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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, 1998
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-13274
MACK-CALI REALTY CORPORATION
(Exact Name of Registrant as specified in its charter)
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<S> <C>
MARYLAND 22-3305147
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11 COMMERCE DRIVE, CRANFORD, NEW JERSEY 07016-3599
(Address of principal executive offices) (Zip code)
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(908) 272-8000
(Registrant's telephone number, including area code)
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
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<S> <C>
(Title of Each Class) (Name of Each Exchange on Which Registered)
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC EXCHANGE
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Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No ____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be con-tained, 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 March 1, 1999, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $1,665,740,874. 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.
As of March 1, 1999, 58,287,261 shares of common stock, $0.01 par value, of
the Company ("Common Stock") were outstanding.
LOCATION OF EXHIBIT INDEX: The index of exhibits is contained in Part IV
herein on page number 54.
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the registrant's
definitive proxy statement to be issued in conjunction with the registrant's
annual meeting of shareholders to be held on May 19, 1999 are incorporated by
reference in Part III of this Form 10-K.
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TABLE OF CONTENTS
FORM 10-K
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PAGE
NO.
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PART I
Item 1 Business................................................ 3
Item 2 Properties.............................................. 17
Item 3 Legal Proceedings....................................... 43
Item 4 Submission of Matters to a Vote of Security Holders..... 43
PART II
Item 5 Market for Registrant's Common Stock and Related
Stockholder Matters................................... 44
Item 6 Selected Financial Data................................. 46
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 47
Item 7a Quantitative and Qualitative Disclosures About Market
Risk.................................................. 53
Item 8 Financial Statements and Supplementary Data............. 54
Item 9 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................... 54
PART III
Item 10 Directors and Executive Officers of the Registrant...... 54
Item 11 Executive Compensation.................................. 54
Item 12 Security Ownership of Certain Beneficial Owners and
Management............................................ 54
Item 13 Certain Relationships and Related Transactions.......... 54
PART IV
Item 14 Exhibits, Financial Statements, Schedules and Reports on
Form 8-K.............................................. 54
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PART I
ITEM 1. BUSINESS
GENERAL
Mack-Cali Realty Corporation (together with its subsidiaries, the "Company")
is a fully-integrated, self-administered and self-managed real estate investment
trust ("REIT") that owns and operates a portfolio comprised predominantly of
Class A office and office/flex properties located primarily in the Northeast, as
well as commercial real estate leasing, management, acquisition, development and
construction businesses. As of December 31, 1998, the Company's portfolio
consisted of 249 properties, aggregating approximately 27.8 million square feet,
plus developable land. Included in the Company's portfolio are 244 wholly-owned
properties aggregating approximately 26.8 million square feet (collectively, the
"Properties"). The Properties are comprised of 153 office properties aggregating
approximately 22.5 million square feet (the "Office Properties"), 79 office/flex
properties aggregating approximately 3.9 million square feet (the "Office/Flex
Properties"), six industrial/warehouse properties aggregating approximately
387,400 square feet (the "Industrial/Warehouse Properties"), two multi-family
residential complexes consisting of 453 units, two stand-alone retail properties
and two land leases. The Company's portfolio also includes ownership interests
in unconsolidated joint ventures which own four office properties and one
office/flex property, aggregating approximately 1.0 million square feet. See
"Investments in Unconsolidated Joint Ventures." Unless otherwise indicated, all
references to square feet represent net rentable area. As of December 31, 1998,
the Office Properties, Office/Flex Properties and Industrial/Warehouse
Properties were approximately 96.6 percent leased to over 2,400 tenants. The
Company's portfolio is located in 12 states, primarily in the Northeast, plus
the District of Columbia.
The Company's strategy has been to focus its acquisition, operation and
development of office properties in markets and sub-markets where it is, or can
become, a significant and preferred owner and operator. 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 rental,
occupancy and tenant retention rates within their markets. The Company will
continue this strategy by expanding, through acquisitions or development in
markets and sub-markets where it has, or can achieve, similar status. Consistent
with its growth strategy, during 1998, the Company acquired or placed in service
56 office and office/flex properties aggregating approximately 4.9 million
square feet, for an aggregate cost of approximately $686.6 million (the
"Property Acquisitions"). In addition, the Company acquired ownership interests
in unconsolidated joint ventures which own five office and office/flex
properties, totaling approximately 1.0 million square feet, for a net investment
of approximately $66.5 million. Management believes that the recent trend
towards rising rental and occupancy rates in the Company's sub-markets continues
to present significant opportunities for internal growth. The Company also may
develop properties in such sub-markets, particularly with a view towards the
development of the Company's vacant holdings, which principally are located
adjacent to the Company's existing properties. 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, professional management services. See
"Business Strategies".
The principals of Cali Associates, the entity to whose business the Company
succeeded in 1994, have been involved in the development, leasing, management,
operation and disposition of commercial and residential properties in Northern
and Central New Jersey for over 50 years and have been primarily focusing on
office building development for the past 20 years. In January 1997, the Company
acquired 65 Class A properties located in Westchester County, New York and
Fairfield County, Connecticut, aggregating approximately 4.1 million square feet
from the Robert Martin Company, LLC and affiliates for a total cost of
approximately $450.0 million (the "RM Transaction"). In December 1997, the
Company acquired 54 Class A office properties, primarily in New Jersey and
Texas, aggregating approximately 9.2 million
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square feet, from The Mack Company and Patriot American Office Group for a total
cost of approximately $1.1 billion (the "Mack Transaction"). Upon the completion
of the Mack Transaction, the Company changed its name from Cali Realty
Corporation to Mack-Cali Realty Corporation.
The Company's executive officers have been employed by the Company and/or
its predecessor companies for an average of approximately 10 years. The Company
and its predecessors have extensive development experience, having developed
11.9 million square feet or 44.4 percent of the Company's portfolio.
As of December 31, 1998, executive officers and directors of the Company
owned approximately 10.5 percent of the Company's outstanding shares of Common
Stock (including Units redeemable or convertible for shares of Common Stock). As
used herein, the term "Units" refers to limited partnership interests in
Mack-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, development, 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 website at "http://www.mack-cali.com".
BUSINESS STRATEGIES
OPERATIONS
REPUTATION: The Company has established a reputation as a highly-regarded
landlord with an emphasis on delivering professional quality tenant services in
buildings it owns or manages. The Company believes that its continued success
depends in part on enhancing its reputation as an operator of choice, which will
facilitate the retention of current tenants and the attraction of new tenants.
The Company believes it provides a superior level of service to its tenants,
which in turn creates higher than average occupancy rates, as well as lower than
average turnover.
COMMUNICATION WITH TENANTS: The Company's property management department
emphasizes frequent communication with tenants to ensure first-class service to
the Properties. Property managers generally are located on site at the
Properties to provide convenient access to management and to ensure that the
Properties are well-maintained. Property management's primary responsibility is
ensuring that buildings are operated at peak efficiency in order to meet both
the Company's and tenants' needs and expectations. The property managers
additionally budget and oversee capital improvements and building system
upgrades to enhance the Properties' competitive advantages in their markets.
Additionally, the Company's leasing department develops and maintains
long-term relationships with its diverse tenant base, and coordinates leasing,
expansion, relocation and build-to-suit opportunities within its portfolio. This
approach allows the Company to offer office space in the appropriate size and
location to current or prospective tenants in any of its sub-markets.
GROWTH
INTERNAL GROWTH: The Company's objectives are to maximize growth in funds
from operations and to enhance the value of its portfolio through effective
management, acquisition and development strategies. The Company seeks to
maximize the value of its existing portfolio through implementing operating
strategies to produce increased effective rental and occupancy rates and
decreased concession and tenant installation costs. The Company believes that it
has a unique opportunity for internal growth through re-leasing space at higher
effective rents with contractual rent increases and developing or redeveloping
space for its diverse base of high credit tenants, which include AT&T
Corporation, Allstate Insurance Company and International Business Machines
Corporation. In addition, the Company's management
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seeks volume discounts to take advantage of the Company's size and dominance in
particular sub-markets, and operating efficiencies through the use of in-house
management, leasing, marketing, financing, accounting, legal and construction
functions. The Company believes that these combined factors should provide the
Company with sustainable internal growth over the next several years.
EXTERNAL GROWTH: The Company also believes that opportunities exist to
increase funds from operations by acquiring or developing 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. The Company will acquire, invest in or develop
additional properties that: (i) provide attractive initial yields with
significant potential for growth in cash flow from 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 in which the Company
can become a significant and preferred owner or operator; and (iv) have been
under-managed or are otherwise capable of improved performance through intensive
management, capital improvements and/or leasing that will result in increased
occupancy and rental revenues.
DEVELOPMENT: In addition, the Company owns 238 acres of land held for
development, on which it can build up to approximately 10 million square feet of
office space. The Company may selectively develop buildings where such
development will result in a favorable risk-adjusted return on investment in
coordination with the above operating strategies. Such development will
primarily occur only when leases have been executed prior to construction, in
stable sub-markets where the demand for such space exceeds available supply and
where the Company is, or can become, a significant and preferred owner and
operator.
FINANCIAL
The Company currently intends to maintain a ratio of debt to total market
capitalization (total debt of the Company as a percentage of the total market
value of issued and outstanding shares of Common Stock, including interests
redeemable therefor, plus total debt) of approximately 50 percent or less.
Although there is no limit in the Company's organizational documents on the
amount of indebtedness that the Company may incur, the Company has entered into
certain financial agreements which contain covenants that limit the Company's
ability to incur indebtedness under certain circumstances. As of December 31,
1998, the Company's total debt constituted approximately 38.5 percent of the
total market capitalization of the Company. The Company will utilize the most
appropriate sources of capital for future acquisitions, development, capital
improvements and other investments, which may include funds from operating
activities, short-term and long-term borrowings (including draws on the
Company's revolving credit facilities), and issuances of debt securities or
additional equity securities.
EMPLOYEES
As of December 31, 1998, the Company had over 450 employees.
COMPETITION
The leasing of real estate is highly competitive. The Properties compete for
tenants with lessors and developers of similar properties located in its
respective markets primarily on the basis of location, rent charged, services
provided, and the design and condition of the Properties. The Company also
experiences competition when attempting to acquire desirable real estate,
including competition from domestic and foreign financial institutions, other
REITs, life insurance companies, pension trusts, trust funds, partnerships and
individual investors.
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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,
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.
There can be no assurance that (i) future laws, ordinances or regulations
will not impose any material environmental liability, (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, or (iii) the Company's assessments reveal all environmental liabilities
and that there are no material environmental liabilities of which the Company is
aware. 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.
INDUSTRY SEGMENTS
The Company operates in only one industry segment-real estate. The Company
does not have any foreign operations and its business is not seasonal.
RECENT DEVELOPMENTS
The Company's funds from operations (after adjustment for straight-lining of
rents) for the year ended December 31, 1998 was $216.9 million as compared to
$111.8 million for the year ended December 31, 1997. As a result of the
Company's improved operating performance, the Company announced, in September
1998, a 10 percent increase in its regular quarterly dividend, commencing with
the Company's dividend with respect to the third quarter of 1998, from $0.50 per
share of Common Stock ($2.00 per share of Common Stock on an annualized basis)
to $0.55 per share of Common Stock ($2.20 per share of Common Stock on an
annualized basis). The Company declared a cash dividend of $0.55 per share on
December 15, 1998 to shareholders of record on January 6, 1999. The dividend was
paid on January 26, 1999. The Company has increased its regular quarterly
dividend for four consecutive years for an increase of 36.2 percent over the
period.
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In 1998, the Company:
- acquired 52 operating properties aggregating 4.7 million square feet at a
total cost of approximately $663.6 million,
- placed in service four properties aggregating 218,600 square feet at a
total cost of approximately $23.0 million,
- acquired seven redevelopment properties/developable land parcels at a
total cost of approximately $41.4 million, and
- acquired interests in unconsolidated joint ventures with an investment of
approximately $66.5 million at December 31, 1998.
These transactions increased the total square footage of the Company's
portfolio by 26.7 percent.
OPERATING PROPERTY ACQUISITIONS
The Company acquired the following operating properties during the year
ended December 31, 1998:
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INVESTMENT BY
COMPANY(A)
ACQUISITION SQUARE -------------
DATE PROPERTY/PORTFOLIO NAME LOCATION # OF BLDGS. FEET
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THOUSANDS)
<S> <C> <C> <C> <C> <C>
OFFICE
2/05/98 500 West Putnam Avenue(b) Greenwich, Fairfield County, CT 1 121,250 $ 20,125
2/25/98 10 Mountainview Road Upper Saddle River, Bergen County, NJ 1 192,000 24,754
3/12/98 1250 Capital of Texas Highway
South Austin, Travis County, TX 1 270,703 37,266
3/27/98 Prudential Business Campus(c) Parsippany, Morris County, NJ 5 703,451 130,437
3/27/98 Pacifica Portfolio--Phase I(d)(e) Denver & Colorado Springs, CO 10 620,017 74,966
3/30/98 Morris County Financial Center Parsippany, Morris County, NJ 2 301,940 52,763
5/13/98 3600 South Yosemite Denver, Denver County, CO 1 133,743 13,555
5/22/98 500 College Road East(f) Princeton, Mercer County, NJ 1 158,235 21,334
6/01/98 1709 New York Ave./
1400 L Street N.W. Washington, D.C. 2 325,000 90,385
6/03/98 400 South Colorado Boulevard Denver, Denver County, CO 1 125,415 12,147
6/08/98 Pacifica Portfolio--Phase
II(d)(e)(g) Denver & Colorado Springs, CO 6 514,427 85,910
7/16/98 4200 Parliament Drive(h) Lanham, Prince George's County, MD 1 122,000 15,807
9/10/98 40 Richards Avenue(d) Norwalk, Fairfield County, CT 1 145,487 19,587
9/15/98 Seven Skyline Drive(i) Hawthorne, Westchester County, NY 1 109,000 13,379
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TOTAL OFFICE PROPERTY ACQUISITIONS: 34 3,842,668 $ 612,415
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OFFICE/FLEX
1/30/98 McGarvey Portfolio(j) Moorestown, Burlington County, NJ 17 748,660 $ 47,526
7/14/98 1510 Lancer Road(k) Moorestown, Burlington County, NJ 1 88,000 3,700
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TOTAL OFFICE/FLEX PROPERTY ACQUISITIONS: 18 836,660 $ 51,226
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TOTAL OPERATING PROPERTY ACQUISITIONS: 52 4,679,328 $ 663,641
--
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PROPERTIES PLACED IN SERVICE
The Company placed in service the following properties through the
completion of development or redevelopment during the year ended December 31,
1998:
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INVESTMENT BY
COMPANY(A)
DATE PLACED -------------
IN SERVICE PROPERTY NAME LOCATION # OF BLDGS. SQUARE FEET
- ----------- ------------------------- ------------------------------------ ----------- ----------- (IN
THOUSANDS)
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OFFICE
1/15/98 224 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 $ 7,796
8/01/98 228 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 7,986
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TOTAL OFFICE PROPERTIES PLACED IN SERVICE: 2 148,000 $ 15,782
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OFFICE/FLEX
6/08/98 Two Center Court Totowa, Passaic County, NJ 1 30,600 $ 2,231
10/23/98 650 West Avenue Stamford, Fairfield County, CT 1 40,000 4,952
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TOTAL OFFICE/FLEX PROPERTIES PLACED IN SERVICE: 2 70,600 $ 7,183
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TOTAL PROPERTIES PLACED IN SERVICE: 4 218,600 $ 22,965
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SEE FOOTNOTES TO THESE SCHEDULES ON SUBSEQUENT PAGE.
