadelphia market consists
of Bucks, Chester, Delaware, Montgomery, Lehigh and Northampton Counties. These
six surround the City of Philadelphia, are home to many affluent communities and
are regarded as major centers for corporate and international business. The
areas are served by an extensive highway network allowing easy access to
Philadelphia International Airport and the Port of Philadelphia.
Over the last few years the overall vacancy rate in this region has declined and
in 1996, the rate dipped below 10 percent for the first time as a result of
strong leasing activity and virtually no new construction. The Company owns and
operates approximately 761,000 square feet in Suburban Philadelphia.
Rockland County, New York: Rockland County, New York is located north of the New
Jersey/New York border directly adjacent to Bergen County. Rockland County has
excellent highway access to both New York City via Interstate 87 and to New
Jersey via Interstate 287.
The Company owns and operates a 180,000 square foot office property in Rockland
County.
Westchester County, New York: Westchester County, New York, is located
immediately north of New York City. There is access to the City by public
transportation and through an extensive road network. The vacancy rate in
Westchester County has declined steadily over the last three years as the office
market has absorbed 3 million square feet that IBM, A.T.& T. and NYNEX vacated
from 1989 to 1993. Speculative construction has been virtually non-existent
during the past five years.
The Company owns and operates approximately 1.6 million square feet of office
space, approximately 1.6 million square feet of office/flex space, approximately
386,000 square feet of industrial/warehouse space and a 124-unit residential
multifamily property in Westchester County, New York. The Company entered this
market for the first time with the RM Acquisition.
Fairfield County, Connecticut: Fairfield County, Connecticut is the county in
Connecticut closest in proximity with New York City. It has direct access to the
City via public transportation and through an extensive road network. The county
is home to ten Fortune 500 headquarters and there has been a substantial decline
in vacancy during the past two years.
The Company owns approximately 166,000 square feet of office/flex space in
Fairfield County. The Company entered this market for the first time with the RM
Acquisition.
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ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to its business, to which the Company is a party or to
which any of its Properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company did not submit any matters to a vote of security holders in the
fourth quarter of the fiscal year ending December 31, 1996.
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PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange under the
symbol CLI.
Market Information. The Company's Common Stock has been traded on the New York
Stock Exchange ("NYSE") since August 25, 1994. The high, low, and close price
per share of Common Stock for the years ended December 31, 1995 and 1996 are as
follows:
<TABLE>
<CAPTION>
For the Year Ended December 31, 1995:
High Low Close
---- --- -----
<S> <C> <C> <C>
First Quarter $17.375 $15.500 $17.375
Second Quarter $19.375 $16.500 $19.375
Third Quarter $20.250 $18.875 $20.250
Fourth Quarter $22.500 $19.125 $21.875
<CAPTION>
For the Year Ended December 31, 1996:
High Low Close
---- --- -----
<S> <C> <C> <C>
First Quarter $23.625 $20.750 $22.375
Second Quarter $24.625 $21.500 $24.250
Third Quarter $27.125 $22.625 $27.125
Fourth Quarter $30.875 $26.125 $30.875
</TABLE>
On February 28, 1997, the closing stock sales price on the NYSE was $32.00 per
share.
Holders. The approximate number of holders of record of the shares of the
Company's Common Stock was 244 as of February 28, 1997.
Dividends and Distributions. As a result of the Company's improved operating
performance, in September 1996 the Company announced a 5.9 percent increase in
its regular quarterly distribution, commencing with the Company's distribution
with respect to the third quarter of 1996, from $.425 per share to $.450 per
share of Common Stock ($1.80 per share of Common Stock on an annualized basis).
The Company declared a cash dividend of $.450 per share on December 20, 1996, to
stockholders of record on January 4, 1997. Also on that date, the Company
declared a cash distribution to the limited partners in the Operating
Partnership that was equivalent to $.450 per share. The dividend and
distribution were paid on January 19, 1997. The declaration and payment of
dividends and distributions will continue to be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition, capital requirements, applicable legal
restrictions and other factors.
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ITEM 6. SELECTED FINANCIAL DATA
CALI REALTY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following table sets forth selected financial data on a consolidated
basis for the Company and on a combined basis for the Cali Group. The
consolidated selected financial data of the Company as of December 31, 1996,
1995 and 1994 and for the years ended December 31, 1996 and 1995, and for the
period from August 31, 1994 to December 31, 1994 and the combined selected
financial data of the Cali Group as of December 31, 1993 and 1992, and for the
periods ended August 30, 1994, December 31, 1993 and 1992 have been derived from
the Company's financial statements.(1)
<TABLE>
<CAPTION>
OPERATING DATA: The Company The Cali Group
---------------------------------- -----------------------------------
(in thousands, except per share data) August 31, January 1,
Year Ended 1994 to 1994 to Year Ended
December 31, December 31, August 30, December 31,
1996 1995 1994 1994 1993 1992
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Revenues $95,472 $62,335 $16,841 $33,637 $47,900 $45,300
Operating and other expenses $29,662 $20,705 $ 5,240 $11,155 $16,408 $15,163
General and administrative $ 5,800 $ 3,712 $ 1,079 $ 2,288 $ 2,618 $ 2,773
Depreciation and amortization $15,812 $12,111 $ 3,764 $ 5,454 $ 8,231 $ 7,640
Interest expense $12,677 $ 8,661 $ 1,768 $13,608 $21,707 $21,896
Income (loss) before gain on sale of rental property,
minority interest and extraordinary items $31,521 $17,146 $ 4,990 $ (110) $(1,064) $(2,172)
Gain on sale of rental property $ 5,658 $ -- $ -- $ -- $ -- $ --
Income (loss) before extraordinary items $32,419 $13,638 $ 3,939 $ (110) $(1,064) $(2,172)
Net income per common share $1.73 $1.23 $0.38
Dividends declared per common share $1.75 $1.66 $0.54
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
BALANCE SHEET DATA: The Company The Cali Group
(in thousands) ----------------------------------- --------------------------------
December 31, December 31,
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rental property, before accumulated
depreciation and amortization $ 853,352 $387,675 $234,470 $213,675 $210,407
Total assets $1,026,328 $363,949 $225,295 $208,828 $208,863
Mortgages and loans payable $ 268,010 $135,464 $ 77,000 $231,981 $230,385
Total liabilities $ 297,985 $150,058 $ 88,081 $243,163 $241,052
Stockholders' equity (partners' deficit) $ 701,379 $185,808 $108,311 $(34,355) $(32,189)
- ------------------------------------------------------------------------------------------------------------------------------------
See footnotes on subsequent page.
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<PAGE>
<CAPTION>
CALI REALTY CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
OTHER DATA: The Company The Cali Group
---------------------------------- -----------------------------------
(in thousands) August 31, January 1,
Year Ended 1994 to 1994 to Year Ended
December 31, December 31, August 30, December 31,
1996 1995 1994 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by operating activities $ 46,823 $ 28,446 $ 6,367 $ 6,328 $ 2,735 $ 5,883
Cash flows (used in) provided
by investing activities $(307,752) $(133,736) $(8,947) $ 1,975 $(3,227) $(5,633)
Cash flows provided by
(used in) financing activities $ 464,769 $ 99,863 $ 8,974 $(1,038) $ (886) $ 5,283
Funds from Operations after straight-lining
of rents before minority interest of
unitholders (2) $ 45,220 $ 27,397 $ 8,404
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
(2) The Company considers Funds from Operations ("FFO"), after adjustment for straight-lining of rents, one measure of real estate
investment trust ("REIT") performance. FFO is defined as net income (loss) before minority interest of unitholders computed in
accordance with Generally Accepted Accounting Principles ("GAAP"), excluding gains (or losses) from debt restructuring and
sales of property, plus real estate-related depreciation and amortization. FFO should not be considered as an alternative for
net income as an indication of the Company's performance or to cash flows as a measure of liquidity. FFO presented herein is
not necessarily comparable to FFO presented by other real estate companies due to the fact that not all real estate companies
use the same definition. However, the Company's FFO is comparable to the FFO of real estate companies that use the current
definition of the National Association of Real Estate Investment Trusts ("NAREIT"), as published in March 1995, after the
adjustment for straight-lining of rents.
</FN>
</TABLE>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CALI REALTY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Financial Data" and the Company's Financial Statements and the Notes thereto.
The Company was incorporated on May 24, 1994, as a Maryland corporation, and
commenced operations effective with the completion of its Initial Public
Offering ("IPO") on August 31, 1994, which was simultaneous with effecting a
business combination with the Cali Group (not a legal entity). The Cali Group
was engaged in development, ownership and operation of a portfolio of twelve
office buildings and one multi-family residential property, all located in New
Jersey.
Following the IPO, during 1994 and 1995, the Company acquired 28 office and
office/flex properties, aggregating approximately 1.7 million square feet, for a
total cost of $157.5 million. The financing for the 1994 and 1995 acquisitions
was primarily facilitated by a public stock offering in November 1995 (from
which the Company raised $72.5 million in net proceeds) and funds made available
from the Company's credit facility. Additionally, in conjunction with one of the
1995 acquisitions, the Company issued 93,458 Units in the Operating Partnership
and assumed an $18.8 million mortgage loan.
At the end of 1995, the Company's portfolio of 39 Class A office and
office/flex properties, and one multi-family residential property, were located
in New Jersey, except for one office property located in Rockland County, New
York. The Company's portfolio at December 31, 1995 aggregated approximately 3.9
million square feet, which was an increase of 78 percent over the Company's
portfolio square feet at its IPO.
In 1996, the Company acquired 15 office and office/flex properties,
aggregating approximately 3.3 million square feet, for a total cost of $459.4
million. The financing for the 1996 acquisitions was facilitated by two public
stock offerings in 1996, from which the Company raised an aggregate of $518.2
million in net proceeds, and the assumption of $150.0 million in mortgage
financing in connection with the acquisition of the Harborside Financial Center
("Harborside").
At the end of 1996, the Company's portfolio of 56 office and office/flex
properties, and a multi-family residential property, was located primarily in
New Jersey, except for seven office properties acquired in 1996 in suburban
Philadelphia, and one office property located in Rockland County, New York. The
Company's portfolio at December 31, 1996 aggregated 7.1 million square feet,
which represented an increase of 82 percent over the Company's portfolio square
feet at December 31, 1995.
As a result of the acquisitions by the Company in 1995 and 1996, the
operating results of the Company during such periods are not
directly comparable.
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RESULTS OF OPERATIONS
The following comparisons for the year ended December 31, 1996 ("1996"), as
compared to the year ended December 31, 1995 ("1995") and for 1995 as compared
to the twelve month period ended December 31, 1994 makes reference to the
following: (i) the effect of the "Initial Properties," which represent all
properties owned by the Company at December 31, 1994, (ii) the effect of the
"Acquired Properties," which represent all properties acquired since January 1,
1995, and (iii) the effect of the "Disposition," which refers to the Company's
sale of Essex Road on March 20, 1996.
Year Ended December 31, 1996 Compared to
Year Ended December 31, 1995
Total revenues increased $33.1 million, or 53.2 percent, for 1996 over 1995.
Base rents increased $26.1 million, or 51.4 percent, of which an increase of
$26.4 million, or 52.0 percent, was attributable to the Acquired Properties, and
an increase of $0.9 million, or 1.8 percent, as a result of occupancy changes at
the Initial Properties, offset by a decrease of $1.2 million, or 2.4 percent, as
a result of the Disposition. Escalations and recoveries increased $4.9 million,
or 51.8 percent, of which an increase of $4.6 million, or 49.0 percent, was
attributable to the Acquired Properties, and $0.4 million, or 4.0 percent, as a
result of occupancy changes at the Initial Properties, offset by a decrease of
$0.1 million, or 1.2 percent, due to the Disposition. Interest income increased
$1.6 million for 1996 over 1995, due primarily to the funds held at December 31,
1996 from the Company's common stock offering in November 1996. Parking and
other income increased $0.5 million, or 29.5 percent, of which $0.3 million, or
17.9 percent, was attributable to the Initial Properties, and $0.3 million, or
15.9 percent, due to the Acquired Properties, offset by a decrease of $0.1
million, or 4.3 percent, due to the Disposition.
Total expenses for 1996 increased $18.7 million, or 41.5 percent, as compared
to 1995. Real estate taxes increased $3.5 million, or 60.4 percent, for 1996
over 1995, of which $3.6 million, or 60.9 percent, was a result of the Acquired
Properties, and $0.1 million, or 2.6 percent, related to the Initial Properties,
offset by a decrease of $0.2 million, or 3.1 percent, due to the Disposition.
Additionally, operating services increased $3.6 million, or 42.4 percent, and
utilities increased $1.8 million, or 28.6 percent. The aggregate increase in
operating services and utilities of $5.4 million, or 36.5 percent, consists of
$5.9 million, or 39.9 percent, attributable to the Acquired Properties, offset
by a decrease of $0.5 million, or 3.5 percent, as a result of the Disposition.
General and administrative expense increased $2.1 million, or 56.3 percent, of
which $2.2 million, or 57.5 percent, is primarily attributable to an increase in
payroll and related costs as a result of the Company's expansion in 1996, offset
by a decrease of $0.1 million, or 1.2 percent, due to the Disposition.
Depreciation and amortization increased $3.7 million, or 30.6 percent, for 1996
over 1995, of which $4.4 million, or 36.7 percent, related to depreciation on
the Acquired Properties, offset by decreases of $0.5 million, or 4.1 percent,
for amortization of deferred financing costs due to reduction in debt
outstanding on the Initial Properties, and $0.2 million, or 2.0 percent, as a
result of the Disposition. Interest expense increased $4.0 million, or 46.4
percent, primarily due to an increase in the average outstanding borrowings on
the Company's credit facilities during 1996 over 1995 in connection with an
increase in property acquisitions, as well as the increase in mortgage
indebtedness assumed in connection with the acquisition of Harborside.
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<PAGE>
Income before gain on sale of rental property, minority interest and
extraordinary item increased to $31.5 million in 1996 from $17.1 million in
1995. The increase of $14.4 million was due to the factors discussed above.
Net income increased $18.3 million for 1996, from $13.6 million in 1995 to
$31.9 million in 1996, as a result of an increase in income before gain on sale
of property, minority interest and extraordinary item of $14.4 million and a
gain on sale of the Disposition property of $5.7 million, offset by the increase
in minority interest of $1.3 million and the recognition in 1996 of an
extraordinary loss for the early retirement of debt of $0.5 million (net of
minority interest's share of $0.1 million).
Year Ended December 31, 1995 Compared to
Year Ended December 31, 1994
The following comparison is for Cali Realty Corporation Consolidated
Operations for the year ended December 31, 1995 as compared to Cali Realty
Corporation Consolidated Operations for the period August 31, 1994 to December
31, 1994, plus Cali Group Combined Operations for the period January 1, 1994 to
August 30, 1994 (collectively, "1994").
Total revenues increased $11.9 million, or 23.5 percent, for 1995 over 1994.
Base rents increased $10.4 million, or 25.6 percent, of which $9.3 million, or
22.8 percent, was attributable to the Acquired Properties and $1.1 million, or
2.8 percent, was due to increased occupancy at the Initial Properties.
Escalations and recoveries increased $1.4 million, or 17.6 percent, of which
$1.1 million, or 13.6 percent, was attributable to the Acquired Properties and
$0.3 million, or 4.0 percent, to the Initial Properties.
Total expenses for 1995 decreased $0.4 million from 1994. Interest expense
decreased $6.7 million, or 43.7 percent, primarily due to the reduction in
indebtedness resulting from the repayment of the mortgages and loans in
connection with the IPO. Additionally, in 1994, the Cali Group recognized an
expense of $0.7 million, in connection with the settlement of a tenant
participation agreement and ground rent of $0.6 million was eliminated as a
result of the purchase by the Company of the land previously leased.
These decreases were partially offset by an increase in depreciation and
amortization of $2.9 million, or 31.4 percent, for 1995 over 1994. This increase
is primarily attributable to increases of $1.9 million in rental property
depreciation, of which $1.3 million is attributable to the Acquired Properties,
and increases of $0.7 million in amortization of costs relating to the Mortgage
Financing and $0.3 million related to amortization of leasing-related costs. In
addition, utilities increased $1.5 million, or 29.8 percent, of which $1.1
million, or 23.5 percent, is attributable to the Acquired Properties; real
estate taxes increased $0.9 million, or 18.0 percent, of which $1.1 million, or
21.8 percent, was attributable to the Acquired Properties offset by a decrease
of $0.2 million, or 3.8 percent, for the Initial Properties; operating services
increased $2.0 million, or 29.9 percent, of which $1.4 million, or 20.9 percent,
was attributable to the Acquired Properties, and general and administrative
costs increased $0.3 million as a result of increased salaries and benefits.
Income before gain on sale of rental property, minority interest and
extraordinary item increased to $17.1 million for 1995 from $4.9 million for
1994. The increase of $12.2 million was due to the factors discussed above.
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<PAGE>
Net income decreased $2.0 million from $15.7 million in 1994 to $13.6 million
in 1995 as a result of recognition in 1994 of an $11.9 million extraordinary
gain primarily due to the early retirement of indebtedness at less than carrying
value.
LIQUIDITY AND CAPITAL RESOURCES
Statement of Cash Flows
During the year ended December 31, 1996, the Company generated $46.8 million
in cash flow from operating activities, and, together with $518.2 million in net
proceeds from its common stock offerings in 1996, $10.3 million of proceeds from
the sale of a rental property, $2.0 million in proceeds from stock options
exercised, and funds from escrow cash balances relating to the Mortgage
Financing of $0.1 million, used an aggregate $577.4 million to (i) purchase 15
rental properties for $304.2 million, (ii) complete construction of two
office/flex properties for $2.7 million, (iii) acquire land for future
development, tenant improvements and building improvements for $11.3 million
(including $2.9 million for tenant improvement costs incurred in connection with
the DLJ Expansion and $1.8 million in tenant improvement costs in connection
with the leasing of 62,275 square feet to Berlitz International Inc. at the
Company's 400 Alexander Park, Princeton, Mercer County, New Jersey office
property), (iv) pay quarterly dividends and distributions of $32.4 million, (v)
prepay a portion of its mortgage notes and prepayment penalties and other
related costs for $5.8 million, (vi) pay the amortization on mortgage principal
of $0.3 million, (vii) reduce its outstanding borrowings on its credit
facilities by a net amount of $16.9 million, and (viii) increase its cash and
cash equivalents balance by $203.8 million.
Acquisition and Development Activity
On March 20, 1996, the Company sold its office building located at 15 Essex
Road in Paramus, Bergen County, New Jersey ("Essex Road") and concurrently
acquired a 96,000 square foot office building at 103 Carnegie Center in
Princeton, Mercer County, New Jersey. The concurrent transactions with unrelated
parties qualified as a tax-free exchange, as the Company used substantially all
of the proceeds from the sale of Essex Road to acquire the Princeton property.
The financial statements for the year ended December 31, 1996 include a gain of
$5.7 million relating to this transaction.
On May 2, 1996, the Company acquired Rose Tree Corporate Center, a
two-building suburban office complex totaling 260,000 square feet, located in
Media, Delaware County, Pennsylvania, for approximately $28.1 million, which was
drawn from one of the Company's credit facilities.
During the second quarter of 1996, the Company completed its construction of
tenant improvements to 400 Alexander Park, a three-story, 70,550 square foot
office building located in Princeton, Mercer County, New Jersey, which the
Company acquired in December 1995 and leased the property in its entirety to
Berlitz International Inc. Also during the second quarter of 1996, the Company
entered into a lease agreement with Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") for an additional 73,200 square feet of office space located
at 95 Christopher Columbus Drive in Jersey City, increasing DLJ's occupancy to
approximately 66 percent of the property.
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On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two
suburban office buildings totaling 115,000 square feet, located in Basking
Ridge, Somerset County, New Jersey, for approximately $10.5 million, which was
drawn from one of the Company's credit facilities.
On November 4, 1996, the Company acquired Harborside, a 1.9 million square
foot office complex located in Jersey City, Hudson County, New Jersey for
approximately $292.7 million. The acquisition cost included the assumption of
existing and seller-provided mortgage financing aggregating $150.0 million. The
balance of the cost was paid primarily in cash and was financed substantially
through drawings from the Company's credit facilities. As part of the purchase,
the Company also acquired 11.3 acres of land fully zoned and permitted for an
additional 4.1 million square feet of development and the water rights
associated with 27.4 acres of land extending into the Hudson River immediately
east of Harborside, including two piers with an area of 5.8 acres.
On November 7, 1996, the Company acquired Five Sentry Parkway East & West, a
two-building office complex comprised of approximately 130,000 square feet
located in Plymouth Meeting, Montgomery County, Pennsylvania for approximately
$12.5 million, which was drawn from one of the Company's credit facilities.
On December 10, 1996, the Company acquired 300 Tice Boulevard, a 230,000
square foot office building located in Woodcliff Lake, Bergen County, New
Jersey, for approximately $35.1 million in cash, made available from the net
proceeds received from the Company's common stock offering in November 1996 (the
"November 1996 Offering").
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 square
foot office building located in Fort Lee, Bergen County, New Jersey, for
approximately $26.9 million in cash, made available from the net proceeds
received from the November 1996 Offering.
On December 17, 1996, the Company acquired the International Court at Airport
Business Center, a three-building office complex comprised of approximately
371,000 square feet located in Lester, Delaware County, Pennsylvania for
approximately $43.2 million in cash, made available from the net proceeds
received from the November 1996 Offering.
In December 1996, the Company completed the construction of two office/flex
properties on vacant land purchased in the Company's Totowa, Passaic County, New
Jersey office park acquired in November 1995. The two properties, which were 25
percent leased at December 31, 1996, aggregated 47,100 square feet, and were
constructed for an aggregate cost of $2.7 million.
On January 28, 1997, the Company acquired 1345 Campus Parkway, a 76,000
square foot office/flex property, located in Wall Township, Monmouth County, New
Jersey, for approximately $6.8 million in cash, made available from the net
proceeds received from the November 1996 Offering. The property is located in
the same office park in which the Company previously acquired two office
properties and four office/flex properties in November 1995.
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On January 31, 1997, the Company acquired 65 properties (the "RM Properties")
of Robert Martin Company LLC and affiliates ("RM"), for a total cost of
approximately $450.0 million. The cost of the transaction was financed through
the assumption of $185.3 million in mortgage indebtedness, approximately $220.0
million in cash, substantially all of which was obtained from the Company's cash
reserves, and the issuance of 1,401,225 Units in the Operating Partnership.
The RM Properties consist primarily of 54 office and office/flex properties
aggregating approximately 3.7 million square feet and six industrial/warehouse
properties aggregating approximately 400,000 square feet. The RM Properties are
located primarily in established business parks in Westchester County, New York
and Fairfield County, Connecticut. The Company has agreed not to sell certain of
the RM Properties for a period of seven years without the consent of the RM
principals, except for sales made under certain circumstances and/or conditions.
In connection with the RM transaction, the Company was granted a three-year
option to acquire a 115,000 square foot office property and an 84,000 square
foot office/flex property (the "Option Properties") for an aggregate minimum
price of $19.0 million and has granted RM the right to put such properties to
the Company between a range of an aggregate purchase price of $11.6 million to
$21.3 million, under certain conditions. The purchase prices, under the
agreement, are subject to adjustment based on different formulas and are payable
in cash or Units.
Financing Activities
Mortgage Debt, Credit Facilities and Interest Rate Swaps
Concurrent with the IPO, the Company's initial operating subsidiaries, which
own the Initial Properties, issued five-year mortgage notes with an aggregate
principal balance of $144.5 million secured and cross-collateralized by the
Initial Properties to an affiliate ("PSI") of Prudential Securities Inc. PSI
then issued commercial mortgage pay-through bonds ("Bonds") collateralized by
the mortgage notes. Bonds with an aggregate principal balance of $70.0 million
were purchased by unrelated third parties. Bonds with an aggregate principal
balance of $74.5 million were purchased by the Company. As a result, the
Company's initial mortgage financing was $70.0 million (the "Mortgage
Financing"). Approximately $38.0 million of the Mortgage Financing is guaranteed
under certain conditions by certain partners of the Cali Group partnerships
which owned the Initial Properties. The Mortgage Financing requires monthly
payments of interest only, with all principal and any accrued but unpaid
interest due in August 1999. $46.0 million of the $70.0 million Mortgage
Financing bears interest at a net cost to the Company equal to a fixed rate of
8.02 percent per annum and the remaining $24.0 million bears interest at a net
cost to the Company equal to a floating rate of 100 basis points over one-month
LIBOR (5.53 percent at December 31, 1996) with a lifetime interest rate cap of
11.6 percent. Pursuant to the terms of the Mortgage Financing, the Company is
required to escrow $143,000 per month for tenant improvements and leasing
commissions and $53,000 per month for capital improvements.
In advance of the sale of Essex Road, on March 12, 1996, the Company prepaid
$5.5 million ($1.7 million-fixed rate, $3.8 million-floating rate debt) of the
Mortgage Financing, resulting in outstanding balances of $44.3 million for the
8.02 percent fixed rate debt and $20.2 million for the floating rate debt.
Page 72
<PAGE>
At the IPO, the Company obtained a $70.0 million revolving credit facility
from Prudential Securities Credit Corp.("PSC") (the "First Prudential
Facility"), which may be used to fund acquisitions and new development projects
and for general working capital purposes, including capital expenditures and
tenant improvements. In connection with the Mortgage Financing, the Company
obtained a $6.0 million letter of credit, secured by the First Prudential
Facility, to meet certain tenant improvement and capital expenditure reserve
requirements. The First Prudential Facility bore interest at a floating rate
equal to 150 basis points over one-month LIBOR for January 1, 1996 through
August 31, 1996. Effective September 1, 1996, the interest rate was reduced to a
floating rate equal to 125 basis points over one-month LIBOR. The First
Prudential Facility is a recourse liability of the Operating Partnership and is
secured by a pledge of the $74.5 million Bonds held by the Company. The First
Prudential Facility requires monthly payments of interest only, with outstanding
advances and any accrued but unpaid interest due November 30, 1997 and is
subject to renewal at the lender's sole discretion. Subsequent to December 31,
1996 and through March 1, 1997, the Company did not draw any additional funds
from the First Prudential Facility.
In connection with the acquisition of an office building in Fair Lawn, Bergen
County, New Jersey on March 3, 1995, the Company assumed an $18.8 million
non-recourse mortgage loan ("Fair Lawn Mortgage") bearing interest at a fixed
rate of 8.25 percent per annum. The loan requires payment of interest only
through March 15, 1996 and payment of principal and interest thereafter, on a
20-year amortization schedule, with the remaining principal balance due October
1, 2003. For the year ended December 31, 1996, the Company paid $319,000 for
amortization of principal on the Fair Lawn Mortgage.
On May 24, 1995, the Company entered into an interest rate swap agreement
with a commercial bank. The swap agreement fixes the Company's one-month LIBOR
base to a fixed 6.285 percent per annum on a notional amount of $24.0 million
through August 1999.
On January 23, 1996, the Company entered into an interest rate swap agreement
with one of the participating banks in the Bank Facility. The swap agreement has
a three-year term and a notional amount of $26.0 million, which fixes the
Company's one-month LIBOR base to 5.265 percent on its floating rate credit
facilities.
On February 1, 1996, the Company obtained a credit facility (the "Bank
Facility"), secured by certain of its properties, in the amount of $75.0 million
from two participating banks. The Bank Facility has a three-year term and bears
interest at 150 basis points over one-month LIBOR. The terms of the Bank
Facility include certain restrictions and covenants which limit, among other
things, dividend payments and additional indebtedness and which require
compliance with specified financial ratios and other financial measurements. The
Bank Facility also requires a fee equal to one quarter of one percent of the
unused balance payable quarterly in arrears.
Page 73
<PAGE>
In connection with the acquisition of Harborside, on November 4, 1996, the
Company assumed existing mortgage debt and was provided seller-mortgage debt
aggregating $150.0 million. The existing financing of approximately $107.5
million bears interest at a fixed rate of 7.32 percent for a term of
approximately nine years. The seller-provided financing of approximately $42.5
million also has a term of nine years and initially bears interest at a rate of
6.99 percent. The interest rate on the seller-provided financing will be reset
at the end of the third and sixth loan years based on the yield of the
three-year treasury obligation at that time, with spreads of 110 basis points in
years four through six and 130 basis points in years seven through maturity.
As part of the Harborside acquisition, the Company agreed to make payments
(with an estimated net present value of approximately $5.3 million) to the
seller for development rights ("Contingent Obligation") if and when the Company
commences construction on the acquired site during the next several years.
However, the agreement provides, among other things, that even if the Company
does not commence construction, the seller may nevertheless require the Company
to acquire these rights during the six-month period after the end of the sixth
year. After such period, the seller's option lapses, but any development in
years 7 through 30 will require a payment, on an increasing scale, for the
development rights.
On November 4, 1996, the Company obtained a revolving credit facility
("Second Prudential Facility") from PSC totaling $80.0 million which bears
interest at 125 basis points over one-month LIBOR, and matures on January 15,
1998, unless the Company or PSC elects to extend the maturity date to not
earlier than June 30, 1998, or the facility is refinanced prior to such date at
the election of either the Company or PSC. The Second Prudential Facility is a
recourse liability of the Operating Partnership and is secured by the Company's
equity interest in Harborside. The terms of the Second Prudential Facility
include certain restrictions and covenants that limit, among other things,
dividend payments and additional indebtedness and that require compliance with
specified financial ratios and other financial measurements.
In connection with the RM transaction on January 31, 1997, the Company
assumed a $185.3 million non-recourse mortgage loan with Teachers Insurance and
Annuity Association of America with interest only payable monthly at a fixed
annual rate of 7.18 percent (the "TIAA Mortgage"). The TIAA Mortgage is secured
and cross-collateralized by 43 of the RM Properties and matures on December 31,
2003. The Company, at its option, may convert the TIAA Mortgage to unsecured
public debt upon achievement by the Company of an investment credit rating of
Baa3/BBB- or better. The TIAA Mortgage is prepayable in whole or in part subject
to certain provisions, including yield maintenance.
Common Stock Offerings and Shelf Registrations
On May 13, 1996, the stockholders approved an increase in the authorized
shares of common stock in the Company from 25 million to 95 million.
On July 29, 1996, the Company filed a shelf registration statement (File No.
333-09081) with the Securities and Exchange Commission ("SEC") for an aggregate
amount of $500.0 million in equity securities of the Company. The registration
statement was declared effective by the SEC on August 2, 1996.
Page 74
<PAGE>
On August 13, 1996, the Company sold 3,450,000 shares of its common stock
through a public stock offering (the "August 1996 Offering"), which included an
exercise of the underwriters' over-allotment option of 450,000 shares. Net
proceeds from the August 1996 Offering (after offering costs) were approximately
$76.8 million. The offering was conducted using one underwriter and the shares
were issued from the Company's $250.0 million shelf registration statement (File
No. 33-96538).
Pursuant to the Company's Registration Statement on Form S-3 (File No.
333-09081), on November 22, 1996, the Company completed an underwritten public
offer and sale of 17,537,500 shares of its common stock using several different
underwriters to underwrite such public offer and sale (which included an
exercise of the underwriters' over-allotment option of 2,287,500 shares). The
Company received approximately $441.2 million in net proceeds (after offering
costs) from the November 1996 Offering, and used such funds to acquire certain
of the Company's property acquisitions in November and December, pay down
outstanding borrowings on its revolving credit facilities, and invested the
excess funds in Overnight Investments.
On December 31, 1996, the Company filed a shelf registration statement (File
No. 333-19101) with the SEC for an aggregate amount of $1.0 billion in equity
securities of the Company. The registration statement was declared effective by
the SEC on January 7, 1997.
STRATEGIC PLAN
Historically, rental revenue has been the principal source of funds to pay
operating expenses, debt service and capital expenditures, excluding
non-recurring capital expenditures. Management believes that the Company will
have access to the capital resources necessary to expand and develop its
business. To the extent that the Company's cash flow from operating activities
is insufficient to finance its non-recurring capital expenditures such as
property acquisition costs and other capital expenditures, the Company expects
to finance such activities through the credit facilities and other debt and
equity financing.
The Company presently has no plans for major capital improvements to the
existing properties, other than normal recurring expenditures.
The Company expects to meet its short-term liquidity requirements generally
through its working capital and net cash provided by operating activities along
with the First Prudential Facility, the Bank Facility and the Second Prudential
Facility. The Company is frequently examining potential property acquisitions
and, at any one given time, one or more of such acquisitions may be under
consideration. Accordingly, the ability to fund property acquisitions is a major
part of the Company's financing requirements. The Company expects to meet its
financing requirements through funds generated from operating activities,
long-term or short-term borrowings (including draws on the Company's credit
facilities), and the issuance of debt securities or additional equity
securities. In addition, the Company anticipates utilizing the First Prudential
Facility, the Bank Facility and the Second Prudential Facility primarily to fund
property acquisition activities.
Page 75
<PAGE>
The Company does not intend to reserve funds to retire the existing Mortgage
Financing, indebtedness under the credit facilities or other mortgages and loans
payable upon maturity. Instead, the Company will seek to refinance such debt at
maturity or retire such debt through the issuance of additional equity
securities. The Company anticipates that its available cash and cash equivalents
and cash flows from operating activities, together with cash available from
borrowings and other sources, will be adequate to meet the Company's capital and
liquidity needs both in the short and long-term. However, if these sources of
funds are insufficient or unavailable, the Company's ability to make the
expected distributions discussed below may be adversely affected.
To maintain its qualification as a real estate investment trust, the Company
must make annual distributions to its stockholders of at least 95 percent of its
REIT taxable income, excluding the dividends paid deduction and net capital
gains. Moreover, the Company intends to continue to make regular quarterly
distributions to its stockholders which, based upon current policy, in the
aggregate would equal approximately $66.0 million on an annual basis. However,
any such distribution, whether for federal income tax purposes or otherwise,
would only be paid out of available cash after meeting both operating
requirements and scheduled debt service on mortgages and loans payable and
required annual capital expenditure reserves pursuant to its mortgage indenture.
FUNDS FROM OPERATIONS
The Company considers Funds from Operations ("FFO") after adjustment for the
straight-lining of rents one measure of REIT performance. FFO is defined as net
income (loss) before minority interest of unitholders, computed in accordance
with Generally Accepted Accounting Principles, excluding gains (or losses) from
debt restructuring and sales of property, plus real estate-related depreciation
and amortization. FFO should not be considered as an alternative to net income
as an indication of the Company's performance or to cash flows as a measure of
liquidity.
Page 76
<PAGE>
FFO for the years ended December 31, 1996 and 1995, as calculated in
accordance with the National Association of Real Estate Investment Trusts
("NAREIT") definition published in March 1995, are summarized in the following
table (in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Income before gain on sale of property,
minority interest, and extraordinary item $31,521 $17,146
Add: Real estate-related depreciation
and amortization 14,677 10,563
- ---------------------------------------------------------------
Funds from Operations 46,198 27,709
Deduct: Rental income adjustment for
straight-lining of rents (978) (312)
- ---------------------------------------------------------------
Funds from Operations after adjustment
for straight-lining of rents $45,220 $27,397
===============================================================
Weighted average shares outstanding (1) 21,171 13,986
- ---------------------------------------------------------------
<FN>
(1) Assumes redemption of all Units, calculated on a weighted average basis,
for shares of common stock in the Company.
</FN>
</TABLE>
INFLATION
The Company's leases with the majority of its tenants provide for recoveries
and escalation charges based upon the tenant's proportionate share of and/or
increases in real estate taxes and certain operating costs, which reduce the
Company's exposure to increases in operating costs resulting from inflation.
Page 77
<PAGE>
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
Report of Independent Accountants
To the Board of Directors and
Shareholders of Cali Realty Corporation
and the Partners of the Cali Group
In our opinion, the consolidated and combined financial statements listed in the
index appearing in Item 14(a)(1) and (2) present fairly, in all material
respects, the financial position of Cali Realty Corporation (the "Company") and
its subsidiaries at December 31, 1996 and 1995, and the results of their
operations and their cash flows for the periods ended December 31, 1996, 1995
and 1994, and the results of operations and cash flows of Cali Group for the
period January 1, 1994 through August 30, 1994, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's and Cali Group's management; our responsibility
is to express and opinion on these financial statements based upon our audits.
We conducted our audits of these statements in accordance with generally
accepted auditing standards which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
/s/Price Waterhouse LLP
- --------------------------
Price Waterhouse LLP
New York, New York
February 18, 1997
Page 78
<PAGE>
CALI REALTY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
December 31,
ASSETS 1996 1995
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Rental property
Land $ 98,127 $ 38,962
Buildings and improvements 718,466 319,028
Tenant improvements 35,626 28,588
Furniture, fixtures and equipment 1,133 1,097
- ----------------------------------------------------------------------------------------
853,352 387,675
Less -- accumulated depreciation and amortization (68,610) (59,095)
- ----------------------------------------------------------------------------------------
Total rental property 784,742 328,580
Cash and cash equivalents (includes $201,269 in overnight
investments at December 31, 1996) 204,807 967
Unbilled rents receivable 19,705 18,855
Deferred charges and other assets, net of accumulated amortization 11,840 10,873
Restricted cash 3,160 3,229
Accounts receivable, net of allowance of $189 and $134 2,074 1,445
- ----------------------------------------------------------------------------------------
Total assets $1,026,328 $363,949
========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------
Mortgages and loans payable $ 268,010 $135,464
Dividends and distributions payable 17,554 7,606
Accounts payable and accrued expenses 5,068 3,245
Rents received in advance and security deposits 6,025 3,114
Accrued interest payable 1,328 629
- ----------------------------------------------------------------------------------------
Total liabilities 297,985 150,058
- ----------------------------------------------------------------------------------------
Minority interest of unitholders in Operating Partnership 26,964 28,083
- ----------------------------------------------------------------------------------------
Commitments and contingencies
Stockholders' equity
Preferred stock, 5,000,000 shares authorized, none issued
Common stock, $.01 par value, 95,000,000 shares authorized,
36,318,937 and 15,104,725 shares outstanding 363 151
Additional paid-in capital 701,016 185,657
Retained earnings -- --
- ----------------------------------------------------------------------------------------
Total stockholders' equity 701,379 185,808
- ----------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $1,026,328 $363,949
========================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 79
<PAGE>
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Cali Group
Cali Realty Corporation Consolidated Combined
---------------------------------------- ---------------
Year Ended August 31, 1994 January 1, 1994
December 31, to to
REVENUES 1996 1995 December 31, 1994 August 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Base rents $76,922 $50,808 $13,805 $26,653
Escalations and recoveries from tenants 14,429 9,504 2,523 5,557
Parking and other 2,204 1,702 434 1,121
Interest income 1,917 321 79 306
- ------------------------------------------------------------------------------------------------------------------------------------
Total revenues 95,472 62,335 16,841 33,637
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
- ------------------------------------------------------------------------------------------------------------------------------------
Real estate taxes 9,395 5,856 1,680 3,282
Utilities 8,138 6,330 1,522 3,354
Operating services 12,129 8,519 2,038 4,519
General and administrative 5,800 3,712 1,079 2,288
Depreciation and amortization 15,812 12,111 3,764 5,454
Interest expense 12,677 8,661 1,768 13,608
Ground rent -- -- -- 589
Participation agreement settlement -- -- -- 653
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 63,951 45,189 11,851 33,747
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before gain on sale of rental property,
minority interest and extraordinary item 31,521 17,146 4,990 (110)
Gain on sale of rental property 5,658 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before minority interest
and extraordinary item 37,179 17,146 4,990 (110)
Minority interest 4,760 3,508 1,051 --
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item 32,419 13,638 3,939 (110)
Extraordinary items-- (loss) gain
(net of minority interest's share of $86 in 1996) (475) -- -- 11,864
- ------------------------------------------------------------------------------------------------------------------------------------
Net income $31,944 $13,638 $3,939 $11,754
===================================================================================================================================
The accompanying notes are an integral part of these financial statements.
Page 80
</TABLE>
<PAGE>
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Cali Realty Corporation Consolidated
----------------------------------------
Year Ended August 31, 1994
December 31, to
1996 1995 December 31, 1994
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income per common share:
Income before extraordinary item --
loss on early retirement of debt $1.76 $1.23 $0.38
Extraordinary item-- loss on early retirement of debt (0.03) -- --
- ------------------------------------------------------------------------------------------------------------------
Net income per common share $1.73 $1.23 $0.38
==================================================================================================================
Dividends declared per common share $1.75 $1.66 $0.54
- ------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 18,461 11,122 10,500
- ------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
Page 81
</TABLE>
<PAGE>
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENT OF STOCKHOLDERS' EQUITY AND PARTNERS' DEFICIT
(in thousands)
<TABLE>
<CAPTION>
Partners'
CALI GROUP COMBINED Deficit
- --------------------------------------------------------------------------------------------------------
<S> <C>
Balance at December 31, 1993 $(34,335)
Contributions 3,130
Distributions (11,857)
Net income 11,754
- --------------------------------------------------------------------------------------------------------
Balance at August 30, 1994 $(31,308)
- --------------------------------------------------------------------------------------------------------
<CAPTION>
Additional Total
Common stock Paid-In Retained Stockholders'
CALI REALTY CORPORATION CONSOLIDATED Shares Par Value Capital Earnings Equity
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net proceeds from IPO 10,500 $105 $165,413 -- $165,518
Adjustments for minority interest of unitholders
in Operating Partnership at IPO -- -- (55,493) -- (55,493)
Net income -- -- -- $ 3,939 3,939
Dividends -- -- (1,714) (3,939) (5,653)
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1994 10,500 105 108,206 -- 108,311
Purchase of treasury stock (100) (1) (1,594) -- (1,595)
Conversion of 105 Units to shares of common stock 105 1 1,097 -- 1,098
Net income -- -- -- 13,638 13,638
Dividends -- -- (5,600) (13,638) (19,238)
Net proceeds from common stock offering 4,600 46 83,548 -- 83,594
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1995 15,105 151 185,657 -- 185,808
Conversion of 101 Units to shares of common stock 101 1 1,072 -- 1,073
Net income -- -- -- 31,944 31,944
Dividends -- -- (5,722) (31,944) (37,666)
Net proceeds from common stock offerings 20,987 210 518,009 -- 518,219
Stock options exercised 126 1 2,000 -- 2,001
- --------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1996 36,319 $363 $701,016 -- $701,379
====================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 82
<PAGE>
<TABLE>
<CAPTION>
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(in thousands)
Cali Group
Cali Realty Corporation Consolidated Combined
---------------------------------------- ---------------
Year Ended August 31, 1994 January 1, 1994
December 31, to to
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995 December 31, 1994 August 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net income $ 31,944 $ 13,638 $ 3,939 $ 11,754
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 15,812 12,111 3,764 5,454
Gain on sale of rental property (5,658) -- -- --
Minority interest 4,760 3,508 1,051 --
Extraordinary item-- loss (gain) 475 -- -- (11,864)
Participation agreement settlement -- -- -- 653
Changes in operating assets and liabilities:
(Increase) decrease in unbilled rents receivable (979) (312) 95 (1,583)
Increase in deferred charges and other assets, net (4,335) (1,678) (3,133) (669)
(Increase) decrease in accounts receivable, net (629) (99) (225) 1,100
Increase in accounts payable and accrued expenses 1,823 35 322 1,005
Increase in rents received in advance and security deposits 2,911 878 162 763
Increase (decrease) in accrued interest payable 699 365 392 (285)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 46,823 28,446 6,367 6,328
===================================================================================================================================
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------------------------------------------------------------------------------------------------------
Additions to rental property (318,145) (133,489) (19,804) (2,235)
Proceeds from sale of rental property 10,324 -- -- --
Decrease (increase) in restricted cash 69 (247) (2,204) 809
Cash from contributed assets -- -- 13,061 --
Proceeds from sale of investments -- -- -- 3,401
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by investing activities (307,752) (133,736) (8,947) 1,975
===================================================================================================================================
Page 83
<PAGE>
<CAPTION>
CALI REALTY CORPORATION AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(in thousands)
Cali Group
Cali Realty Corporation Consolidated Combined
---------------------------------------- ---------------
Year Ended August 31, 1994 January 1, 1994
December 31, to to
CASH FLOWS FROM FINANCING ACTIVITIES 1996 1995 December 31, 1994 August 30, 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Proceeds from mortgages and loans payable 272,113 60,402 79,000 16,327
Repayments of mortgages and loans payable (294,819) (20,702) (223,811) (16,571)
Payment of financing costs -- (102) (5,233) (1,952)
Debt prepayment premiums and other costs (312) -- -- --
Purchase of treasury stock -- (1,595) -- --
Proceeds from common stock offerings 518,219 83,594 165,518 --
Proceeds from stock options exercised 2,001 -- -- --
Payment of dividends and distributions (32,433) (21,734) (1,790) --
Proceeds from concurrent placement -- -- 5,175 --
Cash distributions to partners -- -- (5,175) (1,972)
Payments to non-continuing partners in connection with IPO -- -- (4,710) --
Cash contributions from partners of the Cali Group -- -- -- 3,130
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 464,769 99,863 8,974 (1,038)
===================================================================================================================================
Net increase (decrease) in cash and cash equivalents 203,840 (5,427) 6,394 7,265
Cash and cash equivalents, beginning of period 967 6,394 -- 5,796
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 204,807 $ 967 $ 6,394 $ 13,061
===================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 84
<PAGE>
CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(dollars in thousands, except per share amounts)
1. ORGANIZATION AND BASIS OF PRESENTATION
Organization
Cali Realty Corporation and subsidiaries (the "Company"), a Maryland
corporation, is a fully integrated, self-administered, self-managed real estate
investment trust ("REIT") providing leasing, management, acquisition,
development, construction and tenant-related services for its properties. As of
December 31, 1996, the Company owned and operated 57 properties, consisting of
56 office and office/flex buildings totaling approximately 7.1 million square
feet and a multi-family residential property (the "Properties"). The Properties
are located in New Jersey, New York and Pennsylvania.
The Company was incorporated on May 24, 1994 and commenced operations on
August 31, 1994. On August 31, 1994, the Company completed an initial public
offering ("IPO") and effected a business combination with the Cali Group (not a
legal entity). The Company raised (net of offering costs) approximately $165,518
of capital through the IPO issuing 10,500,000 shares of common stock, and used
the proceeds to acquire a 78.94 percent interest in Cali Realty, L.P. (the
"Operating Partnership") and related entities, which are the successors to the
operations of the Cali Group. In connection with the business combination, the
Operating Partnership assumed net liabilities of $26,133. Prior to the
completion of the business combination with the Company, the Cali Group was
engaged in development, ownership and operation of a portfolio of 12 office
buildings and one multi-family residential property, all located in New Jersey
(the "Original Properties").
Acquisitions
In 1994 and 1995, following the Company's IPO, the Company acquired 28 office
and office/flex properties totaling 1.7 million square feet for approximately
$157,481. These properties are all located in New Jersey, except for one, which
is located in Rockland County, New York.
On March 20, 1996, the Company sold its office building located at 15 Essex
Road in Paramus, Bergen County, New Jersey ("Essex Road") and concurrently
acquired a 96,000 square foot office building at 103 Carnegie Center in
Princeton, Mercer County, New Jersey. The concurrent transactions with unrelated
parties qualified as a tax-free exchange, as the Company used substantially all
of the proceeds from the sale of Essex Road to acquire the Princeton property.
The financial statements for the year ended December 31, 1996 include a gain of
$5,658 relating to this transaction.
In advance of the sale of Essex Road, on March 12, 1996, the Company prepaid
$5,492 of the Mortgage Financing (see Note 5) and obtained a release of the
mortgage liens on the property. On account of prepayment penalties, write-offs
of loan origination fees and costs, legal fees and other costs incurred in the
retirement of the debt, an extraordinary loss of $475, (net of minority
interest's share of the loss ($86)), is recorded for the year ended December 31,
1996.
Page 85
<PAGE>
On May 2, 1996, the Company acquired Rose Tree Corporate Center, a
two-building suburban office complex totaling 260,000 square feet, located in
Media, Delaware County, Pennsylvania, for approximately $28,100, which was drawn
from one of the Company's credit facilities.
On July 23, 1996, the Company acquired 222 and 233 Mount Airy Road, two
suburban office buildings totaling 115,000 square feet, located in Basking
Ridge, Somerset County, New Jersey, for approximately $10,478, which was drawn
from one of the Company's credit facilities.
On November 4, 1996, the Company acquired the property known as the
Harborside Financial Center ("Harborside"), a 1.9 million square foot office
complex located in Jersey City, Hudson County, New Jersey for approximately
$292,670. The acquisition cost included the assumption of existing and
seller-provided mortgage financing aggregating $150,000 (see Note 5). The
balance of the cost was paid in cash and was financed substantially through
drawings from the Company's credit facilities. As part of the purchase, the
Company also acquired 11.3 acres of land fully zoned and permitted for an
additional 4.1 million square feet of development and the water rights
associated with 27.4 acres of land extending into the Hudson River immediately
east of Harborside, including two piers with an area of 5.8 acres.
On November 7, 1996, the Company acquired Five Sentry Parkway East & West, a
two-building office complex comprised of approximately 130,000 square feet
located in Plymouth Meeting, Montgomery County, Pennsylvania for approximately
$12,484, which was drawn from one of the Company's credit facilities.
On December 10, 1996, the Company acquired 300 Tice Boulevard, a 230,000
square foot office building located in Woodcliff Lake, Bergen County, New
Jersey, for approximately $35,112 in cash, made available from the net proceeds
received from the Company's common stock offering in November 1996 (the
"November 1996 Offering").
On December 16, 1996, the Company acquired One Bridge Plaza, a 200,000 square
foot office building located in Fort Lee, Bergen County, New Jersey, for
approximately $26,901 in cash, made available from the net proceeds received
from the November 1996 Offering.
On December 17, 1996, the Company acquired the International Court at Airport
Business Center, a three-building office complex comprised of approximately
371,000 square feet located in Lester, Delaware County, Pennsylvania for
approximately $43,178 in cash, made available from the net proceeds received
from the November 1996 Offering.
In December 1996, the Company completed the construction of two office/flex
properties on vacant land purchased in the Company's Totowa, Passaic County, New
Jersey office park acquired in November 1995. The two properties, which were 19
percent leased at December 31, 1996, aggregate 47,100 square feet, and were
completed for a total cost of $2,714.
On January 28, 1997, the Company acquired 1345 Campus Parkway, a 76,000
square foot office/flex property, located in Wall Township, Monmouth County, New
Jersey, for approximately $6,800 in cash, made available from the net proceeds
received from the November 1996 Offering. The property is located in the same
office park in which the Company previously acquired two office properties and
four office/flex properties in November 1995.
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<PAGE>
On January 31, 1997, the Company acquired 65 properties (the "RM Properties")
of the Robert Martin Company LLC and affiliates ("RM"), for a total cost of
approximately $450,000. The cost of the transaction was financed through the
assumption of $185,283 mortgage indebtedness, approximately $220,000 in cash,
substantially all of which was obtained from the Company's cash reserves, and
the issuance of 1,401,225 Units in the Operating Partnership.
The RM Properties consist primarily of 54 office and office/flex properties
aggregating approximately 3.7 million square feet and six industrial/warehouse
properties aggregating approximately 400,000 square feet. The RM Properties are
located primarily in established business parks in Westchester County, New York
and Fairfield County, Connecticut. The Company has agreed not to sell certain of
the RM Properties for a period of seven years without the consent of the RM
principals, except for sales made under certain circumstances and/or conditions.
In connection with the RM transaction, the Company was granted a three-year
option to acquire a 115,000 square foot office property and an 84,000 square
foot office/flex property (the "Option Properties") for an aggregate minimum
price of $19,000 and has granted RM the right to put such properties to the
Company between a range of an aggregate purchase price of $11,600 to $21,300,
under certain conditions. The purchase prices, under the agreement, are subject
to adjustment based on different formulas and are payable in cash or Units.
The Company provided an $11,600 non-recourse mortgage loan ("Mortgage
Receivable") to entities controlled by the RM principals, bearing interest at an
annual rate of 450 basis points over the one-month London Inter-Bank Offered
Rate ("LIBOR"). The Mortgage Receivable, which is secured by the Option
Properties and guaranteed by certain of the RM principals, matures on February
1, 2000. In addition, the Company received a three percent origination fee in
connection with the Mortgage Receivable.
In connection with the RM transaction, RM has made certain customary
representations and warranties to the Company, most of which survive the closing
for a period of one year. RM has agreed to maintain a minimum net worth of
$25,000 during such period.
As part of the RM transaction, Brad W. Berger, President and Chief Executive
Officer of RM, and Timothy M. Jones, Chief Operating Officer of RM, joined the
Company as Executive Vice- Presidents under three year employment agreements.
The agreements provide for, among other things, both Berger and Jones to be
issued warrants to purchase 170,000 shares of the Company's common stock at a
price of $33 per share, which vest equally over a three-year period and expire
on January 31, 2007.
Robert F. Weinberg, co-founder of RM, and Berger will serve on the Company's
Board of Directors for an initial term of three years. The Company intends to
appoint two additional independent Board members, thereby increasing the size of
the Board from nine to thirteen members.
Following the transaction, the Company's portfolio consists of 123
properties, aggregating 11.4 million square feet of office, office/flex and
industrial/warehouse properties, located in New Jersey, New York, Pennsylvania
and Connecticut.
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<PAGE>
Basis of Presentation
The accompanying consolidated financial statements include all accounts of
the Company and its majority-owned subsidiaries, which consist principally of
the Operating Partnership. The Company's investment in Cali Services, Inc. (an
entity formed to provide third party management services in which the Operating
Partnership has a 99 percent interest) is accounted for under the equity method.
The accompanying combined statements of operations, cash flows, and partners'
deficit of the Cali Group include all the operations of the entities comprising
the Cali Group and are presented on a combined basis because of common
management and because all of the entities became wholly-owned by the Operating
Partnership and the Company.
Certain other properties affiliated with the Cali Group have been excluded
from the statements as they were not included in the business combination
described above.
All significant intercompany accounts and transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. SIGNIFICANT ACCOUNTING POLICIES
Rental Property -- Rental properties are stated at cost less accumulated
depreciation. Costs include interest, property taxes, insurance and other
project costs incurred during the period of construction. Ordinary repairs and
maintenance are expensed as incurred; major replacements and betterments are
capitalized and depreciated over their estimated useful lives. Fully depreciated
assets are removed from the accounts. Depreciation is computed on a
straight-line basis over the estimated useful lives of the assets as follows:
<TABLE>
<S> <C>
Buildings and improvements 39 to 40 years
- ----------------------------------------------------------------
Tenant improvements The shorter of the term of the
related lease or useful life
- ----------------------------------------------------------------
Furniture, fixtures and equipment 5 to 10 years
- ----------------------------------------------------------------
</TABLE>
On a periodic basis, management assesses whether there are any indicators
that the value of the real estate properties may be impaired. A property's value
is impaired only if management's estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by the property are
less than the carrying value of the property. Management does not believe that
the value of any of its real estate properties are impaired.
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<PAGE>
Deferred Financing Costs -- Costs incurred in obtaining financing are
capitalized and amortized on a straight-line basis, which approximates the
effective interest method, over the term of the related indebtedness.
Amortization of such costs were $1,081, $1,456, $445 and $361 for the years
ended December 31, 1996 and 1995, and the periods August 31, 1994 to December
31, 1994 and January 1, 1994 to August 30, 1994, respectively.
Deferred Leasing Costs -- Costs incurred in connection with leases are
capitalized and amortized on a straight-line basis over the terms of the related
leases. Unamortized deferred leasing costs are charged to amortization expense
upon early termination of the lease.
Revenue Recognition -- The Company recognizes base rental revenue on a
straight-line basis over the terms of the respective leases. Unbilled rents
receivable represents the amount by which straight-line rental revenue exceeds
rents currently billed in accordance with the lease agreements. Parking revenue
includes income from parking spaces leased to tenants.
Rental income on residential property under operating leases having terms
generally of one year or less is recognized when earned.
Cash and Cash Equivalents -- All highly liquid investments with a maturity of
three months or less when purchased are considered to be cash equivalents. At
December 31, 1996, cash and cash equivalents included investments in overnight
reverse repurchase agreements ("Overnight Investments") totaling $201,269.
Investments in Overnight Investments are subject to the risks that the
counterparty will default and the collateral will decline in market value. The
Overnight Investments matured on January 2, 1997. The entire balance, including
interest income earned, was realized by the Company and ultimately used in the
funding of the RM transaction on January 31, 1997.
Income and Other Taxes -- The Company has elected to be taxed as a REIT under
Sections 856 through 860 of the Internal Revenue Code (the "Code"). As a REIT,
the Company will not be subject to federal income tax to the extent it
distributes at least 95 percent of its REIT taxable income to its shareholders.
REITs are subject to a number of organizational and operational requirements. If
the Company fails to qualify as a REIT in any taxable year, the Company will be
subject to federal income tax (including any applicable alternative minimum tax)
on its taxable income at regular corporate tax rates. The Company may be subject
to certain state and local taxes. Taxes were not provided for in the Cali Group
combined financial statements because the entities that comprised the Cali Group
were partnerships and any taxable income or loss was included in the income tax
returns of the individual partners.
Net Income Per Share -- Net income per share is computed using the weighted
average common shares outstanding during the period. The assumed exercise of
outstanding stock options using the treasury stock method is not considered
dilutive in any period.
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<PAGE>
Dividends and Distributions Payable -- The dividends and distributions payable
at December 31, 1996 represent dividends payable to shareholders of record on
January 6, 1997 (36,318,937 shares) and distributions payable to minority
interest unitholders (2,689,945 Units) on that same date. The fourth quarter
dividends and distributions of $0.45 per share and per Unit were approved by the
Board of Directors on December 19, 1996 and were paid on January 21, 1997. All
dividends paid and declared during the year ended December 31, 1996 are
considered ordinary income to the Company's shareholders for federal income tax
purposes. The status of such dividend is subject to final determination by the
Internal Revenue Service.
Extraordinary Items -- The extraordinary items represent the net effects
resulting from the early settlement of certain mortgage obligations, including
accrued interest, net of write-offs of related deferred financing costs and
prepayment penalties.
Participation Agreement Settlement -- In connection with its original ten-year
lease entered into in 1988, a tenant was granted a rent concession in the form
of a residual share, as defined, of the proceeds of any sale or refinancing of
the property during the tenants' lease term. In connection with the IPO, the
tenant was paid $1,135 in settlement of this participation agreement, of which
$653 was expensed during the period ended August 30, 1994 and the balance of
$482 is being amortized over the remaining term of the original ten-year term of
the lease.
Underwriting Commissions and Offering Costs -- Underwriting commissions and
offering costs incurred in connection with the Company's common stock offerings
have been reflected as a reduction of additional paid-in-capital.
Stock Options -- The Company accounts for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion (APB)
No. 25, "Accounting for Stock Issued to Employees," and related Interpretations.
Under APB No. 25, compensation cost is measured as the excess, if any, of the
quoted market price of the Company's stock at the date of grant over the
exercise price of the option granted. Compensation cost for stock options, if
any, is recognized ratably over the vesting period. The Company's policy is to
grant options with an exercise price equal to the quoted market price of the
Company's stock on the grant date. Accordingly, no compensation cost has been
recognized for the Company's stock option plans. The Company provides additional
pro forma disclosures as required under Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." (See Note
8.)
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<PAGE>
3. RESTRICTED CASH
Restricted cash includes security deposits for the residential property, and
escrow and reserve funds for debt service, real estate taxes, property
insurance, capital improvements, tenant improvements, and leasing costs
established pursuant to certain mortgage financing arrangements and is comprised
of the following:
December 31,
1996 1995
- ----------------------------------------------------------------
Escrow and other reserve funds $2,814 $2,901
Residential security deposits 346 328
- ----------------------------------------------------------------
Total restricted cash $3,160 $3,229
================================================================
4. DEFERRED CHARGES AND OTHER ASSETS
December 31,
1996 1995
- ----------------------------------------------------------------
Deferred leasing costs $14,031 $13,498
Deferred financing costs 5,390 5,778
- ----------------------------------------------------------------
19,421 19,276
Accumulated amortization (8,994) (9,035)
- ----------------------------------------------------------------
Deferred charges, net 10,427 10,241
Prepaid expenses and other assets 1,413 632
- ----------------------------------------------------------------
Total deferred charges and other assets $11,840 $10,873
================================================================
5. MORTGAGES AND LOANS PAYABLE
December 31,
1996 1995
- ----------------------------------------------------------------
Harborside Mortgages $150,000 $ --
Mortgage Financing 64,508 70,000
Fair Lawn Mortgage 18,445 18,764
First Prudential Facility 6,000 46,700
Bank Facility 23,805 --
Contingent Obligation 5,252 --
- ----------------------------------------------------------------
Total mortgages and loans payable $268,010 $135,464
================================================================
Harborside Mortgages
In connection with the acquisition of Harborside, on November 4, 1996, the
Company assumed existing mortgage debt and was provided seller-mortgage debt
aggregating $150,000. The existing financing of approximately $107,480 bears
interest at a fixed rate of 7.32 percent for a term of approximately nine years.
The seller-provided financing of approximately $42,520 also has a term of nine
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<PAGE>
years and initially bears interest at a rate of 6.99 percent. The interest rate
on the seller-provided financing will be reset at the end of the third and sixth
loan years based on the yield of the three-year treasury obligation at that
time, with spreads of 110 basis points in years four through six and 130 basis
points in years seven through maturity.
Mortgage Financing
Concurrent with the IPO, the Company's initial operating subsidiaries, which
own the Original Properties, issued five-year mortgage notes with an aggregate
principal balance of $144,500 secured and cross-collateralized by the Original
Properties to an affiliate ("PSI") of Prudential Securities Inc. PSI then issued
commercial mortgage pay-through bonds ("Bonds") collateralized by the mortgage
notes. Bonds with an aggregate principal balance of $70,000 were purchased by
unrelated third parties. Bonds with an aggregate principal balance of $74,500
were purchased by the Company. As a result, the Company's initial mortgage
financing was $70,000 (the "Mortgage Financing"). Approximately $38,000 of the
$70,000 is guaranteed under certain conditions by certain partners of the Cali
Group partnerships which owned the Original Properties. The Mortgage Financing
requires monthly payments of interest only, with all principal and any accrued
but unpaid interest due in August 1999. $46,000 of the $70,000 Mortgage
Financing bears interest at a net cost to the Company equal to a fixed rate of
8.02 percent per annum and the remaining $24,000 bears interest at a net cost to
the Company equal to a floating rate of 100 basis points over one-month LIBOR
(5.53 percent at December 31, 1996) with a lifetime interest rate cap of 11.6
percent. Pursuant to the terms of the Mortgage Financing, the Company is
required to escrow $143 per month for tenant improvements and leasing
commissions and $53 per month for capital improvements.
In advance of the sale of Essex Road, on March 12, 1996, the Company prepaid
$5,492 ($1,687 -- fixed rate debt, $3,805 -- floating rate debt) of the Mortgage
Financing, resulting in outstanding balances of $44,313 for the 8.02 percent
fixed rate debt and $20,195 for the floating rate debt.
Fair Lawn Mortgage
In connection with the acquisition of an office building in Fair Lawn, Bergen
County, New Jersey on March 3, 1995, the Company assumed an $18,764 non-recourse
mortgage loan ("Fair Lawn Mortgage") bearing interest at a fixed rate of 8.25
percent per annum. The loan requires payment of interest only through March 15,
1996 and payment of principal and interest thereafter, on a 20-year amortization
schedule, with the remaining principal balance due October 1, 2003. For the year
ended December 31, 1996, the Company has paid $319 for amortization of principal
on the Fair Lawn Mortgage.
First Prudential Facility
The Company has a $70,000 revolving credit facility (the "First Prudential
Facility") with Prudential Securities Credit Corp. ("PSC"), which may be used to
fund acquisitions and new development projects and for general working capital
purposes, including capital expenditures and tenant improvements. In connection
with the Mortgage Financing, the Company obtained a $6,005 letter of credit,
secured by the First Prudential Facility, to meet certain tenant improvement and
capital expenditure reserve requirements. The First Prudential Facility bore
interest at a floating rate equal to 150 basis points over one-month LIBOR for
January 1, 1996 through August 31, 1996. Effective September 1, 1996, the
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<PAGE>
interest rate was reduced to a floating rate equal to 125 basis points over
one-month LIBOR. The First Prudential Facility is a recourse liability of the
Operating Partnership and is secured by a pledge of the $74,500 Bonds held by
the Company. The First Prudential Facility requires monthly payments of interest
only, with outstanding advances and any accrued but unpaid interest due November
30, 1997 and is subject to renewal at the lender's sole discretion. Subsequent
to December 31, 1996 and through February 18, 1997, the Company did not draw any
additional funds from the First Prudential Facility.
Bank Facility
On February 1, 1996, the Company obtained a credit facility (the "Bank
Facility") secured by certain of its properties in the amount of $75,000 from
two participating banks. The Bank Facility has a three-year term and bears
interest at 150 basis points over one-month LIBOR. The terms of the Bank
Facility include certain restrictions and covenants which limit, among other
things, dividend payments and additional indebtedness and which require
compliance with specified financial ratios and other financial measurements. The
Bank Facility also requires a fee equal to one quarter of one percent of the
unused balance payable quarterly in arrears. Subsequent to December 31, 1996 and
through February 18, 1997, the Company had additional net borrowings of $41,195
from the Bank Facility, used for the cash portion of the financing for the RM
transaction on January 31, 1997.
Contingent Obligation
As part of the Harborside acquisition, the Company agreed to make payments
(with an estimated net present value of approximately $5,252) to the seller for
development rights ("Contingent Obligation") if and when the Company commences
construction on the acquired site during the next several years. However, the
agreement provides, among other things, that even if the Company does not
commence construction, the seller may nevertheless require the Company to
acquire these rights during the six-month period after the end of the sixth
year. After such period, the seller's option lapses, but any development in
years 7 through 30 will require a payment, on an increasing scale, for the
development rights.
Second Prudential Facility
On November 4, 1996, the Company obtained a revolving credit facility
("Second Prudential Facility") from PSC totaling $80,000 which bears interest at
125 basis points over one-month LIBOR, and matures on January 15, 1998, unless
the Company or PSC elects to extend the maturity date to not earlier than June
30, 1998, or the facility is refinanced prior to such date at the election of
either the Company or PSC. The Second Prudential Facility is a recourse
liability of the Operating Partnership and is secured by the Company's equity
interest in Harborside. The terms of the Second Prudential Facility include
certain restrictions and covenants that limit, among other things, dividend
payments and additional indebtedness and that require compliance with specified
financial ratios and other financial measurements. Subsequent to December 31,
1996 and through February 18, 1997, the Company did not draw any additional
funds from the Second Prudential Facility.
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<PAGE>
TIAA Mortgage
In connection with the RM transaction on January 31, 1997, the Company
assumed a $185,283 non-recourse mortgage loan with Teachers Insurance and
Annuity Association of America with interest only payable monthly at a fixed
annual rate of 7.18 percent (the "TIAA Mortgage"). The TIAA Mortgage is secured
and cross-collateralized by 43 of the RM Properties and matures on December 31,
2003. The Company, at its option, may convert the TIAA Mortgage to unsecured
public debt upon achievement by the Company of an investment credit rating of
Baa3/BBB- or better. The TIAA Mortgage is prepayable in whole or in part subject
to certain provisions, including yield maintenance.
Interest Rate Swap Agreements
On May 24, 1995, the Company entered into an interest rate swap agreement
with a commercial bank. The swap agreement fixes the Company's one-month LIBOR
base to a fixed 6.285 percent per annum on a notional amount of $24,000 through
August 1999.
On January 23, 1996, the Company entered into an interest rate swap agreement
with one of the participating banks in the Bank Facility. The swap agreement has
a three-year term and a notional amount of $26,000, which fixes the Company's
one-month LIBOR base to 5.265 percent on its floating rate credit facilities.
The Company is exposed to credit loss in the event of non-performance by the
other parties to the interest rate swap agreements. However, the Company does
not anticipate non-performance by either counterparty.
Scheduled Principal Payments and Interest Paid
Scheduled principal payments on the mortgages and loans payable, as of
December 31, 1996, are as follows:
Year Amount
- ----------------------------------------------------------------
1997 $ 6,412
1998 448
1999 88,799
2000 527
2001 573
Thereafter 171,251
- ----------------------------------------------------------------
Total $268,010
================================================================
Cash paid for interest for the years ended December 31, 1996 and 1995, and
the periods from August 31, 1994 to December 31, 1994 and from January 1, 1994
to August 30, 1994 was $12,096, $8,322, $1,504, and $15,977, respectively.
Additionally, interest capitalized by the Company for the years ended December
31, 1996 and 1995 was $118 and $27, respectively, while no interest was
capitalized during the periods August 31, 1994 to December 31, 1994 and January
1, 1994 to August 30, 1994 .
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<PAGE>
6. MINORITY INTEREST
Certain individuals and entities contributing interests to the Operating
Partnership received Units. A Unit and a share of common stock of the Company
have substantially the same economic characteristics in as much as they
effectively share equally in the net income or loss of the Operating
Partnership. Minority interest in the accompanying consolidated financial
statements relates to Units held by parties other than the Company.
Units are able to be redeemed by the unitholders at their option, subject to
certain restrictions, on the basis of one Unit for either one share of common
stock or cash equal to the fair market value of a share at the time of the
redemption. The Company has the option to deliver shares of common stock in
exchange for all or any portion of the cash requested. When a unitholder redeems
a Unit, minority interest is reduced and the Company's investment in the
Operating Partnership is increased. During the year ended December 31, 1996,
100,671 Units were redeemed for common stock of the Company. As of December 31,
1996, the minority interest unitholders owned 6.9 percent of the Operating
Partnership.
7. RELATED PARTY TRANSACTIONS
Certain employees of the Operating Partnership provide leasing services to
the Properties and receive fees as compensation ranging from 0.667 to 2.667
percent of adjusted rents. For the years ended December 31, 1996 and 1995, such
fees, which are capitalized and amortized, approximated $490 and $575,
respectively.
The Cali Group
Prior to the IPO, Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ")
was an affiliate of a 20 percent limited partner of one property partnership.
Total rental income, including escalations and recoveries, from DLJ for the
period January 1, 1994 to August 30, 1994 approximated $6,472.
Prior to the IPO, two limited partners in the Roseland II Limited Partnership
were tenants occupying, in the aggregate, 21 percent of the property. Total
rental income, including escalations and recoveries, from these tenants for the
period January 1, 1994 to August 30, 1994 approximated $578.
The Cali Group provided administrative services to certain properties not
included in the accompanying combined financial statements and earned fees of
$108 for such services for the period January 1, 1994 to August 30, 1994.
Certain Cali Group employees provided leasing services to the Original
Properties and received fees as additional compensation ranging from .667
percent to 2.667 percent of adjusted rents. For the period January 1, 1994 to
August 30, 1994 such fees, which are capitalized and amortized, approximated
$108.
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<PAGE>
8. STOCK OPTION AND EXECUTIVE
COMPENSATION PLANS
Stock Option Plans
In 1994, and as amended on May 13, 1996, the Company established the Cali
Employee Stock Option Plan ("Employee Plan") and the Cali Director Stock Option
Plan ("Director Plan") under which a total of 1,880,188 (subject to adjustment)
of the Company's shares of common stock have been reserved for issuance
(1,780,188 shares under the Employee Plan and 100,000 under the Director Plan).
Stock options granted under the Employee Plan in 1994 and 1995 become
exercisable over a three-year period and those options granted under the
Employee Plan in 1996 become exercisable over a five-year period. All stock
options granted under the Director Plan become exercisable in one year. All
options were granted at the fair market value at the dates of grant and have a
term of ten years.
CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (CONTINUED)
Information regarding the Company's stock option plans is summarized below:
Employee Director
Shares under option: Plan Plan
- -----------------------------------------------------------------
Granted on August 31, 1994 at
$17.25 per share 600,000 20,000
Granted at $15.25 per share -- 5,000
- -----------------------------------------------------------------
Outstanding at December 31, 1994 600,000 25,000
Granted at $17.25 per share 181,200 10,000
Granted at $19.875 per share 39,000 --
Less-- Lapsed or canceled (3,588) --
- -----------------------------------------------------------------
Outstanding at December 31, 1995 816,612 35,000
$15.25 - $19.875 per share
Granted at $21.50 per share 361,750 14,000
Granted at $25.25 per share 58,950 --
Granted at $26.25 per share 375,000 --
Less -- Lapsed or canceled (7,164) --
Exercised at $17.25 per share (116,041) (10,000)
- -----------------------------------------------------------------
Outstanding at December 31, 1996 1,489,107 39,000
$15.25 - $26.25 per share
=================================================================
Exercisable at December 31, 1996 509,710 25,000
- -----------------------------------------------------------------
Available for grant at
December 31, 1995 463,576 15,000
- -----------------------------------------------------------------
Available for grant at
December 31, 1996 175,040 51,000
- -----------------------------------------------------------------
The weighted-average fair value of options granted during 1996 and 1995 were
$2.41 and $1.28 per option, respectively. The fair value of each significant
option grant is estimated on the date of grant using the Black-Scholes model.
The following weighted average assumptions are included in the Company's fair
value calculations:
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<PAGE>
1996 1995
- ---------------------------------------------------------------
Expected life (years) 6 6
Risk-free interest rate 6.11% 6.58%
Volatility 19.14% 1.41%
Dividend yield 7.58% 10.20%
Under the above models, the value of stock options granted under the Employee
Plan and Director Plan during 1996 and 1995 totaled approximately $1,955 and
$294, respectively, which would be amortized ratably on a pro forma basis over
the appropriate vesting period. Had the Company determined compensation cost for
these plans in accordance with SFAS No. 123, the Company's pro forma net income
and earnings per share would have been $31,980 and $1.73 in 1996 and $13,553 and
$1.22 in 1995. The SFAS No. 123 method of accounting does not apply to options
granted prior to January 1, 1995 and accordingly, the resulting pro forma
compensation cost may not be representative of that to be expected in the
future.
Executive Compensation Plans
In January 1997, the Company entered into employment contracts with seven of
its key executives which provide for, among other things, compensation in the
form of stock awards (the "Stock Award Rights") and Company-financed stock
purchase rights (the "Stock Purchase Rights") and associated tax obligation
payments. In connection with the Stock Award Rights, the executives will receive
199,070 shares of the Company's common stock vesting over a five-year period
contingent on the Company meeting certain performance objectives. Pursuant to
the terms of the Stock Purchase Rights, the Company provided fixed rate,
non-prepayable loans to such executives to finance their purchase of 152,000
shares of the Company's common stock, which the Company has agreed to forgive
ratably over five years.
9. EMPLOYEE BENEFIT PLAN
All employees of the Company who meet certain minimum age and period of
service requirements are eligible to participate in a Section 401(k) plan (the
"Plan") as defined by the Code. The Plan allows eligible employees to defer up
to 15 percent of their annual compensation. The amounts contributed by employees
are immediately vested and non-forfeitable. The Company, at management's
discretion, may match employee contributions. No employer contributions have
been made to date.
10. DISCLOSURE OF FAIR VALUE OF
FINANCIAL INSTRUMENTS
The following disclosure of estimated fair value was determined by management
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret market data and develop
estimated fair value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts the Company could realize on disposition
of the financial instruments at December 31, 1996 and 1995. The use of different
market assumptions and/or estimation methodologies may have a material effect on
the estimated fair value amounts.
Page 97
<PAGE>
Cash equivalents, receivables, accounts payable, and accrued expenses and
other liabilities are carried at amounts which reasonably approximate their fair
values.
Mortgages and loans payable have an aggregate carrying value of $268,010 and
$135,464 at December 31, 1996 and 1995, respectively, which approximates their
estimated aggregate fair value (excluding prepayment penalties) based upon then
current interest rates for debt with similar terms and remaining maturities.
The estimated net gain on settling the Company's interest rate swap
agreements, at December 31, 1996, based on quoted market prices of comparable
swaps, was $140.
Disclosure about fair value financial instruments is based on pertinent
information available to management as of December 31, 1996 and 1995. Although
management is not aware of any factors that would significantly affect the fair
value amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since December 31, 1996 and current estimates of
fair value may differ significantly from the amounts presented herein.
11. COMMITMENTS AND CONTINGENCIES
Tax Abatement Agreements
Grove Street Property:
Pursuant to an agreement with the City of Jersey City, New Jersey expiring in
2009, the Company is required to make payments in lieu of property taxes
("PILOT") on its property at 95 Christopher Columbus Drive, Jersey City. Such
PILOT is determined based on the greater of two percent of the property cost, as
defined, or $1,131 per annum, through 1999 and 2.5 percent, or $1,414 per annum,
through 2004.
Harborside Financial Center Property:
Tax abatements for Harborside were obtained in 1988 by the former owner of
the property of the City of Jersey City and were assumed by the Company as part
of the acquisition of Harborside on November 4, 1996. The abatements, which
commenced in 1990, are for a term of 15 years. Such PILOT is equal to two
percent of Total Project Costs, as defined, in year one and increase by $75 per
annum through year fifteen. Total Project Costs, as defined, are $148,712. The
service charges for the remaining undeveloped parcels will be equal to two
percent of Total Project Costs for each unit in year one and increase to three
percent by year fifteen.
12. TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2011. Substantially all of the leases provide for
annual base rents plus recoveries and escalation charges based upon the tenant's
proportionate share of and/or increases in real estate taxes and certain
operating costs as defined and the pass through of charges for electrical usage.
At December 31, 1995, DLJ leased approximately 55 percent of the space in the
Company's 95 Christopher Columbus Drive, Jersey City, Hudson County, New Jersey
property. On April 9, 1996, DLJ signed a lease with the Company for an
additional 73,200 square feet of space ("DLJ Expansion"), increasing its
occupancy to approximately 66 percent of the property.
Page 98
<PAGE>
Total rental income from DLJ, including escalations and recoveries, was
$11,498, $10,352 and $3,324 for the years ended December 31, 1996 and 1995 and
the period ended December 31, 1994, respectively. At December 31, 1996 and 1995,
unbilled rents receivable included $12,862 and $12,164, respectively, from DLJ.
Future minimum rentals to be received under noncancelable operating leases at
December 31, 1996 are as follows:
Year Amount
- -----------------------------------------------------
1997 $117,705
1998 107,399
1999 94,462
2000 76,575
2001 59,081
Thereafter 285,198
- -----------------------------------------------------
Total $740,420
=====================================================
13. STOCKHOLDERS' EQUITY
To maintain its qualification as a REIT, not more than 50 percent in value of
the outstanding shares of the Company may be owned, directly or indirectly, by
five or fewer individuals (defined to include certain entities), applying
certain constructive ownership rules. To help ensure that the Company will not
fail this test, the Company's Articles of Incorporation provide for, among other
things, certain restrictions on the transfer of the common stock to prevent
further concentration of stock ownership. Moreover, to evidence compliance with
these requirements, the Company must maintain records that disclose the actual
ownership of its outstanding common stock and will demand written statements
each year from the holders of record of designated percentages of its common
stock requesting the disclosure of the beneficial owners of such common stock.
During 1995, the Company completed a public offering of 4,600,000 shares of
common stock and received net proceeds of $83,594. Additionally in 1995, the
Company purchased, for constructive retirement, 100,000 shares of its
outstanding common stock for $1,595. The excess of the purchase price over par
value was recorded as a reduction to additional paid-in capital. Concurrent with
this purchase, the Company sold to the Operating Partnership 100,000 Units for
$1,595.
On May 13, 1996, the stockholders approved an increase in the authorized
shares of common stock in the Company from 25,000,000 to 95,000,000.
On July 29, 1996, the Company filed a shelf registration statement (File No.
333-09081) with the Securities and Exchanges Commission ("SEC") for an aggregate
amount of $500,000 in equity securities of the Company. The registration
statement was declared effective by the SEC on August 2, 1996.
On August 13, 1996, the Company sold 3,450,000 shares of its common stock
through a public stock offering (the "August 1996 Offering"), which included an
exercise of the underwriters' over-allotment option of 450,000 shares. Net
proceeds from the August 1996 Offering (after offering costs) were approximately
$76,830. The offering was conducted using one underwriter and the shares were
issued from the Company's $250,000 shelf registration statement (File No.
33-96538).
Page 99
<PAGE>
Pursuant to the Company's Registration Statement on Form S-3 (File No.
333-09081), on November 22, 1996, the Company completed an underwritten public
offer and sale of 17,537,500 shares of its common stock using several different
underwriters to underwrite such public offer and sale (which included an
exercise of the underwriters' over-allotment option of 2,287,500 shares). The
Company received approximately $441,215 in net proceeds (after offering costs)
from the November 1996 Offering, and used such funds to acquire certain of the
Company's property acquisitions in November and December, pay down outstanding
borrowings on its revolving credit facilities, and invested the excess funds in
Overnight Investments.
On December 31, 1996, the Company filed a shelf registration statement (File
No. 333-19101) with the SEC for an aggregate amount of $1,000,000 in equity
securities of the Company. The registration statement was declared effective by
the SEC on January 7, 1997.
Page 100
<PAGE>
14. CONDENSED QUARTERLY FINANCIAL INFORMATION (Unaudited)
The following summarizes the condensed quarterly financial information for
the Company:
<TABLE>
<CAPTION>
Quarter Ended 1996
- -------------------------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $32,370 $22,518 $21,013 $19,571
Operating and other expenses 9,404 7,035 6,579 6,644
General and administrative 2,365 1,371 1,128 936
Depreciation and amortization 5,157 3,747 3,614 3,294
Interest expense 4,388 2,721 2,999 2,569
- -------------------------------------------------------------------------------------------------------------------------
Income before gain on sale of rental property,
minority interest and extraordinary item 11,056 7,644 6,693 6,128
Gain on sale of rental property -- -- -- 5,658
- -------------------------------------------------------------------------------------------------------------------------
Income before minority interest and extraordinary item 11,056 7,644 6,693 11,786
Minority interest 894 1,045 1,009 1,812
- -------------------------------------------------------------------------------------------------------------------------
Income before extraordinary item 10,162 6,599 5,684 9,974
Extraordinary item -- loss on early retirement debt
(net of minority interest's share of $86) -- -- -- 475
- -------------------------------------------------------------------------------------------------------------------------
Net income $10,162 $ 6,599 $ 5,684 $ 9,499
=========================================================================================================================
Net income per common share:
Income before extraordinary item --
loss on early retirement of debt $0.34 $0.39 $0.37 $0.66
Extraordinary item-- loss on early retirement of debt -- -- -- (0.03)
- -------------------------------------------------------------------------------------------------------------------------
Net income per common share $0.34 $0.39 $0.37 $0.63
=========================================================================================================================
Dividends declared per common share $0.45 $0.45 $0.43 $0.43
=========================================================================================================================
Quarter Ended 1995
- -------------------------------------------------------------------------------------------------------------------------
December 31, September 30, June 30, March 31,
- -------------------------------------------------------------------------------------------------------------------------
Revenues $17,535 $15,777 $15,151 $13,872
Operating and other expenses 5,911 5,381 4,872 4,541
General and administrative 922 856 1,001 933
Depreciation and amortization 3,175 3,009 3,095 2,832
Interest expense 2,500 2,347 2,173 1,641
- -------------------------------------------------------------------------------------------------------------------------
Income before minority interest 5,027 4,184 4,010 3,925
Minority interest 888 911 873 836
- -------------------------------------------------------------------------------------------------------------------------
Net income $ 4,139 $ 3,273 $ 3,137 $ 3,089
=========================================================================================================================
Net income per common share $0.31 $0.31 $0.30 $0.29
=========================================================================================================================
Dividends declared per common share $0.43 $0.43 $0.40 $0.40
=========================================================================================================================
</TABLE>
Page 101
<PAGE>
CALI REALTY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED AND COMBINED
FINANCIAL STATEMENTS (CONTINUED)
15. PRO FORMA FINANCIAL INFORMATION
(Unaudited)
The following unaudited pro forma financial information for the years ended
December 31, 1996 and 1995 are presented as if the acquisitions and common stock
offerings which occurred during 1996 and 1995 had occurred on January 1, 1995.
In management's opinion, all adjustments necessary to reflect the effects of
these transactions have been made.
This unaudited pro forma financial information is not necessarily indicative
of what the actual results of operations of the Company would have been assuming
such transactions had been completed as of the beginning of the respective
periods, nor do they represent the results of operations of future periods.
Year Ended
December 31,
1996 1995
- ----------------------------------------------------------------
Revenues $153,619 $145,982
Operating and other expenses 44,571 42,424
General and administrative 8,820 7,862
Depreciation and amortization 23,945 23,778
Interest expense 19,300 19,924
- ----------------------------------------------------------------
Income before minority interest 56,983 51,994
Minority interest 5,043 4,742
- ----------------------------------------------------------------
Net income $ 51,940 $ 47,252
================================================================
Net income per common share $1.86 $1.70
- ----------------------------------------------------------------
The following unaudited pro forma financial information for the year ended
December 31, 1996 is presented as if the acquisitions and common stock offerings
which occurred during 1996 and the January 1997 Robert Martin transaction had
occurred on January 1, 1996. In management's opinion, all adjustments necessary
to reflect the effects of these transactions have been made.
This unaudited pro forma financial information is not necessarily indicative
of what the actual results of operations of the Company would have been assuming
such transactions had been completed as of the beginning of the year, nor do
they represent the results of operations of future periods.
Page 102
<PAGE>
Year Ended
December 31,
1996
- ----------------------------------------------------------------
Revenues $226,578
Operating and other expenses 69,260
General and administrative 12,817
Depreciation and amortization 34,070
Interest expense 34,264
- ----------------------------------------------------------------
Income before minority interest 76,167
Minority interest 7,769
- ----------------------------------------------------------------
Net income $ 68,398
================================================================
Net income per common share $1.89
- ----------------------------------------------------------------
Page 103
<PAGE>
<TABLE>
<CAPTION>
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
Costs
Property Location/Type INITIAL COSTS Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive (O) .................... 1973 -- $ 1,752(a) $ 250 $ -- $ 2,567
11 Commerce Drive (O) ................... 1981 -- 3,480(a) 470 -- 5,599
20 Commerce Drive (O) ................... 1990 -- 10,309(a) 2,346 -- 21,066
65 Jackson Drive (O) .................... 1984 -- 3,747(a) 541 -- 6,682
CLARK, UNION COUNTY, NJ
100 Walnut Avenue (O) ................... 1985 -- 13,706(a) -- -- 15,874
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive (O) ..................... 1989 -- 51,476(a) 6,205 -- 79,230
Harborside Financial Center
Christopher Columbus Drive
Exchange Plaza & the
Hudson River (O)
Plaza I ............................. 1930 1996 42,520 3,923 51,013 5
Plaza II ............................ 1930 1996 (e) 17,655 100,546 61
Plaza III ........................... 1930 1996 (e) 17,655 101,878 131
ROSELAND, ESSEX COUNTY NJ
101 Eisenhower Parkway(O) ............... 1980 -- 12,409(a) 228 -- 13,209
103 Eisenhower Parkway(O) ............... 1985 -- 10,488(a) -- -- 13,950
Page 104
<PAGE>
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
------------------------------
Property Location/Type
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
<S> <C> <C> <C> <C>
CRANFORD, UNION COUNTY, NJ
6 Commerce Drive (O) ....... $ 250 $ 2,567 $ 2,817 $ 1,326
11 Commerce Drive (O) ...... 470 5,599 6,069 2,642
20 Commerce Drive (O) ...... 2,346 21,066 23,412 4,213
65 Jackson Drive (O) ....... 541 6,682 7,223 2,078
CLARK, UNION COUNTY, NJ
100 Walnut Avenue (O) ...... 1,822 14,052 15,874 5,162
JERSEY CITY,
HUDSON COUNTY, NJ
95 Christopher
Columbus Drive (O) ........ 6,205 79,230 85,435 16,761
Harborside Financial Center
Christopher Columbus Drive
Exchange Plaza & the
Hudson River (O)
Plaza I ................ 3,923 51,018 54,941 213
Plaza II ............... 17,655 100,607 118,262 420
Plaza III .............. 17,655 102,009 119,664 420
ROSELAND, ESSEX COUNTY NJ
101 Eisenhower Parkway(O) .. 228 13,209 13,437 6,378
103 Eisenhower Parkway(O) .. 2,300 11,650 13,950 4,254
Page 105
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type ---------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard (O) ..................... 1984 -- 12,795(a) 4,500 -- 25,228
300 Tice Boulevard (O) .................... 1991 1996 -- 5,424 29,688 --
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 (O) ....................... 1987 1995 18,445 3,067 19,415 272
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (O) ...................... 1981 1996 -- 2,439 24,462 --
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike (O) ................. 1987 -- 10,300(a) 1,564 -- 14,897
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road (O) ................... 1978 1994 (d) 1,257 5,594 350
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard (O) ................... 1988 1995 (d) 1,090 13,412 424
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive (O) ........................ 1987 1995 (d) 657 9,800 104
400 Alexander Park (O) .................... 1987 1995 -- 344 3,917 2,123
103 Carnegie Center (O) ................... 1984 1996 -- 2,566 7,868 --
Page 106
<PAGE>
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
---------------------------
Property Location/Type
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
- ------------------- ---- ---------- ----- ---------
<S> <C> <C> <C> <C>
WOODCLIFF LAKE,
BERGEN COUNTY, NJ
50 Tice Boulevard (O) .............. 4,500 25,228 29,728 8,504
300 Tice Boulevard (O) ............. 5,424 29,688 35,112 61
FAIR LAWN, BERGEN COUNTY, NJ
17-17 Route 208 (O) ................ 3,067 19,687 22,754 904
FORT LEE, BERGEN COUNTY, NJ
One Bridge Plaza (O) ............... 2,439 24,462 26,901 --
FLORHAM PARK,
MORRIS COUNTY, NJ
325 Columbia Turnpike (O) .......... 1,564 14,897 16,461 4,510
PARSIPPANY,
MORRIS COUNTY, NJ
600 Parsippany Road (O) ............ 1,257 5,944 7,201 310
SUFFERN, ROCKLAND COUNTY, NY
400 Rella Boulevard (O) ............ 1,090 13,836 14,926 610
PRINCETON, MERCER COUNTY, NJ
5 Vaughn Drive (O) ................. 657 9,904 10,561 354
400 Alexander Park (O) ............. 344 6,040 6,384 167
103 Carnegie Center (O) ............ 2,566 7,868 10,434 166
Page 107
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type --------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive (F) ...................... 1989 1995 (d) 205 1,676 65
200 Horizon Drive (F) ...................... 1991 1995 (d) 205 3,027 1
300 Horizon Drive (F) ...................... 1989 1995 (d) 379 4,355 8
500 Horizon Drive (F) ...................... 1990 1995 (d) 379 3,395 39
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ......................... 1983 -- 1,323(a) -- -- 6,817
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive (O) .................... 1988 1995 (d) 476 6,024 49
11 Commerce Way (F) ........................ 1989 1995 (d) 586 2,986 43
20 Commerce Way (F) ........................ 1992 1995 (d) 516 3,108 26
29 Commerce Way (F) ........................ 1990 1995 (d) 586 3,092 225
40 Commerce Way (F) ........................ 1987 1995 (d) 516 3,260 104
45 Commerce Way (F) ........................ 1992 1995 (d) 536 3,379 124
60 Commece Way (F) ......................... 1988 1995 (d) 526 3,257 152
80 Commerce Way (F) ........................ 1996 -- (d) 743 -- 1,134
100 Commerce Way (F) ....................... 1996 -- (d) 742 -- 1,133
120-140 Commerce Way (F) ................... 1994 1995 (d) 457 2,346 27
Page 108
<PAGE>
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
---------------------------
Property Location/Type
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
<S> <C> <C> <C> <C>
HAMILTON TOWNSHIP,
MERCER COUNTY, NJ
100 Horizon Drive (F) .............. 205 1,741 1,946 49
200 Horizon Drive (F) .............. 205 3,028 3,233 89
300 Horizon Drive (F) .............. 379 4,363 4,742 128
500 Horizon Drive (F) .............. 379 3,434 3,813 104
CLIFTON, PASSAIC COUNTY, NJ
777 Passaic Avenue ................. 1,100 5,717 6,817 2,024
TOTOWA, PASSAIC COUNTY, NJ
999 Riverview Drive (O) ............ 476 6,073 6,549 180
11 Commerce Way (F) ................ 586 3,029 3,615 88
20 Commerce Way (F) ................ 516 3,134 3,650 91
29 Commerce Way (F) ................ 586 3,317 3,903 103
40 Commerce Way (F) ................ 516 3,364 3,880 103
45 Commerce Way (F) ................ 536 3,503 4,039 117
60 Commece Way (F) ................. 526 3,409 3,935 108
80 Commerce Way (F) ................ 743 1,134 1,877 7
100 Commerce Way (F) ............... 742 1,133 1,875 6
120-140 Commerce Way (F) ........... 457 2,373 2,830 69
Page 109
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type -------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway (O) ................. 1988 1995 (d) 335 2,560 27
1325 Campus Parkway (F) ................. 1988 1995 (d) 270 2,928 10
1340 Campus Parkway (F) ................. 1992 1995 (d) 489 4,621 158
1350 Campus Parkway (O) ................. 1990 1995 (d) 454 7,134 103
1320 Wykoff Road (F) .................... 1986 1995 (d) 255 1,285 --
1324 Wykoff Road (F) .................... 1987 1995 (d) 230 1,439 --
1433 Highway 34 (F) ..................... 1985 1995 (d) 889 4,321 37
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66 ........................... 1989 1995 (d) 1,099 18,146 28
EGG HARBOR,
MONMOUTH COUNTY, NJ
100 Decadon Drive (O) ................... 1987 1995 (d) 300 3,282 66
200 Decadon Drive (O) ................... 1991 1995 (d) 369 3,241 48
Page 110
<PAGE>
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
Property Location/Type ---------------------------
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
<S> <C> <C> <C> <C>
WALL TOWNSHIP,
MONMOUTH COUNTY, NJ
1305 Campus Parkway (O) ............ 335 2,587 2,922 86
1325 Campus Parkway (F) ............ 270 2,938 3,208 86
1340 Campus Parkway (F) ............ 489 4,779 5,268 135
1350 Campus Parkway (O) ............ 454 7,237 7,691 218
1320 Wykoff Road (F) ............... 255 1,285 1,540 37
1324 Wykoff Road (F) ............... 230 1,439 1,669 42
1433 Highway 34 (F) ................ 889 4,358 5,247 126
NEPTUNE, MONMOUTH COUNTY, NJ
3600 Route 66 ...................... 1,099 18,174 19,273 531
EGG HARBOR,
MONMOUTH COUNTY, NJ
100 Decadon Drive (O) .............. 300 3,348 3,648 96
200 Decadon Drive (O) .............. 369 3,289 3,658 99
Page 111
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type --------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (O) ...................... 1986 1996 -- 775 3,636 --
233 Mt. Airy Road (O) ...................... 1987 1996 -- 1,034 5,033 --
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East(O) ................... 1984 1996 -- 642 8,168 --
5 Sentry Parkway West(O) ................... 1984 1996 -- 268 3,406 --
MEDIA, DELAWARE COUNTY, PA
Rose Tree Corporate Center(O)
Center I .................................. 1986 1996 -- 1,042 9,054 70
Center II ................................. 1990 1996 -- 1,543 16,464 101
LESTER, DELAWARE COUNTY, PA
Internation Court at
Airport Business Center (O)
International Court I ..................... 1986 1996 -- 1,349 10,018 --
International Court II .................... 1987 1996 -- 1,644 20,186 --
International Court III ................... 1992 1996 -- 491 9,490 --
Page 112
<PAGE>
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
Property Location/Type ---------------------------
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
<S> <C> <C> <C> <C>
BASKING RIDGE,
SOMERSET COUNTY, NJ
222 Mt. Airy Road (O) .............. 775 3,636 4,411 38
233 Mt. Airy Road (O) .............. 1,034 5,033 6,067 52
PLYMOUTH MEETING,
MONTGOMERY COUNTY, PA
5 Sentry Parkway East(O) ........... 642 8,168 8,810 34
5 Sentry Parkway West(O) ........... 268 3,406 3,674 14
MEDIA, DELAWARE COUNTY, PA
Rose Tree Corporate Center(O)
Center I .......................... 1,042 9,124 10,166 157
Center II ......................... 1,543 16,565 18,108 284
LESTER, DELAWARE COUNTY, PA
Internation Court at
Airport Business Center (O)
International Court I ............. 1,349 10,018 11,367 --
International Court II ............ 1,644 20,186 21,830 --
International Court III ........... 491 9,490 9,981 --
Page 113
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Cali Realty Corporation
Real Estate Investments and Accumulated Depreciation
December 31, 1996
(dollars in thousands)
SCHEDULE III
INITIAL COSTS Costs
Property Location/Type ----------------------- Capitalized
[(O) = Office Property/ Year Related Bldgs and Subsequent
(F) = Office/flex] Built Acquired Encumbrances Land Imprvments to Acquis.
------------------ ----- -------- ------------ ---- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
DELRAN, BURLINGTON COUNTY, NJ
Tenby Chase Apartments-
Route 130 [residential] ............ 1970 -- 7,223(a) 395 -- 5,036
Furnitures, fixtures
& equipment ....................... n/a n/a -- -- -- 1,133
-------- -------- --------
TOTALS ...................... $ 92,906 $541,910 $218,536
======== ======== ========
<CAPTION>
GROSS AMOUNT
AT WHICH CARRIED
AT CLOSE OF PERIOD
Property Location/Type -------------------------------
[(O) = Office Property/ Bldgs and Accum.
(F) = Office/flex] Land Imprvments Total Deprec(c)
------------------ ---- ---------- ----- ---------
<S> <C> <C> <C> <C>
DELRAN, BURLINGTON COUNTY, NJ
Tenby Chase Apartments-
Route 130 [residential] .... 395 5,036 5,431 2,996
Furnitures, fixtures
& equipment ............... -- 1,133 1,133 860
-------- -------- -------- --------
TOTALS .............. $ 98,128 $755,224 $853,352 $ 68,610
======== ======== ======== ========
See footnotes on subsequent page.
Page 114
<PAGE>
- -----------
(a) Bonds, which are collateralized by these encumbrances, with an aggregate
principal amount of $74.5 million, are owned by the Company (see Note 5 to
the Financial Statements).
(b) The aggregate cost for federal income tax purposes at December 31, 1996 was
$784,706.
(c) The buildings'depreciable lives are between 5 to 40 years.
(d) These buildings are cross-collateralized by the $75,000 million Bank
Facility, of which $23,805 million was outstanding at December 31, 1996
(see Note 5 to the Financial Statements).
(e) These buildings are cross-collateralized by the $107,480 mortgage assumed
in the acquisition of Harborside.
Page 115
</TABLE>
<PAGE>
Cali Realty Corporation and Cali Group
Note to Schedule III
Changes in rental properties and accumulated depreciation for the periods ended
December 31, 1996, 1995 and 1994, and August 30, 1994, are as follows:
<TABLE>
<CAPTION>
Cali Realty Corporation Cali Group
----------------------- ----------
August 31 to January 1 to
1996 1995 December 31, 1994 August 30, 1994
---- ---- ----------------- ---------------
<S> <C> <C> <C> <C>
Rental Properties:
Balance at beginning of year $ 387,675 $ 234,470 $ 217,282 $ 213,675
Additions ............. 473,371 153,753 17,340 4,126
Retirements/ Disposals (7,694) (548) (152) (519)
--------- --------- --------- ---------
Balance at end of year ..... $ 853,352 $ 387,675 $ 234,470 $ 217,282
========= ========= ========= =========
Accumulated Depreciation:
Balance at beginning of year $ 59,095 $ 50,800 $ 48,201 $ 44,084
Depreciation expense .. 12,810 8,807 2,688 4,267
Retirements/ Disposals (3,295) (512) (89) (150)
--------- --------- --------- ---------
Balance at end of year ..... $ 68,610 $ 59,095 $ 50,800 $ 48,201
========= ========= ========= =========
Page 116
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference to the
Company's definitive proxy statement for its annual meeting of stockholders to
be held on May 15, 1997.
Page 117
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
(a)1. Financial Statements and Report of Price Waterhouse LLP, Independent
Accountants (See Item 8)
Report of Independent Accountants
Financial Statements:
Balance Sheets:
Cali Realty Corporation Consolidated as of December 31, 1996 and 1995
Statements of Operations:
Cali Realty Corporation Consolidated for the Years Ended December 31,
1996 and December 31, 1995, and for the Period from August 31, 1994 to
December 31, 1994
Cali Group Combined for the Period from January 1, 1994 to August 30,
1994
Statements of Stockholders' Equity and Partners' Deficit:
Cali Realty Corporation Consolidated for the Years Ended December 31,
1996 and December 31, 1995, and for the Period from August 31, 1994 to
December 31, 1994
Cali Group Combined for the Period from January 1, 1994 to August 30,
1994
Statements of Cash Flows:
Cali Realty Corporation Consolidated for the Years Ended December 31,
1996 and December 31, 1995, and for the Period from August 31, 1994 to
December 31, 1994
Cali Group Combined for the Period from January 1, 1994 to August 30,
1994
(a)2. Financial Statement Schedules:
Schedule III - Real Estate Investments and Accumulated Depreciation as
of December 31, 1996 (See Item 8)
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes
thereto.
(a)3. Exhibits
The following exhibits are filed herewith or are incorporated by
reference to exhibits previously filed:
Page 118
<PAGE>
Exhibit
Number Exhibit Title
- ------ -------------
1.1 Underwriting Agreement, dated November 18, 1996, between Cali Realty
Corporporation and Prudential Securities Incorporated. (1)
23 Consent of Price Waterhouse LLP.
10.42 Agreement of Purchase and Sale, dated September 11, 1996, among Plaza
One Exchange Place Limited Partnership, Harborside Exchange Place
Limited Partnership, Plaza II and III Urban Renewal Associates, L.P.
(Seller) and Cali Realty Corporation (Purchaser). (2)
10.43 Contingent Consideration Agreement, dated November 4, 1996, between
Harborside Exchange PlaceLimited Partnership and Cali Harborside (Fee)
Associates L.P. (2)
10.44 Revolving Credit Facility Agreement, dated November 1, 1996, among
Cali Realty, L.P., as Borrower, the Lenders parties thereto, and
Prudential Securities Credit Corp., as Administrative Agent, in the
amount of $800,000,000. (2)
10.45 Mortgage Note in the amount of $42,087,513 between Cali Harborside
Plaza I(Fee) Associates L.P. and US West Pension Trust Investment
Management Company, dated November 4, 1996. (2)
10.46 Assignment and Assumption Agreement, dated as of November 4, 1996,
among Plaza One Exchange Place Limited Partnership (formerly known as
BT Exchange Limited Partnership), Harborside Exchange Place Limited
Partnership, Harborside Urban Renewal Associates L.P., Plaza II and
III Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates
L.P., Plaza V Urban Renewal Associates L.P., Plaza VI Urban Renewal
Associates L.P., Cali Harborside (Fee) Associates L.P., Cal- Harbor II
& III Urban Renewal Associates L.P., Cal-Harbor IV Urban Renewal
Association L.P., Cal-Harbor V Urban Renewal Associates, L.P.,
Cal-Harbor VI Urban Renewal Associates L.P., Cal-Harbor VII Urban
Renewal Associates L.P., The Northwestern Mutual Life Insurance
Company and Principal Mutual Life Insurance Company. (2)
10.47 Management Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II & III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal-Harbor IV Urban Renewal Associates L.P., Plaza V Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Harborside Exchange Place Limited
Partnership, Cal-Harbor VIII Urban Renewal Associates L.P., North Pier
Urban Renewal Associates L.P., Cal-Harbor No. Pier Urban Renewal
Associates L.P., South Pier Urban Renewal Associates L.P., Cal-Harbor
So. Pier Urban Renewal Associates L.P. and Institutional Realty
Management, LLC, as Manager. (2)
Page 119
<PAGE>
10.48 Rental Agency Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II and III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal-Harbor IV Urban Renewal Associates L.P., Plaza V Urban Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Cal-Harbor VI Urban Renewal Associates
L.P., Harborside Exchange Place Limited Partnership, Cal-Harbor VII
Urban Renewal Associates L.P., North Pier Urban Renewal Associates
L.P., Cal-Harbor No. Pier Urban Renewal Associates L.P., South Pier
Urban Renewal Associates L.P., Cal-Harbor So. Pier Urban Renewal
Associates L.P., and Institutional Realty Management, LLC, as Rental
Agent. (2)
10.49 Company Pledge Agreement, dated as of November 1, 1996, between Cali
Realty Corporation and Prudential Securities Credit Corp., as
Administrative Agent for the Lenders. (2)
10.50 Pledge Agreement, dated as of November 1, 1996, between Cali Realty,
L.P. and Prudential Securities Credit Corp., as Administrative Agent
for the benefit of the Lenders. (2)
10.51 Agreement of Assignment of Agreement for Purchase and Sale of Real
Estate and Related Property, dated as of October 23, 1996, between
Bryemere, L.P. and Five Sentry Realty Associates, L.P. (3)
10.52 Purchase Agreement, dated October 11, 1996, between Whiteweld Centre,
Inc. and Cali Realty Acquisition Corporation.(3)
10.53 First Amendment to Purchase Agreement, dated as of December 10, 1996,
by and between Whiteweld Centre, Inc. and Cali Realty Acquisition
Corporation.(3)
10.54 Agreement of Sale, dated October 23, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.55 Amendment to Agreement of Sale, dated December 3, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.56 Second Amendment to Agreement of Sale, dated December 17, 1996, by and
among Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.57 Sale Agreement between Metropolitan Life Insurance Company, a New York
corporation, as Seller, and Cali Realty Acquisition Corp., a Delaware
corporation, as Purchaser, as of November 26, 1996.(4)
Page 120
<PAGE>
10.58 Amendment to Sale Agreement as of December 4, 1996, by and between
Metropolitan Life Insurance Company, a New York corporation, and Cali
Realty Acquisition Corp., a Delaware corporation.(4)
10.59 Amended and Restated Employment Agreement between Cali Realty
Corporation and John R. Cali, dated as of January 21, 1997. *
10.60 Restricted Share Agreement between Cali Realty Corporation and John R.
Cali, dated as of January 21, 1997. *
10.61 Amended and Restated Employment Agreement between Cali Realty
Corporation and Brant Cali, dated as of January 21, 1997. *
10.62 Restricted Share Agreement between Cali Realty Corporation and Brant
Cali, dated as of January 21, 1997. *
10.63 Amended and Restated Employment Agreement between Cali Realty
Corporation and Thomas A. Rizk, dated as of January 21, 1997. *
10.64 Restricted Share Agreement between Cali Realty Corporation and Thomas
A. Rizk dated as of January 21, 1997. *
10.65 Stock Pledge Agreement between Cali Realty Corporation and Thomas A.
Rizk, dated as of January 21, 1997. *
10.66 Secured Non-Recourse Promissory Note issued by Thomas A. Rizk to Cali
Realty Corporation, dated as of January 21, 1997. *
10.67 Employment Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.68 Restricted Share Agreement between Cali Realty Corporation and Roger
W. Thomas, dated as of January 21, 1997. *
10.69 Stock Pledge Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.70 Secured Non-Recourse Promissory Note issued by Roger W. Thomas to Cali
Realty Corporation, dated as of January 21, 1997. *
10.71 Employment Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.72 Restricted Share Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.73 Stock Pledge Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997.*
10.74 Secured Non-Recourse Promissory Note issued by Barry Lefkowitz to Cali
Realty Corporation, dated as of January 21, 1997. *
Page 121
<PAGE>
10.75 Employment Agreement between Cali Realty Corporation and James Nugent,
dated as of January 21, 1997. *
10.76 Restricted Share Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.77 Stock Pledge Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.78 Secured Non-Recourse Promissory Note issued by James Nugent to Cali
Realty Corporation, dated as of January 21, 1997. *
10.79 Employment Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.80 Restricted Share Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.81 Stock Pledge Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.82 Secured Non-Recourse Promissory Note issued by Albert Spring to Cali
Realty Corporation, dated as of January 21, 1997. *
10.83 Employment Agreement between Cali Realty Corporation and Brad W.
Berger, dated as of January 31, 1997. *
10.84 Warrant issued by Cali Realty Corporation to Brad W. Berger, dated
January 31, 1997, and amendment No. 1 to the warrant.*
10.85 Employment Agreement between Cali Realty Corporation and Timothy M.
Jones, dated as of January 31, 1997. *
10.86 Warrant issued by Cali Realty Corporation to Timothy M. Jones, dated
January 31, 1997, and amendment No. 1 to the warrant. *
10.87 Warrant issued by Cali Realty Corporation to Greg Berger, dated
January 31, 1997.
10.88 Warrant issued by Cali Realty Corporation to Andrew Greenspan, dated
January 31, 1997.
10.89 Warrant issued by Cali Realty Corporation to Michael Grossman, dated
January 31, 1997.
10.90 Non-Competition Agreement between Cali Realty Corporation and Robert
F. Weinberg, dated January 31, 1997.
10.91 Non-Competition Agreement between Cali Realty Corporation and Martin
S. Berger, dated January 31, 1997.
Page 122
<PAGE>
- ----------------------
* Indicates management contract or compensatory plan or arrangement.
(1) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated November 21, 1996.
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated November 18, 1996.
(3) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 30, 1996.
(4) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 31, 1996.
- ----------------------
(b) Reports on Form 8-K
The Company filed Current Reports on Form 8-K dated October 8, 1996,
October 28, 1996, October 29, 1996, November 18, 1996, November 21, 1996,
December 30, 1996 and December 31, 1996, during the quarter ended
December 31, 1996. Items 2, 5 and 7 were reported.
Included in the Form 8-K's dated October 8, 1996, October 28, 1996 and
October 29, 1996 was the Company's audited consolidated statement of
operations for the year ended December 31, 1995 and the Company's
unaudited consolidated financial statements as of and for the six months
ended June 30, 1996. Included in the Form 8-K dated December 31, 1996 was
the Company's audited consolidated statement of operations for the year
ended December 31, 1995 and the Company's unaudited financial statements
as of and for the nine months ended September 30, 1996. Also included in
the Form 8-K dated October 8, 1996 was the audited financial statements
for the year ended December 31, 1995, and the unaudited financial
statements for the six months ended June 30, 1996 for the Mount Airy
Buildings. Also included in the Form 8-K dated October 28, 1996 was the
audited financial statements for the year ended December 31, 1995, 1994
and 1993 and the unaudited financial statements for the six months ended
June 30, 1996 for the Harborside Financial Center. Also included in the
Form 8-K dated October 29, 1996 was the audited financial statements for
the year ended December 31, 1995 and the unaudited financial statements
for the six months ended June 30, 1996 for each of the following: 5
Sentry Parkway, Whiteweld Centre, and Airport Business Center. Also
included in the Form 8-K dated December 31, 1996 was the audited
financial statements for the year ended December 31, 1995 and the
unaudited financial statements for the nine months ended September 30,
1996 for One Bridge Plaza, and the unaudited financial statements for the
nine months ended June 30, 1996 for each of the following: Harborside
Financial Center, 5 Sentry Parkway, Whiteweld Centre and Airport Business
Center.
Page 123
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
CALI REALTY CORPORATION
(Registrant)
Dated: March 28, 1997 /s/ John J. Cali
----------------
John J. Cali
Chairman of the Board
Dated: March 28, 1997 /s/ Thomas A. Rizk
------------------
Thomas A. Rizk
President, Chief Executive
Officer and Director
Dated: March 28, 1997 /s/ Barry Lefkowitz
-------------------
Barry Lefkowitz
Chief Financial Officer
Dated: March 28, 1997 /s/ Brad W. Berger
------------------
Brad W.Berger
Executive Vice President
and Director
Dated: March 28, 1997 /s/ Angelo R. Cali
------------------
Angelo R. Cali
Director
Dated: March 28, 1997 /s/ Edward Leshowitz
--------------------
Edward Leshowitz
Director
Page 124
<PAGE>
Dated: March 28, 1997 /s/ Brendan T. Byrne
--------------------
Brendan T. Byrne
Director
Dated: March 28, 1997 /s/ Kenneth A. DeGhetto
-----------------------
Kenneth A. DeGhetto
Director
Dated: March 28, 1997 /s/ James W. Hughes
-------------------
James W. Hughes
Director
Dated: March 28, 1997 /s/ Irvin D. Reid
-----------------
Irvin D. Reid
Director
Dated: March 28, 1997 /s/ Alan Turtletaub
-------------------
Alan Turtletaub
Director
Dated: March 28, 1997 /s/ Robert F. Weinberg
----------------------
Robert F. Weinberg
Director
Dated: March 28, 1997 /s/ Alan G. Philibosian
-----------------------
Alan G. Philibosian
Director
Page 125
<PAGE>
EXHIBIT INDEX
Exhibit
Number Exhibit Title
- ------ -------------
1.1 Form of Underwriting Agreement. (1)
23 Consent of Price Waterhouse LLP.
10.42 Agreement of Purchase and Sale, dated September 11, 1996, among Plaza
One Exchange Place Limited Partnership, Harborside Exchange Place
Limited Partnership, Plaza II and III Urban Renewal Associates, L.P.
(Seller) and Cali Realty Corporation (Purchaser). (2)
10.43 Contingent Consideration Agreement, dated November 4, 1996, between
Harborside Exchange Place Limited Partnership and Cali Harborside
(Fee) Associates L.P. (2)
10.44 Revolving Credit Facility Agreement, dated November 1, 1996, among
Cali Realty, L.P., as Borrower, the Lenders parties thereto, and
Prudential Securities Credit Corp., as Administrative Agent, in the
amount of $800,000,000. (2)
10.45 Mortgage Note in the amount of $42,087,513 between Cali Harborside
Plaza I(Fee) Associates L.P. and US West Pension Trust Investment
Management Company, dated November 4, 1996. (2)
10.46 Assignment and Assumption Agreement, dated as of November 4, 1996,
among Plaza One Exchange Place Limited Partnership (formerly known as
BT Exchange Limited Partnership), Harborside Exchange Place Limited
Partnership, Harborside Urban Renewal Associates L.P., Plaza II and
III Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates
L.P., Plaza V Urban Renewal Associates L.P., Plaza VI Urban Renewal
Associates L.P., Cali Harborside (Fee) Associates L.P., Cal-Harbor II
& III Urban Renewal Associates L.P., Cal-Harbor IV Urban Renewal
Association L.P., Cal-Harbor V Urban Renewal Associates, L.P.,
Cal-Harbor VI Urban Renewal Associates L.P., Cal-Harbor VII Urban
Renewal Associates L.P., The Northwestern Mutual Life Insurance
Company and Principal Mutual Life Insurance Company. (2)
10.47 Management Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II & III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal- Harbor IV Urban Renewal Associates L.P., Plaza V Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Harborside Exchange Place Limited
Partnership, Cal- Harbor VIII Urban Renewal Associates L.P., North
Pier Urban Renewal Associates L.P., Cal-Harbor No. Pier Urban Renewal
Associates L.P., South Pier Urban Renewal Associates L.P., Cal-Harbor
So. Pier Urban Renewal Associates L.P. and Institutional Realty
Management, LLC, as Manager. (2)
Page 126
<PAGE>
10.48 Rental Agency Agreement, dated November 4, 1996, among Cali Harborside
(Fee) Associates L.P., Cali Harborside Plaza I (Fee) Associates L.P.,
Plaza II and III Urban Renewal Associates L.P., Cal-Harbor II & III
Urban Renewal Associates L.P., Plaza IV Urban Renewal Associates L.P.,
Cal-Harbor IV Urban Renewal Associates L.P., Plaza V Urban Renewal
Associates L.P., Cal-Harbor V Urban Renewal Associates L.P., Plaza VI
Urban Renewal Associates L.P., Cal-Harbor VI Urban Renewal Associates
L.P., Harborside Exchange Place Limited Partnership, Cal-Harbor VII
Urban Renewal Associates L.P., North Pier Urban Renewal Associates
L.P., Cal-Harbor No. Pier Urban Renewal Associates L.P., South Pier
Urban Renewal Associates L.P., Cal-Harbor So. Pier Urban Renewal
Associates L.P., and Institutional Realty Management, LLC, as Rental
Agent. (2)
10.49 Company Pledge Agreement, dated as of November 1, 1996, between Cali
Realty Corporation and Prudential Securities Credit Corp., as
Administrative Agent for the Lenders. (2)
10.50 Pledge Agreement, dated as of November 1, 1996, between Cali Realty,
L.P. and Prudential Securities Credit Corp., as Administrative Agent
for the benefit of the Lenders. (2)
10.51 Agreement of Assignment of Agreement for Purchase and Sale of Real
Estate and Related Property, dated as of October 23, 1996, between
Bryemere, L.P. and Five Sentry Realty Associates, L.P. (3)
10.52 Purchase Agreement, dated October 11, 1996, between Whiteweld Centre,
Inc. and Cali Realty Acquisition Corporation.(3)
10.53 First Amendment to Purchase Agreement, dated as of December 10, 1996,
by and between Whiteweld Centre, Inc. and Cali Realty Acquisition
Corporation.(3)
10.54 Agreement of Sale, dated October 23, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.55 Amendment to Agreement of Sale, dated December 3, 1996, by and among
Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.56 Second Amendment to Agreement of Sale, dated December 17, 1996, by and
among Henderson/Tinicum Partnership, International Court II Limited
Partnership, International Court III Joint Venture, Wilbur C.
Henderson & Son, David Henderson and Cali Realty Acquisition
Corporation.(3)
10.57 Sale Agreement between Metropolitan Life Insurance Company, a New York
corporation, as Seller, and Cali Realty Acquisition Corp., a Delaware
corporation, as Purchaser, as of November 26, 1996.(4)
Page 126
<PAGE>
10.58 Amendment to Sale Agreement as of December 4, 1996, by and between
Metropolitan Life Insurance Company, a New York corporation, and Cali
Realty Acquisition Corp., a Delaware corporation.(4)
10.59 Amended and Restated Employment Agreement between Cali Realty
Corporation and John R. Cali, dated as of January 21, 1997. *
10.60 Restricted Share Agreement between Cali Realty Corporation and John R.
Cali, dated as of January 21, 1997. *
10.61 Amended and Restated Employment Agreement between Cali Realty
Corporation and Brant Cali, dated as of January 21, 1997. *
10.62 Restricted Share Agreement between Cali Realty Corporation and Brant
Cali, dated as of January 21, 1997. *
10.63 Amended and Restated Employment Agreement between Cali Realty
Corporation and Thomas A. Rizk, dated as of January 21, 1997. *
10.64 Restricted Share Agreement between Cali Realty Corporation and Thomas
A. Rizk dated as of January 21, 1997. *
10.65 Stock Pledge Agreement between Cali Realty Corporation and Thomas A.
Rizk, dated as of January 21, 1997. *
10.66 Secured Non-Recourse Promissory Note issued by Thomas A. Rizk to Cali
Realty Corporation, dated as of January 21, 1997. *
10.67 Employment Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.68 Restricted Share Agreement between Cali Realty Corporation and Roger
W. Thomas, dated as of January 21, 1997. *
10.69 Stock Pledge Agreement between Cali Realty Corporation and Roger W.
Thomas, dated as of January 21, 1997. *
10.70 Secured Non-Recourse Promissory Note issued by Roger W. Thomas to Cali
Realty Corporation, dated as of January 21, 1997. *
10.71 Employment Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.72 Restricted Share Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997. *
10.73 Stock Pledge Agreement between Cali Realty Corporation and Barry
Lefkowitz, dated as of January 21, 1997.*
10.74 Secured Non-Recourse Promissory Note issued by Barry Lefkowitz to Cali
Realty Corporation, dated as of January 21, 1997. *
10.75 Employment Agreement between Cali Realty Corporation and James Nugent,
dated as of January 21, 1997. *
Page 127
<PAGE>
10.76 Restricted Share Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.77 Stock Pledge Agreement between Cali Realty Corporation and James
Nugent, dated as of January 21, 1997. *
10.78 Secured Non-Recourse Promissory Note issued by James Nugent to Cali
Realty Corporation, dated as of January 21, 1997. *
10.79 Employment Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.80 Restricted Share Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.81 Stock Pledge Agreement between Cali Realty Corporation and Albert
Spring, dated as of January 21, 1997. *
10.82 Secured Non-Recourse Promissory Note issued by Albert Spring to Cali
Realty Corporation, dated as of January 21, 1997. *
10.83 Employment Agreement between Cali Realty Corporation and Brad W.
Berger, dated as of January 31, 1997. *
10.84 Warrant issued by Cali Realty Corporation to Brad W. Berger, dated
January 31, 1997.
10.85 Employment Agreement between Cali Realty Corporation and Timothy M.
Jones, dated as of January 31, 1997. *
10.8 Warrant issued by Cali Realty Corporation to Timothy M. Jones, dated
January 31, 1997. *
10.87 Warrant issued by Cali Realty Corporation to Greg Berger, dated
January 31, 1997.
10.88 Warrant issued by Cali Realty Corporation to Andrew Greenspan, dated
January 31, 1997.
10.89 Warrant issued by Cali Realty Corporation to Michael Grossman, dated
January 31, 1997.
10.90 Non-Competition Agreement between Cali Realty Corporation and Robert
F. Weinberg, dated January 31, 1997.
10.91 Non-Competition Agreement between Cali Realty Corporation and Martin
S. Berger, dated January 31, 1997.
- ----------------------
(2) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated November 18, 1996.
(3) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 30, 1996.
(4) Incorporated by reference to the identically numbered exhibit to the
Company's Form 8-K dated December 31, 1996.
================================================================================
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FOR
JOHN R. CALI
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment.................................................................1
2. Services...................................................................2
3. Compensation and Benefits..................................................3
4. Termination of Employment and Change in Control............................6
5. Confidential Information..................................................12
6. Return of Documents.......................................................13
7. Noncompete................................................................13
8. Remedies..................................................................15
9. Successors and Assigns....................................................15
10. Timing of and No Duplication of Payments/Tax Withholding..................16
11. Modification or Waiver....................................................17
12. Notices...................................................................17
13. Governing Law.............................................................18
14. Severability..............................................................18
15. Counterparts..............................................................18
16. Headings..................................................................19
17. Entire Agreement..........................................................19
18. Survival of Agreements...................................................19
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is
entered into as of January 21, 1997, by and between John R. Cali, an individual
residing at 203 Laurel Hill Road, Mountain Lakes, New Jersey 07046
("Executive"), and Cali Realty Corporation, a Maryland corporation with offices
at 11 Commerce Drive, Cranford, New Jersey 07016 (the "Company").
RECITALS
WHEREAS, the Executive has held the position of Chief Administrative
Officer pursuant to his Employment Agreement with the Company dated August 31,
1994 ("Prior Agreement") and, through such service, has acquired special and
unique knowledge, abilities and expertise; and
WHEREAS, the Company desires to extend Executive's Employment Period (as
defined in the Prior Agreement) to January 21, 2002, and the Company and
Executive desires to restructure certain terms of the Prior Agreement and
otherwise to amend and restate the Prior Agreement in its entirety as set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
<PAGE>
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the applicable expiration date either the Company or Executive
shall have given written notice to the other party that such party does not wish
to extend this Agreement. It being agreed and understood that the extension of
this Agreement shall not create an obligation of the Company to issue new awards
to Executive hereunder. The term of this Agreement, as it may be extended from
time to time in accordance with this Paragraph 1, is referred to herein as the
"Employment Period."
2. Services.
During the Employment Period, Executive shall hold the position of Chief
Administrative Officer and shall devote his best efforts and substantially all
of his business time, skill and attention to the business of the Company, and
shall perform such duties as are customarily performed by similar executive
officers and as may be more specifically enumerated from time to time by the
Board of Directors of the Company (the "Board") or the Executive Committee of
the Board, if any; provided, however, that the foregoing is not intended to (a)
preclude Executive from (i) owning and managing personal investments, including
real estate investments, subject to the restrictions set forth in Paragraph 7
hereof or (ii) engaging in charitable activities and community affairs, or (b)
restrict or otherwise limit Executive from conducting real estate development,
acquisition or management activities with respect to those properties described
in Schedule A, attached hereto, (the "Excluded Properties"), provided that
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<PAGE>
the performance of the activities referred to in clauses (a) and (b) does not
prevent Executive from devoting substantially all of his business time to the
Company.
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $225,000 (the "Annual Base Salary"), payable
in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan"), and other benefit plans
(including without limitation the Cali Realty Corporation
401(k) Savings and Retirement Plan and any other stock option
plans which may be adopted or maintained by the Company) made
generally available to executives of the Company with such
participation to be consistent with reasonable Company
guidelines;
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<PAGE>
(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
4
<PAGE>
As further consideration for Executive agreeing to serve as an officer and
entering into this Agreement upon the terms set forth herein, including, without
limitation, the terms relating to noncompetition set forth in Paragraph 7 below,
the Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
grant to Executive 55,555 restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions of this
Agreement, and the written agreement, issued pursuant to this
Agreement, evidencing such award executed between the Company and
Executive (the "Restricted Share Agreement"). In the event of a
conflict between the Restricted Share Agreement and this Agreement,
the terms of this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with twenty
percent (20%) of the Restricted Shares vesting on each of the first
anniversary of the date hereof (the "First Anniversary"), the second
anniversary of the date hereof (the "Second Anniversary"), the third
anniversary of the date hereof (the "Third Anniversary"), the fourth
anniversary of the date hereof (the "Fourth Anniversary") and the
fifth anniversary of the date hereof (the "Fifth Anniversary"),
provided, that certain Performance Goals as defined and set forth in
the Restricted Share Agreement are met. Vesting shall be cumulative
in accordance with the provisions of the Restricted Share Agreement
and the Performance Goals may be achieved as specified therein up
until the seventh anniversary of the date hereof. Except as
otherwise provided in Paragraph 4 hereof, Executive must be employed
by the Company on the applicable anniversary date to vest in the
Restricted Shares scheduled to vest in a particular year. The
measurement date to determine such vesting shall be the last day of
the Company's fiscal year preceding the year in which the applicable
anniversary date occurs.
In addition, upon vesting of the Restricted Shares on each
applicable anniversary date, the Company shall make a cash payment
to Executive on that anniversary date in an amount equal to forty
percent (40%) of the Fair Market Value (determined as of such
anniversary date) of the Restricted Shares that vest on such
anniversary date (the "Restricted Share Tax Gross-Up Payment").
5
<PAGE>
As consideration for entering into the Prior Agreement upon the terms set
forth therein, including without limitation, the terms relating to
noncompetition set forth in Paragraph 7 thereof, the Company, concurrently
therewith, pursuant to Paragraph 3 of the Prior Agreement granted to Executive
options to purchase 200,000 shares of Common Stock at a purchase price of $17.25
per share (the "1994 Options"). Such options were granted pursuant to the terms
and conditions of the Stock Option Plan, having a ten (10) year term and vesting
over a three (3) year period beginning on August 31, 1994, with one-third of
such options vested on the August 31, 1995, and one-third vested on August 31,
1996, and one-third vesting on August 31, 1997, subject to acceleration in
accordance with the terms of the Stock Option Plan.
The 1994 Options were and are intended to qualify as incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that to the extent that any of
such options did not or do not satisfy the requirements of Section 422(b) of the
Code, then they shall be treated as non-qualified options.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which
6
<PAGE>
have vested and are exercisable in accordance with the terms of the applicable
option grant agreement or plan, and (ii) to retain any Restricted Shares
previously awarded to Executive pursuant to this Agreement and the Restricted
Share Agreement and any Restricted Share Tax Gross-Up Payments which are fully
vested on the date of termination. Except for any rights which Executive may
have to unpaid salary amounts through and including the date of termination,
vested options, and vested Restricted Shares and related Restricted Share Tax
Gross-Up Payments, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
(b) Termination of Employment Upon Death or Disability . In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar year in which such termination
occurred and ending with the date the Employment Period ends (assuming such
termination did not occur), of the average annual amount of incentive
compensation payments paid to Executive during each previous year of Executive's
employment hereunder (the "Pro-Rata Portion of Incentive Compensation"). The
aforesaid amount shall be payable, at the option of Executive, his estate or his
personal representative, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, his estate or his personal
representative, within one (1) year of the date of such termination, to exercise
any options which have vested
7
<PAGE>
(including, without limitation, by acceleration in accordance with the terms of
the applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, and (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his estate or his personal representative shall receive a cash
payment from the Company on the date of termination in an amount equal to forty
percent (40%) of the Fair Market Value (determined as of the date of
termination) of the Restricted Shares that vest on the date of termination (the
"Termination Restricted Share Tax Gross-Up Payment"). Except for any rights
which Executive may have to unpaid salary amounts through the end of the
Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, and Restricted Shares (and the full vesting thereof) and the
Termination Restricted Share Tax Gross-Up Payment, all as set forth above, the
Company shall have no further obligations hereunder following such termination.
8
<PAGE>
(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive and Executive
shall be entitled to all the payments and rights Executive would have had if
Executive's employment had been terminated due to Disability as set forth in
sub-paragraph 4(b) (including all benefits under this Agreement and the
Restricted Share Agreement), except that Executive must exercise any options
which have vested within ninety (90) days of the date of termination. Except for
any rights which Executive may have to unpaid salary amounts through the end of
the Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, and Restricted Shares (and full vesting thereof) and the Termination
Restricted Share Tax Gross-Up Payment, all as set forth above, the Company shall
have no further obligations hereunder following such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled to (i) all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the
9
<PAGE>
Change in Control (the "Change in Control Restricted Share Tax Gross-Up
Payment") and (ii) an excise tax gross-up payment. If it is determined by an
independent accountant mutually acceptable to the Company and Executive that as
a result of compensation paid and other benefits provided to Executive by the
Company pursuant to this Agreement or otherwise, a tax will be imposed on
Executive pursuant to Section 4999 of the Code (or any successor provisions) the
Company shall pay Executive in cash an amount equal to the excise tax for which
the Executive is liable under Section 4999 of the Code.
Any cash payments owed to Executive pursuant to this Paragraph 4(d) shall
be paid to Executive in a single sum on or immediately prior to date of the
Change in Control but prior to the consummation of the transaction with any
successor.
In addition, other than the 1994 Options, any other options previously or
hereafter granted to Executive that have not vested as of the date of the Change
in Control shall immediately vest upon the occurrence of and on the date of a
Change in Control irrespective of whether Executive's employment terminates in
connection with such Change in Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties hereunder (other
than any such failure resulting from Executive's incapacity
due to physical or mental illness) for a period of thirty (30)
days after written demand for substantial performance is
delivered by the Company specifically identifying the manner
in which the Company believes Executive has not substantially
performed his duties, or (B) willful misconduct by Executive
which is materially injurious to the Company, monetarily or
otherwise, or (C) the willful violation by Executive of the
provisions of Paragraph 5 or 7 hereof. For purposes of this
Paragraph 4(e)(i), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to
be done, by him (I) not in good faith and (II) without
reasonable belief that his action or omission was in
furtherance of the interests of the Company.
(ii) "Change in Control" shall mean that any of the following
events has occurred: (a) any "person" or "group" of persons,
as such terms are used in Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other
than any employee benefit plan sponsored by the Company,
becomes the "beneficial owner", as such term is used in
Section 13 of the Exchange Act, of thirty percent (30%) or
more of the Common Stock of
10
<PAGE>
the Company issued and outstanding immediately prior to such
acquisition; (b) any Common Stock of the Company is purchased
pursuant to a tender or exchange offer other than an offer by
the Company; or (c) the dissolution or liquidation of the
Company or the consummation of any merger or consolidation of
the Company or any sale or other disposition of all or
substantially all of its assets, if the shareholders of the
Company immediately before such transaction own, immediately
after consummation of such transaction, equity securities
(other than options and other rights to acquire equity
securities) possessing less than thirty percent (30%) of the
voting power of the surviving or acquiring company.
(iii) "Disability" shall mean the determination by the Company, upon
the advice of an independent qualified physician, reasonably
acceptable to Executive, that Executive has become physically
or mentally incapable of performing his duties under this
Agreement and such disability has disabled Executive for a
cumulative period of one hundred eighty (180) days within a
twelve (12) month period.
(iv) "Fair Market Value" shall mean the closing price of the Common
Stock as quoted on the New York Stock Exchange at the end of
the last business day preceding the Determination Date, the
applicable anniversary or the date of termination, as the case
may be, as reported in the New York edition of the Wall Street
Journal.
(v) "Good Reason" shall mean (A) any material and substantial
breach of this Agreement by the Company, (B) a material
reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any other
failure by the Company to comply with Paragraph 3 hereof, or
(C) the Company shall have given notice pursuant to Paragraph
1 hereof at any time prior to the sixth anniversary of the
date hereof that it does not wish to extend this Agreement,
except in connection with termination of Executive's
employment for Cause or by reason of death or Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the Common
Stock on each of the trading days within the thirty
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<PAGE>
(30) days immediately preceding the date of termination of
Executive's employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall not, directly or indirectly, at any time, either during or
after his employment with the Company, without the Company's prior written
consent, use any of such Confidential Information or disclose any of such
Confidential Information to any individual or entity other than the Company or
its employees, except as required in the performance of his duties for the
Company or as otherwise required by law. Executive shall take all reasonable
steps to safeguard such Confidential Information and to protect such
Confidential Information against disclosure, misuse, loss or theft.
12
<PAGE>
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company, and shall be delivered to the Company, without
retaining any copies, upon the termination of Executive's employment or at any
time as requested by the Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
13
<PAGE>
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
(b) If, at the time of enforcement of this Paragraph 7, a court shall hold
that the duration, scope, area or other restrictions stated herein are
unreasonable, the parties agree that reasonable maximum duration, scope, area or
other restrictions may be substituted by such court for the stated duration,
scope, area or other restrictions and upon substitution by such court, this
Agreement shall be automatically modified without further action by the parties
hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any
14
<PAGE>
entity of which a majority of the economic interest is owned, directly or
indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to Executive, to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of an
such succession shall be a breach of this Agreement and shall entitle Executive
to compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated
15
<PAGE>
due to Disability, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the date of
termination. In the event of such a breach of this Agreement, the Notice of
Termination shall specify such date as the date of termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to all or substantially all of its business and/or its assets as
aforesaid which executes and delivers the agreement provided for in this
Paragraph 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. Any cash payments owed to Executive pursuant
to this Paragraph 9 shall be paid to Executive in a single sum immediately prior
to the consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's beneficiary as determined under any applicable plan,
Executive's devisee, legatee, or other designee or, if there be no such
designee, to Executive's estate.
10. Timing of and No Duplication of Payments/Tax Withholding
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
16
<PAGE>
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or discharge any provision or term of this Agreement. No
delay on the part of the Company or Executive in the exercise of any of their
respective rights or remedies shall operate as a waiver thereof, and no single
or partial exercise by the Company or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any other occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or
17
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delivered by a recognized delivery service or mailed, postage prepaid, by
express, certified or registered mail, return receipt requested, and addressed
to the Company or Executive, as applicable, at the address set forth above (or
to such other address as shall have been previously provided in accordance with
this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then, subject to the provisions of
Paragraph 7(b) above, such provision or term shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provisions or term or the remaining
provisions or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
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16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall survive
the termination of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
--------------------------------
Name: Thomas A. Rizk
Title: President
/s/ John R. Cali
--------------------------------
John R. Cali
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SCHEDULE A
Those properties described in the Prospectus of Cali Realty Corporation for the
sale of 10,500,000 Shares dated August 24, 1994, in the section entitled
"Business and Properties -- Excluded Properties".
21
================================================================================
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FOR
BRANT CALI
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment...........................................................1
2. Services.............................................................2
3. Compensation and Benefits............................................3
4. Termination of Employment and Change in Control......................6
5. Confidential Information............................................12
6. Return of Documents.................................................13
7. Noncompete..........................................................13
8. Remedies............................................................15
9. Successors and Assigns..............................................15
10. Timing of and No Duplication of Payments/ Tax Withholding...........16
11. Modification or Waiver..............................................17
12. Notices.............................................................17
13. Governing Law.......................................................18
14. Severability........................................................18
15. Counterparts........................................................18
16. Headings............................................................19
17. Entire Agreement....................................................19
18. Survival of Agreements..............................................19
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of January 21, 1997, by and between Brant Cali, an individual residing
at 175 Eagle Rock Way, Montclair, New Jersey 07042 ("Executive"), and Cali
Realty Corporation, a Maryland corporation with offices at 11 Commerce Drive,
Cranford, New Jersey 07016 (the "Company").
RECITALS
WHEREAS, the Executive has held the positions of Chief Operating Officer
and Secretary of the Company pursuant to his Employment Agreement with the
Company dated August 31, 1994 ("Prior Agreement") and, through such service, has
acquired special and unique knowledge, abilities and expertise; and
WHEREAS, the Company desires to extend Executive's Employment Period (as
defined in the Prior Agreement) to January 21, 2002, and the Company and
Executive desires to restructure certain terms of the Prior Agreement and
otherwise to amend and restate the Prior Agreement in its entirety as set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
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2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the applicable expiration date either the Company or Executive
shall have given written notice to the other party that such party does not wish
to extend this Agreement. It being agreed and understood that the extension of
this Agreement shall not create an obligation of the Company to issue new awards
to Executive hereunder. The term of this Agreement, as it may be extended from
time to time in accordance with this Paragraph 1, is referred to herein as the
"Employment Period."
2. Services.
During the Employment Period, Executive shall hold the positions of Chief
Operating Officer and Secretary of the Company and shall devote his best efforts
and substantially all of his business time, skill and attention to the business
of the Company, and shall perform such duties as are customarily performed by
similar executive officers and as may be more specifically enumerated from time
to time by the Board of Directors of the Company (the "Board") or the Executive
Committee of the Board, if any; provided, however, that the foregoing is not
intended to (a) preclude Executive from (i) owning and managing personal
investments, including real estate investments, subject to the restrictions set
forth in Paragraph 7 hereof or (ii) engaging in charitable activities and
community affairs, or (b) restrict or otherwise limit Executive from conducting
real estate development, acquisition or management activities with respect to
those properties described in Schedule A, attached hereto, (the "Excluded
Properties"), provided that the performance of the activities referred to in
clauses (a) and (b) does
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not prevent Executive from devoting substantially all of his business time to
the Company.
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $225,000 (the "Annual Base Salary"), payable
in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan"), and other benefit plans
(including without limitation the Cali Realty Corporation 401(k)
Savings and Retirement Plan and any other stock option plans
which may be adopted or maintained by the Company) made generally
available to executives of the Company with such participation to
be consistent with reasonable Company guidelines;
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(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
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As further consideration for Executive agreeing to serve as an officer
and entering into this Agreement upon the terms set forth herein, including,
without limitation, the terms relating to noncompetition set forth in Paragraph
7 below, the Company shall, concurrently herewith or as soon as practicable
after the execution of this Agreement:
grant to Executive 55,555 restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions of this
Agreement, and the written agreement, issued pursuant to this
Agreement, evidencing such award executed between the Company and
Executive (the "Restricted Share Agreement"). In the event of a
conflict between the Restricted Share Agreement and this Agreement,
the terms of this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with twenty
percent (20%) of the Restricted Shares vesting on each of the first
anniversary of the date hereof (the "First Anniversary"), the second
anniversary of the date hereof (the "Second Anniversary"), the third
anniversary of the date hereof (the "Third Anniversary"), the fourth
anniversary of the date hereof (the "Fourth Anniversary") and the
fifth anniversary of the date hereof (the "Fifth Anniversary"),
provided, that certain Performance Goals as defined and set forth in
the Restricted Share Agreement are met. Vesting shall be cumulative in
accordance with the provisions of the Restricted Share Agreement and
the Performance Goals may be achieved as specified therein up until
the seventh anniversary of the date hereof. Except as otherwise
provided in Paragraph 4 hereof, Executive must be employed by the
Company on the applicable anniversary date to vest in the Restricted
Shares scheduled to vest in a particular year. The measurement date to
determine such vesting shall be the last day of the Company's fiscal
year preceding the year in which the applicable anniversary date
occurs.
In addition, upon vesting of the Restricted Shares on each applicable
anniversary date, the Company shall make a cash payment to Executive
on that anniversary date in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of such anniversary date) of the
Restricted Shares that vest on such anniversary date (the "Restricted
Share Tax Gross-Up Payment").
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As consideration for entering into the Prior Agreement upon the terms set
forth therein, including without limitation, the terms relating to
noncompetition set forth in Paragraph 7 thereof, the Company, concurrently
therewith, pursuant to Paragraph 3 of the Prior Agreement granted to Executive
options to purchase 200,000 shares of Common Stock at a purchase price of $17.25
per share (the "1994 Options"). Such options were granted pursuant to the terms
and conditions of the Stock Option Plan, having a ten (10) year term and vesting
over a three (3) year period beginning on August 31, 1994, with one-third of
such options vested on the August 31, 1995, and one-third vested on August 31,
1996, and one-third vesting on August 31, 1997, subject to acceleration in
accordance with the terms of the Stock Option Plan.
The 1994 Options were and are intended to qualify as incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that to the extent that any of
such options did not or do not satisfy the requirements of Section 422(b) of the
Code, then they shall be treated as non-qualified options.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which
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have vested and are exercisable in accordance with the terms of the applicable
option grant agreement or plan, and (ii) to retain any Restricted Shares
previously awarded to Executive pursuant to this Agreement and the Restricted
Share Agreement and any Restricted Share Tax Gross-Up Payments which are fully
vested on the date of termination. Except for any rights which Executive may
have to unpaid salary amounts through and including the date of termination,
vested options, and vested Restricted Shares and related Restricted Share Tax
Gross-Up Payments, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
(b) Termination of Employment Upon Death or Disability . In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar year in which such termination
occurred and ending with the date the Employment Period ends (assuming such
termination did not occur), of the average annual amount of incentive
compensation payments paid to Executive during each previous year of Executive's
employment hereunder (the "Pro-Rata Portion of Incentive Compensation"). The
aforesaid amount shall be payable, at the option of Executive, his estate or his
personal representative, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, his estate or his personal
representative, within one (1) year of the date of such termination, to exercise
any options which have vested
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(including, without limitation, by acceleration in accordance with the terms of
the applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, and (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his estate or his personal representative shall receive a cash
payment from the Company on the date of termination in an amount equal to forty
percent (40%) of the Fair Market Value (determined as of the date of
termination) of the Restricted Shares that vest on the date of termination (the
"Termination Restricted Share Tax Gross-Up Payment"). Except for any rights
which Executive may have to unpaid salary amounts through the end of the
Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, and Restricted Shares (and the full vesting thereof) and the
Termination Restricted Share Tax Gross-Up Payment, all as set forth above, the
Company shall have no further obligations hereunder following such termination.
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(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive and Executive
shall be entitled to all the payments and rights Executive would have had if
Executive's employment had been terminated due to Disability as set forth in
sub-paragraph 4(b) (including all benefits under this Agreement and the
Restricted Share Agreement), except that Executive must exercise any options
which have vested within ninety (90) days of the date of termination. Except for
any rights which Executive may have to unpaid salary amounts through the end of
the Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, and Restricted Shares (and full vesting thereof) and the Termination
Restricted Share Tax Gross-Up Payment, all as set forth above, the Company shall
have no further obligations hereunder following such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled to (i) all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the
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Change in Control (the "Change in Control Restricted Share Tax Gross-Up
Payment") and (ii) an excise tax gross-up payment. If it is determined by an
independent accountant mutually acceptable to the Company and Executive that as
a result of compensation paid and other benefits provided to Executive by the
Company pursuant to this Agreement or otherwise, a tax will be imposed on
Executive pursuant to Section 4999 of the Code (or any successor provisions) the
Company shall pay Executive in cash an amount equal to the excise tax for which
the Executive is liable under Section 4999 of the Code.
Any cash payments owed to Executive pursuant to this Paragraph 4(d) shall
be paid to Executive in a single sum on or immediately prior to date of the
Change in Control but prior to the consummation of the transaction with any
successor.
In addition, other than the 1994 Options, any other options previously or
hereafter granted to Executive that have not vested as of the date of the Change
in Control shall immediately vest upon the occurrence of and on the date of a
Change in Control irrespective of whether Executive's employment terminates in
connection with such Change in Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties hereunder (other
than any such failure resulting from Executive's incapacity due
to physical or mental illness) for a period of thirty (30) days
after written demand for substantial performance is delivered by
the Company specifically identifying the manner in which the
Company believes Executive has not substantially performed his
duties, or (B) willful misconduct by Executive which is
materially injurious to the Company, monetarily or otherwise, or
(C) the willful violation by Executive of the provisions of
Paragraph 5 or 7 hereof. For purposes of this Paragraph 4(e)(i),
no act, or failure to act, on Executive's part shall be
considered "willful" unless done, or omitted to be done, by him
(I) not in good faith and (II) without reasonable belief that his
action or omission was in furtherance of the interests of the
Company.
(ii) "Change in Control" shall mean that any of the following events
has occurred: (a) any "person" or "group" of persons, as such
terms are used in Sections 13 and 14 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), other than any
employee benefit plan sponsored by the Company, becomes the
"beneficial owner", as such term is used in Section 13 of the
Exchange Act, of thirty percent (30%) or more of the Common Stock
of
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the Company issued and outstanding immediately prior to such
acquisition; (b) any Common Stock of the Company is purchased
pursuant to a tender or exchange offer other than an offer by the
Company; or (c) the dissolution or liquidation of the Company or
the consummation of any merger or consolidation of the Company or
any sale or other disposition of all or substantially all of its
assets, if the shareholders of the Company immediately before
such transaction own, immediately after consummation of such
transaction, equity securities (other than options and other
rights to acquire equity securities) possessing less than thirty
percent (30%) of the voting power of the surviving or acquiring
company.
(iii) "Disability" shall mean the determination by the Company, upon
the advice of an independent qualified physician, reasonably
acceptable to Executive, that Executive has become physically or
mentally incapable of performing his duties under this Agreement
and such disability has disabled Executive for a cumulative
period of one hundred eighty (180) days within a twelve (12)
month period.
(iv) "Fair Market Value" shall mean the closing price of the Common
Stock as quoted on the New York Stock Exchange at the end of the
last business day preceding the Determination Date, the
applicable anniversary or the date of termination, as the case
may be, as reported in the New York edition of the Wall Street
Journal.
(v) "Good Reason" shall mean (A) any material and substantial breach
of this Agreement by the Company, (B) a material reduction in the
Executive's Annual Base Salary or other benefits (except for
bonuses or similar discretionary payments) as in effect at the
time in question, or any other failure by the Company to comply
with Paragraph 3 hereof, or (C) the Company shall have given
notice pursuant to Paragraph 1 hereof at any time prior to the
sixth anniversary of the date hereof that it does not wish to
extend this Agreement, except in connection with termination of
Executive's employment for Cause or by reason of death or
Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the Common Stock
on each of the trading days within the thirty
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(30) days immediately preceding the date of termination of
Executive's employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall not, directly or indirectly, at any time, either during or
after his employment with the Company, without the Company's prior written
consent, use any of such Confidential Information or disclose any of such
Confidential Information to any individual or entity other than the Company or
its employees, except as required in the performance of his duties for the
Company or as otherwise required by law. Executive shall take all reasonable
steps to safeguard such Confidential Information and to protect such
Confidential Information against disclosure, misuse, loss or theft.
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(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company, and shall be delivered to the Company, without
retaining any copies, upon the termination of Executive's employment or at any
time as requested by the Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
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employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
(b) If, at the time of enforcement of this Paragraph 7, a court shall
hold that the duration, scope, area or other restrictions stated herein are
unreasonable, the parties agree that reasonable maximum duration, scope, area or
other restrictions may be substituted by such court for the stated duration,
scope, area or other restrictions and upon substitution by such court, this
Agreement shall be automatically modified without further action by the parties
hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any
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entity of which a majority of the economic interest is owned, directly or
indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated
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due to Disability, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the date of
termination. In the event of such a breach of this Agreement, the Notice of
Termination shall specify such date as the date of termination. As used in this
Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to all or substantially all of its business and/or its assets as
aforesaid which executes and delivers the agreement provided for in this
Paragraph 9 or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law. Any cash payments owed to Executive pursuant
to this Paragraph 9 shall be paid to Executive in a single sum immediately prior
to the consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary as determined under any applicable plan, Executive's
devisee, legatee, or other designee or, if there be no such designee, to
Executive's estate.
10. Timing of and No Duplication of Payments/ Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall
be paid as soon as practicable after such amounts have become fully vested and
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determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or discharge any provision or term of this Agreement. No
delay on the part of the Company or Executive in the exercise of any of their
respective rights or remedies shall operate as a waiver thereof, and no single
or partial exercise by the Company or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any other occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or
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delivered by a recognized delivery service or mailed, postage prepaid, by
express, certified or registered mail, return receipt requested, and addressed
to the Company or Executive, as applicable, at the address set forth above (or
to such other address as shall have been previously provided in accordance with
this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then, subject to the provisions of
Paragraph 7(b) above, such provision or term shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provisions or term or the remaining
provisions or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
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16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall survive
the termination of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
--------------------------------
Name: Thomas A. Rizk
Title: President
/s/ Brant Cali
--------------------------------
Brant Cali
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SCHEDULE A
Those properties described in the Prospectus of Cali Realty Corporation for the
sale of 10,500,000 Shares dated August 24, 1994, in the section entitled
"Business and Properties -- Excluded Properties".
21
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
JOHN R. CALI
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED SHARE
AWARD PURSUANT TO THE AMENDED AND RESTATED EMPLOYMENT AGREEMENT FOR JOHN R.
CALI ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant
Date") by and between Cali Realty Corporation (the "Company") and John R. Cali
("Recipient").
WHEREAS, pursuant to the amended and restated employment agreement
between Recipient and the Company entered into as of January 21, 1997 (the
"Employment Agreement") the Company has awarded shares of the Company's common
stock, par value $.01 per share ("Common Stock") to the Recipient subject to
such terms, conditions, and restrictions (hereinafter, "Restricted Share Award")
as set forth in the Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock. Pursuant to the Employment
Agreement, the Company hereby awards to the Recipient, effective as of the Grant
Date, a Restricted Share Award representing the right to earn 55,555 shares of
Common Stock ("Restricted Shares") subject to the terms, conditions and
restrictions set forth herein. Capitalized terms not otherwise defined in this
Agreement shall be as defined in the Employment Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not vest
in the Recipient, and shall be subject to forfeiture until the conditions of
Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the
<PAGE>
"Vesting Date."
(b) Vesting. An aggregate of 55,555 Restricted Shares may be
earned by the Recipient and vest on a cumulative basis over a five to seven year
Vesting Period, with 11,111 Restricted Shares scheduled to be vested and earned
on each Vesting Date provided the Performance Goals specified in Section 2(c)
below are satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 11,111 Restricted Shares
shall vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of outstanding limited partnership units of Cali Realty,
L.P., a Delaware limited partnership
-2-
<PAGE>
of which the Company is the sole general partner, for the applicable period.
(ii) In the event that neither of the Financial Tests above
is satisfied in the measurement period ending on the applicable Vesting Date
("Non-Achievement Year"), any Restricted Shares that failed to vest on such Date
may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (l) and (ll) above to be satisfied. Notwithstanding any
contrary provisions contained in this Section 2(c), any Restricted Shares that
have not been earned and vested by January 21, 2004 pursuant to the Cumulative
Test shall
-3-
<PAGE>
automatically be canceled and forfeited.
(d) Lapse of Restrictions. Upon the Vesting of Restricted Shares,
the Recipient shall own the Shares free and clear of all restrictions imposed by
this Agreement and the Recipient shall be free to hold or dispose of such Shares
in his discretion, subject to applicable federal and state law or regulations.
(e) Prohibition Against Assignment. During the Vesting Period,
the Restricted Shares may not be transferred or encumbered by the Recipient by
means of sale, assignment, mortgage, transfer, exchange, pledge, or otherwise.
The levy of any execution, attachment, or similar process upon the Restricted
Shares shall be null and void.
3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one or
more stock certificates registered in the name of the Recipient or a nominee or
nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to the
designee of the Company (the "Designee") a stock power designating the Company
as the transferee of an unspecified number of Shares, which stock power may be
completed by the Designee as specified herein. The Recipient and the Company
each waive the requirement that the signature of the Recipient on the stock
power be guaranteed. Upon receipt of a copy of this Agreement and the stock
power, each signed by the Recipient, the Designee shall promptly notify the
proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to be held in accordance with the terms of the
Employment Agreement and this
-4-
<PAGE>
Agreement.
(c) Effect of Vesting. Upon Vesting, the Company shall cause to
be delivered to the Recipient (i) a certificate for the Shares which have vested
free and clear of restrictive legends and (ii) any stock powers signed hereunder
by the Recipient remaining in its possession. In the event that the Recipient
dies after Vesting and before delivery of the certificate, such certificate
shall be delivered to, and registered in the name of, the Recipient's
beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in
Section 2 and this Section 3, during the Vesting Period and after the
certificates for the Restricted Shares have been issued, the Recipient shall be
entitled to all rights of a stockholder of the Company, including the right to
vote and the right to receive dividends, with respect to the Restricted Shares
subject to this Agreement. Subject to applicable withholding requirements, if
any, dividends on the Restricted Shares shall be paid to the Recipient when
earned.
(e) Power of Designee. The Designee is hereby authorized by the
Recipient to utilize the stock power delivered by the Recipient to transfer all
forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Without Cause, For Good Reason, Disability or
Death; Change in Control. Unless otherwise provided in the Employment Agreement,
if the Recipient's employment with the Company is terminated prior to the end of
the Vesting Period set forth in this Agreement either by the Company without
Cause, by the Recipient for Good Reason, or due to Disability or death, all
Restricted Shares subject to this Agreement and held by, or on behalf of, the
Recipient shall be deemed earned and vested as of the Recipient's last day of
employment with the Company. In
-5-
<PAGE>
addition, unless otherwise provided in the Employment Agreement, all Restricted
Shares subject to this Agreement and held by the Recipient on the date a Change
in Control occurs shall be deemed earned and vested as of such date.
(b) Termination for Any Other Reason. Unless otherwise provided
in the Employment Agreement, if the Recipient's employment with the Company
terminates prior to the end of the Vesting Period set forth in this Agreement
for reasons other than those specified in Section 4(a) above, any Restricted
Shares subject to this Agreement that have not been earned and vested prior to
the Recipient's termination of employment shall be immediately forfeited on the
last day of the Recipient's employment with the Company.
5. Withholding.
In connection with the delivery of any stock certificates, or the
making of any payment in accordance with the provisions of this Agreement, the
Company shall withhold Shares or cash amounts (for fractional Shares) equal to
the taxes then required by applicable federal, state and local law to be so
withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall be
entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from the
Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the fair market value (as determined for
tax purposes) of the Restricted Shares at time of distribution, exclusive of
dividends.
(b) Termination of Employment Without Cause, for Good Reason,
Disability or Death; Change in Control. Unless otherwise provided in the
Employment Agreement, if the Recipient's employment with the Company is
terminated prior to the end of the Vesting Period set forth in this Agreement
either by the Company
-6-
<PAGE>
without Cause, by the Recipient for Good Reason, or due to Disability or death,
or in the event a Change in Control occurs, a final Tax Gross-Up Payment shall
be made to the Recipient (or his beneficiary, as the case may be) in a dollar
amount equal to forty (40%) percent of the fair market value (as determined for
tax purposes) of the Restricted Shares distributed to the Recipient (or his
beneficiary). Payment of the final Tax Gross-Up Payment shall be made on the
date the Restricted Shares are distributed or as soon as administratively
feasible thereafter.
(c) Effect of Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
Agreement for any reason other than those specified in Section 6(b) above, no
further Tax Gross-Up Payments shall be made to such Recipient.
7. Adjustments for Capital Changes.
In the event of any change in the outstanding share of Common Stock of
the Company by reason of any Stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, a duly
authorized representative of the Company shall adjust the number of Restricted
Shares granted pursuant to the Employment Agreement and this Agreement to
prevent dilution or enlargement of the rights granted to the Recipient.
8. No Right to Continued Employment. Nothing in this Agreement shall
confer on the Recipient any right to continue as an employee of the Company or
in any way affect the Company's or any subsidiary's right to terminate the
Recipient's employment at any time.
9. Notice.
-7-
<PAGE>
Any notice to the Company hereunder shall be in writing addressed to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: Thomas A. Rizk
Chief Executive Officer.
Any notice to the Recipient hereunder shall be in writing addressed
to:
Mr. John R. Cali
203 Laurel Hill Road
Mountain Lakes, New Jersey 07046
or such other address as the Recipient shall notify the Company in
writing.
10. Entire Agreement; Effect of Employment Agreement.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties and shall not be modified or amended except in
writing and duly signed by each of the parties hereto. No waiver by either party
of any default under this Agreement shall be deemed a waiver of any later
default thereof.
(b) Effect of Employment Agreement. In the event the Employment
Agreement contains additional rights, duties and/or obligations with respect to
the Recipient, such terms and conditions shall govern the Recipient's Restricted
Share Award as if such terms and conditions had been set forth herein; and in
the event of any conflict or inconsistency between the terms of the Employment
Agreement, this Agreement, the terms and conditions of the Employment Agreement
shall control.
11. Construction. The various provisions of this Agreement are
severable in their entirety. Any determination of invalidity or unenforceability
of any one provision shall have no effect on the continuing force and effect of
the remaining provisions.
-8-
<PAGE>
12. Governing Law. This Agreement shall be governed by the laws of the
State of New Jersey applicable to contracts made, and to be enforced, within the
State of New Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective on the date first above written.
Cali Realty Corporation
By: /s/ Thomas A. Rizk
--------------------------------
Thomas A. Rizk
Chief Executive Officer
Recipient
/s/ John R. Cali
--------------------------------
John R. Cali
-9-
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
BRANT CALI
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED SHARE
AWARD PURSUANT TO THE AMENDED AND RESTATED EMPLOYMENT
AGREEMENT FOR BRANT CALI ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant Date") by
and between Cali Realty Corporation (the "Company") and Brant Cali
("Recipient").
WHEREAS, pursuant to the amended and restated employment agreement between
Recipient and the Company entered into as of January 21, 1997 (the "Employment
Agreement") the Company has awarded shares of the Company's common stock, par
value $.01 per share ("Common Stock") to the Recipient subject to such terms,
conditions, and restrictions (hereinafter, "Restricted Share Award") as set
forth in the Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock.
Pursuant to the Employment Agreement, the Company hereby awards to the
Recipient, effective as of the Grant Date, a Restricted Share Award representing
the right to earn 55,555 shares of Common Stock ("Restricted Shares") subject to
the terms, conditions and restrictions set forth herein. Capitalized terms not
otherwise defined in this Agreement shall be as defined in the Employment
Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not vest in
the Recipient, and shall be subject to forfeiture until the conditions of
Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the
<PAGE>
"Vesting Date."
(b) Vesting. An aggregate of 55,555 Restricted Shares may be earned by
the Recipient and vest on a cumulative basis over a five to seven year Vesting
Period, with 11,111 Restricted Shares scheduled to be vested and earned on each
Vesting Date provided the Performance Goals specified in Section 2(c) below are
satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 11,111 Restricted Shares shall
vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of outstanding limited partnership units of Cali Realty,
L.P., a Delaware limited partnership
-2-
<PAGE>
of which the Company is the sole general partner, for the applicable period.
(ii) In the event that neither of the Financial Tests above is
satisfied in the measurement period ending on the applicable Vesting Date
("Non-Achievement Year"), any Restricted Shares that failed to vest on such Date
may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (l) and (ll) above to be satisfied. Notwithstanding any
contrary provisions contained in this Section 2(c), any Restricted Shares that
have not been earned and vested by January 21, 2004 pursuant to the Cumulative
Test shall
-3-
<PAGE>
automatically be canceled and forfeited.
(d) Lapse of Restrictions. Upon the Vesting of Restricted Shares, the
Recipient shall own the Shares free and clear of all restrictions imposed by
this Agreement and the Recipient shall be free to hold or dispose of such Shares
in his discretion, subject to applicable federal and state law or regulations.