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FOOTNOTES TO SCHEDULES ON PREVIOUS PAGE:
(a) Unless otherwise noted, transactions were funded by the Company with funds
primarily made available through draws on the Company's credit facilities.
(b) The acquisition was funded with cash as well as the assumption of mortgage
debt (estimated fair value of approximately $12,104, with annual effective
interest rate of 6.52 percent.)
(c) The acquisition was funded primarily from proceeds received from the sale of
2,705,628 shares of common stock. Also included in the acquisition, but
excluded from this schedule, is (i) Nine Campus Drive in which the Company
has a 50 percent interest through an unconsolidated joint venture (see
"Investments in Unconsolidated Joint Ventures"), and (ii) developable land
adjacent to the acquired portfolio (see "Redevelopment
Properties/Developable Land Acquisitions.")
(d) The acquisition was funded with cash and the issuance of common units to the
seller (see Note 9 to the Financial Statements).
(e) The Company may be required to pay additional consideration due to earn-out
provisions in the agreement. The Company is under contract to acquire two
remaining office buildings, encompassing 95,360 square feet (for an
aggregate price of approximately $12,300).
(f) The property was acquired subject to a ground lease, which is prepaid
through 2031, and has two 10-year renewal options, at rent levels as defined
in the lease agreement.
(g) Also included in the acquisition, but excluded from this schedule, is
developable land adjacent to the acquired portfolio (see "Redevelopment
Properties/Developable Land Acquisitions.")
(h) Includes land adjacent to the operating property, which may be sub-divided
for future development.
(i) The property was acquired through the exercise of a purchase option obtained
in the RM Transaction. The acquisition was funded with cash, net of the
repayment by the seller of the remaining balance of the RM Note Receivable
(see Note 7 to the Financial Statements).
(j) The acquisition was funded with cash as well as the assumption of mortgage
debt (aggregate estimated fair value of approximately $8,354, with weighted
average annual effective interest rate of 6.24 percent.) The Company is
under contract to acquire an additional four office/flex properties and has
a right of first refusal to acquire six additional office/flex properties.
(k) The property was acquired through the exercise of a purchase option obtained
in the acquisition of the McGarvey portfolio in January 1998.
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REDEVELOPMENT PROPERTIES/DEVELOPABLE LAND ACQUISITIONS
On January 23, 1998, the Company acquired 10 acres of vacant land in the
Stamford Executive Park, located in Stamford, Fairfield County, Connecticut for
approximately $1.3 million, funded from the Company's cash reserves. In October
1998, the Company completed and placed in service a 40,000 square-foot
office/flex property on the acquired land (see "Properties Placed in Service.")
On February 2, 1998, the Company acquired 2115 Linwood Avenue, a 68,000
square-foot vacant office building located in Fort Lee, Bergen County, New
Jersey. The building was acquired for approximately $5.2 million, which was made
available from drawing on one of the Company's credit facilities. The Company is
currently redeveloping the property for future lease-up and operation.
On March 27, 1998, as part of the purchase of the Prudential Business Campus
(see "Operating Property Acquisitions"), the Company acquired approximately 95
acres of vacant land adjacent to the operating properties for approximately
$27.5 million.
On June 8, 1998, as part of the Pacifica portfolio-phase II acquisition (see
"Operating Property Acquisitions"), the Company acquired vacant land adjacent to
the operating properties for approximately $2.0 million.
On September 4, 1998, the Company acquired approximately 128 acres of vacant
land located at the Horizon Center Business Park, Hamilton Township, Mercer
County, New Jersey, through the exercise of a purchase option obtained in the
Company's acquisition of the Horizon Center Business Park in November 1995. The
land was acquired for approximately $1.7 million, which was funded from the
Company's cash reserves.
On November 10, 1998, the Company acquired approximately 10.1 acres of land
located at Three Vaughn Drive, Princeton, Mercer County, New Jersey. The Company
acquired the land for approximately $2.1 million, which was funded from the
Company's cash reserves.
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On December 3, 1998, the Company acquired approximately 2.7 acres of land
located at 12 Skyline Drive, Hawthorne, Westchester County, New York. The
Company acquired the land for approximately $1.5 million, which was funded from
the Company's cash reserves.
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The following is a summary of the Company's net investment in unconsolidated
joint ventures as of December 31, 1998:
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COMPANY'S NET
INVESTMENT
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UNCONSOLIDATED JOINT VENTURE (IN THOUSANDS)
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Pru-Beta 3........................................................................................ $ 17,980
HPMC.............................................................................................. 17,578
G&G Martco........................................................................................ 10,964
American Financial Exchange L.L.C................................................................. 10,983
Ramland Realty Associates L.L.C................................................................... 4,851
Ashford Loop Associates L.P....................................................................... 4,152
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Total............................................................................................. $ 66,508
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PRU-BETA 3 (NINE CAMPUS DRIVE): On March 27, 1998, the Company acquired a
50 percent interest in an existing joint venture with The Prudential Insurance
Company of America ("Prudential"), known as Pru-Beta 3, which owns and operates
Nine Campus Drive, a 156,495 square-foot office building, located in the
Mack-Cali Business Campus (formerly Prudential Business Campus) office complex
in Parsippany, Morris County, New Jersey. The Company performs management and
leasing services for the property owned by the joint venture.
HPMC (CONTINENTAL GRAND II/SUMMIT RIDGE/LAVA RIDGE): On April 23, 1998, the
Company entered into a joint venture agreement with HCG Development, L.L.C. and
Summit Partners I, L.L.C. to form HPMC Development Partners, L.P. and, on July
21, 1998, entered into a second joint venture named HPMC Lava Ridge Partners,
L.P. with these same parties. HPMC Development Partners, L.P.'s efforts have
focused on two development projects, commonly referred to as Continental Grand
II and Summit Ridge. Continental Grand II is a 4.2 acre site located in El
Segundo, Los Angeles County, California, acquired by the venture upon which it
has commenced construction of a 237,000 square-foot office property. Summit
Ridge is a 7.3 acre site located in San Diego, San Diego County, California,
acquired by the venture upon which it has commenced construction of a 132,000
square-foot office/flex property. HPMC Lava Ridge Partners, L.P. has commenced
construction of three two-story buildings aggregating 183,200 square-feet of
office space on a 12.1 acre site located in Roseville, Placer County,
California. The Company is required to make capital contributions to the
ventures totaling up to $26.6 million, pursuant to the partnership agreements.
Among other things, the partnership agreements provide for a preferred return on
the Company's invested capital in each venture, in addition to 50 percent of
such venture's profit above such preferred returns, as defined in each
agreement.
G&G MARTCO (CONVENTION PLAZA): On April 30, 1998, the Company acquired a
49.9 percent interest in an existing joint venture, known as G&G Martco, which
owns Convention Plaza, a 305,618 square-foot office building, located in San
Francisco, San Francisco County, California. A portion of its initial investment
was financed through the issuance of common units (see Note 9 to the Financial
Statements), as well as funds drawn from the Company's credit facilities. The
Company performs management and leasing services for the property owned by the
joint venture.
AMERICAN FINANCIAL EXCHANGE L.L.C.: On May 20, 1998, the Company entered
into a joint venture agreement with Columbia Development Corp. to form American
Financial Exchange L.L.C. The venture
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was initially formed to acquire land for future development, located on the
Hudson River waterfront in Jersey City, Hudson County, New Jersey, adjacent to
the Company's Harborside property. The Company holds a 50 percent interest in
the joint venture. Among other things, the partnership agreement provides for a
preferred return on the Company's invested capital in the venture, in addition
to the Company's proportionate share of the venture's profit, as defined in the
agreement. The joint venture has acquired land on which it has constructed a
parking facility, which is currently leased to a parking operator under a
10-year agreement. Such parking facility serves a ferry service between the
Company's Harborside Financial Center and Manhattan.
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD): On August 20, 1998,
the Company entered into a joint venture agreement with S.B. New York Realty
Corp. to form Ramland Realty Associates L.L.C. The venture was formed to own,
manage and operate One Ramland Road, a 232,000 square-foot office/ flex building
plus adjacent developable land, located in Orangeburg, Rockland County, New
York. The office/flex building is being redeveloped for future lease-up and
operation. The Company holds a 50 percent interest in the joint venture.
ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/2100 WEST LOOP
SOUTH): On September 18, 1998, the Company entered into a joint venture
agreement with Prudential to form Ashford Loop Associates L.P. The venture was
formed to own, manage and operate 1001 South Dairy Ashford, a 130,000
square-foot office building acquired on September 18, 1998 and 2100 West Loop
South, a 168,000 square-foot office building acquired on November 25, 1998, both
located in Houston, Harris County, Texas. The Company holds a 20 percent
interest in the joint venture. The joint venture may be required to pay
additional consideration due to earn-out provisions in the acquisition
contracts. The Company performs management and leasing services for the
properties owned by the joint venture.
FINANCING ACTIVITY
During 1998, the Company issued approximately 8.0 million shares in several
offerings and sales of its common stock (at a weighted average price of $37.38
per share) raising aggregate net proceeds of approximately $288.4 million.
Concurrent with these offerings and sales, the Company purchased from the
Operating Partnership approximately 8.0 million Common Units, as defined below,
for approximately $288.4 million. Additionally, during 1998, in conjunction with
the funding of several of its property acquisitions as well as redemption of
certain of the contingent units issued in the Mack Transaction, the Company
issued a total of approximately 3.1 million common operating partnership units
("Common Units") and 19,694 preferred operating partnership units (convertible
into 568,369 Common Units), with a total value of approximately $126.3 million
at time of issuance.
In October 1998, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 4.089
percent per annum for the three-year U.S. Treasury Note effective November 4,
1999, on a notional amount of $50.0 million. The agreement will be used to fix
the Index Rate on $50.0 million of the Harborside mortgages, for which the
Company's interest rate re-sets for three years beginning November 4, 1999 to
the interpolated three-year U.S. Treasury Note plus 110 basis points (see Note 8
to the Financial Statements--"Harborside Mortgages").
In August 1998, the Board of Directors of the Company authorized a share
repurchase program under which the Company was permitted to purchase up to
$100.0 million of the Company's outstanding Common Stock. Purchases could be
made from time to time in open market transactions at prevailing prices or
through privately-negotiated transactions. Subsequently, the Company purchased
in the open market, for constructive retirement, 854,700 shares of its
outstanding Common Stock for an aggregate cost of approximately $25.1 million.
Concurrent with these purchases, the Company sold to the Operating Partnership
854,700 Common Units for approximately $25.1 million.
10
<PAGE>
On April 30, 1998, the Company retired a $200 million term loan which it
obtained from Prudential Securities Credit Corp. on December 10, 1997. Such loan
had a one-year term and bore interest at 110 basis points over one-month LIBOR.
Also on April 30, 1998, the Company obtained a loan in the amount of $150
million from The Prudential Insurance Company of America. Such loan has a
seven-year term and bears interest at an effective rate of 7.1 percent.
On April 17, 1998, the Company repaid in full and terminated the Original
Unsecured Facility and obtained a new unsecured revolving credit facility (the
"1998 Unsecured Facility") in the amount of $870.0 million from a group of 26
lender banks. In July 1998, the 1998 Unsecured Facility was expanded to $900.0
million with the addition of two new lender banks into the facility, bringing
the total number of participants to 28. In December 1998, the 1998 Unsecured
Facility was further expanded to $1.0 billion. The 1998 Unsecured Facility has a
three-year term and bore interest at 110 basis points over LIBOR. In November
1998, with the Company's achievement of investment grade unsecured debt ratings,
the interest rate was reduced to 90 basis points over LIBOR.
The Company has three investment grade credit ratings. Duff & Phelps Credit
Rating Co. ("DCR") and Standard & Poors Rating Services ("S&P") have each
assigned their BBB rating to prospective senior unsecured debt offerings of the
Operating Partnership. DCR and S&P have also assigned their BBB- rating to
prospective preferred stock offerings of the Company. Moody's Investors Service
has assigned its Baa3 rating to prospective senior unsecured debt of the
Operating Partnership and its Ba1 rating to prospective preferred stock
offerings of the Company.