(e) Prohibition Against Assignment. During the Vesting Period, the
Restricted Shares may not be transferred or encumbered by the Recipient by means
of sale, assignment, mortgage, transfer, exchange, pledge, or otherwise. The
levy of any execution, attachment, or similar process upon the Restricted Shares
shall be null and void.
3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one or more
stock certificates registered in the name of the Recipient or a nominee or
nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to the
designee of the Company ( the "Designee") a stock power designating the Company
as the transferee of an unspecified number of Shares, which stock power may be
completed by the Designee as specified herein. The Recipient and the Company
each waive the requirement that the signature of the Recipient on the stock
power be guaranteed. Upon receipt of a copy of this Agreement and the stock
power, each signed by the Recipient, the Designee shall promptly notify the
proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to be held in accordance with the terms of the
Employment Agreement and this
-4-
<PAGE>
Agreement.
(c) Effect of Vesting. Upon Vesting, the Company shall cause to be
delivered to the Recipient (i) a certificate for the Shares which have vested
free and clear of restrictive legends and (ii) any stock powers signed hereunder
by the Recipient remaining in its possession. In the event that the Recipient
dies after Vesting and before delivery of the certificate, such certificate
shall be delivered to, and registered in the name of, the Recipient's
beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in Section 2
and this Section 3, during the Vesting Period and after the certificates for the
Restricted Shares have been issued, the Recipient shall be entitled to all
rights of a stockholder of the Company, including the right to vote and the
right to receive dividends, with respect to the Restricted Shares subject to
this Agreement. Subject to applicable withholding requirements, if any,
dividends on the Restricted Shares shall be paid to the Recipient when earned.
(e) Power of Designee. The Designee is hereby authorized by the
Recipient to utilize the stock power delivered by the Recipient to transfer all
forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Without Cause, For Good Reason, Disability or Death;
Change in Control. Unless otherwise provided in the Employment Agreement, if the
Recipient's employment with the Company is terminated prior to the end of the
Vesting Period set forth in this Agreement either by the Company without Cause,
by the Recipient for Good Reason, or due to Disability or death, all Restricted
Shares subject to this Agreement and held by, or on behalf of, the Recipient
shall be deemed earned and vested as of the Recipient's last day of employment
with the Company. In
-5-
<PAGE>
addition, unless otherwise provided in the Employment Agreement, all Restricted
Shares subject to this Agreement and held by the Recipient on the date a Change
in Control occurs shall be deemed earned and vested as of such date.
(b) Termination for Any Other Reason. Unless otherwise provided in the
Employment Agreement, if the Recipient's employment with the Company terminates
prior to the end of the Vesting Period set forth in this Agreement for reasons
other than those specified in Section 4(a) above, any Restricted Shares subject
to this Agreement that have not been earned and vested prior to the Recipient's
termination of employment shall be immediately forfeited on the last day of the
Recipient's employment with the Company.
5. Withholding.
In connection with the delivery of any stock certificates, or the making of
any payment in accordance with the provisions of this Agreement, the Company
shall withhold Shares or cash amounts (for fractional Shares) equal to the taxes
then required by applicable federal, state and local law to be so withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall be
entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from the
Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the fair market value (as determined for
tax purposes) of the Restricted Shares at time of distribution, exclusive of
dividends.
(b) Termination of Employment Without Cause, for Good Reason,
Disability or Death; Change in Control. Unless otherwise provided in the
Employment Agreement, if the Recipient's employment with the Company is
terminated prior to the end of the Vesting Period set forth in this Agreement
either by the Company
-6-
<PAGE>
without Cause, by the Recipient for Good Reason, or due to Disability or death,
or in the event a Change in Control occurs, a final Tax Gross-Up Payment shall
be made to the Recipient (or his beneficiary, as the case may be) in a dollar
amount equal to forty (40%) percent of the fair market value (as determined for
tax purposes) of the Restricted Shares distributed to the Recipient (or his
beneficiary). Payment of the final Tax Gross-Up Payment shall be made on the
date the Restricted Shares are distributed or as soon as administratively
feasible thereafter.
(c) Effect of Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
Agreement for any reason other than those specified in Section 6(b) above, no
further Tax Gross-Up Payments shall be made to such Recipient.
7. Adjustments for Capital Changes.
In the event of any change in the outstanding share of Common Stock of the
Company by reason of any Stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, a duly
authorized representative of the Company shall adjust the number of Restricted
Shares granted pursuant to the Employment Agreement and this Agreement to
prevent dilution or enlargement of the rights granted to the Recipient.
8. No Right to Continued Employment.
Nothing in this Agreement shall confer on the Recipient any right to
continue as an employee of the Company or in any way affect the Company's or any
subsidiary's right to terminate the Recipient's employment at any time.
-7-
<PAGE>
9. Notice.
Any notice to the Company hereunder shall be in writing addressed to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: Thomas A. Rizk
Chief Executive Officer.
Any notice to the Recipient hereunder shall be in writing addressed to:
Mr. Brant Cali
175 Eagle Rock Way
Montclair, New Jersey 07042
or such other address as the Recipient shall notify the Company in writing.
10. Entire Agreement; Effect of Employment Agreement.
(a) Entire Agreement. This Agreement contains the entire understanding
of the parties and shall not be modified or amended except in writing and duly
signed by each of the parties hereto. No waiver by either party of any default
under this Agreement shall be deemed a waiver of any later default thereof.
(b) Effect of Employment Agreement. In the event the Employment
Agreement contains additional rights, duties and/or obligations with respect to
the Recipient, such terms and conditions shall govern the Recipient's Restricted
Share Award as if such terms and conditions had been set forth herein; and in
the event of any conflict or inconsistency between the terms of the Employment
Agreement, this Agreement, the terms and conditions of the Employment Agreement
shall control.
-8-
<PAGE>
11. Construction.
The various provisions of this Agreement are severable in their entirety.
Any determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
12. Governing Law.
This Agreement shall be governed by the laws of the State of New Jersey
applicable to contracts made, and to be enforced, within the State of New
Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective on the date first above written.
Cali Realty Corporation
By: /s/ Thomas A. Rizk
--------------------------------
Name: Thomas A. Rizk
Chief Executive Officer
Recipient
/s/ Brant Cali
--------------------------------
Brant Cali
-9-
================================================================================
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
FOR
THOMAS A. RIZK
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment.................................................................2
2. Services...................................................................2
3. Compensation and Benefits..................................................3
4. Termination of Employment and Change in Control............................8
5. Confidential Information..................................................16
6. Return of Documents.......................................................17
7. Noncompete................................................................17
8. Remedies..................................................................18
9. Successors and Assigns....................................................19
10. Timing of and No Duplication of Payments/ Tax Withholding.................20
11. Modification or Waiver....................................................20
12. Notices...................................................................21
13. Governing Law.............................................................21
14. Severability..............................................................22
15. Counterparts..............................................................22
16. Headings..................................................................22
17. Entire Agreement..........................................................22
18. Survival of Agreements....................................................23
<PAGE>
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement") is entered
into as of January 21, 1997, by and between Thomas A. Rizk, an individual
residing at 87 Braemar Drive, Wayne, New Jersey 07470 ("Executive"), and Cali
Realty Corporation, a Maryland corporation with offices at 11 Commerce Drive,
Cranford, New Jersey 07016 (the "Company").
RECITALS
WHEREAS, the Executive held the positions of President and Chief Financial
Officer and served as a member of the Board of Directors of the Company (the
"Board") pursuant to his Employment Agreement with the Company dated August 31,
1994 ("Prior Agreement") and, through such service, has acquired special and
unique knowledge, abilities and expertise; and
WHEREAS, the Executive now holds the positions of President and Chief
Executive Officer and serves as a member of the Board; and
WHEREAS, the Company desires to extend Executive's Employment Period (as
defined in the Prior Agreement) to January 21, 2002, and the Company and
Executive desires to restructure certain terms of the Prior Agreement and
otherwise to amend and restate the Prior Agreement in its entirety as set forth
in this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
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1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the applicable expiration date either the Company or Executive
shall have given written notice to the other party that such party does not wish
to extend this Agreement. It being agreed and understood that the extension of
this Agreement shall not create an obligation of the Company to issue new awards
to Executive hereunder. The term of this Agreement, as it may be extended from
time to time in accordance with this Paragraph 1, is referred to herein as the
"Employment Period."
2. Services.
During the Employment Period, Executive shall hold the positions of
President and Chief Executive Officer and shall serve as a member of the Board.
Executive shall devote his best efforts and substantially all of his business
time, skill and attention to the business of the Company, and shall perform such
duties as are customarily performed by similar executive officers and as may be
more specifically enumerated from time to time by the Board or the Executive
Committee of the Board, if any; provided, however, that the foregoing is not
intended to (a) preclude Executive from (i) owning and managing personal
investments, including real estate investments, subject to the restrictions set
forth in Paragraph 7 hereof or (ii) engaging in charitable activities
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and community affairs, or (b) restrict or otherwise limit Executive from
conducting real estate development, acquisition or management activities with
respect to those properties described in Schedule A, attached hereto, (the
"Excluded Properties"), provided that the performance of the activities referred
to in clauses (a) and (b) does not prevent Executive from devoting substantially
all of his business time to the Company.
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $450,000 (the "Annual Base Salary"), payable
in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided
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pursuant to this Paragraph 3, Executive shall be entitled to the following
benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan") and other benefit plans
(including without limitation the Cali Realty Corporation 401(k)
Savings and Retirement Plan and any other stock option plans which may
be adopted or maintained by the Company) made generally available to
executives of the Company with such participation to be consistent
with reasonable Company guidelines;
(b) participation in any health insurance, disability insurance, group
life insurance or other welfare benefit program made generally
available to executives of the Company; and
(c) reimbursement for reasonable business expenses incurred by Executive
in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided
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by (ii) the sum of (A) the primary weighted average number of outstanding shares
of Common Stock as it appears in the Company's financial statement for the
applicable period and (B) the primary weighted average number of outstanding
limited partnership units of Cali Realty, L.P., a Delaware limited partnership
of which the Company is the sole general partner, for the applicable period.
As further consideration for Executive agreeing to serve as an officer and
entering into this Agreement upon the terms set forth herein, including, without
limitation, the terms relating to noncompetition set forth in Paragraph 7 below,
the Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
(a) grant to Executive 55,555 restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions of this
Agreement, and the written agreement, issued pursuant to this
Agreement, evidencing such award executed between the Company and
Executive (the "Restricted Share Agreement"). In the event of a
conflict between the Restricted Share Agreement and this Agreement,
the terms of this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with twenty
percent (20%) of the Restricted Shares vesting on each of the first
anniversary of the date hereof (the "First Anniversary"), the second
anniversary of the date hereof (the "Second Anniversary"),the third
anniversary of the date hereof (the "Third Anniversary"), the fourth
anniversary of the date hereof (the "Fourth Anniversary") and the
fifth anniversary of the date hereof (the "Fifth Anniversary"),
provided, that certain Performance Goals as defined and set forth in
the Restricted Share Agreement are met. Vesting shall be cumulative in
accordance with the provisions of the Restricted Share Agreement and
the Performance Goals may be achieved as specified therein up until
the seventh anniversary of the date hereof. Except as otherwise
provided in Paragraph 4 hereof, Executive must be employed by the
Company on the applicable anniversary date to vest in the Restricted
Shares scheduled to vest in a particular year. The measurement date to
determine such
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vesting shall be the last day of the Company's fiscal year preceding
the year in which the applicable anniversary date occurs.
In addition, upon vesting of the Restricted Shares on each applicable
anniversary date, the Company shall make a cash payment to Executive
on that anniversary date in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of such anniversary date) of the
Restricted Shares that vest on such anniversary date (the "Restricted
Share Tax Gross-Up Payment").
(b) loan on a non-recourse basis to Executive $3,000,000 (the "Stock
Acquisition Loan"), with the loan proceeds to be used by Executive
simultaneously to purchase newly issued Common Stock from the Company.
Interest shall accrue on the Stock Acquisition Loan at the rate of
6.21% per year and shall be payable, on the entire outstanding
balance, annually in arrears. The Stock Acquisition Loan is being
granted and secured pursuant to the terms and conditions of this
Agreement, and a Secured Non-Recourse Promissory Note and Stock Pledge
Agreement evidencing and securing such Loan as executed between the
Company and Executive. In the event of a conflict between the
aforementioned documents and this Agreement, the terms of this
Agreement shall control.
The Stock Acquisition Loan shall be forgiven over a period of five (5)
years from the date hereof, with twenty percent (20%) of the principal
and interest on the then outstanding balance of the principal to be
forgiven on each applicable anniversary date (the "Forgiven Amount").
In addition, on each applicable anniversary date as the Stock
Acquisition Loan and interest accrued thereon is forgiven, in order to
enable Executive to meet his tax liability with respect to the
forgiveness of the Stock Acquisition Loan, the Company shall make a
cash payment to Executive on that anniversary date in an amount equal
to forty percent (40%) of the respective Forgiven Amount (the
"Acquisition Loan Tax Gross-Up Payment"). Since the Stock Acquisition
Loan will be forgiven over a five (5) year period, a total of five (5)
Acquisition Loan Tax Gross-Up Payments will be made to Executive over
the period of forgiveness. No additional payments will be made to
Executive with respect to any Acquisition Loan Tax Gross-Up Payments
made hereunder. Except as otherwise provided in Paragraph 4 hereof,
the aforementioned forgiveness of the Stock Acquisition Loan inclusive
of interest thereon and respective Acquisition Loan Tax Gross-Up
Payment shall only occur if Executive is employed by the Company on
the applicable anniversary date.
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The Stock Acquisition Loan shall be initially secured by the shares of
Common Stock purchased by Executive from the Company with the proceeds
of the Stock Acquisition Loan. Beginning on the First Anniversary, the
outstanding balance of the Stock Acquisition Loan shall be secured
only by shares of Common Stock having a Fair Market Value of one
hundred and ten percent (110%) of the outstanding principal amount of
the Stock Acquisition Loan (together with interest accrued thereon).
On the First Anniversary, and on each anniversary date, March 31, June
30 and September 30 through the Fifth Anniversary (each such date a
"Determination Date"), the Company shall reasonably determine the
aggregate Fair Market Value of the collateral (the "Market Value")
being held. If on such Determination Date the Market Value exceeds one
hundred ten percent (110%) of the outstanding balance of the Stock
Acquisition Loan (together with interest accrued thereon) on such
Determination Date (the "Base Value"), the Company shall, unless
otherwise requested by Executive, automatically release to Executive
such portion of the collateral the aggregate Fair Market Value of
which equals the Market Value less 110% of the Base Value, free and
clear of any and all encumbrances under the Stock Pledge Agreement.
Executive shall be required to execute the aforementioned Stock Pledge
Agreement and Secured Non-Recourse Promissory Note. The Company shall
then issue shares of Common Stock to Executive in exchange for the
Stock Acquisition Loan. The Company shall, upon receipt from Executive
of the Stock Pledge Agreement and Secured Non-Recourse Promissory Note
for the purchase of the shares of Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt delivery of the
certificates evidencing the shares of Common Stock to Executive,
subject to any requirements set forth in the Stock Pledge Agreement;
provided, however, that if any law or regulation requires the Company
to take any action with respect to such shares prior to the delivery
thereof, then the date of the delivery of the shares shall be extended
for the period necessary to complete such action. Certificates for
shares of Common Stock when issued to Executive may have restrictive
legends or statements of other applicable restrictions endorsed
thereon and may not be immediately transferable.
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As consideration for entering into the Prior Agreement upon the terms set
forth therein, including without limitation, the terms relating to
noncompetition set forth in Paragraph 7 thereof, the Company, concurrently
therewith, pursuant to Paragraph 3 of the Prior Agreement granted to Executive
options to purchase 200,000 shares of Common Stock at a purchase price of $17.25
per share (the "1994 Options"). Such options were granted pursuant to the terms
and conditions of the Stock Option Plan, having a ten (10) year term and vesting
over a three (3) year period beginning on August 31, 1994, with one-third of
such options vested on the August 31, 1995, and one-third vested on August 31,
1996, and one-third vesting on August 31, 1997, subject to acceleration in
accordance with the terms of the Stock Option Plan.
The 1994 Options were and are intended to qualify as incentive stock
options within the meaning of Section 422(b) of the Internal Revenue Code of
1986, as amended (the "Code"); provided, however, that to the extent that any of
such options did not or do not satisfy the requirements of Section 422(b) of the
Code, then they shall be treated as non-qualified options.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which
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have vested and are exercisable in accordance with the terms of the applicable
option grant agreement or plan, (ii) to retain any Restricted Shares previously
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement and any Restricted Share Tax Gross-Up Payments which are fully vested
on the date of termination, and (iii) to retain any shares of Common Stock
purchased by Executive with the proceeds of the Stock Acquisition Loan which are
no longer pledged as collateral for the outstanding balance of the Stock
Acquisition Loan and any Acquisition Loan Tax Gross-Up Payments applicable to
Forgiven Amounts and to retain the balance of the shares of Common Stock which
are still pledged as collateral for the outstanding balance of the Stock
Acquisition Loan, provided, that Executive immediately repays to the Company the
outstanding balance of the Stock Acquisition Loan including interest accrued
thereon through the date of termination. Except for any rights which Executive
may have to unpaid salary amounts through and including the date of termination,
vested options, vested Restricted Shares and related Restricted Share Tax
Gross-Up Payments, and shares of Common Stock purchased with the proceeds of the
Stock Acquisition Loan and related Acquisition Loan Tax Gross-Up Payments, all
as set forth above, the Company shall have no further obligations hereunder
following such termination.
(b) Termination of Employment Upon Death or Disability . In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion,
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based upon the number of days in the period beginning with January 1 of the
calendar year in which such termination occurred and ending with the date the
Employment Period ends (assuming such termination did not occur), of the average
annual amount of incentive compensation payments paid to Executive during each
previous year of Executive's employment hereunder (the "Pro-Rata Portion of
Incentive Compensation"). The aforesaid amount shall be payable, at the option
of Executive, his estate or his personal representative, either (i) in full
immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled (i) at the option of
Executive, his estate or his personal representative, within one (1) year of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his
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estate or his personal representative shall receive a cash payment from the
Company on the date of termination in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of termination) of the
Restricted Shares that vest on the date of termination (the "Termination
Restricted Share Tax Gross-Up Payment"), (iii) to retain all shares of Common
Stock purchased by Executive with the proceeds of the Stock Acquisition Loan
without regard to whether or not the Stock Acquisition Loan has been forgiven or
repaid. In the event there is an outstanding balance on the Stock Acquisition
Loan, such outstanding balance including interest accrued thereon shall on the
first day of the calendar month next succeeding Executive's Disability or death
be forgiven (and any shares pledged under the Stock Pledge Agreement shall be
released to Executive, his estate or his personal representative) and Executive,
his estate or his personal representative shall receive a cash payment from the
Company on that date in an amount equal to forty percent (40%) of the
outstanding balance of the Stock Acquisition Loan and interest accrued thereon
that is forgiven on the date of termination (the "Termination Acquisition Loan
Tax Gross-Up Payment"). Except for any rights which Executive may have to unpaid
salary amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, Restricted Shares (and the full vesting
thereof) and the Termination Restricted Share Tax Gross-Up Payment, and shares
of Common Stock purchased with the proceeds of the Stock Acquisition Loan (and
the forgiveness of the outstanding balance of the Stock Acquisition Loan
inclusive of interest accrued thereon) and the Termination Acquisition Loan Tax
Gross-Up Payment, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
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(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive and Executive
shall be entitled to all the payments and rights Executive would have had if
Executive's employment had been terminated due to Disability as set forth in
sub-paragraph 4(b) (including all benefits under this Agreement and the
Restricted Share Agreement), except that Executive must exercise any options
which have vested within ninety (90) days of the date of termination. Except for
any rights which Executive may have to unpaid salary amounts through the end of
the Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, Restricted Shares (and full vesting thereof) and the Termination
Restricted Share Tax Gross-Up Payment, and shares of Common Stock purchased with
the proceeds of the Stock Acquisition Loan (and the forgiveness of the
outstanding balance of the Stock Acquisition Loan inclusive of interest accrued
thereon) and the Termination Acquisition Loan Tax Gross-Up Payment, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled (i) to all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall
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receive a cash payment from the Company on the date of the Change in Control in
an amount equal to forty percent (40%) of the Fair Market Value (determined as
of the date of the Change in Control) of the Restricted Shares that vest on the
date of the Change in Control (the "Change in Control Restricted Share Tax
Gross-Up Payment"), (ii) to all shares of Common Stock purchased by Executive
with the proceeds of the Stock Acquisition Loan without regard to whether or not
the Stock Acquisition Loan has been forgiven or repaid. In the event there is an
outstanding balance on the Stock Acquisition Loan, such outstanding balance
including interest accrued thereon through the date of the Change in Control
shall be immediately forgiven (and any shares pledged under the Stock Pledge
Agreement shall be released to Executive) and Executive shall receive a cash
payment from the Company on the date of the Change in Control in an amount equal
to forty percent (40%) of the outstanding balance of the Stock Acquisition Loan
and interest accrued thereon that is forgiven on the date of the Change in
Control (the "Change in Control Acquisition Loan Tax Gross-Up Payment") and
(iii) an excise tax gross-up payment. If it is determined by an indpendent
accountant mutually acceptable to the Company and Executive that as a result of
compensation paid and other benefits provided to Executive by the Company
pursuant to this Agreement or otherwise, a tax will be imposed on Executive
pursuant to Section 4999 of the Code (or any successor provisions) the Company
shall pay Executive in cash an amount equal to the excise tax for which the
Executive is liable under Section 4999 of the Code. Any cash payments owed to
Executive pursuant to this Paragraph 4(d) shall be paid to Executive in a single
sum on or immediately prior to date of the Change in Control but prior to the
consummation of the transaction with any successor.
In addition, other than the 1994 Options, any other options previously or
hereafter granted to Executive that have not vested as of the date of the Change
in Control shall immediately vest upon the occurrence of and on the date of a
Change in Control irrespective of whether Executive's employment terminates in
connection with such Change in Control.
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(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties hereunder
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) for a period
of thirty (30) days after written demand for substantial
performance is delivered by the Company specifically
identifying the manner in which the Company believes
Executive has not substantially performed his duties, or (B)
willful misconduct by Executive which is materially
injurious to the Company, monetarily or otherwise, or (C)
the willful violation by Executive of the provisions of
Paragraph 5 or 7 hereof. For purposes of this Paragraph
4(e)(i), no act, or failure to act, on Executive's part
shall be considered "willful" unless done, or omitted to be
done, by him (I) not in good faith and (II) without
reasonable belief that his action or omission was in
furtherance of the interests of the Company.
(ii) "Change in Control" shall mean that any of the following
events has occurred: (a) any "person" or "group" of persons,
as such terms are used in Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than any employee benefit plan sponsored by the
Company, becomes the "beneficial owner", as such term is
used in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company issued and
outstanding immediately prior to such acquisition; (b) any
Common Stock of the Company is purchased pursuant to a
tender or exchange offer other than an offer by the Company;
or (c) the dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the Company
or any sale or other disposition of all or substantially all
of its assets, if the shareholders of the Company
immediately before such transaction own, immediately after
consummation of such transaction, equity securities (other
than options and other rights to acquire equity securities)
possessing less than thirty percent (30%) of the voting
power of the surviving or acquiring company.
(iii) "Disability" shall mean the determination by the Company,
upon the advice of an independent qualified physician,
reasonably acceptable to Executive, that Executive has
become physically or mentally incapable of performing his
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duties under this Agreement and such disability has disabled
Executive for a cumulative period of one hundred eighty
(180) days within a twelve (12) month period.
(iv) "Fair Market Value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the
end of the last business day preceding the Determination
Date, the applicable anniversary or the date of termination,
as the case may be, as reported in the New York edition of
the Wall Street Journal.
(v) "Good Reason" shall mean (A) any material and substantial
breach of this Agreement by the Company, (B) a material
reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any other
failure by the Company to comply with Paragraph 3 hereof, or
(C) the Company shall have given notice pursuant to
Paragraph 1 hereof at any time prior to the sixth
anniversary of the date hereof that it does not wish to
extend this Agreement, except in connection with termination
of Executive's employment for Cause or by reason of death or
Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the Common
Stock on each of the trading days within the thirty (30)
days immediately preceding the date of termination of
Executive's employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
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5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall not, directly or indirectly, at any time, either during or
after his employment with the Company, without the Company's prior written
consent, use any of such Confidential Information or disclose any of such
Confidential Information to any individual or entity other than the Company or
its employees, except as required in the performance of his duties for the
Company or as otherwise required by law. Executive shall take all reasonable
steps to safeguard such Confidential Information and to protect such
Confidential Information against disclosure, misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
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6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company, and shall be delivered to the Company, without
retaining any copies, upon the termination of Executive's employment or at any
time as requested by the Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
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foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
(b) If, at the time of enforcement of this Paragraph 7, a court shall
hold that the duration, scope, area or other restrictions stated herein are
unreasonable, the parties agree that reasonable maximum duration, scope, area or
other restrictions may be substituted by such court for the stated duration,
scope, area or other restrictions and upon substitution by such court, this
Agreement shall be automatically modified without further action by the parties
hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific
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performance and/or injunctive or other relief in order to enforce or prevent any
violation of the provisions thereof.
9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated due to Disability,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify such date as the date of termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
19
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(b) This Agreement and all rights of Executive hereunder shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary as determined under any applicable plan, Executive's
devisee, legatee, or other designee or, if there be no such designee, to
Executive's estate.
10. Timing of and No Duplication of Payments/ Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification,
20
<PAGE>
waiver, termination or cancellation is sought. No course of dealing between or
among the parties to this Agreement shall be deemed to affect or to modify,
amend or discharge any provision or term of this Agreement. No delay on the part
of the Company or Executive in the exercise of any of their respective rights or
remedies shall operate as a waiver thereof, and no single or partial exercise by
the Company or Executive of any such right or remedy shall preclude other or
further exercise thereof. A waiver of right or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy on any other
occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to the Company or Executive, as applicable, at the address set forth
above (or to such other address as shall have been previously provided in
accordance with this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
21
<PAGE>
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then, subject to the provisions of
Paragraph 7(b) above, such provision or term shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provisions or term or the remaining
provisions or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
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18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall survive
the termination of this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
23
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ John R. Cali
----------------------------------
Name: John R. Cali
Title: Chief Administrative Officer
/s/ Thomas A. Rizk
----------------------------------
Thomas A. Rizk
25
<PAGE>
SCHEDULE A
Those properties described in the Prospectus of Cali Realty Corporation for the
sale of 10,500,000 Shares dated August 24, 1994, in the section entitled
"Business and Properties -- Excluded Properties".
25
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
THOMAS A. RIZK
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED SHARE
AWARD PURSUANT TO THE AMENDED AND RESTATED EMPLOYMENT
AGREEMENT FOR THOMAS A. RIZK ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant Date") by
and between Cali Realty Corporation (the "Company") and Thomas A. Rizk
("Recipient").
WHEREAS, pursuant to the amended and restated employment agreement between
Recipient and the Company entered into as of January 21, 1997 (the "Employment
Agreement") the Company has awarded shares of the Company's common stock, par
value $.01 per share ("Common Stock") to the Recipient subject to such terms,
conditions, and restrictions (hereinafter, "Restricted Share Award") as set
forth in the Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock.
Pursuant to the Employment Agreement, the Company hereby awards to the
Recipient, effective as of the Grant Date, a Restricted Share Award representing
the right to earn 55,555 shares of Common Stock ("Restricted Shares") subject to
the terms, conditions and restrictions set forth herein. Capitalized terms not
otherwise defined in this Agreement shall be as defined in the Employment
Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not vest in
the Recipient, and shall be subject to forfeiture until the conditions of
Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the "Vesting Date."
<PAGE>
(b) Vesting. An aggregate of 55,555 Restricted Shares may be earned by
the Recipient and vest on a cumulative basis over a five to seven year Vesting
Period, with 11,111 Restricted Shares scheduled to be vested and earned on each
Vesting Date provided the Performance Goals specified in Section 2(c) below are
satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 11,111 Restricted Shares shall
vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of outstanding limited partnership units of Cali Realty,
L.P., a Delaware limited partnership of which the Company is the sole general
partner, for the applicable period.
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<PAGE>
(ii) In the event that neither of the Financial Tests above is
satisfied in the measurement period ending on the applicable Vesting Date
("Non-Achievement Year"), any Restricted Shares that failed to vest on such Date
may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (l) and (ll) above to be satisfied. Notwithstanding any
contrary provisions contained in this Section 2(c), any Restricted Shares that
have not been earned and vested by January 21, 2004 pursuant to the Cumulative
Test shall automatically be canceled and forfeited.
-3-
<PAGE>
(d) Lapse of Restrictions. Upon the Vesting of Restricted Shares, the
Recipient shall own the Shares free and clear of all restrictions imposed by
this Agreement and the Recipient shall be free to hold or dispose of such Shares
in his discretion, subject to applicable federal and state law or regulations.
(e) Prohibition Against Assignment. During the Vesting Period, the
Restricted Shares may not be transferred or encumbered by the Recipient by means
of sale, assignment, mortgage, transfer, exchange, pledge, or otherwise. The
levy of any execution, attachment, or similar process upon the Restricted Shares
shall be null and void.
3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one or more
stock certificates registered in the name of the Recipient or a nominee or
nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to the
designee of the Company (the "Designee") a stock power designating the Company
as the transferee of an unspecified number of Shares, which stock power may be
completed by the Designee as specified herein. The Recipient and the Company
each waive the requirement that the signature of the Recipient on the stock
power be guaranteed. Upon receipt of a copy of this Agreement and the stock
power, each signed by the Recipient, the Designee shall promptly notify the
proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to be held in accordance with the terms of the
Employment Agreement and this Agreement.
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<PAGE>
(c) Effect of Vesting. Upon Vesting, the Company shall cause to be
delivered to the Recipient (i) a certificate for the Shares which have vested
free and clear of restrictive legends and (ii) any stock powers signed hereunder
by the Recipient remaining in its possession. In the event that the Recipient
dies after Vesting and before delivery of the certificate, such certificate
shall be delivered to, and registered in the name of, the Recipient's
beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in Section 2
and this Section 3, during the Vesting Period and after the certificates for the
Restricted Shares have been issued, the Recipient shall be entitled to all
rights of a stockholder of the Company, including the right to vote and the
right to receive dividends, with respect to the Restricted Shares subject to
this Agreement. Subject to applicable withholding requirements, if any,
dividends on the Restricted Shares shall be paid to the Recipient when earned.
(e) Power of Designee. The Designee is hereby authorized by the
Recipient to utilize the stock power delivered by the Recipient to transfer all
forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Without Cause, For Good Reason, Disability or Death;
Change in Control. Unless otherwise provided in the Employment Agreement, if the
Recipient's employment with the Company is terminated prior to the end of the
Vesting Period set forth in this Agreement either by the Company without Cause,
by the Recipient for Good Reason, or due to Disability or death, all Restricted
Shares subject to this Agreement and held by, or on behalf of, the Recipient
shall be deemed earned and vested as of the Recipient's last day of employment
with the Company. In addition, unless otherwise provided in the Employment
Agreement, all Restricted
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<PAGE>
Shares subject to this Agreement and held by the Recipient on the date a Change
in Control occurs shall be deemed earned and vested as of such date.
(b) Termination for Any Other Reason. Unless otherwise provided in the
Employment Agreement, if the Recipient's employment with the Company terminates
prior to the end of the Vesting Period set forth in this Agreement for reasons
other than those specified in Section 4(a) above, any Restricted Shares subject
to this Agreement that have not been earned and vested prior to the Recipient's
termination of employment shall be immediately forfeited on the last day of the
Recipient's employment with the Company.
-6-
<PAGE>
5. Withholding.
In connection with the delivery of any stock certificates, or the making of
any payment in accordance with the provisions of this Agreement, the Company
shall withhold Shares or cash amounts (for fractional Shares) equal to the taxes
then required by applicable federal, state and local law to be so withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall be
entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from the
Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the fair market value (as determined for
tax purposes) of the Restricted Shares at time of distribution, exclusive of
dividends.
(b) Termination of Employment Without Cause, for Good Reason,
Disability or Death; Change in Control. Unless otherwise provided in the
Employment Agreement, if the Recipient's employment with the Company is
terminated prior to the end of the Vesting Period set forth in this Agreement
either by the Company without Cause, by the Recipient for Good Reason, or due to
Disability or death, or in the event a Change in Control occurs, a final Tax
Gross-Up Payment shall be made to the Recipient (or his beneficiary, as the case
may be) in a dollar amount equal to forty (40%) percent of the fair market value
(as determined for tax purposes) of the Restricted Shares distributed to the
Recipient (or his beneficiary). Payment of the final Tax Gross-Up Payment shall
be made on the date the Restricted Shares are distributed or as soon as
administratively feasible thereafter.
(c) Effect of Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
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<PAGE>
Agreement for any reason other than those specified in Section 6(b) above, no
further Tax Gross-Up Payments shall be made to such Recipient.
7. Adjustments for Capital Changes.
In the event of any change in the outstanding share of Common Stock of the
Company by reason of any Stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, a duly
authorized representative of the Company shall adjust the number of Restricted
Shares granted pursuant to the Employment Agreement and this Agreement to
prevent dilution or enlargement of the rights granted to the Recipient.
8. No Right to Continued Employment.
Nothing in this Agreement shall confer on the Recipient any right to
continue as an employee of the Company or in any way affect the Company's or any
subsidiary's right to terminate the Recipient's employment at any time.
9. Notice.
Any notice to the Company hereunder shall be in writing addressed to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer.
Any notice to the Recipient hereunder shall be in writing addressed to:
Mr. Thomas A. Rizk
87 Braemer Drive
Wayne, New Jersey 07470
or such other address as the Recipient shall notify the Company in writing.
10. Entire Agreement; Effect of Employment Agreement.
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<PAGE>
(a) Entire Agreement. This Agreement contains the entire understanding
of the parties and shall not be modified or amended except in writing and duly
signed by each of the parties hereto. No waiver by either party of any default
under this Agreement shall be deemed a waiver of any later default thereof.
(b) Effect of Employment Agreement. In the event the Employment
Agreement contains additional rights, duties and/or obligations with respect to
the Recipient, such terms and conditions shall govern the Recipient's Restricted
Share Award as if such terms and conditions had been set forth herein; and in
the event of any conflict or inconsistency between the terms of the Employment
Agreement, this Agreement, the terms and conditions of the Employment Agreement
shall control.
11. Construction.
The various provisions of this Agreement are severable in their entirety.
Any determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
12. Governing Law.
This Agreement shall be governed by the laws of the State of New Jersey
applicable to contracts made, and to be enforced, within the State of New
Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective on the date first above written.
Cali Realty Corporation
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<PAGE>
By: /s/ John R. Cali
----------------------------------
Name: John R. Cali
Title: Chief Administrative Officer
/s/ Thomas A. Rizk
----------------------------------
Thomas A. Rizk
-10-
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of January 21, 1997, made by Thomas A.
Rizk, an individual residing at 87 Braemer Drive, Wayne, New Jersey 07470 (the
"Pledgor"), to Cali Realty Corporation, a Maryland corporation, (the "Pledgee"
or the "Company").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of 96,000 shares of
the issued and outstanding shares of common stock, $.01 par value (the "Common
Stock"), of the Company (such Common Stock being the "Pledged Shares"), acquired
in connection with the Pledgor's amended and restated employment agreement with
the Pledgee entered into as of January 21, 1997 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement, the Pledgor has agreed to
secure, to the extent hereinafter set forth, the payment in full and the
performance of the obligations of the Pledgor to the Pledgee under a
non-recourse promissory note, dated as of the date hereof, in the amount of
$3,000,000 (such promissory note as it may hereafter be amended or otherwise
modified from time to time, the "Note"); and the capitalized terms used herein,
and not otherwise defined herein, are used with the meanings ascribed to them in
the Note); and
WHEREAS, the Pledgor hereby pledges and grants a lien and security interest
to Pledgee in the Pledged Shares to secure the Pledgor's obligations under the
Note.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Pledgee to make the loan under the Note, the Pledgor hereby agrees as follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Pledgee, and grants to
the Pledgee a security interest in the Pledged Shares and certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares,), and all
proceeds thereof, additions thereto and changes therein (the "Pledged
Collateral").
SECTION 2. Security for Obligations; Non-Recourse Obligations. (a) This
Agreement secures the payment of all liabilities, obligations and indebtedness
of any and every kind and nature heretofore, now or hereafter owing, arising,
due or payable from the Pledgor to the Pledgee pursuant to the Note, however
evidenced, created, incurred, acquired or owing, whether primary or secondary,
direct or indirect, joint or several, contingent or fixed, or otherwise,
including without limitation, obligations of performance, and whether arising
under any other agreements, documents or instruments entered into in connection
with the Note, now or hereafter given by the Pledgor to the Pledgee and whether
arising by book entry, agreement or operation of law and whether or not
evidenced by promissory notes or other evidences of indebtedness (all such
obligations of the Pledgor being the "Obligations").
(b) It is expressly understood and agreed that it is the intention of
the parties that the Obligations of the Pledgor under the Note are non-recourse
obligations of the Pledgor and
<PAGE>
that the Pledgee's right to recover against the Pledgor hereunder in respect of
such Obligations shall be limited solely to the Pledged Collateral.
SECTION 3. Delivery and Release of Pledged Collateral. (a) All certificates
or instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of the Pledgee pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. The Pledgee shall hold the Pledged
Collateral in the form in which it is delivered to the Pledgee unless and until
the occurrence and continuation of an Event of Default under the Note (unless
such Event of Default is waived by the Pledgee) or as otherwise provided in
paragraph 3(b) below. Upon the occurrence and continuance of an Event of Default
under the Note, the Pledgee shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in the name of
the Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 6(a) below. In addition, the
Pledgee shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations.
(b) On the first anniversary date of this Agreement, and on each
anniversary date and each March 31, June 30 and September 30 thereafter for the
term of this Agreement (each such date a "Determination Date"), the Pledgee
shall reasonably determine the aggregate fair market value of the Pledged
Collateral (the "Market Value"). If on such Determination Date the Market Value
exceeds one hundred ten percent (110%) of the aggregate principal amount of the
Note (together with interest accrued thereon) on such Determination Date (the
"Base Value"), Pledgee shall, unless otherwise requested by Pledgor,
automatically release to the Pledgor such portion of the Pledged Collateral the
aggregate fair market value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances hereunder. For purposes
of this paragraph 3(b), "fair market value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the end of the last
business day preceding the Determination Date as reported in the New York
edition of The Wall Street Journal.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, adverse claim, security interest, option
or other charge or encumbrance, except for the security interest created by this
Agreement.
(b) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Obligations.
(c) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by the Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement, stockholder agreement, or other agreement
or instrument to which the Pledgor is a party or by which he is bound or (ii)
any provision of law, any order of any court or administrative agency or any
rule or regulation applicable to the Pledgor, subject to applicable state and
federal securities laws.
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<PAGE>
(d) This Agreement constitutes the legal, valid and binding obligation
of the Pledgor, enforceable in accordance with its terms.
(e) There are no actions, suits or proceedings (whether or not
purportedly on behalf of the Pledgor) pending or, to the best knowledge of the
Pledgor, threatened affecting the Pledgor that involve the Pledged Collateral.
(f) All consents or approvals, if any, required as a condition
precedent to or in connection with the due and valid execution, delivery and
performance by the Pledgor of this Agreement have been obtained, subject to
applicable state and federal securities laws.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and from
time to time, at the expense of the Pledgor, the Pledgor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgee may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Pledgee to exercise and enforce its rights and
remedies hereunder, subject to applicable state and federal securities laws,
with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends, Etc. (a) So long as no Event of
Default under the Note shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Note.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral; provided,
however, that any and all:
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral (whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the Company, or
any merger, consolidation, acquisition or other exchange of assets or
securities to which the Company may be a party, or any conversion,
call or redemption, or otherwise);
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral,
shall be, at the option and request of the Pledgee, forthwith delivered to
the Pledgee to hold as Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be segregated
from the other property or funds of the Pledgor, and be forthwith delivered
to the Pledgee as Pledged Collateral in the same form as so received (with
any necessary endorsement).
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<PAGE>
(iii) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which he is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest
payments which he is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default
under the Note, and at the election of Pledgee:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which he would otherwise be entitled to exercise pursuant
to Section 6(a)(i) and to receive the dividends and interest payments which
he would otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall cease for the period subsequent to the Event of Default, and
all such rights shall thereupon become vested in the Pledgee who shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive and hold as Pledged Collateral such dividends and
interest payments.
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 6(b)
shall be received in trust for the benefit of the Pledgee, shall be
segregated from other funds of the Pledgor and shall be forthwith paid over
to the Pledgee as Pledged Collateral in the same form as so received (with
any necessary endorsement).
(c) In the event that during the term of this Agreement subscription
warrants or other rights or options shall be issued in connection with the
Pledged Collateral, all such stock warrants, rights and options shall forthwith
be assigned by the Pledgor to the Pledgee and said stock warrants, rights and
options shall be, and, to the extent exercised by Pledgor, all new stock issued
pursuant thereto shall be pledged by Pledgor to Pledgee to be held as, and shall
be deemed to be part of, the "Pledged Collateral" under the terms of this
Agreement in the same manner as the shares of stock originally pledged
hereunder.
SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor agrees
that he will not (i) sell or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral, or (ii) create or permit to exist any
lien, security interest, or other charge or encumbrance upon or with respect to
any of the Pledged Collateral, except for the security interest under this
Agreement.
SECTION 8. Litigation Respecting Pledged Shares. In the event any action,
suit or other proceeding at law, in equity, in arbitration or before any other
authority involving or affecting the Pledged Collateral becomes known to or is
contemplated by the Pledgor, the Pledgor shall give the Pledgee immediate notice
thereof and if the Pledgor is contemplating such action, suit or other
proceeding, the Pledgor shall receive the written consent of the Pledgee prior
to commencing any such action, suit or other proceeding.
SECTION 9. Pledgee Appointed Attorney-in-Fact. (a) If an Event of Default
shall occur and be continuing under the Note (unless such Event of Default is
waived by the Pledgee), Pledgor hereby appoints the Pledgee (and any officer or
agent of the Pledgee with full power of substitution and revocation) the
Pledgor's true and lawful attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion to take any action and to execute any
instrument which the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including,
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<PAGE>
without limitation, (i) to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and (ii) to transfer the Pledged Collateral on
the books of the Company, in whole or in part, to the name of the Pledgee or
such other person or persons as the Pledgee may designate; take possession of
and endorse any one or more checks, drafts, bills of exchange, money orders or
any other documents received on account of the Pledged Collateral; collect, sue
for and give acquittances for moneys due on account of the foregoing; withdraw
any claims, suits, or proceedings pertaining to or arising out of the foregoing;
execute and record or file on behalf of the Pledgor any evidence of a security
interest contemplated by this Agreement or any refiling, continuation or
extension thereof; take any other action contemplated by this Agreement; and
sign, execute, acknowledge, swear to, verify, deliver, file, record and publish
any one or more of the foregoing.
(b) The powers of attorney which shall be granted pursuant to Section
9(a) and all authority thereby conferred shall be granted and conferred solely
to protect the Pledgee's interests in the Pledged Collateral and shall not
impose any duty upon the attorney-in-fact to exercise such powers. Such powers
of attorney shall be irrevocable prior to the performance in full of the
Obligations and shall not be terminated prior thereto or affected by any act of
the Pledgor or other person or by operation of law, including, but not limited
to, the dissolution, death, disability or incompetency of any person, the
termination of any trust, or the occurrence of any other event, and if the
Pledgor or any other person should be dissolved or die or become disabled or
incompetent or any other event should occur before the performance in full of
the Obligations and termination of this Agreement, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of attorney as if such
dissolution, death, disability or incompetency or other event had not occurred
and regardless of notice thereof.
(c) Each person who shall be a transferee of the beneficial ownership
of the Pledged Collateral, by the acceptance of such a transfer, shall be deemed
to have irrevocably appointed the Pledgee, with full power of substitution and
revocation, such person's true and lawful attorney-in-fact in such person's name
and otherwise to do any and all acts permitted to, and to exercise any and all
powers herein conferred upon, such attorney-in- fact.
SECTION 10. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. Remedies Upon Event of Default.
(a) Subject to Section 2(b) hereof, if any Event of Default under the
Note shall have occurred and be continuing (unless such Event of Default is
waived by the Pledgee), for the period subsequent to the Event of Default:
(i) The Pledgee may receive and retain all payments of any kind
with respect to the Pledged Collateral and may notify the obligors or
other parties, if any, interested in any items of Pledged Collateral
of the interest of the Pledgee therein and of any action proposed to
be taken with respect thereto, and inform any of those parties that
all payments otherwise payable to the Pledgor with
5
<PAGE>
respect thereto shall be made to the Pledgee until all amounts due
under the Note have been paid in full;
(ii) The Pledgee may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code (the
"Code") in effect in the State of New Jersey at that time, and the
Pledgee may also, without notice except as specified below, sell the
Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of
the Pledgee's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Pledgee may deem
commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned;
(iii) Any cash held by the Pledgee as Pledged Collateral and all
cash proceeds received by the Pledgee in respect of any sale of,
collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Pledgee, be held by
the Pledgee as collateral for, and/or then or at any time thereafter
applied in whole or in part by the Pledgee against, all or any part of
the Obligations in such order as the Pledgee shall elect. Any surplus
of such cash or cash proceeds held by the Pledgee and remaining after
payment in full of all the Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such
surplus; and
(iv) The Pledgee may otherwise use or deal from time to time with
the Pledged Collateral, in whole or in part, in all respects as if the
Pledgee were the outright owner thereof.
(b) Except as set forth in Section 11(a)(iii), the Pledgee shall have
the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, telegraphed or hand delivered to the Pledgor at least
three days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Pledgee shall collect the cash proceeds received from any sale
or other disposition or from any other source contemplated by subsection (a)
above and shall apply the full proceeds in accordance with the provisions of
this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this
Section 11 shall confer on the Pledgee any rights or privileges that are not
permissible under applicable law. The Pledgee may effect the provisions of this
ection 11 only in compliance with all applicable federal and state securities
laws.
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<PAGE>
(e) In connection with the provisions of this Agreement, the Pledgor
from time to time shall promptly execute and deliver, or cause to be executed
and delivered, to the Pledgee such documents and instruments, shall join in such
notices and shall take, or cause to be taken, such other lawful actions as the
Pledgee shall deem reasonably necessary or desirable to enable it to exercise
any of the rights with respect to the Pledged Collateral granted to it pursuant
to this Agreement.
SECTION 12. Waivers and Amendments, Etc. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the
Pledgee shall be deemed to constitute a waiver of any power, right or remedy
hereunder, nor shall any single or partial exercise thereof preclude any further
exercise thereof or the exercise of any other power, right or remedy. Any waiver
or consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Pledgee at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its right at
a later time to enforce any such provision. No notice to or demand on a party in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Pledgee
hereunder respecting the Pledged Collateral and any other property or money held
hereunder may at the option of the Pledgee be exercised as to all or any part of
the same and the term the "Pledged Collateral" wherever used herein, unless the
context clearly requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Collateral and any other property or money held hereunder or
any part thereof". This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
SECTION 13. Notices. All notices hereunder shall be given and deemed
received as set forth in the Note.
SECTION 14. Continuing Security Interest and Reinstatement. (a) This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon the Pledgor, his heirs, successors and assigns,
and (ii) inure to the benefit of the Pledgee and its successors, transferees and
assigns. Upon the payment in full or performance of the Obligations, the Pledgor
shall be entitled to the return, upon his request and at his expense, of such of
the Pledged Collateral as shall not have been released, sold or otherwise
applied pursuant to the terms of the Agreement.
(b) If at any time after payment in full by the Pledgor of all Obligations
and termination of the pledge granted in this Agreement, any payments on
Obligations theretofore made by the Pledgor must be disgorged by the Pledgee for
any reason whatsoever, this Agreement and the pledge granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and the Pledgor shall sign and deliver to Pledgee all documents and things
necessary to reperfect the terminated pledge.
SECTION 15. Severability. In the event that any provision of this Agreement
shall be determined to be superseded, invalid or otherwise unenforceable
pursuant to applicable law, such determination shall not affect the validity of
the remaining provisions of this Agreement, and the remaining provisions of this
Agreement shall be enforced as if the invalid provision were
7
<PAGE>
deleted.
SECTION 16. Survival of Representations, etc. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Note have been paid in full. This
Agreement shall remain and continue in full force and effect without regard to
any modification, execution, renewal, amendment or waiver of any provision of
the Note.
SECTION 17. Termination and Return of Pledged Stock. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
paid and satisfied or until the release, discharge or termination of the Note,
whichever last occurs. Upon the termination of this Agreement, the Pledgee shall
cause to be transferred to Pledgor all of the Pledged Collateral and any money,
property and rights received by Pledgor pursuant thereto, to the extent Pledgee
has not released, taken, sold or otherwise realized upon the same pursuant to
its rights and obligations hereunder.
SECTION 18. Transfer and Assignment. The Pledgee may transfer the Pledged
Collateral and any other property or money held hereunder to any transferee of
the Obligations or any part thereof. The transferee shall thereupon succeed to
all of the Pledgee's rights hereunder with respect to the Pledged Collateral so
transferred. Thereafter, the Pledgee shall have no obligation to Pledgor with
respect to the Pledged Collateral so transferred. The Pledgee shall, however,
retain all of its rights and powers with respect to any part of the Pledged
Collateral not transferred. Every agent or nominee of the Pledgee shall have the
benefit of this Agreement as if named herein and may exercise all of the rights
and powers given to the Pledgee hereunder.
SECTION 19. Entire Agreement. This Agreement, the Secured Non-Recourse
Promissory Note and the Employment Agreement contain the entire agreement of the
parties and supersedes all other agreements, understandings and representations,
oral or otherwise, between the parties with respect to the matters contained
herein. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs,
administrators, fiduciaries, next of kin and executors. Section headings used
herein are for convenience only and shall not affect the meaning or construction
of any of the provisions hereof. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. In the event of any conflict among any of the
documents referred to above, the terms of the Employment Agreement shall
prevail.
SECTION 20. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New Jersey
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Note, terms defined in Article 9 of the Uniform
Commercial Code in the State of New Jersey are used herein as therein defined.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
/s/ Thomas A. Rizk
----------------------------------
Thomas A. Rizk
CALI REALTY CORPORATION
By: /s/ John R. Cali
----------------------------------
Name: John R. Cali
Title: Chief Administrative Officer
9
SECURED NON-RECOURSE PROMISSORY NOTE
January 21, 1997 $3,000,000
FOR VALUE RECEIVED, Thomas A. Rizk, an individual residing at 87 Braemer
Drive, Wayne, New Jersey 07470 ("Payor"), hereby promises to pay to Cali Realty
Corporation, a Maryland corporation ("Payee" or the "Company"), or its assigns,
the principal amount of three million dollars exactly ($3,000,000), together
with all interest accrued thereon calculated from the date hereof in accordance
with the provisions of Section 1 hereof. Certain capitalized terms used in this
Secured Non-Recourse Promissory Note (the "Note") are defined in Section 6
below.
This Note is being made by Payor in order to finance the Payor's purchase
of 96,000 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") from the Company pursuant to the Payor's amended and restated
employment agreement with Payee entered into as of January 21, 1997 (the
"Employment Agreement").
This Note is secured by the Pledged Collateral under the terms of the Stock
Pledge Agreement and is entitled to the benefits thereof.
1. Accrual of Interest. Interest will accrue on the unpaid principal amount
of this Note from and after the date hereof on a daily basis at the rate per
annum equal to 6.21%, as set forth in the Employment Agreement, and such
interest shall be compounded annually, calculated on the basis of a 365 day
year. Unless forgiven as contemplated herein, interest shall be payable annually
in arrears on each anniversary date hereof.
2. Payment of Note.
(a) Maturity Date. Except as provided in Sections 2(b) and (c) and
Sections 3 and 4 below, the entire unpaid principal balance of this Note
(together with interest accrued thereon) shall become due and payable on the
fifth anniversary of the date of this Note.
(b) Forgiveness of Loan. The principal amount of this Note shall be
automatically forgiven ratably over a five (5) year term in annual equal twenty
percent (20%) increments commencing on the first anniversary of the date of this
Note and each anniversary thereafter. All then accrued but unpaid interest on
this Note shall also be automatically forgiven annually on each applicable
anniversary date; provided, however, subject to the provisions of Sections 3 and
4 hereof, the forgiveness of each principal
<PAGE>
portion of this Note plus interest shall be conditioned upon Payor being in the
employ of the Company on the applicable anniversary date.
(c) Change in Control. Pursuant to the Employment Agreement, in the
event of a Change in Control (as defined in the Employment Agreement) or in the
absence thereof in the Cali Realty Corporation Employee Stock Option Plan) the
entire unpaid principal amount of this Note (including any accrued but unpaid
interest) shall automatically be accelerated and forgiven, and no portion of
this Note shall become due or payable at any time thereafter.
(d) Non-Recourse Obligations. Notwithstanding anything to the contrary
stated herein, Payee agrees that for payment of this Note it will look solely to
the Pledged Collateral and such other collateral, if any, as may now or
hereafter be given to secure the payment of this Note, and no other assets of
Payor shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Payee, or for any payment required to be made
under this Note.
3. Effect of Termination of Employment Due to Disability or Death. In the
event Payor terminates employment with the Company prior to the expiration of
the term of this Note due to his disability (as determined pursuant to the terms
of the Employment Agreement or in the absence thereof by the Committee in its
discretion) or death, the entire unpaid balance of this Note plus interest shall
automatically be accelerated and forgiven on the first day of the calendar month
next succeeding Payor's disability or death, and no portion of this Note shall
become due or payable at any time thereafter.
4. Effect of Termination of Employment For Any Other Reason. (a) Subject to
paragraph (b) below, in the event Payor terminates employment with the Company
or the Company terminates Payor's employment with the Company, in each case
prior to the expiration of the term of this Note for any reason other than
disability or death, there shall be no further forgiveness of the principal or
the interest of this Note and the entire unpaid balance of this Note plus
interest shall automatically be accelerated and become due and payable to the
Company on the effective date of Payor's termination of employment with the
Company.
(b) In the event Company terminates Payor's employment with the Company
without Cause or Payor terminates employment with the Company for Good Reason
(as determined pursuant to the terms of the Employment Agreement), in each case
prior to the expiration of the term of this Note, the entire unpaid balance of
this Note plus interest shall automatically be forgiven on the effective date of
such termination, and no portion of this Note nor any interest thereon shall
become due or payable at any time thereafter.
2
<PAGE>
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) Payor fails to pay when due any amount (whether interest,
principal or other amount) then due or payable on this Note for a period of
ten (10) days after the holder of this Note notifies Payor of such failure;
(ii) Payor fails to perform or observe any other provision contained
in this Note or the Stock Pledge Agreement and such failure continues
unremedied for a period of thirty (30) days after the holder of this Note
notifies Payor of such breach; or
(iii) If an event set forth in Section 4 hereof has occurred, Payor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due; or an order,
judgment or decree is entered adjudicating Payor bankrupt or insolvent; or
any order for relief with respect to Payor is entered under the Bankruptcy
Code; or Payor petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator, or commences any proceeding
relating to himself under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against Payor and either (a) Payor in writing
indicates his approval thereof, consents thereto or acquiesces therein or
(b) such petition, application or proceeding is not dismissed within ninety
(90) days.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
paragraph 3(a)(iii) hereof has occurred, the holder of this Note may demand
(by written notice delivered to Payor) immediate payment of all or any
portion of the outstanding principal amount of this Note together with any
and all accrued interest thereon, which amount shall become due and payable
upon such demand. If an Event of Default of the type described in paragraph
3(a)(iii) has occurred, then all of the outstanding principal amount of
this Note together with any and all accrued interest thereon shall
automatically be immediately due and payable without any action on the part
of the holder of this Note.
(ii) Each holder of this Note shall also have any other rights which
such holder may have been afforded under this Note or the Stock Pledge
Agreement at any time and any other rights which such holder may have
pursuant to applicable law.
3
<PAGE>
6. Certain Defined Terms. As used in this Note, the following terms shall
have the following meanings:
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Committee" means the Compensation Committee of the Board of Directors
of the Company.
"Pledged Collateral" means the Common Stock pledged by Payor under the
Stock Pledge Agreement as security for Payor's performance of his obligations
under this Note.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated the
date hereof between Payor and the Company.
7. Amendment and Waiver. Except as otherwise expressly provided herein, the
provisions of this Note may not be amended and Payor may not take any action
prohibited herein, or omit to perform any act required to be performed by him
herein, unless Payor has obtained the prior written consent of the holder of
this Note.
8. Cancellation. After all obligations for the payment of money arising
under this Note have been paid in full, this Note will be surrendered to Payor
for cancellation.
9. Tax Withholding. The Company shall have the right to deduct and withhold
from any amounts which become taxable to Payor hereunder all employment and
other federal, state and local taxes and charges which are, or which may
hereafter, be required by law to be so deducted or withheld.
10. Notices; Place of Payment. Any notice hereunder shall be in writing and
shall be delivered by recognized courier, facsimile or certified mail, return
receipt requested, and shall be conclusively deemed to have been received by a
party hereto and to be effective on the day on which delivered or facsimiled to
such party at its address set forth below (or at such other address as such
party shall specify in writing):
If to Payor: Thomas A. Rizk
87 Braemer Drive
Wayne, New Jersey 07470
If to Payee: Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
4
<PAGE>
All payments to be made under this Note are to be delivered to the holder
at such address or to the attention of such person as the holder may designate
by prior written notice to Payor. At the request of the holder of this Note, all
payments shall be made by wire transfer of immediately available funds to an
account which the holder may designate from time to time.
11. Waiver of Presentment, Demand, Dishonor.
(a) Payor hereby waives presentment for payment, protest, demand, notice of
protest, notice of nonpayment and diligence with respect to this Note, and
waives and renounces all rights to the benefits of any statute of limitations or
any moratorium, appraisement, exemption, or homestead now provided or that
hereafter may be provided by any federal or applicable state statute, including
but not limited to exemptions provided or allowed under the Bankruptcy Code,
both as to himself and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals and modifications hereof.
(b) No failure on the part of any holder of this Note to exercise any right
or remedy hereunder with respect to Payor, whether before or after the happening
of an Event of Default, shall constitute waiver of any such Event of Default or
of any other Event of Default by such holder or on behalf of any other holder.
No failure to accelerate the debt of Payor evidenced hereby by reason of an
Event of Default or indulgence granted from time to time shall be construed to
be a waiver of the right to insist upon prompt payment thereafter, or shall be
deemed to be a novation of this Note or a reinstatement of such debt evidenced
hereby or a waiver of such right of acceleration or any other right, or be
construed so as to preclude the exercise of any right any holder of this Note
may have, whether by the laws of the state governing this Note, by agreement or
otherwise, and Payor hereby expressly waives the benefit of any statute or rule
of law or equity that would produce a result contrary to or in conflict with the
foregoing.
12. Governing Law. The validity, construction and interpretation of this
Note shall be governed by and construed in accordance with the internal laws of
the State of New Jersey.
13. Transfer; Assignment. This Note may not be negotiated, assigned or
transferred by Payor at any time, except with Payee's prior written consent.
This Note may not be negotiated, assigned or transferred by Payee except in
connection with the sale of all or substantially all of Payee's assets if the
transferee expressly assumes Payee's obligations under the Employment Agreement.
14. Entire Agreement. This Secured Non-Recourse Promissory Note, the Stock
Pledge Agreement and the Employment Agreement contain the entire agreement of
the parties and supersedes all other agreements, understandings and
representations, oral or otherwise, between the parties with respect to
5
<PAGE>
the matters contained herein. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors,
assigns, heirs, administrators, fiduciaries, next of kin and executors. Section
headings used herein are for convenience only and shall not affect the meaning
or construction of any of the provisions hereof. This Agreement may be executed
in any number of counterparts with the same effect as if the signatures thereto
and hereto were upon the same instrument. In the event of any conflict among any
of the documents referred to above, the terms of the Employment Agreement shall
prevail.
IN WITNESS WHEREOF, Payor has executed and delivered this Secured
Non-Recourse Promissory Note on the date first written above.
/s/ Thomas A. Rizk
----------------------------------
Thomas A. Rizk
6
================================================================================
EMPLOYMENT AGREEMENT
FOR
ROGER W. THOMAS
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment................................................................1
2. Services..................................................................2
3. Compensation and Benefits.................................................3
4. Termination of Employment and Change in Control...........................7
5. Confidential Information.................................................15
6. Return of Documents......................................................16
7. Noncompete...............................................................17
8. Remedies.................................................................18
9. Successors and Assigns...................................................19
10. Timing of and No Duplication of Payments/ Tax Withholding................20
11. Modification or Waiver...................................................20
12. Notices..................................................................21
13. Governing Law............................................................21
14. Severability.............................................................21
15. Counterparts.............................................................22
16. Headings.................................................................22
17. Entire Agreement.........................................................22
18. Survival of Agreements...................................................22
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
21, 1997, by and between Roger W. Thomas, an individual residing at #PHA, 30
West 90th Street, New York, New York 10024 ("Executive"), and Cali Realty
Corporation, a Maryland corporation with offices at 11 Commerce Drive, Cranford,
New Jersey 07016 (the "Company").
RECITALS
WHEREAS, the Executive has served as Vice President, General Counsel and
Assistant Secretary of the Company and, through such service, has acquired
special and unique knowledge, abilities and expertise; and
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the
<PAGE>
applicable expiration date either the Company or Executive shall have given
written notice to the other party that such party does not wish to extend this
Agreement. It being agreed and understood that the extension of this Agreement
shall not create an obligation of the Company to issue new awards to Executive
hereunder. The term of this Agreement, as it may be extended from time to time
in accordance with this Paragraph 1, is referred to herein as the "Employment
Period."
2. Services.
During the Employment Period, Executive shall hold the positions of Vice
President, General Counsel and Assistant Secretary of the Company and shall
devote his best efforts and substantially all of his business time, skill and
attention to the business of the Company, and shall perform such duties as are
customarily performed by similar executive officers and as may be more
specifically enumerated from time to time by the Board of Directors of the
Company (the "Board") or the Executive Committee of the Board, if any; provided,
however, that the foregoing is not intended to (a) preclude Executive from (i)
owning and managing personal investments, including real estate investments,
subject to the restrictions set forth in Paragraph 7 hereof or (ii) engaging in
charitable activities and community affairs, or (b) restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to those properties described in Schedule A, attached
hereto, (the "Excluded Properties"), provided that the performance of the
activities referred to in clauses (a) and (b) does not prevent Executive from
devoting substantially all of his business time to the Company.
2
<PAGE>
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $185,000, ( the "Annual Base Salary"),
payable in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan") and other benefit plans
(including without limitation the Cali Realty Corporation 401(k)
Savings and Retirement Plan and any other stock option plans
which may be adopted or maintained by the Company) made generally
available to executives of the Company with such participation to
be consistent with reasonable Company guidelines;
(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
3
<PAGE>
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
As further consideration for Executive agreeing to serve as an officer
and entering into this Agreement upon the terms set forth herein, including,
without
4
<PAGE>
limitation, the terms relating to noncompetition set forth in Paragraph 7 below,
the Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
(a) grant to Executive 9,260 restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions of
this Agreement and the written agreement issued pursuant to this
Agreement, evidencing such award executed between the Company and
Executive (the "Restricted Share Agreement"). In the event of a
conflict between the Restricted Share Agreement and this
Agreement, the terms of this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with twenty
percent (20%) of the Restricted Shares vesting on each of the
first anniversary of the date hereof (the "First Anniversary"),
the second anniversary of the date hereof (the "Second
Anniversary"),the third anniversary of the date hereof (the
"Third Anniversary"), the fourth anniversary of the date hereof
(the "Fourth Anniversary") and the fifth anniversary of the date
hereof (the "Fifth Anniversary"), provided, that certain
Performance Goals as defined and set forth in the Restricted
Share Agreement are met. Vesting shall be cumulative in
accordance with the provisions of the Restricted Share Agreement
and the Performance Goals may be achieved as specified therein up
until the seventh anniversary of the date hereof. Except as
otherwise provided in Paragraph 4 hereof, Executive must be
employed by the Company on the applicable anniversary date to
vest in the Restricted Shares scheduled to vest in a particular
year. The measurement date to determine such vesting shall be the
last day of the Company's fiscal year preceding the year in which
the applicable anniversary date occurs.
In addition, upon vesting of the Restricted Shares on each
applicable anniversary date, the Company shall make a cash
payment to Executive on that anniversary date in an amount equal
to forty percent (40%) of the Fair Market Value (determined as of
such anniversary date) of the Restricted Shares that vest on such
anniversary date (the "Restricted Share Tax Gross-Up Payment").
(b) loan on a non-recourse basis to Executive $500,000 (the "Stock
Acquisition Loan"), with the loan proceeds to be used by
Executive simultaneously to purchase newly issued Common Stock
from the Company. Interest shall accrue on the Stock Acquisition
Loan at
5
<PAGE>
the rate of 6.21% per year and shall be payable, on the entire
outstanding balance, annually in arrears. The Stock Acquisition
Loan is being granted and secured pursuant to the terms and
conditions of this Agreement, and a Secured Non-Recourse
Promissory Note and Stock Pledge Agreement evidencing and
securing such Loan as executed between the Company and Executive.
In the event of a conflict between the aforementioned documents
and this Agreement, the terms of this Agreement shall control.
The Stock Acquisition Loan shall be forgiven over a period of
five (5) years from the date hereof, with twenty percent (20%) of
the principal and interest on the then outstanding balance of the
principal to be forgiven on each applicable anniversary date (the
"Forgiven Amount"). In addition, on each applicable anniversary
date as the Stock Acquisition Loan and interest accrued thereon
is forgiven, in order to enable Executive to meet his tax
liability with respect to the forgiveness of the Stock
Acquisition Loan, the Company shall make a cash payment to
Executive on that anniversary date in an amount equal to forty
percent (40%) of the respective Forgiven Amount (the "Acquisition
Loan Tax Gross-Up Payment"). Since the Stock Acquisition Loan
will be forgiven over a five (5) year period, a total of five (5)
Acquisition Loan Tax Gross-Up Payments will be made to Executive
over the period of forgiveness. No additional payments will be
made to Executive with respect to any Acquisition Loan Tax
Gross-Up Payments made hereunder. Except as otherwise provided in
Paragraph 4 hereof, the aforementioned forgiveness of the Stock
Acquisition Loan inclusive of interest thereon and respective
Acquisition Loan Tax Gross-Up Payment shall only occur if
Executive is employed by the Company on the applicable
anniversary date.
The Stock Acquisition Loan shall be initially secured by the
shares of Common Stock purchased by Executive from the Company
with the proceeds of the Stock Acquisition Loan. Beginning on the
First Anniversary, the outstanding balance of the Stock
Acquisition Loan shall be secured only by shares of Common Stock
having a Fair Market Value of one hundred and ten percent (110%)
of the outstanding principal amount of the Stock Acquisition Loan
(together with interest accrued thereon). On the First
Anniversary, and on each anniversary date, March 31, June 30 and
September 30 through the Fifth Anniversary (each such date a
"Determination Date"), the Company shall reasonably determine the
aggregate Fair Market Value of the collateral (the "Market
Value") being held. If on such Determination Date the Market
Value exceeds one
6
<PAGE>
hundred ten percent (110%) of the outstanding balance of the
Stock Acquisition Loan (together with interest accrued thereon)
on such Determination Date (the "Base Value"), the Company shall,
unless otherwise requested by Executive, automatically release to
Executive such portion of the collateral the aggregate Fair
Market Value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances under the
Stock Pledge Agreement.
Executive shall be required to execute the aforementioned Stock
Pledge Agreement and Secured Non-Recourse Promissory Note. The
Company shall then issue shares of Common Stock to Executive in
exchange for the Stock Acquisition Loan. The Company shall, upon
receipt from Executive of the Stock Pledge Agreement and Secured
Non-Recourse Promissory Note for the purchase of the shares of
Common Stock purchased with the proceeds of the Stock Acquisition
Loan, make prompt delivery of the certificates evidencing the
shares of Common Stock to Executive, subject to any requirements
set forth in the Stock Pledge Agreement; provided, however, that
if any law or regulation requires the Company to take any action
with respect to such shares prior to the delivery thereof, then
the date of the delivery of the shares shall be extended for the
period necessary to complete such action. Certificates for shares
of Common Stock when issued to Executive may have restrictive
legends or statements of other applicable restrictions endorsed
thereon and may not be immediately transferable.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which have vested and are exercisable in accordance with
the terms of the applicable option
7
<PAGE>
grant agreement or plan, (ii) to retain any Restricted Shares previously awarded
to Executive pursuant to this Agreement and the Restricted Share Agreement and
any Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as collateral for the outstanding balance of the Stock Acquisition Loan
and any Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts
and to retain the balance of the shares of Common Stock which are still pledged
as collateral for the outstanding balance of the Stock Acquisition Loan,
provided, that Executive immediately repays to the Company the outstanding
balance of the Stock Acquisition Loan including interest accrued thereon through
the date of termination. Except for any rights which Executive may have to
unpaid salary amounts through and including the date of termination, vested
options, vested Restricted Shares and related Restricted Share Tax Gross-Up
Payments, and shares of Common Stock purchased with the proceeds of the Stock
Acquisition Loan and related Acquisition Loan Tax Gross-Up Payments, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(b) Termination of Employment Upon Death or Disability. In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar
8
<PAGE>
year in which such termination occurred and ending with the date the Employment
Period ends (assuming such termination did not occur), of the average annual
amount of incentive compensation payments paid to Executive during each previous
year of Executive's employment hereunder (the "Pro-Rata Portion of Incentive
Compensation"). The aforesaid amount shall be payable, at the option of
Executive, his estate or his personal representative, either (i) in full
immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled (i) at the option of
Executive, his estate or his personal representative, within one (1) year of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his estate or his personal representative shall receive a cash
payment from the Company
9
<PAGE>
on the date of termination in an amount equal to forty percent (40%) of the Fair
Market Value (determined as of the date of termination) of the Restricted Shares
that vest on the date of termination (the "Termination Restricted Share Tax
Gross-Up Payment"), (iii) to retain all shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan without regard to
whether or not the Stock Acquisition Loan has been forgiven or repaid. In the
event there is an outstanding balance on the Stock Acquisition Loan, such
outstanding balance including interest accrued thereon shall on the first day of
the calendar month next succeeding Executive's Disability or death be forgiven
(and any shares pledged under the Stock Pledge Agreement shall be released to
Executive, his estate or his personal representative) and Executive, his estate
or his personal representative shall receive a cash payment from the Company on
that date in an amount equal to forty percent (40%) of the outstanding balance
of the Stock Acquisition Loan and interest accrued thereon that is forgiven on
the date of termination (the "Termination Acquisition Loan Tax Gross-Up
Payment"). Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, Restricted Shares (and the full vesting
thereof) and the Termination Restricted Share Tax Gross-Up Payment, and shares
of Common Stock purchased with the proceeds of the Stock Acquisition Loan (and
the forgiveness of the outstanding balance of the Stock Acquisition Loan
inclusive of interest accrued thereon) and the Termination Acquisition Loan Tax
Gross-Up Payment, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
10
<PAGE>
(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive (A) the unpaid
salary through the end of the Employment Period remaining (assuming no such
termination occurred) and (B) a pro-rata portion, based upon the number of days
in the period beginning with January 1 of the calendar year in which such
termination occurred and ending with the date the Employment Period ends
(assuming such termination did not occur), of the average annual amount of
incentive compensation payments paid to Executive during each previous year of
Executive's employment hereunder. The aforesaid amount shall be payable, at the
option of Executive, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, within ninety (90) days of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan, it being agreed
and understood that this Agreement does not require the Company to issue options
to Executive, (ii) to retain any Restricted Shares previously awarded to
Executive pursuant to this Agreement and the Restricted Share Agreement and any
Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as
11
<PAGE>
collateral for the outstanding balance of the Stock Acquisition Loan and any
Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts and to
retain the balance of the shares of Common Stock which are still pledged as
collateral for the outstanding balance of the Stock Acquisition Loan, provided,
that Executive immediately repays to the Company the outstanding balance of the
Stock Acquisition Loan including interest accrued thereon through the date of
termination. Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, vested Restricted Shares and related
Restricted Share Tax Gross-Up Payments, and shares of Common Stock purchased
with the proceeds of the Stock Acquisition Loan and related Acquisition Loan Tax
Gross-Up Payments, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled (i) to all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the Change in Control (the
"Change in Control Restricted Share Tax Gross-Up Payment"), (ii) to all
shares of Common Stock purchased by Executive with the proceeds of the
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<PAGE>
Stock Acquisition Loan without regard to whether or not the Stock Acquisition
Loan has been forgiven or repaid. In the event there is an outstanding balance
on the Stock Acquisition Loan, such outstanding balance including interest
accrued thereon through the date of the Change in Control shall be immediately
forgiven (and any shares pledged under the Stock Pledge Agreement shall be
released to Executive) and Executive shall receive a cash payment from the
Company on the date of the Change in Control in an amount equal to forty percent
(40%) of the outstanding balance of the Stock Acquisition Loan and interest
accrued thereon that is forgiven on the date of the Change in Control (the
"Change in Control Acquisition Loan Tax Gross-Up Payment") and (iii) an excise
tax gross-up payment. If it is determined by an indpendent accountant mutually
acceptable to the Company and Executive that as a result of compensation paid
and other benefits provided to Executive by the Company pursuant to this
Agreement or otherwise, a tax will be imposed on Executive pursuant to Section
4999 of the Code (or any successor provisions) the Company shall pay Executive
in cash an amount equal to the excise tax for which the Executive is liable
under Section 4999 of the Code. Any cash payments owed to Executive pursuant to
this Paragraph 4(d) shall be paid to Executive in a single sum on or immediately
prior to date of the Change in Control but prior to the consummation of the
transaction with any successor.
In addition, any other options previously or hereafter granted to Executive
that have not vested as of the date of the Change in Control shall immediately
vest upon the occurrence of and on the date of a Change in Control irrespective
of whether Executive's employment terminates in connection with such Change in
Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties hereunder
(other than any such failure resulting from Executive's
incapacity due to physical or mental illness) for a period
of thirty (30) days after written demand for substantial
performance is delivered by the Company specifically
identifying the manner in which the Company believes
Executive has not substantially performed his duties, or (B)
willful misconduct by Executive which is materially
injurious to the Company, monetarily or otherwise, or (C)
the willful violation by Executive of the provisions of
Paragraph 5 or 7
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hereof. For purposes of this Paragraph 4(e)(i), no act, or
failure to act, on Executive's part shall be considered
"willful" unless done, or omitted to be done, by him (I) not
in good faith and (II) without reasonable belief that his
action or omission was in furtherance of the interests of
the Company.
(ii) "Change in Control" shall mean that any of the following
events has occurred: (a) any "person" or "group" of persons,
as such terms are used in Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), other than any employee benefit plan sponsored by the
Company, becomes the "beneficial owner", as such term is
used in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company issued and
outstanding immediately prior to such acquisition; (b) any
Common Stock of the Company is purchased pursuant to a
tender or exchange offer other than an offer by the Company;
or (c) the dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the Company
or any sale or other disposition of all or substantially all
of its assets, if the shareholders of the Company
immediately before such transaction own, immediately after
consummation of such transaction, equity securities (other
than options and other rights to acquire equity securities)
possessing less than thirty percent (30%) of the voting
power of the surviving or acquiring company.
(iii) "Disability" shall mean the determination by the Company,
upon the advice of an independent qualified physician,
reasonably acceptable to Executive, that Executive has
become physically or mentally incapable of performing his
duties under this Agreement and such disability has disabled
Executive for a cumulative period of one hundred eighty
(180) days within a twelve (12) month period.
(iv) "Fair Market Value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the
end of the last business day preceding the Determination
Date, the applicable anniversary or the date of termination,
as the case may be, as reported in the New York edition of
the Wall Street Journal.
(v) "Good Reason" shall mean (A) any material and substantial
breach of this Agreement by the Company, (B) a material
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reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any other
failure by the Company to comply with Paragraph 3 hereof, or
(C) the Company shall have given notice pursuant to
Paragraph 1 hereof at any time prior to the sixth
anniversary of the date hereof that it does not wish to
extend this Agreement, except in connection with termination
of Executive's employment for Cause or by reason of death or
Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the Common
Stock on each of the trading days within the thirty (30)
days immediately preceding the date of termination of
Executive's employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall
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not, directly or indirectly, at any time, either during or after his employment
with the Company, without the Company's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than the Company or its employees, except as required
in the performance of his duties for the Company or as otherwise required by
law. Executive shall take all reasonable steps to safeguard such Confidential
Information and to protect such Confidential Information against disclosure,
misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company,
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and shall be delivered to the Company, without retaining any copies, upon the
termination of Executive's employment or at any time as requested by the
Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
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(b) If, at the time of enforcement of this Paragraph 7, a court shall
hold that the duration, scope, area or other restrictions stated herein are
unreasonable, the parties agree that reasonable maximum duration, scope, area or
other restrictions may be substituted by such court for the stated duration,
scope, area or other restrictions and upon substitution by such court, this
Agreement shall be automatically modified without further action by the parties
hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
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9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated due to Disability,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify such date as the date of termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to the
benefit of and be enforceable by Executive's personal or legal representatives,
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executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary as determined under any applicable plan, Executive's
devisee, legatee, or other designee or, if there be no such designee, to
Executive's estate.
10. Timing of and No Duplication of Payments/ Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or
20
<PAGE>
discharge any provision or term of this Agreement. No delay on the part of the
Company or Executive in the exercise of any of their respective rights or
remedies shall operate as a waiver thereof, and no single or partial exercise by
the Company or Executive of any such right or remedy shall preclude other or
further exercise thereof. A waiver of right or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy on any other
occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to the Company or Executive, as applicable, at the address set forth
above (or to such other address as shall have been previously provided in
accordance with this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under
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such applicable law, then, subject to the provisions of Paragraph 7(b) above,
such provision or term shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provisions or term or the remaining provisions
or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect
to the subject matter hereof and supersedes all other prior agreements and
undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall
survive the termination of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
----------------------------------
Name: Thomas A. Rizk
Title: President
/s/ Roger W. Thomas
----------------------------------
Roger W. Thomas
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SCHEDULE A
24
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
ROGER W. THOMAS
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED
SHARE AWARD PURSUANT TO THE EMPLOYMENT AGREEMENT
FOR ROGER W. THOMAS ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant Date") by
and between Cali Realty Corporation (the "Company") and Roger W. Thomas
("Recipient").
WHEREAS, pursuant to the employment agreement between Recipient and the
Company entered into as of January 21, 1997 (the "Employment Agreement"), the
Company has awarded shares of the Company's common stock, par value $.01 per
share ("Common Stock") to the Recipient subject to such terms, conditions, and
restrictions (hereinafter, "Restricted Share Award") as set forth in the
Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock.
Pursuant to the Employment Agreement, the Company hereby awards to the
Recipient, effective as of the Grant Date, a Restricted Share Award representing
the right to earn 9,260 shares of Common Stock ("Restricted Shares") subject to
the terms, conditions and restrictions set forth herein. Capitalized terms not
otherwise defined in this Agreement shall be as defined in the Employment
Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not vest in
the Recipient, and shall be subject to forfeiture until the conditions of
Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the "Vesting Date."
<PAGE>
(b) Vesting. An aggregate of 9,260 Restricted Shares may be earned by
the Recipient and vest on a cumulative basis over a five to seven year Vesting
Period, with 1,852 Restricted Shares scheduled to be vested and earned on each
Vesting Date provided the Performance Goals specified in Section 2(c) below are
satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 1,852 Restricted Shares shall
vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of outstanding limited partnership units of Cali Realty,
L.P., a Delaware limited partnership
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<PAGE>
of which the Company is the sole general partner, for the applicable period.
(ii) In the event that neither of the Financial Tests above is
satisfied in the measurement period ending on the applicable Vesting Date
("Non-Achievement Year"), any Restricted Shares that failed to vest on such Date
may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (I) and (II) above to be satisfied. Notwithstanding any
contrary provisions contained in this Section 2(c), any Restricted Shares that
have not been
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<PAGE>
earned and vested by January 21, 2004 pursuant to the Cumulative Test shall
automatically be canceled and forfeited.