RISK FACTORS
Our results from operations and ability to pay dividends on our equity and
debt service on our indebtedness may be affected by the risk factors set forth
below. All investors should consider the following risk factors before deciding
to purchase securities of the Company. The Company refers to itself as "we" or
"our" in the following risk factors.
WE ARE DEPENDENT UPON THE ECONOMICS OF THE NORTHEASTERN OFFICE MARKETS.
A majority of our revenues are derived from our properties located in the
Northeast, particularly in New Jersey, New York, Pennsylvania and Connecticut.
Adverse economic developments in these states could adversely impact the
operations of our properties and, therefore, our profitability. Because our
portfolio consists primarily of office and office/flex buildings (as compared to
a more diversified real estate portfolio), a decline in the economy and/or a
decline in the demand for office space may adversely affect our ability to make
distributions or payments to our investors.
OUR PERFORMANCE IS SUBJECT TO RISKS ASSOCIATED WITH THE REAL ESTATE INDUSTRY.
GENERAL: Our ability to make distributions or payments to our investors
depends on the ability of our properties to generate funds in excess of
operating expenses (including scheduled principal payments on debt and capital
expenditure requirements). Events or conditions that are beyond our control may
adversely affect our operations and the value of our properties. Such events or
conditions could include:
- changes in the general economic climate;
- changes in local conditions such as oversupply of office space or a
reduction in demand for office space;
- decreased attractiveness of our properties to potential tenants;
- competition from other office and office/flex buildings;
11
<PAGE>
- our inability to provide adequate maintenance;
- increased operating costs, including insurance premiums and real estate
taxes, due to inflation and other factors which may not necessarily be
offset by increased rents;
- changes in laws and regulations (including tax, environmental and housing
laws and regulations) and agency or court interpretations of such laws and
regulations and the related costs of compliance;
- changes in interest rate levels and the availability of financing;
- the inability of a significant number of tenants to pay rent;
- our inability to rent office space on favorable terms; and
- civil unrest, earthquakes and other natural disasters or acts of God that
may result in uninsured losses.
FINANCIALLY DISTRESSED TENANTS MAY BE UNABLE TO PAY RENT: If a tenant
defaults, we may experience delays and incur substantial costs in enforcing our
rights as landlord and protecting our investments. If a tenant files for
bankruptcy, a potential court judgment rejecting and terminating such tenant's
lease could adversely affect our ability to make distributions or payments to
our investors.
ILLIQUIDITY OF REAL ESTATE LIMITS OUR ABILITY TO ACT QUICKLY: Real estate
investments are relatively illiquid. Such illiquidity may limit our ability to
react quickly in response to changes in economic and other conditions. If we
want to sell an investment, we might not be able to dispose of that investment
in the time period we desire, and the sales price of that investment might not
recoup or exceed the amount of our investment. The prohibition in the Internal
Revenue Code of 1986, as amended, and related regulations on a real estate
investment trust holding property for sale also may restrict our ability to sell
property. In addition, we acquired a significant number of our properties from
individuals to whom we issued limited partnership units as part of the purchase
price. In connection with the acquisition of these properties, in order to
preserve such individual's tax deferral, we contractually agreed not to sell or
otherwise transfer the properties for a specified period of time, subject to
certain exceptions. The above limitations on our ability to sell our investments
could adversely affect our ability to make distributions or payments to our
investors.
AMERICANS WITH DISABILITIES ACT COMPLIANCE COULD BE COSTLY: Under the
Americans with Disabilities Act of 1990, all public accommodations and
commercial facilities must meet certain federal requirements related to access
and use by disabled persons. Compliance with the ADA requirements could involve
removal of structural barriers from certain disabled persons' entrances. Other
federal, state and local laws may require modifications to or restrict further
renovations of our properties with respect to such accesses. Although we believe
that our properties are substantially in compliance with present requirements,
noncompliance with the ADA or related laws or regulations could result in the
United States government imposing fines or private litigants being awarded
damages against us. Such costs may adversely affect our ability to make
distributions or payments to our investors.
ENVIRONMENTAL PROBLEMS ARE POSSIBLE AND MAY BE COSTLY: Various federal,
state and local laws and regulations subject property owners or operators to
liability 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 or operator was responsible for or even knew
of the presence of such substances. The presence of or failure to properly
remediate hazardous or toxic substances may adversely affect our ability to
rent, sell or borrow against contaminated property. Various laws and regulations
also impose liability on persons who arrange for the disposal or treatment of
hazardous or toxic substances at another location for the costs of removal or
remediation of such substances at the disposal or treatment facility. These laws
often impose liability whether or not the person arranging for such disposal
ever owned
12
<PAGE>
or operated the disposal facility. Certain other environmental laws and
regulations impose liability on owners or operators of property for injuries
relating to the release of asbestos-containing materials into the air. As owners
and operators of property and as potential arrangers for hazardous substance
disposal, we may be liable under such laws and regulations for removal or
remediation costs, governmental penalties, property damage, personal injuries
and related expenses. Payment of such costs and expenses could adversely affect
our ability to make distributions or payments to our investors.
COMPETITION FOR ACQUISITIONS MAY RESULT IN INCREASED PRICES FOR
PROPERTIES: We plan to acquire additional properties in New Jersey, New York
and Pennsylvania and in the Northeast generally. We may be competing for
investment opportunities with entities that have greater financial resources and
more experienced managers. Several office building developers and real estate
companies may compete with us in seeking properties for acquisition, land for
development and prospective tenants. Such competition may adversely affect our
ability to make distributions or payments to our investors by:
- reducing the number of suitable investment opportunities offered to us;
- increasing the bargaining power of property owners;
- interfering with our ability to attract and retain tenants;
- increasing vacancies which lowers market rental rates and limits our
ability to negotiate rental rates; and/or
- adversely affecting our ability to minimize expenses of operation.
DEVELOPMENT OF REAL ESTATE COULD BE COSTLY: As part of our operating
strategy, we may acquire land for development under certain conditions. Included
among the risks of the real estate development business are the following, which
may adversely affect our ability to make distributions or payments to our
investors:
- financing for development projects may not be available on favorable
terms;
- long-term financing may not be available upon completion of construction;
and
- failure to complete construction on schedule or within budget may increase
debt service expense and construction costs.
DEBT FINANCING COULD ADVERSELY AFFECT OUR ECONOMIC PERFORMANCE.
SCHEDULED DEBT PAYMENTS AND REFINANCING COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION: We are subject to the risks normally associated with debt financing.
These risks, including the following, may adversely affect our ability to make
distributions or payments to our investors:
- our cash flow may be insufficient to meet required payments of principal
and interest;
- payments of principal and interest on borrowings may leave us with
insufficient cash resources to pay operating expenses;
- we may not be able to refinance indebtedness on our properties at
maturity; and
- if refinanced, the terms of refinancing may not be as favorable as the
original terms of the related indebtedness.
As of December 31, 1998, we had outstanding an aggregate of approximately
$743.2 million of mortgage indebtedness (in addition to borrowings under our
revolving credit facilities). As of December 31, 1998, we had outstanding
borrowings of $671.6 million under our revolving credit facilities (with
aggregate borrowing capacity of $1.1 billion). The outstanding borrowings were
comprised of $671.6 million from our unsecured $1.0 billion credit facility,
with no outstanding borrowings on our $100.0 million credit facility. We may
have to refinance the principal due on our indebtedness at maturity, and we may
not be able to refinance any indebtedness we incur in the future.
13
<PAGE>
If we are unable to refinance our indebtedness on acceptable terms, or at
all, events or conditions that may adversely affect our ability to make
distributions or payments to our investors include the following:
- we may need to dispose of one or more of our properties upon
disadvantageous terms;
- prevailing interest rates or other factors at the time of refinancing
could increase interest rates and, therefore, our interest expense;
- if we mortgage property to secure payment of indebtedness and are unable
to meet mortgage payments, the mortgagee could foreclose upon such
property or appoint a receiver to receive an assignment of our rents and
leases; and
- foreclosures upon mortgaged property could create taxable income without
accompanying cash proceeds and, therefore, hinder our ability to meet the
real estate investment trust distribution requirements of the Internal
Revenue Code.
RISING INTEREST RATES MAY ADVERSELY AFFECT OUR CASH FLOW: Outstanding
borrowings of approximately $671.6 million (as of December 31, 1998) under our
revolving credit facilities and approximately $80.2 million (as of December 31,
1998) of our mortgage indebtedness bear interest at variable rates. We may incur
additional indebtedness in the future that also bears interest at variable
rates. Variable rate debt creates higher debt service requirements if market
interest rates increase. Higher debt service requirements could adversely affect
our ability to make distributions or payments to our investors or cause us to
default under certain debt covenants.
OUR DEGREE OF LEVERAGE COULD ADVERSELY AFFECT OUR CASH FLOW: We fund
acquisition opportunities and development partially through short-term
borrowings (including our revolving credit facilities), as well as out of
undistributed cash. We expect to refinance projects purchased with short-term
debt either with long-term indebtedness or equity financing depending upon the
economic conditions at the time of refinancing. Our Board of Directors has a
general policy of limiting the ratio of our indebtedness to total market
capitalization (total debt as a percentage of the total market value of the
issued and outstanding shares of our common stock, including interests
redeemable therefor, plus total debt) of 50 percent or less, although there is
no limit in Mack-Cali Realty, L.P.'s or our organizational documents on the
amount of indebtedness that we may incur. However, we have entered into certain
financial agreements which contain financial and operating covenants that limit
our ability under certain circumstances to incur additional secured and
unsecured indebtedness. The Board of Directors could alter or eliminate its
current policy on borrowing at any time at its discretion. If this policy were
changed, we could become more highly
leveraged, resulting in an increase in debt service that could adversely affect
our cash flow and our ability to make distributions or payments to our investors
and could cause an increased risk of default on our obligations.
ANY UNSECURED INDEBTEDNESS THAT WE MAY ISSUE IS EFFECTIVELY SUBORDINATED TO
OUR SECURED INDEBTEDNESS AND INDEBTEDNESS OF OUR SUBSIDIARIES: Any unsecured
indebtedness that we may issue will be effectively subordinated to any of our
secured indebtedness to the extent of the value of the assets securing such
indebtedness and indebtedness of our subsidiaries. As of December 31, 1998, our
total secured indebtedness (including secured indebtedness issued by our
subsidiaries) was approximately $743.2 million. Consequently, in the event we
are involved in a bankruptcy, liquidation, dissolution, reorganization or
similar proceeding, the holders of any secured indebtedness will be entitled to
proceed against the collateral that secures any such secured indebtedness, and
such collateral will not be available for satisfaction of any amounts owned
under our unsecured indebtedness, including the notes. In addition, in the event
of a bankruptcy, liquidation, dissolution, reorganization or similar proceeding
of our subsidiaries, holders of indebtedness of our subsidiaries (whether
secured or unsecured) and trade creditors of our subsidiaries generally will be
entitled to payment of their claims from the assets of those subsidiaries before
any assets are made available for distribution to us.
14
<PAGE>
WE ARE DEPENDENT ON OUR KEY PERSONNEL WHOSE CONTINUED SERVICE IS NOT GUARANTEED.
We are dependent upon our executive officers for strategic business
direction and real estate experience. While we believe that we could find
replacements for these key personnel, loss of their services could adversely
affect our operations. We have entered into an employment agreement (including
non-competition provisions) which provides for a continuous five-year employment
term with each of Thomas A. Rizk, Mitchell E. Hersh, Brant B. Cali, John R.
Cali, Timothy M. Jones, Barry Lefkowitz and Roger W. Thomas. We do not have key
man life insurance for our executive officers.
A YEAR 2000 FAILURE COULD DISRUPT OUR OPERATIONS.
The year 2000 problem is the result of computer programs and embedded chips
using a two-digit format, as opposed to four digits, to indicate the year. Such
computer systems may be unable to interpret dates beyond the year 1999, which
could cause a system failure or other computer errors, leading to disruptions in
operations. The failure to correct a material year 2000 problem could result in
an interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the year 2000 problem, resulting in part from the uncertainty of the
year 2000 readiness of third-party vendors and tenants, we are unable to
determine at this time whether the consequences of year 2000 failures will have
a material impact on our results of operations, liquidity or financial
condition. See "Item 7--Management's Discussion and Analysis of Financial
Condition and Results of Operations."
CONSEQUENCES OF FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST COULD
ADVERSELY AFFECT
OUR FINANCIAL CONDITION.
FAILURE TO MAINTAIN OWNERSHIP LIMITS COULD CAUSE US TO LOSE OUR
QUALIFICATION AS A REAL ESTATE INVESTMENT TRUST: In order for us to maintain
our qualification as a real estate investment trust, not more than 50 percent in
value of our outstanding stock may be actually and/or constructively owned by
five or fewer individuals (as defined in the Internal Revenue Code to include
certain entities). We have limited ownership of our outstanding shares of our
common stock by any single stockholder to 9.8 percent of the outstanding shares
of our common stock. Our Board of Directors could waive this restriction if they
were satisfied, based upon the advice of tax counsel or otherwise, that such
action would be in our best interests and would not affect our qualifications as
a real estate investment trust. Common stock acquired or transferred in breach
of the limitation may be redeemed by us for the lesser of the price paid and the
average closing price for the 10 trading days immediately preceding redemption
or sold at the direction of us. We may elect to redeem such shares of common
stock for limited partnership units, which are nontransferable except in very
limited circumstances. Any transfer of shares of common stock which, as a result
of such transfer, causes us to be in violation of any ownership limit will be
deemed void. Although we currently intend to continue to operate in a manner
which will enable us to continue to qualify as a real estate investment trust,
it is possible that future economic, market, legal, tax or other considerations
may cause our Board of Directors to revoke the election for us to qualify as a
real estate investment trust. Under our organizational documents, our Board of
Directors can make such revocation without the consent of our stockholders.