(d) Lapse of Restrictions. Upon the Vesting of Restricted Shares, the
Recipient shall own the Shares free and clear of all restrictions imposed by
this Agreement and the Recipient shall be free to hold or dispose of such Shares
in his discretion, subject to applicable federal and state law or regulations.
(e) Prohibition Against Assignment. During the Vesting Period, the
Restricted Shares may not be transferred or encumbered by the Recipient by means
of sale, assignment, mortgage, transfer, exchange, pledge, or otherwise. The
levy of any execution, attachment, or similar process upon the Restricted Shares
shall be null and void.
3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one or more
stock certificates registered in the name of the Recipient or a nominee or
nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to the
designee of the Company (the "Designee") a stock power designating the Company
as the transferee of an unspecified number of Shares, which stock power may be
completed by the Designee as specified herein. The Recipient and the Company
each waive the requirement that the signature of the Recipient on the stock
power be guaranteed. Upon receipt of a copy of this Agreement and the stock
power, each signed by the Recipient, the Designee shall promptly notify the
proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to
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<PAGE>
be held in accordance with the terms of the Employment Agreement and this
Agreement.
(c) Effect of Vesting. Upon Vesting, the Company shall cause to be
delivered to the Recipient (i) a certificate for the Shares which have vested
free and clear of restrictive legends and (ii) any stock powers signed hereunder
by the Recipient remaining in its possession. In the event that the Recipient
dies after Vesting and before delivery of the certificate, such certificate
shall be delivered to, and registered in the name of, the Recipient's
beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in Section 2
and this Section 3, during the Vesting Period and after the certificates for the
Restricted Shares have been issued, the Recipient shall be entitled to all
rights of a stockholder of the Company, including the right to vote and the
right to receive dividends, with respect to the Restricted Shares subject to
this Agreement. Subject to applicable withholding requirements, if any,
dividends on the Restricted Shares shall be paid to the Recipient when earned.
(e) Power of Designee. The Designee is hereby authorized by the
Recipient to utilize the stock power delivered by the Recipient to transfer all
forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Due to Disability or Death; Change in Control. Unless
otherwise provided in the Employment Agreement, if the Recipient terminates
employment with the Company prior to the end of the Vesting Period set forth in
this Agreement due to Disability or death, all Restricted Shares subject to this
Agreement and held by, or on behalf of, the Recipient shall be deemed earned and
vested as of the Recipient's last day of employment with the Company. In
addition, unless
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<PAGE>
otherwise provided in the Employment Agreement, all Restricted Shares subject to
this Agreement and held by the Recipient on the date a Change in Control occurs
shall be deemed earned and vested as of such date.
(b) Termination for Any Other Reason. Unless otherwise provided in the
Employment Agreement, if the Recipient's employment with the Company terminates
prior to the end of the Vesting Period set forth in this Agreement for reasons
other than Disability or death, any Restricted Shares subject to this Agreement
that have not been earned and vested prior to the Recipient's termination of
employment shall be immediately forfeited on the last day of the Recipient's
employment with the Company.
5. Withholding.
In connection with the delivery of any stock certificates, or the making of
any payment in accordance with the provisions of this Agreement, the Company
shall withhold Shares or cash amounts (for fractional Shares) equal to the taxes
then required by applicable federal, state and local law to be so withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall be
entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from the
Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the Fair Market Value of the Restricted
Shares at time of distribution, exclusive of dividends.
(b) Effect of Termination Due to Disability or Death; Change in
Control. Unless otherwise provided in the Employment Agreement, if the Recipient
terminates employment with the Company prior to the end of the Vesting Period
set forth in this Agreement due to Disability or death, or in the event a Change
in Control
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<PAGE>
occurs, a final Tax Gross-Up Payment shall be made to the Recipient (or his
Beneficiary, as the case may be) in a dollar amount equal to forty (40%) percent
of the Fair Market Value of the Restricted Shares distributed to the Recipient
(or his beneficiary), exclusive of dividends. Payment of the final Tax Gross-Up
Payment shall be made on the date the Restricted Shares are distributed or as
soon as administratively feasible thereafter.
(c) Effect of Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
Agreement for any reason other than Disability or death, no further Tax Gross-Up
Payments shall be made to such Recipient.
7. Adjustments for Capital Changes.
In the event of any change in the outstanding shares of Common Stock of the
Company by reason of any stock dividend or split, recapitalization, merger,
consolidation, spin-off, reorganization, combination or exchange of shares, or
other similar corporate change, or other increase or decrease in such shares
effected without receipt or payment of consideration by the Company, a duly
authorized representative of the Company shall adjust the number of Restricted
Shares granted pursuant to the Employment Agreement and this Agreement to
prevent dilution or enlargement of the rights granted to the Recipient.
8. No Right to Continued Employment.
Nothing in this Agreement shall confer on the Recipient any right to
continue as an employee of the Company or in any way affect the Company's or any
subsidiary's right to terminate the Recipient's employment at any time.
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<PAGE>
9. Notice.
Any notice to the Company hereunder shall be in writing addressed to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
Any notice to the Recipient hereunder shall be in writing addressed to:
Mr. Roger W. Thomas
#PHA
30 West 90th Street
New York, New York 10024
or such other address as the Recipient shall notify the Company in writing.
10. Entire Agreement; Effect of Employment Agreement.
(a) Entire Agreement. This Agreement contains the entire understanding
of the parties and shall not be modified or amended except in writing and duly
signed by each of the parties hereto. No waiver by either party of any default
under this Agreement shall be deemed a waiver of any later default thereof.
(b) Effect of Employment Agreement. In the event the Employment
Agreement with the Company contains additional rights, duties and/or obligations
with respect to the Recipient, such terms and conditions shall govern the
Recipient's Restricted Share Award as if such terms and conditions had been set
forth herein; and in the event of any conflict or inconsistency between the
terms of the Employment Agreement or this Agreement, the terms and conditions of
the Employment Agreement shall control.
11. Construction.
The various provisions of this Agreement are severable in their entirety.
Any determination of invalidity or unenforceability of any one provision shall
have no effect on the continuing force and effect of the remaining provisions.
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<PAGE>
12. Governing Law.
This Agreement shall be governed by the laws of the State of New Jersey
applicable to contracts made, and to be enforced, within the State of New
Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective on the date first above written.
Cali Realty Corporation
By: /s/ John R. Cali
-------------------------------------
John R. Cali
Chief Administrative Officer
Recipient
/s/ Roger W. Thomas
-----------------------------------------
Roger W. Thomas
-9-
STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of January 21, 1997, made by Roger W.
Thomas, an individual residing at #PHA, 30 West 90th Street, New York, New York
10024 (the "Pledgor"), to Cali Realty Corporation, a Maryland corporation, (the
"Pledgee" or the "Company").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of 16,000 shares of
the issued and outstanding shares of common stock, $.01 par value (the "Common
Stock"), of the Company (such Common Stock being the "Pledged Shares"), acquired
in connection with the Pledgor's employment agreement with the Pledgee entered
into as of January 21, 1997 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement, the Pledgor has agreed to
secure, to the extent hereinafter set forth, the payment in full and the
performance of the obligations of the Pledgor to the Pledgee under a
non-recourse promissory note, dated as of the date hereof, in the amount of
$500,000 (such promissory note as it may hereafter be amended or otherwise
modified from time to time, the "Note"); and the capitalized terms used herein,
and not otherwise defined herein, are used with the meanings ascribed to them in
the Note); and
WHEREAS, the Pledgor hereby pledges and grants a lien and security interest
to Pledgee in the Pledged Shares to secure the Pledgor's obligations under the
Note.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Pledgee to make the loan under the Note, the Pledgor hereby agrees as follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Pledgee, and grants to
the Pledgee a security interest in the Pledged Shares and certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares,), and all
proceeds thereof, additions thereto and changes therein (the "Pledged
Collateral").
SECTION 2. Security for Obligations; Non-Recourse Obligations. (a) This
Agreement secures the payment of all liabilities, obligations and indebtedness
of any and every kind and nature heretofore, now or hereafter owing, arising,
due or payable from the Pledgor to the Pledgee pursuant to the Note, however
evidenced, created, incurred, acquired or owing, whether primary or secondary,
direct or indirect, joint or several, contingent or fixed, or otherwise,
including without limitation, obligations of performance, and whether arising
under any other agreements, documents or instruments entered into in connection
with the Note, now or hereafter given by the Pledgor to the Pledgee and whether
arising by book entry, agreement or operation of law and whether or not
evidenced by promissory notes or other evidences of indebtedness (all such
obligations of the Pledgor being the "Obligations").
(b) It is expressly understood and agreed that it is the intention of
the parties that the Obligations of the Pledgor under the Note are non-recourse
obligations of the Pledgor and
<PAGE>
that the Pledgee's right to recover against the Pledgor hereunder in respect of
such Obligations shall be limited solely to the Pledged Collateral.
SECTION 3. Delivery and Release of Pledged Collateral. (a) All certificates
or instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of the Pledgee pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. The Pledgee shall hold the Pledged
Collateral in the form in which it is delivered to the Pledgee unless and until
the occurrence and continuation of an Event of Default under the Note (unless
such Event of Default is waived by the Pledgee) or as otherwise provided in
paragraph 3(b) below. Upon the occurrence and continuance of an Event of Default
under the Note, the Pledgee shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in the name of
the Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 6(a) below. In addition, the
Pledgee shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations.
(b) On the first anniversary date of this Agreement, and on each
anniversary date and each March 31, June 30 and September 30 thereafter for the
term of this Agreement (each such date a "Determination Date"), the Pledgee
shall reasonably determine the aggregate fair market value of the Pledged
Collateral (the "Market Value"). If on such Determination Date the Market Value
exceeds one hundred ten percent (110%) of the aggregate principal amount of the
Note (together with interest accrued thereon) on such Determination Date (the
"Base Value"), Pledgee shall, unless otherwise requested by Pledgor,
automatically release to the Pledgor such portion of the Pledged Collateral the
aggregate fair market value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances hereunder. For purposes
of this paragraph 3(b), "fair market value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the end of the last
business day preceding the Determination Date as reported in the New York
edition of The Wall Street Journal.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, adverse claim, security interest, option
or other charge or encumbrance, except for the security interest created by this
Agreement.
(b) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Obligations.
(c) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by the Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement, stockholder agreement, or other agreement
or instrument to which the Pledgor is a party or by which he is bound or (ii)
any provision of law, any order of any court or administrative agency or any
rule or regulation applicable to the Pledgor, subject to applicable state and
federal securities laws.
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<PAGE>
(d) This Agreement constitutes the legal, valid and binding obligation
of the Pledgor, enforceable in accordance with its terms.
(e) There are no actions, suits or proceedings (whether or not
purportedly on behalf of the Pledgor) pending or, to the best knowledge of the
Pledgor, threatened affecting the Pledgor that involve the Pledged Collateral.
(f) All consents or approvals, if any, required as a condition
precedent to or in connection with the due and valid execution, delivery and
performance by the Pledgor of this Agreement have been obtained, subject to
applicable state and federal securities laws.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and from
time to time, at the expense of the Pledgor, the Pledgor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgee may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Pledgee to exercise and enforce its rights and
remedies hereunder, subject to applicable state and federal securities laws,
with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends, Etc. (a) So long as no Event of
Default under the Note shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Note.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral; provided,
however, that any and all:
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral (whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the Company, or
any merger, consolidation, acquisition or other exchange of assets or
securities to which the Company may be a party, or any conversion,
call or redemption, or otherwise);
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral,
shall be, at the option and request of the Pledgee, forthwith delivered to
the Pledgee to hold as Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be segregated
from the other property or funds of the Pledgor, and be forthwith delivered
to the Pledgee as Pledged Collateral in the same form as so received (with
any necessary endorsement).
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(iii) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as the
Pledgor may reasonably request for the purpose of enabling the Pledgor to
exercise the voting and other rights which he is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest
payments which he is authorized to receive and retain pursuant to paragraph
(ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default
under the Note, and at the election of Pledgee:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which he would otherwise be entitled to exercise pursuant
to Section 6(a)(i) and to receive the dividends and interest payments which
he would otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall cease for the period subsequent to the Event of Default, and
all such rights shall thereupon become vested in the Pledgee who shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive and hold as Pledged Collateral such dividends and
interest payments.
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 6(b)
shall be received in trust for the benefit of the Pledgee, shall be
segregated from other funds of the Pledgor and shall be forthwith paid over
to the Pledgee as Pledged Collateral in the same form as so received (with
any necessary endorsement).
(c) In the event that during the term of this Agreement subscription
warrants or other rights or options shall be issued in connection with the
Pledged Collateral, all such stock warrants, rights and options shall forthwith
be assigned by the Pledgor to the Pledgee and said stock warrants, rights and
options shall be, and, to the extent exercised by Pledgor, all new stock issued
pursuant thereto shall be pledged by Pledgor to Pledgee to be held as, and shall
be deemed to be part of, the "Pledged Collateral" under the terms of this
Agreement in the same manner as the shares of stock originally pledged
hereunder.
SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor agrees
that he will not (i) sell or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral, or (ii) create or permit to exist any
lien, security interest, or other charge or encumbrance upon or with respect to
any of the Pledged Collateral, except for the security interest under this
Agreement.
SECTION 8. Litigation Respecting Pledged Shares. In the event any action,
suit or other proceeding at law, in equity, in arbitration or before any other
authority involving or affecting the Pledged Collateral becomes known to or is
contemplated by the Pledgor, the Pledgor shall give the Pledgee immediate notice
thereof and if the Pledgor is contemplating such action, suit or other
proceeding, the Pledgor shall receive the written consent of the Pledgee prior
to commencing any such action, suit or other proceeding.
SECTION 9. Pledgee Appointed Attorney-in-Fact. (a) If an Event of Default
shall occur and be continuing under the Note (unless such Event of Default is
waived by the Pledgee), Pledgor hereby appoints the Pledgee (and any officer or
agent of the Pledgee with full power of substitution and revocation) the
Pledgor's true and lawful attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion to take any action and to execute any
instrument which the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including,
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<PAGE>
without limitation, (i) to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and (ii) to transfer the Pledged Collateral on
the books of the Company, in whole or in part, to the name of the Pledgee or
such other person or persons as the Pledgee may designate; take possession of
and endorse any one or more checks, drafts, bills of exchange, money orders or
any other documents received on account of the Pledged Collateral; collect, sue
for and give acquittances for moneys due on account of the foregoing; withdraw
any claims, suits, or proceedings pertaining to or arising out of the foregoing;
execute and record or file on behalf of the Pledgor any evidence of a security
interest contemplated by this Agreement or any refiling, continuation or
extension thereof; take any other action contemplated by this Agreement; and
sign, execute, acknowledge, swear to, verify, deliver, file, record and publish
any one or more of the foregoing.
(b) The powers of attorney which shall be granted pursuant to Section
9(a) and all authority thereby conferred shall be granted and conferred solely
to protect the Pledgee's interests in the Pledged Collateral and shall not
impose any duty upon the attorney-in-fact to exercise such powers. Such powers
of attorney shall be irrevocable prior to the performance in full of the
Obligations and shall not be terminated prior thereto or affected by any act of
the Pledgor or other person or by operation of law, including, but not limited
to, the dissolution, death, disability or incompetency of any person, the
termination of any trust, or the occurrence of any other event, and if the
Pledgor or any other person should be dissolved or die or become disabled or
incompetent or any other event should occur before the performance in full of
the Obligations and termination of this Agreement, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of attorney as if such
dissolution, death, disability or incompetency or other event had not occurred
and regardless of notice thereof.
(c) Each person who shall be a transferee of the beneficial ownership
of the Pledged Collateral, by the acceptance of such a transfer, shall be deemed
to have irrevocably appointed the Pledgee, with full power of substitution and
revocation, such person's true and lawful attorney-in-fact in such person's name
and otherwise to do any and all acts permitted to, and to exercise any and all
powers herein conferred upon, such attorney-in- fact.
SECTION 10. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. Remedies Upon Event of Default.
(a) Subject to Section 2(b) hereof, if any Event of Default under the
Note shall have occurred and be continuing (unless such Event of Default is
waived by the Pledgee), for the period subsequent to the Event of Default:
(i) The Pledgee may receive and retain all payments of any kind
with respect to the Pledged Collateral and may notify the obligors or
other parties, if any, interested in any items of Pledged Collateral
of the interest of the Pledgee therein and of any action proposed to
be taken with respect thereto, and inform any of those parties that
all payments otherwise payable to the Pledgor with
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<PAGE>
respect thereto shall be made to the Pledgee until all amounts due
under the Note have been paid in full;
(ii) The Pledgee may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code (the
"Code") in effect in the State of New Jersey at that time, and the
Pledgee may also, without notice except as specified below, sell the
Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of
the Pledgee's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Pledgee may deem
commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned;
(iii) Any cash held by the Pledgee as Pledged Collateral and all
cash proceeds received by the Pledgee in respect of any sale of,
collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Pledgee, be held by
the Pledgee as collateral for, and/or then or at any time thereafter
applied in whole or in part by the Pledgee against, all or any part of
the Obligations in such order as the Pledgee shall elect. Any surplus
of such cash or cash proceeds held by the Pledgee and remaining after
payment in full of all the Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such
surplus; and
(iv) The Pledgee may otherwise use or deal from time to time with
the Pledged Collateral, in whole or in part, in all respects as if the
Pledgee were the outright owner thereof.
(b) Except as set forth in Section 11(a)(iii), the Pledgee shall have
the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, telegraphed or hand delivered to the Pledgor at least
three days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Pledgee shall collect the cash proceeds received from any sale
or other disposition or from any other source contemplated by subsection (a)
above and shall apply the full proceeds in accordance with the provisions of
this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this
Section 11 shall confer on the Pledgee any rights or privileges that are not
permissible under applicable law. The Pledgee may effect the provisions of this
Section 11 only in compliance with all applicable federal and state securities
laws.
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<PAGE>
(e) In connection with the provisions of this Agreement, the Pledgor
from time to time shall promptly execute and deliver, or cause to be executed
and delivered, to the Pledgee such documents and instruments, shall join in such
notices and shall take, or cause to be taken, such other lawful actions as the
Pledgee shall deem reasonably necessary or desirable to enable it to exercise
any of the rights with respect to the Pledged Collateral granted to it pursuant
to this Agreement.
SECTION 12. Waivers and Amendments, Etc. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the
Pledgee shall be deemed to constitute a waiver of any power, right or remedy
hereunder, nor shall any single or partial exercise thereof preclude any further
exercise thereof or the exercise of any other power, right or remedy. Any waiver
or consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Pledgee at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its right at
a later time to enforce any such provision. No notice to or demand on a party in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Pledgee
hereunder respecting the Pledged Collateral and any other property or money held
hereunder may at the option of the Pledgee be exercised as to all or any part of
the same and the term the "Pledged Collateral" wherever used herein, unless the
context clearly requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Collateral and any other property or money held hereunder or
any part thereof". This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
SECTION 13. Notices. All notices hereunder shall be given and deemed
received as set forth in the Note.
SECTION 14. Continuing Security Interest and Reinstatement. (a) This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon the Pledgor, his heirs, successors and assigns,
and (ii) inure to the benefit of the Pledgee and its successors, transferees and
assigns. Upon the payment in full or performance of the Obligations, the Pledgor
shall be entitled to the return, upon his request and at his expense, of such of
the Pledged Collateral as shall not have been released, sold or otherwise
applied pursuant to the terms of the Agreement.
(b) If at any time after payment in full by the Pledgor of all Obligations
and termination of the pledge granted in this Agreement, any payments on
Obligations theretofore made by the Pledgor must be disgorged by the Pledgee for
any reason whatsoever, this Agreement and the pledge granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and the Pledgor shall sign and deliver to Pledgee all documents and things
necessary to reperfect the terminated pledge.
SECTION 15. Severability. In the event that any provision of this Agreement
shall be determined to be superseded, invalid or otherwise unenforceable
pursuant to applicable law, such determination shall not affect the validity of
the remaining provisions of this Agreement, and the remaining provisions of this
Agreement shall be enforced as if the invalid provision were
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<PAGE>
deleted.
SECTION 16. Survival of Representations, etc. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Note have been paid in full. This
Agreement shall remain and continue in full force and effect without regard to
any modification, execution, renewal, amendment or waiver of any provision of
the Note.
SECTION 17. Termination and Return of Pledged Stock. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
paid and satisfied or until the release, discharge or termination of the Note,
whichever last occurs. Upon the termination of this Agreement, the Pledgee shall
cause to be transferred to Pledgor all of the Pledged Collateral and any money,
property and rights received by Pledgor pursuant thereto, to the extent Pledgee
has not released, taken, sold or otherwise realized upon the same pursuant to
its rights and obligations hereunder.
SECTION 18. Transfer and Assignment. The Pledgee may transfer the Pledged
Collateral and any other property or money held hereunder to any transferee of
the Obligations or any part thereof. The transferee shall thereupon succeed to
all of the Pledgee's rights hereunder with respect to the Pledged Collateral so
transferred. Thereafter, the Pledgee shall have no obligation to Pledgor with
respect to the Pledged Collateral so transferred. The Pledgee shall, however,
retain all of its rights and powers with respect to any part of the Pledged
Collateral not transferred. Every agent or nominee of the Pledgee shall have the
benefit of this Agreement as if named herein and may exercise all of the rights
and powers given to the Pledgee hereunder.
SECTION 19. Entire Agreement. This Agreement, the Secured Non-Recourse
Promissory Note and the Employment Agreement contain the entire agreement of the
parties and supersedes all other agreements, understandings and representations,
oral or otherwise, between the parties with respect to the matters contained
herein. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs,
administrators, fiduciaries, next of kin and executors. Section headings used
herein are for convenience only and shall not affect the meaning or construction
of any of the provisions hereof. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. In the event of any conflict among any of the
documents referred to above, the terms of the Employment Agreement shall
prevail.
SECTION 20. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New Jersey
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Note, terms defined in Article 9 of the Uniform
Commercial Code in the State of New Jersey are used herein as therein defined.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
/s/ Roger W. Thomas
-----------------------------------------
Roger W. Thomas
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
-------------------------------------
Name: Thomas A. Rizk
Title: President and
Chief Executive Officer
9
SECURED NON-RECOURSE PROMISSORY NOTE
January 21, 1997 $500,000
FOR VALUE RECEIVED, Roger W. Thomas, an individual residing at #PHA, 30
West 90th Street, New York, New York 10024 ("Payor"), hereby promises to pay to
Cali Realty Corporation, a Maryland corporation ("Payee" or the "Company"), or
its assigns, the principal amount of five hundred thousand dollars exactly
($500,000), together with all interest accrued thereon calculated from the date
hereof in accordance with the provisions of Section 1 hereof. Certain
capitalized terms used in this Secured Non-Recourse Promissory Note (the "Note")
are defined in Section 6 below.
This Note is being made by Payor in order to finance the Payor's purchase
of 16,000 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") from the Company pursuant to the Payor's employment agreement
with Payee entered into as of January 21, 1997 (the "Employment Agreement").
This Note is secured by the Pledged Collateral under the terms of the
Stock Pledge Agreement and is entitled to the benefits thereof.
1. Accrual of Interest. Interest will accrue on the unpaid principal
amount of this Note from and after the date hereof on a daily basis at the rate
per annum equal to 6.21%, as set forth in the Employment Agreement, and such
interest shall be compounded annually, calculated on the basis of a 365 day
year. Unless forgiven as contemplated herein, interest shall be payable annually
in arrears on each anniversary date hereof.
2. Payment of Note.
(a) Maturity Date. Except as provided in Sections 2(b) and (c) and
Sections 3 and 4 below, the entire unpaid principal balance of this Note
(together with interest accrued thereon) shall become due and payable on the
fifth anniversary of the date of this Note.
(b) Forgiveness of Loan. The principal amount of this Note shall be
automatically forgiven ratably over a five (5) year term in annual equal twenty
percent (20%) increments commencing on the first anniversary of the date of this
Note and each anniversary thereafter. All then accrued but unpaid interest on
this Note shall also be automatically forgiven annually on each applicable
anniversary date; provided, however,
<PAGE>
subject to the provisions of Sections 3 and 4 hereof, the forgiveness of each
principal portion of this Note plus interest shall be conditioned upon Payor
being in the employ of the Company on the applicable anniversary date.
(c) Change in Control. Pursuant to the Employment Agreement, in the
event of a Change in Control (as defined in the Employment Agreement) or in the
absence thereof in the Cali Realty Corporation Employee Stock Option Plan) the
entire unpaid principal amount of this Note (including any accrued but unpaid
interest) shall automatically be accelerated and forgiven, and no portion of
this Note shall become due or payable at any time thereafter.
(d) Non-Recourse Obligations. Notwithstanding anything to the
contrary stated herein, Payee agrees that for payment of this Note it will look
solely to the Pledged Collateral and such other collateral, if any, as may now
or hereafter be given to secure the payment of this Note, and no other assets of
Payor shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Payee, or for any payment required to be made
under this Note.
3. Effect of Termination of Employment Due to Disability or Death. In the
event Payor terminates employment with the Company prior to the expiration of
the term of this Note due to his disability (as determined pursuant to the terms
of the Employment Agreement or in the absence thereof by the Committee in its
discretion) or death, the entire unpaid balance of this Note plus interest shall
automatically be accelerated and forgiven on the first day of the calendar month
next succeeding Payor's disability or death, and no portion of this Note shall
become due or payable at any time thereafter.
4. Effect of Termination of Employment For Any Other Reason. In the event
Payor terminates employment with the Company or the Company terminates Payor's
employment with the Company, in each case prior to the expiration of the term of
this Note for any reason other than disability or death, there shall be no
further forgiveness of the principal or the interest of this Note and the entire
unpaid balance of this Note plus interest shall automatically be accelerated and
become due and payable to the Company on the effective date of Payor's
termination of employment with the Company.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) Payor fails to pay when due any amount (whether interest,
principal or other amount) then due or payable on this Note for a period
of ten (10) days after the holder of this Note notifies Payor of such
failure;
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<PAGE>
(ii) Payor fails to perform or observe any other provision contained
in this Note or the Stock Pledge Agreement and such failure continues
unremedied for a period of thirty (30) days after the holder of this Note
notifies Payor of such breach; or
(iii) If an event set forth in Section 4 hereof has occurred, Payor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due; or an order,
judgment or decree is entered adjudicating Payor bankrupt or insolvent; or
any order for relief with respect to Payor is entered under the Bankruptcy
Code; or Payor petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator, or commences any proceeding
relating to himself under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against Payor and either (a) Payor in writing
indicates his approval thereof, consents thereto or acquiesces therein or
(b) such petition, application or proceeding is not dismissed within
ninety (90) days.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
paragraph 3(a)(iii) hereof has occurred, the holder of this Note may
demand (by written notice delivered to Payor) immediate payment of all or
any portion of the outstanding principal amount of this Note together with
any and all accrued interest thereon, which amount shall become due and
payable upon such demand. If an Event of Default of the type described in
paragraph 3(a)(iii) has occurred, then all of the outstanding principal
amount of this Note together with any and all accrued interest thereon
shall automatically be immediately due and payable without any action on
the part of the holder of this Note.
(ii) Each holder of this Note shall also have any other rights which
such holder may have been afforded under this Note or the Stock Pledge
Agreement at any time and any other rights which such holder may have
pursuant to applicable law.
6. Certain Defined Terms. As used in this Note, the following terms shall
have the following meanings:
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
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<PAGE>
"Pledged Collateral" means the Common Stock pledged by Payor under
the Stock Pledge Agreement as security for Payor's performance of his
obligations under this Note.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated the
date hereof between Payor and the Company.
7. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may not be amended and Payor may not take any action
prohibited herein, or omit to perform any act required to be performed by him
herein, unless Payor has obtained the prior written consent of the holder of
this Note.
8. Cancellation. After all obligations for the payment of money arising
under this Note have been paid in full, this Note will be surrendered to Payor
for cancellation.
9. Tax Withholding. The Company shall have the right to deduct and
withhold from any amounts which become taxable to Payor hereunder all employment
and other federal, state and local taxes and charges which are, or which may
hereafter, be required by law to be so deducted or withheld.
10. Notices; Place of Payment. Any notice hereunder shall be in writing
and shall be delivered by recognized courier, facsimile or certified mail,
return receipt requested, and shall be conclusively deemed to have been received
by a party hereto and to be effective on the day on which delivered or
facsimiled to such party at its address set forth below (or at such other
address as such party shall specify in writing):
If to Payor: Roger W. Thomas
30 West 90th Street, #PHA
New York, New York 10024
If to Payee: Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
All payments to be made under this Note are to be delivered to the holder
at such address or to the attention of such person as the holder may designate
by prior written notice to Payor. At the request of the holder of this Note, all
payments shall be made by wire transfer of immediately available funds to an
account which the holder may designate from time to time.
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<PAGE>
11. Waiver of Presentment, Demand, Dishonor.
(a) Payor hereby waives presentment for payment, protest, demand, notice
of protest, notice of nonpayment and diligence with respect to this Note, and
waives and renounces all rights to the benefits of any statute of limitations or
any moratorium, appraisement, exemption, or homestead now provided or that
hereafter may be provided by any federal or applicable state statute, including
but not limited to exemptions provided or allowed under the Bankruptcy Code,
both as to himself and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals and modifications hereof.
(b) No failure on the part of any holder of this Note to exercise any
right or remedy hereunder with respect to Payor, whether before or after the
happening of an Event of Default, shall constitute waiver of any such Event of
Default or of any other Event of Default by such holder or on behalf of any
other holder. No failure to accelerate the debt of Payor evidenced hereby by
reason of an Event of Default or indulgence granted from time to time shall be
construed to be a waiver of the right to insist upon prompt payment thereafter,
or shall be deemed to be a novation of this Note or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any holder of this
Note may have, whether by the laws of the state governing this Note, by
agreement or otherwise, and Payor hereby expressly waives the benefit of any
statute or rule of law or equity that would produce a result contrary to or in
conflict with the foregoing.
12. Governing Law. The validity, construction and interpretation of this
Note shall be governed by and construed in accordance with the internal laws of
the State of New Jersey.
13. Transfer; Assignment. This Note may not be negotiated, assigned or
transferred by Payor at any time, except with Payee's prior written consent.
This Note may not be negotiated, assigned or transferred by Payee except in
connection with the sale of all or substantially all of Payee's assets if the
transferee expressly assumes Payee's obligations under the Employment Agreement.
14. Entire Agreement. This Secured Non-Recourse Promissory Note, the Stock
Pledge Agreement and the Employment Agreement contain the entire agreement of
the parties and supersedes all other agreements, understandings and
representations, oral or otherwise, between the parties with respect to the
matters contained herein. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators, fiduciaries, next of kin and executors. Section headings
used herein are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed in
any number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument. In the event of any
5
<PAGE>
conflict among any of the documents referred to above, the terms of the
Employment Agreement shall prevail.
IN WITNESS WHEREOF, Payor has executed and delivered this Secured
Non-Recourse Promissory Note on the date first written above.
/s/ Roger W. Thomas
------------------------------
Roger W. Thomas
================================================================================
EMPLOYMENT AGREEMENT
FOR
BARRY LEFKOWITZ
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment.................................................................1
2. Services...................................................................2
3. Compensation and Benefits..................................................3
4. Termination of Employment and Change in Control............................7
5. Confidential Information..................................................15
6. Return of Documents.......................................................16
7. Noncompete................................................................17
8. Remedies..................................................................18
9. Successors and Assigns....................................................19
10. Timing of and No Duplication of Payments/ Tax Withholding.................20
11. Modification or Waiver....................................................20
12. Notices...................................................................21
13. Governing Law.............................................................21
14. Severability..............................................................21
15. Counterparts..............................................................22
16. Headings..................................................................22
17. Entire Agreement..........................................................22
18. Survival of Agreements....................................................22
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
21, 1997, by and between Barry Lefkowitz, an individual residing at 4 Borden
Place, Livingston, New Jersey 07039 ("Executive"), and Cali Realty Corporation,
a Maryland corporation with offices at 11 Commerce Drive, Cranford, New Jersey
07016 (the "Company").
RECITALS
WHEREAS, the Executive has served as Vice President - Finance and Chief
Financial Officer and, through such service, has acquired special and unique
knowledge, abilities and expertise; and
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the
<PAGE>
applicable expiration date either the Company or Executive shall have given
written notice to the other party that such party does not wish to extend this
Agreement. It being agreed and understood that the extension of this Agreement
shall not create an obligation of the Company to issue new awards to Executive
hereunder. The term of this Agreement, as it may be extended from time to time
in accordance with this Paragraph 1, is referred to herein as the "Employment
Period."
2. Services.
During the Employment Period, Executive shall hold the positions of Vice
President - Finance and Chief Financial Officer and shall devote his best
efforts and substantially all of his business time, skill and attention to the
business of the Company, and shall perform such duties as are customarily
performed by similar executive officers and as may be more specifically
enumerated from time to time by the Board of Directors of the Company (the
"Board") or the Executive Committee of the Board, if any; provided, however,
that the foregoing is not intended to (a) preclude Executive from (i) owning and
managing personal investments, including real estate investments, subject to the
restrictions set forth in Paragraph 7 hereof or (ii) engaging in charitable
activities and community affairs, or (b) restrict or otherwise limit Executive
from conducting real estate development, acquisition or management activities
with respect to those properties described in Schedule A, attached hereto, (the
"Excluded Properties"), provided that the performance of the activities referred
to in clauses (a) and (b) does not prevent Executive from devoting substantially
all of his business time to the Company.
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3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $150,000 (the "Annual Base Salary"), payable
in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan") and other benefit plans
(including without limitation the Cali Realty Corporation
401(k) Savings and Retirement Plan and any other stock option
plans which may be adopted or maintained by the Company) made
generally available to executives of the Company with such
participation to be consistent with reasonable Company
guidelines;
(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
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(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
As further consideration for Executive agreeing to serve as an officer and
entering into this Agreement upon the terms set forth herein, including, without
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limitation, the terms relating to noncompetition set forth in Paragraph 7 below,
the Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
(a) grant to Executive 9,260 restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions of
this Agreement and the written agreement issued pursuant to
this Agreement, evidencing such award executed between the
Company and Executive (the "Restricted Share Agreement"). In
the event of a conflict between the Restricted Share Agreement
and this Agreement, the terms of this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with
twenty percent (20%) of the Restricted Shares vesting on each
of the first anniversary of the date hereof (the "First
Anniversary"), the second anniversary of the date hereof (the
"Second Anniversary"),the third anniversary of the date hereof
(the "Third Anniversary"), the fourth anniversary of the date
hereof (the "Fourth Anniversary") and the fifth anniversary of
the date hereof (the "Fifth Anniversary"), provided, that
certain Performance Goals as defined and set forth in the
Restricted Share Agreement are met. Vesting shall be
cumulative in accordance with the provisions of the Restricted
Share Agreement and the Performance Goals may be achieved as
specified therein up until the seventh anniversary of the date
hereof. Except as otherwise provided in Paragraph 4 hereof,
Executive must be employed by the Company on the applicable
anniversary date to vest in the Restricted Shares scheduled to
vest in a particular year. The measurement date to determine
such vesting shall be the last day of the Company's fiscal
year preceding the year in which the applicable anniversary
date occurs.
In addition, upon vesting of the Restricted Shares on each
applicable anniversary date, the Company shall make a cash
payment to Executive on that anniversary date in an amount
equal to forty percent (40%) of the Fair Market Value
(determined as of such anniversary date) of the Restricted
Shares that vest on such anniversary date (the "Restricted
Share Tax Gross-Up Payment").
(b) loan on a non-recourse basis to Executive $500,000 (the "Stock
Acquisition Loan"), with the loan proceeds to be used by
Executive simultaneously to purchase newly issued Common Stock
from the Company. Interest shall accrue on the Stock
Acquisition Loan at
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the rate of 6.21% per year and shall be payable, on the entire
outstanding balance, annually in arrears. The Stock
Acquisition Loan is being granted and secured pursuant to the
terms and conditions of this Agreement, and a Secured
Non-Recourse Promissory Note and Stock Pledge Agreement
evidencing and securing such Loan as executed between the
Company and Executive. In the event of a conflict between the
aforementioned documents and this Agreement, the terms of this
Agreement shall control.
The Stock Acquisition Loan shall be forgiven over a period of
five (5) years from the date hereof, with twenty percent (20%)
of the principal and interest on the then outstanding balance
of the principal to be forgiven on each applicable anniversary
date (the "Forgiven Amount"). In addition, on each applicable
anniversary date as the Stock Acquisition Loan and interest
accrued thereon is forgiven, in order to enable Executive to
meet his tax liability with respect to the forgiveness of the
Stock Acquisition Loan, the Company shall make a cash payment
to Executive on that anniversary date in an amount equal to
forty percent (40%) of the respective Forgiven Amount (the
"Acquisition Loan Tax Gross-Up Payment"). Since the Stock
Acquisition Loan will be forgiven over a five (5) year period,
a total of five (5) Acquisition Loan Tax Gross-Up Payments
will be made to Executive over the period of forgiveness. No
additional payments will be made to Executive with respect to
any Acquisition Loan Tax Gross-Up Payments made hereunder.
Except as otherwise provided in Paragraph 4 hereof, the
aforementioned forgiveness of the Stock Acquisition Loan
inclusive of interest thereon and respective Acquisition Loan
Tax Gross-Up Payment shall only occur if Executive is employed
by the Company on the applicable anniversary date.
The Stock Acquisition Loan shall be initially secured by the
shares of Common Stock purchased by Executive from the Company
with the proceeds of the Stock Acquisition Loan. Beginning on
the First Anniversary, the outstanding balance of the Stock
Acquisition Loan shall be secured only by shares of Common
Stock having a Fair Market Value of one hundred and ten
percent (110%) of the outstanding principal amount of the
Stock Acquisition Loan (together with interest accrued
thereon). On the First Anniversary, and on each anniversary
date, March 31, June 30 and September 30 through the Fifth
Anniversary (each such date a "Determination Date"), the
Company shall reasonably determine the aggregate Fair Market
Value of the collateral (the "Market Value") being held. If on
such Determination Date the Market Value exceeds one
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hundred ten percent (110%) of the outstanding balance of the
Stock Acquisition Loan (together with interest accrued
thereon) on such Determination Date (the "Base Value"), the
Company shall, unless otherwise requested by Executive,
automatically release to Executive such portion of the
collateral the aggregate Fair Market Value of which equals the
Market Value less 110% of the Base Value, free and clear of
any and all encumbrances under the Stock Pledge Agreement.
Executive shall be required to execute the aforementioned
Stock Pledge Agreement and Secured Non-Recourse Promissory
Note. The Company shall then issue shares of Common Stock to
Executive in exchange for the Stock Acquisition Loan. The
Company shall, upon receipt from Executive of the Stock Pledge
Agreement and Secured Non-Recourse Promissory Note for the
purchase of the shares of Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt delivery
of the certificates evidencing the shares of Common Stock to
Executive, subject to any requirements set forth in the Stock
Pledge Agreement; provided, however, that if any law or
regulation requires the Company to take any action with
respect to such shares prior to the delivery thereof, then the
date of the delivery of the shares shall be extended for the
period necessary to complete such action. Certificates for
shares of Common Stock when issued to Executive may have
restrictive legends or statements of other applicable
restrictions endorsed thereon and may not be immediately
transferable.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By
Executive without Good Reason. In the event (i) the Company terminates
Executive's employment for Cause (as hereinafter defined) or (ii) Executive
terminates his employment without Good Reason (as hereinafter defined), the
Company shall pay Executive any unpaid salary accrued through and including the
date of termination. In addition, in such event, Executive shall be entitled (i)
to exercise any options which have vested and are exercisable in accordance with
the terms of the applicable option
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grant agreement or plan, (ii) to retain any Restricted Shares previously awarded
to Executive pursuant to this Agreement and the Restricted Share Agreement and
any Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as collateral for the outstanding balance of the Stock Acquisition Loan
and any Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts
and to retain the balance of the shares of Common Stock which are still pledged
as collateral for the outstanding balance of the Stock Acquisition Loan,
provided, that Executive immediately repays to the Company the outstanding
balance of the Stock Acquisition Loan including interest accrued thereon through
the date of termination. Except for any rights which Executive may have to
unpaid salary amounts through and including the date of termination, vested
options, vested Restricted Shares and related Restricted Share Tax Gross-Up
Payments, and shares of Common Stock purchased with the proceeds of the Stock
Acquisition Loan and related Acquisition Loan Tax Gross-Up Payments, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(b) Termination of Employment Upon Death or Disability . In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar
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year in which such termination occurred and ending with the date the Employment
Period ends (assuming such termination did not occur), of the average annual
amount of incentive compensation payments paid to Executive during each previous
year of Executive's employment hereunder (the "Pro-Rata Portion of Incentive
Compensation"). The aforesaid amount shall be payable, at the option of
Executive, his estate or his personal representative, either (i) in full
immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled (i) at the option of
Executive, his estate or his personal representative, within one (1) year of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his estate or his personal representative shall receive a cash
payment from the Company
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<PAGE>
on the date of termination in an amount equal to forty percent (40%) of the Fair
Market Value (determined as of the date of termination) of the Restricted Shares
that vest on the date of termination (the "Termination Restricted Share Tax
Gross-Up Payment"), (iii) to retain all shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan without regard to
whether or not the Stock Acquisition Loan has been forgiven or repaid. In the
event there is an outstanding balance on the Stock Acquisition Loan, such
outstanding balance including interest accrued thereon shall on the first day of
the calendar month next succeeding Executive's Disability or death be forgiven
(and any shares pledged under the Stock Pledge Agreement shall be released to
Executive, his estate or his personal representative) and Executive, his estate
or his personal representative shall receive a cash payment from the Company on
that date in an amount equal to forty percent (40%) of the outstanding balance
of the Stock Acquisition Loan and interest accrued thereon that is forgiven on
the date of termination (the "Termination Acquisition Loan Tax Gross-Up
Payment"). Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, Restricted Shares (and the full vesting
thereof) and the Termination Restricted Share Tax Gross-Up Payment, and shares
of Common Stock purchased with the proceeds of the Stock Acquisition Loan (and
the forgiveness of the outstanding balance of the Stock Acquisition Loan
inclusive of interest accrued thereon) and the Termination Acquisition Loan Tax
Gross-Up Payment, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
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<PAGE>
(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive (A) the unpaid
salary through the end of the Employment Period remaining (assuming no such
termination occurred) and (B) a pro-rata portion, based upon the number of days
in the period beginning with January 1 of the calendar year in which such
termination occurred and ending with the date the Employment Period ends
(assuming such termination did not occur), of the average annual amount of
incentive compensation payments paid to Executive during each previous year of
Executive's employment hereunder. The aforesaid amount shall be payable, at the
option of Executive, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, within ninety (90) days of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan, it being agreed
and understood that this Agreement does not require the Company to issue options
to Executive, (ii) to retain any Restricted Shares previously awarded to
Executive pursuant to this Agreement and the Restricted Share Agreement and any
Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as
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<PAGE>
collateral for the outstanding balance of the Stock Acquisition Loan and any
Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts and to
retain the balance of the shares of Common Stock which are still pledged as
collateral for the outstanding balance of the Stock Acquisition Loan, provided,
that Executive immediately repays to the Company the outstanding balance of the
Stock Acquisition Loan including interest accrued thereon through the date of
termination. Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, vested Restricted Shares and related
Restricted Share Tax Gross-Up Payments, and shares of Common Stock purchased
with the proceeds of the Stock Acquisition Loan and related Acquisition Loan Tax
Gross-Up Payments, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled (i) to all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the Change in Control (the
"Change in Control Restricted Share Tax Gross-Up Payment"), (ii) to all
shares of Common Stock purchased by Executive with the proceeds of the
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Stock Acquisition Loan without regard to whether or not the Stock Acquisition
Loan has been forgiven or repaid. In the event there is an outstanding balance
on the Stock Acquisition Loan, such outstanding balance including interest
accrued thereon through the date of the Change in Control shall be immediately
forgiven (and any shares pledged under the Stock Pledge Agreement shall be
released to Executive) and Executive shall receive a cash payment from the
Company on the date of the Change in Control in an amount equal to forty percent
(40%) of the outstanding balance of the Stock Acquisition Loan and interest
accrued thereon that is forgiven on the date of the Change in Control (the
"Change in Control Acquisition Loan Tax Gross-Up Payment") and
(iii) an excise tax gross-up payment. If it is determined by an indpendent
accountant mutually acceptable to the Company and Executive that as a result of
compensation paid and other benefits provided to Executive by the Company
pursuant to this Agreement or otherwise, a tax will be imposed on Executive
pursuant to Section 4999 of the Code (or any successor provisions) the Company
shall pay Executive in cash an amount equal to the excise tax for which the
Executive is liable under Section 4999 of the Code. Any cash payments
owed to Executive pursuant to this Paragraph 4(d) shall be paid to Executive in
a single sum on or immediately prior to date of the Change in Control but prior
to the consummation of the transaction with any successor.
In addition, any other options previously or hereafter granted to
Executive that have not vested as of the date of the Change in Control shall
immediately vest upon the occurrence of and on the date of a Change in Control
irrespective of whether Executive's employment terminates in connection with
such Change in Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties hereunder (other
than any such failure resulting from Executive's incapacity
due to physical or mental illness) for a period of thirty (30)
days after written demand for substantial performance is
delivered by the Company specifically identifying the manner
in which the Company believes Executive has not substantially
performed his duties, or (B) willful misconduct by Executive
which is materially injurious to the Company, monetarily or
otherwise, or (C) the willful violation by Executive of the
provisions of Paragraph 5 or 7
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hereof. For purposes of this Paragraph 4(e)(i), no act, or
failure to act, on Executive's part shall be considered
"willful" unless done, or omitted to be done, by him (I) not
in good faith and (II) without reasonable belief that his
action or omission was in furtherance of the interests of the
Company.
(ii) "Change in Control" shall mean that any of the following
events has occurred: (a) any "person" or "group" of persons,
as such terms are used in Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), other
than any employee benefit plan sponsored by the Company,
becomes the "beneficial owner", as such term is used in
Section 13 of the Exchange Act, of thirty percent (30%) or
more of the Common Stock of the Company issued and outstanding
immediately prior to such acquisition; (b) any Common Stock of
the Company is purchased pursuant to a tender or exchange
offer other than an offer by the Company; or (c) the
dissolution or liquidation of the Company or the consummation
of any merger or consolidation of the Company or any sale or
other disposition of all or substantially all of its assets,
if the shareholders of the Company immediately before such
transaction own, immediately after consummation of such
transaction, equity securities (other than options and other
rights to acquire equity securities) possessing less than
thirty percent (30%) of the voting power of the surviving or
acquiring company.
(iii) "Disability" shall mean the determination by the Company, upon
the advice of an independent qualified physician, reasonably
acceptable to Executive, that Executive has become physically
or mentally incapable of performing his duties under this
Agreement and such disability has disabled Executive for a
cumulative period of one hundred eighty (180) days within a
twelve (12) month period.
(iv) "Fair Market Value" shall mean the closing price of the Common
Stock as quoted on the New York Stock Exchange at the end of
the last business day preceding the Determination Date, the
applicable anniversary or the date of termination, as the case
may be, as reported in the New York edition of the Wall Street
Journal.
(v) "Good Reason" shall mean (A) any material and substantial
breach of this Agreement by the Company, (B) a material
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reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any other
failure by the Company to comply with Paragraph 3 hereof, or
(C) the Company shall have given notice pursuant to Paragraph
1 hereof at any time prior to the sixth anniversary of the
date hereof that it does not wish to extend this Agreement,
except in connection with termination of Executive's
employment for Cause or by reason of death or Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the Common
Stock on each of the trading days within the thirty (30) days
immediately preceding the date of termination of Executive's
employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall
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not, directly or indirectly, at any time, either during or after his employment
with the Company, without the Company's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than the Company or its employees, except as required
in the performance of his duties for the Company or as otherwise required by
law. Executive shall take all reasonable steps to safeguard such Confidential
Information and to protect such Confidential Information against disclosure,
misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company,
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and shall be delivered to the Company, without retaining any copies, upon the
termination of Executive's employment or at any time as requested by the
Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
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(b) If, at the time of enforcement of this Paragraph 7, a court
shall hold that the duration, scope, area or other restrictions stated herein
are unreasonable, the parties agree that reasonable maximum duration, scope,
area or other restrictions may be substituted by such court for the stated
duration, scope, area or other restrictions and upon substitution by such court,
this Agreement shall be automatically modified without further action by the
parties hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
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9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated due to Disability,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify such date as the date of termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives,
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executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary as determined under any applicable plan, Executive's
devisee, legatee, or other designee or, if there be no such designee, to
Executive's estate.
10. Timing of and No Duplication of Payments/ Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or
20
<PAGE>
discharge any provision or term of this Agreement. No delay on the part of the
Company or Executive in the exercise of any of their respective rights or
remedies shall operate as a waiver thereof, and no single or partial exercise by
the Company or Executive of any such right or remedy shall preclude other or
further exercise thereof. A waiver of right or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy on any other
occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to the Company or Executive, as applicable, at the address set forth
above (or to such other address as shall have been previously provided in
accordance with this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under
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<PAGE>
such applicable law, then, subject to the provisions of Paragraph 7(b) above,
such provision or term shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provisions or term or the remaining provisions
or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall survive
the termination of this Agreement.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
--------------------------------
Name: Thomas A. Rizk
Title: President
/s/ Barry Lefkowitz
--------------------------------
Barry Lefkowitz
23
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SCHEDULE A
24
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
BARRY LEFKOWITZ
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED
SHARE AWARD PURSUANT TO THE EMPLOYMENT AGREEMENT
FOR BARRY LEFKOWITZ ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant
Date") by and between Cali Realty Corporation (the "Company") and Barry
Lefkowitz ("Recipient").
WHEREAS, pursuant to the employment agreement between Recipient and
the Company entered into as of January 21, 1997 (the "Employment Agreement"),
the Company has awarded shares of the Company's common stock, par value $.01 per
share ("Common Stock") to the Recipient subject to such terms, conditions, and
restrictions (hereinafter, "Restricted Share Award") as set forth in the
Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock.
Pursuant to the Employment Agreement, the Company hereby awards to the
Recipient, effective as of the Grant Date, a Restricted Share Award representing
the right to earn 9,260 shares of Common Stock ("Restricted Shares") subject to
the terms, conditions and restrictions set forth herein. Capitalized terms not
otherwise defined in this Agreement shall be as defined in the Employment
Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not vest
in the Recipient, and shall be subject to forfeiture until the conditions of
Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the
<PAGE>
"Vesting Date."
(b) Vesting. An aggregate of 9,260 Restricted Shares may be
earned by the Recipient and vest on a cumulative basis over a five to seven year
Vesting Period, with 1,852 Restricted Shares scheduled to be vested and earned
on each Vesting Date provided the Performance Goals specified in Section 2(c)
below are satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 1,852 Restricted Shares
shall vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of
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<PAGE>
outstanding limited partnership units of Cali Realty, L.P., a Delaware limited
partnership of which the Company is the sole general partner, for the applicable
period.
(ii) In the event that neither of the Financial Tests above is
satisfied in the measurement period ending on the applicable Vesting Date
("Non-Achievement Year"), any Restricted Shares that failed to vest on such Date
may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (I) and (II) above to be satisfied. Notwithstanding any
contrary
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<PAGE>
provisions contained in this Section 2(c), any Restricted Shares that have not
been earned and vested by January 21, 2004 pursuant to the Cumulative Test shall
automatically be canceled and forfeited.
(d) Lapse of Restrictions. Upon the Vesting of Restricted Shares,
the Recipient shall own the Shares free and clear of all restrictions imposed by
this Agreement and the Recipient shall be free to hold or dispose of such Shares
in his discretion, subject to applicable federal and state law or regulations.
(e) Prohibition Against Assignment. During the Vesting Period,
the Restricted Shares may not be transferred or encumbered by the Recipient by
means of sale, assignment, mortgage, transfer, exchange, pledge, or otherwise.
The levy of any execution, attachment, or similar process upon the Restricted
Shares shall be null and void.
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<PAGE>
3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one or
more stock certificates registered in the name of the Recipient or a nominee or
nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to the
designee of the Company (the "Designee") a stock power designating the Company
as the transferee of an unspecified number of Shares, which stock power may be
completed by the Designee as specified herein. The Recipient and the Company
each waive the requirement that the signature of the Recipient on the stock
power be guaranteed. Upon receipt of a copy of this Agreement and the stock
power, each signed by the Recipient, the Designee shall promptly notify the
proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to be held in accordance with the terms of the
Employment Agreement and this Agreement.
(c) Effect of Vesting. Upon Vesting, the Company shall cause to
be delivered to the Recipient (i) a certificate for the Shares which have vested
free and clear of restrictive legends and (ii) any stock powers signed hereunder
by the Recipient remaining in its possession. In the event that the Recipient
dies after Vesting and before delivery of the certificate, such certificate
shall be delivered to, and registered in the name of, the Recipient's
beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in
Section 2 and this Section 3, during the Vesting Period and after the
certificates for the Restricted Shares have been issued, the Recipient shall be
entitled to all rights of a
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<PAGE>
stockholder of the Company, including the right to vote and the right to receive
dividends, with respect to the Restricted Shares subject to this Agreement.
Subject to applicable withholding requirements, if any, dividends on the
Restricted Shares shall be paid to the Recipient when earned.
(e) Power of Designee. The Designee is hereby authorized by the
Recipient to utilize the stock power delivered by the Recipient to transfer all
forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Due to Disability or Death; Change in Control.
Unless otherwise provided in the Employment Agreement, if the Recipient
terminates employment with the Company prior to the end of the Vesting Period
set forth in this Agreement due to Disability or death, all Restricted Shares
subject to this Agreement and held by, or on behalf of, the Recipient shall be
deemed earned and vested as of the Recipient's last day of employment with the
Company. In addition, unless otherwise provided in the Employment Agreement, all
Restricted Shares subject to this Agreement and held by the Recipient on the
date a Change in Control occurs shall be deemed earned and vested as of such
date.
(b) Termination for Any Other Reason. Unless otherwise provided
in the Employment Agreement, if the Recipient's employment with the Company
terminates prior to the end of the Vesting Period set forth in this Agreement
for reasons other than Disability or death, any Restricted Shares subject to
this Agreement that have not been earned and vested prior to the Recipient's
termination of employment shall be immediately forfeited on the last day of the
Recipient's employment with the Company.
5. Withholding.
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<PAGE>
In connection with the delivery of any stock certificates, or the
making of any payment in accordance with the provisions of this Agreement, the
Company shall withhold Shares or cash amounts (for fractional Shares) equal to
the taxes then required by applicable federal, state and local law to be so
withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall be
entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from the
Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the Fair Market Value of the Restricted
Shares at time of distribution, exclusive of dividends.
(b) Effect of Termination Due to Disability or Death; Change in
Control. Unless otherwise provided in the Employment Agreement, if the Recipient
terminates employment with the Company prior to the end of the Vesting Period
set forth in this Agreement due to Disability or death, or in the event a Change
in Control occurs, a final Tax Gross-Up Payment shall be made to the Recipient
(or his Beneficiary, as the case may be) in a dollar amount equal to forty (40%)
percent of the Fair Market Value of the Restricted Shares distributed to the
Recipient (or his beneficiary), exclusive of dividends. Payment of the final Tax
Gross-Up Payment shall be made on the date the Restricted Shares are distributed
or as soon as administratively feasible thereafter.
(c) Effect of Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
Agreement for any reason other than Disability or death, no further Tax Gross-Up
Payments shall be made to such Recipient.
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<PAGE>
7. Adjustments for Capital Changes.
In the event of any change in the outstanding shares of Common Stock
of the Company by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease in such
shares effected without receipt or payment of consideration by the Company, a
duly authorized representative of the Company shall adjust the number of
Restricted Shares granted pursuant to the Employment Agreement and this
Agreement to prevent dilution or enlargement of the rights granted to the
Recipient.
8. No Right to Continued Employment.
Nothing in this Agreement shall confer on the Recipient any right to
continue as an employee of the Company or in any way affect the Company's or any
subsidiary's right to terminate the Recipient's employment at any time.
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<PAGE>
9. Notice.
Any notice to the Company hereunder shall be in writing addressed to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
Any notice to the Recipient hereunder shall be in writing addressed
to:
Mr. Barry Lefkowitz
4 Borden Place
Livingston, New Jersey 07039
or such other address as the Recipient shall notify the Company in
writing.
10. Entire Agreement; Effect of Employment Agreement.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties and shall not be modified or amended except in
writing and duly signed by each of the parties hereto. No waiver by either party
of any default under this Agreement shall be deemed a waiver of any later
default thereof.
(b) Effect of Employment Agreement. In the event the Employment
Agreement with the Company contains additional rights, duties and/or obligations
with respect to the Recipient, such terms and conditions shall govern the
Recipient's Restricted Share Award as if such terms and conditions had been set
forth herein; and in the event of any conflict or inconsistency between the
terms of the Employment Agreement or this Agreement, the terms and conditions of
the Employment Agreement shall control.
11. Construction.
The various provisions of this Agreement are severable in their
entirety. Any determination of invalidity or unenforceability of any one
provision shall have no effect on the continuing force and effect of the
remaining provisions.
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<PAGE>
12. Governing Law.
This Agreement shall be governed by the laws of the State of New
Jersey applicable to contracts made, and to be enforced, within the State of New
Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective on the date first above written.
Cali Realty Corporation
By: /s/ John R. Cali
-------------------------
John R. Cali
Chief Administrative Officer
Recipient
/s/ Barry Lefkowitz
-------------------------
Barry Lefkowitz
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STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of January 21, 1997, made by Barry
Lefkowitz, an individual residing at 4 Borden Place, Livingston, New Jersey
07039 (the "Pledgor"), to Cali Realty Corporation, a Maryland corporation, (the
"Pledgee" or the "Company").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of 16,000 shares of
the issued and outstanding shares of common stock, $.01 par value (the "Common
Stock"), of the Company (such Common Stock being the "Pledged Shares"), acquired
in connection with the Pledgor's employment agreement with the Pledgee entered
into as of January 21, 1997 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement, the Pledgor has agreed to
secure, to the extent hereinafter set forth, the payment in full and the
performance of the obligations of the Pledgor to the Pledgee under a
non-recourse promissory note, dated as of the date hereof, in the amount of
$500,000 (such promissory note as it may hereafter be amended or otherwise
modified from time to time, the "Note"); and the capitalized terms used herein,
and not otherwise defined herein, are used with the meanings ascribed to them in
the Note); and
WHEREAS, the Pledgor hereby pledges and grants a lien and security interest
to Pledgee in the Pledged Shares to secure the Pledgor's obligations under the
Note.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Pledgee to make the loan under the Note, the Pledgor hereby agrees as follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Pledgee, and grants to
the Pledgee a security interest in the Pledged Shares and certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares,), and all
proceeds thereof, additions thereto and changes therein (the "Pledged
Collateral").
SECTION 2. Security for Obligations; Non-Recourse Obligations. (a) This
Agreement secures the payment of all liabilities, obligations and indebtedness
of any and every kind and nature heretofore, now or hereafter owing, arising,
due or payable from the Pledgor to the Pledgee pursuant to the Note, however
evidenced, created, incurred, acquired or owing, whether primary or secondary,
direct or indirect, joint or several, contingent or fixed, or otherwise,
including without limitation, obligations of performance, and whether arising
under any other agreements, documents or instruments entered into in connection
with the Note, now or hereafter given by the Pledgor to the Pledgee and whether
arising by book entry, agreement or operation of law and whether or not
evidenced by promissory notes or other evidences of indebtedness (all such
obligations of the Pledgor being the "Obligations").
(b) It is expressly understood and agreed that it is the intention of
the parties that the Obligations of the Pledgor under the Note are non-recourse
obligations of the Pledgor and that the Pledgee's right to recover against the
Pledgor hereunder in respect of such Obligations
<PAGE>
shall be limited solely to the Pledged Collateral.
SECTION 3. Delivery and Release of Pledged Collateral. (a) All certificates
or instruments representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of the Pledgee pursuant hereto and shall
be in suitable form for transfer by delivery, or shall be accompanied by duly
executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. The Pledgee shall hold the Pledged
Collateral in the form in which it is delivered to the Pledgee unless and until
the occurrence and continuation of an Event of Default under the Note (unless
such Event of Default is waived by the Pledgee) or as otherwise provided in
paragraph 3(b) below. Upon the occurrence and continuance of an Event of Default
under the Note, the Pledgee shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in the name of
the Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 6(a) below. In addition, the
Pledgee shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations.
(b) On the first anniversary date of this Agreement, and on each
anniversary date and each March 31, June 30 and September 30 thereafter for the
term of this Agreement (each such date a "Determination Date"), the Pledgee
shall reasonably determine the aggregate fair market value of the Pledged
Collateral (the "Market Value"). If on such Determination Date the Market Value
exceeds one hundred ten percent (110%) of the aggregate principal amount of the
Note (together with interest accrued thereon) on such Determination Date (the
"Base Value"), Pledgee shall, unless otherwise requested by Pledgor,
automatically release to the Pledgor such portion of the Pledged Collateral the
aggregate fair market value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances hereunder. For purposes
of this paragraph 3(b), "fair market value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the end of the last
business day preceding the Determination Date as reported in the New York
edition of The Wall Street Journal.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, adverse claim, security interest, option
or other charge or encumbrance, except for the security interest created by this
Agreement.
(b) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Obligations.
(c) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by the Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement, stockholder agreement, or other agreement
or instrument to which the Pledgor is a party or by which he is bound or (ii)
any provision of law, any order of any court or administrative agency or any
rule or regulation applicable to the Pledgor, subject to applicable state and
federal securities laws.
(d) This Agreement constitutes the legal, valid and binding obligation
of the
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<PAGE>
Pledgor, enforceable in accordance with its terms.
(e) There are no actions, suits or proceedings (whether or not
purportedly on behalf of the Pledgor) pending or, to the best knowledge of the
Pledgor, threatened affecting the Pledgor that involve the Pledged Collateral.
(f) All consents or approvals, if any, required as a condition
precedent to or in connection with the due and valid execution, delivery and
performance by the Pledgor of this Agreement have been obtained, subject to
applicable state and federal securities laws.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and from
time to time, at the expense of the Pledgor, the Pledgor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Pledgee may reasonably request,
in order to perfect and protect any security interest granted or purported to be
granted hereby or to enable the Pledgee to exercise and enforce its rights and
remedies hereunder, subject to applicable state and federal securities laws,
with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends, Etc. (a) So long as no Event of
Default under the Note shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Note.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral; provided,
however, that any and all:
(A) dividends and interest paid or payable other than in cash in
respect of, and instruments and other property received, receivable or
otherwise distributed in respect of, or in exchange for, any Pledged
Collateral (whether resulting from a subdivision, combination or
reclassification of the outstanding capital stock of the Company, or
any merger, consolidation, acquisition or other exchange of assets or
securities to which the Company may be a party, or any conversion,
call or redemption, or otherwise);
(B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction of
capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral,
shall be, at the option and request of the Pledgee, forthwith delivered to
the Pledgee to hold as Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be segregated
from the other property or funds of the Pledgor, and be forthwith delivered
to the Pledgee as Pledged Collateral in the same form as so received (with
any necessary endorsement).
(iii) The Pledgee shall execute and deliver (or cause to be executed
and delivered)
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<PAGE>
to the Pledgor all such proxies and other instruments as the Pledgor may
reasonably request for the purpose of enabling the Pledgor to exercise the
voting and other rights which he is entitled to exercise pursuant to
paragraph (i) above and to receive the dividends or interest payments which
he is authorized to receive and retain pursuant to paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default
under the Note, and at the election of Pledgee:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which he would otherwise be entitled to exercise pursuant
to Section 6(a)(i) and to receive the dividends and interest payments which
he would otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall cease for the period subsequent to the Event of Default, and
all such rights shall thereupon become vested in the Pledgee who shall
thereupon have the sole right to exercise such voting and other consensual
rights and to receive and hold as Pledged Collateral such dividends and
interest payments.
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 6(b)
shall be received in trust for the benefit of the Pledgee, shall be
segregated from other funds of the Pledgor and shall be forthwith paid over
to the Pledgee as Pledged Collateral in the same form as so received (with
any necessary endorsement).
(c) In the event that during the term of this Agreement subscription
warrants or other rights or options shall be issued in connection with the
Pledged Collateral, all such stock warrants, rights and options shall forthwith
be assigned by the Pledgor to the Pledgee and said stock warrants, rights and
options shall be, and, to the extent exercised by Pledgor, all new stock issued
pursuant thereto shall be pledged by Pledgor to Pledgee to be held as, and shall
be deemed to be part of, the "Pledged Collateral" under the terms of this
Agreement in the same manner as the shares of stock originally pledged
hereunder.
SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor agrees
that he will not (i) sell or otherwise dispose of, or grant any option with
respect to, any of the Pledged Collateral, or (ii) create or permit to exist any
lien, security interest, or other charge or encumbrance upon or with respect to
any of the Pledged Collateral, except for the security interest under this
Agreement.
SECTION 8. Litigation Respecting Pledged Shares. In the event any action,
suit or other proceeding at law, in equity, in arbitration or before any other
authority involving or affecting the Pledged Collateral becomes known to or is
contemplated by the Pledgor, the Pledgor shall give the Pledgee immediate notice
thereof and if the Pledgor is contemplating such action, suit or other
proceeding, the Pledgor shall receive the written consent of the Pledgee prior
to commencing any such action, suit or other proceeding.
SECTION 9. Pledgee Appointed Attorney-in-Fact. (a) If an Event of Default
shall occur and be continuing under the Note (unless such Event of Default is
waived by the Pledgee), Pledgor hereby appoints the Pledgee (and any officer or
agent of the Pledgee with full power of substitution and revocation) the
Pledgor's true and lawful attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion to take any action and to execute any
instrument which the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation, (i) to receive,
endorse and collect all instruments made payable to the Pledgor
4
<PAGE>
representing any dividend, interest payment or other distribution in respect of
the Pledged Collateral or any part thereof and to give full discharge for the
same; and (ii) to transfer the Pledged Collateral on the books of the Company,
in whole or in part, to the name of the Pledgee or such other person or persons
as the Pledgee may designate; take possession of and endorse any one or more
checks, drafts, bills of exchange, money orders or any other documents received
on account of the Pledged Collateral; collect, sue for and give acquittances for
moneys due on account of the foregoing; withdraw any claims, suits, or
proceedings pertaining to or arising out of the foregoing; execute and record or
file on behalf of the Pledgor any evidence of a security interest contemplated
by this Agreement or any refiling, continuation or extension thereof; take any
other action contemplated by this Agreement; and sign, execute, acknowledge,
swear to, verify, deliver, file, record and publish any one or more of the
foregoing.
(b) The powers of attorney which shall be granted pursuant to Section
9(a) and all authority thereby conferred shall be granted and conferred solely
to protect the Pledgee's interests in the Pledged Collateral and shall not
impose any duty upon the attorney-in-fact to exercise such powers. Such powers
of attorney shall be irrevocable prior to the performance in full of the
Obligations and shall not be terminated prior thereto or affected by any act of
the Pledgor or other person or by operation of law, including, but not limited
to, the dissolution, death, disability or incompetency of any person, the
termination of any trust, or the occurrence of any other event, and if the
Pledgor or any other person should be dissolved or die or become disabled or
incompetent or any other event should occur before the performance in full of
the Obligations and termination of this Agreement, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of attorney as if such
dissolution, death, disability or incompetency or other event had not occurred
and regardless of notice thereof.
(c) Each person who shall be a transferee of the beneficial ownership
of the Pledged Collateral, by the acceptance of such a transfer, shall be deemed
to have irrevocably appointed the Pledgee, with full power of substitution and
revocation, such person's true and lawful attorney-in-fact in such person's name
and otherwise to do any and all acts permitted to, and to exercise any and all
powers herein conferred upon, such attorney-in- fact.
SECTION 10. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. Remedies Upon Event of Default.
(a) Subject to Section 2(b) hereof, if any Event of Default under the
Note shall have occurred and be continuing (unless such Event of Default is
waived by the Pledgee), for the period subsequent to the Event of Default:
(i) The Pledgee may receive and retain all payments of any kind
with respect to the Pledged Collateral and may notify the obligors or
other parties, if any, interested in any items of Pledged Collateral
of the interest of the Pledgee therein and of any action proposed to
be taken with respect thereto, and inform any of those parties that
all payments otherwise payable to the Pledgor with respect thereto
shall be made to the Pledgee until all amounts due under the
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<PAGE>
Note have been paid in full;
(ii) The Pledgee may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party on default under the Uniform Commercial Code (the
"Code") in effect in the State of New Jersey at that time, and the
Pledgee may also, without notice except as specified below, sell the
Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of
the Pledgee's offices or elsewhere, for cash, on credit or for future
delivery, and upon such other terms as the Pledgee may deem
commercially reasonable. The Pledgor agrees that, to the extent notice
of sale shall be required by law, at least ten days' notice to the
Pledgor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Pledgee shall not be obligated to make any sale of
Pledged Collateral regardless of notice of sale having been given. The
Pledgee may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was
so adjourned;
(iii) Any cash held by the Pledgee as Pledged Collateral and all
cash proceeds received by the Pledgee in respect of any sale of,
collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Pledgee, be held by
the Pledgee as collateral for, and/or then or at any time thereafter
applied in whole or in part by the Pledgee against, all or any part of
the Obligations in such order as the Pledgee shall elect. Any surplus
of such cash or cash proceeds held by the Pledgee and remaining after
payment in full of all the Obligations shall be paid over to the
Pledgor or to whomsoever may be lawfully entitled to receive such
surplus; and
(iv) The Pledgee may otherwise use or deal from time to time with
the Pledged Collateral, in whole or in part, in all respects as if the
Pledgee were the outright owner thereof.
(b) Except as set forth in Section 11(a)(iii), the Pledgee shall have
the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, telegraphed or hand delivered to the Pledgor at least
three days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Pledgee shall collect the cash proceeds received from any sale
or other disposition or from any other source contemplated by subsection (a)
above and shall apply the full proceeds in accordance with the provisions of
this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this
Section 11 shall confer on the Pledgee any rights or privileges that are not
permissible under applicable law. The Pledgee may effect the provisions of this
Section 11 only in compliance with all applicable federal and state securities
laws.
(e) In connection with the provisions of this Agreement, the Pledgor
from time to
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<PAGE>
time shall promptly execute and deliver, or cause to be executed and delivered,
to the Pledgee such documents and instruments, shall join in such notices and
shall take, or cause to be taken, such other lawful actions as the Pledgee shall
deem reasonably necessary or desirable to enable it to exercise any of the
rights with respect to the Pledged Collateral granted to it pursuant to this
Agreement.
SECTION 12. Waivers and Amendments, Etc. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the
Pledgee shall be deemed to constitute a waiver of any power, right or remedy
hereunder, nor shall any single or partial exercise thereof preclude any further
exercise thereof or the exercise of any other power, right or remedy. Any waiver
or consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Pledgee at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its right at
a later time to enforce any such provision. No notice to or demand on a party in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Pledgee
hereunder respecting the Pledged Collateral and any other property or money held
hereunder may at the option of the Pledgee be exercised as to all or any part of
the same and the term the "Pledged Collateral" wherever used herein, unless the
context clearly requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Collateral and any other property or money held hereunder or
any part thereof". This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
SECTION 13. Notices. All notices hereunder shall be given and deemed
received as set forth in the Note.
SECTION 14. Continuing Security Interest and Reinstatement. (a) This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon the Pledgor, his heirs, successors and assigns,
and (ii) inure to the benefit of the Pledgee and its successors, transferees and
assigns. Upon the payment in full or performance of the Obligations, the Pledgor
shall be entitled to the return, upon his request and at his expense, of such of
the Pledged Collateral as shall not have been released, sold or otherwise
applied pursuant to the terms of the Agreement.
(b) If at any time after payment in full by the Pledgor of all Obligations
and termination of the pledge granted in this Agreement, any payments on
Obligations theretofore made by the Pledgor must be disgorged by the Pledgee for
any reason whatsoever, this Agreement and the pledge granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and the Pledgor shall sign and deliver to Pledgee all documents and things
necessary to reperfect the terminated pledge.
SECTION 15. Severability. In the event that any provision of this Agreement
shall be determined to be superseded, invalid or otherwise unenforceable
pursuant to applicable law, such determination shall not affect the validity of
the remaining provisions of this Agreement, and the remaining provisions of this
Agreement shall be enforced as if the invalid provision were deleted.
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SECTION 16. Survival of Representations, etc. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Note have been paid in full. This
Agreement shall remain and continue in full force and effect without regard to
any modification, execution, renewal, amendment or waiver of any provision of
the Note.
SECTION 17. Termination and Return of Pledged Stock. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
paid and satisfied or until the release, discharge or termination of the Note,
whichever last occurs. Upon the termination of this Agreement, the Pledgee shall
cause to be transferred to Pledgor all of the Pledged Collateral and any money,
property and rights received by Pledgor pursuant thereto, to the extent Pledgee
has not released, taken, sold or otherwise realized upon the same pursuant to
its rights and obligations hereunder.
SECTION 18. Transfer and Assignment. The Pledgee may transfer the Pledged
Collateral and any other property or money held hereunder to any transferee of
the Obligations or any part thereof. The transferee shall thereupon succeed to
all of the Pledgee's rights hereunder with respect to the Pledged Collateral so
transferred. Thereafter, the Pledgee shall have no obligation to Pledgor with
respect to the Pledged Collateral so transferred. The Pledgee shall, however,
retain all of its rights and powers with respect to any part of the Pledged
Collateral not transferred. Every agent or nominee of the Pledgee shall have the
benefit of this Agreement as if named herein and may exercise all of the rights
and powers given to the Pledgee hereunder.
SECTION 19. Entire Agreement. This Agreement, the Secured Non-Recourse
Promissory Note and the Employment Agreement contain the entire agreement of the
parties and supersedes all other agreements, understandings and representations,
oral or otherwise, between the parties with respect to the matters contained
herein. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs,
administrators, fiduciaries, next of kin and executors. Section headings used
herein are for convenience only and shall not affect the meaning or construction
of any of the provisions hereof. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. In the event of any conflict among any of the
documents referred to above, the terms of the Employment Agreement shall
prevail.
SECTION 20. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New Jersey
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Note, terms defined in Article 9 of the Uniform
Commercial Code in the State of New Jersey are used herein as therein defined.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
/s/ Barry Lefkowitz
-------------------------------------
Barry Lefkowitz
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
-------------------------------------
Name: Thomas A. Rizk
Title: President and
Chief Executive Officer
9
SECURED NON-RECOURSE PROMISSORY NOTE
January 21, 1997 $500,000
FOR VALUE RECEIVED, Barry Lefkowitz, an individual residing at 4 Borden
Place, Livingston, New Jersey 07039 ("Payor"), hereby promises to pay to Cali
Realty Corporation, a Maryland corporation ("Payee" or the "Company"), or its
assigns, the principal amount of five hundred thousand dollars ($500,000),
together with all interest accrued thereon calculated from the date hereof in
accordance with the provisions of Section 1 hereof. Certain capitalized terms
used in this Secured Non-Recourse Promissory Note (the "Note") are defined in
Section 6 below.
This Note is being made by Payor in order to finance the Payor's purchase
of 16,000 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") from the Company pursuant to the Payor's employment agreement
with Payee entered into as of January 21, 1997 (the "Employment Agreement").
This Note is secured by the Pledged Collateral under the terms of the
Stock Pledge Agreement and is entitled to the benefits thereof.
1. Accrual of Interest. Interest will accrue on the unpaid principal
amount of this Note from and after the date hereof on a daily basis at the rate
per annum equal to 6.21%, as set forth in the Employment Agreement, and such
interest shall be compounded annually, calculated on the basis of a 365 day
year. Unless forgiven as contemplated herein, interest shall be payable annually
in arrears on each anniversary date hereof.
2. Payment of Note.
(a) Maturity Date. Except as provided in Sections 2(b) and (c) and
Sections 3 and 4 below, the entire unpaid principal balance of this Note
(together with interest accrued thereon) shall become due and payable on the
fifth anniversary of the date of this Note.
(b) Forgiveness of Loan. The principal amount of this Note shall be
automatically forgiven ratably over a five (5) year term in annual equal twenty
percent (20%) increments commencing on the first anniversary of the date of this
Note and each anniversary thereafter. All then accrued but unpaid interest on
this Note shall also be automatically forgiven annually on each applicable
anniversary date; provided, however, subject to the provisions of Sections 3 and
4 hereof, the forgiveness of each principal
<PAGE>
portion of this Note plus interest shall be conditioned upon Payor being in the
employ of the Company on the applicable anniversary date.
(c) Change in Control. Pursuant to the Employment Agreement, in the
event of a Change in Control (as defined in the Employment Agreement) or in the
absence thereof in the Cali Realty Corporation Employee Stock Option Plan) the
entire unpaid principal amount of this Note (including any accrued but unpaid
interest) shall automatically be accelerated and forgiven, and no portion of
this Note shall become due or payable at any time thereafter.
(d) Non-Recourse Obligations. Notwithstanding anything to the
contrary stated herein, Payee agrees that for payment of this Note it will look
solely to the Pledged Collateral and such other collateral, if any, as may now
or hereafter be given to secure the payment of this Note, and no other assets of
Payor shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Payee, or for any payment required to be made
under this Note.
3. Effect of Termination of Employment Due to Disability or Death. In the
event Payor terminates employment with the Company prior to the expiration of
the term of this Note due to his disability (as determined pursuant to the terms
of the Employment Agreement or in the absence thereof by the Committee in its
discretion) or death, the entire unpaid balance of this Note plus interest shall
automatically be accelerated and forgiven on the first day of the calendar month
next succeeding Payor's disability or death, and no portion of this Note shall
become due or payable at any time thereafter.
4. Effect of Termination of Employment For Any Other Reason. In the event
Payor terminates employment with the Company or the Company terminates Payor's
employment with the Company, in each case prior to the expiration of the term of
this Note for any reason other than disability or death, there shall be no
further forgiveness of the principal or the interest of this Note and the entire
unpaid balance of this Note plus interest shall automatically be accelerated and
become due and payable to the Company on the effective date of Payor's
termination of employment with the Company.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) Payor fails to pay when due any amount (whether interest,
principal or other amount) then due or payable on this Note for a period
of ten (10) days after the holder of this Note notifies Payor of such
failure;
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<PAGE>
(ii) Payor fails to perform or observe any other provision contained
in this Note or the Stock Pledge Agreement and such failure continues
unremedied for a period of thirty (30) days after the holder of this Note
notifies Payor of such breach; or
(iii) If an event set forth in Section 4 hereof has occurred, Payor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due; or an order,
judgment or decree is entered adjudicating Payor bankrupt or insolvent; or
any order for relief with respect to Payor is entered under the Bankruptcy
Code; or Payor petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator, or commences any proceeding
relating to himself under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against Payor and either (a) Payor in writing
indicates his approval thereof, consents thereto or acquiesces therein or
(b) such petition, application or proceeding is not dismissed within
ninety (90) days.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
paragraph 3(a)(iii) hereof has occurred, the holder of this Note may
demand (by written notice delivered to Payor) immediate payment of all or
any portion of the outstanding principal amount of this Note together with
any and all accrued interest thereon, which amount shall become due and
payable upon such demand. If an Event of Default of the type described in
paragraph 3(a)(iii) has occurred, then all of the outstanding principal
amount of this Note together with any and all accrued interest thereon
shall automatically be immediately due and payable without any action on
the part of the holder of this Note.
(ii) Each holder of this Note shall also have any other rights which
such holder may have been afforded under this Note or the Stock Pledge
Agreement at any time and any other rights which such holder may have
pursuant to applicable law.
6. Certain Defined Terms. As used in this Note, the following terms shall
have the following meanings:
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
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<PAGE>
"Pledged Collateral" means the Common Stock pledged by Payor under
the Stock Pledge Agreement as security for Payor's performance of his
obligations under this Note.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated the
date hereof between Payor and the Company.
7. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may not be amended and Payor may not take any action
prohibited herein, or omit to perform any act required to be performed by him
herein, unless Payor has obtained the prior written consent of the holder of
this Note.
8. Cancellation. After all obligations for the payment of money arising
under this Note have been paid in full, this Note will be surrendered to Payor
for cancellation.
9. Tax Withholding. The Company shall have the right to deduct and
withhold from any amounts which become taxable to Payor hereunder all employment
and other federal, state and local taxes and charges which are, or which may
hereafter, be required by law to be so deducted or withheld.
10. Notices; Place of Payment. Any notice hereunder shall be in writing
and shall be delivered by recognized courier, facsimile or certified mail,
return receipt requested, and shall be conclusively deemed to have been received
by a party hereto and to be effective on the day on which delivered or
facsimiled to such party at its address set forth below (or at such other
address as such party shall specify in writing):
If to Payor: Barry Lefkowitz
4 Borden Place
Livingston, New Jersey 07039
If to Payee: Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
All payments to be made under this Note are to be delivered to the holder
at such address or to the attention of such person as the holder may designate
by prior written notice to Payor. At the request of the holder of this Note, all
payments shall be made by wire transfer of immediately available funds to an
account which the holder may designate from time to time.
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<PAGE>
11. Waiver of Presentment, Demand, Dishonor.
(a) Payor hereby waives presentment for payment, protest, demand, notice
of protest, notice of nonpayment and diligence with respect to this Note, and
waives and renounces all rights to the benefits of any statute of limitations or
any moratorium, appraisement, exemption, or homestead now provided or that
hereafter may be provided by any federal or applicable state statute, including
but not limited to exemptions provided or allowed under the Bankruptcy Code,
both as to himself and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals and modifications hereof.
(b) No failure on the part of any holder of this Note to exercise any
right or remedy hereunder with respect to Payor, whether before or after the
happening of an Event of Default, shall constitute waiver of any such Event of
Default or of any other Event of Default by such holder or on behalf of any
other holder. No failure to accelerate the debt of Payor evidenced hereby by
reason of an Event of Default or indulgence granted from time to time shall be
construed to be a waiver of the right to insist upon prompt payment thereafter,
or shall be deemed to be a novation of this Note or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any holder of this
Note may have, whether by the laws of the state governing this Note, by
agreement or otherwise, and Payor hereby expressly waives the benefit of any
statute or rule of law or equity that would produce a result contrary to or in
conflict with the foregoing.
12. Governing Law. The validity, construction and interpretation of this
Note shall be governed by and construed in accordance with the internal laws of
the State of New Jersey.
13. Transfer; Assignment. This Note may not be negotiated, assigned or
transferred by Payor at any time, except with Payee's prior written consent.
This Note may not be negotiated, assigned or transferred by Payee except in
connection with the sale of all or substantially all of Payee's assets if the
transferee expressly assumes Payee's obligations under the Employment Agreement.
14. Entire Agreement. This Secured Non-Recourse Promissory Note, the Stock
Pledge Agreement and the Employment Agreement contain the entire agreement of
the parties and supersedes all other agreements, understandings and
representations, oral or otherwise, between the parties with respect to the
matters contained herein. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators, fiduciaries, next of kin and executors. Section headings
used herein are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed in
any number of counterparts with the same effect as if
5
<PAGE>
the signatures thereto and hereto were upon the same instrument. In the event of
any conflict among any of the documents referred to above, the terms of the
Employment Agreement shall prevail.
IN WITNESS WHEREOF, Payor has executed and delivered this Secured
Non-Recourse Promissory Note on the date first written above.
/s/ Barry Lefkowitz
------------------------------
Barry Lefkowitz
================================================================================
EMPLOYMENT AGREEMENT
FOR
JAMES NUGENT
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment................................................................ 1
2. Services.................................................................. 2
3. Compensation and Benefits................................................. 2
4. Termination of Employment and Change in Control........................... 7
5. Confidential Information..................................................15
6. Return of Documents.......................................................16
7. Remedies..................................................................17
8. Successors and Assigns....................................................17
9. Timing of and No Duplication of Payments/Tax Withholding..................18
10. Modification or Waiver....................................................19
11. Notices...................................................................19
12. Governing Law.............................................................20
13. Severability..............................................................20
14. Counterparts..............................................................20
15. Headings..................................................................20
16. Entire Agreement..........................................................21
17. Survival of Agreements....................................................21
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
21, 1997, by and between James Nugent, an individual residing at 608 North
Boulevard, Belmar, New Jersey 07719 ("Executive"), and Cali Realty Corporation,
a Maryland corporation with offices at 11 Commerce Drive, Cranford, New Jersey
07016 (the "Company").
RECITALS
WHEREAS, the Executive has served as Vice President - Leasing of the
Company and, through such service, has acquired special and unique knowledge,
abilities and expertise; and
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the
<PAGE>
applicable expiration date either the Company or Executive shall have given
written notice to the other party that such party does not wish to extend this
Agreement. It being agreed and understood that the extension of this Agreement
shall not create an obligation of the Company to issue new awards to Executive
hereunder. The term of this Agreement, as it may be extended from time to time
in accordance with this Paragraph 1, is referred to herein as the "Employment
Period."
2. Services.
During the Employment Period, Executive shall hold the position of Vice
President - Leasing and shall devote his best efforts and substantially all of
his business time, skill and attention to the business of the Company, and shall
perform such duties as are customarily performed by similar executive officers
and as may be more specifically enumerated from time to time by the Board of
Directors of the Company (the "Board") or the Executive Committee of the Board,
if any; provided, however, that the foregoing is not intended to preclude
Executive from (i) owning and managing personal investments, including real
estate investments or (ii) engaging in charitable activities and community
affairs, provided that the performance of these activities does not prevent
Executive from devoting substantially all of his business time to the Company.
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $140,000 (the "Annual Base Salary"), payable
in
2
<PAGE>
accordance with the Company's regular payroll practices. In addition, Executive
also shall be eligible for incentive compensation payable each year in such
amounts as may be determined by the Compensation Committee of the Board (the
"Compensation Committee") based upon, among other factors, growth in Funds from
Operations per Common Share (as hereinafter defined) for the year. Executive's
Annual Base Salary shall be reviewed annually in accordance with the policy of
the Company from time to time and may be subject to upward adjustment based on,
among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan") and other benefit plans
(including without limitation the Cali Realty Corporation
401(k) Savings and Retirement Plan and any other stock option
plans which may be adopted or maintained by the Company) made
generally available to executives of the Company with such
participation to be consistent with reasonable Company
guidelines;
(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
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<PAGE>
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
As further consideration for Executive agreeing to serve as an
officer and entering into this Agreement upon the terms set forth herein, the
Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
(a) grant to Executive 7,405 restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions of
this Agreement, and the written agreement, issued pursuant to
this Agreement, evidencing such award executed between the
Company and Executive (the "Restricted Share Agreement"). In
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<PAGE>
the event of a conflict between the Restricted Share Agreement
and this Agreement, the terms of this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with
twenty percent (20%) of the Restricted Shares vesting on each
of the first anniversary of the date hereof (the "First
Anniversary"), the second anniversary of the date hereof (the
"Second Anniversary"),the third anniversary of the date hereof
(the "Third Anniversary"), the fourth anniversary of the date
hereof (the "Fourth Anniversary") and the fifth anniversary of
the date hereof (the "Fifth Anniversary"), provided, that
certain Performance Goals as defined and set forth in the
Restricted Share Agreement are met. Vesting shall be
cumulative in accordance with the provisions of the Restricted
Share Agreement and the Performance Goals may be achieved as
specified therein up until the seventh anniversary of the date
hereof. Except as otherwise provided in Paragraph 4 hereof,
Executive must be employed by the Company on the applicable
anniversary date to vest in the Restricted Shares scheduled to
vest in a particular year. The measurement date to determine
such vesting shall be the last day of the Company's fiscal
year preceding the year in which the applicable anniversary
date occurs.
In addition, upon vesting of the Restricted Shares on each
applicable anniversary date, the Company shall make a cash
payment to Executive on that anniversary date in an amount
equal to forty percent (40%) of the Fair Market Value
(determined as of such anniversary date) of the Restricted
Shares that vest on such anniversary date (the "Restricted
Share Tax Gross-Up Payment").
(b) loan on a non-recourse basis to Executive $400,000 (the "Stock
Acquisition Loan"), with the loan proceeds to be used by
Executive simultaneously to purchase newly issued Common Stock
from the Company. Interest shall accrue on the Stock
Acquisition Loan at the rate of 6.21% per year and shall be
payable, on the entire outstanding balance, annually in
arrears. The Stock Acquisition Loan is being granted and
secured pursuant to the terms and conditions of this
Agreement, and a Secured Non-Recourse Promissory Note and
Stock Pledge Agreement evidencing and securing such Loan as
executed between the Company and Executive. In the event of a
conflict between the aforementioned documents and this
Agreement, the terms of this Agreement shall control.
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<PAGE>
The Stock Acquisition Loan shall be forgiven over a period of
five (5) years from the date hereof, with twenty percent (20%)
of the principal and interest on the then outstanding balance
of the principal to be forgiven on each applicable anniversary
date (the "Forgiven Amount"). In addition, on each applicable
anniversary date as the Stock Acquisition Loan and interest
accrued thereon is forgiven, in order to enable Executive to
meet his tax liability with respect to the forgiveness of the
Stock Acquisition Loan, the Company shall make a cash payment
to Executive on that anniversary date in an amount equal to
forty percent (40%) of the respective Forgiven Amount (the
"Acquisition Loan Tax Gross-Up Payment"). Since the Stock
Acquisition Loan will be forgiven over a five (5) year period,
a total of five (5) Acquisition Loan Tax Gross-Up Payments
will be made to Executive over the period of forgiveness. No
additional payments will be made to Executive with respect to
any Acquisition Loan Tax Gross-Up Payments made hereunder.
Except as otherwise provided in Paragraph 4 hereof, the
aforementioned forgiveness of the Stock Acquisition Loan
inclusive of interest thereon and respective Acquisition Loan
Tax Gross-Up Payment shall only occur if Executive is employed
by the Company on the applicable anniversary date.
The Stock Acquisition Loan shall be initially secured by the
shares of Common Stock purchased by Executive from the Company
with the proceeds of the Stock Acquisition Loan. Beginning on
the First Anniversary, the outstanding balance of the Stock
Acquisition Loan shall be secured only by shares of Common
Stock having a Fair Market Value of one hundred and ten
percent (110%) of the outstanding principal amount of the
Stock Acquisition Loan (together with interest accrued
thereon). On the First Anniversary, and on each anniversary
date, March 31, June 30 and September 30 through the Fifth
Anniversary (each such date a "Determination Date"), the
Company shall reasonably determine the aggregate Fair Market
Value of the collateral (the "Market Value") being held. If on
such Determination Date the Market Value exceeds one hundred
ten percent (110%) of the outstanding balance of the Stock
Acquisition Loan (together with interest accrued thereon) on
such Determination Date (the "Base Value"), the Company shall,
unless otherwise requested by Executive, automatically release
to Executive such portion of the collateral the aggregate Fair
Market Value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances under
the Stock Pledge Agreement.
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<PAGE>
Executive shall be required to execute the aforementioned
Stock Pledge Agreement and Secured Non-Recourse Promissory
Note. The Company shall then issue shares of Common Stock to
Executive in exchange for the Stock Acquisition Loan. The
Company shall, upon receipt from Executive of the Stock Pledge
Agreement and Secured Non-Recourse Promissory Note for the
purchase of the shares of Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt delivery
of the certificates evidencing the shares of Common Stock to
Executive, subject to any requirements set forth in the Stock
Pledge Agreement; provided, however, that if any law or
regulation requires the Company to take any action with
respect to such shares prior to the delivery thereof, then the
date of the delivery of the shares shall be extended for the
period necessary to complete such action. Certificates for
shares of Common Stock when issued to Executive may have
restrictive legends or statements of other applicable
restrictions endorsed thereon and may not be immediately
transferable.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which have vested and are exercisable in accordance with
the terms of the applicable option grant agreement or plan, (ii) to retain any
Restricted Shares previously awarded to Executive pursuant to this Agreement and
the Restricted Share Agreement and any Restricted Share Tax Gross-Up Payments
which are fully vested on the date of termination, and (iii) to retain any
shares of Common Stock purchased by Executive with the proceeds of the Stock
Acquisition Loan which are no longer pledged as
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<PAGE>
collateral for the outstanding balance of the Stock Acquisition Loan and any
Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts and to
retain the balance of the shares of Common Stock which are still pledged as
collateral for the outstanding balance of the Stock Acquisition Loan, provided,
that Executive immediately repays to the Company the outstanding balance of the
Stock Acquisition Loan including interest accrued thereon through the date of
termination. Except for any rights which Executive may have to unpaid salary
amounts through and including the date of termination, vested options, vested
Restricted Shares and related Restricted Share Tax Gross-Up Payments, and shares
of Common Stock purchased with the proceeds of the Stock Acquisition Loan and
related Acquisition Loan Tax Gross-Up Payments, all as set forth above, the
Company shall have no further obligations hereunder following such termination.
(b) Termination of Employment Upon Death or Disability. In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar year in which such termination
occurred and ending with the date the Employment Period ends (assuming such
termination did not occur), of the average annual amount of incentive
compensation payments paid to Executive during each previous year of Executive's
employment hereunder (the "Pro-Rata Portion of Incentive Compensation"). The
aforesaid amount shall be payable, at the option of Executive, his estate or his
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<PAGE>
personal representative, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, his estate or his personal
representative, within one (1) year of the date of such termination, to exercise
any options which have vested (including, without limitation, by acceleration in
accordance with the terms of the applicable option grant agreement or plan) and
are exercisable in accordance with the terms of the applicable option grant
agreement or plan or to require the Company (upon written notice delivered
within one hundred eighty (180) days following the date of Executive's
termination) to repurchase all or any portion of Executive's vested options to
purchase shares of Common Stock at a price equal to the difference between the
Repurchase Fair Market Value (as hereinafter defined) of the shares of Common
Stock for which the options to be repurchased are exercisable and the exercise
price of such option as of the date of Executive's termination of employment,
(ii) to retain all Restricted Shares awarded to Executive pursuant to this
Agreement and the Restricted Share Agreement whether or not such Restricted
Shares had previously vested as of the date of termination. In the event any
Restricted Shares have not vested as of the date of termination, such Restricted
Shares shall immediately vest and Executive, his estate or his personal
representative shall receive a cash payment from the Company on the date of
termination in an amount equal to forty percent (40%) of the Fair Market Value
(determined as of the date of termination) of the Restricted Shares that vest on
the date of termination (the "Termination Restricted Share Tax Gross-Up
Payment"), (iii) to retain all shares of Common Stock purchased by Executive
with the proceeds of the Stock Acquisition Loan without regard to whether or not
the Stock Acquisition Loan
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<PAGE>
has been forgiven or repaid. In the event there is an outstanding balance on the
Stock Acquisition Loan, such outstanding balance including interest accrued
thereon shall on the first day of the calendar month next succeeding Executive's
Disability or death be forgiven (and any shares pledged under the Stock Pledge
Agreement shall be released to Executive, his estate or his personal
representative) and Executive, his estate or his personal representative shall
receive a cash payment from the Company on that date in an amount equal to forty
percent (40%) of the outstanding balance of the Stock Acquisition Loan and
interest accrued thereon that is forgiven on the date of termination (the
"Termination Acquisition Loan Tax Gross-Up Payment"). Except for any rights
which Executive may have to unpaid salary amounts through the end of the
Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, Restricted Shares (and the full vesting thereof) and the Termination
Restricted Share Tax Gross-Up Payment, and shares of Common Stock purchased with
the proceeds of the Stock Acquisition Loan (and the forgiveness of the
outstanding balance of the Stock Acquisition Loan inclusive of interest accrued
thereon) and the Termination Acquisition Loan Tax Gross-Up Payment, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive (A) the unpaid
salary through the end of the Employment Period remaining (assuming no such
termination occurred) and (B) a pro-rata portion, based upon the number of days
in the
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<PAGE>
period beginning with January 1 of the calendar year in which such termination
occurred and ending with the date the Employment Period ends (assuming such
termination did not occur), of the average annual amount of incentive
compensation payments paid to Executive during each previous year of Executive's
employment hereunder. The aforesaid amount shall be payable, at the option of
Executive, either (i) in full immediately upon such termination or (ii) monthly
over the remainder of the Employment Period. In addition, Executive shall be
entitled (i) at the option of Executive, within ninety (90) days of the date of
such termination, to exercise any options which have vested (including, without
limitation, by acceleration in accordance with the terms of the applicable
option grant agreement or plan) and are exercisable in accordance with the terms
of the applicable option grant agreement or plan, it being agreed and understood
that this Agreement does not require the Company to issue options to Executive,
(ii) to retain any Restricted Shares previously awarded to Executive pursuant to
this Agreement and the Restricted Share Agreement and any Restricted Share Tax
Gross-Up Payments which are fully vested on the date of termination, and (iii)
to retain any shares of Common Stock purchased by Executive with the proceeds of
the Stock Acquisition Loan which are no longer pledged as collateral for the
outstanding balance of the Stock Acquisition Loan and any Acquisition Loan Tax
Gross-Up Payments applicable to Forgiven Amounts and to retain the balance of
the shares of Common Stock which are still pledged as collateral for the
outstanding balance of the Stock Acquisition Loan, provided, that Executive
immediately repays to the Company the outstanding balance of the Stock
Acquisition Loan including interest accrued thereon through the date of
termination. Except for any
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<PAGE>
rights which Executive may have to unpaid salary amounts through the end of the
Employment Period, the Pro-Rata Portion of Incentive Compensation, vested
options, vested Restricted Shares and related Restricted Share Tax Gross-Up
Payments, and shares of Common Stock purchased with the proceeds of the Stock
Acquisition Loan and related Acquisition Loan Tax Gross-Up Payments, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled (i) to all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the Change in Control (the
"Change in Control Restricted Share Tax Gross-Up Payment"), (ii) to all
shares of Common Stock purchased by Executive with the proceeds of the Stock
Acquisition Loan without regard to whether or not the Stock Acquisition Loan has
been forgiven or repaid. In the event there is an outstanding balance on the
Stock Acquisition Loan, such outstanding balance including interest accrued
thereon through the date of the Change in Control shall be immediately forgiven
(and any shares pledged under the Stock Pledge Agreement shall be released to
Executive) and Executive shall receive a cash payment from the Company on the
date of the Change
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<PAGE>
in Control in an amount equal to forty percent (40%) of the outstanding balance
of the Stock Acquisition Loan and interest accrued thereon that is forgiven on
the date of the Change in Control (the "Change in Control Acquisition Loan Tax
Gross-Up Payment") and (iii) an excise tax gross-up payment. If it is determined
by an indpendent accountant mutually acceptable to the Company and Executive
that as a result of compensation paid and other benefits provided to Executive
by the Company pursuant to this Agreement or otherwise, a tax will be imposed
on Executive pursuant to Section 4999 of the Code (or any successor provisions)
the Company shall pay Executive in cash an amount equal to the excise tax for
which the Executive is liable under Section 4999 of the Code.
Any cash payments owed to Executive pursuant to this Paragraph 4(d) shall
be paid to Executive in a single sum on or immediately prior to date of the
Change in Control but prior to the consummation of the transaction with any
successor.
In addition, any other options previously or hereafter granted to
Executive that have not vested as of the date of the Change in Control shall
immediately vest upon the occurrence of and on the date of a Change in Control
irrespective of whether Executive's employment terminates in connection with
such Change in Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure by
Executive to substantially perform his duties hereunder (other
than any such failure resulting from Executive's incapacity
due to physical or mental illness) for a period of thirty (30)
days after written demand for substantial performance is
delivered by the Company specifically identifying the manner
in which the Company believes Executive has not substantially
performed his duties, or (B) willful misconduct by Executive
which is materially injurious to the Company, monetarily or
otherwise, or (C) the willful violation by Executive of the
provisions of Paragraph 5 hereof. For purposes of this
Paragraph 4(e)(i), no act, or failure to act, on Executive's
part shall be considered "willful" unless done, or omitted to
be done, by him (I) not in good faith and (II) without
reasonable belief that his action or omission was in
furtherance of the interests of the Company.
(ii) "Change in Control" shall mean that any of the following
events has occurred: (a) any "person" or "group" of persons,
as such terms are used in Sections 13 and 14 of the Securities
Exchange Act of 1934, as amended (the
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<PAGE>
"Exchange Act"), other than any employee benefit plan
sponsored by the Company, becomes the "beneficial owner", as
such term is used in Section 13 of the Exchange Act, of thirty
percent (30%) or more of the Common Stock of the Company
issued and outstanding immediately prior to such acquisition;
(b) any Common Stock of the Company is purchased pursuant to a
tender or exchange offer other than an offer by the Company;
or (c) the dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the Company or
any sale or other disposition of all or substantially all of
its assets, if the shareholders of the Company immediately
before such transaction own, immediately after consummation of
such transaction, equity securities (other than options and
other rights to acquire equity securities) possessing less
than thirty percent (30%) of the voting power of the surviving
or acquiring company.
(iii) "Disability" shall mean the determination by the Company, upon
the advice of an independent qualified physician, reasonably
acceptable to Executive, that Executive has become physically
or mentally incapable of performing his duties under this
Agreement and such disability has disabled Executive for a
cumulative period of one hundred eighty (180) days within a
twelve (12) month period.
(iv) "Fair Market Value" shall mean the closing price of the Common
Stock as quoted on the New York Stock Exchange at the end of
the last business day preceding the Determination Date, the
applicable anniversary or the date of termination, as the case
may be, as reported in the New York edition of the Wall Street
Journal.
(v) "Good Reason" shall mean (A) any material and substantial
breach of this Agreement by the Company, (B) a material
reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any other
failure by the Company to comply with Paragraph 3 hereof, or
(C) the Company shall have given notice pursuant to Paragraph
1 hereof at any time prior to the sixth anniversary of the
date hereof that it does not wish to extend this Agreement,
except in connection with termination of Executive's
employment for Cause or by reason of death or Disability.
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(vi) "Repurchase Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the Common
Stock on each of the trading days within the thirty (30) days
immediately preceding the date of termination of Executive's
employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall not, directly or indirectly, at any time, either during or
after his employment with the Company, without the Company's prior written
consent, use any of such Confidential Information or disclose any of such
Confidential Information to any individual or entity other than the Company or
its employees, except as required in the performance of his duties for the
Company or as otherwise required by law. Executive shall take all
15
<PAGE>
reasonable steps to safeguard such Confidential Information and to protect such
Confidential Information against disclosure, misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company, and shall be delivered to the Company, without
retaining any copies, upon the termination of Executive's employment or at any
time as requested by the Company.
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<PAGE>
7. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5 or 6 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5 or 6 of
this Agreement, the Company may, in addition and supplementary to other rights
and remedies existing in its favor, apply to any court of law or equity of
competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
8. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated due to Disability,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify
17
<PAGE>
such date as the date of termination. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to all or
substantially all of its business and/or its assets as aforesaid which executes
and delivers the agreement provided for in this Paragraph 8 or which otherwise
becomes bound by all the terms and provisions of this Agreement by operation of
law. Any cash payments owed to Executive pursuant to this Paragraph 8 shall be
paid to Executive in a single sum immediately prior to the consummation of the
transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's beneficiary as determined under any applicable plan,
Executive's devisee, legatee, or other designee or, if there be no such
designee, to Executive's estate.
9. Timing of and No Duplication of Payments/Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
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<PAGE>
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
10. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or discharge any provision or term of this Agreement. No
delay on the part of the Company or Executive in the exercise of any of their
respective rights or remedies shall operate as a waiver thereof, and no single
or partial exercise by the Company or Executive of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any other occasion.
11. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to the Company or Executive, as applicable, at the address set forth
above (or to such other address as shall have been previously provided in
accordance with this Paragraph 11).
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<PAGE>
12. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
13. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then such provision or term shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or affecting in any manner whatsoever the remainder of such
provisions or term or the remaining provisions or terms of this Agreement.
14. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
15. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
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16. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
17. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7 and 13 each shall survive the
termination of this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
----------------------------------
Name: Thomas A. Rizk
Title: President
/s/ James Nugent
----------------------------------
James Nugent
22
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
JAMES NUGENT
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED
SHARE AWARD PURSUANT TO THE EMPLOYMENT AGREEMENT
FOR JAMES NUGENT ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant
Date") by and between Cali Realty Corporation (the "Company") and James Nugent
("Recipient").
WHEREAS, pursuant to the employment agreement between Recipient and
the Company entered into as of January 21, 1997 (the "Employment Agreement"),
the Company has awarded shares of the Company's common stock, par value $.01 per
share ("Common Stock") to the Recipient subject to such terms, conditions, and
restrictions (hereinafter, "Restricted Share Award") as set forth in the
Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock.
Pursuant to the Employment Agreement, the Company hereby awards to
the Recipient, effective as of the Grant Date, a Restricted Share Award
representing the right to earn 7,405 shares of Common Stock ("Restricted
Shares") subject to the terms, conditions and restrictions set forth herein.
Capitalized terms not otherwise defined in this Agreement shall be as defined in
the Employment Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not
vest in the Recipient, and shall be subject to forfeiture until the conditions
of Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the
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"Vesting Date."
(b) Vesting. An aggregate of 7,405 Restricted Shares may be
earned by the Recipient and vest on a cumulative basis over a five to seven year
Vesting Period, with 1,481 Restricted Shares scheduled to be vested and earned
on each Vesting Date provided the Performance Goals specified in Section 2(c)
below are satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 1,481 Restricted Shares
shall vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of
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outstanding limited partnership units of Cali Realty, L.P., a Delaware limited
partnership of which the Company is the sole general partner, for the applicable
period.
(ii) In the event that neither of the Financial Tests
above is satisfied in the measurement period ending on the applicable Vesting
Date ("Non-Achievement Year"), any Restricted Shares that failed to vest on such
Date may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (I) and (II) above to be satisfied. Notwithstanding any
contrary
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provisions contained in this Section 2(c), any Restricted Shares that have not
been earned and vested by January 21, 2004 pursuant to the Cumulative Test shall
automatically be canceled and forfeited.
(d) Lapse of Restrictions. Upon the Vesting of
Restricted Shares, the Recipient shall own the Shares free and clear of all
restrictions imposed by this Agreement and the Recipient shall be free to hold
or dispose of such Shares in his discretion, subject to applicable federal and
state law or regulations.
(e) Prohibition Against Assignment. During the Vesting
Period, the Restricted Shares may not be transferred or encumbered by the
Recipient by means of sale, assignment, mortgage, transfer, exchange, pledge, or
otherwise. The levy of any execution, attachment, or similar process upon the
Restricted Shares shall be null and void.
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3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one
or more stock certificates registered in the name of the Recipient or a nominee
or nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to
the designee of the Company (the "Designee") a stock power designating the
Company as the transferee of an unspecified number of Shares, which stock power
may be completed by the Designee as specified herein. The Recipient and the
Company each waive the requirement that the signature of the Recipient on the
stock power be guaranteed. Upon receipt of a copy of this Agreement and the
stock power, each signed by the Recipient, the Designee shall promptly notify
the proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to be held in accordance with the terms of the
Employment Agreement and this Agreement.
(c) Effect of Vesting. Upon Vesting, the Company shall cause
to be delivered to the Recipient (i) a certificate for the Shares which have
vested free and clear of restrictive legends and (ii) any stock powers signed
hereunder by the Recipient remaining in its possession. In the event that the
Recipient dies after Vesting and before delivery of the certificate, such
certificate shall be delivered to, and registered in the name of, the
Recipient's beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in
Section 2 and this Section 3, during the Vesting Period and after the
certificates for the Restricted Shares have been issued, the Recipient shall be
entitled to all rights of a
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stockholder of the Company, including the right to vote and the right to receive
dividends, with respect to the Restricted Shares subject to this Agreement.
Subject to applicable withholding requirements, if any, dividends on the
Restricted Shares shall be paid to the Recipient when earned.
(e) Power of Designee. The Designee is hereby authorized by
the Recipient to utilize the stock power delivered by the Recipient to transfer
all forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Due to Disability or Death; Change in Control.
Unless otherwise provided in the Employment Agreement, if the Recipient
terminates employment with the Company prior to the end of the Vesting Period
set forth in this Agreement due to Disability or death, all Restricted Shares
subject to this Agreement and held by, or on behalf of, the Recipient shall be
deemed earned and vested as of the Recipient's last day of employment with the
Company. In addition, unless otherwise provided in the Employment Agreement, all
Restricted Shares subject to this Agreement and held by the Recipient on the
date a Change in Control occurs shall be deemed earned and vested as of such
date.
(b) Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
Agreement for reasons other than Disability or death, any Restricted Shares
subject to this Agreement that have not been earned and vested prior to the
Recipient's termination of employment shall be immediately forfeited on the last
day of the Recipient's employment with the Company.
5. Withholding.
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In connection with the delivery of any stock certificates, or
the making of any payment in accordance with the provisions of this Agreement,
the Company shall withhold Shares or cash amounts (for fractional Shares) equal
to the taxes then required by applicable federal, state and local law to be so
withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall
be entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from
the Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the Fair Market Value of the Restricted
Shares at time of distribution, exclusive of dividends.
(b) Effect of Termination Due to Disability or Death; Change
in Control. Unless otherwise provided in the Employment Agreement, if the
Recipient terminates employment with the Company prior to the end of the Vesting
Period set forth in this Agreement due to Disability or death, or in the event a
Change in Control occurs, a final Tax Gross-Up Payment shall be made to the
Recipient (or his Beneficiary, as the case may be) in a dollar amount equal to
forty (40%) percent of the Fair Market Value of the Restricted Shares
distributed to the Recipient (or his beneficiary), exclusive of dividends.
Payment of the final Tax Gross-Up Payment shall be made on the date the
Restricted Shares are distributed or as soon as administratively feasible
thereafter.
(c) Effect of Termination for Any Other Reason. Unless
otherwise provided in the Employment Agreement, if the Recipient's employment
with the Company terminates prior to the end of the Vesting Period set forth in
this Agreement for any reason other than Disability or death, no further Tax
Gross-Up Payments shall be made to such Recipient.
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7. Adjustments for Capital Changes.
In the event of any change in the outstanding shares of Common
Stock of the Company by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease in such
shares effected without receipt or payment of consideration by the Company, a
duly authorized representative of the Company shall adjust the number of
Restricted Shares granted pursuant to the Employment Agreement and this
Agreement to prevent dilution or enlargement of the rights granted to the
Recipient.
8. No Right to Continued Employment.
Nothing in this Agreement shall confer on the Recipient any
right to continue as an employee of the Company or in any way affect the
Company's or any subsidiary's right to terminate the Recipient's employment at
any time.
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9. Notice.
Any notice to the Company hereunder shall be in writing addressed
to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
Any notice to the Recipient hereunder shall be in writing addressed
to:
Mr. James Nugent
608 North Boulevard
Belmar, New Jersey 07719
or such other address as the Recipient shall notify the Company in
writing.
10. Entire Agreement; Effect of Employment Agreement.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties and shall not be modified or amended except in
writing and duly signed by each of the parties hereto. No waiver by either party
of any default under this Agreement shall be deemed a waiver of any later
default thereof.
(b) Effect of Employment Agreement. In the event the
Employment Agreement with the Company contains additional rights, duties and/or
obligations with respect to the Recipient, such terms and conditions shall
govern the Recipient's Restricted Share Award as if such terms and conditions
had been set forth herein; and in the event of any conflict or inconsistency
between the terms of the Employment Agreement or this Agreement, the terms and
conditions of the Employment Agreement shall control.
11. Construction.
The various provisions of this Agreement are severable in
their entirety. Any determination of invalidity or unenforceability of any one
provision shall have no effect on the continuing force and effect of the
remaining provisions.
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12. Governing Law.
This Agreement shall be governed by the laws of the State of New
Jersey applicable to contracts made, and to be enforced, within the State of New
Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of
the successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
to be effective on the date first above written.
Cali Realty Corporation
By: /s/ John R. Cali
------------------------------
John R. Cali
Chief Administrative Officer
Recipient
/s/ James Nugent
------------------------------
James Nugent
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STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of January 21, 1997, made by James
Nugent, an individual residing at 608 North Boulevard, Belmar, New Jersey 07719
(the "Pledgor"), to Cali Realty Corporation, a Maryland corporation, (the
"Pledgee" or the "Company").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of 12,800 shares
of the issued and outstanding shares of common stock, $.01 par value (the
"Common Stock"), of the Company (such Common Stock being the "Pledged Shares"),
acquired in connection with the Pledgor's employment agreement with the Pledgee
entered into as of January 21, 1997 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement, the Pledgor has agreed to
secure, to the extent hereinafter set forth, the payment in full and the
performance of the obligations of the Pledgor to the Pledgee under a
non-recourse promissory note, dated as of the date hereof, in the amount of
$400,000 (such promissory note as it may hereafter be amended or otherwise
modified from time to time, the "Note"); and the capitalized terms used herein,
and not otherwise defined herein, are used with the meanings ascribed to them in
the Note); and
WHEREAS, the Pledgor hereby pledges and grants a lien and security
interest to Pledgee in the Pledged Shares to secure the Pledgor's obligations
under the Note.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Pledgee to make the loan under the Note, the Pledgor hereby agrees as
follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Pledgee, and grants
to the Pledgee a security interest in the Pledged Shares and certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares,), and all
proceeds thereof, additions thereto and changes therein (the "Pledged
Collateral").
SECTION 2. Security for Obligations; Non-Recourse Obligations. (a) This
Agreement secures the payment of all liabilities, obligations and indebtedness
of any and every kind and nature heretofore, now or hereafter owing, arising,
due or payable from the Pledgor to the Pledgee pursuant to the Note, however
evidenced, created, incurred, acquired or owing, whether primary or secondary,
direct or indirect, joint or several, contingent or fixed, or otherwise,
including without limitation, obligations of performance, and whether arising
under any other agreements, documents or instruments entered into in connection
with the Note, now or hereafter given by the Pledgor to the Pledgee and whether
arising by book entry, agreement or operation of law and whether or not
evidenced by promissory notes or other evidences of indebtedness (all such
obligations of the Pledgor being the "Obligations").
(b) It is expressly understood and agreed that it is the intention
of the parties that the Obligations of the Pledgor under the Note are
non-recourse obligations of the Pledgor and
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that the Pledgee's right to recover against the Pledgor hereunder in respect of
such Obligations shall be limited solely to the Pledged Collateral.
SECTION 3. Delivery and Release of Pledged Collateral. (a) All
certificates or instruments representing or evidencing the Pledged Collateral
shall be delivered to and held by or on behalf of the Pledgee pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. The Pledgee shall hold the Pledged
Collateral in the form in which it is delivered to the Pledgee unless and until
the occurrence and continuation of an Event of Default under the Note (unless
such Event of Default is waived by the Pledgee) or as otherwise provided in
paragraph 3(b) below. Upon the occurrence and continuance of an Event of Default
under the Note, the Pledgee shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in the name of
the Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 6(a) below. In addition, the
Pledgee shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations.
(b) On the first anniversary date of this Agreement, and on each
anniversary date and each March 31, June 30 and September 30 thereafter for the
term of this Agreement (each such date a "Determination Date"), the Pledgee
shall reasonably determine the aggregate fair market value of the Pledged
Collateral (the "Market Value"). If on such Determination Date the Market Value
exceeds one hundred ten percent (110%) of the aggregate principal amount of the
Note (together with interest accrued thereon) on such Determination Date (the
"Base Value"), Pledgee shall, unless otherwise requested by Pledgor,
automatically release to the Pledgor such portion of the Pledged Collateral the
aggregate fair market value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances hereunder. For purposes
of this paragraph 3(b), "fair market value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the end of the last
business day preceding the Determination Date as reported in the New York
edition of The Wall Street Journal.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, adverse claim, security interest, option
or other charge or encumbrance, except for the security interest created by this
Agreement.
(b) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Obligations.
(c) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by the Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement, stockholder agreement, or other agreement
or instrument to which the Pledgor is a party or by which he is bound or (ii)
any provision of law, any order of any court or administrative agency or any
rule or regulation applicable to the Pledgor, subject to applicable state and
federal securities laws.
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(d) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms.
(e) There are no actions, suits or proceedings (whether or not
purportedly on behalf of the Pledgor) pending or, to the best knowledge of the
Pledgor, threatened affecting the Pledgor that involve the Pledged Collateral.
(f) All consents or approvals, if any, required as a condition
precedent to or in connection with the due and valid execution, delivery and
performance by the Pledgor of this Agreement have been obtained, subject to
applicable state and federal securities laws.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Pledgee may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Pledgee to exercise and enforce
its rights and remedies hereunder, subject to applicable state and federal
securities laws, with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends, Etc. (a) So long as no Event of
Default under the Note shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Note.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral;
provided, however, that any and all:
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral (whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of
the Company, or any merger, consolidation, acquisition or other
exchange of assets or securities to which the Company may be a
party, or any conversion, call or redemption, or otherwise);
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral,
shall be, at the option and request of the Pledgee, forthwith delivered to
the Pledgee to hold as Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be
segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Pledgee as Pledged Collateral in the same form
as so received (with any necessary endorsement).
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(iii) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as
the Pledgor may reasonably request for the purpose of enabling the Pledgor
to exercise the voting and other rights which he is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest
payments which he is authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default
under the Note, and at the election of Pledgee:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which he would otherwise be entitled to exercise
pursuant to Section 6(a)(i) and to receive the dividends and interest
payments which he would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) shall cease for the period subsequent to the
Event of Default, and all such rights shall thereupon become vested in the
Pledgee who shall thereupon have the sole right to exercise such voting
and other consensual rights and to receive and hold as Pledged Collateral
such dividends and interest payments.
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 6(b)
shall be received in trust for the benefit of the Pledgee, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the Pledgee as Pledged Collateral in the same form as so received
(with any necessary endorsement).
(c) In the event that during the term of this Agreement subscription
warrants or other rights or options shall be issued in connection with the
Pledged Collateral, all such stock warrants, rights and options shall forthwith
be assigned by the Pledgor to the Pledgee and said stock warrants, rights and
options shall be, and, to the extent exercised by Pledgor, all new stock issued
pursuant thereto shall be pledged by Pledgor to Pledgee to be held as, and shall
be deemed to be part of, the "Pledged Collateral" under the terms of this
Agreement in the same manner as the shares of stock originally pledged
hereunder.
SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor
agrees that he will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral, or (ii) create or permit to
exist any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Pledged Collateral, except for the security interest under
this Agreement.
SECTION 8. Litigation Respecting Pledged Shares. In the event any action,
suit or other proceeding at law, in equity, in arbitration or before any other
authority involving or affecting the Pledged Collateral becomes known to or is
contemplated by the Pledgor, the Pledgor shall give the Pledgee immediate notice
thereof and if the Pledgor is contemplating such action, suit or other
proceeding, the Pledgor shall receive the written consent of the Pledgee prior
to commencing any such action, suit or other proceeding.
SECTION 9. Pledgee Appointed Attorney-in-Fact. (a) If an Event of Default
shall occur and be continuing under the Note (unless such Event of Default is
waived by the Pledgee), Pledgor hereby appoints the Pledgee (and any officer or
agent of the Pledgee with full power of substitution and revocation) the
Pledgor's true and lawful attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion to take any action and to execute any
instrument which the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including,
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without limitation, (i) to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and (ii) to transfer the Pledged Collateral on
the books of the Company, in whole or in part, to the name of the Pledgee or
such other person or persons as the Pledgee may designate; take possession of
and endorse any one or more checks, drafts, bills of exchange, money orders or
any other documents received on account of the Pledged Collateral; collect, sue
for and give acquittances for moneys due on account of the foregoing; withdraw
any claims, suits, or proceedings pertaining to or arising out of the foregoing;
execute and record or file on behalf of the Pledgor any evidence of a security
interest contemplated by this Agreement or any refiling, continuation or
extension thereof; take any other action contemplated by this Agreement; and
sign, execute, acknowledge, swear to, verify, deliver, file, record and publish
any one or more of the foregoing.
(b) The powers of attorney which shall be granted pursuant to
Section 9(a) and all authority thereby conferred shall be granted and conferred
solely to protect the Pledgee's interests in the Pledged Collateral and shall
not impose any duty upon the attorney-in-fact to exercise such powers. Such
powers of attorney shall be irrevocable prior to the performance in full of the
Obligations and shall not be terminated prior thereto or affected by any act of
the Pledgor or other person or by operation of law, including, but not limited
to, the dissolution, death, disability or incompetency of any person, the
termination of any trust, or the occurrence of any other event, and if the
Pledgor or any other person should be dissolved or die or become disabled or
incompetent or any other event should occur before the performance in full of
the Obligations and termination of this Agreement, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of attorney as if such
dissolution, death, disability or incompetency or other event had not occurred
and regardless of notice thereof.
(c) Each person who shall be a transferee of the beneficial
ownership of the Pledged Collateral, by the acceptance of such a transfer, shall
be deemed to have irrevocably appointed the Pledgee, with full power of
substitution and revocation, such person's true and lawful attorney-in-fact in
such person's name and otherwise to do any and all acts permitted to, and to
exercise any and all powers herein conferred upon, such attorney-in- fact.
SECTION 10. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. Remedies Upon Event of Default.
(a) Subject to Section 2(b) hereof, if any Event of Default under
the Note shall have occurred and be continuing (unless such Event of Default is
waived by the Pledgee), for the period subsequent to the Event of Default:
(i) The Pledgee may receive and retain all payments of any kind with
respect to the Pledged Collateral and may notify the obligors or other
parties, if any, interested in any items of Pledged Collateral of the
interest of the Pledgee therein and of any action proposed to be taken
with respect thereto, and inform any of those parties that all payments
otherwise payable to the Pledgor with
5
<PAGE>
respect thereto shall be made to the Pledgee until all amounts due under
the Note have been paid in full;
(ii) The Pledgee may exercise in respect of the Pledged Collateral,
in addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on default
under the Uniform Commercial Code (the "Code") in effect in the State of
New Jersey at that time, and the Pledgee may also, without notice except
as specified below, sell the Pledged Collateral or any part thereof in one
or more parcels at public or private sale, at any exchange, broker's board
or at any of the Pledgee's offices or elsewhere, for cash, on credit or
for future delivery, and upon such other terms as the Pledgee may deem
commercially reasonable. The Pledgor agrees that, to the extent notice of
sale shall be required by law, at least ten days' notice to the Pledgor of
the time and place of any public sale or the time after which any private
sale is to be made shall constitute reasonable notification. The Pledgee
shall not be obligated to make any sale of Pledged Collateral regardless
of notice of sale having been given. The Pledgee may adjourn any public or
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned;
(iii) Any cash held by the Pledgee as Pledged Collateral and all
cash proceeds received by the Pledgee in respect of any sale of,
collection from, or other realization upon all or any part of the Pledged
Collateral may, in the discretion of the Pledgee, be held by the Pledgee
as collateral for, and/or then or at any time thereafter applied in whole
or in part by the Pledgee against, all or any part of the Obligations in
such order as the Pledgee shall elect. Any surplus of such cash or cash
proceeds held by the Pledgee and remaining after payment in full of all
the Obligations shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus; and
(iv) The Pledgee may otherwise use or deal from time to time with
the Pledged Collateral, in whole or in part, in all respects as if the
Pledgee were the outright owner thereof.
(b) Except as set forth in Section 11(a)(iii), the Pledgee shall
have the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, telegraphed or hand delivered to the Pledgor at least
three days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Pledgee shall collect the cash proceeds received from any
sale or other disposition or from any other source contemplated by subsection
(a) above and shall apply the full proceeds in accordance with the provisions of
this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this
Section 11 shall confer on the Pledgee any rights or privileges that are not
permissible under applicable law. The Pledgee may effect the provisions of this
Section 11 only in compliance with all applicable federal and state securities
laws.
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<PAGE>
(e) In connection with the provisions of this Agreement, the Pledgor
from time to time shall promptly execute and deliver, or cause to be executed
and delivered, to the Pledgee such documents and instruments, shall join in such
notices and shall take, or cause to be taken, such other lawful actions as the
Pledgee shall deem reasonably necessary or desirable to enable it to exercise
any of the rights with respect to the Pledged Collateral granted to it pursuant
to this Agreement.
SECTION 12. Waivers and Amendments, Etc. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the
Pledgee shall be deemed to constitute a waiver of any power, right or remedy
hereunder, nor shall any single or partial exercise thereof preclude any further
exercise thereof or the exercise of any other power, right or remedy. Any waiver
or consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Pledgee at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its right at
a later time to enforce any such provision. No notice to or demand on a party in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Pledgee
hereunder respecting the Pledged Collateral and any other property or money held
hereunder may at the option of the Pledgee be exercised as to all or any part of
the same and the term the "Pledged Collateral" wherever used herein, unless the
context clearly requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Collateral and any other property or money held hereunder or
any part thereof". This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
SECTION 13. Notices. All notices hereunder shall be given and deemed
received as set forth in the Note.
SECTION 14. Continuing Security Interest and Reinstatement. (a) This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon the Pledgor, his heirs, successors and assigns,
and (ii) inure to the benefit of the Pledgee and its successors, transferees and
assigns. Upon the payment in full or performance of the Obligations, the Pledgor
shall be entitled to the return, upon his request and at his expense, of such of
the Pledged Collateral as shall not have been released, sold or otherwise
applied pursuant to the terms of the Agreement.
(b) If at any time after payment in full by the Pledgor of all Obligations
and termination of the pledge granted in this Agreement, any payments on
Obligations theretofore made by the Pledgor must be disgorged by the Pledgee for
any reason whatsoever, this Agreement and the pledge granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and the Pledgor shall sign and deliver to Pledgee all documents and things
necessary to reperfect the terminated pledge.
SECTION 15. Severability. In the event that any provision of this
Agreement shall be determined to be superseded, invalid or otherwise
unenforceable pursuant to applicable law, such determination shall not affect
the validity of the remaining provisions of this Agreement, and the remaining
provisions of this Agreement shall be enforced as if the invalid provision were
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<PAGE>
deleted.
SECTION 16. Survival of Representations, etc. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Note have been paid in full. This
Agreement shall remain and continue in full force and effect without regard to
any modification, execution, renewal, amendment or waiver of any provision of
the Note.
SECTION 17. Termination and Return of Pledged Stock. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
paid and satisfied or until the release, discharge or termination of the Note,
whichever last occurs. Upon the termination of this Agreement, the Pledgee shall
cause to be transferred to Pledgor all of the Pledged Collateral and any money,
property and rights received by Pledgor pursuant thereto, to the extent Pledgee
has not released, taken, sold or otherwise realized upon the same pursuant to
its rights and obligations hereunder.
SECTION 18. Transfer and Assignment. The Pledgee may transfer the Pledged
Collateral and any other property or money held hereunder to any transferee of
the Obligations or any part thereof. The transferee shall thereupon succeed to
all of the Pledgee's rights hereunder with respect to the Pledged Collateral so
transferred. Thereafter, the Pledgee shall have no obligation to Pledgor with
respect to the Pledged Collateral so transferred. The Pledgee shall, however,
retain all of its rights and powers with respect to any part of the Pledged
Collateral not transferred. Every agent or nominee of the Pledgee shall have the
benefit of this Agreement as if named herein and may exercise all of the rights
and powers given to the Pledgee hereunder.
SECTION 19. Entire Agreement. This Agreement, the Secured Non-Recourse
Promissory Note and the Employment Agreement contain the entire agreement of the
parties and supersedes all other agreements, understandings and representations,
oral or otherwise, between the parties with respect to the matters contained
herein. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs,
administrators, fiduciaries, next of kin and executors. Section headings used
herein are for convenience only and shall not affect the meaning or construction
of any of the provisions hereof. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. In the event of any conflict among any of the
documents referred to above, the terms of the Employment Agreement shall
prevail.
SECTION 20. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New Jersey
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Note, terms defined in Article 9 of the Uniform
Commercial Code in the State of New Jersey are used herein as therein defined.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
/s/ James Nugent
-------------------------------------
James Nugent
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
-------------------------------------
Name: Thomas A. Rizk
Title: President and
Chief Executive Officer
SECURED NON-RECOURSE PROMISSORY NOTE
January 21, 1997 $400,000
FOR VALUE RECEIVED, James Nugent, an individual residing at 608
North Boulevard, Belmar, New Jersey 07719 ("Payor"), hereby promises to pay to
Cali Realty Corporation, a Maryland corporation ("Payee" or the "Company"), or
its assigns, the principal amount of four hundred thousand dollars exactly
($400,000), together with all interest accrued thereon calculated from the date
hereof in accordance with the provisions of Section 1 hereof. Certain
capitalized terms used in this Secured Non-Recourse Promissory Note (the "Note")
are defined in Section 6 below.
This Note is being made by Payor in order to finance the Payor's purchase
of 12,800 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") from the Company pursuant to the Payor's employment agreement
with Payee entered into as of January 21, 1997 (the "Employment Agreement").
This Note is secured by the Pledged Collateral under the terms of the
Stock Pledge Agreement and is entitled to the benefits thereof.
1. Accrual of Interest. Interest will accrue on the unpaid principal
amount of this Note from and after the date hereof on a daily basis at the rate
per annum equal to 6.21%, as set forth in the Employment Agreement, and such
interest shall be compounded annually, calculated on the basis of a 365 day
year. Unless forgiven as contemplated herein, interest shall be payable annually
in arrears on each anniversary date hereof.
2. Payment of Note.
(a) Maturity Date. Except as provided in Sections 2(b) and (c) and
Sections 3 and 4 below, the entire unpaid principal balance of this Note
(together with interest accrued thereon) shall become due and payable on the
fifth anniversary of the date of this Note.
(b) Forgiveness of Loan. The principal amount of this Note shall be
automatically forgiven ratably over a five (5) year term in annual equal twenty
percent (20%) increments commencing on the first anniversary of the date of this
Note and each anniversary thereafter. All then accrued but unpaid interest on
this Note shall also be automatically forgiven annually on each applicable
anniversary date; provided, however, subject to the provisions of Sections 3 and
4 hereof, the forgiveness of each principal
<PAGE>
portion of this Note plus interest shall be conditioned upon Payor being in the
employ of the Company on the applicable anniversary date.
(c) Change in Control. Pursuant to the Employment Agreement, in the
event of a Change in Control (as defined in the Employment Agreement) or in the
absence thereof in the Cali Realty Corporation Employee Stock Option Plan) the
entire unpaid principal amount of this Note (including any accrued but unpaid
interest) shall automatically be accelerated and forgiven, and no portion of
this Note shall become due or payable at any time thereafter.
(d) Non-Recourse Obligations. Notwithstanding anything to the
contrary stated herein, Payee agrees that for payment of this Note it will look
solely to the Pledged Collateral and such other collateral, if any, as may now
or hereafter be given to secure the payment of this Note, and no other assets of
Payor shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Payee, or for any payment required to be made
under this Note.
3. Effect of Termination of Employment Due to Disability or Death. In the
event Payor terminates employment with the Company prior to the expiration of
the term of this Note due to his disability (as determined pursuant to the terms
of the Employment Agreement or in the absence thereof by the Committee in its
discretion) or death, the entire unpaid balance of this Note plus interest shall
automatically be accelerated and forgiven on the first day of the calendar month
next succeeding Payor's disability or death, and no portion of this Note shall
become due or payable at any time thereafter.
4. Effect of Termination of Employment For Any Other Reason. In the event
Payor terminates employment with the Company or the Company terminates Payor's
employment with the Company, in each case prior to the expiration of the term of
this Note for any reason other than disability or death, there shall be no
further forgiveness of the principal or the interest of this Note and the entire
unpaid balance of this Note plus interest shall automatically be accelerated and
become due and payable to the Company on the effective date of Payor's
termination of employment with the Company.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) Payor fails to pay when due any amount (whether interest,
principal or other amount) then due or payable on this Note for a period
of ten (10) days after the holder of this Note notifies Payor of such
failure;
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<PAGE>
(ii) Payor fails to perform or observe any other provision contained
in this Note or the Stock Pledge Agreement and such failure continues
unremedied for a period of thirty (30) days after the holder of this Note
notifies Payor of such breach; or
(iii) If an event set forth in Section 4 hereof has occurred, Payor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due; or an order,
judgment or decree is entered adjudicating Payor bankrupt or insolvent; or
any order for relief with respect to Payor is entered under the Bankruptcy
Code; or Payor petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator, or commences any proceeding
relating to himself under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against Payor and either (a) Payor in writing
indicates his approval thereof, consents thereto or acquiesces therein or
(b) such petition, application or proceeding is not dismissed within
ninety (90) days.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
paragraph 3(a)(iii) hereof has occurred, the holder of this Note may
demand (by written notice delivered to Payor) immediate payment of all or
any portion of the outstanding principal amount of this Note together with
any and all accrued interest thereon, which amount shall become due and
payable upon such demand. If an Event of Default of the type described in
paragraph 3(a)(iii) has occurred, then all of the outstanding principal
amount of this Note together with any and all accrued interest thereon
shall automatically be immediately due and payable without any action on
the part of the holder of this Note.
(ii) Each holder of this Note shall also have any other rights which
such holder may have been afforded under this Note or the Stock Pledge
Agreement at any time and any other rights which such holder may have
pursuant to applicable law.
6. Certain Defined Terms. As used in this Note, the following terms shall
have the following meanings:
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
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<PAGE>
"Pledged Collateral" means the Common Stock pledged by Payor under
the Stock Pledge Agreement as security for Payor's performance of his
obligations under this Note.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated the
date hereof between Payor and the Company.
7. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may not be amended and Payor may not take any action
prohibited herein, or omit to perform any act required to be performed by him
herein, unless Payor has obtained the prior written consent of the holder of
this Note.
8. Cancellation. After all obligations for the payment of money arising
under this Note have been paid in full, this Note will be surrendered to Payor
for cancellation.
9. Tax Withholding. The Company shall have the right to deduct and
withhold from any amounts which become taxable to Payor hereunder all employment
and other federal, state and local taxes and charges which are, or which may
hereafter, be required by law to be so deducted or withheld.
10. Notices; Place of Payment. Any notice hereunder shall be in writing
and shall be delivered by recognized courier, facsimile or certified mail,
return receipt requested, and shall be conclusively deemed to have been received
by a party hereto and to be effective on the day on which delivered or
facsimiled to such party at its address set forth below (or at such other
address as such party shall specify in writing):
If to Payor: James Nugent
608 North Boulevard
Belmar, New Jersey 07719
If to Payee: Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
All payments to be made under this Note are to be delivered to the holder
at such address or to the attention of such person as the holder may designate
by prior written notice to Payor. At the request of the holder of this Note, all
payments shall be made by wire transfer of immediately available funds to an
account which the holder may designate from time to time.
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<PAGE>
11. Waiver of Presentment, Demand, Dishonor.
(a) Payor hereby waives presentment for payment, protest, demand, notice
of protest, notice of nonpayment and diligence with respect to this Note, and
waives and renounces all rights to the benefits of any statute of limitations or
any moratorium, appraisement, exemption, or homestead now provided or that
hereafter may be provided by any federal or applicable state statute, including
but not limited to exemptions provided or allowed under the Bankruptcy Code,
both as to himself and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals and modifications hereof.
(b) No failure on the part of any holder of this Note to exercise any
right or remedy hereunder with respect to Payor, whether before or after the
happening of an Event of Default, shall constitute waiver of any such Event of
Default or of any other Event of Default by such holder or on behalf of any
other holder. No failure to accelerate the debt of Payor evidenced hereby by
reason of an Event of Default or indulgence granted from time to time shall be
construed to be a waiver of the right to insist upon prompt payment thereafter,
or shall be deemed to be a novation of this Note or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any holder of this
Note may have, whether by the laws of the state governing this Note, by
agreement or otherwise, and Payor hereby expressly waives the benefit of any
statute or rule of law or equity that would produce a result contrary to or in
conflict with the foregoing.
12. Governing Law. The validity, construction and interpretation of this
Note shall be governed by and construed in accordance with the internal laws of
the State of New Jersey.
13. Transfer; Assignment. This Note may not be negotiated, assigned or
transferred by Payor at any time, except with Payee's prior written consent.
This Note may not be negotiated, assigned or transferred by Payee except in
connection with the sale of all or substantially all of Payee's assets if the
transferee expressly assumes Payee's obligations under the Employment Agreement.
14. Entire Agreement. This Secured Non-Recourse Promissory Note, the Stock
Pledge Agreement and the Employment Agreement contain the entire agreement of
the parties and supersedes all other agreements, understandings and
representations, oral or otherwise, between the parties with respect to the
matters contained herein. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators, fiduciaries, next of kin and executors. Section headings
used herein are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed in
any number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument. In the event of any
5
<PAGE>
conflict among any of the documents referred to above, the terms of the
Employment Agreement shall prevail.
IN WITNESS WHEREOF, Payor has executed and delivered this Secured
Non-Recourse Promissory Note on the date first written above.
/s/ James Nugent
------------------------------
James Nugent
6
================================================================================
EMPLOYMENT AGREEMENT
FOR
ALBERT SPRING
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment...............................................................1
2. Services.................................................................2
3. Compensation and Benefits................................................3
4. Termination of Employment and Change in Control..........................7
5. Confidential Information................................................15
6. Return of Documents.....................................................16
7. Noncompete..............................................................17
8. Remedies................................................................18
9. Successors and Assigns..................................................19
10. Timing of and No Duplication of Payments/ Tax Withholding...............20
11. Modification or Waiver..................................................20
12. Notices.................................................................21
13. Governing Law...........................................................21
14. Severability............................................................21
15. Counterparts............................................................22
16. Headings................................................................22
17. Entire Agreement........................................................22
18. Survival of Agreements..................................................22
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
21, 1997, by and between Albert Spring, an individual residing at 15 Nottingham
Road, West Orange, New Jersey 07043 ("Executive"), and Cali Realty Corporation,
a Maryland corporation with offices at 11 Commerce Drive, Cranford, New Jersey
07016 (the "Company").
RECITALS
WHEREAS, the Executive has served as Vice President - Operations of the
Company and, through such service, has acquired special and unique knowledge,
abilities and expertise; and
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the
<PAGE>
applicable expiration date either the Company or Executive shall have given
written notice to the other party that such party does not wish to extend this
Agreement. It being agreed and understood that the extension of this Agreement
shall not create an obligation of the Company to issue new awards to Executive
hereunder. The term of this Agreement, as it may be extended from time to time
in accordance with this Paragraph 1, is referred to herein as the "Employment
Period."
2. Services.
During the Employment Period, Executive shall hold the position of Vice
President - Operations and shall devote his best efforts and substantially all
of his business time, skill and attention to the business of the Company, and
shall perform such duties as are customarily performed by similar executive
officers and as may be more specifically enumerated from time to time by the
Board of Directors of the Company (the "Board") or the Executive Committee of
the Board, if any; provided, however, that the foregoing is not intended to (a)
preclude Executive from (i) owning and managing personal investments, including
real estate investments, subject to the restrictions set forth in Paragraph 7
hereof or (ii) engaging in charitable activities and community affairs, or (b)
restrict or otherwise limit Executive from conducting real estate development,
acquisition or management activities with respect to those properties described
in Schedule A, attached hereto, (the "Excluded Properties"), provided that the
performance of the activities referred to in clauses (a) and (b) does not
prevent Executive from devoting substantially all of his business time to the
Company.
2
<PAGE>
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $140,000 (the "Annual Base Salary"), payable
in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan") and other benefit plans
(including without limitation the Cali Realty Corporation
401(k) Savings and Retirement Plan and any other stock option
plans which may be adopted or maintained by the Company) made
generally available to executives of the Company with such
participation to be consistent with reasonable Company
guidelines;
(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
3
<PAGE>
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
As further consideration for Executive agreeing to serve as an
officer and entering into this Agreement upon the terms set forth herein,
including, without
4
<PAGE>
limitation, the terms relating to noncompetition set forth in Paragraph 7 below,
the Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
(a) grant to Executive 6,480 Restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions
of this Agreement and the written agreement issued pursuant
to this Agreement, evidencing such award executed between
the Company and Executive (the "Restricted Share
Agreement"). In the event of a conflict between the
Restricted Share Agreement and this Agreement, the terms of
this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with
twenty percent (20%) of the Restricted Shares vesting on each
of the first anniversary of the date hereof (the "First
Anniversary"), the second anniversary of the date hereof (the
"Second Anniversary"),the third anniversary of the date hereof
(the "Third Anniversary"), the fourth anniversary of the date
hereof (the "Fourth Anniversary") and the fifth anniversary of
the date hereof (the "Fifth Anniversary"), provided, that
certain Performance Goals as defined and set forth in the
Restricted Share Agreement are met. Vesting shall be
cumulative in accordance with the provisions of the Restricted
Share Agreement and the Performance Goals may be achieved as
specified therein up until the seventh anniversary of the date
hereof. Except as otherwise provided in Paragraph 4 hereof,
Executive must be employed by the Company on the applicable
anniversary date to vest in the Restricted Shares scheduled to
vest in a particular year. The measurement date to determine
such vesting shall be the last day of the Company's fiscal
year preceding the year in which the applicable anniversary
date occurs.
In addition, upon vesting of the Restricted Shares on each
applicable anniversary date, the Company shall make a cash
payment to Executive on that anniversary date in an amount
equal to forty percent (40%) of the Fair Market Value
(determined as of such anniversary date) of the Restricted
Shares that vest on such anniversary date (the "Restricted
Share Tax Gross-Up Payment").
(b) loan on a non-recourse basis to Executive $350,000 (the
"Stock Acquisition Loan"), with the loan proceeds to be
used by Executive simultaneously to purchase newly issued
Common Stock from the Company. Interest shall accrue on
the Stock Acquisition Loan at
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the rate of 6.21% per year and shall be payable, on the entire
outstanding balance, annually in arrears. The Stock
Acquisition Loan is being granted and secured pursuant to the
terms and conditions of this Agreement, and a Secured
Non-Recourse Promissory Note and Stock Pledge Agreement
evidencing and securing such Loan as executed between the
Company and Executive. In the event of a conflict between the
aforementioned documents and this Agreement, the terms of this
Agreement shall control.
The Stock Acquisition Loan shall be forgiven over a period of
five (5) years from the date hereof, with twenty percent (20%)
of the principal and interest on the then outstanding balance
of the principal to be forgiven on each applicable anniversary
date (the "Forgiven Amount"). In addition, on each applicable
anniversary date as the Stock Acquisition Loan and interest
accrued thereon is forgiven, in order to enable Executive to
meet his tax liability with respect to the forgiveness of the
Stock Acquisition Loan, the Company shall make a cash payment
to Executive on that anniversary date in an amount equal to
forty percent (40%) of the respective Forgiven Amount (the
"Acquisition Loan Tax Gross-Up Payment"). Since the Stock
Acquisition Loan will be forgiven over a five (5) year period,
a total of five (5) Acquisition Loan Tax Gross-Up Payments
will be made to Executive over the period of forgiveness. No
additional payments will be made to Executive with respect to
any Acquisition Loan Tax Gross-Up Payments made hereunder.
Except as otherwise provided in Paragraph 4 hereof, the
aforementioned forgiveness of the Stock Acquisition Loan
inclusive of interest thereon and respective Acquisition Loan
Tax Gross-Up Payment shall only occur if Executive is employed
by the Company on the applicable anniversary date.
The Stock Acquisition Loan shall be initially secured by the
shares of Common Stock purchased by Executive from the Company
with the proceeds of the Stock Acquisition Loan. Beginning on
the First Anniversary, the outstanding balance of the Stock
Acquisition Loan shall be secured only by shares of Common
Stock having a Fair Market Value of one hundred and ten
percent (110%) of the outstanding principal amount of the
Stock Acquisition Loan (together with interest accrued
thereon). On the First Anniversary, and on each anniversary
date, March 31, June 30 and September 30 through the Fifth
Anniversary (each such date a "Determination Date"), the
Company shall reasonably determine the aggregate Fair Market
Value of the collateral (the "Market Value") being held. If on
such Determination Date the Market Value exceeds one
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<PAGE>
hundred ten percent (110%) of the outstanding balance of the
Stock Acquisition Loan (together with interest accrued
thereon) on such Determination Date (the "Base Value"), the
Company shall, unless otherwise requested by Executive,
automatically release to Executive such portion of the
collateral the aggregate Fair Market Value of which equals the
Market Value less 110% of the Base Value, free and clear of
any and all encumbrances under the Stock Pledge Agreement.
Executive shall be required to execute the aforementioned
Stock Pledge Agreement and Secured Non-Recourse Promissory
Note. The Company shall then issue shares of Common Stock to
Executive in exchange for the Stock Acquisition Loan. The
Company shall, upon receipt from Executive of the Stock Pledge
Agreement and Secured Non-Recourse Promissory Note for the
purchase of the shares of Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt delivery
of the certificates evidencing the shares of Common Stock to
Executive, subject to any requirements set forth in the Stock
Pledge Agreement; provided, however, that if any law or
regulation requires the Company to take any action with
respect to such shares prior to the delivery thereof, then the
date of the delivery of the shares shall be extended for the
period necessary to complete such action. Certificates for
shares of Common Stock when issued to Executive may have
restrictive legends or statements of other applicable
restrictions endorsed thereon and may not be immediately
transferable.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which have vested and are exercisable in accordance with
the terms of the applicable option
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<PAGE>
grant agreement or plan, (ii) to retain any Restricted Shares previously awarded
to Executive pursuant to this Agreement and the Restricted Share Agreement and
any Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as collateral for the outstanding balance of the Stock Acquisition Loan
and any Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts
and to retain the balance of the shares of Common Stock which are still pledged
as collateral for the outstanding balance of the Stock Acquisition Loan,
provided, that Executive immediately repays to the Company the outstanding
balance of the Stock Acquisition Loan including interest accrued thereon through
the date of termination. Except for any rights which Executive may have to
unpaid salary amounts through and including the date of termination, vested
options, vested Restricted Shares and related Restricted Share Tax Gross-Up
Payments, and shares of Common Stock purchased with the proceeds of the Stock
Acquisition Loan and related Acquisition Loan Tax Gross-Up Payments, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(b) Termination of Employment Upon Death or Disability . In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar
8
<PAGE>
year in which such termination occurred and ending with the date the Employment
Period ends (assuming such termination did not occur), of the average annual
amount of incentive compensation payments paid to Executive during each previous
year of Executive's employment hereunder (the "Pro-Rata Portion of Incentive
Compensation"). The aforesaid amount shall be payable, at the option of
Executive, his estate or his personal representative, either (i) in full
immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled (i) at the option of
Executive, his estate or his personal representative, within one (1) year of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his estate or his personal representative shall receive a cash
payment from the Company
9
<PAGE>
on the date of termination in an amount equal to forty percent (40%) of the Fair
Market Value (determined as of the date of termination) of the Restricted Shares
that vest on the date of termination (the "Termination Restricted Share Tax
Gross-Up Payment"), (iii) to retain all shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan without regard to
whether or not the Stock Acquisition Loan has been forgiven or repaid. In the
event there is an outstanding balance on the Stock Acquisition Loan, such
outstanding balance including interest accrued thereon shall on the first day of
the calendar month next succeeding Executive's Disability or death be forgiven
(and any shares pledged under the Stock Pledge Agreement shall be released to
Executive, his estate or his personal representative) and Executive, his estate
or his personal representative shall receive a cash payment from the Company on
that date in an amount equal to forty percent (40%) of the outstanding balance
of the Stock Acquisition Loan and interest accrued thereon that is forgiven on
the date of termination (the "Termination Acquisition Loan Tax Gross-Up
Payment"). Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, Restricted Shares (and the full vesting
thereof) and the Termination Restricted Share Tax Gross-Up Payment, and shares
of Common Stock purchased with the proceeds of the Stock Acquisition Loan (and
the forgiveness of the outstanding balance of the Stock Acquisition Loan
inclusive of interest accrued thereon) and the Termination Acquisition Loan Tax
Gross-Up Payment, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
10
<PAGE>
(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive (A) the unpaid
salary through the end of the Employment Period remaining (assuming no such
termination occurred) and (B) a pro-rata portion, based upon the number of days
in the period beginning with January 1 of the calendar year in which such
termination occurred and ending with the date the Employment Period ends
(assuming such termination did not occur), of the average annual amount of
incentive compensation payments paid to Executive during each previous year of
Executive's employment hereunder. The aforesaid amount shall be payable, at the
option of Executive, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, within ninety (90) days of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan, it being agreed
and understood that this Agreement does not require the Company to issue options
to Executive, (ii) to retain any Restricted Shares previously awarded to
Executive pursuant to this Agreement and the Restricted Share Agreement and any
Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as
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<PAGE>
collateral for the outstanding balance of the Stock Acquisition Loan and any
Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts and to
retain the balance of the shares of Common Stock which are still pledged as
collateral for the outstanding balance of the Stock Acquisition Loan, provided,
that Executive immediately repays to the Company the outstanding balance of the
Stock Acquisition Loan including interest accrued thereon through the date of
termination. Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, vested Restricted Shares and related
Restricted Share Tax Gross-Up Payments, and shares of Common Stock purchased
with the proceeds of the Stock Acquisition Loan and related Acquisition Loan Tax
Gross-Up Payments, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled (i) to all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the Change in Control (the
"Change in Control Restricted Share Tax Gross-Up Payment"), (ii) to all
shares of Common Stock purchased by Executive with the proceeds of the
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<PAGE>
Stock Acquisition Loan without regard to whether or not the Stock Acquisition
Loan has been forgiven or repaid. In the event there is an outstanding balance
on the Stock Acquisition Loan, such outstanding balance including interest
accrued thereon through the date of the Change in Control shall be immediately
forgiven (and any shares pledged under the Stock Pledge Agreement shall be
released to Executive) and Executive shall receive a cash payment from the
Company on the date of the Change in Control in an amount equal to forty percent
(40%) of the outstanding balance of the Stock Acquisition Loan and interest
accrued thereon that is forgiven on the date of the Change in Control (the
"Change in Control Acquisition Loan Tax Gross-Up Payment") and (iii) an excise
tax gross-up payment. If it is determined by an indpendent accountant mutually
acceptable to the Company and Executive that as a result of compensation paid
and other benefits provided to Executive by the Company pursuant to this
Agreement or otherwise, a tax will be imposed on Executive pursuant to Section
4999 of the Code (or any successor provisions) the Company shall pay Executive
in cash an amount equal to the excise tax for which the Executive is liable
under Section 4999 of the Code.
Any cash payments owed to Executive pursuant to this Paragraph 4(d) shall
be paid to Executive in a single sum on or immediately prior to date of the
Change in Control but prior to the consummation of the transaction with any
successor.
In addition, any other options previously or hereafter granted to
Executive that have not vested as of the date of the Change in Control shall
immediately vest upon the occurrence of and on the date of a Change in Control
irrespective of whether Executive's employment terminates in connection with
such Change in Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued
failure by Executive to substantially perform his
duties hereunder (other than any such failure
resulting from Executive's incapacity due to physical
or mental illness) for a period of thirty (30) days
after written demand for substantial performance is
delivered by the Company specifically identifying the
manner in which the Company believes Executive has
not substantially performed his duties, or (B)
willful misconduct by Executive which is materially
injurious to the Company, monetarily or otherwise, or
(C) the willful violation by Executive of the
provisions of Paragraph 5 or 7
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hereof. For purposes of this Paragraph 4(e)(i), no act,
or failure to act, on Executive's part shall be
considered "willful" unless done, or omitted to be done,
by him (I) not in good faith and (II) without reasonable
belief that his action or omission was in furtherance of
the interests of the Company.
(ii) "Change in Control" shall mean that any of the
following events has occurred: (a) any "person" or
"group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than any
employee benefit plan sponsored by the Company,
becomes the "beneficial owner", as such term is used
in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company
issued and outstanding immediately prior to such
acquisition; (b) any Common Stock of the Company is
purchased pursuant to a tender or exchange offer
other than an offer by the Company; or (c) the
dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the
Company or any sale or other disposition of all or
substantially all of its assets, if the shareholders
of the Company immediately before such transaction
own, immediately after consummation of such
transaction, equity securities (other than options
and other rights to acquire equity securities)
possessing less than thirty percent (30%) of the
voting power of the surviving or acquiring company.
(iii) "Disability" shall mean the determination by the
Company, upon the advice of an independent qualified
physician, reasonably acceptable to Executive, that
Executive has become physically or mentally incapable of
performing his duties under this Agreement and such
disability has disabled Executive for a cumulative
period of one hundred eighty (180) days within a twelve
(12) month period.
(iv) "Fair Market Value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at
the end of the last business day preceding the
Determination Date, the applicable anniversary or the
date of termination, as the case may be, as reported in
the New York edition of the Wall Street Journal.
(v) "Good Reason" shall mean (A) any material and
substantial breach of this Agreement by the Company,
(B) a material
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<PAGE>
reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any
other failure by the Company to comply with Paragraph 3
hereof, or (C) the Company shall have given notice
pursuant to Paragraph 1 hereof at any time prior to the
sixth anniversary of the date hereof that it does not
wish to extend this Agreement, except in connection with
termination of Executive's employment for Cause or by
reason of death or Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of
the closing price on the New York Stock Exchange of the
Common Stock on each of the trading days within the
thirty (30) days immediately preceding the date of
termination of Executive's employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall
15
<PAGE>
not, directly or indirectly, at any time, either during or after his employment
with the Company, without the Company's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than the Company or its employees, except as required
in the performance of his duties for the Company or as otherwise required by
law. Executive shall take all reasonable steps to safeguard such Confidential
Information and to protect such Confidential Information against disclosure,
misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company,
16
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and shall be delivered to the Company, without retaining any copies, upon the
termination of Executive's employment or at any time as requested by the
Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
17
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(b) If, at the time of enforcement of this Paragraph 7, a court
shall hold that the duration, scope, area or other restrictions stated herein
are unreasonable, the parties agree that reasonable maximum duration, scope,
area or other restrictions may be substituted by such court for the stated
duration, scope, area or other restrictions and upon substitution by such court,
this Agreement shall be automatically modified without further action by the
parties hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
18
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9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated due to Disability,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify such date as the date of termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives,
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executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary as determined under any applicable plan, Executive's
devisee, legatee, or other designee or, if there be no such designee, to
Executive's estate.
10. Timing of and No Duplication of Payments/ Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or
20
<PAGE>
discharge any provision or term of this Agreement. No delay on the part of the
Company or Executive in the exercise of any of their respective rights or
remedies shall operate as a waiver thereof, and no single or partial exercise by
the Company or Executive of any such right or remedy shall preclude other or
further exercise thereof. A waiver of right or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy on any other
occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to the Company or Executive, as applicable, at the address set forth
above (or to such other address as shall have been previously provided in
accordance with this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under
21
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such applicable law, then, subject to the provisions of Paragraph 7(b) above,
such provision or term shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provisions or term or the remaining provisions
or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall survive
the termination of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
---------------------------------
Name: Thomas A. Rizk
Title: President
/s/ Albert Spring
---------------------------------
Albert Spring
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SCHEDULE A
SECURED NON-RECOURSE PROMISSORY NOTE
January 21, 1997 $400,000
FOR VALUE RECEIVED, James Nugent, an individual residing at 608
North Boulevard, Belmar, New Jersey 07719 ("Payor"), hereby promises to pay to
Cali Realty Corporation, a Maryland corporation ("Payee" or the "Company"), or
its assigns, the principal amount of four hundred thousand dollars exactly
($400,000), together with all interest accrued thereon calculated from the date
hereof in accordance with the provisions of Section 1 hereof. Certain
capitalized terms used in this Secured Non-Recourse Promissory Note (the "Note")
are defined in Section 6 below.
This Note is being made by Payor in order to finance the Payor's purchase
of 12,800 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") from the Company pursuant to the Payor's employment agreement
with Payee entered into as of January 21, 1997 (the "Employment Agreement").
This Note is secured by the Pledged Collateral under the terms of the
Stock Pledge Agreement and is entitled to the benefits thereof.
1. Accrual of Interest. Interest will accrue on the unpaid principal
amount of this Note from and after the date hereof on a daily basis at the rate
per annum equal to 6.21%, as set forth in the Employment Agreement, and such
interest shall be compounded annually, calculated on the basis of a 365 day
year. Unless forgiven as contemplated herein, interest shall be payable annually
in arrears on each anniversary date hereof.
2. Payment of Note.
(a) Maturity Date. Except as provided in Sections 2(b) and (c) and
Sections 3 and 4 below, the entire unpaid principal balance of this Note
(together with interest accrued thereon) shall become due and payable on the
fifth anniversary of the date of this Note.
(b) Forgiveness of Loan. The principal amount of this Note shall be
automatically forgiven ratably over a five (5) year term in annual equal twenty
percent (20%) increments commencing on the first anniversary of the date of this
Note and each anniversary thereafter. All then accrued but unpaid interest on
this Note shall also be automatically forgiven annually on each applicable
anniversary date; provided, however, subject to the provisions of Sections 3 and
4 hereof, the forgiveness of each principal
<PAGE>
portion of this Note plus interest shall be conditioned upon Payor being in the
employ of the Company on the applicable anniversary date.
(c) Change in Control. Pursuant to the Employment Agreement, in the
event of a Change in Control (as defined in the Employment Agreement) or in the
absence thereof in the Cali Realty Corporation Employee Stock Option Plan) the
entire unpaid principal amount of this Note (including any accrued but unpaid
interest) shall automatically be accelerated and forgiven, and no portion of
this Note shall become due or payable at any time thereafter.
(d) Non-Recourse Obligations. Notwithstanding anything to the
contrary stated herein, Payee agrees that for payment of this Note it will look
solely to the Pledged Collateral and such other collateral, if any, as may now
or hereafter be given to secure the payment of this Note, and no other assets of
Payor shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Payee, or for any payment required to be made
under this Note.
3. Effect of Termination of Employment Due to Disability or Death. In the
event Payor terminates employment with the Company prior to the expiration of
the term of this Note due to his disability (as determined pursuant to the terms
of the Employment Agreement or in the absence thereof by the Committee in its
discretion) or death, the entire unpaid balance of this Note plus interest shall
automatically be accelerated and forgiven on the first day of the calendar month
next succeeding Payor's disability or death, and no portion of this Note shall
become due or payable at any time thereafter.
4. Effect of Termination of Employment For Any Other Reason. In the event
Payor terminates employment with the Company or the Company terminates Payor's
employment with the Company, in each case prior to the expiration of the term of
this Note for any reason other than disability or death, there shall be no
further forgiveness of the principal or the interest of this Note and the entire
unpaid balance of this Note plus interest shall automatically be accelerated and
become due and payable to the Company on the effective date of Payor's
termination of employment with the Company.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) Payor fails to pay when due any amount (whether interest,
principal or other amount) then due or payable on this Note for a period
of ten (10) days after the holder of this Note notifies Payor of such
failure;
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<PAGE>
(ii) Payor fails to perform or observe any other provision contained
in this Note or the Stock Pledge Agreement and such failure continues
unremedied for a period of thirty (30) days after the holder of this Note
notifies Payor of such breach; or
(iii) If an event set forth in Section 4 hereof has occurred, Payor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due; or an order,
judgment or decree is entered adjudicating Payor bankrupt or insolvent; or
any order for relief with respect to Payor is entered under the Bankruptcy
Code; or Payor petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator, or commences any proceeding
relating to himself under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against Payor and either (a) Payor in writing
indicates his approval thereof, consents thereto or acquiesces therein or
(b) such petition, application or proceeding is not dismissed within
ninety (90) days.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
paragraph 3(a)(iii) hereof has occurred, the holder of this Note may
demand (by written notice delivered to Payor) immediate payment of all or
any portion of the outstanding principal amount of this Note together with
any and all accrued interest thereon, which amount shall become due and
payable upon such demand. If an Event of Default of the type described in
paragraph 3(a)(iii) has occurred, then all of the outstanding principal
amount of this Note together with any and all accrued interest thereon
shall automatically be immediately due and payable without any action on
the part of the holder of this Note.