In addition, the consent of the holders of at least 85 percent of Mack-Cali
Realty, L.P.'s partnership units is required: (i) to merge (or permit the merger
of) us with another unrelated person, pursuant to a transaction in which
Mack-Cali Realty, L.P. is not the surviving entity; (ii) to dissolve, liquidate
or wind Mack-Cali Realty, L.P. up; or (iii) to convey or otherwise transfer all
or substantially all of Mack-Cali Realty, L.P.'s assets. As general partner, we
own approximately 77.8 percent of Mack-Cali Realty, L.P.'s outstanding
partnership units (assuming conversion of all preferred limited partnership
units).
15
<PAGE>
TAX LIABILITIES AS A CONSEQUENCE OF FAILURE TO QUALIFY AS A REAL ESTATE
INVESTMENT TRUST: We have elected to be treated and have operated so as to
qualify as a real estate investment trust for federal income tax purposes since
our taxable year ended December 31, 1994. Although we believe we will continue
to operate in such manner, we cannot guarantee that we will do so. Qualification
as a real estate investment trust involves the satisfaction of various
requirements (some on an annual and quarterly basis) established under highly
technical and complex tax provisions of the Internal Revenue Code. Because few
judicial or administrative interpretations of such provisions exist and
qualification determinations are fact sensitive, we cannot assure you that we
will qualify as a real estate investment trust for any taxable year.
If we fail to qualify as a real estate investment trust in any taxable year,
we will be subject to the following:
- we will not be allowed a deduction for dividends to shareholders;
- we will be subject to federal income tax at regular corporate rates,
including any alternative minimum tax, if applicable; and
- unless we are entitled to relief under certain statutory provisions, we
will not be permitted to qualify as a real estate investment trust for the
four taxable years following the year during which we were disqualified.
A loss of our status as a real estate investment trust could have an adverse
effect on us. Failure to qualify as a real estate investment trust also would
eliminate the requirement that we pay dividends to our shareholders.
OTHER TAX LIABILITIES: Even if we qualify as a real estate investment
trust, we are subject to certain federal, state and local taxes on our income
and property and, in some circumstances, certain other state taxes. Our net
income from third party management and tenant improvements, if any, also may be
subject to federal income tax.
RISK OF CHANGES IN THE TAX LAW APPLICABLE TO REAL ESTATE INVESTMENT
TRUSTS: Since the Internal Revenue Service, the United States Treasury
Department and Congress frequently review federal income tax legislation, we
cannot predict whether, when or to what extent new federal tax laws,
regulations, interpretations or rulings will be adopted. Any of such legislative
action may prospectively or retroactively modify our and Mack-Cali Realty,
L.P.'s tax treatment and, therefore, may adversely affect taxation of us,
Mack-Cali Realty, L.P., and/or investors.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS.
The Company considers portions of this information to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of The Securities Exchange Act of 1934. Although the Company
believes that the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved.
16
<PAGE>
ITEM 2. PROPERTIES
PROPERTY LIST
As of December 31, 1998, the Company's Properties consisted of 237
in-service office, office/flex and industrial/warehouse properties, ranging from
one to 19 stories, as well as two multi-family residential properties, two
stand-alone retail properties, two land leases and one redevelopment office
property. The Properties are located primarily in the Northeast. The Properties
are easily accessible from major thoroughfares and are in close proximity to
numerous amenities. The Properties contain a total of approximately 26.8 million
square feet, with the individual properties ranging from approximately 6,600 to
761,200 square feet. The Properties, managed by on-site employees, generally
have attractively landscaped sites, atriums and covered parking in addition to
quality design and construction. 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.
17
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE PROPERTIES
ATLANTIC COUNTY, NEW JERSEY
EGG HARBOR
100 Decadon Drive...................... 1987 40,422 100.0 770 770 0.18 19.05
200 Decadon Drive...................... 1991 39,922 99.8 501 477 0.12 12.57
BERGEN COUNTY, NEW JERSEY
FAIR LAWN
17-17 Route 208 North.................. 1987 143,000 96.0 3,391 3,327 0.80 24.70
FORT LEE
One Bridge Plaza....................... 1981 200,000 98.2 4,686 4,539 1.11 23.86
LITTLE FERRY
200 Riser Road......................... 1974 286,628 100.0 1,858 1,858 0.44 6.48
MONTVALE
95 Chestnut Ridge Road................. 1975 47,700 100.0 565 565 0.13 11.84
135 Chestnut Ridge Road................ 1981 66,150 100.0 1,217 1,217 0.29 18.40
PARAMUS
140 Ridgewood Avenue................... 1981 239,680 100.0 5,141 5,128 1.22 21.45
15 East Midland Avenue................. 1988 259,823 100.0 6,749 6,749 1.60 25.98
461 From Road.......................... 1988 253,554 99.8 5,993 5,991 1.42 23.68
650 From Road.......................... 1978 348,510 96.7 7,538 7,535 1.79 22.37
61 South Paramus Avenue................ 1985 269,191 99.0 5,596 5,556 1.33 21.00
ROCHELLE PARK
120 Passaic Street..................... 1972 52,000 100.0 575 575 0.14 11.06
365 West Passaic Street................ 1976 212,578 84.0 3,463 3,428 0.82 19.39
SADDLE RIVER
1 Lake Street.......................... 1994 474,801 100.0 7,465 7,465 1.77 15.72
UPPER SADDLE RIVER
10 Mountainview Road(7)................ 1986 192,000 100.0 3,053 2,952 0.72 18.72
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
OFFICE PROPERTIES
ATLANTIC COUNTY, NEW JERSEY
EGG HARBOR
100 Decadon Drive...................... 19.05 Computer Sciences Corp. (80%), United States of America--GSA (20%)
200 Decadon Drive...................... 11.97 Computer Sciences Corp. (45%), Advanced Casino Corp. (33%), Dimensions
International Inc. (15%)
BERGEN COUNTY, NEW JERSEY
FAIR LAWN
17-17 Route 208 North.................. 24.24 Lonza, Inc. (63%), Boron-Lepore Assoc., Inc. (16%)
FORT LEE
One Bridge Plaza....................... 23.11 PricewaterhouseCoopers LLP (26%), Broadview Associates (16%), Bozell
Worldwide, Inc. (16%)
LITTLE FERRY
200 Riser Road......................... 6.48 Ford Motor Company (34%), Dassault Falcon Jet Corp. (33%), Sanyo Fisher
Service Corp. (33%)
MONTVALE
95 Chestnut Ridge Road................. 11.84 Roussel-UCLAF Holdings Corp. (100%)
135 Chestnut Ridge Road................ 18.40 Alliance Funding Company (100%)
PARAMUS
140 Ridgewood Avenue................... 21.40 AT&T Wireless Services (46%), Smith Barney Shearson Inc. (19%)
15 East Midland Avenue................. 25.98 AT&T Wireless Services (98%)
461 From Road.......................... 23.68 Toys 'R' Us--NJ Inc. (96%)
650 From Road.......................... 22.36 Western Union Financial Services, Inc. (38%)
61 South Paramus Avenue................ 20.85 Dun & Bradstreet Software Services, Inc. (11%)
ROCHELLE PARK
120 Passaic Street..................... 11.06 Electronic Data Systems Corp. (100%)
365 West Passaic Street................ 19.20 United Retail Incorporated (26%), Catalina Marketing Corp. (10%),
Financial Telesis Inc. (10%)
SADDLE RIVER
1 Lake Street.......................... 15.72 Prentice-Hall Inc. (100%)
UPPER SADDLE RIVER
10 Mountainview Road(7)................ 18.10 Thomson Minwax Company (23%), Corning Life Sciences (15%), ITT Fluid
Technology (14%), Professional Detailing Inc. (14%), Neuromedical
Systems Inc. (14%), Innapharma Inc. (10%)
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
WOODCLIFF LAKE
400 Chestnut Ridge Road................ 1982 89,200 100.0 2,120 2,120 0.50 23.77
470 Chestnut Ridge Road................ 1987 52,500 100.0 1,192 1,192 0.28 22.70
530 Chestnut Ridge Road................ 1986 57,204 100.0 1,166 1,166 0.28 20.38
50 Tice Boulevard...................... 1984 235,000 100.0 4,372 3,732 1.04 18.60
300 Tice Boulevard..................... 1991 230,000 100.0 5,022 4,951 1.19 21.83
BURLINGTON COUNTY, NEW JERSEY
MOORESTOWN
224 Strawbridge Drive(7)............... 1984 74,000 63.4 800 734 0.19 17.05
228 Strawbridge Drive(7)............... 1984 74,000 100.0 597 459 0.14 8.07
ESSEX COUNTY, NEW JERSEY
MILLBURN
150 J.F. Kennedy Parkway............... 1980 247,476 100.0 6,572 6,565 1.56 26.56
ROSELAND
101 Eisenhower Parkway................. 1980 237,000 95.2 4,084 3,800 0.97 18.10
103 Eisenhower Parkway................. 1985 151,545 94.1 3,195 2,934 0.76 22.40
HUDSON COUNTY, NEW JERSEY
JERSEY CITY
95 Christopher Columbus Drive.......... 1989 621,900 100.0 12,717 11,552 3.02 20.45
Harborside Financial Center Plaza I.... 1983 400,000 98.8 3,264 3,264 0.77 8.26
Harborside Financial Center Plaza II... 1990 761,200 100.0 17,145 17,047 4.06 22.52
Harborside Financial Center Plaza III.. 1990 725,600 100.0 16,341 16,247 3.87 22.52
MERCER COUNTY, NEW JERSEY
PRINCETON
5 Vaughn Drive......................... 1987 98,500 94.9 2,095 2,052 0.50 22.41
400 Alexander Road..................... 1987 70,550 100.0 1,270 1,081 0.30 18.00
103 Carnegie Center.................... 1984 96,000 100.0 2,038 1,929 0.48 21.23
100 Overlook Center.................... 1988 149,600 99.8 3,862 3,862 0.92 25.87
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
WOODCLIFF LAKE
400 Chestnut Ridge Road................ 23.77 Timeplex, Inc. (100%)
470 Chestnut Ridge Road................ 22.70 Andermatt LP (100%)
530 Chestnut Ridge Road................ 20.38 KPMG Peat Marwick, LLP (100%)
50 Tice Boulevard...................... 15.88 Syncsort, Inc. (22%)
300 Tice Boulevard..................... 21.53 Merck-Medco Managed Care LLC (20%), Xerox Corp. (14%), Chase Manhattan
Mortgage Corp. (12%), Comdisco, Inc. (11%), NYCE, Corp. (11%)
BURLINGTON COUNTY, NEW JERSEY
MOORESTOWN
224 Strawbridge Drive(7)............... 15.64 Allstate Insurance Co. (49%)
228 Strawbridge Drive(7)............... 6.20 Cendant Mortgage Corporation (100%)
ESSEX COUNTY, NEW JERSEY
MILLBURN
150 J.F. Kennedy Parkway............... 26.53 KPMG Peat Marwick, LLP (42%), Budd Larner Gross (23%), Coldwell Banker
Residential Real Estate (14%)
ROSELAND
101 Eisenhower Parkway................. 16.84 Arthur Andersen, LLP (31%), Brach, Eichler, Rosenberg (13%)
103 Eisenhower Parkway................. 20.57 Ravin, Sarasohn, Cook, Baumgarten (18%), Lum, Danzis, Drasco (16%),
Chelsea GCA Realty Corp. (15%), Salomon Smith Barney, Inc. (11%)
HUDSON COUNTY, NEW JERSEY
JERSEY CITY
95 Christopher Columbus Drive.......... 18.58 DLJ Securities Corp. (Pershing) (72%), NTT Data Corp. (22%)
Harborside Financial Center Plaza I.... 8.26 Bankers Trust Harborside, Inc. (96%)
Harborside Financial Center Plaza II... 22.39 Dow Jones Telerate Systems, Inc. (44%), Morgan Stanley Dean Witter (30%),
Lewco Sercurities (11%)
Harborside Financial Center Plaza III.. 22.39 AICPA (34%), BTM Information Services, Inc. (19%)
MERCER COUNTY, NEW JERSEY
PRINCETON
5 Vaughn Drive......................... 21.95 U.S. Trust Co. of NJ (19%), Woodrow Wilson National Fellowship Foundation
(14%), Princeton Venture Research Corp. (14%), Villeroy & Boch Tableware
Ltd. (11%)
400 Alexander Road..................... 15.32 Berlitz International Inc. (100%)
103 Carnegie Center.................... 20.09 Ronin Development Corp. (15%), R.G. Vanderweil Engineers (14%)
100 Overlook Center.................... 25.87 Squibb-Novo Inc. (24%), Xerox Corp. (24%), IFP North America Inc. (14%)
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MIDDLESEX COUNTY, NEW JERSEY
EAST BRUNSWICK
377 Summerhill Road.................... 1977 40,000 100.0 373 373 0.09 9.33
PLAINSBORO
500 College Road East(7)............... 1984 158,235 100.0 2,060 2,060 0.49 21.21
SOUTH BRUNSWICK
3 Independence Way..................... 1983 111,300 87.3 1,913 1,912 0.45 19.69
WOODBRIDGE
581 Main Street........................ 1991 200,000 94.0 3,078 3,043 0.73 16.37
MONMOUTH COUNTY, NEW JERSEY
NEPTUNE
3600 Route 66.......................... 1989 180,000 100.0 2,411 2,411 0.57 13.39
WALL TOWNSHIP
1305 Campus Parkway.................... 1988 23,350 92.3 402 391 0.10 18.65
1350 Campus Parkway.................... 1990 79,747 97.5 1,324 1,233 0.31 17.03
MORRIS COUNTY, NEW JERSEY
FLORHAM PARK
325 Columbia Parkway................... 1987 168,144 100.0 3,749 3,279 0.89 22.30
PARSIPPANY
1 Sylvan Way(7)........................ 1989 150,557 100.0 2,427 2,381 0.58 21.24
2 Dryden Way(7)........................ 1990 6,216 100.0 51 51 0.01 10.69
2 Hilton Court(7)...................... 1991 181,592 100.0 4,745 4,745 1.12 34.06
5 Sylvan Way(7)........................ 1989 151,383 93.0 2,576 2,576 0.61 24.11
7 Campus Drive(7)...................... 1982 154,395 100.0 1,945 1,945 0.46 16.42
7 Sylvan Way(7)........................ 1987 145,983 100.0 2,229 2,229 0.53 19.90
8 Campus Drive(7)...................... 1987 215,265 92.8 3,495 3,491 0.83 22.81
600 Parsippany Road.................... 1978 96,000 100.0 1,592 1,542 0.38 16.58
MORRIS PLAINS
201 Littleton Road..................... 1979 88,369 100.0 1,703 1,702 0.40 19.27
250 Johnson Road....................... 1977 75,000 100.0 1,090 1,090 0.26 14.53
MORRIS TOWNSHIP
340 Mt. Kemble Avenue.................. 1985 387,000 100.0 5,530 5,530 1.31 14.29
412 Mt. Kemble Avenue.................. 1986 475,100 100.0 6,902 6,902 1.64 14.53
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
MIDDLESEX COUNTY, NEW JERSEY
EAST BRUNSWICK
377 Summerhill Road.................... 9.33 Greater New York Mutual Insurance Company (100%)
PLAINSBORO
500 College Road East(7)............... 21.21 Merrill Lynch Asset Mgmt (72%), Buchanan Ingersoll P.C. (17%)
SOUTH BRUNSWICK
3 Independence Way..................... 19.68 Merrill Lynch Pierce Fenner & Smith (72%)
WOODBRIDGE
581 Main Street........................ 16.19 First Investors Management Company, Inc. (38%), Cast North America Ltd.
(11%)
MONMOUTH COUNTY, NEW JERSEY
NEPTUNE
3600 Route 66.......................... 13.39 The United States Life Insurance Company (100%)
WALL TOWNSHIP
1305 Campus Parkway.................... 18.14 Centennial Cellular Corp. (41%), McLaughlin, Bennett, Gelson (35%), NJ
Natural Energy Co. (10%)
1350 Campus Parkway.................... 15.86 Meridan Health Realty Corp. (22%), New Jersey National Bank/Core States
(17%), Stephen E. Gertler Law Office (17%), Milestone Materials Inc.
(16%), Hospital Computer Systems Inc. (11%)
MORRIS COUNTY, NEW JERSEY
FLORHAM PARK
325 Columbia Parkway................... 19.50 Bressler Amery & Ross (24%), Atlantic Health Systems (12%), Dun &
Bradstreet Inc. (12%), QWest Communications Corp. (11%)
PARSIPPANY
1 Sylvan Way(7)........................ 20.84 Cendant Operations Inc. (99%)
2 Dryden Way(7)........................ 10.69 Bright Horizons Childrens Center (100%)
2 Hilton Court(7)...................... 34.06 Deloitte & Touche USA LLP (66%), Northern Telecom Inc. (16%)
5 Sylvan Way(7)........................ 24.11 Integrated Communications (50%), Experian Information Solution (15%)
7 Campus Drive(7)...................... 16.42 Nabisco Inc. (100%)
7 Sylvan Way(7)........................ 19.90 Nabisco Inc. (100%)
8 Campus Drive(7)...................... 22.78 Prudential Insurance Co. (31%), Bay Networks Inc. (27%), MCI
Telecommunications Corp. (18%), Ayco Company LP (13%)
600 Parsippany Road.................... 16.06 Metropolitan Life Insurance Co. (36%), IBM Corporation (30%)
MORRIS PLAINS
201 Littleton Road..................... 19.26 Xerox Corp. (35%), Bozell Worldwide Inc. (34%), Willis Corroon Corp. of
New Jersey (20%), Chep USA (11%)
250 Johnson Road....................... 14.53 Electronic Data Systems Corp. (100%)
MORRIS TOWNSHIP
340 Mt. Kemble Avenue.................. 14.29 AT&T Corp. (100%)
412 Mt. Kemble Avenue.................. 14.53 AT&T Corp. (100%)
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
PASSAIC COUNTY, NEW JERSEY
CLIFTON
777 Passaic Avenue..................... 1983 75,000 76.8 1,036 891 0.25 17.99
TOTOWA
999 Riverview Drive.................... 1988 56,066 95.1 937 914 0.22 17.57
WAYNE
201 Willowbrook Boulevard.............. 1970 178,329 99.0 2,446 2,435 0.58 13.85
SOMERSET COUNTY, NEW JERSEY
BASKING RIDGE
222 Mt. Airy Road...................... 1986 49,000 100.0 434 434 0.10 8.86
233 Mt. Airy Road...................... 1987 66,000 100.0 762 720 0.18 11.55
BRIDGEWATER
721 Route 202/206...................... 1989 192,741 100.0 3,900 3,900 0.92 20.23
UNION COUNTY, NEW JERSEY
CLARK
100 Walnut Avenue...................... 1985 182,555 100.0 4,105 3,579 0.97 22.49
CRANFORD
6 Commerce Drive....................... 1973 56,000 100.0 996 912 0.24 17.79
11 Commerce Drive(6)................... 1981 90,000 96.2 881 742 0.21 10.18
12 Commerce Drive...................... 1967 72,260 90.6 594 594 0.14 9.07
20 Commerce Drive...................... 1990 176,600 87.0 3,090 2,689 0.73 20.11
65 Jackson Drive....................... 1984 82,778 100.0 1,636 1,233 0.39 19.76
NEW PROVIDENCE
890 Mountain Road...................... 1977 80,000 100.0 2,030 2,028 0.48 25.38
DUTCHESS COUNTY, NEW YORK
FISHKILL
300 South Lake Drive................... 1987 118,727 99.8 2,026 2,023 0.48 17.10
NASSAU COUNTY, NEW YORK
NORTH HEMPSTEAD
111 East Shore Road.................... 1980 55,575 100.0 1,528 1,528 0.36 27.49
600 Community Drive.................... 1983 206,274 100.0 4,966 4,966 1.17 24.07
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
PASSAIC COUNTY, NEW JERSEY
CLIFTON
777 Passaic Avenue..................... 15.47 Motorola Inc. (19%)
TOTOWA
999 Riverview Drive.................... 17.14 Bank of New York (56%), Commonwealth Land Title Insurance Co. (11%),
Bankers Mortgage Company (10%)
WAYNE
201 Willowbrook Boulevard.............. 13.79 The Grand Union Co. (75%), Woodward-Clyde Consultants (24%)
SOMERSET COUNTY, NEW JERSEY
BASKING RIDGE
222 Mt. Airy Road...................... 8.86 Lucent Technologies Inc. (100%)
233 Mt. Airy Road...................... 10.91 AT&T Corp. (100%)
BRIDGEWATER
721 Route 202/206...................... 20.23 Allstate Insurance Company (37%), Norris, McLaughlin & Marcus, PA (31%),
AT&T Corp. (20%)
UNION COUNTY, NEW JERSEY
CLARK
100 Walnut Avenue...................... 19.61 BDSI, Inc. (41%), Allstate Insurance Company (13%), The Equitable Life
Assurance Society of the United States (10%)
CRANFORD
6 Commerce Drive....................... 16.29 Kendle International Inc. (32%), PSE&G--American Resurgence (18%),
Columbia National, Inc. (13%)
11 Commerce Drive(6)................... 8.57 Northeast Administrators Inc. (10%)
12 Commerce Drive...................... 9.07 Dames & Moore (40%), Registrar & Transfer Co. (24%)
20 Commerce Drive...................... 17.50 PSE&G--American Resurgence (26%), Quintiles Inc. (15%)
65 Jackson Drive....................... 14.90 Kraft General Foods, Inc. (35%), Allstate Insurance Co. (27%), Procter &
Gamble Distribution Co., Inc. (18%), Unum Life Insurance Co. (14%)
NEW PROVIDENCE
890 Mountain Road...................... 25.35 Allstate Insurance Co. (58%), Dun & Bradstreet (26%), K Line America, Inc.
(16%)
DUTCHESS COUNTY, NEW YORK
FISHKILL
300 South Lake Drive................... 17.07 Allstate Insurance Company (16%)
NASSAU COUNTY, NEW YORK
NORTH HEMPSTEAD
111 East Shore Road.................... 27.49 Administrators For The Professions, Inc. (100%)
600 Community Drive.................... 24.07 CMP Media, Inc. (100%)
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
ROCKLAND COUNTY, NEW YORK
SUFFERN
400 Rella Boulevard.................... 1988 180,000 96.5 3,269 3,191 0.78 18.82
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
100 Clearbrook Road(6)................. 1975 60,000 100.0 693 676 0.16 11.55
101 Executive Boulevard................ 1971 50,000 94.2 877 861 0.21 18.62
570 Taxter Road........................ 1972 75,000 91.4 1,431 1,414 0.34 20.88
HAWTHORNE
1 Skyline Drive........................ 1980 20,400 99.0 274 270 0.06 13.57
2 Skyline Drive........................ 1987 30,000 98.9 394 394 0.09 13.28
17 Skyline Drive....................... 1989 85,000 100.0 1,103 1,103 0.26 12.98
30 Saw Mill River Road................. 1982 248,400 100.0 5,216 4,919 1.24 21.00
7 Skyline Drive(7)..................... 1987 109,000 97.8 634 634 0.15 20.10
TARRYTOWN
200 White Plains Road.................. 1982 89,000 98.5 1,767 1,702 0.42 20.16
220 White Plains Road.................. 1984 89,000 83.5 1,677 1,631 0.40 22.57
WHITE PLAINS
1 Barker Avenue........................ 1975 68,000 95.9 1,482 1,469 0.35 22.73
3 Barker Avenue........................ 1983 65,300 100.0 1,380 1,351 0.33 21.13
1 Water Street......................... 1979 45,700 99.8 899 893 0.21 19.71
11 Martine Avenue...................... 1987 180,000 86.1 3,441 3,410 0.82 22.20
50 Main Street......................... 1985 309,000 97.9 7,265 7,133 1.72 24.02
YONKERS
1 Executive Boulevard.................. 1982 112,000 100.0 2,270 2,209 0.54 20.27
3 Executive Plaza...................... 1987 58,000 65.6 890 888 0.21 23.39
CHESTER COUNTY, PENNSYLVANIA
BERWYN
1000 Westlakes Drive................... 1989 60,696 100.0 1,361 1,359 0.32 22.42
1055 Westlakes Drive................... 1990 118,487 100.0 2,298 2,298 0.54 19.39
1205 Westlakes Drive................... 1988 130,265 99.8 2,782 2,774 0.66 21.40
1235 Westlakes Drive................... 1986 134,902 98.4 2,827 2,824 0.67 21.30
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
ROCKLAND COUNTY, NEW YORK
SUFFERN
400 Rella Boulevard.................... 18.37 The Prudential Insurance Co. (21%), Provident Savings F.A. (20%), Allstate
Insurance Co. (19%), John Alden Life Insurance Co. (11%)
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
100 Clearbrook Road(6)................. 11.27 MIM Corporation (18%), Amerihealth Inc. (13%)
101 Executive Boulevard................ 18.28 Pennysaver Group Inc. (23%), MCS Business Solutions Inc. (11%)
570 Taxter Road........................ 20.63 Lincoln Financial Adivsors Inc. (16%), New York State United Teachers
Association (10%)