(ii) Each holder of this Note shall also have any other rights which
such holder may have been afforded under this Note or the Stock Pledge
Agreement at any time and any other rights which such holder may have
pursuant to applicable law.
6. Certain Defined Terms. As used in this Note, the following terms shall
have the following meanings:
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
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<PAGE>
"Pledged Collateral" means the Common Stock pledged by Payor under
the Stock Pledge Agreement as security for Payor's performance of his
obligations under this Note.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated the
date hereof between Payor and the Company.
7. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may not be amended and Payor may not take any action
prohibited herein, or omit to perform any act required to be performed by him
herein, unless Payor has obtained the prior written consent of the holder of
this Note.
8. Cancellation. After all obligations for the payment of money arising
under this Note have been paid in full, this Note will be surrendered to Payor
for cancellation.
9. Tax Withholding. The Company shall have the right to deduct and
withhold from any amounts which become taxable to Payor hereunder all employment
and other federal, state and local taxes and charges which are, or which may
hereafter, be required by law to be so deducted or withheld.
10. Notices; Place of Payment. Any notice hereunder shall be in writing
and shall be delivered by recognized courier, facsimile or certified mail,
return receipt requested, and shall be conclusively deemed to have been received
by a party hereto and to be effective on the day on which delivered or
facsimiled to such party at its address set forth below (or at such other
address as such party shall specify in writing):
If to Payor: James Nugent
608 North Boulevard
Belmar, New Jersey 07719
If to Payee: Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
All payments to be made under this Note are to be delivered to the holder
at such address or to the attention of such person as the holder may designate
by prior written notice to Payor. At the request of the holder of this Note, all
payments shall be made by wire transfer of immediately available funds to an
account which the holder may designate from time to time.
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<PAGE>
11. Waiver of Presentment, Demand, Dishonor.
(a) Payor hereby waives presentment for payment, protest, demand, notice
of protest, notice of nonpayment and diligence with respect to this Note, and
waives and renounces all rights to the benefits of any statute of limitations or
any moratorium, appraisement, exemption, or homestead now provided or that
hereafter may be provided by any federal or applicable state statute, including
but not limited to exemptions provided or allowed under the Bankruptcy Code,
both as to himself and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals and modifications hereof.
(b) No failure on the part of any holder of this Note to exercise any
right or remedy hereunder with respect to Payor, whether before or after the
happening of an Event of Default, shall constitute waiver of any such Event of
Default or of any other Event of Default by such holder or on behalf of any
other holder. No failure to accelerate the debt of Payor evidenced hereby by
reason of an Event of Default or indulgence granted from time to time shall be
construed to be a waiver of the right to insist upon prompt payment thereafter,
or shall be deemed to be a novation of this Note or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any holder of this
Note may have, whether by the laws of the state governing this Note, by
agreement or otherwise, and Payor hereby expressly waives the benefit of any
statute or rule of law or equity that would produce a result contrary to or in
conflict with the foregoing.
12. Governing Law. The validity, construction and interpretation of this
Note shall be governed by and construed in accordance with the internal laws of
the State of New Jersey.
13. Transfer; Assignment. This Note may not be negotiated, assigned or
transferred by Payor at any time, except with Payee's prior written consent.
This Note may not be negotiated, assigned or transferred by Payee except in
connection with the sale of all or substantially all of Payee's assets if the
transferee expressly assumes Payee's obligations under the Employment Agreement.
14. Entire Agreement. This Secured Non-Recourse Promissory Note, the Stock
Pledge Agreement and the Employment Agreement contain the entire agreement of
the parties and supersedes all other agreements, understandings and
representations, oral or otherwise, between the parties with respect to the
matters contained herein. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators, fiduciaries, next of kin and executors. Section headings
used herein are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed in
any number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument. In the event of any
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<PAGE>
conflict among any of the documents referred to above, the terms of the
Employment Agreement shall prevail.
IN WITNESS WHEREOF, Payor has executed and delivered this Secured
Non-Recourse Promissory Note on the date first written above.
/s/ James Nugent
------------------------------
James Nugent
6
================================================================================
EMPLOYMENT AGREEMENT
FOR
ALBERT SPRING
==============================================================================
<PAGE>
TABLE OF CONTENTS
Page
----
1. Employment...............................................................1
2. Services.................................................................2
3. Compensation and Benefits................................................3
4. Termination of Employment and Change in Control..........................7
5. Confidential Information................................................15
6. Return of Documents.....................................................16
7. Noncompete..............................................................17
8. Remedies................................................................18
9. Successors and Assigns..................................................19
10. Timing of and No Duplication of Payments/ Tax Withholding...............20
11. Modification or Waiver..................................................20
12. Notices.................................................................21
13. Governing Law...........................................................21
14. Severability............................................................21
15. Counterparts............................................................22
16. Headings................................................................22
17. Entire Agreement........................................................22
18. Survival of Agreements..................................................22
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
21, 1997, by and between Albert Spring, an individual residing at 15 Nottingham
Road, West Orange, New Jersey 07043 ("Executive"), and Cali Realty Corporation,
a Maryland corporation with offices at 11 Commerce Drive, Cranford, New Jersey
07016 (the "Company").
RECITALS
WHEREAS, the Executive has served as Vice President - Operations of the
Company and, through such service, has acquired special and unique knowledge,
abilities and expertise; and
WHEREAS, the Company desires to continue to employ the Executive, and the
Executive desires to continue to be employed by the Company, pursuant to the
terms set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereby agree as follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees
to be employed by the Company, for a term commencing on the date hereof and
expiring on January 21, 2002; provided, however, that commencing on January 21,
2002 and each January 21 thereafter, the term of this Agreement shall be
extended automatically for one (1) additional year unless at least ninety (90)
days prior to the
<PAGE>
applicable expiration date either the Company or Executive shall have given
written notice to the other party that such party does not wish to extend this
Agreement. It being agreed and understood that the extension of this Agreement
shall not create an obligation of the Company to issue new awards to Executive
hereunder. The term of this Agreement, as it may be extended from time to time
in accordance with this Paragraph 1, is referred to herein as the "Employment
Period."
2. Services.
During the Employment Period, Executive shall hold the position of Vice
President - Operations and shall devote his best efforts and substantially all
of his business time, skill and attention to the business of the Company, and
shall perform such duties as are customarily performed by similar executive
officers and as may be more specifically enumerated from time to time by the
Board of Directors of the Company (the "Board") or the Executive Committee of
the Board, if any; provided, however, that the foregoing is not intended to (a)
preclude Executive from (i) owning and managing personal investments, including
real estate investments, subject to the restrictions set forth in Paragraph 7
hereof or (ii) engaging in charitable activities and community affairs, or (b)
restrict or otherwise limit Executive from conducting real estate development,
acquisition or management activities with respect to those properties described
in Schedule A, attached hereto, (the "Excluded Properties"), provided that the
performance of the activities referred to in clauses (a) and (b) does not
prevent Executive from devoting substantially all of his business time to the
Company.
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<PAGE>
3. Compensation and Benefits.
During the Employment Period, the Company shall pay Executive a minimum
annual base salary in the amount of $140,000 (the "Annual Base Salary"), payable
in accordance with the Company's regular payroll practices. In addition,
Executive also shall be eligible for incentive compensation payable each year in
such amounts as may be determined by the Compensation Committee of the Board
(the "Compensation Committee") based upon, among other factors, growth in Funds
from Operations per Common Share (as hereinafter defined) for the year.
Executive's Annual Base Salary shall be reviewed annually in accordance with the
policy of the Company from time to time and may be subject to upward adjustment
based on, among other things, Executive's performance, as determined in the sole
discretion of the Compensation Committee. The Company shall have the right to
deduct and withhold from all compensation all social security and other federal,
state and local taxes and charges which currently are or which hereafter may be
required by law to be so deducted and withheld. In addition to the compensation
specified above and other benefits provided pursuant to this Paragraph 3,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Stock Option Plan") and other benefit plans
(including without limitation the Cali Realty Corporation
401(k) Savings and Retirement Plan and any other stock option
plans which may be adopted or maintained by the Company) made
generally available to executives of the Company with such
participation to be consistent with reasonable Company
guidelines;
(b) participation in any health insurance, disability insurance,
group life insurance or other welfare benefit program made
generally available to executives of the Company; and
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<PAGE>
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of the Company.
In addition, Executive shall be entitled to receive such bonuses and
options to purchase shares of common stock, par value $0.01 per share, of the
Company (the "Common Stock") as the Board shall approve, in its sole discretion,
including, without limitation, options and bonuses contingent upon Executive's
performance and the achievement of specified financial and operating objectives
for Funds from Operations per Common Share. For purposes of this Agreement,
"Funds from Operations per Common Share" for any period shall mean (i) net
income (loss) before minority interest of unit holders, computed in accordance
with generally accepted accounting principles ("GAAP"), excluding gains (or
losses) from debt restructuring and sale of property, plus real estate return,
depreciation and amortization as calculated in accordance with the National
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Company in effect from time to time on a
consistent basis to the entire Employment Period, divided by (ii) the sum of (A)
the primary weighted average number of outstanding shares of Common Stock as it
appears in the Company's financial statement for the applicable period and (B)
the primary weighted average number of outstanding limited partnership units of
Cali Realty, L.P., a Delaware limited partnership of which the Company is the
sole general partner, for the applicable period.
As further consideration for Executive agreeing to serve as an
officer and entering into this Agreement upon the terms set forth herein,
including, without
4
<PAGE>
limitation, the terms relating to noncompetition set forth in Paragraph 7 below,
the Company shall, concurrently herewith or as soon as practicable after the
execution of this Agreement:
(a) grant to Executive 6,480 Restricted shares of Common Stock
("Restricted Shares") pursuant to the terms and conditions
of this Agreement and the written agreement issued pursuant
to this Agreement, evidencing such award executed between
the Company and Executive (the "Restricted Share
Agreement"). In the event of a conflict between the
Restricted Share Agreement and this Agreement, the terms of
this Agreement shall control.
The Restricted Share Award (as defined in the Restricted Share
Agreement) is scheduled to vest over five (5) years with
twenty percent (20%) of the Restricted Shares vesting on each
of the first anniversary of the date hereof (the "First
Anniversary"), the second anniversary of the date hereof (the
"Second Anniversary"),the third anniversary of the date hereof
(the "Third Anniversary"), the fourth anniversary of the date
hereof (the "Fourth Anniversary") and the fifth anniversary of
the date hereof (the "Fifth Anniversary"), provided, that
certain Performance Goals as defined and set forth in the
Restricted Share Agreement are met. Vesting shall be
cumulative in accordance with the provisions of the Restricted
Share Agreement and the Performance Goals may be achieved as
specified therein up until the seventh anniversary of the date
hereof. Except as otherwise provided in Paragraph 4 hereof,
Executive must be employed by the Company on the applicable
anniversary date to vest in the Restricted Shares scheduled to
vest in a particular year. The measurement date to determine
such vesting shall be the last day of the Company's fiscal
year preceding the year in which the applicable anniversary
date occurs.
In addition, upon vesting of the Restricted Shares on each
applicable anniversary date, the Company shall make a cash
payment to Executive on that anniversary date in an amount
equal to forty percent (40%) of the Fair Market Value
(determined as of such anniversary date) of the Restricted
Shares that vest on such anniversary date (the "Restricted
Share Tax Gross-Up Payment").
(b) loan on a non-recourse basis to Executive $350,000 (the
"Stock Acquisition Loan"), with the loan proceeds to be
used by Executive simultaneously to purchase newly issued
Common Stock from the Company. Interest shall accrue on
the Stock Acquisition Loan at
5
<PAGE>
the rate of 6.21% per year and shall be payable, on the entire
outstanding balance, annually in arrears. The Stock
Acquisition Loan is being granted and secured pursuant to the
terms and conditions of this Agreement, and a Secured
Non-Recourse Promissory Note and Stock Pledge Agreement
evidencing and securing such Loan as executed between the
Company and Executive. In the event of a conflict between the
aforementioned documents and this Agreement, the terms of this
Agreement shall control.
The Stock Acquisition Loan shall be forgiven over a period of
five (5) years from the date hereof, with twenty percent (20%)
of the principal and interest on the then outstanding balance
of the principal to be forgiven on each applicable anniversary
date (the "Forgiven Amount"). In addition, on each applicable
anniversary date as the Stock Acquisition Loan and interest
accrued thereon is forgiven, in order to enable Executive to
meet his tax liability with respect to the forgiveness of the
Stock Acquisition Loan, the Company shall make a cash payment
to Executive on that anniversary date in an amount equal to
forty percent (40%) of the respective Forgiven Amount (the
"Acquisition Loan Tax Gross-Up Payment"). Since the Stock
Acquisition Loan will be forgiven over a five (5) year period,
a total of five (5) Acquisition Loan Tax Gross-Up Payments
will be made to Executive over the period of forgiveness. No
additional payments will be made to Executive with respect to
any Acquisition Loan Tax Gross-Up Payments made hereunder.
Except as otherwise provided in Paragraph 4 hereof, the
aforementioned forgiveness of the Stock Acquisition Loan
inclusive of interest thereon and respective Acquisition Loan
Tax Gross-Up Payment shall only occur if Executive is employed
by the Company on the applicable anniversary date.
The Stock Acquisition Loan shall be initially secured by the
shares of Common Stock purchased by Executive from the Company
with the proceeds of the Stock Acquisition Loan. Beginning on
the First Anniversary, the outstanding balance of the Stock
Acquisition Loan shall be secured only by shares of Common
Stock having a Fair Market Value of one hundred and ten
percent (110%) of the outstanding principal amount of the
Stock Acquisition Loan (together with interest accrued
thereon). On the First Anniversary, and on each anniversary
date, March 31, June 30 and September 30 through the Fifth
Anniversary (each such date a "Determination Date"), the
Company shall reasonably determine the aggregate Fair Market
Value of the collateral (the "Market Value") being held. If on
such Determination Date the Market Value exceeds one
6
<PAGE>
hundred ten percent (110%) of the outstanding balance of the
Stock Acquisition Loan (together with interest accrued
thereon) on such Determination Date (the "Base Value"), the
Company shall, unless otherwise requested by Executive,
automatically release to Executive such portion of the
collateral the aggregate Fair Market Value of which equals the
Market Value less 110% of the Base Value, free and clear of
any and all encumbrances under the Stock Pledge Agreement.
Executive shall be required to execute the aforementioned
Stock Pledge Agreement and Secured Non-Recourse Promissory
Note. The Company shall then issue shares of Common Stock to
Executive in exchange for the Stock Acquisition Loan. The
Company shall, upon receipt from Executive of the Stock Pledge
Agreement and Secured Non-Recourse Promissory Note for the
purchase of the shares of Common Stock purchased with the
proceeds of the Stock Acquisition Loan, make prompt delivery
of the certificates evidencing the shares of Common Stock to
Executive, subject to any requirements set forth in the Stock
Pledge Agreement; provided, however, that if any law or
regulation requires the Company to take any action with
respect to such shares prior to the delivery thereof, then the
date of the delivery of the shares shall be extended for the
period necessary to complete such action. Certificates for
shares of Common Stock when issued to Executive may have
restrictive legends or statements of other applicable
restrictions endorsed thereon and may not be immediately
transferable.
4. Termination of Employment and Change in Control.
(a) Termination of Employment by the Company for Cause or By Executive
without Good Reason. In the event (i) the Company terminates Executive's
employment for Cause (as hereinafter defined) or (ii) Executive terminates his
employment without Good Reason (as hereinafter defined), the Company shall pay
Executive any unpaid salary accrued through and including the date of
termination. In addition, in such event, Executive shall be entitled (i) to
exercise any options which have vested and are exercisable in accordance with
the terms of the applicable option
7
<PAGE>
grant agreement or plan, (ii) to retain any Restricted Shares previously awarded
to Executive pursuant to this Agreement and the Restricted Share Agreement and
any Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as collateral for the outstanding balance of the Stock Acquisition Loan
and any Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts
and to retain the balance of the shares of Common Stock which are still pledged
as collateral for the outstanding balance of the Stock Acquisition Loan,
provided, that Executive immediately repays to the Company the outstanding
balance of the Stock Acquisition Loan including interest accrued thereon through
the date of termination. Except for any rights which Executive may have to
unpaid salary amounts through and including the date of termination, vested
options, vested Restricted Shares and related Restricted Share Tax Gross-Up
Payments, and shares of Common Stock purchased with the proceeds of the Stock
Acquisition Loan and related Acquisition Loan Tax Gross-Up Payments, all as set
forth above, the Company shall have no further obligations hereunder following
such termination.
(b) Termination of Employment Upon Death or Disability . In the event of
termination of Executive's employment as a result of either (i) Executive's
death or Disability (as hereinafter defined), the Company shall pay to
Executive, his estate or his personal representative (A) the unpaid salary
through the end of the Employment Period remaining (assuming no such termination
occurred) and (B) a pro-rata portion, based upon the number of days in the
period beginning with January 1 of the calendar
8
<PAGE>
year in which such termination occurred and ending with the date the Employment
Period ends (assuming such termination did not occur), of the average annual
amount of incentive compensation payments paid to Executive during each previous
year of Executive's employment hereunder (the "Pro-Rata Portion of Incentive
Compensation"). The aforesaid amount shall be payable, at the option of
Executive, his estate or his personal representative, either (i) in full
immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled (i) at the option of
Executive, his estate or his personal representative, within one (1) year of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan or to require
the Company (upon written notice delivered within one hundred eighty (180) days
following the date of Executive's termination) to repurchase all or any portion
of Executive's vested options to purchase shares of Common Stock at a price
equal to the difference between the Repurchase Fair Market Value (as hereinafter
defined) of the shares of Common Stock for which the options to be repurchased
are exercisable and the exercise price of such option as of the date of
Executive's termination of employment, (ii) to retain all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of termination. In the event any Restricted Shares have not vested as of
the date of termination, such Restricted Shares shall immediately vest and
Executive, his estate or his personal representative shall receive a cash
payment from the Company
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<PAGE>
on the date of termination in an amount equal to forty percent (40%) of the Fair
Market Value (determined as of the date of termination) of the Restricted Shares
that vest on the date of termination (the "Termination Restricted Share Tax
Gross-Up Payment"), (iii) to retain all shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan without regard to
whether or not the Stock Acquisition Loan has been forgiven or repaid. In the
event there is an outstanding balance on the Stock Acquisition Loan, such
outstanding balance including interest accrued thereon shall on the first day of
the calendar month next succeeding Executive's Disability or death be forgiven
(and any shares pledged under the Stock Pledge Agreement shall be released to
Executive, his estate or his personal representative) and Executive, his estate
or his personal representative shall receive a cash payment from the Company on
that date in an amount equal to forty percent (40%) of the outstanding balance
of the Stock Acquisition Loan and interest accrued thereon that is forgiven on
the date of termination (the "Termination Acquisition Loan Tax Gross-Up
Payment"). Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, Restricted Shares (and the full vesting
thereof) and the Termination Restricted Share Tax Gross-Up Payment, and shares
of Common Stock purchased with the proceeds of the Stock Acquisition Loan (and
the forgiveness of the outstanding balance of the Stock Acquisition Loan
inclusive of interest accrued thereon) and the Termination Acquisition Loan Tax
Gross-Up Payment, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
10
<PAGE>
(c) Termination of Employment By the Company Without Cause or By the
Executive for Good Reason. In the event (i) the Company terminates Executive's
employment for any reason other than Cause or (ii) Executive terminates his
employment for Good Reason, the Company shall pay to Executive (A) the unpaid
salary through the end of the Employment Period remaining (assuming no such
termination occurred) and (B) a pro-rata portion, based upon the number of days
in the period beginning with January 1 of the calendar year in which such
termination occurred and ending with the date the Employment Period ends
(assuming such termination did not occur), of the average annual amount of
incentive compensation payments paid to Executive during each previous year of
Executive's employment hereunder. The aforesaid amount shall be payable, at the
option of Executive, either (i) in full immediately upon such termination or
(ii) monthly over the remainder of the Employment Period. In addition, Executive
shall be entitled (i) at the option of Executive, within ninety (90) days of the
date of such termination, to exercise any options which have vested (including,
without limitation, by acceleration in accordance with the terms of the
applicable option grant agreement or plan) and are exercisable in accordance
with the terms of the applicable option grant agreement or plan, it being agreed
and understood that this Agreement does not require the Company to issue options
to Executive, (ii) to retain any Restricted Shares previously awarded to
Executive pursuant to this Agreement and the Restricted Share Agreement and any
Restricted Share Tax Gross-Up Payments which are fully vested on the date of
termination, and (iii) to retain any shares of Common Stock purchased by
Executive with the proceeds of the Stock Acquisition Loan which are no longer
pledged as
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collateral for the outstanding balance of the Stock Acquisition Loan and any
Acquisition Loan Tax Gross-Up Payments applicable to Forgiven Amounts and to
retain the balance of the shares of Common Stock which are still pledged as
collateral for the outstanding balance of the Stock Acquisition Loan, provided,
that Executive immediately repays to the Company the outstanding balance of the
Stock Acquisition Loan including interest accrued thereon through the date of
termination. Except for any rights which Executive may have to unpaid salary
amounts through the end of the Employment Period, the Pro-Rata Portion of
Incentive Compensation, vested options, vested Restricted Shares and related
Restricted Share Tax Gross-Up Payments, and shares of Common Stock purchased
with the proceeds of the Stock Acquisition Loan and related Acquisition Loan Tax
Gross-Up Payments, all as set forth above, the Company shall have no further
obligations hereunder following such termination.
(d) Upon a Change in Control. In the event of a Change in Control (as
hereinafter defined), Executive shall be entitled (i) to all Restricted Shares
awarded to Executive pursuant to this Agreement and the Restricted Share
Agreement whether or not such Restricted Shares had previously vested as of the
date of the Change in Control. In the event any Restricted Shares have not
vested as of the date of the Change in Control, such Restricted Shares shall
immediately vest and Executive shall receive a cash payment from the Company on
the date of the Change in Control in an amount equal to forty percent (40%) of
the Fair Market Value (determined as of the date of the Change in Control) of
the Restricted Shares that vest on the date of the Change in Control (the
"Change in Control Restricted Share Tax Gross-Up Payment"), and (ii) to all
shares of Common Stock purchased by Executive with the proceeds of the
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Stock Acquisition Loan without regard to whether or not the Stock Acquisition
Loan has been forgiven or repaid. In the event there is an outstanding balance
on the Stock Acquisition Loan, such outstanding balance including interest
accrued thereon through the date of the Change in Control shall be immediately
forgiven (and any shares pledged under the Stock Pledge Agreement shall be
released to Executive) and Executive shall receive a cash payment from the
Company on the date of the Change in Control in an amount equal to forty percent
(40%) of the outstanding balance of the Stock Acquisition Loan and interest
accrued thereon that is forgiven on the date of the Change in Control (the
"Change in Control Acquisition Loan Tax Gross-Up Payment"). Any cash payments
owed to Executive pursuant to this Paragraph 4(d) shall be paid to Executive in
a single sum on or immediately prior to date of the Change in Control but prior
to the consummation of the transaction with any successor.
In addition, any other options previously or hereafter granted to
Executive that have not vested as of the date of the Change in Control shall
immediately vest upon the occurrence of and on the date of a Change in Control
irrespective of whether Executive's employment terminates in connection with
such Change in Control.
(e) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued
failure by Executive to substantially perform his
duties hereunder (other than any such failure
resulting from Executive's incapacity due to physical
or mental illness) for a period of thirty (30) days
after written demand for substantial performance is
delivered by the Company specifically identifying the
manner in which the Company believes Executive has
not substantially performed his duties, or (B)
willful misconduct by Executive which is materially
injurious to the Company, monetarily or otherwise, or
(C) the willful violation by Executive of the
provisions of Paragraph 5 or 7
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<PAGE>
hereof. For purposes of this Paragraph 4(e)(i), no act,
or failure to act, on Executive's part shall be
considered "willful" unless done, or omitted to be done,
by him (I) not in good faith and (II) without reasonable
belief that his action or omission was in furtherance of
the interests of the Company.
(ii) "Change in Control" shall mean that any of the
following events has occurred: (a) any "person" or
"group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than any
employee benefit plan sponsored by the Company,
becomes the "beneficial owner", as such term is used
in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company
issued and outstanding immediately prior to such
acquisition; (b) any Common Stock of the Company is
purchased pursuant to a tender or exchange offer
other than an offer by the Company; or (c) the
dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the
Company or any sale or other disposition of all or
substantially all of its assets, if the shareholders
of the Company immediately before such transaction
own, immediately after consummation of such
transaction, equity securities (other than options
and other rights to acquire equity securities)
possessing less than thirty percent (30%) of the
voting power of the surviving or acquiring company.
(iii) "Disability" shall mean the determination by the
Company, upon the advice of an independent qualified
physician, reasonably acceptable to Executive, that
Executive has become physically or mentally incapable of
performing his duties under this Agreement and such
disability has disabled Executive for a cumulative
period of one hundred eighty (180) days within a twelve
(12) month period.
(iv) "Fair Market Value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at
the end of the last business day preceding the
Determination Date, the applicable anniversary or the
date of termination, as the case may be, as reported in
the New York edition of the Wall Street Journal.
(v) "Good Reason" shall mean (A) any material and
substantial breach of this Agreement by the Company,
(B) a material
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<PAGE>
reduction in the Executive's Annual Base Salary or other
benefits (except for bonuses or similar discretionary
payments) as in effect at the time in question, or any
other failure by the Company to comply with Paragraph 3
hereof, or (C) the Company shall have given notice
pursuant to Paragraph 1 hereof at any time prior to the
sixth anniversary of the date hereof that it does not
wish to extend this Agreement, except in connection with
termination of Executive's employment for Cause or by
reason of death or Disability.
(vi) "Repurchase Fair Market Value" shall mean the average of
the closing price on the New York Stock Exchange of the
Common Stock on each of the trading days within the
thirty (30) days immediately preceding the date of
termination of Executive's employment;
(f) Any termination of Executive's employment by the Company or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his employment with
the Company, he will be exposed to Confidential Information (as defined below),
all of which is proprietary and which will rightfully belong to the Company. The
Executive shall hold in a fiduciary capacity for the benefit of the Company such
Confidential Information obtained by Executive during his employment with the
Company and shall
15
<PAGE>
not, directly or indirectly, at any time, either during or after his employment
with the Company, without the Company's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than the Company or its employees, except as required
in the performance of his duties for the Company or as otherwise required by
law. Executive shall take all reasonable steps to safeguard such Confidential
Information and to protect such Confidential Information against disclosure,
misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information not
generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from the Company or its predecessors
or which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of the Company or its predecessors. For purposes of this Paragraph 5, the
Company shall be deemed to include any entity which is controlled, directly or
indirectly, by the Company and any entity of which a majority of the economic
interest is owned, directly or indirectly, by the Company.
6. Return of Documents.
Except for such items which are of a personal nature to Executive (e.g.,
daily business planner), all writings, records, and other documents and things
containing any Confidential Information shall be the exclusive property of the
Company, shall not be copied, summarized, extracted from, or removed from the
premises of the Company, except in pursuit of the business of the Company and at
the direction of the Company,
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<PAGE>
and shall be delivered to the Company, without retaining any copies, upon the
termination of Executive's employment or at any time as requested by the
Company.
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, in the event (i) the Company
terminates Executive's employment for Cause, or (ii) Executive terminates his
employment without Good Reason, for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Pennsylvania, and the State of Connecticut, engage in,
or own, invest in, manage or control any venture or enterprise primarily engaged
in any office-service, office, industrial, or flex property development,
acquisition or management activities, without regard to whether or not such
activities compete with the Company. Nothing herein shall prohibit Executive
from being a passive owner of not more than five percent (5%) of the outstanding
stock of any class of securities of a corporation or other entity engaged in
such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover, the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from conducting real estate development, acquisition or management
activities with respect to the Excluded Properties, if any, provided that during
the Employment Period the performance of such activities does not prevent
Executive from devoting substantially all of his business time to the Company.
17
<PAGE>
(b) If, at the time of enforcement of this Paragraph 7, a court
shall hold that the duration, scope, area or other restrictions stated herein
are unreasonable, the parties agree that reasonable maximum duration, scope,
area or other restrictions may be substituted by such court for the stated
duration, scope, area or other restrictions and upon substitution by such court,
this Agreement shall be automatically modified without further action by the
parties hereto.
(c) For purposes of this Paragraph 7, the Company shall be deemed to
include any entity which is controlled, directly or indirectly, by the Company
and any entity of which a majority of the economic interest is owned, directly
or indirectly, by the Company.
8. Remedies.
The parties hereto agree that the Company would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, the Company may, in addition and supplementary to other
rights and remedies existing in its favor, apply to any court of law or equity
of competent jurisdiction for specific performance and/or injunctive or other
relief in order to enforce or prevent any violation of the provisions thereof.
18
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9. Successors and Assigns.
(a) The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company, by agreement in form and substance
satisfactory to Executive, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of an such
succession shall be a breach of this Agreement and shall entitle Executive to
compensation from the Company in the same amount and on the same terms as he
would be entitled to hereunder if his employment terminated due to Disability,
except that for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the date of termination. In
the event of such a breach of this Agreement, the Notice of Termination shall
specify such date as the date of termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure to
the benefit of and be enforceable by Executive's personal or legal
representatives,
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executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts would still be payable to
him hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's beneficiary as determined under any applicable plan, Executive's
devisee, legatee, or other designee or, if there be no such designee, to
Executive's estate.
10. Timing of and No Duplication of Payments/ Tax Withholding.
(a) All payments payable to Executive pursuant to this Agreement shall be
paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
(b) The Company shall have the right to deduct and withhold from any
amounts which become taxable to Executive hereunder all employment and other
federal, state and local taxes and charges which are, or which may hereafter, be
required by law to be so deducted or withheld.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of this
Agreement shall be binding or effective for any purpose unless it is made in a
writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or
20
<PAGE>
discharge any provision or term of this Agreement. No delay on the part of the
Company or Executive in the exercise of any of their respective rights or
remedies shall operate as a waiver thereof, and no single or partial exercise by
the Company or Executive of any such right or remedy shall preclude other or
further exercise thereof. A waiver of right or remedy on any one occasion shall
not be construed as a bar to or waiver of any such right or remedy on any other
occasion.
12. Notices.
All notices or other communications required or permitted hereunder shall
be made in writing and shall be deemed to have been duly given if delivered by
hand or delivered by a recognized delivery service or mailed, postage prepaid,
by express, certified or registered mail, return receipt requested, and
addressed to the Company or Executive, as applicable, at the address set forth
above (or to such other address as shall have been previously provided in
accordance with this Paragraph 12).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF
LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under
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such applicable law, then, subject to the provisions of Paragraph 7(b) above,
such provision or term shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or affecting in any manner
whatsoever the remainder of such provisions or term or the remaining provisions
or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of which is
deemed to be an original and both of which taken together shall constitute one
and the same agreement.
16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6, 7, 8 and 14 each shall survive
the termination of this Agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
---------------------------------
Name: Thomas A. Rizk
Title: President
/s/ Albert Spring
---------------------------------
Albert Spring
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SCHEDULE A
CALI REALTY CORPORATION
RESTRICTED SHARE AWARD AGREEMENT
ALBERT SPRING
<PAGE>
AGREEMENT EVIDENCING THE GRANT OF A RESTRICTED
SHARE AWARD PURSUANT TO THE EMPLOYMENT AGREEMENT
FOR ALBERT SPRING ENTERED INTO AS OF JANUARY 21, 1997
AGREEMENT ("Agreement") effective as of January 21, 1997, ("Grant
Date") by and between Cali Realty Corporation (the "Company") and Albert Spring
("Recipient").
WHEREAS, pursuant to the employment agreement between Recipient and
the Company entered into as of January 21, 1997 (the "Employment Agreement"),
the Company has awarded shares of the Company's common stock, par value $.01 per
share ("Common Stock") to the Recipient subject to such terms, conditions, and
restrictions (hereinafter, "Restricted Share Award") as set forth in the
Employment Agreement and this Agreement;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Award of Shares of Restricted Stock.
Pursuant to the Employment Agreement, the Company hereby awards to the
Recipient, effective as of the Grant Date, a Restricted Share Award representing
the right to earn 6,480 shares of Common Stock ("Restricted Shares") subject to
the terms, conditions and restrictions set forth herein. Capitalized terms not
otherwise defined in this Agreement shall be as defined in the Employment
Agreement.
2. Award Restrictions.
(a) General Rules. Ownership of Restricted Shares shall not vest
in the Recipient, and shall be subject to forfeiture until the conditions of
Section 2(b) and (c) are fully satisfied. For purposes of this Agreement, the
following concepts shall be defined as follows: (i) the lapse of restrictions on
the Recipient's rights with respect to the Restricted Shares granted hereunder
shall be referred to as "Vesting"; (ii) the period between the Grant Date and
the date of Vesting shall be referred to as the "Vesting Period"; and (iii) the
date Vesting occurs shall be referred to as the "Vesting Date."
<PAGE>
(b) Vesting. An aggregate of 6,480 Restricted Shares may be
earned by the Recipient and vest on a cumulative basis over a five to seven year
Vesting Period, with 1,296 Restricted Shares scheduled to be vested and earned
on each Vesting Date provided the Performance Goals specified in Section 2(c)
below are satisfied. The Vesting Date for this Agreement shall be January 21. In
determining the number of Restricted Shares which are earned and vested,
fractional shares shall be rounded down to the nearest whole number and shall be
aggregated and earned, on the last Vesting Date.
(c) Performance Goals. (i) A total of 1,296 Restricted Shares
shall vest on each Vesting Date provided one of the following financial tests
("Financial Tests") is met for the measurement period ending on the last day of
the Company's fiscal year immediately preceding such Vesting Date: (A) the
Company achieves an eight percent (8%) funds from operations per common share
("FFO") increase, or (B) shareholders receive a fifteen percent (15%) total
return (dividends plus stock appreciation per share of Common Stock). For
purposes of this Agreement, FFO shall mean (i) net income (loss) before minority
interest of unit holders, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains (or losses) from debt
restructuring and sale of property, plus real estate return, depreciation and
amortization as calculated in accordance with the National Association of Real
Estate Investment Trusts definition published in March 1995, as amended from
time to time, and as applied in accordance with the accounting practices and
policies of the Company in effect from time to time on a consistent basis to the
entire Vesting Period, divided by (ii) the sum of (A) the primary weighted
average number of outstanding shares of Common Stock as it appears in the
Company's financial statement for the applicable period and (B) the primary
weighted average number of outstanding limited partnership units of Cali Realty,
L.P., a Delaware limited partnership
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of which the Company is the sole general partner, for the applicable period.
(ii) In the event that neither of the Financial Tests above is
satisfied in the measurement period ending on the applicable Vesting Date
("Non-Achievement Year"), any Restricted Shares that failed to vest on such Date
may vest on a subsequent Vesting Date provided the test described below is
satisfied (the "Cumulative Test"). The Cumulative Test shall be applied at the
end of any measurement period ("Catch-Up Year") with respect to any prior
Non-Achievement Year provided both of the following conditions are satisfied:
(I) a Financial Test is satisfied in the Catch-Up Year without respect to any
prior period and (II) a Financial Test is satisfied in the Catch-Up Year on a
cumulative basis beginning with the first measurement period occurring within
the Vesting Period and ending with the Catch-Up Year. In the event that both of
the conditions in the immediately preceding sentence are satisfied, the
Restricted Shares that failed to vest in the Non-Achievement Year shall
automatically vest on the Vesting Date applicable to the Catch-Up Year. For
example, if vesting occurred in years one (1) and two (2), year three (3) is a
Non-Achievement Year, and one of the Financial Tests is met in year four (4),
the Cumulative Test may be used. Vesting in that portion of the Restricted Stock
Award scheduled to vest in year three (3) will occur in year four (4) if either
the aggregate FFO is thirty-two percent (32%) or the aggregate total return is
sixty percent (60%) at the end of the fourth (4th) fiscal year. Rules for
Application of the Cumulative Test: (a) it is not necessary for the Catch-Up
Year to immediately succeed the Non-Achievement Year in order for the Cumulative
Test to be applicable as long as the Catch-Up Year occurs during the Vesting
Period and (b) it is not necessary for the same Financial Test to be satisfied
in the Catch-Up Year, first on an independent and then on a cumulative basis, in
order for conditions (I) and (II) above to be satisfied. Notwithstanding any
contrary provisions contained in this Section 2(c), any Restricted Shares that
have not been
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<PAGE>
earned and vested by January 21, 2004 pursuant to the Cumulative Test shall
automatically be canceled and forfeited.
(d) Lapse of Restrictions. Upon the Vesting of Restricted Shares,
the Recipient shall own the Shares free and clear of all restrictions imposed by
this Agreement and the Recipient shall be free to hold or dispose of such Shares
in his discretion, subject to applicable federal and state law or regulations.
(e) Prohibition Against Assignment. During the Vesting Period,
the Restricted Shares may not be transferred or encumbered by the Recipient by
means of sale, assignment, mortgage, transfer, exchange, pledge, or otherwise.
The levy of any execution, attachment, or similar process upon the Restricted
Shares shall be null and void.
3. Stock Certificates.
(a) Certificates. Restricted Shares shall be evidenced by one or
more stock certificates registered in the name of the Recipient or a nominee or
nominees therefor. Prior to Vesting, the Company shall prepare and issue a
certificate for the Restricted Shares (the "Share Certificate"), which shall be
registered in the name of the Recipient and which shall bear such restrictive
legend or legends (if any) as the Company may deem necessary or desirable under
any applicable law.
(b) Stock Powers. The Recipient shall execute and deliver to the
designee of the Company (the "Designee") a stock power designating the Company
as the transferee of an unspecified number of Shares, which stock power may be
completed by the Designee as specified herein. The Recipient and the Company
each waive the requirement that the signature of the Recipient on the stock
power be guaranteed. Upon receipt of a copy of this Agreement and the stock
power, each signed by the Recipient, the Designee shall promptly notify the
proper officers of the Company who shall cause the Share Certificate to be
deposited with the Designee, to
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<PAGE>
be held in accordance with the terms of the Employment Agreement and this
Agreement.
(c) Effect of Vesting. Upon Vesting, the Company shall cause to
be delivered to the Recipient (i) a certificate for the Shares which have vested
free and clear of restrictive legends and (ii) any stock powers signed hereunder
by the Recipient remaining in its possession. In the event that the Recipient
dies after Vesting and before delivery of the certificate, such certificate
shall be delivered to, and registered in the name of, the Recipient's
beneficiary or estate, as the case may be.
(d) Rights of Stockholder. Except as otherwise provided in
Section 2 and this Section 3, during the Vesting Period and after the
certificates for the Restricted Shares have been issued, the Recipient shall be
entitled to all rights of a stockholder of the Company, including the right to
vote and the right to receive dividends, with respect to the Restricted Shares
subject to this Agreement. Subject to applicable withholding requirements, if
any, dividends on the Restricted Shares shall be paid to the Recipient when
earned.
(e) Power of Designee. The Designee is hereby authorized by the
Recipient to utilize the stock power delivered by the Recipient to transfer all
forfeited Shares to the Company upon receipt of instructions from a duly
authorized representative of the Company.
4. Termination of Employment; Change in Control.
(a) Termination Due to Disability or Death; Change in Control.
Unless otherwise provided in the Employment Agreement, if the Recipient
terminates employment with the Company prior to the end of the Vesting Period
set forth in this Agreement due to Disability or death, all Restricted Shares
subject to this Agreement and held by, or on behalf of, the Recipient shall be
deemed earned and vested as of the Recipient's last day of employment with the
Company. In addition, unless
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<PAGE>
otherwise provided in the Employment Agreement, all Restricted Shares subject to
this Agreement and held by the Recipient on the date a Change in Control occurs
shall be deemed earned and vested as of such date.
(b) Termination for Any Other Reason. Unless otherwise provided
in the Employment Agreement, if the Recipient's employment with the Company
terminates prior to the end of the Vesting Period set forth in this Agreement
for reasons other than Disability or death, any Restricted Shares subject to
this Agreement that have not been earned and vested prior to the Recipient's
termination of employment shall be immediately forfeited on the last day of the
Recipient's employment with the Company.
5. Withholding.
In connection with the delivery of any stock certificates, or the
making of any payment in accordance with the provisions of this Agreement, the
Company shall withhold Shares or cash amounts (for fractional Shares) equal to
the taxes then required by applicable federal, state and local law to be so
withheld.
6. Tax Gross-Up Payments.
(a) Entitlement to Tax Gross-Up Payments. The Recipient shall be
entitled to receive a tax gross-up payment (the "Tax Gross-Up Payment") from the
Company with respect to each tax year Restricted Shares covered by this
Agreement are distributed to him. Each Tax Gross-Up Payment shall be a dollar
amount equal to forty (40%) percent of the Fair Market Value of the Restricted
Shares at time of distribution, exclusive of dividends.
(b) Effect of Termination Due to Disability or Death; Change in
Control. Unless otherwise provided in the Employment Agreement, if the Recipient
terminates employment with the Company prior to the end of the Vesting Period
set forth in this Agreement due to Disability or death, or in the event a Change
in Control
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<PAGE>
occurs, a final Tax Gross-Up Payment shall be made to the Recipient (or his
Beneficiary, as the case may be) in a dollar amount equal to forty (40%) percent
of the Fair Market Value of the Restricted Shares distributed to the Recipient
(or his beneficiary), exclusive of dividends. Payment of the final Tax Gross-Up
Payment shall be made on the date the Restricted Shares are distributed or as
soon as administratively feasible thereafter.
(c) Effect of Termination for Any Other Reason. Unless otherwise
provided in the Employment Agreement, if the Recipient's employment with the
Company terminates prior to the end of the Vesting Period set forth in this
Agreement for any reason other than Disability or death, no further Tax Gross-Up
Payments shall be made to such Recipient.
7. Adjustments for Capital Changes.
In the event of any change in the outstanding shares of Common Stock
of the Company by reason of any stock dividend or split, recapitalization,
merger, consolidation, spin-off, reorganization, combination or exchange of
shares, or other similar corporate change, or other increase or decrease in such
shares effected without receipt or payment of consideration by the Company, a
duly authorized representative of the Company shall adjust the number of
Restricted Shares granted pursuant to the Employment Agreement and this
Agreement to prevent dilution or enlargement of the rights granted to the
Recipient.
8. No Right to Continued Employment.
Nothing in this Agreement shall confer on the Recipient any right to
continue as an employee of the Company or in any way affect the Company's or any
subsidiary's right to terminate the Recipient's employment at any time.
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<PAGE>
9. Notice.
Any notice to the Company hereunder shall be in writing addressed to:
Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
Any notice to the Recipient hereunder shall be in writing addressed
to:
Mr. Albert Spring
15 Nottingham Road
West Orange, New Jersey 07043
or such other address as the Recipient shall notify the Company in
writing.
10. Entire Agreement; Effect of Employment Agreement.
(a) Entire Agreement. This Agreement contains the entire
understanding of the parties and shall not be modified or amended except in
writing and duly signed by each of the parties hereto. No waiver by either party
of any default under this Agreement shall be deemed a waiver of any later
default thereof.
(b) Effect of Employment Agreement. In the event the Employment
Agreement with the Company contains additional rights, duties and/or obligations
with respect to the Recipient, such terms and conditions shall govern the
Recipient's Restricted Share Award as if such terms and conditions had been set
forth herein; and in the event of any conflict or inconsistency between the
terms of the Employment Agreement or this Agreement, the terms and conditions of
the Employment Agreement shall control.
11. Construction.
The various provisions of this Agreement are severable in their
entirety. Any determination of invalidity or unenforceability of any one
provision shall have no effect on the continuing force and effect of the
remaining provisions.
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<PAGE>
12. Governing Law.
This Agreement shall be governed by the laws of the State of New
Jersey applicable to contracts made, and to be enforced, within the State of New
Jersey.
13. Successors.
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective on the date first above written.
Cali Realty Corporation
By: /s/ John R. Cali
-----------------------------
John R. Cali
Chief Administrative Officer
Recipient
/s/ Albert Spring
-----------------------------
Albert Spring
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STOCK PLEDGE AGREEMENT
STOCK PLEDGE AGREEMENT, dated as of January 21, 1997, made by Albert
Spring, an individual residing at 15 Nottingham Road, West Orange, New Jersey
07043(the "Pledgor"), to Cali Realty Corporation, a Maryland corporation, (the
"Pledgee" or the "Company").
W I T N E S S E T H:
WHEREAS, the Pledgor is the record and beneficial owner of 11,200 shares
of the issued and outstanding shares of common stock, $.01 par value (the
"Common Stock"), of the Company (such Common Stock being the "Pledged Shares"),
acquired in connection with the Pledgor's employment agreement with the Pledgee
entered into as of January 21, 1997 (the "Employment Agreement");
WHEREAS, pursuant to the Employment Agreement, the Pledgor has agreed to
secure, to the extent hereinafter set forth, the payment in full and the
performance of the obligations of the Pledgor to the Pledgee under a
non-recourse promissory note, dated as of the date hereof, in the amount of
$350,000 (such promissory note as it may hereafter be amended or otherwise
modified from time to time, the "Note"); and the capitalized terms used herein,
and not otherwise defined herein, are used with the meanings ascribed to them in
the Note); and
WHEREAS, the Pledgor hereby pledges and grants a lien and security
interest to Pledgee in the Pledged Shares to secure the Pledgor's obligations
under the Note.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Pledgee to make the loan under the Note, the Pledgor hereby agrees as
follows:
SECTION 1. Pledge. The Pledgor hereby pledges to the Pledgee, and grants
to the Pledgee a security interest in the Pledged Shares and certificates
representing the Pledged Shares, and all dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the Pledged Shares,), and all
proceeds thereof, additions thereto and changes therein (the "Pledged
Collateral").
SECTION 2. Security for Obligations; Non-Recourse Obligations. (a) This
Agreement secures the payment of all liabilities, obligations and indebtedness
of any and every kind and nature heretofore, now or hereafter owing, arising,
due or payable from the Pledgor to the Pledgee pursuant to the Note, however
evidenced, created, incurred, acquired or owing, whether primary or secondary,
direct or indirect, joint or several, contingent or fixed, or otherwise,
including without limitation, obligations of performance, and whether arising
under any other agreements, documents or instruments entered into in connection
with the Note, now or hereafter given by the Pledgor to the Pledgee and whether
arising by book entry, agreement or operation of law and whether or not
evidenced by promissory notes or other evidences of indebtedness (all such
obligations of the Pledgor being the "Obligations").
(b) It is expressly understood and agreed that it is the intention
of the parties that the Obligations of the Pledgor under the Note are
non-recourse obligations of the Pledgor and
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that the Pledgee's right to recover against the Pledgor hereunder in respect of
such Obligations shall be limited solely to the Pledged Collateral.
SECTION 3. Delivery and Release of Pledged Collateral. (a) All
certificates or instruments representing or evidencing the Pledged Collateral
shall be delivered to and held by or on behalf of the Pledgee pursuant hereto
and shall be in suitable form for transfer by delivery, or shall be accompanied
by duly executed instruments of transfer or assignment in blank, all in form and
substance satisfactory to the Pledgee. The Pledgee shall hold the Pledged
Collateral in the form in which it is delivered to the Pledgee unless and until
the occurrence and continuation of an Event of Default under the Note (unless
such Event of Default is waived by the Pledgee) or as otherwise provided in
paragraph 3(b) below. Upon the occurrence and continuance of an Event of Default
under the Note, the Pledgee shall have the right, at any time in its discretion
and without notice to the Pledgor, to transfer to or to register in the name of
the Pledgee or any of its nominees any or all of the Pledged Collateral, subject
only to the revocable rights specified in Section 6(a) below. In addition, the
Pledgee shall have the right at any time to exchange certificates or instruments
representing or evidencing Pledged Collateral for certificates or instruments of
smaller or larger denominations.
(b) On the first anniversary date of this Agreement, and on each
anniversary date and each March 31, June 30 and September 30 thereafter for the
term of this Agreement (each such date a "Determination Date"), the Pledgee
shall reasonably determine the aggregate fair market value of the Pledged
Collateral (the "Market Value"). If on such Determination Date the Market Value
exceeds one hundred ten percent (110%) of the aggregate principal amount of the
Note (together with interest accrued thereon) on such Determination Date (the
"Base Value"), Pledgee shall, unless otherwise requested by Pledgor,
automatically release to the Pledgor such portion of the Pledged Collateral the
aggregate fair market value of which equals the Market Value less 110% of the
Base Value, free and clear of any and all encumbrances hereunder. For purposes
of this paragraph 3(b), "fair market value" shall mean the closing price of the
Common Stock as quoted on the New York Stock Exchange at the end of the last
business day preceding the Determination Date as reported in the New York
edition of The Wall Street Journal.
SECTION 4. Representations and Warranties. The Pledgor represents and
warrants as follows:
(a) The Pledgor is the legal and beneficial owner of the Pledged
Collateral free and clear of any lien, adverse claim, security interest, option
or other charge or encumbrance, except for the security interest created by this
Agreement.
(b) The pledge of the Pledged Collateral pursuant to this Agreement
creates a valid and perfected first priority security interest in the Pledged
Collateral, securing the payment of the Obligations.
(c) Neither the execution or delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, nor the compliance with or
performance of the terms and conditions of this Agreement by the Pledgor is
prevented by, limited by, conflicts with or will result in the breach or
violation of or a default under the terms, conditions or provisions of (i) any
mortgage, security agreement, indenture, evidence of indebtedness, loan or
financing agreement, trust agreement, stockholder agreement, or other agreement
or instrument to which the Pledgor is a party or by which he is bound or (ii)
any provision of law, any order of any court or administrative agency or any
rule or regulation applicable to the Pledgor, subject to applicable state and
federal securities laws.
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(d) This Agreement constitutes the legal, valid and binding
obligation of the Pledgor, enforceable in accordance with its terms.
(e) There are no actions, suits or proceedings (whether or not
purportedly on behalf of the Pledgor) pending or, to the best knowledge of the
Pledgor, threatened affecting the Pledgor that involve the Pledged Collateral.
(f) All consents or approvals, if any, required as a condition
precedent to or in connection with the due and valid execution, delivery and
performance by the Pledgor of this Agreement have been obtained, subject to
applicable state and federal securities laws.
SECTION 5. Further Assurances. The Pledgor agrees that at any time and
from time to time, at the expense of the Pledgor, the Pledgor will promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or desirable, or that the Pledgee may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Pledgee to exercise and enforce
its rights and remedies hereunder, subject to applicable state and federal
securities laws, with respect to any Pledged Collateral.
SECTION 6. Voting Rights; Dividends, Etc. (a) So long as no Event of
Default under the Note shall have occurred and be continuing:
(i) The Pledgor shall be entitled to exercise any and all voting and
other consensual rights pertaining to the Pledged Collateral or any part
thereof for any purpose not inconsistent with the terms of this Agreement
or the Note.
(ii) The Pledgor shall be entitled to receive and retain any and all
dividends and interest paid in respect of the Pledged Collateral;
provided, however, that any and all:
(A) dividends and interest paid or payable other than in cash
in respect of, and instruments and other property received,
receivable or otherwise distributed in respect of, or in exchange
for, any Pledged Collateral (whether resulting from a subdivision,
combination or reclassification of the outstanding capital stock of
the Company, or any merger, consolidation, acquisition or other
exchange of assets or securities to which the Company may be a
party, or any conversion, call or redemption, or otherwise);
(B) dividends and other distributions paid or payable in cash
in respect of any Pledged Collateral in connection with a partial or
total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus; and
(C) cash paid, payable or otherwise distributed in respect of
principal of, or in redemption of, or in exchange for, any Pledged
Collateral,
shall be, at the option and request of the Pledgee, forthwith delivered to
the Pledgee to hold as Pledged Collateral and shall, if received by the
Pledgor, be received in trust for the benefit of the Pledgee, be
segregated from the other property or funds of the Pledgor, and be
forthwith delivered to the Pledgee as Pledged Collateral in the same form
as so received (with any necessary endorsement).
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(iii) The Pledgee shall execute and deliver (or cause to be executed
and delivered) to the Pledgor all such proxies and other instruments as
the Pledgor may reasonably request for the purpose of enabling the Pledgor
to exercise the voting and other rights which he is entitled to exercise
pursuant to paragraph (i) above and to receive the dividends or interest
payments which he is authorized to receive and retain pursuant to
paragraph (ii) above.
(b) Upon the occurrence and during the continuance of an Event of Default
under the Note, and at the election of Pledgee:
(i) All rights of the Pledgor to exercise the voting and other
consensual rights which he would otherwise be entitled to exercise
pursuant to Section 6(a)(i) and to receive the dividends and interest
payments which he would otherwise be authorized to receive and retain
pursuant to Section 6(a)(ii) shall cease for the period subsequent to the
Event of Default, and all such rights shall thereupon become vested in the
Pledgee who shall thereupon have the sole right to exercise such voting
and other consensual rights and to receive and hold as Pledged Collateral
such dividends and interest payments.
(ii) All dividends and interest payments which are received by the
Pledgor contrary to the provisions of paragraph (i) of this Section 6(b)
shall be received in trust for the benefit of the Pledgee, shall be
segregated from other funds of the Pledgor and shall be forthwith paid
over to the Pledgee as Pledged Collateral in the same form as so received
(with any necessary endorsement).
(c) In the event that during the term of this Agreement subscription
warrants or other rights or options shall be issued in connection with the
Pledged Collateral, all such stock warrants, rights and options shall forthwith
be assigned by the Pledgor to the Pledgee and said stock warrants, rights and
options shall be, and, to the extent exercised by Pledgor, all new stock issued
pursuant thereto shall be pledged by Pledgor to Pledgee to be held as, and shall
be deemed to be part of, the "Pledged Collateral" under the terms of this
Agreement in the same manner as the shares of stock originally pledged
hereunder.
SECTION 7. Transfers and Other Liens; Additional Shares. The Pledgor
agrees that he will not (i) sell or otherwise dispose of, or grant any option
with respect to, any of the Pledged Collateral, or (ii) create or permit to
exist any lien, security interest, or other charge or encumbrance upon or with
respect to any of the Pledged Collateral, except for the security interest under
this Agreement.
SECTION 8. Litigation Respecting Pledged Shares. In the event any action,
suit or other proceeding at law, in equity, in arbitration or before any other
authority involving or affecting the Pledged Collateral becomes known to or is
contemplated by the Pledgor, the Pledgor shall give the Pledgee immediate notice
thereof and if the Pledgor is contemplating such action, suit or other
proceeding, the Pledgor shall receive the written consent of the Pledgee prior
to commencing any such action, suit or other proceeding.
SECTION 9. Pledgee Appointed Attorney-in-Fact. (a) If an Event of Default
shall occur and be continuing under the Note (unless such Event of Default is
waived by the Pledgee), Pledgor hereby appoints the Pledgee (and any officer or
agent of the Pledgee with full power of substitution and revocation) the
Pledgor's true and lawful attorney-in-fact, with full authority in the place and
stead of the Pledgor and in the name of the Pledgor or otherwise, from time to
time in the Pledgee's discretion to take any action and to execute any
instrument which the Pledgee may deem necessary or advisable to accomplish the
purposes of this Agreement, including,
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without limitation, (i) to receive, endorse and collect all instruments made
payable to the Pledgor representing any dividend, interest payment or other
distribution in respect of the Pledged Collateral or any part thereof and to
give full discharge for the same; and (ii) to transfer the Pledged Collateral on
the books of the Company, in whole or in part, to the name of the Pledgee or
such other person or persons as the Pledgee may designate; take possession of
and endorse any one or more checks, drafts, bills of exchange, money orders or
any other documents received on account of the Pledged Collateral; collect, sue
for and give acquittances for moneys due on account of the foregoing; withdraw
any claims, suits, or proceedings pertaining to or arising out of the foregoing;
execute and record or file on behalf of the Pledgor any evidence of a security
interest contemplated by this Agreement or any refiling, continuation or
extension thereof; take any other action contemplated by this Agreement; and
sign, execute, acknowledge, swear to, verify, deliver, file, record and publish
any one or more of the foregoing.
(b) The powers of attorney which shall be granted pursuant to
Section 9(a) and all authority thereby conferred shall be granted and conferred
solely to protect the Pledgee's interests in the Pledged Collateral and shall
not impose any duty upon the attorney-in-fact to exercise such powers. Such
powers of attorney shall be irrevocable prior to the performance in full of the
Obligations and shall not be terminated prior thereto or affected by any act of
the Pledgor or other person or by operation of law, including, but not limited
to, the dissolution, death, disability or incompetency of any person, the
termination of any trust, or the occurrence of any other event, and if the
Pledgor or any other person should be dissolved or die or become disabled or
incompetent or any other event should occur before the performance in full of
the Obligations and termination of this Agreement, such attorney-in-fact shall
nevertheless be fully authorized to act under such powers of attorney as if such
dissolution, death, disability or incompetency or other event had not occurred
and regardless of notice thereof.
(c) Each person who shall be a transferee of the beneficial
ownership of the Pledged Collateral, by the acceptance of such a transfer, shall
be deemed to have irrevocably appointed the Pledgee, with full power of
substitution and revocation, such person's true and lawful attorney-in-fact in
such person's name and otherwise to do any and all acts permitted to, and to
exercise any and all powers herein conferred upon, such attorney-in- fact.
SECTION 10. Reasonable Care. The Pledgee shall be deemed to have exercised
reasonable care in the custody and preservation of the Pledged Collateral in its
possession if the Pledged Collateral is accorded treatment substantially equal
to that which the Pledgee accords its own property, it being understood that the
Pledgee shall not have any responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relative to any Pledged Collateral, whether or not the Pledgee has or is
deemed to have knowledge of such matters, or (ii) taking any necessary steps to
preserve rights against any parties with respect to any Pledged Collateral.
SECTION 11. Remedies Upon Event of Default.
(a) Subject to Section 2(b) hereof, if any Event of Default under
the Note shall have occurred and be continuing (unless such Event of Default is
waived by the Pledgee), for the period subsequent to the Event of Default:
(i) The Pledgee may receive and retain all payments of any
kind with respect to the Pledged Collateral and may notify the
obligors or other parties, if any, interested in any items of
Pledged Collateral of the interest of the Pledgee therein and of any
action proposed to be taken with respect thereto, and inform any of
those parties that all payments otherwise payable to the Pledgor
with
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respect thereto shall be made to the Pledgee until all amounts due
under the Note have been paid in full;
(ii) The Pledgee may exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of
a secured party on default under the Uniform Commercial Code (the
"Code") in effect in the State of New Jersey at that time, and the
Pledgee may also, without notice except as specified below, sell the
Pledged Collateral or any part thereof in one or more parcels at
public or private sale, at any exchange, broker's board or at any of
the Pledgee's offices or elsewhere, for cash, on credit or for
future delivery, and upon such other terms as the Pledgee may deem
commercially reasonable. The Pledgor agrees that, to the extent
notice of sale shall be required by law, at least ten days' notice
to the Pledgor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute
reasonable notification. The Pledgee shall not be obligated to make
any sale of Pledged Collateral regardless of notice of sale having
been given. The Pledgee may adjourn any public or private sale from
time to time by announcement at the time and place fixed therefor,
and such sale may, without further notice, be made at the time and
place to which it was so adjourned;
(iii) Any cash held by the Pledgee as Pledged Collateral and
all cash proceeds received by the Pledgee in respect of any sale of,
collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Pledgee, be held by
the Pledgee as collateral for, and/or then or at any time thereafter
applied in whole or in part by the Pledgee against, all or any part
of the Obligations in such order as the Pledgee shall elect. Any
surplus of such cash or cash proceeds held by the Pledgee and
remaining after payment in full of all the Obligations shall be paid
over to the Pledgor or to whomsoever may be lawfully entitled to
receive such surplus; and
(iv) The Pledgee may otherwise use or deal from time to time
with the Pledged Collateral, in whole or in part, in all respects as
if the Pledgee were the outright owner thereof.
(b) Except as set forth in Section 11(a)(iii), the Pledgee shall
have the sole right to determine the order in which Obligations shall be deemed
discharged by the application of the Pledged Collateral or any other property or
money held hereunder or any amount realized thereon. Any requirement of
reasonable notice imposed by law shall be deemed met if such notice is in
writing and is mailed, telegraphed or hand delivered to the Pledgor at least
three days prior to the sale, disposition or other event giving rise to such
notice requirement.
(c) The Pledgee shall collect the cash proceeds received from any
sale or other disposition or from any other source contemplated by subsection
(a) above and shall apply the full proceeds in accordance with the provisions of
this Agreement.
(d) Notwithstanding the foregoing, none of the provisions of this
Section 11 shall confer on the Pledgee any rights or privileges that are not
permissible under applicable law. The Pledgee may effect the provisions of this
Section 11 only in compliance with all applicable federal and state securities
laws.
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(e) In connection with the provisions of this Agreement, the Pledgor
from time to time shall promptly execute and deliver, or cause to be executed
and delivered, to the Pledgee such documents and instruments, shall join in such
notices and shall take, or cause to be taken, such other lawful actions as the
Pledgee shall deem reasonably necessary or desirable to enable it to exercise
any of the rights with respect to the Pledged Collateral granted to it pursuant
to this Agreement.
SECTION 12. Waivers and Amendments, Etc. The rights and remedies given
hereby are in addition to all others however arising, but it is not intended
that any right or remedy be exercised in any jurisdiction in which such exercise
would be prohibited by law. No action, failure to act or knowledge of the
Pledgee shall be deemed to constitute a waiver of any power, right or remedy
hereunder, nor shall any single or partial exercise thereof preclude any further
exercise thereof or the exercise of any other power, right or remedy. Any waiver
or consent respecting any covenant, representation, warranty or other term or
provision of this Agreement shall be effective only in the specified instance
and for the specific purpose for which given and shall not be deemed, regardless
of frequency given, to be a further or continuing waiver or consent. The failure
or delay of the Pledgee at any time or times to require performance of, or to
exercise its rights with respect to, any representation, warranty, covenant or
other term or provision of this Agreement in no manner shall affect its right at
a later time to enforce any such provision. No notice to or demand on a party in
any case shall entitle such party to any other or further notice or demand in
the same, similar or other circumstances. Any right or power of the Pledgee
hereunder respecting the Pledged Collateral and any other property or money held
hereunder may at the option of the Pledgee be exercised as to all or any part of
the same and the term the "Pledged Collateral" wherever used herein, unless the
context clearly requires otherwise, shall be deemed to mean (and shall be read
as) the "Pledged Collateral and any other property or money held hereunder or
any part thereof". This Agreement shall not be amended nor shall any right
hereunder be deemed waived except by a written agreement expressly setting forth
the amendment or waiver and signed by the party against whom or which such
amendment or waiver is sought to be charged.
SECTION 13. Notices. All notices hereunder shall be given and deemed
received as set forth in the Note.
SECTION 14. Continuing Security Interest and Reinstatement. (a) This
Agreement shall create a continuing security interest in the Pledged Collateral
and shall (i) be binding upon the Pledgor, his heirs, successors and assigns,
and (ii) inure to the benefit of the Pledgee and its successors, transferees and
assigns. Upon the payment in full or performance of the Obligations, the Pledgor
shall be entitled to the return, upon his request and at his expense, of such of
the Pledged Collateral as shall not have been released, sold or otherwise
applied pursuant to the terms of the Agreement.
(b) If at any time after payment in full by the Pledgor of all Obligations
and termination of the pledge granted in this Agreement, any payments on
Obligations theretofore made by the Pledgor must be disgorged by the Pledgee for
any reason whatsoever, this Agreement and the pledge granted hereunder shall be
reinstated as to all disgorged payments as though such payments had not been
made, and the Pledgor shall sign and deliver to Pledgee all documents and things
necessary to reperfect the terminated pledge.
SECTION 15. Severability. In the event that any provision of this
Agreement shall be determined to be superseded, invalid or otherwise
unenforceable pursuant to applicable law, such determination shall not affect
the validity of the remaining provisions of this Agreement, and the remaining
provisions of this Agreement shall be enforced as if the invalid provision were
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deleted.
SECTION 16. Survival of Representations, etc. All representations,
warranties, covenants and other agreements made herein shall survive the
execution and delivery of this Agreement and shall continue in full force and
effect until all amounts due under the Note have been paid in full. This
Agreement shall remain and continue in full force and effect without regard to
any modification, execution, renewal, amendment or waiver of any provision of
the Note.
SECTION 17. Termination and Return of Pledged Stock. This Agreement shall
continue in full force and effect until all of the Obligations shall have been
paid and satisfied or until the release, discharge or termination of the Note,
whichever last occurs. Upon the termination of this Agreement, the Pledgee shall
cause to be transferred to Pledgor all of the Pledged Collateral and any money,
property and rights received by Pledgor pursuant thereto, to the extent Pledgee
has not released, taken, sold or otherwise realized upon the same pursuant to
its rights and obligations hereunder.
SECTION 18. Transfer and Assignment. The Pledgee may transfer the Pledged
Collateral and any other property or money held hereunder to any transferee of
the Obligations or any part thereof. The transferee shall thereupon succeed to
all of the Pledgee's rights hereunder with respect to the Pledged Collateral so
transferred. Thereafter, the Pledgee shall have no obligation to Pledgor with
respect to the Pledged Collateral so transferred. The Pledgee shall, however,
retain all of its rights and powers with respect to any part of the Pledged
Collateral not transferred. Every agent or nominee of the Pledgee shall have the
benefit of this Agreement as if named herein and may exercise all of the rights
and powers given to the Pledgee hereunder.
SECTION 19. Entire Agreement. This Agreement, the Secured Non-Recourse
Promissory Note and the Employment Agreement contain the entire agreement of the
parties and supersedes all other agreements, understandings and representations,
oral or otherwise, between the parties with respect to the matters contained
herein. This Agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors, assigns, heirs,
administrators, fiduciaries, next of kin and executors. Section headings used
herein are for convenience only and shall not affect the meaning or construction
of any of the provisions hereof. This Agreement may be executed in any number of
counterparts with the same effect as if the signatures thereto and hereto were
upon the same instrument. In the event of any conflict among any of the
documents referred to above, the terms of the Employment Agreement shall
prevail.
SECTION 20. Governing Law; Terms. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of New Jersey
without giving effect to its conflict of laws provisions. Unless otherwise
defined herein or in the Note, terms defined in Article 9 of the Uniform
Commercial Code in the State of New Jersey are used herein as therein defined.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the date first above written.
/s/ Albert Spring
-----------------------------------
Albert Spring
CALI REALTY CORPORATION
By: /s/ Thomas A. Rizk
-------------------------------
Name: Thomas A. Rizk
Title: President and
Chief Executive Officer
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SECURED NON-RECOURSE PROMISSORY NOTE
January 21, 1997 $350,000
FOR VALUE RECEIVED, Albert Spring, an individual residing at 15 Nottingham
Road, West Orange, New Jersey 07043 ("Payor"), hereby promises to pay to Cali
Realty Corporation, a Maryland corporation ("Payee" or the "Company"), or its
assigns, the principal amount of three hundred fifty thousand dollars exactly
($350,000), together with all interest accrued thereon calculated from the date
hereof in accordance with the provisions of Section 1 hereof. Certain
capitalized terms used in this Secured Non-Recourse Promissory Note (the "Note")
are defined in Section 6 below.
This Note is being made by Payor in order to finance the Payor's purchase
of 11,200 shares of common stock, par value $.01 per share, of the Company (the
"Common Stock") from the Company pursuant to the Payor's employment agreement
with Payee entered into as of January 21, 1997 (the "Employment Agreement").
This Note is secured by the Pledged Collateral under the terms of the
Stock Pledge Agreement and is entitled to the benefits thereof.
1. Accrual of Interest. Interest will accrue on the unpaid principal
amount of this Note from and after the date hereof on a daily basis at the rate
per annum equal to 6.21%, as set forth in the Employment Agreement, and such
interest shall be compounded annually, calculated on the basis of a 365 day
year. Unless forgiven as contemplated herein, interest shall be payable annually
in arrears on each anniversary date hereof.
2. Payment of Note.
(a) Maturity Date. Except as provided in Sections 2(b) and (c) and
Sections 3 and 4 below, the entire unpaid principal balance of this Note
(together with interest accrued thereon) shall become due and payable on the
fifth anniversary of the date of this Note.
(b) Forgiveness of Loan. The principal amount of this Note shall be
automatically forgiven ratably over a five (5) year term in annual equal twenty
percent (20%) increments commencing on the first anniversary of the date of this
Note and each anniversary thereafter. All then accrued but unpaid interest on
this Note shall also be automatically forgiven annually on each applicable
anniversary date; provided, however, subject to the provisions of Sections 3 and
4 hereof, the forgiveness of each principal
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portion of this Note plus interest shall be conditioned upon Payor being in the
employ of the Company on the applicable anniversary date.
(c) Change in Control. Pursuant to the Employment Agreement, in the
event of a Change in Control (as defined in the Employment Agreement) or in the
absence thereof in the Cali Realty Corporation Employee Stock Option Plan) the
entire unpaid principal amount of this Note (including any accrued but unpaid
interest) shall automatically be accelerated and forgiven, and no portion of
this Note shall become due or payable at any time thereafter.
(d) Non-Recourse Obligations. Notwithstanding anything to the
contrary stated herein, Payee agrees that for payment of this Note it will look
solely to the Pledged Collateral and such other collateral, if any, as may now
or hereafter be given to secure the payment of this Note, and no other assets of
Payor shall be subject to levy, execution or other enforcement procedure for the
satisfaction of the remedies of Payee, or for any payment required to be made
under this Note.
3. Effect of Termination of Employment Due to Disability or Death. In the
event Payor terminates employment with the Company prior to the expiration of
the term of this Note due to his disability (as determined pursuant to the terms
of the Employment Agreement or in the absence thereof by the Committee in its
discretion) or death, the entire unpaid balance of this Note plus interest shall
automatically be accelerated and forgiven on the first day of the calendar month
next succeeding Payor's disability or death, and no portion of this Note shall
become due or payable at any time thereafter.
4. Effect of Termination of Employment For Any Other Reason. In the event
Payor terminates employment with the Company or the Company terminates Payor's
employment with the Company, in each case prior to the expiration of the term of
this Note for any reason other than disability or death, there shall be no
further forgiveness of the principal or the interest of this Note and the entire
unpaid balance of this Note plus interest shall automatically be accelerated and
become due and payable to the Company on the effective date of Payor's
termination of employment with the Company.
5. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall
be deemed to have occurred if:
(i) Payor fails to pay when due any amount (whether interest,
principal or other amount) then due or payable on this Note for a period
of ten (10) days after the holder of this Note notifies Payor of such
failure;
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<PAGE>
(ii) Payor fails to perform or observe any other provision contained
in this Note or the Stock Pledge Agreement and such failure continues
unremedied for a period of thirty (30) days after the holder of this Note
notifies Payor of such breach; or
(iii) If an event set forth in Section 4 hereof has occurred, Payor
makes an assignment for the benefit of creditors or admits in writing his
inability to pay his debts generally as they become due; or an order,
judgment or decree is entered adjudicating Payor bankrupt or insolvent; or
any order for relief with respect to Payor is entered under the Bankruptcy
Code; or Payor petitions or applies to any tribunal for the appointment of
a custodian, trustee, receiver or liquidator, or commences any proceeding
relating to himself under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against Payor and either (a) Payor in writing
indicates his approval thereof, consents thereto or acquiesces therein or
(b) such petition, application or proceeding is not dismissed within
ninety (90) days.
(b) Consequences of Events of Default.
(i) If any Event of Default (other than the type described in
paragraph 3(a)(iii) hereof has occurred, the holder of this Note may
demand (by written notice delivered to Payor) immediate payment of all or
any portion of the outstanding principal amount of this Note together with
any and all accrued interest thereon, which amount shall become due and
payable upon such demand. If an Event of Default of the type described in
paragraph 3(a)(iii) has occurred, then all of the outstanding principal
amount of this Note together with any and all accrued interest thereon
shall automatically be immediately due and payable without any action on
the part of the holder of this Note.
(ii) Each holder of this Note shall also have any other rights which
such holder may have been afforded under this Note or the Stock Pledge
Agreement at any time and any other rights which such holder may have
pursuant to applicable law.
6. Certain Defined Terms. As used in this Note, the following terms shall
have the following meanings:
"Bankruptcy Code" means the Bankruptcy Code of 1978, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
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<PAGE>
"Pledged Collateral" means the Common Stock pledged by Payor under
the Stock Pledge Agreement as security for Payor's performance of his
obligations under this Note.
"Stock Pledge Agreement" means the Stock Pledge Agreement dated the
date hereof between Payor and the Company.
7. Amendment and Waiver. Except as otherwise expressly provided herein,
the provisions of this Note may not be amended and Payor may not take any action
prohibited herein, or omit to perform any act required to be performed by him
herein, unless Payor has obtained the prior written consent of the holder of
this Note.
8. Cancellation. After all obligations for the payment of money arising
under this Note have been paid in full, this Note will be surrendered to Payor
for cancellation.
9. Tax Withholding. The Company shall have the right to deduct and
withhold from any amounts which become taxable to Payor hereunder all employment
and other federal, state and local taxes and charges which are, or which may
hereafter, be required by law to be so deducted or withheld.
10. Notices; Place of Payment. Any notice hereunder shall be in writing
and shall be delivered by recognized courier, facsimile or certified mail,
return receipt requested, and shall be conclusively deemed to have been received
by a party hereto and to be effective on the day on which delivered or
facsimiled to such party at its address set forth below (or at such other
address as such party shall specify in writing):
If to Payor: Albert Spring
15 Nottingham Drive
West Orange, New Jersey 07043
If to Payee: Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Attn: John R. Cali
Chief Administrative Officer
All payments to be made under this Note are to be delivered to the holder
at such address or to the attention of such person as the holder may designate
by prior written notice to Payor. At the request of the holder of this Note, all
payments shall be made by wire transfer of immediately available funds to an
account which the holder may designate from time to time.
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11. Waiver of Presentment, Demand, Dishonor.
(a) Payor hereby waives presentment for payment, protest, demand, notice
of protest, notice of nonpayment and diligence with respect to this Note, and
waives and renounces all rights to the benefits of any statute of limitations or
any moratorium, appraisement, exemption, or homestead now provided or that
hereafter may be provided by any federal or applicable state statute, including
but not limited to exemptions provided or allowed under the Bankruptcy Code,
both as to himself and as to all of his property, whether real or personal,
against the enforcement and collection of the obligations evidenced by this Note
and any and all extensions, renewals and modifications hereof.
(b) No failure on the part of any holder of this Note to exercise any
right or remedy hereunder with respect to Payor, whether before or after the
happening of an Event of Default, shall constitute waiver of any such Event of
Default or of any other Event of Default by such holder or on behalf of any
other holder. No failure to accelerate the debt of Payor evidenced hereby by
reason of an Event of Default or indulgence granted from time to time shall be
construed to be a waiver of the right to insist upon prompt payment thereafter,
or shall be deemed to be a novation of this Note or a reinstatement of such debt
evidenced hereby or a waiver of such right of acceleration or any other right,
or be construed so as to preclude the exercise of any right any holder of this
Note may have, whether by the laws of the state governing this Note, by
agreement or otherwise, and Payor hereby expressly waives the benefit of any
statute or rule of law or equity that would produce a result contrary to or in
conflict with the foregoing.
12. Governing Law. The validity, construction and interpretation of this
Note shall be governed by and construed in accordance with the internal laws of
the State of New Jersey.
13. Transfer; Assignment. This Note may not be negotiated, assigned or
transferred by Payor at any time, except with Payee's prior written consent.
This Note may not be negotiated, assigned or transferred by Payee except in
connection with the sale of all or substantially all of Payee's assets if the
transferee expressly assumes Payee's obligations under the Employment Agreement.
14. Entire Agreement. This Secured Non-Recourse Promissory Note, the Stock
Pledge Agreement and the Employment Agreement contain the entire agreement of
the parties and supersedes all other agreements, understandings and
representations, oral or otherwise, between the parties with respect to the
matters contained herein. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors, assigns,
heirs, administrators, fiduciaries, next of kin and executors. Section headings
used herein are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof. This Agreement may be executed in
any number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument. In the event of any
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conflict among any of the documents referred to above, the terms of the
Employment Agreement shall prevail.
IN WITNESS WHEREOF, Payor has executed and delivered this Secured
Non-Recourse Promissory Note on the date first written above.
/s/ Albert Spring
------------------------------
Albert Spring
6
================================================================================
EMPLOYMENT AGREEMENT
FOR
BRAD W. BERGER
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. EMPLOYMENT. 2
2. SERVICES. 2
3. COMPENSATION AND BENEFITS. 4
4. TERMINATION OF EMPLOYMENT. 7
5. CONFIDENTIAL INFORMATION. 10
6. RETURN OF DOCUMENTS. 11
7. NONCOMPETE. 12
8. REMEDIES. 13
9. SUCCESSORS AND ASSIGNS. 13
10. TIMING OF AND NO DUPLICATION OF PAYMENTS 15
11. MODIFICATION OR WAIVER. 15
12. NOTICES. 15
13. GOVERNING LAW. 16
14. SEVERABILITY. 16
15. COUNTERPARTS. 16
16. HEADINGS. 17
17. ENTIRE AGREEMENT. 17
18. SURVIVAL OF AGREEMENTS. 17
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
31, 1997 by and between Brad W. Berger, an individual residing at 41 Doral
Greens Drive West, Rye Brook, New York 10573 ("Executive"), and Cali Realty
Corporation, a Maryland corporation with offices at 11 Commerce Drive, Cranford,
New Jersey 07016 ("Cali").
RECITALS
WHEREAS, Robert Martin Company, LLC, a New York limited liability company
and Robert Martin-Eastview North Company, L.P., a New York limited partnership
(collectively "RM") and Cali Realty, L.P., a Delaware limited partnership
("CRLP") and Cali have determined that it is in the best interests of the
parties' long term strategic growth to combine their respective properties and
related assets;
WHEREAS, in order to effectuate this combination, RM has agreed to
contribute certain properties and other assets located throughout southern New
York and Connecticut and owned or controlled by RM (the "Property") to designees
of CRLP, to cause certain key executives of RM to become part of the management
of Cali, and through RM's existing structure to continue to manage and operate
the properties being contributed by RM, all as of the closing (the "Closing
Date");
WHEREAS, Executive has served as a key executive of RM and, through such
service, has acquired special and unique knowledge, abilities and expertise; and
WHEREAS, Cali desires to employ Executive, and Executive desires to be
employed by Cali, pursuant to the terms set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements set forth herein and for other good and valuable consideration,
the adequacy and receipt of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment.
Cali hereby agrees to employ Executive, and Executive hereby agrees
to be employed by Cali, for a term commencing on the date hereof and expiring on
January 31, 2000; provided, however, that commencing on January 31, 2000, and
each January 31 thereafter, the term of this Agreement shall be extended
automatically for one (1) additional year unless at least ninety (90) days prior
to the applicable expiration date either Cali or Executive shall have given
written notice that such party does not wish to extend this Agreement. The term
of this Agreement, as it may be extended from time to time in accordance with
this Paragraph 1, is referred to herein as the "Employment Period."
2. Services.
During the Employment Period, Executive shall hold the position of
Executive Vice President and shall serve as a member of the Board of Directors
of Cali (the "Board"). Executive shall devote his best efforts and substantially
all of his business time, skill and attention to the business of Cali, and shall
be primarily responsible for the supervision of the operation of the Property
contributed to Cali by RM and agrees to participate actively in devising and
implementing Cali's corporate strategy. Specifically, Executive agrees to meet
at both Cranford, New Jersey and
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Elmsford, New York at least twice a month with Cali's senior management to plan
future investments and geographical growth. Executive shall also perform such
duties as are customarily performed by similar executive officers of Cali and as
may be more specifically enumerated from time to time by the Board or the
Executive Committee of the Board, if any; provided, however, that the foregoing
is not intended to (a) preclude Executive from (i) owning and managing personal
investments, including real estate investments, subject to the restrictions set
forth in Paragraph 7 hereof or (ii) engaging in charitable activities and
community affairs, or (b) restrict or otherwise limit Executive from (i)
conducting the real estate development, acquisition or management activities as
and to the extent permitted pursuant to Section 26 of the Contribution and
Exchange Agreement dated January 24, 1997 by and between Cali, CRLP and RM (the
"Contribution and Exchange Agreement"), or (ii) acquiring and conducting real
estate development and management activities with respect to properties which
may be purchased by the RM Principal pursuant to Sections 8.3 or 27.5 of the
Contribution and Exchange Agreement, provided that the performance of these
activities referred to in clauses (a) and (b) does not prevent Executive from
devoting substantially all of his business time to Cali.