HAWTHORNE
1 Skyline Drive........................ 13.37 Boxx International Corp. (50%), Childtime Childcare Inc. (49%)
2 Skyline Drive........................ 13.28 MW Samara (56%), Perini Corp. (43%)
17 Skyline Drive....................... 12.98 IBM Corp. (100%)
30 Saw Mill River Road................. 19.80 IBM Corp. (100%)
7 Skyline Drive(7)..................... 20.10 E.M. Industries Inc. (42%), Cortlandt Group Inc. (14%)
TARRYTOWN
200 White Plains Road.................. 19.41 Independent Health Associates (28%), Allmerica Financial (17%), NYS Dept.
of Environmental CNS (13%)
220 White Plains Road.................. 21.95 Clientsoft Inc. (13%), Eagle Family Foods Inc. (11%)
WHITE PLAINS
1 Barker Avenue........................ 22.53 O'Connor McGuinness Conte (19%), United Skys Realty Corp. (18%)
3 Barker Avenue........................ 20.69 Bernard C. Harris Publishing Co. Inc. (56%)
1 Water Street......................... 19.58 Trigen Energy Co. (48%), Stewart Title Insurance Co. (16%)
11 Martine Avenue...................... 22.00 McCarthy Fingar Donovan (11%), David Worby (11%), Dean Witter Reynolds
Inc. (11%)
50 Main Street......................... 23.58 Heineken USA Inc. (10%), National Economic Research (10%)
YONKERS
1 Executive Boulevard.................. 19.72 Wise Contact US Optical Corp. (12%), Pedal Holdings Inc. (12%), Protective
Tech International (11%), York, International Agency Inc. (11%)
3 Executive Plaza...................... 23.34 Metropolitan Life Insurance (22%), Allstate Insurance Company (20%), City
& Suburban Federal Savings Bank (15%)
CHESTER COUNTY, PENNSYLVANIA
BERWYN
1000 Westlakes Drive................... 22.39 PNC Bank, NA (38%), Drinker Biddle & Reath (24%), Manchester, Inc. (14%)
1055 Westlakes Drive................... 19.39 Tokai Financial Services Inc. (92%)
1205 Westlakes Drive................... 21.34 Provident Mutual Life Insurance Co. (35%), Oracle Corp. (30%)
1235 Westlakes Drive................... 21.27 Pepper Hamilton & Scheetz (18%), Ratner & Prestia (16%)
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DELAWARE COUNTY, PENNSYLVANIA
MEDIA
1400 Providence Road--Center I......... 1986 100,000 97.9 1,969 1,908 0.47 20.11
1400 Providence Road--Center II........ 1990 160,000 99.9 3,062 2,927 0.73 19.16
LESTER
100 Stevens Drive...................... 1986 95,000 99.7 2,074 2,073 0.49 21.90
200 Stevens Drive...................... 1987 208,000 99.7 4,146 4,106 0.98 19.99
300 Stevens Drive...................... 1992 68,000 100.0 1,441 1,438 0.34 21.19
MONTGOMERY COUNTY, PENNSYLVANIA
LOWER PROVIDENCE
1000 Madison Avenue.................... 1990 100,700 96.5 1,650 1,650 0.39 16.98
PLYMOUTH MEETING
Five Sentry Parkway East............... 1984 91,600 100.0 1,456 1,454 0.35 15.90
Five Sentry Parkway West............... 1984 38,400 100.0 640 640 0.15 16.67
1150 Plymouth Meeting Mall............. 1970 167,748 100.0 3,193 3,178 0.76 19.03
FAIRFIELD COUNTY, CONNECTICUT
GREENWICH
500 West Putnam........................ 1973 121,250 100.0 2,480 2,474 0.59 22.62
NORWALK
40 Richards Avenue(7).................. 1985 145,487 97.1 876 863 0.21 20.03
SHELTON
1000 Bridgeport Avenue................. 1986 133,000 100.0 2,453 2,433 0.58 18.44
DISTRICT OF COLUMBIA
WASHINGTON
1400 L Street, NW(7)................... 1987 159,000 86.2 3,165 3,164 0.75 39.38
1709 New York Avenue, NW(7)............ 1972 166,000 94.4 3,731 3,731 0.88 40.61
PRINCE GEORGE'S COUNTY, MARYLAND
LANHAM
4200 Parliament Place(7)............... 1989 122,000 80.0 1,032 1,028 0.24 22.84
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
DELAWARE COUNTY, PENNSYLVANIA
MEDIA
1400 Providence Road--Center I......... 19.49 General Services Admin (13%), Erie Insurance Company (11%)
1400 Providence Road--Center II........ 18.31 Barnett International (36%)
LESTER
100 Stevens Drive...................... 21.89 SAP America, Inc. (82%)
200 Stevens Drive...................... 19.80 PNC Bank NA (52%), Keystone Mercy Health Plan (42%)
300 Stevens Drive...................... 21.15 SAP America, Inc. (50%), Keystone Mercy Health Plan (28%)
MONTGOMERY COUNTY, PENNSYLVANIA
LOWER PROVIDENCE
1000 Madison Avenue.................... 16.98 Reality Online Inc. (37%), First Chicago Nat'l Proc. (21%), Danka Corp.
(14%), Seton Company (12%)
PLYMOUTH MEETING
Five Sentry Parkway East............... 15.87 Merck & Co. Inc. (77%), Selas Fluid Processing Corp. (23%)
Five Sentry Parkway West............... 16.67 Merck & Co. Inc. (70%), David Cutler Group (30%)
1150 Plymouth Meeting Mall............. 18.95 Computer Learning Centers, Inc. (18%), Ken-Crest Services (17%), ATC Group
Services Inc. (15%), ECC Management Services (13%)
FAIRFIELD COUNTY, CONNECTICUT
GREENWICH
500 West Putnam........................ 22.57 Hachette Filipacchi Magazines (27%), Great Brands of Europe Inc. (13%),
Winklevoss Consultants Inc. (12%), Orthapaedic Associates (11%)
NORWALK
40 Richards Avenue(7).................. 19.73 --
SHELTON
1000 Bridgeport Avenue................. 18.29 Weseley Software Development (22%), William Carter Company (20%), Unilever
Home and Personal CA (15%), Toyota Motor Credit Corp. (11%), Land Star
System, Inc. (11%)
DISTRICT OF COLUMBIA
WASHINGTON
1400 L Street, NW(7)................... 39.37 Winston & Strawn (59%)
1709 New York Avenue, NW(7)............ 40.61 Board of Gov/Federal Reserve (71%), United States of America--GSA (13%)
PRINCE GEORGE'S COUNTY, MARYLAND
LANHAM
4200 Parliament Place(7)............... 22.75 Group I Software Inc. (43%), State Farm Mutual Auto Ins. Co. (11%)
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BEXAR COUNTY, TEXAS
SAN ANTONIO
111 Soledad............................ 1918 248,153 90.7 2,346 2,320 0.56 10.42
1777 N.E. Loop 410..................... 1986 256,137 94.8 3,533 3,504 0.84 14.55
84 N.E. Loop 410....................... 1971 187,312 89.3 2,497 2,497 0.59 14.93
200 Concord Plaza Drive................ 1986 248,700 98.8 4,290 4,280 1.02 17.46
COLLIN COUNTY, TEXAS
PLANO
555 Republic Place..................... 1986 97,889 94.7 1,389 1,379 0.33 14.98
DALLAS COUNTY, TEXAS
DALLAS
3030 LBJ Freeway(6).................... 1984 367,018 93.5 5,863 5,803 1.38 17.09
3100 Monticello........................ 1984 173,837 93.7 2,577 2,571 0.61 15.82
8214 Westchester....................... 1983 95,509 96.2 1,418 1,417 0.34 15.43
IRVING
2300 Valley View....................... 1985 142,634 97.5 2,311 2,292 0.55 16.62
RICHARDSON
1122 Alma Road......................... 1977 82,576 100.0 607 607 0.14 7.35
HARRIS COUNTY, TEXAS
HOUSTON
10497 Town & Country Way............... 1981 148,434 91.5 1,886 1,869 0.45 13.89
14511 Falling Creek.................... 1982 70,999 84.6 650 646 0.15 10.82
1717 St. James Place................... 1975 109,574 99.0 1,299 1,278 0.31 11.97
1770 St. James Place................... 1973 103,689 99.0 1,209 1,192 0.29 11.78
5225 Katy Freeway...................... 1983 112,213 91.0 1,134 1,127 0.27 11.11
5300 Memorial.......................... 1982 155,099 99.4 1,956 1,952 0.46 12.69
POTTER COUNTY, TEXAS
AMARILLO
6900 IH--40 West....................... 1986 71,771 74.9 522 515 0.12 9.71
TARRANT COUNTY, TEXAS
EULESS
150 West Parkway....................... 1984 74,429 99.7 1,000 997 0.24 13.48
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
BEXAR COUNTY, TEXAS
SAN ANTONIO
111 Soledad............................ 10.31 SBC Communications, Inc. (34%)
1777 N.E. Loop 410..................... 14.43 --
84 N.E. Loop 410....................... 14.93 Pacificare of Texas, Inc. (30%), KBL Cable, Inc. (26%), Kraft General
Foods Inc. (25%)
200 Concord Plaza Drive................ 17.42 Merrill Lynch Pierce Fenner Smith (12%)
COLLIN COUNTY, TEXAS
PLANO
555 Republic Place..................... 14.88 William Smith Enterprises (22%), Texas Health Choice (17%), Dayton Hudson
Corporation (14%)
DALLAS COUNTY, TEXAS
DALLAS
3030 LBJ Freeway(6).................... 16.91 Club Corporation of America (32%)
3100 Monticello........................ 15.78 Insignia Commercial, Inc. (23%), Time Marketing Corporation/Evans Group
(12%), Heath Insurance Brokers, Inc. (10%)
8214 Westchester....................... 15.42 Preston Business Center, Inc. (15%), Malone Mortgage Company of America,
Inc. (12%), State Bank & Trust Co. (11%)
IRVING
2300 Valley View....................... 16.48 Nokia, Inc. (38%), Alltel Information Services, Inc. (18%), Computer Task
Group, Inc. (12%), Tricon Restaurant Services (11%)
RICHARDSON
1122 Alma Road......................... 7.35 MCI Telecommunications Corp. (100%)
HARRIS COUNTY, TEXAS
HOUSTON
10497 Town & Country Way............... 13.76 Vastar Resources, Inc. (23%), Texas Ohio Gas, Inc. (11%)
14511 Falling Creek.................... 10.75 Nationwide Mutual Insurance Company (12%)
1717 St. James Place................... 11.78 MCX Corp (14%), Home Loan Corporation (10%)
1770 St. James Place................... 11.61 Neosoft Inc. (10%)
5225 Katy Freeway...................... 11.04 --
5300 Memorial.......................... 12.66 Drypers Corporation (20%), Datavox, Inc. (20%), HCI Chemicals (USA) Ltd.
Inc. (15%)
POTTER COUNTY, TEXAS
AMARILLO
6900 IH--40 West....................... 9.58 Sitel Corporation (16%)
TARRANT COUNTY, TEXAS
EULESS
150 West Parkway....................... 13.44 Warrantech Automotive, Inc. (34%), Landmark BankMid-Cities (18%), Mike
Bowman Realtors/Century 21 (17%)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TRAVIS COUNTY, TEXAS
AUSTIN
1250 Capital of Texas Hwy. South(7).... 1985 270,703 99.5 4,369 4,360 1.04 20.07
MARICOPA COUNTY, ARIZONA
GLENDALE
5551 West Talavi Boulevard............. 1991 181,596 100.0 1,454 1,451 0.34 8.01
PHOENIX
19640 North 31st Street................ 1990 124,171 100.0 1,584 1,572 0.38 12.76
20002 North 19th Avenue................ 1986 119,301 100.0 679 679 0.16 5.69
SCOTTSDALE
9060 E. Via Linda Boulevard............ 1984 111,200 100.0 2,161 2,161 0.51 19.43
SAN FRANCISCO COUNTY, CALIFORNIA
SAN FRANCISCO
760 Market Street...................... 1908 267,446 87.7 4,512 4,490 1.07 19.24
ARAPAHOE COUNTY, COLORADO
AURORA
750 South Richfield Street(7).......... 1997 108,240 100.0 1,642 1,642 0.39 26.75
DENVER
400 South Colorado Boulevard(7)........ 1983 125,415 94.5 1,048 1,041 0.25 15.22
ENGLEWOOD
5350 South Roslyn Street (6) (7)....... 1982 63,754 100.0 816 815 0.19 16.68
9359 East Nichols Avenue(7)............ 1997 72,610 100.0 509 509 0.12 12.36
BOULDER COUNTY, COLORADO
BROOMFIELD
105 South Technology Court(7).......... 1997 37,574 100.0 340 340 0.08 15.95
303 South Technology Court-A(7)........ 1997 34,454 100.0 290 290 0.07 10.97
303 South Technology Court-B(7)........ 1997 40,416 100.0 341 341 0.08 11.00
LOUISVILLE
1172 Century Drive(7).................. 1996 49,566 100.0 467 467 0.11 12.28
248 Centennial Parkway(7).............. 1996 39,266 93.1 370 370 0.09 13.19
285 Century Place(7)................... 1997 69,145 100.0 617 617 0.15 15.73
DENVER COUNTY, COLORADO
DENVER
3600 South Yosemite(7)................. 1974 133,743 100.0 812 812 0.19 9.51
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
TRAVIS COUNTY, TEXAS
AUSTIN
1250 Capital of Texas Hwy. South(7).... 20.03 Intelliquest Inc. (14%)
MARICOPA COUNTY, ARIZONA
GLENDALE
5551 West Talavi Boulevard............. 7.99 Honeywell, Inc. (100%)
PHOENIX
19640 North 31st Street................ 12.66 American Express (100%)
20002 North 19th Avenue................ 5.69 American Express (100%)
SCOTTSDALE
9060 E. Via Linda Boulevard............ 19.43 Sentry Insurance (63%), Rite Aid Corporation (37%)
SAN FRANCISCO COUNTY, CALIFORNIA
SAN FRANCISCO
760 Market Street...................... 19.14 Macy's c/o Federated Department Stores (19%)
ARAPAHOE COUNTY, COLORADO
AURORA
750 South Richfield Street(7).......... 26.75 T.R.W. Inc. (100%)
DENVER
400 South Colorado Boulevard(7)........ 15.12 Community Health Plan (12%), Department of Revenue (12%), Norwest Bank
Colorado N.A. (11%), Senter GoldFarb & Rice (10%)
ENGLEWOOD
5350 South Roslyn Street (6) (7)....... 16.66 Westland Enterprises (17%), Business World Inc. (17%)
9359 East Nichols Avenue(7)............ 12.36 First Tennessee Bank NA (100%)
BOULDER COUNTY, COLORADO
BROOMFIELD
105 South Technology Court(7).......... 15.95 Sun Microsystems Inc. (100%)
303 South Technology Court-A(7)........ 10.97 Sun Microsystems Inc. (100%)
303 South Technology Court-B(7)........ 11.00 Sun Microsystems Inc. (100%)
LOUISVILLE
1172 Century Drive(7).................. 12.28 Skyconnect Inc. (40%), Evolving Systems Inc. (22%), MCI Systemhouse Corp.
(22%), RX Kinetix Inc. (16%)
248 Centennial Parkway(7).............. 13.19 Rock Bottom Restaurants Inc. (59%), Aircell Inc. (28%)
285 Century Place(7)................... 15.73 HBO & Company of Georgia (100%)
DENVER COUNTY, COLORADO
DENVER
3600 South Yosemite(7)................. 9.51 M.D.C. Holdings Inc. (100%)
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
DOUGLAS COUNTY, COLORADO
ENGLEWOOD
384 Inverness Drive South(7)........... 1985 51,523 100.0 603 594 0.14 15.26
400 Inverness Drive(7)................. 1997 111,608 99.9 1,343 1,339 0.32 21.24
5975 South Quebec Street(7)............ 1996 102,877 98.7 1,728 1,725 0.41 22.18
67 Inverness Drive East(7)............. 1996 54,280 100.0 489 489 0.12 11.74
PARKER
9777 Pyramid Court(7).................. 1995 120,281 100.0 1,021 1,021 0.24 11.06
EL PASO COUNTY, COLORADO
COLORADO SPRINGS
1975 Research Parkway(7)............... 1997 115,250 95.7 719 710 0.17 11.49
JEFFERSON COUNTY, COLORADO
LAKEWOOD
141 Union Boulevard(7)................. 1985 63,600 94.7 739 720 0.18 15.99
HILLSBOROUGH COUNTY, FLORIDA
TAMPA
501 Kennedy Boulevard.................. 1982 297,429 89.7 3,402 3,389 0.81 12.75
POLK COUNTY, IOWA
WEST DES MOINES
2600 Westown Parkway................... 1988 72,265 98.2 1,088 1,079 0.26 15.33
DOUGLAS COUNTY, NEBRASKA
OMAHA
210 South 16th Street.................. 1894 319,535 95.0 3,225 3,216 0.76 10.62
---------- ----- --------- --------- ------ -----------
Total Office Properties................ 22,420,331 97.11 $ 377,828 $ 370,248 89.56 $ 18.51
---------- ----- --------- --------- ------ -----------
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
DOUGLAS COUNTY, COLORADO
ENGLEWOOD
384 Inverness Drive South(7)........... 15.03 Quickpen International Corp. (37%), United States of America--GSA (19%)
400 Inverness Drive(7)................. 21.17 Convergent Communications Inc. (26%), Summit Group Inc. (22%), Compuware
Corp. (17%), Ani Colorado Inc./Alliance Int'l (16%)
5975 South Quebec Street(7)............ 22.14 Northern Telecom Inc. (43%), Silicon Graphics Inc. (28%)
67 Inverness Drive East(7)............. 11.74 T-Netix Inc. (69%), Convergent Communications Inc. (31%)
PARKER
9777 Pyramid Court(7).................. 11.06 Evolving System Inc. (100%)
EL PASO COUNTY, COLORADO
COLORADO SPRINGS
1975 Research Parkway(7)............... 11.35 Bombardier Capital Florida (69%), Concert Management Services (18%)
JEFFERSON COUNTY, COLORADO
LAKEWOOD
141 Union Boulevard(7)................. 15.58 Arbitration Forums Inc. (18%), Special District Management (11%)
HILLSBOROUGH COUNTY, FLORIDA
TAMPA
501 Kennedy Boulevard.................. 12.70 Fowler, White, Gillen, Boggs, Villareal & Banker, PA (33%), Raytheon
Engineers & Constructors, Inc. (31%)
POLK COUNTY, IOWA
WEST DES MOINES
2600 Westown Parkway................... 15.20 St. Paul Fire and Marine Insurance Company (19%), MCI Telecommunications
Corp. (14%), New England Mutual Life Insurance Company (13%), American
Express Financial Advisors, Inc. (12%)
DOUGLAS COUNTY, NEBRASKA
OMAHA
210 South 16th Street.................. 10.59 Union Pacific Railroad Company (70%)
-----------
Total Office Properties................ $ 18.16
-----------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OFFICE/FLEX PROPERTIES
BURLINGTON COUNTY, NEW JERSEY
BURLINGTON
3 Terri Lane(7)........................ 1991 64,500 82.8 486 486 0.12 9.89
5 Terri Lane(7)........................ 1992 74,555 100.0 506 505 0.12 7.37
MOORESTOWN
1 Executive Drive(7)................... 1989 20,570 43.0 115 115 0.03 14.12
101 Commerce Drive(7).................. 1988 64,700 100.0 335 315 0.08 5.62
101 Executive Drive(7)................. 1990 29,355 84.2 205 205 0.05 9.01
102 Executive Drive(7)................. 1990 64,000 80.0 321 314 0.08 6.81
1256 North Church(7)................... 1984 63,495 100.0 316 289 0.07 5.41
1507 Lancer Drive(7)................... 1995 32,700 100.0 28 28 0.01 0.93
1510 Lancer Drive(7)................... 1998 88,000 100.0 171 171 0.04 4.15
201 Commerce Drive(7).................. 1986 38,400 100.0 178 178 0.04 5.04
225 Executive Drive(7)................. 1990 50,600 85.8 243 233 0.06 6.08
30 Twosome Drive(7).................... 1997 39,675 100.0 205 205 0.05 5.61
40 Twosome Drive(7).................... 1996 40,265 100.0 255 255 0.06 6.88
50 Twosome Drive(7).................... 1997 34,075 100.0 248 248 0.06 7.91
840 North Lenola(7).................... 1995 38,300 100.0 250 250 0.06 7.09
844 North Lenola(7).................... 1995 28,670 100.0 196 196 0.05 7.43
97 Foster Road(7)...................... 1982 43,200 100.0 170 170 0.04 4.27
WEST DEPTFORD
1451 Metropolitan Drive(7)............. 1996 21,600 100.0 137 137 0.03 6.89
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
OFFICE/FLEX PROPERTIES
BURLINGTON COUNTY, NEW JERSEY
BURLINGTON
3 Terri Lane(7)........................ 9.89 Tempel Steel Company (18%), Signature Home Care (16%), BCM Engineers Inc.
(15%), General Services Administrators (10%)
5 Terri Lane(7)........................ 7.36 Actimed Laboratories Inc. (38%), Lykes Dispensing Systems Inc. (20%), West
Electronics Inc. (12%)
MOORESTOWN
1 Executive Drive(7)................... 14.12 T.T.I. (18%)
101 Commerce Drive(7).................. 5.29 Beckett Corporation (100%)
101 Executive Drive(7)................. 9.01 Bayada Nurses Inc. (24%), Total Package Marketing Inc. (20%), National
Service Solutions (15%)
102 Executive Drive(7)................. 6.66 Comtrex Systems Corp. (29%), Commonwealth Scientific Corp. (21%), Judge
Computer (20%), Judge Imaging Systems Inc. (10%)
1256 North Church(7)................... 4.94 Package Coordinators Inc. (50%), James C. Anderson Associates (30%), Ketec
Inc. (20%)
1507 Lancer Drive(7)................... 0.93 Tad's Delivery Service Inc. (31%)
1510 Lancer Drive(7)................... 4.15 Tad's Delivery Service Inc. (100%)
201 Commerce Drive(7).................. 5.04 Flow Thru Metals Inc. (25%), Franchise Stores Realty Corp. (25%), RE/ Com
Group (25%), Tropicana Products Inc. (25%)
225 Executive Drive(7)................. 5.83 Eastern Research Inc. (33%), Schermerhorn Brothers Inc. (19%), Bioclimatic
Inc. (14%), Band-It Index Inc. (11%)
30 Twosome Drive(7).................... 5.61 Hartman Cards Inc. (28%), Sagot Office Interiors Inc. (24%), Aramark
Sports/Entertainment (14%), The Closet Factory (12%), C&L Packaging Inc.
(12%), Mosler Inc. (10%)
40 Twosome Drive(7).................... 6.88 Vitalink Pharmacy Services (49%), A.D.P. Inc. (37%), Bellstar Inc. (14%)
50 Twosome Drive(7).................... 7.91 Wells Fargo (44%), Sussex Wine Merchants (30%), McCarthy Associates Inc.
(14%), Inacomp Financial Services (12%)
840 North Lenola(7).................... 7.09 Millar Elevator Service Co. (31%), Twin Pines Construction Co. (31%),
Technology Service Solutions (25%), Computer Integration Services (13%)
844 North Lenola(7).................... 7.43 First Union National Bank (41%), Curbell Inc. (34%), James J. Martin Inc.
(25%)
97 Foster Road(7)...................... 4.27 Consumer Response Company Inc. (50%), Pioneer and Company Inc. (33%),
Colornet Inc. (17%)
WEST DEPTFORD
1451 Metropolitan Drive(7)............. 6.89 Garlock Bearings Inc. (100%)
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
MERCER COUNTY, NEW JERSEY
HAMILTON TOWNSHIP
100 Horizon Drive...................... 1989 13,275 100.0 226 226 0.05 17.02
200 Horizon Drive...................... 1991 45,770 85.3 445 432 0.11 11.40
300 Horizon Drive...................... 1989 69,780 100.0 912 903 0.22 13.07
500 Horizon Drive...................... 1990 41,205 81.9 383 357 0.09 11.35
MONMOUTH COUNTY, NEW JERSEY
WALL TOWNSHIP
1320 Wykoff Avenue..................... 1986 20,336 28.6 143 143 0.03 24.59
1324 Wykoff Avenue..................... 1987 21,168 75.0 227 195 0.05 14.30
1325 Campus Parkway.................... 1988 35,000 92.9 232 221 0.06 7.14
1340 Campus Parkway.................... 1992 72,502 94.6 748 659 0.18 10.91
1345 Campus Parkway(7)................. 1995 76,300 100.0 699 699 0.17 9.16
1433 Highway 34........................ 1985 69,020 58.2 517 435 0.12 12.87
PASSAIC COUNTY, NEW JERSEY
TOTOWA
2 Center Court(7)...................... 1998 30,600 99.3 149 116 0.04 8.65
11 Commerce Way........................ 1989 47,025 77.8 403 392 0.10 11.02
20 Commerce Way........................ 1992 42,540 85.9 371 371 0.09 10.15
29 Commerce Way........................ 1990 48,930 100.0 465 420 0.11 9.50
40 Commerce Way........................ 1987 50,576 100.0 552 458 0.13 10.91
45 Commerce Way........................ 1992 51,207 100.0 475 445 0.11 9.28
60 Commerce Way........................ 1988 50,333 100.0 406 352 0.10 8.07
80 Commerce Way........................ 1996 22,500 100.0 268 166 0.06 11.91
100 Commerce Way....................... 1996 24,600 100.0 293 169 0.07 11.91
120 Commerce Way....................... 1994 9,024 100.0 87 85 0.02 9.64
140 Commerce Way....................... 1994 26,881 99.5 261 257 0.06 9.76
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
MERCER COUNTY, NEW JERSEY
HAMILTON TOWNSHIP
100 Horizon Drive...................... 17.02 HIP of New Jersey Inc. (100%)
200 Horizon Drive...................... 11.07 O.H.M. Remediation Services Corp. (85%)
300 Horizon Drive...................... 12.94 State of NJ/DEP (50%), McFaul & Lyons Inc. (26%), Fluor Daniel GTI (24%)
500 Horizon Drive...................... 10.58 Anacomp Inc. (30%), Lakeview Child Center Inc. (19%), NJ Builders Assoc.
(14%), Diedre Moire Corp. (11%)
MONMOUTH COUNTY, NEW JERSEY
WALL TOWNSHIP
1320 Wykoff Avenue..................... 24.59 Lucent Technologies Inc. (29%)
1324 Wykoff Avenue..................... 12.28 Collectors Alliance Inc. (53%), Supply-Saver, Inc. (22%)
1325 Campus Parkway.................... 6.80 American Press Inc. (71%), Centennial Cellular Corp. (14%)
1340 Campus Parkway.................... 9.61 Groundwater Environmental Services Inc. (33%), GEAC Computers Inc. (22%),
State Farm Co. (17%), Association For Retarded Citizens (11%), Digital
Lightwave, Inc. (11%)
1345 Campus Parkway(7)................. 9.16 Depot America, Inc. (37%), Quadramed Corp. (24%), De Vine Corp. (11%)
1433 Highway 34........................ 10.83 State Farm Mutual Insurance Co. (30%), New Jersey Natural Gas Co (11%)
PASSAIC COUNTY, NEW JERSEY
TOTOWA
2 Center Court(7)...................... 6.73 Nomadic Display (36%), Electro Rent Corp. (33%), Alpine Electronics of
America (30%)
11 Commerce Way........................ 10.71 Coram Alternative Site Services (56%), Olsten Health Services (11%),
Siemens Electromechanical (11%)
20 Commerce Way........................ 10.15 Motorola Inc. (45%), Siemens Fiber Optics (41%)
29 Commerce Way........................ 8.58 Sandvik Sorting Systems, Inc. (44%), Patterson Dental Supply Inc. (23%),
Fujitec America Inc. (22%), Wiltel Communications LLC (11%)
40 Commerce Way........................ 9.06 Thomson Electron Tubes (43%), Intertek Testing Services Inc. (29%),
Snap-On, Inc. (14%), System 3R USA Inc. (14%)
45 Commerce Way........................ 8.69 Ericsson Radio Systems Inc. (52%), Woodward-Clyde Consultants (27%),
Security Technologies, Inc. (10%), Oakwood Corporate Housing (10%)
60 Commerce Way........................ 6.99 Relectronic Service Corp. (43%), Ericsson Inc. (29%), Maxlite S.K. America
(14%), HW Exhibits (14%)
80 Commerce Way........................ 7.38 Hey Diddle Diddle Inc. (40%), Idexx Veterinary Services (37%), Inter-
American Safety Council (12%), Bell Atlantic (11%)