Executive shall be based in Elmsford, NY, subject to reasonable travel
requirements, in an office comparable to the office previously provided to
Executive by RM.
Subject to the approval of a general and administrative budget by CRLP
and/or Cali and within the parameters of such budget, Executive jointly with
Timothy M. Jones shall select RM's property management and leasing teams and
members of such
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management and leasing teams shall become employees of Cali on the Closing Date.
In addition, Executive jointly with Timothy M. Jones shall, in June 1997 and
again in June 1998, have the sole and absolute authority to allocate options to
purchase 120,000 shares of Common Stock (as hereinafter defined) (i.e., 150,000
shares less 30,000 shares underlying the Warrants (as hereinafter defined)
transferred to the Warrant Transferees (as hereinafter defined)) at then current
fair market value and subject to the provisions of the Plan (as hereinafter
defined) to Cali employees who are part of such management and leasing teams;
provided, however, that Executive may not allocate any of such 120,000 options
to himself or to Timothy M. Jones. Any of the foregoing options which are not
actually granted in 1997 may be granted in 1998 and any of the foregoing options
not granted in 1998 may be granted in 1999, provided that all such options shall
be granted at then current fair market value.
3. Compensation and Benefits.
During the Employment Period, Cali shall pay Executive a minimum
annual base salary in the amount of $225,000 (as adjusted from time to time,
(the "Annual Base Salary")), payable in accordance with Cali's normal payroll
practices. In addition, Executive shall be eligible for incentive compensation
payable each year in such amounts as may be determined by the Compensation
Committee of the Board (the "Compensation Committee") based upon, among other
factors, growth in Funds from Operations per Common Share (as hereinafter
defined) for the year. Executive's Annual Base Salary shall be reviewed annually
in accordance with the policy of Cali from time to time and may be subject to
adjustment based on, among other things, Executive's performance, as determined
in the sole discretion of the Compensation
4
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Committee. Cali shall have the right to deduct and withhold from such
compensation all social security and other federal, state and local taxes and
charges which currently are or which hereafter may be required by law to be so
deducted and withheld. In addition to the compensation specified above,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Plan"), and other benefit plans (including without
limitation Cali's Section 401(k) Savings/Retirement Plan) made
generally available to executives of Cali;
(b) during the 1997 calendar year, participation in any health
insurance, disability insurance, group life insurance or other
welfare benefit programs which were maintained by RM and which are
assumed by Cali on the Closing Date (the "RM Plans") and other Cali
welfare plans, if any, providing benefits of the type not provided
under any of the RM Plans, and thereafter, participation in any
health insurance, disability insurance, group life insurance or
other welfare benefit programs made generally available to
executives of Cali with respect to which Executive shall be granted
credit for all service with RM and its affiliates and their
respective predecessors prior to the Closing Date; and
(c) reimbursement for reasonable business expenses incurred by Executive
in furtherance of the interests of Cali.
In addition, Executive shall be entitled to receive such bonuses and options to
purchase shares of common stock, par value $0.01 per share, of Cali (the "Common
Stock") as the Board shall approve, in its sole discretion, including, without
limitation, options and bonuses contingent upon Executive's performance and the
achievement of specified financial and operating objectives for Funds from
Operations per Common Share.
As further consideration for Executive agreeing to serve as an officer and
entering into this Agreement upon the terms set forth herein, including, without
limitation, the terms relating to non-competition set forth in Paragraph 7
below, Cali is
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issuing to Executive and certain members of the management and leasing teams
designated by Executive (the "Warrant Transferees"), warrants to purchase an
aggregate of 200,000 shares of Common Stock at a purchase price equal to fair
market value on the Closing Date ("Warrants"). Executive's Warrants shall be
evidenced by the Warrant Agreement dated January 31, 1997 which shall include,
but not be limited to, the following provisions: vesting over a three year
period with one third (1/3) of the Warrants vesting on the first, second and
third anniversaries of the date of the Warrant Agreement and non-transferability
provisions. For purposes of this issuance "fair market value" shall mean the
closing price as quoted on the New York Stock Exchange at the end of the last
business day preceding the date of the grant as reported in the New York edition
of the Wall Street Journal. In accordance with the written direction of
Executive as provided to Cali, Executive shall receive Warrants to purchase
170,000 shares of Common Stock and the Warrant Transferees shall receive
Warrants to purchase an aggregate of 30,000 shares of Common Stock. Since
Executive has directed Cali to issue the aforementioned Warrants to the Warrant
Transferees, Executive shall receive in July 1997 and again in July 1998,
options to purchase 15,000 shares of Common Stock on each such date at a
purchase price of then current fair market value and subject to the provisions
of the Plan.
For purposes of this Agreement, "Funds from Operations per Common Share"
shall mean (i) net income (loss) before minority interest of unit holders,
computed in accordance with generally accepted accounting principles ("GAAP"),
excluding gains (or losses) from debt restructuring and sale of property, plus
real estate return, depreciation and amortization as calculated in accordance
with the National
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Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Cali in effect from time to time on a consistent
basis to the entire Employment Period, divided by (ii) the sum of (A) the
primary weighted average number of outstanding shares of Common Stock as it
appears in the Cali's financial statement for the applicable period and (B) the
primary weighted average number of outstanding limited partnership units of
CRLP, for the applicable period.
4. Termination of Employment.
(a) In the event (i) Cali terminates Executive's employment for
Cause (as hereinafter defined) or (ii) Executive terminates his employment
without Good Reason (as hereinafter defined), Cali shall pay Executive any
unpaid salary accrued through and including the date of termination (the
"Accrued Amount"). In addition, in such event, Executive shall be entitled (i)
to exercise any Warrants and/or options which have vested and are exercisable in
accordance with the terms of this Agreement, the applicable Warrant Agreement,
stock option agreement or the Plan, and (ii) to retain any shares awarded to
Executive which are fully vested on the date of termination. Except for any
rights which Executive may have to the Accrued Amount, vested Warrants and/or
options and vested share awards, Cali shall have no further obligations
hereunder following such termination.
(b) In the event of termination of Executive's employment as a
result of either (i) Executive's death or Disability (as hereinafter defined),
(ii) termination by Cali for any reason other than Cause or (iii) termination by
Executive of his employment for Good Reason, Cali shall pay to Executive (A) the
Accrued Amount, (B) the unpaid
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<PAGE>
salary, at the rate then in effect without reduction, from the date of
termination through the end of the Employment Period remaining (assuming no such
termination occurred) and (C) a pro-rata portion, based upon the number of days
in the period beginning with January 1 of the calendar year in which such
termination occurred and ending with the date the Employment Period ends
(assuming such termination did not occur), of the average annual amount of
incentive compensation payments paid to Executive during each previous year of
Executive's employment hereunder. The aforesaid amount shall be payable, at the
option of Executive, his estate or his personal representative, either (i) in
full immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled, at the option of
Executive, his estate or his personal representative, within ninety (90) days
(one (1) year in the case of termination as a result of Executive's death or
Disability) of the date of such termination, (i) to exercise any Warrants and/or
options to purchase shares of Common Stock that have vested (including, without
limitation, by acceleration in accordance with the terms of the Plan or Warrant
Agreement) and are exercisable in accordance with the terms of this Agreement,
any applicable Warrant Agreement, stock option agreement or the Plan, (ii) to
retain any shares of Common Stock awarded to Executive which are vested on the
date of termination, and (iii) to require Cali (upon written notice delivered
within one hundred eighty (180) days following the date of Executive's
termination) to repurchase all or any portion of Executive's vested Warrants or
options (including without limitation Warrants and options, if any, which have
vested by acceleration in accordance with the terms of the Plan or stock option
agreement or Warrant Agreement) to purchase shares of Common Stock at a price
equal to the
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<PAGE>
difference between the Fair Market Value (as hereinafter defined) of the shares
of Common Stock for which the Warrants or options to be repurchased are
exercisable and the exercise price of such Warrant or option as of the date of
Executive's termination of employment.
(c) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure
by Executive to substantially perform his duties
hereunder (other than any such failure resulting from
Executive's incapacity due to physical or mental
illness) for a period of thirty (30) days after written
demand for substantial performance is delivered by Cali
specifically identifying the manner in which Cali
believes Executive has not substantially performed his
duties, or (B) willful misconduct by Executive which is
materially injurious to Cali, monetarily or otherwise,
or (C) the willful violation by Executive of the
provisions of Paragraph 5 or 7 hereof. For purposes of
this Paragraph 4(c)(i), no act, or failure to act, on
Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or
omission was in furtherance of the interests of Cali.
(ii) "Disability" shall mean the determination by Cali, upon
the advice of an independent qualified physician,
reasonably acceptable to Executive, that Executive has
become physically or mentally incapable of performing
his duties under this Agreement and such disability has
disabled Executive for a cumulative period of one
hundred eighty (180) days within a twelve (12) month
period.
(iii) "Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the
Common Stock on each of the trading days within the
thirty (30) days immediately preceding the date of
termination of Executive's employment;
(iv) "Good Reason" shall mean (A) any assignment to Executive
of any duties materially different from those
contemplated by Paragraph 2 hereof, or any limitation of
the powers of Executive in any respect not contemplated
by Paragraph 2 hereof or other material breach of this
Agreement by Cali,
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<PAGE>
(B) a material reduction in Executive's Annual Base
Salary as in effect at the time in question, or any
other material failure by Cali to comply with Paragraph
3 hereof, provided, however, that in the event Executive
is not awarded a bonus or other discretionary payment or
discretionary award described in Paragraph 3, it shall
not be deemed a failure, (C) Cali shall have given
notice pursuant to Paragraph 1 hereof that it does not
wish to extend this Agreement, except in connection with
termination of Executive's employment for Cause or by
reason of death or Disability, or (D) failure of Cali to
obtain the assumption of the obligation to perform this
Agreement by any successor as contemplated in Paragraph
9(a) hereof.
(d) Any termination of Executive's employment by Cali or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his
employment with Cali, he will be exposed to Confidential Information (as defined
below), all of which is proprietary and which will rightfully belong to Cali.
Executive shall hold in a fiduciary capacity for the benefit of Cali such
Confidential Information obtained by Executive during his employment with RM and
Cali and shall not, directly or indirectly, at any time, either during or after
his employment with Cali, without Cali's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than Cali or its employees,
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<PAGE>
except as required in the performance of his duties for Cali or as otherwise
required by law. Executive shall take all reasonable steps to safeguard such
Confidential Information and to protect such Confidential Information against
disclosure, misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information
not generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from Cali or its predecessors or
which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of Cali or its predecessors including without limitation RM. For purposes of
this Paragraph 5, Cali shall be deemed to include any entity which is
controlled, directly or indirectly, by Cali and any entity of which a majority
of the economic interest is owned, directly or indirectly, by Cali.
6. Return of Documents.
Except for such items which are of a personal nature to Executive
(e.g., daily business planner), all writings, records, and other documents and
things containing any Confidential Information shall be the exclusive property
of Cali, shall not be copied, summarized, extracted from, or removed from the
premises of Cali, except in pursuit of the business of Cali or at the direction
of Cali, and shall be delivered to Cali, without retaining any copies, upon the
termination of Executive's employment or at any time as requested by Cali.
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7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, unless (i) Cali terminates
Executive's employment hereunder without Cause, (ii) Executive terminates his
employment hereunder with Good Reason or (iii) Cali shall have given notice
pursuant to Paragraph 1 hereof that it does not wish to extend this Agreement
(except in connection with termination of Executive's employment for Cause or by
reason of death or Disability), for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Connecticut or the State of Pennsylvania engage in, or
own, invest in, manage or control any venture or enterprise engaged in any
development, acquisition or management activities with respect to
office-service, office or industrial or flex property, without regard to whether
or not such activities compete with Cali. Nothing herein shall prohibit
Executive from being a passive owner of not more than five percent (5%) of the
outstanding stock of any class of securities of a corporation or other entity
engaged in such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from (i) conducting real estate development, acquisition or management
activities as and to the extent permitted pursuant to Section 26 of the
Contribution and Exchange Agreement or (ii) acquiring and conducting real estate
development and management activities with respect to properties which may be
purchased by the RM Principal pursuant to Sections 8.3 or 27.5 of the
Contribution and Exchange Agreement, provided that during the
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Employment Period, the performance of such activities does not prevent Executive
from devoting substantially all of his business time to Cali.
(b) If, at the time of enforcement of this Paragraph 7, a court
shall hold that the duration, scope, area or other restrictions stated herein
are unreasonable, the parties agree that reasonable maximum duration, scope,
area or other restrictions may be substituted by such court for the stated
duration, scope, area or other restrictions.
(c) For purposes of this Paragraph 7, Cali shall be deemed to
include any entity which is controlled, directly or indirectly, by Cali and any
entity of which a majority of the economic interest is owned, directly or
indirectly, by Cali.
8. Remedies.
The parties hereto agree that Cali would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, Cali may, in addition and supplementary to other rights and
remedies existing in its favor, apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce or prevent any violation of the provisions thereof.
9. Successors and Assigns.
(a) Cali shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Cali, by agreement in form and substance satisfactory
to Executive, to
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expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Cali would be required to perform it if no such succession
had taken place. Failure of Cali to obtain such agreement prior to the
effectiveness of an such succession shall be a breach of this Agreement and
shall entitle Executive to compensation from Cali in the same amount and on the
same terms as he would be entitled to hereunder if he terminated his employment
for Good Reason, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the date of
termination. In the event of such a breach of this Agreement, the Notice of
Termination shall specify such date as the date of termination. As used in this
Agreement, "Cali" shall mean Cali as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other designee or, if there be no
such designee, to Executive's estate.
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10. Timing of and No Duplication of Payments
All payments payable to Executive pursuant to this Agreement shall
be paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of
this Agreement shall be binding or effective for any purpose unless it is made
in a writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or discharge any provision or term of this Agreement. No
delay on the part of Cali or Executive in the exercise of any of their
respective rights or remedies shall operate as a waiver thereof, and no single
or partial exercise by Cali or Executive of any such right or remedy shall
preclude other or further exercise thereof. A waiver of right or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy on any other occasion.
12. Notices.
All notices or other communications required or permitted hereunder
shall be made in writing and shall be deemed to have been duly given if
delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to Cali or
15
<PAGE>
Executive, as applicable, at the address set forth above (or to such other
address as shall have been previously provided in accordance with this Paragraph
11).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then, subject to the provisions of
Paragraph 7(b) above, such provision or term shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provisions or term or the remaining
provisions or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and both of which taken together shall
constitute one and the same agreement.
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16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6 and 7 each shall survive
the termination of this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
----------------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
EXECUTIVE
/s/ Brad W. Berger
----------------------------------
Brad W. Berger
18
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 4 OF THIS
WARRANT.
WARRANT
to Purchase Common Stock of
CALI REALTY CORPORATION
Expiring January 31, 2007
This Warrant certifies that Brad W. Berger, or registered and permitted
assigns (the "Holder"), is entitled to, subject to the terms set forth below,
subscribe for and purchase from Cali Realty Corporation, a Maryland corporation
(the "Company"), One Hundred-Seventy Thousand (170,000) duly authorized, validly
issued, fully paid and nonassessable shares of the Company's common stock, $.01
par value per share (the common stock, including any stock into which it may be
changed, reclassified, or converted, and as it may be adjusted pursuant to
Section 4(B) below, is herein referred to as the "Common Stock"). This Warrant
is one of a class of Warrants (the "RM Warrants") of the Company issued to
purchase an aggregate of 400,000 shares of Common Stock pursuant to Section
12.1(h) of the Contribution and Exchange Agreement dated January 24, 1997 by and
between the Company, Cali Realty, L.P., a Delaware limited partnership, Robert
Martin Company, LLC ("RMC LLC"), a limited liability company organized under the
laws of the State of New York, and Robert Martin-Eastview North Company, L.P., a
New York limited partnership.
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
To exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at its principal office in Cranford, New Jersey, (a) a written
notice, in substantially the form of the Exercise Notice appearing at the end of
this Warrant, of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) cash or
a certified check payable to the Company, or such other consideration as
determined in accordance with Section 2(D) below, in an amount equal to the
aggregate purchase price of the number of shares of Common Stock being
purchased, and (c) this Warrant. The Company shall as promptly as practicable,
and in any event within 15 days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a stock certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice. The stock certificate or certificates so delivered
shall be in such denominations as may be specified in such notice and shall be
issued in the name of the Holder or, subject to Sections 2(E) and (F) and
Sections 4(H) and (I) below, such other name as shall be designated in such
notice. Such stock certificate or certificates shall be deemed to have been
issued and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares immediately prior to the close of business on the date such
<PAGE>
notice is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificates or
new Warrants shall be paid by the Holder at the time of delivering the notice of
exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities exchange or quoted on an automated quotation
system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. Terms and Conditions of Warrants.
(A) Exercise Period. Each Warrant shall vest over a three-year period
(subject to acceleration in accordance with the terms of this Warrant), with
one-third of such Warrant vesting on the first anniversary of the date hereof,
one-third vesting on the second anniversary of the date hereof, and one-third
vesting on the third anniversary of the date hereof, and shall expire at 5:00
p.m., New York City time, on January 31, 2007, or in connection with the
Holder's earlier termination of employment with the Company as provided in
paragraph 2(E) below (the "Expiration Date").
(B) Purchase Price. The purchase price per share of Common Stock shall be
equal to the fair market value of the Common Stock on the date hereof. For
purposes of this paragraph 2(B), "fair market value" means the closing price as
quoted on the New York Stock Exchange at the end of the last business day
preceding the date hereof as reported in the New York edition of The Wall Street
Journal. It is agreed that such purchase price is $33.00 per share.
(C) Exercise of Warrant. No part of any Warrant may be exercised at the
time of vesting unless the Holder shall have remained in the employ of the
Company for such period as to which such portion of the Warrant has vested,
except as otherwise provided in paragraph 2(E) below.
(D) Payment of Purchase Price upon Exercise. Subject to the terms of
Section 2(F) hereof, the purchase price of the Common Stock as to which a
Warrant is exercised shall be paid to the Company at the time of exercise either
in cash or in such other consideration as the Executive Compensation Committee
of the Board of Directors of the Company (the "Board of
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<PAGE>
Directors") or such other committee that the Board of Directors may appoint to
administer the Warrants (the "Committee"), deems appropriate, including, but not
limited to, loans from the Company or a third party, Common Stock already owned
by the Holder having a total fair market value, as determined by the Committee,
equal to the purchase price, or a combination of cash and Common Stock having a
total fair market value, as so determined, equal to the purchase price. The
Committee in its sole discretion may also provide that the purchase price may be
paid by delivering a properly executed exercise notice in a form approved by the
Committee, together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of applicable sale or loan proceeds to pay the
purchase price.
(E) Exercise in the Event of Death, Disability, Retirement or Other
Termination of Employment, or Change in Control.
(1) Death or Disability. If a Holder's employment by the Company
shall terminate because of his or her death or permanent disability, the
Committee may, in its sole discretion, accelerate in whole or in part, any
or all Warrants which the Holder shall not then have been entitled to
exercise. If a Holder shall die (i) while an employee of the Company, or
(ii) within twelve (12) months after termination of his or her employment
with the Company because of his or her permanent disability, such Holder's
Warrants may be exercised, to the extent that such Holder shall have been
entitled to do so on the date of his or her death or such termination of
employment (including, without limitation, by acceleration or otherwise)
by the Holder's Beneficiary (as defined below) or by the person or persons
to whom the Holder's rights under the Warrants pass by will or applicable
law, or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, but not later than the
Expiration Date or one year after the Holder's death, whichever date is
earlier. If a Holder's employment by the Company shall terminate because
of his or her permanent disability, such Holder may exercise his or her
Warrants, to the extent that such Holder shall have been entitled to do so
at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later than the Expiration Date or one year after
termination of employment because of his or her permanent disability,
whichever date is earlier.
(2) Change in Control. In the event a Holder's employment shall
terminate within six (6) months following a Change in Control (as defined
below), all Warrants which the Holder shall not then have been entitled to
exercise shall be accelerated immediately prior to or concurrently with
the occurrence of the Change in Control and the Holder shall have the
right to exercise all such Warrants at any time or from time to time
through the Expiration Date.
(3) Good Reason. If a Holder terminates his or her employment for
Good Reason (as defined below), the Committee may, in its sole discretion,
accelerate in whole or in part, any or all Warrants which the Holder shall
not then have been entitled to exercise. If a Holder's employment by the
Company shall terminate for Good Reason, such Holder may exercise his or
her Warrants, to the extent that such Holder shall have been entitled to
do so at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later
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<PAGE>
than the Expiration Date or ninety (90) days after termination of
employment, whichever date is earlier.
"Good Reason" shall mean (A) any assignment to the Holder of any duties
materially different from those contemplated by his or her employment agreement,
or any limitation of the powers of the Holder in any respect not contemplated by
his or her employment agreement or other material breach of his or her
employment agreement by the Company, (B) a material reduction in the Holder's
Annual Base Salary (as defined in the Holder's employment agreement) as in
effect at the time in question, or any other material failure by the Company to
comply with Paragraph 3 of the employment agreement; provided, however, that in
the event Holder is not awarded a bonus or other discretionary payment or
discretionary award described in Paragraph 3 of the employment agreement, it
shall not be deemed a failure, (C) the Company shall have given notice pursuant
to Paragraph 1 of the employment agreement that it does not wish to extend the
employment agreement, except in connection with termination of the Holder's
employment for Cause (as defined in Section 4(A) below) or by reason of death or
Disability (as defined below), or (D) failure of the Company to obtain the
assumption of the obligation to perform the employment agreement by any
successor as contemplated in Paragraph 9(a) of the employment agreement.
(4) Subject to Section 4(A) below, if a Holder's employment shall
terminate for any reason other than death, Disability, Good Reason or a
Change in Control (each as defined below) as aforesaid, all rights to
exercise his or her Warrant shall terminate at the Expiration Date or
three (3) months after termination of employment, whichever date is
earlier; provided, however, that the Committee may, in its sole
discretion, grant new Warrants or modify outstanding Warrants to permit
their exercise upon a Holder's termination of employment due to retirement
with the consent of the Company until the earlier of the Expiration Date
or twelve (12) months after termination of employment.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Section 4(H) to receive the amount, if any, payable under the
Warrant upon the death of a Holder.
"Change in Control" means that any of the following events has occurred:
(i) any "person" or "group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than any employee benefit plan
sponsored by the Company, becomes the "beneficial owner", as such
term is used in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company issued and
outstanding immediately prior to such acquisition;
(ii) any Common Stock of the Company is purchased pursuant to a tender or
exchange offer other than an offer by the Company; or
(iii) the dissolution or liquidation of the Company or the consummation of
any merger or consolidation of the Company or any sale or other
disposition of
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<PAGE>
all or substantially all of its assets, if the shareholders of the
Company immediately before such transaction own, immediately after
consummation of such transaction, equity securities (other than
options and other rights to acquire equity securities) possessing
less than thirty percent (30%) of the voting power of the surviving
or acquiring Company.
provided, however, that notwithstanding anything herein to the contrary, no
Change in Control shall be deemed to have occurred and no rights arising upon a
Change in Control described in Section 2(E) shall exist unless the Board of
Directors directs to the contrary by resolution adopted prior to the Change in
Control. Any resolution of the Board of Directors adopted in accordance with the
provisions of this Section directing that this Section 2(E) or any of such
Section become ineffective may be rescinded or countermanded at any time with or
without retroactive effect by such Board.
"Disability" means the determination by the Company, upon the advice of an
independent qualified physician, reasonably acceptable to the Holder, that the
Holder has become physically or mentally incapable of performing his duties
under any employment agreement or otherwise and such disability has disabled the
Holder for a cumulative period of one hundred eighty (180) days within a twelve
(12) month period.
(F) Repurchase Right. In the event of termination of the Holder's
employment as a result of either (i) death or Disability, (ii) termination by
the Company for any reason other than Cause or (iii) termination by the Holder
of his employment for Good Reason, the Holder shall be entitled, at the option
of the Holder, his estate or his personal representative, within ninety (90)
days (one (1) year in the case of termination as a result of the Holder's death
or Disability) of the date of such termination, to require the Company (upon
written notice delivered within one hundred eighty (180) days following the date
of termination) to repurchase all or any portion of the Holder's vested Warrants
at a price equal to the difference between the fair market value (as defined
below) of the shares of Common Stock for which the Warrants to be repurchased
are exercisable and the exercise price of such Warrant as of the date of the
Holder's termination of employment. For purposes of this paragraph 2(F), "fair
market value" means the average of the closing price on the New York Stock
Exchange of the Common Stock on each of the trading days within the thirty (30)
days immediately preceding the date of termination of the Holder's employment.
(G) Transferability and Exercise of Warrants. Subject to the provisions of
any registration rights agreement entered into in connection with the
registration of shares of Common Stock underlying the RM Warrants, no Warrant
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the Holder, a Warrant shall be exercisable
only by the Holder. This Warrant shall be exercisable or convertible (a) only
under circumstances such that the issue of Common Stock issuable upon such
exercise or conversion is exempt from the requirements of registration under the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith; provided, however, that the foregoing shall not apply if this Warrant
is exercised by the original Holder hereof. This Warrant shall be transferable
only under circumstances such that the transfer is exempt from the requirements
of registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to
5
<PAGE>
comply with such laws.
(H) Investment Representation. The Holder, by acceptance hereof, (i)
hereby represents that he or she is an "Accredited Investor" under Rule 501(a)
of Regulation D promulgated under Section 4(2) of the 1933 Act, and (ii)
acknowledges that this Warrant and, to the extent not registered under the 1933
Act, any Common Stock purchased or acquired pursuant hereto is being or will be
acquired solely for the Holder's own account and not as a nominee for any other
party, and with a current investment intent and not with a view to distribution
thereof. The Holder (or any person acting under Sections 2(E), (F) or (G) above)
shall deliver to the Company, at the time of any exercise of a Warrant or
portion thereof, a written representation that the shares to be acquired upon
such exercise are to be acquired for investment and not for resale or with a
view to the distribution thereof, and, if applicable, that he or she is the
original Holder of this Warrant. Delivery of such representation prior to the
delivery of any Common Stock issued upon exercise of a Warrant and prior to the
expiration of the Warrant period shall be a condition precedent to the right of
the Holder or such other person to purchase any Common Stock. In the event
certificates for Common Stock are delivered upon the exercise of a Warrant with
respect to which such an investment representation has been obtained, the
Company may cause a legend or legends to be placed on such certificates to make
appropriate reference to such representations and to restrict transfer in the
absence of compliance with applicable federal or state securities laws.
Section 3. Transfer, Division and Combination.
The Company agrees to maintain at its principal office in Cranford, New
Jersey, books for the registration and transfer of this Warrant, and, subject to
the provisions of Section 2(G) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on such books at such office, upon surrender
of this Warrant at such office, together with a written assignment of this
Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. A Warrant may be exercised by a new holder for the
purchase of shares of Common Stock without having a new Warrant issued. All of
the provisions of this Section 3 are subject to the provisions of Sections 2(E),
(F) and (G) above.
Section 4. General Provisions
(A) Termination for Cause. Notwithstanding anything herein contained to
the contrary, if a Holder's employment is terminated for Cause, all Warrants, to
the extent not vested on the date of termination, shall be forfeited. "Cause"
shall mean (1) the willful and continued failure by the Holder to substantially
perform his or her duties under his or her employment agreement with the
Company, if any, or otherwise (other than any such failure resulting from the
Holder's incapacity due to physical or mental illness) for a period of thirty
(30) days after written demand for substantial performance is delivered by the
Company specifically identifying the manner in which the Company believes the
Holder has not substantially performed his or her duties, or (2) willful
misconduct by the Holder which is materially injurious to the Company,
monetarily or otherwise, or (3) the willful violation by the Holder of the
provisions of any covenant not to compete or breach of
6
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confidential information with respect to the Company. For purposes of this
Paragraph 4(A), no act, or failure to act, on the Holder's part shall be
considered "willful" unless done, or omitted to be done, by him or her not in
good faith and without reasonable belief that his or her action or omission was
in furtherance of the interests of the Company.
(B) Certain Adjustments. In the event of any change in the Common Stock by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and kind
of shares subject to Warrants in and the purchase price per share thereof shall
be appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, the Holders hereunder. Any adjustment
of a Warrant pursuant to this Section 4(B) shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Internal Revenue Code of 1986, as amended from time to time, unless the holder
of such Warrant shall agree otherwise. The Committee shall give notice to each
Holder of any adjustment made pursuant to this Section 4(B) and, upon notice,
such adjustment shall be effective and binding for all purposes under this
Warrant.
(C) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor Company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor Company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holders' rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
(D) No Claim or Right. Nothing contained herein nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company.
(E) Awards Not Treated as Compensation Under Benefit Plans. No Warrant
shall be considered as compensation under any employee benefit plan of the
Company, except as specifically provided in any such plan or as otherwise
determined by the Board of Directors.
(F) Listing and Qualification of Common Stock. The Company, in its
discretion, may postpone the issuance or delivery of Common Stock upon any
exercise of a Warrant until completion of such stock exchange listing or other
qualification of such shares under any state or federal law, rule or regulation
as the Company may consider appropriate, and may require any Holder, Beneficiary
or legal representative to make such representations and furnish such
information as it may consider reasonably appropriate in connection with the
issuance or delivery of the shares in compliance with applicable laws, rules and
regulations. The Company covenants, however, to effect the listing of the Common
Stock underlying the Warrants on the New York Stock Exchange prior to December
1997.
(G) Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Warrants exercised
pursuant to this Agreement including, but not
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<PAGE>
limited to (i) deducting the amount required to be withheld from any other
amount then or thereafter payable to a Holder, Beneficiary or legal
representative, and (ii) requiring a Holder, Beneficiary or legal representative
to pay to the Company the amount required to be withheld as a condition of
releasing Common Stock. In addition, subject to such rules and regulations as
the Committee shall from time to time establish, Holders shall be permitted to
satisfy federal, state and local taxes, if any, imposed upon the issuance of
Common Stock at a rate up to such Holder's maximum marginal tax rate with
respect to each such tax by (i) irrevocably electing to have the Company deduct
from the number of shares Common Stock otherwise deliverable upon exercise of a
Warrant such number of shares of Common Stock as shall have a value equal to the
amount of tax to be withheld, (ii) delivering to the Company such portion of the
Common Stock delivered upon exercise of the Warrant as shall have a value equal
to the amount of tax to be withheld, or (iii) delivering to the Company such
Common Stock or combination of Common Stock and cash as shall have a value equal
to the amount of tax to be withheld.
(H) Designation and Change of Beneficiary. Each Holder shall file with the
Committee a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under this Warrant upon
his or her death. A Holder may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Holder's death, and in no event shall it be effective as
of a date prior to such receipt.
(I) Payments to Persons Other Than A Holder. If the Committee shall find
that any person to whom any amount is payable under this Warrant is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal representative),
may, if the Committee so directs the Company, be paid to his or her spouse, a
child, a relative, an institution maintaining or having custody of such person,
or any other person deemed by the Committee to be a proper recipient on behalf
of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Committee and the Company therefor.
(J) General Creditor Status. Holders shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations hereunder. Nothing contained herein, and no action
taken pursuant hereto, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder,
Beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth herein; provided, however, that in its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created hereunder to deliver Common Stock or pay cash; provided,
further, however, that, unless the Committee otherwise determines with the
consent of the affected Holder, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the 1994 Employee
Stock Option
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Plan of Cali Realty Corporation.
(K) No Liability of Committee Members. The Holder of this Warrant agrees
that no member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith.
Section 5. Covenant to Reserve Shares of Common Stock.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Warrant, sufficient to enable it at any time to fulfill all its obligations
hereunder.
Section 6. Notices.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Common Stock upon its Common Stock or make any
distribution (other than ordinary cash dividends) to the holders of its
Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or Warrants (excluding any Warrants granted to any
employee, director, officer, contractor or consultant of the Company
pursuant to any plan approved by the Board of Directors of the Company),
(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially
as an entirety, or
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the holder of this Warrant shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the Holder
at the last address shown on the books of the Company maintained for the
registry and transfer of this Warrant. Any notice or other document required or
permitted
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<PAGE>
to be given or delivered to holders of record of Common Stock issued pursuant to
this Warrant shall be delivered by facsimile, reliable courier or first-class
mail postage prepaid to Holder at Holder's address as the same appears on the
stock records of the Company. Any notice or other document required or permitted
to be given or delivered to the Company shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the
principal office of the Company in Cranford, New Jersey, or delivered to the
office of one of the Company's executive officers at such address, or such other
address as shall have been furnished by the Company to the holders of record of
such Warrants and the holders of record of such Common Stock.
Section 7. Limitation of Liability; Not Shareholders.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 8. Loss, Destruction, etc, of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of such Warrant, the Company
will make and deliver a new Warrant, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company.
Section 9. Registration Rights.
As used in this Section 9, the term "Registrable Stock" shall mean
(i) all shares of Common Stock that may be issued upon exercise of this Warrant
(and all shares of Common Stock that may thereafter be issued in respect of such
Warrant) that is from time to time outstanding.
References in this Warrant to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
The rights and obligations of the Company and the Holder with
respect to the Registrable Stock are set forth in a Registration Rights
Agreement, dated January 31, 1997, between the Company, the Holder and the other
signatories thereto, and shall supersede any registration rights and obligations
of the Company and the Holder existing prior to the date
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<PAGE>
hereof with respect to the Registrable Stock.
Section 10. Amendments.
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, provided that any term of this
Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of the
RM Warrants that are exercisable for a number of shares of Common Stock that
represent in the aggregate at least a majority of the total number of shares of
Common Stock for which all of the RM Warrants are then exercisable (whether or
not the holder of this Warrant consents).
Section 11. Governing Law and Consent to Jurisdiction.
This Warrant shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules. This Warrant shall
be deemed to have been executed and delivered at and shall be deemed to have
been made in New York, New York.
Any legal action, suit or proceeding arising out of or relating to this
Warrant may only be instituted in any federal court of the Southern District of
New York or any state court located in New York County, State of New York, and
the Company agrees not to assert, by way of motion, as a defense or otherwise,
in any action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of such courts, that the action, suit or proceeding if
brought in such courts, would be an inconvenient forum, that the venue of the
action, suit or proceeding, if brought in any of such courts, is improper or
that this Agreement or the subject matter may not be enforced in or by such
courts on jurisdictional grounds.
11
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: January 31, 1997
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
----------------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
12
<PAGE>
EXERCISE NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ____________ shares
of the Common Stock covered by such Warrant and herewith makes payment in full
therefor of $_________ cash and/or by cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that, subject to
the terms and conditions of the Warrant, certificates for such shares (and any
securities or property deliverable upon such exercise) be issued in the name of
and delivered to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for the Holder's own account and not
as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD
PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
stop transfer instructions will be entered on the Company's stock transfer
records with respect to Common Stock issued upon this exercise.
Dated: __________________________
Signature guaranteed:
<PAGE>
AMENDMENT NO. 1 TO THE
WARRANT
to Purchase Common Stock of
Cali Realty Corporation
This Amendment No. 1 is made, effective as of January 31, 1997, by and
between Cali Realty Corporation, a Maryland corporation (the "Company") and Brad
W. Berger, or registered and permitted assigns (the "Holder").
W I T N E S S E T H
WHEREAS, the Company granted the right to purchase 170,000 shares of
Common Stock of the Company to the Holder pursuant to a warrant dated January
31, 1997 (the "Warrant"); and
WHEREAS, the Company and Holder have agreed to amend the terms of the
Warrant to provide for full vesting upon a Change in Control; and
WHEREAS, the Holder and Timothy M. Jones together hold a majority of the
RM Warrants and by executing this document consent to the foregoing amendment,
as required by Section 10 of the Warrant.
NOW, THEREFORE, in consideration of the premises, the parties hereto
hereby agree as follows:
1. Section 2(E)(2) of the Warrant, "Change in Control", shall be deleted
in its entirety and amended to read as follows:
"Change in Control. In the event of a Change in Control (as defined
below), all Warrants which the Holder shall not then have been
entitled to exercise shall be accelerated immediately prior to or
concurrently with the occurrence of the Change in Control and the
Holder shall have the right to exercise all such Warrants at any
time or from time to time through the Expiration Date."
2. Except as specifically amended above, the Warrant and all provisions
thereof shall remain in full force and effect and are hereby ratified and
confirmed.
3. Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Warrant to "this Warrant", "hereunder", "hereof", "herein"
or words of like import, and each reference to the Warrant in any document
relating to the Warrant shall mean and be a reference to the Warrant as amended
hereby.
<PAGE>
4. The execution, delivery, and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Holder under the Warrant nor constitute a waiver of any provision
of the Warrant.
5. This Amendment may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
7. Capitalized terms used herein and not otherwise defined herein shall
have the meanings specified, or ascribed thereto by reference, in the Warrant.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first written above.
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
----------------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
/s/ Brad W. Berger
----------------------------------
Brad W. Berger
I hereby consent, as required by Section 10 of the RM Warrants, to the
amendment of the aforementioned Warrant to provide for full vesting upon a
Change in Control as set forth herein.
/s/ Timothy M. Jones
----------------------------------
Timothy M. Jones
================================================================================
EMPLOYMENT AGREEMENT
FOR
TIMOTHY M. JONES
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
1. EMPLOYMENT. 2
2. SERVICES. 2
3. COMPENSATION AND BENEFITS. 4
4. TERMINATION OF EMPLOYMENT. 7
5. CONFIDENTIAL INFORMATION. 10
6. RETURN OF DOCUMENTS. 11
7. NONCOMPETE. 12
8. REMEDIES. 13
9. SUCCESSORS AND ASSIGNS. 13
10. TIMING OF AND NO DUPLICATION OF PAYMENTS 15
11. MODIFICATION OR WAIVER. 15
12. NOTICES. 15
13. GOVERNING LAW. 16
14. SEVERABILITY. 16
15. COUNTERPARTS. 16
16. HEADINGS. 17
17. ENTIRE AGREEMENT. 17
18. SURVIVAL OF AGREEMENTS. 17
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is entered into as of January
31, 1997 by and between Timothy M. Jones, an individual residing at 20 Church
Street, Greenwich, Connecticut 06830 ("Executive"), and Cali Realty Corporation,
a Maryland corporation with offices at 11 Commerce Drive, Cranford, New Jersey
07016 ("Cali").
RECITALS
WHEREAS, Robert Martin Company, LLC, a New York limited liability company
and Robert Martin-Eastview North Company, L.P., a New York limited partnership
(collectively "RM") and Cali Realty, L.P., a Delaware limited partnership
("CRLP") and Cali have determined that it is in the best interests of the
parties' long term strategic growth to combine their respective properties and
related assets;
WHEREAS, in order to effectuate this combination, RM has agreed to
contribute certain properties and other assets located throughout southern New
York and Connecticut and owned or controlled by RM (the "Property") to designees
of CRLP, to cause certain key executives of RM to become part of the management
of Cali, and through RM's existing structure to continue to manage and operate
the properties being contributed by RM, all as of the closing (the "Closing
Date");
WHEREAS, Executive has served as a key executive of RM and, through such
service, has acquired special and unique knowledge, abilities and expertise; and
WHEREAS, Cali desires to employ Executive, and Executive desires to be
employed by Cali, pursuant to the terms set forth herein.
<PAGE>
NOW, THEREFORE, in consideration of the promises and the mutual covenants
and agreements set forth herein and for other good and valuable consideration,
the adequacy and receipt of which are hereby acknowledged, the parties hereto
agree as follows:
1. Employment.
Cali hereby agrees to employ Executive, and Executive hereby agrees
to be employed by Cali, for a term commencing on the date hereof and expiring on
January 31, 2000; provided, however, that commencing on January 31, 2000, and
each January 31 thereafter, the term of this Agreement shall be extended
automatically for one (1) additional year unless at least ninety (90) days prior
to the applicable expiration date either Cali or Executive shall have given
written notice that such party does not wish to extend this Agreement. The term
of this Agreement, as it may be extended from time to time in accordance with
this Paragraph 1, is referred to herein as the "Employment Period."
2. Services.
During the Employment Period, Executive shall hold the position of
Executive Vice President, shall devote his best efforts and substantially all of
his business time, skill and attention to the business of Cali, and shall be
primarily responsible for the supervision of the operation of the Property
contributed to Cali by RM and agrees to participate actively in devising and
implementing Cali's corporate strategy. Specifically, Executive agrees to meet
at both Cranford, New Jersey and Elmsford, New York at least twice a month with
Cali's senior management to plan future
2
<PAGE>
investments and geographical growth. Executive shall also perform such duties as
are customarily performed by similar executive officers of Cali and as may be
more specifically enumerated from time to time by the Board of Directors of Cali
(the "Board") or the Executive Committee of the Board, if any; provided,
however, that the foregoing is not intended to (a) preclude Executive from (i)
owning and managing personal investments, including real estate investments,
subject to the restrictions set forth in Paragraph 7 hereof or (ii) engaging in
charitable activities and community affairs, or (b) restrict or otherwise limit
Executive from (i) conducting the real estate development, acquisition or
management activities as and to the extent permitted pursuant to Section 26 of
the Contribution and Exchange Agreement dated January 24, 1997 by and between
Cali, CRLP and RM (the "Contribution and Exchange Agreement"), or (ii) acquiring
and conducting real estate development and management activities with respect to
properties which may be purchased by the RM Principal pursuant to Sections 8.3
or 27.5 of the Contribution and Exchange Agreement, provided that the
performance of these activities referred to in clauses (a) and (b) does not
prevent Executive from devoting substantially all of his business time to Cali.
Executive shall be based in Elmsford, NY, subject to reasonable
travel requirements, in an office comparable to the office previously provided
to Executive by RM.
Subject to the approval of a general and administrative budget by
CRLP and/or Cali and within the parameters of such budget, Executive jointly
with Brad W. Berger shall select RM's property management and leasing teams and
members of such management and leasing teams shall become employees of Cali on
the Closing
3
<PAGE>
Date. In addition, Executive jointly with Brad W. Berger shall, in June 1997 and
again in June 1998, have the sole and absolute authority to allocate options to
purchase 120,000 shares of Common Stock (as hereinafter defined) (i.e., 150,000
shares less 30,000 shares underlying the Warrants (as hereinafter defined)
transferred to the Warrant Transferees (as hereinafter defined)) at then current
fair market value and subject to the provisions of the Plan (as hereinafter
defined) to Cali employees who are part of such management and leasing teams;
provided, however, that Executive may not allocate any of such 120,000 options
to himself or to Brad W. Berger. Any of the foregoing options which are not
actually granted in 1997 may be granted in 1998 and any of the foregoing options
not granted in 1998 may be granted in 1999, provided that all such options shall
be granted at then current fair market value.
3. Compensation and Benefits.
During the Employment Period, Cali shall pay Executive a minimum
annual base salary in the amount of $225,000 (as adjusted from time to time,
(the "Annual Base Salary")), payable in accordance with Cali's normal payroll
practices. In addition, Executive shall be eligible for incentive compensation
payable each year in such amounts as may be determined by the Compensation
Committee of the Board (the "Compensation Committee") based upon, among other
factors, growth in Funds from Operations per Common Share (as hereinafter
defined) for the year. Executive's Annual Base Salary shall be reviewed annually
in accordance with the policy of Cali from time to time and may be subject to
adjustment based on, among other things, Executive's performance, as determined
in the sole discretion of the Compensation
4
<PAGE>
Committee. Cali shall have the right to deduct and withhold from such
compensation all social security and other federal, state and local taxes and
charges which currently are or which hereafter may be required by law to be so
deducted and withheld. In addition to the compensation specified above,
Executive shall be entitled to the following benefits:
(a) participation in the Employee Stock Option Plan of Cali Realty
Corporation (the "Plan"), and other benefit plans (including
without limitation Cali's Section 401(k) Savings/Retirement
Plan) made generally available to executives of Cali;
(b) during the 1997 calendar year, participation in any health
insurance, disability insurance, group life insurance or other
welfare benefit programs which were maintained by RM and which
are assumed by Cali on the Closing Date (the "RM Plans") and
other Cali welfare plans, if any, providing benefits of the
type not provided under any of the RM Plans, and thereafter,
participation in any health insurance, disability insurance,
group life insurance or other welfare benefit programs made
generally available to executives of Cali with respect to
which Executive shall be granted credit for all service with
RM and its affiliates and their respective predecessors prior
to the Closing Date; and
(c) reimbursement for reasonable business expenses incurred by
Executive in furtherance of the interests of Cali.
In addition, Executive shall be entitled to receive such bonuses and options to
purchase shares of common stock, par value $0.01 per share, of Cali (the "Common
Stock") as the Board shall approve, in its sole discretion, including, without
limitation, options and bonuses contingent upon Executive's performance and the
achievement of specified financial and operating objectives for Funds from
Operations per Common Share.
As further consideration for Executive agreeing to serve as an
officer and entering into this Agreement upon the terms set forth herein,
including, without limitation, the terms relating to non-competition set forth
in Paragraph 7 below, Cali is
5
<PAGE>
issuing to Executive and certain members of the management and leasing teams
designated by Executive (the "Warrant Transferees"), warrants to purchase an
aggregate of 200,000 shares of Common Stock at a purchase price equal to fair
market value on the Closing Date ("Warrants"). Executive's Warrants shall be
evidenced by the Warrant Agreement dated January 31, 1997 which shall include,
but not be limited to, the following provisions: vesting over a three year
period with one third (1/3) of the Warrants vesting on the first, second and
third anniversaries of the date of the Warrant Agreement and non-transferability
provisions. For purposes of this issuance "fair market value" shall mean the
closing price as quoted on the New York Stock Exchange at the end of the last
business day preceding the date of the grant as reported in the New York edition
of the Wall Street Journal. In accordance with the written direction of
Executive as provided to Cali, Executive shall receive Warrants to purchase
170,000 shares of Common Stock and the Warrant Transferees shall receive
Warrants to purchase an aggregate of 30,000 shares of Common Stock. Since
Executive has directed Cali to issue the aforementioned Warrants to the Warrant
Transferees, Executive shall receive in July 1997 and again in July 1998,
options to purchase 15,000 shares of Common Stock on each such date at a
purchase price of then current fair market value and subject to the provisions
of the Plan.
For purposes of this Agreement, "Funds from Operations per Common
Share" shall mean (i) net income (loss) before minority interest of unit
holders, computed in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from debt restructuring and sale of
property, plus real estate return, depreciation and amortization as calculated
in accordance with the National
6
<PAGE>
Association of Real Estate Investment Trusts definition published in March 1995,
as amended from time to time, and as applied in accordance with the accounting
practices and policies of the Cali in effect from time to time on a consistent
basis to the entire Employment Period, divided by (ii) the sum of (A) the
primary weighted average number of outstanding shares of Common Stock as it
appears in the Cali's financial statement for the applicable period and (B) the
primary weighted average number of outstanding limited partnership units of
CRLP, for the applicable period.
4. Termination of Employment.
(a) In the event (i) Cali terminates Executive's employment for
Cause (as hereinafter defined) or (ii) Executive terminates his employment
without Good Reason (as hereinafter defined), Cali shall pay Executive any
unpaid salary accrued through and including the date of termination (the
"Accrued Amount"). In addition, in such event, Executive shall be entitled (i)
to exercise any Warrants and/or options which have vested and are exercisable in
accordance with the terms of this Agreement, the applicable Warrant Agreement,
stock option agreement or the Plan, and (ii) to retain any shares awarded to
Executive which are fully vested on the date of termination. Except for any
rights which Executive may have to the Accrued Amount, vested Warrants and/or
options and vested share awards, Cali shall have no further obligations
hereunder following such termination.
(b) In the event of termination of Executive's employment as a
result of either (i) Executive's death or Disability (as hereinafter defined),
(ii) termination by Cali for any reason other than Cause or (iii) termination by
Executive of his employment for Good Reason, Cali shall pay to Executive (A) the
Accrued Amount, (B) the unpaid
7
<PAGE>
salary, at the rate then in effect without reduction, from the date of
termination through the end of the Employment Period remaining (assuming no such
termination occurred) and (C) a pro-rata portion, based upon the number of days
in the period beginning with January 1 of the calendar year in which such
termination occurred and ending with the date the Employment Period ends
(assuming such termination did not occur), of the average annual amount of
incentive compensation payments paid to Executive during each previous year of
Executive's employment hereunder. The aforesaid amount shall be payable, at the
option of Executive, his estate or his personal representative, either (i) in
full immediately upon such termination or (ii) monthly over the remainder of the
Employment Period. In addition, Executive shall be entitled, at the option of
Executive, his estate or his personal representative, within ninety (90) days
(one (1) year in the case of termination as a result of Executive's death or
Disability) of the date of such termination, (i) to exercise any Warrants and/or
options to purchase shares of Common Stock that have vested (including, without
limitation, by acceleration in accordance with the terms of the Plan or Warrant
Agreement) and are exercisable in accordance with the terms of this Agreement,
any applicable Warrant Agreement, stock option agreement or the Plan, (ii) to
retain any shares of Common Stock awarded to Executive which are vested on the
date of termination, and (iii) to require Cali (upon written notice delivered
within one hundred eighty (180) days following the date of Executive's
termination) to repurchase all or any portion of Executive's vested Warrants or
options (including without limitation Warrants and options, if any, which have
vested by acceleration in accordance with the terms of the Plan or stock option
agreement or Warrant Agreement) to purchase shares of Common Stock at a price
equal to the
8
<PAGE>
difference between the Fair Market Value (as hereinafter defined) of the shares
of Common Stock for which the Warrants or options to be repurchased are
exercisable and the exercise price of such Warrant or option as of the date of
Executive's termination of employment.
(c) For purposes of this Agreement:
(i) "Cause" shall mean (A) the willful and continued failure
by Executive to substantially perform his duties
hereunder (other than any such failure resulting from
Executive's incapacity due to physical or mental
illness) for a period of thirty (30) days after written
demand for substantial performance is delivered by Cali
specifically identifying the manner in which Cali
believes Executive has not substantially performed his
duties, or (B) willful misconduct by Executive which is
materially injurious to Cali, monetarily or otherwise,
or (C) the willful violation by Executive of the
provisions of Paragraph 5 or 7 hereof. For purposes of
this Paragraph 4(c)(i), no act, or failure to act, on
Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith
and without reasonable belief that his action or
omission was in furtherance of the interests of Cali.
(ii) "Disability" shall mean the determination by Cali, upon
the advice of an independent qualified physician,
reasonably acceptable to Executive, that Executive has
become physically or mentally incapable of performing
his duties under this Agreement and such disability has
disabled Executive for a cumulative period of one
hundred eighty (180) days within a twelve (12) month
period.
(iii) "Fair Market Value" shall mean the average of the
closing price on the New York Stock Exchange of the
Common Stock on each of the trading days within the
thirty (30) days immediately preceding the date of
termination of Executive's employment;
(iv) "Good Reason" shall mean (A) any assignment to Executive
of any duties materially different from those
contemplated by Paragraph 2 hereof, or any limitation of
the powers of Executive in any respect not contemplated
by Paragraph 2 hereof or other material breach of this
Agreement by Cali,
9
<PAGE>
(B) a material reduction in Executive's Annual Base
Salary as in effect at the time in question, or any
other material failure by Cali to comply with Paragraph
3 hereof, provided, however, that in the event Executive
is not awarded a bonus or other discretionary payment or
discretionary award described in Paragraph 3, it shall
not be deemed a failure, (C) Cali shall have given
notice pursuant to Paragraph 1 hereof that it does not
wish to extend this Agreement, except in connection with
termination of Executive's employment for Cause or by
reason of death or Disability, or (D) failure of Cali to
obtain the assumption of the obligation to perform this
Agreement by any successor as contemplated in Paragraph
9(a) hereof.
(d) Any termination of Executive's employment by Cali or any such
termination by Executive (other than on account of death) shall be communicated
by written Notice of Termination to the other party hereto. 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.
5. Confidential Information.
(a) Executive understands and acknowledges that during his
employment with Cali, he will be exposed to Confidential Information (as defined
below), all of which is proprietary and which will rightfully belong to Cali.
Executive shall hold in a fiduciary capacity for the benefit of Cali such
Confidential Information obtained by Executive during his employment with RM and
Cali and shall not, directly or indirectly, at any time, either during or after
his employment with Cali, without Cali's prior written consent, use any of such
Confidential Information or disclose any of such Confidential Information to any
individual or entity other than Cali or its employees,
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<PAGE>
except as required in the performance of his duties for Cali or as otherwise
required by law. Executive shall take all reasonable steps to safeguard such
Confidential Information and to protect such Confidential Information against
disclosure, misuse, loss or theft.
(b) The term "Confidential Information" shall mean any information
not generally known in the relevant trade or industry or otherwise not generally
available to the public, which was obtained from Cali or its predecessors or
which was learned, discovered, developed, conceived, originated or prepared
during or as a result of the performance of any services by Executive on behalf
of Cali or its predecessors including without limitation RM. For purposes of
this Paragraph 5, Cali shall be deemed to include any entity which is
controlled, directly or indirectly, by Cali and any entity of which a majority
of the economic interest is owned, directly or indirectly, by Cali.
6. Return of Documents.
Except for such items which are of a personal nature to Executive
(e.g., daily business planner), all writings, records, and other documents and
things containing any Confidential Information shall be the exclusive property
of Cali, shall not be copied, summarized, extracted from, or removed from the
premises of Cali, except in pursuit of the business of Cali or at the direction
of Cali, and shall be delivered to Cali, without retaining any copies, upon the
termination of Executive's employment or at any time as requested by Cali.
11
<PAGE>
7. Noncompete.
Executive agrees that:
(a) During the Employment Period and, unless (i) Cali terminates
Executive's employment hereunder without Cause, (ii) Executive terminates his
employment hereunder with Good Reason or (iii) Cali shall have given notice
pursuant to Paragraph 1 hereof that it does not wish to extend this Agreement
(except in connection with termination of Executive's employment for Cause or by
reason of death or Disability), for a one (1) year period thereafter, Executive
shall not, directly or indirectly, within the State of New York, the State of
New Jersey, the State of Connecticut or the State of Pennsylvania engage in, or
own, invest in, manage or control any venture or enterprise engaged in any
development, acquisition or management activities with respect to
office-service, office or industrial or flex property, without regard to whether
or not such activities compete with Cali. Nothing herein shall prohibit
Executive from being a passive owner of not more than five percent (5%) of the
outstanding stock of any class of securities of a corporation or other entity
engaged in such business which is publicly traded, so long as he has no active
participation in the business of such corporation or other entity. Moreover the
foregoing limitations shall not be deemed to restrict or otherwise limit
Executive from (i) conducting the real estate development, acquisition or
management activities as and to the extent permitted pursuant to Section 26 of
the Contribution and Exchange Agreement, or (ii) acquiring and conducting real
estate development and management activities with respect to properties which
may be purchased by the RM Principal pursuant to Sections 8.3 or 27.5 of the
Contribution and Exchange Agreement, provided that during the
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Employment Period, the performance of such activities does not prevent Executive
from devoting substantially all of his business time to Cali.
(b) If, at the time of enforcement of this Paragraph 7, a court
shall hold that the duration, scope, area or other restrictions stated herein
are unreasonable, the parties agree that reasonable maximum duration, scope,
area or other restrictions may be substituted by such court for the stated
duration, scope, area or other restrictions.
(c) For purposes of this Paragraph 7, Cali shall be deemed to
include any entity which is controlled, directly or indirectly, by Cali and any
entity of which a majority of the economic interest is owned, directly or
indirectly, by Cali.
8. Remedies.
The parties hereto agree that Cali would suffer irreparable harm
from a breach by Executive of any of the covenants or agreements contained in
Paragraph 5, 6 or 7 of this Agreement. Therefore, in the event of the actual or
threatened breach by Executive of any of the provisions of Paragraph 5, 6 or 7
of this Agreement, Cali may, in addition and supplementary to other rights and
remedies existing in its favor, apply to any court of law or equity of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce or prevent any violation of the provisions thereof.
9. Successors and Assigns.
(a) Cali shall require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of Cali, by agreement in form and substance satisfactory
to Executive, to
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expressly assume and agree to perform this Agreement in the same manner and to
the same extent that Cali would be required to perform it if no such succession
had taken place. Failure of Cali to obtain such agreement prior to the
effectiveness of an such succession shall be a breach of this Agreement and
shall entitle Executive to compensation from Cali in the same amount and on the
same terms as he would be entitled to hereunder if he terminated his employment
for Good Reason, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the date of
termination. In the event of such a breach of this Agreement, the Notice of
Termination shall specify such date as the date of termination. As used in this
Agreement, "Cali" shall mean Cali as hereinbefore defined and any successor to
all or substantially all of its business and/or its assets as aforesaid which
executes and delivers the agreement provided for in this Paragraph 9 or which
otherwise becomes bound by all the terms and provisions of this Agreement by
operation of law. Any cash payments owed to Executive pursuant to this Paragraph
9 shall be paid to Executive in a single sum immediately prior to the
consummation of the transaction with such successor.
(b) This Agreement and all rights of Executive hereunder shall inure
to the benefit of and be enforceable by Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any amounts would still be
payable to him hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to Executive's devisee, legatee, or other designee or, if there be no
such designee, to Executive's estate.
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10. Timing of and No Duplication of Payments
All payments payable to Executive pursuant to this Agreement shall
be paid as soon as practicable after such amounts have become fully vested and
determinable. In addition, Executive shall not be entitled to receive duplicate
payments under any of the provisions of this Agreement.
11. Modification or Waiver.
No amendment, modification, waiver, termination or cancellation of
this Agreement shall be binding or effective for any purpose unless it is made
in a writing signed by the party against whom enforcement of such amendment,
modification, waiver, termination or cancellation is sought. No course of
dealing between or among the parties to this Agreement shall be deemed to affect
or to modify, amend or discharge any provision or term of this Agreement. No
delay on the part of Cali or Executive in the exercise of any of their
respective rights or remedies shall operate as a waiver thereof, and no single
or partial exercise by Cali or Executive of any such right or remedy shall
preclude other or further exercise thereof. A waiver of right or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right or
remedy on any other occasion.
12. Notices.
All notices or other communications required or permitted hereunder
shall be made in writing and shall be deemed to have been duly given if
delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to Cali or
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Executive, as applicable, at the address set forth above (or to such other
address as shall have been previously provided in accordance with this Paragraph
11).
13. Governing Law.
THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS
OF LAWS THEREUNDER.
14. Severability.
Whenever possible, each provision and term of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision or term of this Agreement shall be held to be prohibited by
or invalid under such applicable law, then, subject to the provisions of
Paragraph 7(b) above, such provision or term shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating or affecting in
any manner whatsoever the remainder of such provisions or term or the remaining
provisions or terms of this Agreement.
15. Counterparts.
This Agreement may be executed in separate counterparts, each of
which is deemed to be an original and both of which taken together shall
constitute one and the same agreement.
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16. Headings.
The headings of the Paragraphs of this Agreement are inserted for
convenience only and shall not be deemed to constitute a part hereof and shall
not affect the construction or interpretation of this Agreement.
17. Entire Agreement.
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all other prior agreements
and undertakings, both written and oral, among the parties with respect to the
subject matter hereof.
18. Survival of Agreements.
The covenants made in Paragraphs 4, 5, 6 and 7 each shall survive
the termination of this Agreement.
THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
----------------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
EXECUTIVE
/s/ Timothy M. Jones
----------------------------------
Timothy M. Jones
18
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 4 OF THIS
WARRANT.
WARRANT
to Purchase Common Stock of
CALI REALTY CORPORATION
Expiring January 31, 2007
This Warrant certifies that Timothy M. Jones, or registered and permitted
assigns (the "Holder"), is entitled to, subject to the terms set forth below,
subscribe for and purchase from Cali Realty Corporation, a Maryland corporation
(the "Company"), One Hundred-Seventy Thousand (170,000) duly authorized, validly
issued, fully paid and nonassessable shares of the Company's common stock, $.01
par value per share (the common stock, including any stock into which it may be
changed, reclassified, or converted, and as it may be adjusted pursuant to
Section 4(B) below, is herein referred to as the "Common Stock"). This Warrant
is one of a class of Warrants (the "RM Warrants") of the Company issued to
purchase an aggregate of 400,000 shares of Common Stock pursuant to Section
12.1(h) of the Contribution and Exchange Agreement dated January 24, 1997 by and
between the Company, Cali Realty, L.P., a Delaware limited partnership, Robert
Martin Company, LLC ("RMC LLC"), a limited liability company organized under the
laws of the State of New York, and Robert Martin-Eastview North Company, L.P., a
New York limited partnership.
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
To exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at its principal office in Cranford, New Jersey, (a) a written
notice, in substantially the form of the Exercise Notice appearing at the end of
this Warrant, of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) cash or
a certified check payable to the Company, or such other consideration as
determined in accordance with Section 2(D) below, in an amount equal to the
aggregate purchase price of the number of shares of Common Stock being
purchased, and (c) this Warrant. The Company shall as promptly as practicable,
and in any event within 15 days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a stock certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice. The stock certificate or certificates so delivered
shall be in such denominations as may be specified in such notice and shall be
issued in the name of the Holder or, subject to Sections 2(E) and (F) and
Sections 4(H) and (I) below, such other name as shall be designated in such
notice. Such stock certificate or certificates shall be deemed to have been
issued and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares immediately prior to the close of business on the date such
<PAGE>
notice is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificates or
new Warrants shall be paid by the Holder at the time of delivering the notice of
exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities exchange or quoted on an automated quotation
system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. Terms and Conditions of Warrants.
(A) Exercise Period. Each Warrant shall vest over a three-year period
(subject to acceleration in accordance with the terms of this Warrant), with
one-third of such Warrant vesting on the first anniversary of the date hereof,
one-third vesting on the second anniversary of the date hereof, and one-third
vesting on the third anniversary of the date hereof, and shall expire at 5:00
p.m., New York City time, on January 31, 2007, or in connection with the
Holder's earlier termination of employment with the Company as provided in
paragraph 2(E) below (the "Expiration Date").
(B) Purchase Price. The purchase price per share of Common Stock shall be
equal to the fair market value of the Common Stock on the date hereof. For
purposes of this paragraph 2(B), "fair market value" means the closing price as
quoted on the New York Stock Exchange at the end of the last business day
preceding the date hereof as reported in the New York edition of The Wall Street
Journal. It is agreed that such purchase price is $33.00 per share.
(C) Exercise of Warrant. No part of any Warrant may be exercised at the
time of vesting unless the Holder shall have remained in the employ of the
Company for such period as to which such portion of the Warrant has vested,
except as otherwise provided in paragraph 2(E) below.
(D) Payment of Purchase Price upon Exercise. Subject to the terms of
Section 2(F) hereof, the purchase price of the Common Stock as to which a
Warrant is exercised shall be paid to the Company at the time of exercise either
in cash or in such other consideration as the Executive Compensation Committee
of the Board of Directors of the Company (the "Board of
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<PAGE>
Directors") or such other committee that the Board of Directors may appoint to
administer the Warrants (the "Committee"), deems appropriate, including, but not
limited to, loans from the Company or a third party, Common Stock already owned
by the Holder having a total fair market value, as determined by the Committee,
equal to the purchase price, or a combination of cash and Common Stock having a
total fair market value, as so determined, equal to the purchase price. The
Committee in its sole discretion may also provide that the purchase price may be
paid by delivering a properly executed exercise notice in a form approved by the
Committee, together with irrevocable instructions to a broker to promptly
deliver to the Company the amount of applicable sale or loan proceeds to pay the
purchase price.
(E) Exercise in the Event of Death, Disability, Retirement or Other
Termination of Employment, or Change in Control.
(1) Death or Disability. If a Holder's employment by the Company shall
terminate because of his or her death or permanent disability, the
Committee may, in its sole discretion, accelerate in whole or in part, any
or all Warrants which the Holder shall not then have been entitled to
exercise. If a Holder shall die (i) while an employee of the Company, or
(ii) within twelve (12) months after termination of his or her employment
with the Company because of his or her permanent disability, such Holder's
Warrants may be exercised, to the extent that such Holder shall have been
entitled to do so on the date of his or her death or such termination of
employment (including, without limitation, by acceleration or otherwise) by
the Holder's Beneficiary (as defined below) or by the person or persons to
whom the Holder's rights under the Warrants pass by will or applicable law,
or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, but not later than the
Expiration Date or one year after the Holder's death, whichever date is
earlier. If a Holder's employment by the Company shall terminate because of
his or her permanent disability, such Holder may exercise his or her
Warrants, to the extent that such Holder shall have been entitled to do so
at the date of the termination of his or her employment (including, without
limitation, by acceleration or otherwise), at any time, or from time to
time, but not later than the Expiration Date or one year after termination
of employment because of his or her permanent disability, whichever date is
earlier.
(2) Change in Control. In the event a Holder's employment shall
terminate within six (6) months following a Change in Control (as defined
below), all Warrants which the Holder shall not then have been entitled to
exercise shall be accelerated immediately prior to or concurrently with the
occurrence of the Change in Control and the Holder shall have the right to
exercise all such Warrants at any time or from time to time through the
Expiration Date.
(3) Good Reason. If a Holder terminates his or her employment for Good
Reason (as defined below), the Committee may, in its sole discretion,
accelerate in whole or in part, any or all Warrants which the Holder shall
not then have been entitled to exercise. If a Holder's employment by the
Company shall terminate for Good Reason, such Holder may exercise his or
her Warrants, to the extent that such Holder shall have been entitled to do
so at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later
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<PAGE>
than the Expiration Date or ninety (90) days after termination of
employment, whichever date is earlier.
"Good Reason" shall mean (A) any assignment to the Holder of any
duties materially different from those contemplated by his or her
employment agreement, or any limitation of the powers of the Holder in any
respect not contemplated by his or her employment agreement or other
material breach of his or her employment agreement by the Company, (B) a
material reduction in the Holder's Annual Base Salary (as defined in the
Holder's employment agreement) as in effect at the time in question, or any
other material failure by the Company to comply with Paragraph 3 of the
employment agreement; provided, however, that in the event Holder is not
awarded a bonus or other discretionary payment or discretionary award
described in Paragraph 3 of the employment agreement, it shall not be
deemed a failure, (C) the Company shall have given notice pursuant to
Paragraph 1 of the employment agreement that it does not wish to extend the
employment agreement, except in connection with termination of the Holder's
employment for Cause (as defined in Section 4(A) below) or by reason of
death or Disability (as defined below), or (D) failure of the Company to
obtain the assumption of the obligation to perform the employment agreement
by any successor as contemplated in Paragraph 9(a) of the employment
agreement.
(4) Subject to Section 4(A) below, if a Holder's employment shall
terminate for any reason other than death, Disability, Good Reason or
a Change in Control (each as defined below) as aforesaid, all rights
to exercise his or her Warrant shall terminate at the Expiration Date
or three (3) months after termination of employment, whichever date is
earlier; provided, however, that the Committee may, in its sole
discretion, grant new Warrants or modify outstanding Warrants to
permit their exercise upon a Holder's termination of employment due to
retirement with the consent of the Company until the earlier of the
Expiration Date or twelve (12) months after termination of employment.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Section 4(H) to receive the amount, if any, payable under
the Warrant upon the death of a Holder.
"Change in Control" means that any of the following events has
occurred:
(i) any "person" or "group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than any employee benefit plan sponsored by the
Company, becomes the "beneficial owner", as such term is used in Section 13
of the Exchange Act, of thirty percent (30%) or more of the Common Stock of
the Company issued and outstanding immediately prior to such acquisition;
(ii) any Common Stock of the Company is purchased pursuant to a tender
or exchange offer other than an offer by the Company; or
(iii) the dissolution or liquidation of the Company or the
consummation of any merger or consolidation of the Company or any sale or
other disposition of
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all or substantially all of its assets, if the shareholders of the
Company immediately before such transaction own, immediately after
consummation of such transaction, equity securities (other than
options and other rights to acquire equity securities) possessing less
than thirty percent (30%) of the voting power of the surviving or
acquiring Company.
provided, however, that notwithstanding anything herein to the contrary, no
Change in Control shall be deemed to have occurred and no rights arising upon a
Change in Control described in Section 2(E) shall exist unless the Board of
Directors directs to the contrary by resolution adopted prior to the Change in
Control. Any resolution of the Board of Directors adopted in accordance with the
provisions of this Section directing that this Section 2(E) or any of such
Section become ineffective may be rescinded or countermanded at any time with or
without retroactive effect by such Board.
"Disability" means the determination by the Company, upon the advice of an
independent qualified physician, reasonably acceptable to the Holder, that the
Holder has become physically or mentally incapable of performing his duties
under any employment agreement or otherwise and such disability has disabled the
Holder for a cumulative period of one hundred eighty (180) days within a twelve
(12) month period.
(F) Repurchase Right. In the event of termination of the Holder's
employment as a result of either (i) death or Disability, (ii) termination by
the Company for any reason other than Cause or (iii) termination by the Holder
of his employment for Good Reason, the Holder shall be entitled, at the option
of the Holder, his estate or his personal representative, within ninety (90)
days (one (1) year in the case of termination as a result of the Holder's death
or Disability) of the date of such termination, to require the Company (upon
written notice delivered within one hundred eighty (180) days following the date
of termination) to repurchase all or any portion of the Holder's vested Warrants
at a price equal to the difference between the fair market value (as defined
below) of the shares of Common Stock for which the Warrants to be repurchased
are exercisable and the exercise price of such Warrant as of the date of the
Holder's termination of employment. For purposes of this paragraph 2(F), "fair
market value" means the average of the closing price on the New York Stock
Exchange of the Common Stock on each of the trading days within the thirty (30)
days immediately preceding the date of termination of the Holder's employment.
(G) Transferability and Exercise of Warrants. Subject to the provisions of
any registration rights agreement entered into in connection with the
registration of shares of Common Stock underlying the RM Warrants, no Warrant
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the Holder, a Warrant shall be exercisable
only by the Holder. This Warrant shall be exercisable or convertible (a) only
under circumstances such that the issue of Common Stock issuable upon such
exercise or conversion is exempt from the requirements of registration under the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith; provided, however, that the foregoing shall not apply if this Warrant
is exercised by the original Holder hereof. This Warrant shall be transferable
only under circumstances such that the transfer is exempt from the requirements
of registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to
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<PAGE>
comply with such laws.
(H) Investment Representation. The Holder, by acceptance hereof, (i) hereby
represents that he or she is an "Accredited Investor" under Rule 501(a) of
Regulation D promulgated under Section 4(2) of the 1933 Act, and (ii)
acknowledges that this Warrant and, to the extent not registered under the 1933
Act, any Common Stock purchased or acquired pursuant hereto is being or will be
acquired solely for the Holder's own account and not as a nominee for any other
party, and with a current investment intent and not with a view to distribution
thereof. The Holder (or any person acting under Sections 2(E), (F) or (G) above)
shall deliver to the Company, at the time of any exercise of a Warrant or
portion thereof, a written representation that the shares to be acquired upon
such exercise are to be acquired for investment and not for resale or with a
view to the distribution thereof, and, if applicable, that he or she is the
original Holder of this Warrant. Delivery of such representation prior to the
delivery of any Common Stock issued upon exercise of a Warrant and prior to the
expiration of the Warrant period shall be a condition precedent to the right of
the Holder or such other person to purchase any Common Stock. In the event
certificates for Common Stock are delivered upon the exercise of a Warrant with
respect to which such an investment representation has been obtained, the
Company may cause a legend or legends to be placed on such certificates to make
appropriate reference to such representations and to restrict transfer in the
absence of compliance with applicable federal or state securities laws.
Section 3. Transfer, Division and Combination.
The Company agrees to maintain at its principal office in Cranford, New
Jersey, books for the registration and transfer of this Warrant, and, subject to
the provisions of Section 2(G) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on such books at such office, upon surrender
of this Warrant at such office, together with a written assignment of this
Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. A Warrant may be exercised by a new holder for the
purchase of shares of Common Stock without having a new Warrant issued. All of
the provisions of this Section 3 are subject to the provisions of Sections 2(E),
(F) and (G) above.
Section 4. General Provisions
(A) Termination for Cause. Notwithstanding anything herein contained to the
contrary, if a Holder's employment is terminated for Cause, all Warrants, to the
extent not vested on the date of termination, shall be forfeited. "Cause" shall
mean (1) the willful and continued failure by the Holder to substantially
perform his or her duties under his or her employment agreement with the
Company, if any, or otherwise (other than any such failure resulting from the
Holder's incapacity due to physical or mental illness) for a period of thirty
(30) days after written demand for substantial performance is delivered by the
Company specifically identifying the manner in which the Company believes the
Holder has not substantially performed his or her duties, or (2) willful
misconduct by the Holder which is materially injurious to the Company,
monetarily or otherwise, or (3) the willful violation by the Holder of the
provisions of any covenant not to compete or breach of
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confidential information with respect to the Company. For purposes of this
Paragraph 4(A), no act, or failure to act, on the Holder's part shall be
considered "willful" unless done, or omitted to be done, by him or her not in
good faith and without reasonable belief that his or her action or omission was
in furtherance of the interests of the Company.
(B) Certain Adjustments. In the event of any change in the Common Stock by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and kind
of shares subject to Warrants in and the purchase price per share thereof shall
be appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, the Holders hereunder. Any adjustment
of a Warrant pursuant to this Section 4(B) shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Internal Revenue Code of 1986, as amended from time to time, unless the holder
of such Warrant shall agree otherwise. The Committee shall give notice to each
Holder of any adjustment made pursuant to this Section 4(B) and, upon notice,
such adjustment shall be effective and binding for all purposes under this
Warrant.
(C) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor Company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor Company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holders' rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
(D) No Claim or Right. Nothing contained herein nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company.
(E) Awards Not Treated as Compensation Under Benefit Plans. No Warrant
shall be considered as compensation under any employee benefit plan of the
Company, except as specifically provided in any such plan or as otherwise
determined by the Board of Directors.
(F) Listing and Qualification of Common Stock. The Company, in its
discretion, may postpone the issuance or delivery of Common Stock upon any
exercise of a Warrant until completion of such stock exchange listing or other
qualification of such shares under any state or federal law, rule or regulation
as the Company may consider appropriate, and may require any Holder, Beneficiary
or legal representative to make such representations and furnish such
information as it may consider reasonably appropriate in connection with the
issuance or delivery of the shares in compliance with applicable laws, rules and
regulations. The Company covenants, however, to effect the listing of the Common
Stock underlying the Warrants on the New York Stock Exchange prior to December
1997.
(G) Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Warrants exercised
pursuant to this Agreement including, but not
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limited to (i) deducting the amount required to be withheld from any other
amount then or thereafter payable to a Holder, Beneficiary or legal
representative, and (ii) requiring a Holder, Beneficiary or legal representative
to pay to the Company the amount required to be withheld as a condition of
releasing Common Stock. In addition, subject to such rules and regulations as
the Committee shall from time to time establish, Holders shall be permitted to
satisfy federal, state and local taxes, if any, imposed upon the issuance of
Common Stock at a rate up to such Holder's maximum marginal tax rate with
respect to each such tax by (i) irrevocably electing to have the Company deduct
from the number of shares Common Stock otherwise deliverable upon exercise of a
Warrant such number of shares of Common Stock as shall have a value equal to the
amount of tax to be withheld, (ii) delivering to the Company such portion of the
Common Stock delivered upon exercise of the Warrant as shall have a value equal
to the amount of tax to be withheld, or (iii) delivering to the Company such
Common Stock or combination of Common Stock and cash as shall have a value equal
to the amount of tax to be withheld.
(H) Designation and Change of Beneficiary. Each Holder shall file with the
Committee a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under this Warrant upon
his or her death. A Holder may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Holder's death, and in no event shall it be effective as
of a date prior to such receipt.
(I) Payments to Persons Other Than A Holder. If the Committee shall find
that any person to whom any amount is payable under this Warrant is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal representative),
may, if the Committee so directs the Company, be paid to his or her spouse, a
child, a relative, an institution maintaining or having custody of such person,
or any other person deemed by the Committee to be a proper recipient on behalf
of such person otherwise entitled to payment. Any such payment shall be a
complete discharge of the liability of the Committee and the Company therefor.
(J) General Creditor Status. Holders shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations hereunder. Nothing contained herein, and no action
taken pursuant hereto, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder,
Beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth herein; provided, however, that in its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created hereunder to deliver Common Stock or pay cash; provided,
further, however, that, unless the Committee otherwise determines with the
consent of the affected Holder, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the 1994 Employee
Stock Option
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Plan of Cali Realty Corporation.
(K) No Liability of Committee Members. The Holder of this Warrant agrees
that no member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith.
Section 5. Covenant to Reserve Shares of Common Stock.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Warrant, sufficient to enable it at any time to fulfill all its obligations
hereunder.
Section 6. Notices.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Common Stock upon its Common Stock or make any
distribution (other than ordinary cash dividends) to the holders of its Common
Stock,
(b) the Company proposes to grant to the holders of its Common
Stock generally any rights or Warrants (excluding any Warrants granted to any
employee, director, officer, contractor or consultant of the Company pursuant to
any plan approved by the Board of Directors of the Company),
(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially as an
entirety, or
(e) the Company proposes to effect the liquidation, dissolution
or winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or delivered
to the holder of this Warrant shall be delivered by facsimile transmission,
reliable courier or first-class mail postage prepaid to the Holder at the last
address shown on the books of the Company maintained for the registry and
transfer of this Warrant. Any notice or other document required or permitted
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to be given or delivered to holders of record of Common Stock issued pursuant to
this Warrant shall be delivered by facsimile, reliable courier or first-class
mail postage prepaid to Holder at Holder's address as the same appears on the
stock records of the Company. Any notice or other document required or permitted
to be given or delivered to the Company shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the
principal office of the Company in Cranford, New Jersey, or delivered to the
office of one of the Company's executive officers at such address, or such other
address as shall have been furnished by the Company to the holders of record of
such Warrants and the holders of record of such Common Stock.
Section 7. Limitation of Liability; Not Shareholders.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 8. Loss, Destruction, etc, of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of such Warrant, the Company
will make and deliver a new Warrant, of like tenor, in lieu of such lost,
stolen, destroyed or mutilated Warrant. Any Warrant issued under the provisions
of this Section 8 in lieu of any Warrant alleged to be lost, destroyed or
stolen, or of any mutilated Warrant, shall constitute an original contractual
obligation on the part of the Company.
Section 9. Registration Rights.
As used in this Section 9, the term "Registrable Stock" shall mean (i) all
shares of Common Stock that may be issued upon exercise of this Warrant (and all
shares of Common Stock that may thereafter be issued in respect of such Warrant)
that is from time to time outstanding.
References in this Warrant to rules, regulations and forms promulgated by
the Securities and Exchange Commission shall include rules, regulations and
forms succeeding to the functions thereof, whether or not bearing the same
designation.
The rights and obligations of the Company and the Holder with respect to
the Registrable Stock are set forth in a Registration Rights Agreement, dated
January 31, 1997, between the Company, the Holder and the other signatories
thereto, and shall supersede any registration rights and obligations of the
Company and the Holder existing prior to the date
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hereof with respect to the Registrable Stock.
Section 10. Amendments.
Neither this Warrant nor any term hereof may be changed, waived, discharged
or terminated orally or in writing, provided that any term of this Warrant may
be amended or the observance of such term may be waived (either generally or in
a particular instance and either retroactively or prospectively) with, but only
with, the written consent of the Company and the holders of the RM Warrants that
are exercisable for a number of shares of Common Stock that represent in the
aggregate at least a majority of the total number of shares of Common Stock for
which all of the RM Warrants are then exercisable (whether or not the holder of
this Warrant consents).
Section 11. Governing Law and Consent to Jurisdiction.
This Warrant shall be governed by the laws of the State of New York without
regard to its conflict of laws principles or rules. This Warrant shall be deemed
to have been executed and delivered at and shall be deemed to have been made in
New York, New York.
Any legal action, suit or proceeding arising out of or relating to this
Warrant may only be instituted in any federal court of the Southern District of
New York or any state court located in New York County, State of New York, and
the Company agrees not to assert, by way of motion, as a defense or otherwise,
in any action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of such courts, that the action, suit or proceeding if
brought in such courts, would be an inconvenient forum, that the venue of the
action, suit or proceeding, if brought in any of such courts, is improper or
that this Agreement or the subject matter may not be enforced in or by such
courts on jurisdictional grounds.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
name by its duly authorized officer.
Dated: January 31, 1997
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
----------------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
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EXERCISE NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ____________ shares
of the Common Stock covered by such Warrant and herewith makes payment in full
therefor of $_________ cash and/or by cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that, subject to
the terms and conditions of the Warrant, certificates for such shares (and any
securities or property deliverable upon such exercise) be issued in the name of
and delivered to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for the Holder's own account and not
as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY
ARE SOLD PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND
EXCHANGE COMMISSION UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION AND QUALIFICATION
WITHOUT AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY
TO COUNSEL FOR THE COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION
ARE NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
stop transfer instructions will be entered on the Company's stock transfer
records with respect to Common Stock issued upon this exercise.
Dated: __________________________
Signature guaranteed:
<PAGE>
AMENDMENT NO. 1 TO THE
WARRANT
to Purchase Common Stock of
Cali Realty Corporation
This Amendment No. 1 is made, effective as of January 31, 1997, by and
between Cali Realty Corporation, a Maryland corporation (the "Company") and
Timothy M. Jones, or registered and permitted assigns (the "Holder").
W I T N E S S E T H
WHEREAS, the Company granted the right to purchase 170,000 shares of Common
Stock of the Company to the Holder pursuant to a warrant dated January 31, 1997
(the "Warrant"); and
WHEREAS, the Company and Holder have agreed to amend the terms of the
Warrant to provide for full vesting upon a Change in Control; and
WHEREAS, the Holder and Brad W. Berger together hold a majority of the RM
Warrants and by executing this document consent to the foregoing amendment, as
required by Section 10 of the Warrant.
NOW, THEREFORE, in consideration of the premises, the parties hereto hereby
agree as follows:
1. Section 2(E)(2) of the Warrant, "Change in Control", shall be deleted in
its entirety and amended to read as follows:
"Change in Control. In the event of a Change in Control (as
defined below), all Warrants which the Holder shall not then have
been entitled to exercise shall be accelerated immediately prior
to or concurrently with the occurrence of the Change in Control
and the Holder shall have the right to exercise all such Warrants
at any time or from time to time through the Expiration Date."
2. Except as specifically amended above, the Warrant and all provisions
thereof shall remain in full force and effect and are hereby ratified and
confirmed.
3. Upon the effectiveness of this Amendment, on and after the date hereof,
each reference in the Warrant to "this Warrant", "hereunder", "hereof", "herein"
or words of like import, and each reference to the Warrant in any document
relating to the Warrant shall mean and be a reference to the Warrant as amended
hereby.
<PAGE>
4. The execution, delivery, and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Holder under the Warrant nor constitute a waiver of any provision
of the Warrant.
5. This Amendment may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.
6. This Amendment shall be governed by and construed in accordance with the
laws of the State of New York.
7. Capitalized terms used herein and not otherwise defined herein shall
have the meanings specified, or ascribed thereto by reference, in the Warrant.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
effective as of the date first written above.
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
-------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
/s/ Timothy M. Jones
-----------------------
Timothy M. Jones
I hereby consent, as required by Section 10 of the RM Warrants, to the
amendment of the aforementioned Warrant to provide for full vesting upon a
Change in Control as set forth herein.
/s/ Brad W. Berger
-----------------------
Brad W. Berger
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 4 OF THIS
WARRANT.
WARRANT
to Purchase Common Stock of
CALI REALTY CORPORATION
Expiring January 31, 2007
This Warrant certifies that Greg Berger, or registered and permitted
assigns (the "Holder"), is entitled to, subject to the terms set forth below,
subscribe for and purchase from Cali Realty Corporation, a Maryland corporation
(the "Company"), Twenty Thousand (20,000) duly authorized, validly issued, fully
paid and nonassessable shares of the Company's common stock, $.01 par value per
share (the common stock, including any stock into which it may be changed,
reclassified, or converted, and as it may be adjusted pursuant to Section 4(B)
below, is herein referred to as the "Common Stock"). This Warrant is one of a
class of Warrants (the "RM Warrants") of the Company issued to purchase an
aggregate of 400,000 shares of Common Stock pursuant to Section 12.1(h) of the
Contribution and Exchange Agreement dated January 24, 1997 by and between the
Company, Cali Realty, L.P., a Delaware limited partnership, Robert Martin
Company, LLC ("RMC LLC"), a limited liability company organized under the laws
of the State of New York, and Robert Martin-Eastview North Company, L.P., a New
York limited partnership.
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
To exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at its principal office in Cranford, New Jersey, (a) a written
notice, in substantially the form of the Exercise Notice appearing at the end of
this Warrant, of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) cash or
a certified check payable to the Company, or such other consideration as
determined in accordance with Section 2(D) below, in an amount equal to the
aggregate purchase price of the number of shares of Common Stock being
purchased, and (c) this Warrant. The Company shall as promptly as practicable,
and in any event within 15 days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a stock certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice. The stock certificate or certificates so delivered
shall be in such denominations as may be specified in such notice and shall be
issued in the name of the Holder or, subject to Sections 2(E) and (F) and
Sections 4(H) and (I) below, such other name as shall be designated in such
notice. Such stock certificate or certificates shall be deemed to have been
issued and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares immediately prior to the close of business on the date such
<PAGE>
notice is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificates or
new Warrants shall be paid by the Holder at the time of delivering the notice of
exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities exchange or quoted on an automated quotation
system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. Terms and Conditions of Warrants.
(A) Exercise Period. Each Warrant shall vest over a three-year period
(subject to acceleration in accordance with the terms of this Warrant), with
one-third of such Warrant vesting on the first anniversary of the date hereof,
one-third vesting on the second anniversary of the date hereof, and one-third
vesting on the third anniversary of the date hereof, and shall expire at 5:00
p.m., New York City time, on January 31, 2007, or in connection with the
Holder's earlier termination of employment with the Company as provided in
paragraph 2(E) below (the "Expiration Date").
(B) Purchase Price. The purchase price per share of Common Stock shall be
equal to the fair market value of the Common Stock on the date hereof. For
purposes of this paragraph 2(B), "fair market value" means the closing price as
quoted on the New York Stock Exchange at the end of the last business day
preceding the date hereof as reported in the New York edition of The Wall Street
Journal. It is agreed that such purchase price is $33.00 per share.
(C) Exercise of Warrant. No part of any Warrant may be exercised at the
time of vesting unless the Holder shall have remained in the employ of the
Company for such period as to which such portion of the Warrant has vested,
except as otherwise provided in paragraph 2(E) below.
(D) Payment of Purchase Price upon Exercise. The purchase price of the
Common Stock as to which a Warrant is exercised shall be paid to the Company at
the time of exercise either in cash or in such other consideration as the
Executive Compensation Committee of the Board of Directors of the Company (the
"Board of Directors") or such other committee that the
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<PAGE>
Board of Directors may appoint to administer the Warrants (the "Committee"),
deems appropriate, including, but not limited to, loans from the Company or a
third party, Common Stock already owned by the Holder having a total fair market
value, as determined by the Committee, equal to the purchase price, or a
combination of cash and Common Stock having a total fair market value, as so
determined, equal to the purchase price. The Committee in its sole discretion
may also provide that the purchase price may be paid by delivering a properly
executed exercise notice in a form approved by the Committee, together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of applicable sale or loan proceeds to pay the purchase price.
(E) Exercise in the Event of Death, Disability, Retirement or Other
Termination of Employment, or Change in Control.
(1) Death or Disability. If a Holder's employment by the Company
shall terminate because of his or her death or permanent disability, the
Committee may, in its sole discretion, accelerate in whole or in part, any
or all Warrants which the Holder shall not then have been entitled to
exercise. If a Holder shall die (i) while an employee of the Company, or
(ii) within twelve (12) months after termination of his or her employment
with the Company because of his or her permanent disability, such Holder's
Warrants may be exercised, to the extent that such Holder shall have been
entitled to do so on the date of his or her death or such termination of
employment (including, without limitation, by acceleration or otherwise)
by the Holder's Beneficiary (as defined below) or by the person or persons
to whom the Holder's rights under the Warrants pass by will or applicable
law, or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, but not later than the
Expiration Date or one year after the Holder's death, whichever date is
earlier. If a Holder's employment by the Company shall terminate because
of his or her permanent disability, such Holder may exercise his or her
Warrants, to the extent that such Holder shall have been entitled to do so
at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later than the Expiration Date or one year after
termination of employment because of his or her permanent disability,
whichever date is earlier.
(2) Change in Control. In the event a Holder's employment shall
terminate within six (6) months following a Change in Control (as defined
below), all Warrants which the Holder shall not then have been entitled to
exercise shall be accelerated immediately prior to or concurrently with
the occurrence of the Change in Control and the Holder shall have the
right to exercise all such Warrants at any time or from time to time
through the Expiration Date.
(3) Good Reason. If a Holder terminates his or her employment for
Good Reason (as defined below), the Committee may, in its sole discretion,
accelerate in whole or in part, any or all Warrants which the Holder shall
not then have been entitled to exercise. If a Holder's employment by the
Company shall terminate for Good Reason, such Holder may exercise his or
her Warrants, to the extent that such Holder shall have been entitled to
do so at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later
3
<PAGE>
than the Expiration Date or ninety (90) days after termination of
employment, whichever date is earlier.
"Good Reason" shall mean a material reduction in the Holder's annual base
salary or other benefits (except for bonuses or similar discretionary payments)
as in effect at the time in question.
(4) Subject to Section 4(A) below, if a Holder's employment shall
terminate for any reason other than death, Disability, Good Reason or a
Change in Control (each as defined below) as aforesaid, all rights to
exercise his or her Warrant shall terminate at the Expiration Date or
three (3) months after termination of employment, whichever date is
earlier; provided, however, that the Committee may, in its sole
discretion, grant new Warrants or modify outstanding Warrants to permit
their exercise upon a Holder's termination of employment due to retirement
with the consent of the Company until the earlier of the Expiration Date
or twelve (12) months after termination of employment.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Section 4(H) to receive the amount, if any, payable under the
Warrant upon the death of a Holder.
"Change in Control" means that any of the following events has occurred:
(i) any "person" or "group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than any employee benefit plan
sponsored by the Company, becomes the "beneficial owner", as such
term is used in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company issued and
outstanding immediately prior to such acquisition;
(ii) any Common Stock of the Company is purchased pursuant to a tender or
exchange offer other than an offer by the Company; or
(iii) the dissolution or liquidation of the Company or the consummation of
any merger or consolidation of the Company or any sale or other
disposition of all or substantially all of its assets, if the
shareholders of the Company immediately before such transaction own,
immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity
securities) possessing less than thirty percent (30%) of the voting
power of the surviving or acquiring Company.
provided, however, that notwithstanding anything herein to the contrary, no
Change in Control shall be deemed to have occurred and no rights arising upon a
Change in Control described in Section 2(E) shall exist unless the Board of
Directors directs to the contrary by resolution adopted prior to the Change in
Control. Any resolution of the Board of Directors adopted in accordance with the
provisions of this Section directing that this Section 2(E) or any of such
Section become ineffective may be rescinded or countermanded at any time with or
without
4
<PAGE>
retroactive effect by such Board.
"Disability" means the determination by the Company, upon the advice of an
independent qualified physician, that the Holder has become physically or
mentally incapable of performing his duties under any employment agreement or
otherwise and such disability has disabled the Holder for a cumulative period of
one hundred eighty (180) days within a twelve (12) month period.
(F) Transferability and Exercise of Warrants. Subject to the provisions of
any registration rights agreement entered into in connection with the
registration of shares of Common Stock underlying the RM Warrants, no Warrant
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the Holder, a Warrant shall be exercisable
only by the Holder. This Warrant shall be exercisable or convertible (a) only
under circumstances such that the issue of Common Stock issuable upon such
exercise or conversion is exempt from the requirements of registration under the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith; provided, however, that the foregoing shall not apply if this Warrant
is exercised by the original Holder hereof. This Warrant shall be transferable
only under circumstances such that the transfer is exempt from the requirements
of registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to comply with such laws.
(G) Investment Representation. The Holder, by acceptance hereof, (i)
hereby represents that he or she is an "Accredited Investor" under Rule 501(a)
of Regulation D promulgated under Section 4(2) of the 1933 Act, and (ii)
acknowledges that this Warrant and, to the extent not registered under the 1933
Act, any Common Stock purchased or acquired pursuant hereto is being or will be
acquired solely for the Holder's own account and not as a nominee for any other
party, and with a current investment intent and not with a view to distribution
thereof. The Holder (or any person acting under Sections 2(E) or (F) above)
shall deliver to the Company, at the time of any exercise of a Warrant or
portion thereof, a written representation that the shares to be acquired upon
such exercise are to be acquired for investment and not for resale or with a
view to the distribution thereof, and, if applicable, that he or she is the
original Holder of this Warrant. Delivery of such representation prior to the
delivery of any Common Stock issued upon exercise of a Warrant and prior to the
expiration of the Warrant period shall be a condition precedent to the right of
the Holder or such other person to purchase any Common Stock. In the event
certificates for Common Stock are delivered upon the exercise of a Warrant with
respect to which such an investment representation has been obtained, the
Company may cause a legend or legends to be placed on such certificates to make
appropriate reference to such representations and to restrict transfer in the
absence of compliance with applicable federal or state securities laws.
Section 3. Transfer, Division and Combination.
The Company agrees to maintain at its principal office in Cranford, New
Jersey, books for the registration and transfer of this Warrant, and, subject to
the provisions of Section 2(F) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on such books at such office, upon surrender
of this Warrant at such office, together with a written assignment
5
<PAGE>
of this Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. A Warrant may be exercised by a new holder for the
purchase of shares of Common Stock without having a new Warrant issued. All of
the provisions of this Section 3 are subject to the provisions of Sections 2(E)
and (F) above.
Section 4. General Provisions
(A) Termination for Cause. Notwithstanding anything herein contained to
the contrary, if a Holder's employment is terminated for Cause, all Warrants, to
the extent not vested on the date of termination, shall be forfeited. "Cause"
shall mean (1) the willful and continued failure by the Holder to substantially
perform his or her duties under his or her employment agreement with the
Company, if any, or otherwise (other than any such failure resulting from the
Holder's incapacity due to physical or mental illness) for a period of thirty
(30) days after written demand for substantial performance is delivered by the
Company specifically identifying the manner in which the Company believes the
Holder has not substantially performed his or her duties, or (2) willful
misconduct by the Holder which is materially injurious to the Company,
monetarily or otherwise, or (3) the willful violation by the Holder of the
provisions of any covenant not to compete or breach of confidential information
with respect to the Company. For purposes of this Paragraph 4(A), no act, or
failure to act, on the Holder's part shall be considered "willful" unless done,
or omitted to be done, by him or her not in good faith and without reasonable
belief that his or her action or omission was in the best interests of the
Company.
(B) Certain Adjustments. In the event of any change in the Common Stock by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and kind
of shares subject to Warrants in and the purchase price per share thereof shall
be appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, the Holders hereunder. Any adjustment
of a Warrant pursuant to this Section 4(B) shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Internal Revenue Code of 1986, as amended from time to time, unless the holder
of such Warrant shall agree otherwise. The Committee shall give notice to each
Holder of any adjustment made pursuant to this Section 4(B) and, upon notice,
such adjustment shall be effective and binding for all purposes under this
Warrant.
(C) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor Company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor Company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holders' rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
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(D) No Claim or Right. Nothing contained herein nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company.
(E) Awards Not Treated as Compensation Under Benefit Plans. No Warrant
shall be considered as compensation under any employee benefit plan of the
Company, except as specifically provided in any such plan or as otherwise
determined by the Board of Directors.
(F) Listing and Qualification of Common Stock. The Company, in its
discretion, may postpone the issuance or delivery of Common Stock upon any
exercise of a Warrant until completion of such stock exchange listing or other
qualification of such shares under any state or federal law, rule or regulation
as the Company may consider appropriate, and may require any Holder, Beneficiary
or legal representative to make such representations and furnish such
information as it may consider reasonably appropriate in connection with the
issuance or delivery of the shares in compliance with applicable laws, rules and
regulations. The Company covenants, however, to effect the listing of the Common
Stock underlying the Warrants on the New York Stock Exchange prior to December
1997.
(G) Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Warrants exercised
pursuant to this Agreement including, but not limited to (i) deducting the
amount required to be withheld from any other amount then or thereafter payable
to a Holder, Beneficiary or legal representative, and (ii) requiring a Holder,
Beneficiary or legal representative to pay to the Company the amount required to
be withheld as a condition of releasing Common Stock. In addition, subject to
such rules and regulations as the Committee shall from time to time establish,
Holders shall be permitted to satisfy federal, state and local taxes, if any,
imposed upon the issuance of Common Stock at a rate up to such Holder's maximum
marginal tax rate with respect to each such tax by (i) irrevocably electing to
have the Company deduct from the number of shares Common Stock otherwise
deliverable upon exercise of a Warrant such number of shares of Common Stock as
shall have a value equal to the amount of tax to be withheld, (ii) delivering to
the Company such portion of the Common Stock delivered upon exercise of the
Warrant as shall have a value equal to the amount of tax to be withheld, or
(iii) delivering to the Company such Common Stock or combination of Common Stock
and cash as shall have a value equal to the amount of tax to be withheld.
(H) Designation and Change of Beneficiary. Each Holder shall file with the
Committee a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under this Warrant upon
his or her death. A Holder may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Holder's death, and in no event shall it be effective as
of a date prior to such receipt.
(I) Payments to Persons Other Than A Holder. If the Committee shall find
that any person to whom any amount is payable under this Warrant is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal
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representative), may, if the Committee so directs the Company, be paid to his or
her spouse, a child, a relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and the
Company therefor.
(J) General Creditor Status. Holders shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations hereunder. Nothing contained herein, and no action
taken pursuant hereto, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder,
Beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth herein; provided, however, that in its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created hereunder to deliver Common Stock or pay cash; provided,
further, however, that, unless the Committee otherwise determines with the
consent of the affected Holder, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the 1994 Employee
Stock Option Plan of Cali Realty Corporation.
(K) No Liability of Committee Members. The Holder of this Warrant agrees
that no member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith.
Section 5. Covenant to Reserve Shares of Common Stock.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Warrant, sufficient to enable it at any time to fulfill all its obligations
hereunder.
Section 6. Notices.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Common Stock upon its Common Stock or make any
distribution (other than ordinary cash dividends) to the holders of its
Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or Warrants (excluding any Warrants granted to any
employee, director, officer, contractor or consultant of the Company
pursuant to any plan approved by the Board of Directors of the Company),
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(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially
as an entirety, or
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the holder of this Warrant shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the Holder
at the last address shown on the books of the Company maintained for the
registry and transfer of this Warrant. Any notice or other document required or
permitted to be given or delivered to holders of record of Common Stock issued
pursuant to this Warrant shall be delivered by facsimile, reliable courier or
first-class mail postage prepaid to Holder at Holder's address as the same
appears on the stock records of the Company. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
by facsimile transmission, reliable courier or first-class mail postage prepaid
to the principal office of the Company in Cranford, New Jersey, or delivered to
the office of one of the Company's executive officers at such address, or such
other address as shall have been furnished by the Company to the holders of
record of such Warrants and the holders of record of such Common Stock.
Section 7. Limitation of Liability; Not Shareholders.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 8. Loss, Destruction, etc, of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of such Warrant,
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the Company will make and deliver a new Warrant, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Warrant. Any Warrant issued under the
provisions of this Section 8 in lieu of any Warrant alleged to be lost,
destroyed or stolen, or of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company.
Section 9. Registration Rights.
As used in this Section 9, the term "Registrable Stock" shall mean
(i) all shares of Common Stock that may be issued upon exercise of this Warrant
(and all shares of Common Stock that may thereafter be issued in respect of such
Warrant) that is from time to time outstanding.
References in this Warrant to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
The rights and obligations of the Company and the Holder with
respect to the Registrable Stock are set forth in a Registration Rights
Agreement, dated January 31, 1997, between the Company, the Holder and the other
signatories thereto, and shall supersede any registration rights and obligations
of the Company and the Holder existing prior to the date hereof with respect to
the Registrable Stock.
Section 10. Amendments.
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, provided that any term of this
Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of the
RM Warrants that are exercisable for a number of shares of Common Stock that
represent in the aggregate at least a majority of the total number of shares of
Common Stock for which all of the RM Warrants are then exercisable (whether or
not the holder of this Warrant consents).
Section 11. Governing Law and Consent to Jurisdiction.
This Warrant shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules. This Warrant shall
be deemed to have been executed and delivered at and shall be deemed to have
been made in New York, New York.
Any legal action, suit or proceeding arising out of or relating to this
Warrant may only be instituted in any federal court of the Southern District of
New York or any state court located in New York County, State of New York, and
the Company agrees not to assert, by way of motion, as a defense or otherwise,
in any action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of such courts, that the action, suit or proceeding if
brought in such courts, would be an inconvenient forum, that the venue of the
action, suit or proceeding, if brought in any of such courts, is improper or
that this Agreement or the subject matter may not be enforced in or by such
courts on jurisdictional grounds.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: January 31, 1997
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
--------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
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EXERCISE NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ____________ shares
of the Common Stock covered by such Warrant and herewith makes payment in full
therefor of $_________ cash and/or by cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that, subject to
the terms and conditions of the Warrant, certificates for such shares (and any
securities or property deliverable upon such exercise) be issued in the name of
and delivered to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for the Holder's own account and not
as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD
PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
stop transfer instructions will be entered on the Company's stock transfer
records with respect to Common Stock issued upon this exercise.
Dated: __________________________
Signature guaranteed:
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 4 OF THIS
WARRANT.
WARRANT
to Purchase Common Stock of
CALI REALTY CORPORATION
Expiring January 31, 2007
This Warrant certifies that Andrew Greenspan, or registered and permitted
assigns (the "Holder"), is entitled to, subject to the terms set forth below,
subscribe for and purchase from Cali Realty Corporation, a Maryland corporation
(the "Company"), Twenty Thousand (20,000) duly authorized, validly issued, fully
paid and nonassessable shares of the Company's common stock, $.01 par value per
share (the common stock, including any stock into which it may be changed,
reclassified, or converted, and as it may be adjusted pursuant to Section 4(B)
below, is herein referred to as the "Common Stock"). This Warrant is one of a
class of Warrants (the "RM Warrants") of the Company issued to purchase an
aggregate of 400,000 shares of Common Stock pursuant to Section 12.1(h) of the
Contribution and Exchange Agreement dated January 24, 1997 by and between the
Company, Cali Realty, L.P., a Delaware limited partnership, Robert Martin
Company, LLC ("RMC LLC"), a limited liability company organized under the laws
of the State of New York, and Robert Martin-Eastview North Company, L.P., a New
York limited partnership.
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
To exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at its principal office in Cranford, New Jersey, (a) a written
notice, in substantially the form of the Exercise Notice appearing at the end of
this Warrant, of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) cash or
a certified check payable to the Company, or such other consideration as
determined in accordance with Section 2(D) below, in an amount equal to the
aggregate purchase price of the number of shares of Common Stock being
purchased, and (c) this Warrant. The Company shall as promptly as practicable,
and in any event within 15 days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a stock certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice. The stock certificate or certificates so delivered
shall be in such denominations as may be specified in such notice and shall be
issued in the name of the Holder or, subject to Sections 2(E) and (F) and
Sections 4(H) and (I) below, such other name as shall be designated in such
notice. Such stock certificate or certificates shall be deemed to have been
issued and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares immediately prior to the close of business on the date such
<PAGE>
notice is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificates or
new Warrants shall be paid by the Holder at the time of delivering the notice of
exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities exchange or quoted on an automated quotation
system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. Terms and Conditions of Warrants.
(A) Exercise Period. Each Warrant shall vest over a three-year period
(subject to acceleration in accordance with the terms of this Warrant), with
one-third of such Warrant vesting on the first anniversary of the date hereof,
one-third vesting on the second anniversary of the date hereof, and one-third
vesting on the third anniversary of the date hereof, and shall expire at 5:00
p.m., New York City time, on January 31, 2007, or in connection with the
Holder's earlier termination of employment with the Company as provided in
paragraph 2(E) below (the "Expiration Date").
(B) Purchase Price. The purchase price per share of Common Stock shall be
equal to the fair market value of the Common Stock on the date hereof. For
purposes of this paragraph 2(B), "fair market value" means the closing price as
quoted on the New York Stock Exchange at the end of the last business day
preceding the date hereof as reported in the New York edition of The Wall Street
Journal. It is agreed that such purchase price is $33.00 per share.
(C) Exercise of Warrant. No part of any Warrant may be exercised at the
time of vesting unless the Holder shall have remained in the employ of the
Company for such period as to which such portion of the Warrant has vested,
except as otherwise provided in paragraph 2(E) below.
(D) Payment of Purchase Price upon Exercise. The purchase price of the
Common Stock as to which a Warrant is exercised shall be paid to the Company at
the time of exercise either in cash or in such other consideration as the
Executive Compensation Committee of the Board of Directors of the Company (the
"Board of Directors") or such other committee that the
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Board of Directors may appoint to administer the Warrants (the "Committee"),
deems appropriate, including, but not limited to, loans from the Company or a
third party, Common Stock already owned by the Holder having a total fair market
value, as determined by the Committee, equal to the purchase price, or a
combination of cash and Common Stock having a total fair market value, as so
determined, equal to the purchase price. The Committee in its sole discretion
may also provide that the purchase price may be paid by delivering a properly
executed exercise notice in a form approved by the Committee, together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of applicable sale or loan proceeds to pay the purchase price.
(E) Exercise in the Event of Death, Disability, Retirement or Other
Termination of Employment, or Change in Control.
(1) Death or Disability. If a Holder's employment by the Company
shall terminate because of his or her death or permanent disability, the
Committee may, in its sole discretion, accelerate in whole or in part, any
or all Warrants which the Holder shall not then have been entitled to
exercise. If a Holder shall die (i) while an employee of the Company, or
(ii) within twelve (12) months after termination of his or her employment
with the Company because of his or her permanent disability, such Holder's
Warrants may be exercised, to the extent that such Holder shall have been
entitled to do so on the date of his or her death or such termination of
employment (including, without limitation, by acceleration or otherwise)
by the Holder's Beneficiary (as defined below) or by the person or persons
to whom the Holder's rights under the Warrants pass by will or applicable
law, or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, but not later than the
Expiration Date or one year after the Holder's death, whichever date is
earlier. If a Holder's employment by the Company shall terminate because
of his or her permanent disability, such Holder may exercise his or her
Warrants, to the extent that such Holder shall have been entitled to do so
at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later than the Expiration Date or one year after
termination of employment because of his or her permanent disability,
whichever date is earlier.
(2) Change in Control. In the event a Holder's employment shall
terminate within six (6) months following a Change in Control (as defined
below), all Warrants which the Holder shall not then have been entitled to
exercise shall be accelerated immediately prior to or concurrently with
the occurrence of the Change in Control and the Holder shall have the
right to exercise all such Warrants at any time or from time to time
through the Expiration Date.
(3) Good Reason. If a Holder terminates his or her employment for
Good Reason (as defined below), the Committee may, in its sole discretion,
accelerate in whole or in part, any or all Warrants which the Holder shall
not then have been entitled to exercise. If a Holder's employment by the
Company shall terminate for Good Reason, such Holder may exercise his or
her Warrants, to the extent that such Holder shall have been entitled to
do so at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later
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<PAGE>
than the Expiration Date or ninety (90) days after termination of
employment, whichever date is earlier.
"Good Reason" shall mean a material reduction in the Holder's annual base
salary or other benefits (except for bonuses or similar discretionary payments)
as in effect at the time in question.
(4) Subject to Section 4(A) below, if a Holder's employment shall
terminate for any reason other than death, Disability, Good Reason or a
Change in Control (each as defined below) as aforesaid, all rights to
exercise his or her Warrant shall terminate at the Expiration Date or
three (3) months after termination of employment, whichever date is
earlier; provided, however, that the Committee may, in its sole
discretion, grant new Warrants or modify outstanding Warrants to permit
their exercise upon a Holder's termination of employment due to retirement
with the consent of the Company until the earlier of the Expiration Date
or twelve (12) months after termination of employment.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Section 4(H) to receive the amount, if any, payable under the
Warrant upon the death of a Holder.
"Change in Control" means that any of the following events has occurred:
(i) any "person" or "group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than any employee benefit plan
sponsored by the Company, becomes the "beneficial owner", as such
term is used in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company issued and
outstanding immediately prior to such acquisition;
(ii) any Common Stock of the Company is purchased pursuant to a tender or
exchange offer other than an offer by the Company; or
(iii) the dissolution or liquidation of the Company or the consummation of
any merger or consolidation of the Company or any sale or other
disposition of all or substantially all of its assets, if the
shareholders of the Company immediately before such transaction own,
immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity
securities) possessing less than thirty percent (30%) of the voting
power of the surviving or acquiring Company.
provided, however, that notwithstanding anything herein to the contrary, no
Change in Control shall be deemed to have occurred and no rights arising upon a
Change in Control described in Section 2(E) shall exist unless the Board of
Directors directs to the contrary by resolution adopted prior to the Change in
Control. Any resolution of the Board of Directors adopted in accordance with the
provisions of this Section directing that this Section 2(E) or any of such
Section become ineffective may be rescinded or countermanded at any time with or
without
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retroactive effect by such Board.
"Disability" means the determination by the Company, upon the advice of an
independent qualified physician, that the Holder has become physically or
mentally incapable of performing his duties under any employment agreement or
otherwise and such disability has disabled the Holder for a cumulative period of
one hundred eighty (180) days within a twelve (12) month period.
(F) Transferability and Exercise of Warrants. Subject to the provisions of
any registration rights agreement entered into in connection with the
registration of shares of Common Stock underlying the RM Warrants, no Warrant
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the Holder, a Warrant shall be exercisable
only by the Holder. This Warrant shall be exercisable or convertible (a) only
under circumstances such that the issue of Common Stock issuable upon such
exercise or conversion is exempt from the requirements of registration under the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith; provided, however, that the foregoing shall not apply if this Warrant
is exercised by the original Holder hereof. This Warrant shall be transferable
only under circumstances such that the transfer is exempt from the requirements
of registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to comply with such laws.
(G) Investment Representation. The Holder, by acceptance hereof, (i)
hereby represents that he or she is an "Accredited Investor" under Rule 501(a)
of Regulation D promulgated under Section 4(2) of the 1933 Act, and (ii)
acknowledges that this Warrant and, to the extent not registered under the 1933
Act, any Common Stock purchased or acquired pursuant hereto is being or will be
acquired solely for the Holder's own account and not as a nominee for any other
party, and with a current investment intent and not with a view to distribution
thereof. The Holder (or any person acting under Sections 2(E) or (F) above)
shall deliver to the Company, at the time of any exercise of a Warrant or
portion thereof, a written representation that the shares to be acquired upon
such exercise are to be acquired for investment and not for resale or with a
view to the distribution thereof, and, if applicable, that he or she is the
original Holder of this Warrant. Delivery of such representation prior to the
delivery of any Common Stock issued upon exercise of a Warrant and prior to the
expiration of the Warrant period shall be a condition precedent to the right of
the Holder or such other person to purchase any Common Stock. In the event
certificates for Common Stock are delivered upon the exercise of a Warrant with
respect to which such an investment representation has been obtained, the
Company may cause a legend or legends to be placed on such certificates to make
appropriate reference to such representations and to restrict transfer in the
absence of compliance with applicable federal or state securities laws.
Section 3. Transfer, Division and Combination.
The Company agrees to maintain at its principal office in Cranford, New
Jersey, books for the registration and transfer of this Warrant, and, subject to
the provisions of Section 2(F) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on such books at such office, upon surrender
of this Warrant at such office, together with a written assignment
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of this Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. A Warrant may be exercised by a new holder for the
purchase of shares of Common Stock without having a new Warrant issued. All of
the provisions of this Section 3 are subject to the provisions of Sections 2(E)
and (F) above.
Section 4. General Provisions
(A) Termination for Cause. Notwithstanding anything herein contained to
the contrary, if a Holder's employment is terminated for Cause, all Warrants, to
the extent not vested on the date of termination, shall be forfeited. "Cause"
shall mean (1) the willful and continued failure by the Holder to substantially
perform his or her duties under his or her employment agreement with the
Company, if any, or otherwise (other than any such failure resulting from the
Holder's incapacity due to physical or mental illness) for a period of thirty
(30) days after written demand for substantial performance is delivered by the
Company specifically identifying the manner in which the Company believes the
Holder has not substantially performed his or her duties, or (2) willful
misconduct by the Holder which is materially injurious to the Company,
monetarily or otherwise, or (3) the willful violation by the Holder of the
provisions of any covenant not to compete or breach of confidential information
with respect to the Company. For purposes of this Paragraph 4(A), no act, or
failure to act, on the Holder's part shall be considered "willful" unless done,
or omitted to be done, by him or her not in good faith and without reasonable
belief that his or her action or omission was in the best interests of the
Company.
(B) Certain Adjustments. In the event of any change in the Common Stock by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and kind
of shares subject to Warrants in and the purchase price per share thereof shall
be appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, the Holders hereunder. Any adjustment
of a Warrant pursuant to this Section 4(B) shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Internal Revenue Code of 1986, as amended from time to time, unless the holder
of such Warrant shall agree otherwise. The Committee shall give notice to each
Holder of any adjustment made pursuant to this Section 4(B) and, upon notice,
such adjustment shall be effective and binding for all purposes under this
Warrant.
(C) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor Company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor Company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holders' rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
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(D) No Claim or Right. Nothing contained herein nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company.
(E) Awards Not Treated as Compensation Under Benefit Plans. No Warrant
shall be considered as compensation under any employee benefit plan of the
Company, except as specifically provided in any such plan or as otherwise
determined by the Board of Directors.
(F) Listing and Qualification of Common Stock. The Company, in its
discretion, may postpone the issuance or delivery of Common Stock upon any
exercise of a Warrant until completion of such stock exchange listing or other
qualification of such shares under any state or federal law, rule or regulation
as the Company may consider appropriate, and may require any Holder, Beneficiary
or legal representative to make such representations and furnish such
information as it may consider reasonably appropriate in connection with the
issuance or delivery of the shares in compliance with applicable laws, rules and
regulations. The Company covenants, however, to effect the listing of the Common
Stock underlying the Warrants on the New York Stock Exchange prior to December
1997.
(G) Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Warrants exercised
pursuant to this Agreement including, but not limited to (i) deducting the
amount required to be withheld from any other amount then or thereafter payable
to a Holder, Beneficiary or legal representative, and (ii) requiring a Holder,
Beneficiary or legal representative to pay to the Company the amount required to
be withheld as a condition of releasing Common Stock. In addition, subject to
such rules and regulations as the Committee shall from time to time establish,
Holders shall be permitted to satisfy federal, state and local taxes, if any,
imposed upon the issuance of Common Stock at a rate up to such Holder's maximum
marginal tax rate with respect to each such tax by (i) irrevocably electing to
have the Company deduct from the number of shares Common Stock otherwise
deliverable upon exercise of a Warrant such number of shares of Common Stock as
shall have a value equal to the amount of tax to be withheld, (ii) delivering to
the Company such portion of the Common Stock delivered upon exercise of the
Warrant as shall have a value equal to the amount of tax to be withheld, or
(iii) delivering to the Company such Common Stock or combination of Common Stock
and cash as shall have a value equal to the amount of tax to be withheld.
(H) Designation and Change of Beneficiary. Each Holder shall file with the
Committee a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under this Warrant upon
his or her death. A Holder may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Holder's death, and in no event shall it be effective as
of a date prior to such receipt.
(I) Payments to Persons Other Than A Holder. If the Committee shall find
that any person to whom any amount is payable under this Warrant is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal
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representative), may, if the Committee so directs the Company, be paid to his or
her spouse, a child, a relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and the
Company therefor.
(J) General Creditor Status. Holders shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations hereunder. Nothing contained herein, and no action
taken pursuant hereto, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder,
Beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth herein; provided, however, that in its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created hereunder to deliver Common Stock or pay cash; provided,
further, however, that, unless the Committee otherwise determines with the
consent of the affected Holder, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the 1994 Employee
Stock Option Plan of Cali Realty Corporation.
(K) No Liability of Committee Members. The Holder of this Warrant agrees
that no member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith.
Section 5. Covenant to Reserve Shares of Common Stock.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Warrant, sufficient to enable it at any time to fulfill all its obligations
hereunder.
Section 6. Notices.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Common Stock upon its Common Stock or make any
distribution (other than ordinary cash dividends) to the holders of its
Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or Warrants (excluding any Warrants granted to any
employee, director, officer, contractor or consultant of the Company
pursuant to any plan approved by the Board of Directors of the Company),
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(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially
as an entirety, or
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the holder of this Warrant shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the Holder
at the last address shown on the books of the Company maintained for the
registry and transfer of this Warrant. Any notice or other document required or
permitted to be given or delivered to holders of record of Common Stock issued
pursuant to this Warrant shall be delivered by facsimile, reliable courier or
first-class mail postage prepaid to Holder at Holder's address as the same
appears on the stock records of the Company. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
by facsimile transmission, reliable courier or first-class mail postage prepaid
to the principal office of the Company in Cranford, New Jersey, or delivered to
the office of one of the Company's executive officers at such address, or such
other address as shall have been furnished by the Company to the holders of
record of such Warrants and the holders of record of such Common Stock.
Section 7. Limitation of Liability; Not Shareholders.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 8. Loss, Destruction, etc, of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of such Warrant,
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the Company will make and deliver a new Warrant, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Warrant. Any Warrant issued under the
provisions of this Section 8 in lieu of any Warrant alleged to be lost,
destroyed or stolen, or of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company.
Section 9. Registration Rights.
As used in this Section 9, the term "Registrable Stock" shall mean
(i) all shares of Common Stock that may be issued upon exercise of this Warrant
(and all shares of Common Stock that may thereafter be issued in respect of such
Warrant) that is from time to time outstanding.
References in this Warrant to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
The rights and obligations of the Company and the Holder with
respect to the Registrable Stock are set forth in a Registration Rights
Agreement, dated January 31, 1997, between the Company, the Holder and the other
signatories thereto, and shall supersede any registration rights and obligations
of the Company and the Holder existing prior to the date hereof with respect to
the Registrable Stock.
Section 10. Amendments.
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, provided that any term of this
Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of the
RM Warrants that are exercisable for a number of shares of Common Stock that
represent in the aggregate at least a majority of the total number of shares of
Common Stock for which all of the RM Warrants are then exercisable (whether or
not the holder of this Warrant consents).
Section 11. Governing Law and Consent to Jurisdiction.
This Warrant shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules. This Warrant shall
be deemed to have been executed and delivered at and shall be deemed to have
been made in New York, New York.
Any legal action, suit or proceeding arising out of or relating to this
Warrant may only be instituted in any federal court of the Southern District of
New York or any state court located in New York County, State of New York, and
the Company agrees not to assert, by way of motion, as a defense or otherwise,
in any action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of such courts, that the action, suit or proceeding if
brought in such courts, would be an inconvenient forum, that the venue of the
action, suit or proceeding, if brought in any of such courts, is improper or
that this Agreement or the subject matter may not be enforced in or by such
courts on jurisdictional grounds.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: January 31, 1997
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
--------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
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EXERCISE NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ____________ shares
of the Common Stock covered by such Warrant and herewith makes payment in full
therefor of $_________ cash and/or by cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that, subject to
the terms and conditions of the Warrant, certificates for such shares (and any
securities or property deliverable upon such exercise) be issued in the name of
and delivered to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for the Holder's own account and not
as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD
PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
stop transfer instructions will be entered on the Company's stock transfer
records with respect to Common Stock issued upon this exercise.
Dated: __________________________
Signature guaranteed:
NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAS BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE LAWS AND NEITHER THIS WARRANT NOR THE COMMON STOCK ISSUABLE UPON EXERCISE
OF THIS WARRANT MAY BE TRANSFERRED EXCEPT AS PROVIDED IN SECTION 4 OF THIS
WARRANT.
WARRANT
to Purchase Common Stock of
CALI REALTY CORPORATION
Expiring January 31, 2007
This Warrant certifies that Michael Grossman, or registered and permitted
assigns (the "Holder"), is entitled to, subject to the terms set forth below,
subscribe for and purchase from Cali Realty Corporation, a Maryland corporation
(the "Company"), Twenty Thousand (20,000) duly authorized, validly issued, fully
paid and nonassessable shares of the Company's common stock, $.01 par value per
share (the common stock, including any stock into which it may be changed,
reclassified, or converted, and as it may be adjusted pursuant to Section 4(B)
below, is herein referred to as the "Common Stock"). This Warrant is one of a
class of Warrants (the "RM Warrants") of the Company issued to purchase an
aggregate of 400,000 shares of Common Stock pursuant to Section 12.1(h) of the
Contribution and Exchange Agreement dated January 24, 1997 by and between the
Company, Cali Realty, L.P., a Delaware limited partnership, Robert Martin
Company, LLC ("RMC LLC"), a limited liability company organized under the laws
of the State of New York, and Robert Martin-Eastview North Company, L.P., a New
York limited partnership.
This Warrant is subject to the following provisions, terms and conditions:
Section 1. Exercise of Warrant.
To exercise this Warrant in whole or in part, the Holder shall deliver to
the Company at its principal office in Cranford, New Jersey, (a) a written
notice, in substantially the form of the Exercise Notice appearing at the end of
this Warrant, of the Holder's election to exercise this Warrant, which notice
shall specify the number of shares of Common Stock to be purchased, (b) cash or
a certified check payable to the Company, or such other consideration as
determined in accordance with Section 2(D) below, in an amount equal to the
aggregate purchase price of the number of shares of Common Stock being
purchased, and (c) this Warrant. The Company shall as promptly as practicable,
and in any event within 15 days thereafter, execute and deliver or cause to be
executed and delivered, in accordance with such notice, a stock certificate or
certificates representing the aggregate number of shares of Common Stock
specified in such notice. The stock certificate or certificates so delivered
shall be in such denominations as may be specified in such notice and shall be
issued in the name of the Holder or, subject to Sections 2(E) and (F) and
Sections 4(H) and (I) below, such other name as shall be designated in such
notice. Such stock certificate or certificates shall be deemed to have been
issued and the Holder or any other person so designated to be named therein
shall be deemed for all purposes to have become a holder of record of such
shares immediately prior to the close of business on the date such
<PAGE>
notice is received by the Company as aforesaid. If this Warrant shall have been
exercised only in part, the Company shall, at the time of delivery of said stock
certificate or certificates, deliver to the Holder a new Warrant evidencing the
rights of the Holder to purchase the remaining shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical to
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder. The Company shall pay all
expenses, taxes and other charges payable in connection with the preparation,
issue and delivery of such stock certificates and new Warrants, except that, in
case such stock certificates or new Warrants shall be registered in a name or
names other than the name of the Holder, funds sufficient to pay all stock
transfer taxes that are payable upon the issuance of such stock certificates or
new Warrants shall be paid by the Holder at the time of delivering the notice of
exercise mentioned above.
All shares of Common Stock issued upon the exercise of this Warrant shall
be validly issued, fully paid and nonassessable and, if the Common Stock is then
listed on a national securities exchange or quoted on an automated quotation
system, shall be duly listed or quoted thereon.
The Company shall not be required upon any exercise of this Warrant to
issue a certificate representing any fraction of a share of Common Stock, but,
in lieu thereof, shall pay to the Holder cash in an amount equal to a
corresponding fraction (calculated to the nearest 1/100 of a share) of the
purchase price of one share of Common Stock as of the date of receipt by the
Company of notice of exercise of this Warrant.
Section 2. Terms and Conditions of Warrants.
(A) Exercise Period. Each Warrant shall vest over a three-year period
(subject to acceleration in accordance with the terms of this Warrant), with
one-third of such Warrant vesting on the first anniversary of the date hereof,
one-third vesting on the second anniversary of the date hereof, and one-third
vesting on the third anniversary of the date hereof, and shall expire at 5:00
p.m., New York City time, on January 31, 2007, or in connection with the
Holder's earlier termination of employment with the Company as provided in
paragraph 2(E) below (the "Expiration Date").
(B) Purchase Price. The purchase price per share of Common Stock shall be
equal to the fair market value of the Common Stock on the date hereof. For
purposes of this paragraph 2(B), "fair market value" means the closing price as
quoted on the New York Stock Exchange at the end of the last business day
preceding the date hereof as reported in the New York edition of The Wall Street
Journal. It is agreed that such purchase price is $33.00 per share.
(C) Exercise of Warrant. No part of any Warrant may be exercised at the
time of vesting unless the Holder shall have remained in the employ of the
Company for such period as to which such portion of the Warrant has vested,
except as otherwise provided in paragraph 2(E) below.
(D) Payment of Purchase Price upon Exercise. The purchase price of the
Common Stock as to which a Warrant is exercised shall be paid to the Company at
the time of exercise either in cash or in such other consideration as the
Executive Compensation Committee of the Board of Directors of the Company (the
"Board of Directors") or such other committee that the
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Board of Directors may appoint to administer the Warrants (the "Committee"),
deems appropriate, including, but not limited to, loans from the Company or a
third party, Common Stock already owned by the Holder having a total fair market
value, as determined by the Committee, equal to the purchase price, or a
combination of cash and Common Stock having a total fair market value, as so
determined, equal to the purchase price. The Committee in its sole discretion
may also provide that the purchase price may be paid by delivering a properly
executed exercise notice in a form approved by the Committee, together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of applicable sale or loan proceeds to pay the purchase price.
(E) Exercise in the Event of Death, Disability, Retirement or Other
Termination of Employment, or Change in Control.
(1) Death or Disability. If a Holder's employment by the Company
shall terminate because of his or her death or permanent disability, the
Committee may, in its sole discretion, accelerate in whole or in part, any
or all Warrants which the Holder shall not then have been entitled to
exercise. If a Holder shall die (i) while an employee of the Company, or
(ii) within twelve (12) months after termination of his or her employment
with the Company because of his or her permanent disability, such Holder's
Warrants may be exercised, to the extent that such Holder shall have been
entitled to do so on the date of his or her death or such termination of
employment (including, without limitation, by acceleration or otherwise)
by the Holder's Beneficiary (as defined below) or by the person or persons
to whom the Holder's rights under the Warrants pass by will or applicable
law, or if no such person has such right, by his or her executors or
administrators, at any time, or from time to time, but not later than the
Expiration Date or one year after the Holder's death, whichever date is
earlier. If a Holder's employment by the Company shall terminate because
of his or her permanent disability, such Holder may exercise his or her
Warrants, to the extent that such Holder shall have been entitled to do so
at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later than the Expiration Date or one year after
termination of employment because of his or her permanent disability,
whichever date is earlier.
(2) Change in Control. In the event a Holder's employment shall
terminate within six (6) months following a Change in Control (as defined
below), all Warrants which the Holder shall not then have been entitled to
exercise shall be accelerated immediately prior to or concurrently with
the occurrence of the Change in Control and the Holder shall have the
right to exercise all such Warrants at any time or from time to time
through the Expiration Date.
(3) Good Reason. If a Holder terminates his or her employment for
Good Reason (as defined below), the Committee may, in its sole discretion,
accelerate in whole or in part, any or all Warrants which the Holder shall
not then have been entitled to exercise. If a Holder's employment by the
Company shall terminate for Good Reason, such Holder may exercise his or
her Warrants, to the extent that such Holder shall have been entitled to
do so at the date of the termination of his or her employment (including,
without limitation, by acceleration or otherwise), at any time, or from
time to time, but not later
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than the Expiration Date or ninety (90) days after termination of
employment, whichever date is earlier.
"Good Reason" shall mean a material reduction in the Holder's annual base
salary or other benefits (except for bonuses or similar discretionary payments)
as in effect at the time in question.
(4) Subject to Section 4(A) below, if a Holder's employment shall
terminate for any reason other than death, Disability, Good Reason or a
Change in Control (each as defined below) as aforesaid, all rights to
exercise his or her Warrant shall terminate at the Expiration Date or
three (3) months after termination of employment, whichever date is
earlier; provided, however, that the Committee may, in its sole
discretion, grant new Warrants or modify outstanding Warrants to permit
their exercise upon a Holder's termination of employment due to retirement
with the consent of the Company until the earlier of the Expiration Date
or twelve (12) months after termination of employment.
"Beneficiary" means the beneficiary or beneficiaries designated in
accordance with Section 4(H) to receive the amount, if any, payable under the
Warrant upon the death of a Holder.
"Change in Control" means that any of the following events has occurred:
(i) any "person" or "group" of persons, as such terms are used in
Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), other than any employee benefit plan
sponsored by the Company, becomes the "beneficial owner", as such
term is used in Section 13 of the Exchange Act, of thirty percent
(30%) or more of the Common Stock of the Company issued and
outstanding immediately prior to such acquisition;
(ii) any Common Stock of the Company is purchased pursuant to a tender or
exchange offer other than an offer by the Company; or
(iii) the dissolution or liquidation of the Company or the consummation of
any merger or consolidation of the Company or any sale or other
disposition of all or substantially all of its assets, if the
shareholders of the Company immediately before such transaction own,
immediately after consummation of such transaction, equity
securities (other than options and other rights to acquire equity
securities) possessing less than thirty percent (30%) of the voting
power of the surviving or acquiring Company.
provided, however, that notwithstanding anything herein to the contrary, no
Change in Control shall be deemed to have occurred and no rights arising upon a
Change in Control described in Section 2(E) shall exist unless the Board of
Directors directs to the contrary by resolution adopted prior to the Change in
Control. Any resolution of the Board of Directors adopted in accordance with the
provisions of this Section directing that this Section 2(E) or any of such
Section become ineffective may be rescinded or countermanded at any time with or
without
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retroactive effect by such Board.
"Disability" means the determination by the Company, upon the advice of an
independent qualified physician, that the Holder has become physically or
mentally incapable of performing his duties under any employment agreement or
otherwise and such disability has disabled the Holder for a cumulative period of
one hundred eighty (180) days within a twelve (12) month period.
(F) Transferability and Exercise of Warrants. Subject to the provisions of
any registration rights agreement entered into in connection with the
registration of shares of Common Stock underlying the RM Warrants, no Warrant
shall be transferable other than by will or by the laws of descent and
distribution. During the lifetime of the Holder, a Warrant shall be exercisable
only by the Holder. This Warrant shall be exercisable or convertible (a) only
under circumstances such that the issue of Common Stock issuable upon such
exercise or conversion is exempt from the requirements of registration under the
Securities Act of 1933, as amended (the "1933 Act"), and any applicable state
securities law or (b) upon registration of such Common Stock in compliance
therewith; provided, however, that the foregoing shall not apply if this Warrant
is exercised by the original Holder hereof. This Warrant shall be transferable
only under circumstances such that the transfer is exempt from the requirements
of registration under the 1933 Act and any applicable state securities law. By
acceptance hereof, the Holder agrees to comply with such laws.
(G) Investment Representation. The Holder, by acceptance hereof, (i)
hereby represents that he or she is an "Accredited Investor" under Rule 501(a)
of Regulation D promulgated under Section 4(2) of the 1933 Act, and (ii)
acknowledges that this Warrant and, to the extent not registered under the 1933
Act, any Common Stock purchased or acquired pursuant hereto is being or will be
acquired solely for the Holder's own account and not as a nominee for any other
party, and with a current investment intent and not with a view to distribution
thereof. The Holder (or any person acting under Sections 2(E) or (F) above)
shall deliver to the Company, at the time of any exercise of a Warrant or
portion thereof, a written representation that the shares to be acquired upon
such exercise are to be acquired for investment and not for resale or with a
view to the distribution thereof, and, if applicable, that he or she is the
original Holder of this Warrant. Delivery of such representation prior to the
delivery of any Common Stock issued upon exercise of a Warrant and prior to the
expiration of the Warrant period shall be a condition precedent to the right of
the Holder or such other person to purchase any Common Stock. In the event
certificates for Common Stock are delivered upon the exercise of a Warrant with
respect to which such an investment representation has been obtained, the
Company may cause a legend or legends to be placed on such certificates to make
appropriate reference to such representations and to restrict transfer in the
absence of compliance with applicable federal or state securities laws.
Section 3. Transfer, Division and Combination.
The Company agrees to maintain at its principal office in Cranford, New
Jersey, books for the registration and transfer of this Warrant, and, subject to
the provisions of Section 2(F) hereof, this Warrant and all rights hereunder are
transferable, in whole or in part, on such books at such office, upon surrender
of this Warrant at such office, together with a written assignment
5
<PAGE>
of this Warrant duly executed by the Holder or his agent or attorney and funds
sufficient to pay any stock transfer taxes payable upon the making of such
transfer. Upon such surrender and payment, the Company shall execute and deliver
a new Warrant or Warrants in the name of the assignee or assignees and in the
denominations specified in such instrument of assignment, and this Warrant shall
promptly be canceled. A Warrant may be exercised by a new holder for the
purchase of shares of Common Stock without having a new Warrant issued. All of
the provisions of this Section 3 are subject to the provisions of Sections 2(E)
and (F) above.
Section 4. General Provisions
(A) Termination for Cause. Notwithstanding anything herein contained to
the contrary, if a Holder's employment is terminated for Cause, all Warrants, to
the extent not vested on the date of termination, shall be forfeited. "Cause"
shall mean (1) the willful and continued failure by the Holder to substantially
perform his or her duties under his or her employment agreement with the
Company, if any, or otherwise (other than any such failure resulting from the
Holder's incapacity due to physical or mental illness) for a period of thirty
(30) days after written demand for substantial performance is delivered by the
Company specifically identifying the manner in which the Company believes the
Holder has not substantially performed his or her duties, or (2) willful
misconduct by the Holder which is materially injurious to the Company,
monetarily or otherwise, or (3) the willful violation by the Holder of the
provisions of any covenant not to compete or breach of confidential information
with respect to the Company. For purposes of this Paragraph 4(A), no act, or
failure to act, on the Holder's part shall be considered "willful" unless done,
or omitted to be done, by him or her not in good faith and without reasonable
belief that his or her action or omission was in the best interests of the
Company.
(B) Certain Adjustments. In the event of any change in the Common Stock by
reason of any stock dividend, recapitalization, reorganization, merger,
consolidation, split-up, combination or exchange of shares, or any rights
offering to purchase Common Stock at a price substantially below fair market
value, or of any similar change affecting the Common Stock, the number and kind
of shares subject to Warrants in and the purchase price per share thereof shall
be appropriately adjusted consistent with such change in such manner as the
Committee may deem equitable to prevent substantial dilution or enlargement of
the rights granted to, or available for, the Holders hereunder. Any adjustment
of a Warrant pursuant to this Section 4(B) shall be made only to the extent not
constituting a "modification" within the meaning of Section 424(h)(3) of the
Internal Revenue Code of 1986, as amended from time to time, unless the holder
of such Warrant shall agree otherwise. The Committee shall give notice to each
Holder of any adjustment made pursuant to this Section 4(B) and, upon notice,
such adjustment shall be effective and binding for all purposes under this
Warrant.
(C) Successor Company. The obligations of the Company under this Warrant
shall be binding upon any successor Company or organization resulting from the
merger, consolidation or other reorganization of the Company, or upon any
successor Company or organization succeeding to substantially all of the assets
and business of the Company. The Company agrees that it will make appropriate
provision for the preservation of Holders' rights under this Warrant in any
agreement or plan which it may enter into or adopt to effect any such merger,
consolidation, reorganization or transfer of assets.
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<PAGE>
(D) No Claim or Right. Nothing contained herein nor any action taken
hereunder shall be construed as giving any employee any right to be retained in
the employ of the Company.
(E) Awards Not Treated as Compensation Under Benefit Plans. No Warrant
shall be considered as compensation under any employee benefit plan of the
Company, except as specifically provided in any such plan or as otherwise
determined by the Board of Directors.
(F) Listing and Qualification of Common Stock. The Company, in its
discretion, may postpone the issuance or delivery of Common Stock upon any
exercise of a Warrant until completion of such stock exchange listing or other
qualification of such shares under any state or federal law, rule or regulation
as the Company may consider appropriate, and may require any Holder, Beneficiary
or legal representative to make such representations and furnish such
information as it may consider reasonably appropriate in connection with the
issuance or delivery of the shares in compliance with applicable laws, rules and
regulations. The Company covenants, however, to effect the listing of the Common
Stock underlying the Warrants on the New York Stock Exchange prior to December
1997.
(G) Taxes. The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of all federal, state and
local taxes required by law to be withheld with respect to Warrants exercised
pursuant to this Agreement including, but not limited to (i) deducting the
amount required to be withheld from any other amount then or thereafter payable
to a Holder, Beneficiary or legal representative, and (ii) requiring a Holder,
Beneficiary or legal representative to pay to the Company the amount required to
be withheld as a condition of releasing Common Stock. In addition, subject to
such rules and regulations as the Committee shall from time to time establish,
Holders shall be permitted to satisfy federal, state and local taxes, if any,
imposed upon the issuance of Common Stock at a rate up to such Holder's maximum
marginal tax rate with respect to each such tax by (i) irrevocably electing to
have the Company deduct from the number of shares Common Stock otherwise
deliverable upon exercise of a Warrant such number of shares of Common Stock as
shall have a value equal to the amount of tax to be withheld, (ii) delivering to
the Company such portion of the Common Stock delivered upon exercise of the
Warrant as shall have a value equal to the amount of tax to be withheld, or
(iii) delivering to the Company such Common Stock or combination of Common Stock
and cash as shall have a value equal to the amount of tax to be withheld.
(H) Designation and Change of Beneficiary. Each Holder shall file with the
Committee a written designation of one or more persons as the Beneficiary who
shall be entitled to receive the amount, if any, payable under this Warrant upon
his or her death. A Holder may, from time to time, revoke or change his or her
Beneficiary designation without the consent of any prior Beneficiary by filing a
new designation with the Committee. The last such designation received by the
Committee shall be controlling; provided, however, that no designation, or
change or revocation thereof, shall be effective unless received by the
Committee prior to the Holder's death, and in no event shall it be effective as
of a date prior to such receipt.
(I) Payments to Persons Other Than A Holder. If the Committee shall find
that any person to whom any amount is payable under this Warrant is unable to
care for his or her affairs because of illness or accident, or is a minor, or
has died, then any payment due to such person or his or her estate (unless a
prior claim therefor has been made by a duly appointed legal
7
<PAGE>
representative), may, if the Committee so directs the Company, be paid to his or
her spouse, a child, a relative, an institution maintaining or having custody of
such person, or any other person deemed by the Committee to be a proper
recipient on behalf of such person otherwise entitled to payment. Any such
payment shall be a complete discharge of the liability of the Committee and the
Company therefor.
(J) General Creditor Status. Holders shall have no right, title, or
interest whatsoever in or to any investments which the Company may make to aid
it in meeting its obligations hereunder. Nothing contained herein, and no action
taken pursuant hereto, shall create or be construed to create a trust of any
kind, or a fiduciary relationship between the Company and any Holder,
Beneficiary, legal representative or any other person. To the extent that any
person acquires a right to receive payments from the Company hereunder, such
right shall be no greater than the right of an unsecured general creditor of the
Company. All payments to be made hereunder shall be paid from the general funds
of the Company and no special or separate fund shall be established and no
segregation of assets shall be made to assure payment of such amounts except as
expressly set forth herein; provided, however, that in its sole discretion, the
Committee may authorize the creation of trusts or other arrangements to meet the
obligations created hereunder to deliver Common Stock or pay cash; provided,
further, however, that, unless the Committee otherwise determines with the
consent of the affected Holder, the existence of such trusts or other
arrangements shall be consistent with the "unfunded" status of the 1994 Employee
Stock Option Plan of Cali Realty Corporation.
(K) No Liability of Committee Members. The Holder of this Warrant agrees
that no member of the Committee shall be personally liable by reason of any
contract or other instrument executed by such member or on his or her behalf in
his or her capacity as a member of the Committee nor for any mistake of judgment
made in good faith.
Section 5. Covenant to Reserve Shares of Common Stock.
The Company covenants and agrees that it will at all times reserve and set
apart and have, free from preemptive rights, a number of shares of authorized
but unissued Common Stock, or other stock or securities deliverable pursuant to
this Warrant, sufficient to enable it at any time to fulfill all its obligations
hereunder.
Section 6. Notices.
In the event that:
(a) the Company proposes to pay any dividend payable in stock (of
any class or classes) or any obligations or stock convertible into or
exchangeable for shares of Common Stock upon its Common Stock or make any
distribution (other than ordinary cash dividends) to the holders of its
Common Stock,
(b) the Company proposes to grant to the holders of its Common Stock
generally any rights or Warrants (excluding any Warrants granted to any
employee, director, officer, contractor or consultant of the Company
pursuant to any plan approved by the Board of Directors of the Company),
8
<PAGE>
(c) the Company proposes to effect any capital reorganization or
reclassification of capital stock of the Company,
(d) the Company proposes to consolidate with, or merge into, any
other Company or to transfer its property as an entirety or substantially
as an entirety, or
(e) the Company proposes to effect the liquidation, dissolution or
winding up of the Company,
then the Company shall cause notice of any such intended action to be given to
the holder of this Warrant not less than 30 days before the date on which the
transfer books of the Company shall close or a record shall be taken for such
stock dividend, distribution or granting of rights or Warrants, or the date when
such capital reorganization, reclassification, consolidation, merger, transfer,
liquidation, dissolution or winding up shall be effective, as the case may be.
Any notice or other document required or permitted to be given or
delivered to the holder of this Warrant shall be delivered by facsimile
transmission, reliable courier or first-class mail postage prepaid to the Holder
at the last address shown on the books of the Company maintained for the
registry and transfer of this Warrant. Any notice or other document required or
permitted to be given or delivered to holders of record of Common Stock issued
pursuant to this Warrant shall be delivered by facsimile, reliable courier or
first-class mail postage prepaid to Holder at Holder's address as the same
appears on the stock records of the Company. Any notice or other document
required or permitted to be given or delivered to the Company shall be delivered
by facsimile transmission, reliable courier or first-class mail postage prepaid
to the principal office of the Company in Cranford, New Jersey, or delivered to
the office of one of the Company's executive officers at such address, or such
other address as shall have been furnished by the Company to the holders of
record of such Warrants and the holders of record of such Common Stock.
Section 7. Limitation of Liability; Not Shareholders.
No provision of this Warrant shall be construed as conferring upon the
Holder the right to vote or to consent or to receive dividends or to receive
notice as a shareholder in respect of meetings of shareholders for the election
of directors of the Company or any other matter whatsoever as shareholders of
the Company. No provision hereof, in the absence of affirmative action by the
Holder to purchase shares of Common Stock, and no mere enumeration herein of the
rights or privileges of the Holder, shall give rise to any liability of Holder
for the purchase price or as a shareholder of the Company, whether such
liability is asserted by the Company, creditors of the Company or others.
Section 8. Loss, Destruction, etc, of Warrant.
Upon receipt of evidence satisfactory to the Company of the loss, theft,
mutilation or destruction of any Warrant, and in the case of any such loss,
theft or destruction upon delivery of a bond of indemnity in such form and
amount as shall be reasonably satisfactory to the Company, or in the event of
such mutilation upon surrender and cancellation of such Warrant,
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<PAGE>
the Company will make and deliver a new Warrant, of like tenor, in lieu of such
lost, stolen, destroyed or mutilated Warrant. Any Warrant issued under the
provisions of this Section 8 in lieu of any Warrant alleged to be lost,
destroyed or stolen, or of any mutilated Warrant, shall constitute an original
contractual obligation on the part of the Company.
Section 9. Registration Rights.
As used in this Section 9, the term "Registrable Stock" shall mean
(i) all shares of Common Stock that may be issued upon exercise of this Warrant
(and all shares of Common Stock that may thereafter be issued in respect of such
Warrant) that is from time to time outstanding.
References in this Warrant to rules, regulations and forms
promulgated by the Securities and Exchange Commission shall include rules,
regulations and forms succeeding to the functions thereof, whether or not
bearing the same designation.
The rights and obligations of the Company and the Holder with
respect to the Registrable Stock are set forth in a Registration Rights
Agreement, dated January 31, 1997, between the Company, the Holder and the other
signatories thereto, and shall supersede any registration rights and obligations
of the Company and the Holder existing prior to the date hereof with respect to
the Registrable Stock.
Section 10. Amendments.
Neither this Warrant nor any term hereof may be changed, waived,
discharged or terminated orally or in writing, provided that any term of this
Warrant may be amended or the observance of such term may be waived (either
generally or in a particular instance and either retroactively or prospectively)
with, but only with, the written consent of the Company and the holders of the
RM Warrants that are exercisable for a number of shares of Common Stock that
represent in the aggregate at least a majority of the total number of shares of
Common Stock for which all of the RM Warrants are then exercisable (whether or
not the holder of this Warrant consents).
Section 11. Governing Law and Consent to Jurisdiction.
This Warrant shall be governed by the laws of the State of New York
without regard to its conflict of laws principles or rules. This Warrant shall
be deemed to have been executed and delivered at and shall be deemed to have
been made in New York, New York.
Any legal action, suit or proceeding arising out of or relating to this
Warrant may only be instituted in any federal court of the Southern District of
New York or any state court located in New York County, State of New York, and
the Company agrees not to assert, by way of motion, as a defense or otherwise,
in any action, suit or proceeding, any claim that it is not subject personally
to the jurisdiction of such courts, that the action, suit or proceeding if
brought in such courts, would be an inconvenient forum, that the venue of the
action, suit or proceeding, if brought in any of such courts, is improper or
that this Agreement or the subject matter may not be enforced in or by such
courts on jurisdictional grounds.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in
its name by its duly authorized officer.
Dated: January 31, 1997
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
--------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
11
<PAGE>
EXERCISE NOTICE
The undersigned, the Holder, hereby elects to exercise purchase rights
represented by such Warrant for, and to purchase thereunder, ____________ shares
of the Common Stock covered by such Warrant and herewith makes payment in full
therefor of $_________ cash and/or by cancellation of $__________ of
indebtedness of the Company to the Holder hereof and requests that, subject to
the terms and conditions of the Warrant, certificates for such shares (and any
securities or property deliverable upon such exercise) be issued in the name of
and delivered to ______________________ whose address is
_______________________________________, and whose social security or employer
identification number is ____________.
The undersigned agrees that, in the absence of an effective registration
statement with respect to Common Stock issued upon this exercise, the
undersigned is acquiring such Common Stock for the Holder's own account and not
as a nominee for any other party, for investment and not with a view to
distribution thereof and that the certificate or certificates representing such
Common Stock may bear a legend substantially as follows:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS. UNLESS THEY ARE SOLD
PURSUANT TO RULE 144 PROMULGATED BY THE SECURITIES AND EXCHANGE COMMISSION
UNDER SAID ACT, THEY MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION AND QUALIFICATION WITHOUT AN OPINION OF
COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, THAT SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
In addition, the undersigned agrees that, in the absence of an effective
registration statement with respect to Common Stock issued upon this exercise,
stop transfer instructions will be entered on the Company's stock transfer
records with respect to Common Stock issued upon this exercise.
Dated: __________________________
Signature guaranteed:
================================================================================
NON COMPETITION AGREEMENT
FOR
ROBERT F. WEINBERG
================================================================================
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is entered into as of
January 31, 1997, by and between Robert F. Weinberg, an individual residing at
5 Barker Avenue, White Plains, New York 10601 ("Director"), and Cali Realty
Corporation, a Maryland corporation with offices at 11 Commerce Drive, Cranford,
New Jersey 07016 ("Cali").
R E C I T A L S
WHEREAS, Robert Martin Company, LLC, a New York limited liability company
and Robert Martin-Eastview North Company, L.P., a New York limited partnership
(collectively "RM") and Cali Realty, L.P., a Delaware limited partnership
("CRLP") and Cali have determined that it is in the best interests of the
parties' long term strategic growth to combine their respective properties and
related assets;
WHEREAS, in order to effectuate this combination, RM has agreed to
contribute certain properties and other assets located throughout southern New
York and Connecticut owned or controlled by RM (the "Property") to designees of
CRLP, to cause certain key executives of RM to become part of the management of
Cali, and through RM's existing structure to continue to manage and operate the
properties being contributed by RM, all as of the closing (the "Closing Date")
and RM has also been granted certain rights with respect to appointing members
of the Board of Directors of Cali (the "Board") which is the sole general
partner of CRLP, pursuant to which Director has been designated to serve as a
member of the Board;
WHEREAS, the Director has served as a principal of RM and, through such
service, has acquired special and unique knowledge, abilities and expertise; and
WHEREAS, the Director desires to be associated with Cali, as a member of
the Board and in such capacity the Director will have access to Cali's business
plans, financial data and other confidential matters;
WHEREAS, in connection with the Director's desires to be a member of the
Board, the Director has agreed to be bound by the non-competition restrictions
provided below; and
WHEREAS, Cali desires to have the Director enter into this Agreement in
order to protect Cali from unfair competition.
<PAGE>
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Non-Competition. The Director hereby agrees that:
(a) For the period commencing on the Closing Date and terminating on
the later of (i) the date which is one year following the date on which the
Director shall no longer be a member of the Board and (ii) January 31, 2000 the
Director shall not, directly or indirectly, within the State of New York, the
State of New Jersey, the State of Connecticut or the State of Pennsylvania
engage in, or own, invest in, manage or control any venture or enterprise
engaged in any development, acquisition or management activities with respect to
office-service, office or industrial or flex property without regard to whether
or not such activities compete with Cali.
Nothing herein shall prohibit the Director from being a
passive owner of not more than five percent (5%) of the outstanding stock of any
class of securities of a corporation or other entity engaged in such business
which is publicly traded, so long as he has no active participation in the
business of such corporation or other entity. Moreover, the foregoing
limitations shall not be deemed to restrict or otherwise limit the Director
from: (i) conducting real estate development, acquisition, or management
activities as and to the extent permitted pursuant to Section 26 of the
Contribution and Exchange Agreement dated January 24, 1997 by and between Cali,
CRLP and RM (the "Contribution and Exchange Agreement"), (ii) acquiring and
conducting real estate development and management activities with respect to
properties which may be purchased by Director pursuant to Sections 8.3 or 27.5
of the Contribution and Exchange Agreement, and (iii) conducting activities
within the ordinary course of business as a stockholder, director, member or
manager of City & Suburban Federal Savings Bank (the "Bank") or any entity
controlling, controlled by or under common control with the Bank, their
successors or assigns, provided that the performance of the activities set forth
in (i), (ii) and (iii) above does not materially impair the Director's
performance of his obligations as a member of the Board of Cali.
(b) If, at the time of enforcement of this Paragraph 1, a court
shall hold that the duration, scope, area or other restriction stated herein is
unreasonable, the parties hereto agree that reasonable maximum duration, scope,
area or other restriction may be substituted by such court for the stated
duration, scope, area or other restriction.
(c) For purposes of this Agreement, Cali shall be deemed to include
any entity which is controlled, directly or indirectly, by Cali and any entity
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<PAGE>
of which a majority of the economic interest is owned, directly or indirectly,
by Cali.
2. Remedies. The parties hereto agree that Cali would suffer irreparable
harm from a breach by the Director of any of the covenants or agreements
contained herein. Therefore, in the event of the actual or threatened breach by
the Director of any of the provisions of this Agreement, Cali may, in addition
and supplementary to any other rights and remedies existing in its favor, apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violation
of the provisions hereof.
3. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
4. Modification or Waiver. No amendment, modification, waiver, termination
or cancellation of this Agreement shall be binding or effective for any purpose
unless it is made in writing signed by the party against whom enforcement of
such amendment, modification, waiver, termination or cancellation is sought. No
course of dealing between or among the parties to this Agreement shall be deemed
to affect or to modify, amend or discharge any provisions or terms of this
Agreement. No delay on the part of Cali or the Director in the exercise of any
of their respective rights or remedies shall operate as a waiver thereof, and no
single or partial exercise by Cali or the Director of any such right or remedy
shall preclude other or further exercise thereof. A waiver of right or remedy on
any one occasion shall not be construed as a bar to or waiver of any such right
or remedy on any other occasion.
5. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to Cali or the Director, as applicable, at the address
set forth above (or to such other address as shall have been previously provided
in accordance with this section).
6. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
7. Severability. Whenever possible, each provision and term of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision or term of this Agreement shall be held to
be
3
<PAGE>
prohibited by or invalid under such applicable law, then, subject to the
provisions of Paragraph 1 (b) above, such provision or term shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
affecting in any manner whatsoever the remainder of such provision or term or
the remaining provisions or terms of this Agreement.
8. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and both of which when taken together
shall constitute one and the same Agreement.
9. Headings. The headings of the Paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof and
shall not affect the construction or interpretation of this Agreement.
10. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes all other
prior agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
--------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
DIRECTOR
/s/ Robert F. Weinberg
-----------------------------------
Robert F. Weinberg
5
================================================================================
NON COMPETITION AGREEMENT
FOR
MARTIN S. BERGER
================================================================================
<PAGE>
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is entered into as of
January 31, 1997, by and between Martin S. Berger, an individual residing at
630 Park Avenue, #8A, New York, New York 10021 (the "RM Principal"), and Cali
Realty Corporation, a Maryland corporation with offices at 11 Commerce Drive,
Cranford, New Jersey 07016 ("Cali").
R E C I T A L S
WHEREAS, Robert Martin Company, LLC, a New York limited liability company
and Robert Martin-Eastview North Company, L.P., a New York limited partnership
(collectively "RM") and Cali Realty, L.P., a Delaware limited partnership
("CRLP") and Cali have determined that it is in the best interests of the
parties' long term strategic growth to combine their respective properties and
related assets;
WHEREAS, in order to effectuate this combination, RM has agreed to
contribute certain properties and other assets located throughout southern New
York and Connecticut owned or controlled by RM (the "Property") to designees of
CRLP, to cause certain key executives of RM to become part of the management of
Cali, and through RM's existing structure to continue to manage and operate the
properties being contributed by RM, all as of the closing (the "Closing Date")
and RM has also been granted certain rights with respect to appointing members
of the Board of Directors of Cali (the "Board") which is the sole general
partner of CRLP;
WHEREAS, the RM Principal has served as a principal of RM and, through
such service, has acquired special and unique knowledge, abilities and
expertise; and
WHEREAS, Cali is the recipient of some or all of the Property, and in
connection with the contribution of the Property to Cali, the RM Principal had
access to RM's and Cali's business plans, financial data and other confidential
matters;
WHEREAS, as a condition of the contribution of the Property to Cali, the
RM Principal has agreed to be bound by the non-competition restrictions provided
below; and
WHEREAS, Cali desires to have the RM Principal enter into this Agreement
in order to protect Cali from unfair competition.
<PAGE>
NOW, THEREFORE, in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Non-Competition. The RM Principal hereby agrees that:
(a) For the period commencing on the Closing Date and terminating on
January 31, 2000 the RM Principal shall not, directly or indirectly, within the
State of New York, the State of New Jersey, the State of Connecticut or the
State of Pennsylvania engage in, or own, invest in, manage or control any
venture or enterprise engaged in any development, acquisition or management
activities with respect to office-service, office or industrial or flex property
without regard to whether or not such activities compete with Cali.
Nothing herein shall prohibit the RM Principal from being a passive
owner of not more than five percent (5%) of the outstanding stock of any class
of securities of a corporation or other entity engaged in such business which is
publicly traded, so long as he has no active participation in the business of
such corporation or other entity. Moreover, the foregoing limitations shall not
be deemed to restrict or otherwise limit the RM Principal from: (i) conducting
real estate development, acquisition, or management activities as and to the
extent permitted pursuant to Section 26 of the Contribution and Exchange
Agreement dated January 24, 1997 by and between Cali, CRLP and RM (the
"Contribution and Exchange Agreement"), (ii) acquiring and conducting real
estate development and management activities with respect to properties which
may be purchased by the RM Principal pursuant to Sections 8.3 or 27.5 of the
Contribution and Exchange Agreement, and (iii) conducting activities within the
ordinary course of business as a stockholder, director, member or manager of
City & Suburban Federal Savings Bank (the "Bank") or any entity controlling,
controlled by or under common control with the Bank, their successors or
assigns.
(b) If, at the time of enforcement of this Paragraph 1, a court
shall hold that the duration, scope, area or other restriction stated herein is
unreasonable, the parties hereto agree that reasonable maximum duration, scope,
area or other restriction may be substituted by such court for the stated
duration, scope, area or other restriction.
(c) For purposes of this Agreement, Cali shall be deemed to include
any entity which is controlled, directly or indirectly, by Cali and any entity
of which a majority of the economic interest is owned, directly or indirectly,
by Cali.
2
<PAGE>
2. Remedies. The parties hereto agree that Cali would suffer irreparable
harm from a breach by the RM Principal of any of the covenants or agreements
contained herein. Therefore, in the event of the actual or threatened breach by
the RM Principal of any of the provisions of this Agreement, Cali may, in
addition and supplementary to any other rights and remedies existing in its
favor, apply to any court of law or equity of competent jurisdiction for
specific performance and/or injunctive or other relief in order to enforce or
prevent any violation of the provisions hereof.
3. Successors and Assigns. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns.
4. Modification or Waiver. No amendment, modification, waiver, termination
or cancellation of this Agreement shall be binding or effective for any purpose
unless it is made in writing signed by the party against whom enforcement of
such amendment, modification, waiver, termination or cancellation is sought. No
course of dealing between or among the parties to this Agreement shall be deemed
to affect or to modify, amend or discharge any provisions or terms of this
Agreement. No delay on the part of Cali or the RM Principal in the exercise of
any of their respective rights or remedies shall operate as a waiver thereof,
and no single or partial exercise by Cali or the RM Principal of any such right
or remedy shall preclude other or further exercise thereof. A waiver of right or
remedy on any one occasion shall not be construed as a bar to or waiver of any
such right or remedy on any other occasion.
5. Notices. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered by hand or delivered by a recognized delivery service or mailed,
postage prepaid, by express, certified or registered mail, return receipt
requested, and addressed to Cali or the RM Principal, as applicable, at the
address set forth above (or to such other address as shall have been previously
provided in accordance with this section).
6. Governing Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW JERSEY, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAWS THEREUNDER.
7. Severability. Whenever possible, each provision and term of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision or term of this Agreement shall be held to
be prohibited by or invalid under such applicable law, then, subject to the
provisions of Paragraph 1 (b) above, such provision or term shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
affecting in any
3
<PAGE>
manner whatsoever the remainder of such provision or term or the remaining
provisions or terms of this Agreement.
8. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and both of which when taken together
shall constitute one and the same Agreement.
9. Headings. The headings of the Paragraphs of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part hereof and
shall not affect the construction or interpretation of this Agreement.
10. Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter hereof and supersedes all other
prior agreements and undertakings, both written and oral, among the parties with
respect to the subject matter hereof.
THE REMAINDER OF THIS PAGE IS LEFT INTENTIONALLY BLANK
4
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
CALI REALTY CORPORATION
By: /s/ Roger W. Thomas
--------------------------
Name: Roger W. Thomas
Title: Vice President and
General Counsel
RM PRINCIPAL
/s/ Martin S. Berger
-----------------------------------
Martin S. Berger
5
Exhibit 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-3 (Nos. 333-19101, 333-09081 and 33-96538) and the
Registration Statement on Form S-8 (No. 33-91822) of Cali Realty Corporation of
our report dated February 18, 1997, appearing in this Form 10-K.
Price Waterhouse LLP
New York, New York
March 28, 1997
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 207,967
<SECURITIES> 0
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0
0
<COMMON> 363
<OTHER-SE> 701,016
<TOTAL-LIABILITY-AND-EQUITY> 1,026,328
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<EXTRAORDINARY> (475)
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<NET-INCOME> 31,944
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