100 Commerce Way....................... 6.87 Minolta Business Systems, Inc. (34%), Pharmamerica Inc. (34%), CCH Inc.
(32%)
120 Commerce Way....................... 9.42 Deerfield Healthcare (100%)
140 Commerce Way....................... 9.61 Advanced Image System Inc. (20%), MSR Publications Inc. (19%), Holder
Group, Inc. (11%), Alpha Testing (10%), Dairygold (10%), Showa Tool USA,
Inc. (10%), Telsource, Inc. (10%), Universal Hospital Services (10%)
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Westchester Plaza.................... 1967 25,000 100.0 292 284 0.07 11.68
2 Westchester Plaza.................... 1968 25,000 100.0 407 407 0.10 16.28
3 Westchester Plaza.................... 1969 93,500 100.0 1,094 1,093 0.26 11.70
4 Westchester Plaza.................... 1969 44,700 92.4 573 549 0.14 13.87
5 Westchester Plaza.................... 1969 20,000 100.0 276 274 0.07 13.80
6 Westchester Plaza.................... 1968 20,000 78.0 201 198 0.05 12.88
7 Westchester Plaza.................... 1972 46,200 100.0 617 615 0.15 13.35
8 Westchester Plaza.................... 1971 67,200 100.0 889 803 0.21 13.23
11 Clearbrook Road..................... 1974 31,800 100.0 324 323 0.08 10.19
75 Clearbrook Road..................... 1990 32,720 100.0 816 816 0.19 24.94
150 Clearbrook Road.................... 1975 74,900 100.0 1,014 1,006 0.24 13.54
175 Clearbrook Road.................... 1973 98,900 65.8 897 862 0.21 13.78
200 Clearbrook Road.................... 1974 94,000 99.7 793 781 0.19 8.46
250 Clearbrook Road.................... 1973 155,000 83.6 1,124 1,123 0.27 8.67
50 Executive Boulevard................. 1969 45,200 97.2 383 379 0.09 8.72
77 Executive Boulevard................. 1977 13,000 100.0 180 179 0.04 13.85
85 Executive Boulevard................. 1968 31,000 99.4 387 384 0.09 12.56
300 Executive Boulevard................ 1970 60,000 99.7 575 575 0.14 9.61
350 Executive Boulevard................ 1970 15,400 98.8 243 243 0.06 15.97
399 Executive Boulevard................ 1962 80,000 89.5 930 929 0.22 12.99
400 Executive Boulevard................ 1970 42,200 99.9 532 526 0.13 12.62
500 Executive Boulevard................ 1970 41,600 88.3 564 559 0.13 15.35
525 Executive Boulevard................ 1972 61,700 100.0 838 832 0.20 13.58
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Westchester Plaza.................... 11.36 British Apparel Collection (40%), American Greeting Corp. (20%), RS Knapp
(20%), Thin Film Concepts Inc. (20%)
2 Westchester Plaza.................... 16.28 Board of Cooperative Education (80%), Kin-Tronics Inc. (10%), Squires
Productions Inc. (10%)
3 Westchester Plaza.................... 11.69 Apria Healthcare Inc. (32%), Kangol Headware Inc. (28%), V-Band Corp.
(16%), Dental Concepts Inc. (12%)
4 Westchester Plaza.................... 13.29 Metropolitan Life (38%), EEV Inc. (34%), Arsys Innotech Corp. (13%)
5 Westchester Plaza.................... 13.70 Kramer Scientific Corp. (26%), Rokonet Industries USA Inc. (25%), UA
Plumbers Education Fund (25%), Fujitsu (12%), Furniture Etc. Inc. (12%)
6 Westchester Plaza.................... 12.69 Signacon Controls Inc. (28%), Xerox Corp. (28%), Girard Rubber Co. (13%)
7 Westchester Plaza.................... 13.31 Emigrant Savings Bank (69%), Fire End Croker Corp. (22%)
8 Westchester Plaza.................... 11.95 Mamiya America Corp. (24%), Ciba Specialty Chemicals Corp. (19%), Kubra
Data Transfer Ltd. (15%)
11 Clearbrook Road..................... 10.16 Eastern Jungle Gym (27%), MCS Marketing Group Inc. (24%), Treetops Inc.
(21%), Creative Medical Supplies (14%), Westchester Party Rental Inc.
(14%)
75 Clearbrook Road..................... 24.94 Evening Out Inc. (100%)
150 Clearbrook Road.................... 13.43 Court Sports I LLC (24%), Philips Medical (18%), Transwestern Publications
(12%)
175 Clearbrook Road.................... 13.25 Hypres Inc (15%)
200 Clearbrook Road.................... 8.33 Brunschwig & Fils Inc. (39%), Proftech Corp. (20%), WYSE Technology (15%)
250 Clearbrook Road.................... 8.67 AFP Imaging Corp. (42%), The Artina Group Inc. (14%), Conri Services Inc.
(11%)
50 Executive Boulevard................. 8.63 MMO Music Group (71%), Medical Billing Associates (22%)
77 Executive Boulevard................. 13.77 Bright Horizons Children (55%), WNN Corp. (45%)
85 Executive Boulevard................. 12.46 VREX Inc. (49%), Westhab Inc. (18%), John Caufield Fiber Optical (13%),
Saturn II Systems Inc. (11%)
300 Executive Boulevard................ 9.61 Varta Batteries Inc. (44%), Princeton Ski Outlet Corp. (43%), LMG
International Inc. (12%)
350 Executive Boulevard................ 15.97 Copytex Corp. (99%)
399 Executive Boulevard................ 12.97 American Banknote Holographic (74%), Wine Enthusiast Inc. (16%)
400 Executive Boulevard................ 12.48 Baker Engineering NY Inc. (39%), North American Van Lines (25%)
500 Executive Boulevard................ 15.22 Original Consumer (36%), Dover Elevator (16%), Angelica Corp. (16%),
Charles Martine Inc.(13%)
525 Executive Boulevard................ 13.48 Vie De France Yamasaki Inc. (59%), New York Blood Center Inc. (21%)
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE, 1998
NET PERCENTAGE 1998 OFFICE/FLEX, AND AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE INDUSTRIAL/ BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT WAREHOUSE BASE PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) RENT (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
HAWTHORNE
4 Skyline Drive........................ 1987 80,600 96.8 1,137 1,044 0.27 14.57
8 Skyline Drive........................ 1985 50,000 98.9 682 665 0.16 13.79
10 Skyline Drive....................... 1985 20,000 100.0 278 260 0.07 13.90
11 Skyline Drive....................... 1989 45,000 100.0 670 656 0.16 14.89
15 Skyline Drive....................... 1989 55,000 100.0 856 789 0.20 15.56
200 Saw Mill River Road................ 1965 51,100 99.6 537 521 0.13 10.55
YONKERS
1 Odell Plaza.......................... 1980 106,000 98.5 1,224 1,220 0.29 11.72
5 Odell Plaza.......................... 1983 38,400 99.6 498 498 0.12 13.02
7 Odell Plaza.......................... 1984 42,600 99.6 636 616 0.15 14.99
4 Executive Plaza...................... 1986 80,000 99.9 989 937 0.23 12.37
6 Executive Plaza...................... 1987 80,000 90.4 1,056 1,040 0.25 14.60
100 Corporate Boulevard................ 1987 78,000 78.5 1,208 1,206 0.29 19.73
200 Corporate Boulevard South.......... 1990 84,000 99.8 1,314 1,295 0.31 15.67
FAIRFIELD COUNTY, CONNECTICUT
STAMFORD
419 West Avenue........................ 1986 88,000 99.7 1,534 1,528 0.36 17.48
500 West Avenue........................ 1988 25,000 100.0 332 328 0.08 13.28
550 West Avenue........................ 1990 54,000 100.0 753 743 0.18 13.94
650 West Avenue(7)..................... 1998 40,000 100.0 105 85 0.02 13.69
---------- ----- --------- --------- ------ -----------
Total Office/Flex Properties........... 3,941,952 93.76 $ 40,385 $ 38,972 9.62 $ 11.23
---------- ----- --------- --------- ------ -----------
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
HAWTHORNE
4 Skyline Drive........................ 13.38 GEC Alsthom Int'l. (60%)
8 Skyline Drive........................ 13.45 Cityscape Corp. (62%), Reveo Inc (29%)
10 Skyline Drive....................... 13.00 Bi-Tronics Inc./LCA Sales Corp. (52%), Phoenix Systems Int'l (32%), Galson
Corp. (16%)
11 Skyline Drive....................... 14.58 Cube Computer (41%), Bowthorpe Holdings (19%), Agathon Machine Inc. (12%),
Planned Parenthood (11%)
15 Skyline Drive....................... 14.35 Tellabs Inc. (33%), Emisphere Technology (24%), Minolta Copier Corp. (16%)
200 Saw Mill River Road................ 10.24 Walter Degruyter Inc. (21%), Abscoa Industries Inc. (18%), Monohans
Plumbing Inc. (17%), Argents Air Express Ltd. (12%)
YONKERS
1 Odell Plaza.......................... 11.68 Court Sports II LLC (19%), Gannet Satellite Info Network (11%)
5 Odell Plaza.......................... 13.02 Voyerta Technologies Inc. (44%), Photo File Inc. (34%), Pharmerica Inc.
(22%)
7 Odell Plaza.......................... 14.52 US Postal Service (41%), TT Systems Co. (24%), Bright Horizons (16%)
4 Executive Plaza...................... 11.72 O.K. Industries (42%), E&B Giftware Inc. (22%), Universal Outdoor
Advertising (12%)
6 Executive Plaza...................... 14.38 Cablevision Systems Corp. (40%), Yonkers Savings & Loan Assoc. (11%)
100 Corporate Boulevard................ 19.70 MonteFiore Medical Center (19%), Sempra Energy Trading Corp. (13%), Minami
International Corp. (12%), Medigene Inc. (11%)
200 Corporate Boulevard South.......... 15.45 Belmay Inc. (32%), Montefiore Medical Center (23%) Advanced Viral Research
Corp. (20%)
FAIRFIELD COUNTY, CONNECTICUT
STAMFORD
419 West Avenue........................ 17.42 Fuji Medical Systems USA Inc. (80%)
500 West Avenue........................ 13.12 Stamford Associates (26%), Convergent Communications (26%), Lead Trackers
Inc. (20%), Seneca Media Group Inc. (17%), M. Cohen and Sons Inc. (11%)
550 West Avenue........................ 13.76 Lifecodes Corp. (68%), Davidoff of Geneva Inc. (32%)
650 West Avenue(7)..................... 11.08 Davidoff of Geneva (CT) Inc. (100%)
-----------
Total Office/Flex Properties........... $ 10.81
-----------
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF
TOTAL 1998
OFFICE,
OFFICE/FLEX, AND 1998
NET PERCENTAGE 1998 INDUSTRIAL/ AVERAGE
RENTABLE LEASED AS OF 1998 BASE EFFECTIVE WAREHOUSE BASE BASE RENT
YEAR AREA (SQ. 12/31/98 RENT RENT RENT PER SQ. FT.
PROPERTY LOCATION BUILT FT.) (%)(1) ($000)(2) ($000)(3) (%) ($)(4)
- --------------------------------------- --------- ---------- ------------- --------- --------- ----------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
INDUSTRIAL/WAREHOUSE PROPERTIES
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Warehouse Lane....................... 1957 6,600 100.0 57 56 0.01 8.64
2 Warehouse Lane....................... 1957 10,900 100.0 114 113 0.03 10.46
3 Warehouse Lane....................... 1957 77,200 100.0 269 269 0.06 3.48
4 Warehouse Lane....................... 1957 195,500 88.9 1,855 1,826 0.44 10.67
5 Warehouse Lane....................... 1957 75,100 94.8 678 672 0.16 9.52
6 Warehouse Lane....................... 1982 22,100 100.0 504 504 0.12 22.81
---------- ----- --------- --------- ------ -----------
Total Industrial/Warehouse Properties.. 387,400 93.39% $ 3,477 $ 3,440 0.82 $ 9.61
---------- ----- --------- --------- ------ -----------
Total Office, Office/Flex, and
Industrial/ Warehouse Properties..... 26,749,683 96.56% $ 421,690 $ 412,660 100.00 $ 17.35
---------- ----- --------- --------- ------ -----------
---------- ----- --------- --------- ------ -----------
<CAPTION>
1998
AVERAGE
EFFECTIVE
RENT PER
SQ. FT. TENANTS LEASING 10% OR MORE OF NET RENTABLE AREA PER PROPERTY AS OF
PROPERTY LOCATION ($)(5) 12/31/98
- --------------------------------------- ----------- --------------------------------------------------------------------------
<S> <C> <C>
INDUSTRIAL/WAREHOUSE PROPERTIES
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Warehouse Lane....................... 8.48 JP Trucking Service Inc. (100%)
2 Warehouse Lane....................... 10.37 RJ Bruno Roofing Inc. (55%), Savin Engineers PC (41%)
3 Warehouse Lane....................... 3.48 United Parcel Service (100%)
4 Warehouse Lane....................... 10.51 San Mar Laboratories Inc. (63%), Westinghouse Air Brake Co. (14%)
5 Warehouse Lane....................... 9.44 F&V Distribution Co. (62%), E & H Tire Buying Service (19%)
6 Warehouse Lane....................... 22.81 Conway Central Express (100%)
-----------
Total Industrial/Warehouse Properties.. $ 9.51
-----------
Total Office, Office/Flex, and
Industrial/ Warehouse Properties..... $ 16.99
-----------
-----------
</TABLE>
SEE FOOTNOTES ON SUBSEQUENT PAGE.
31
<PAGE>
- ------------------------------
(1) Based on all leases in effect as of December 31, 1998.
(2) Total base rent for 1998, determined in accordance with generally accepted
accounting principles ("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 1998 minus total 1998 amortization of tenant
improvements, leasing commissions and other concessions and costs,
determined in accordance with GAAP.
(4) Base rent for 1998 divided by net rentable square feet leased at December
31, 1998. For those properties acquired by the Company during 1998, amounts
presented are annualized, as per Note 7.
(5) Effective rent for 1998 divided by net rentable square feet leased at
December 31, 1998. For those properties acquired by the Company during 1998,
amounts presented are annualized, as per Note 7.
(6) Excludes office space leased by the Company from base rent, effective rent
and per square foot amounts.
(7) As this property was acquired or placed in service by the Company during
1998, the amounts represented in 1998 base rent and 1998 effective rent
reflect only that portion of the year during which the Company owned or
placed the property in service. Accordingly, these amounts may not be
indicative of the property's full year results. For comparison purposes, the
amounts represented in 1998 average base rent per sq. ft. and 1998 average
effective rent per sq. ft. for this property have been calculated by taking
1998 base rent and 1998 effective rent for such property and annualizing
these partial-year results, dividing such annualized amounts by the net
rentable square feet leased at December 31, 1998. These annualized per
square foot amounts may not be indicative of the property's results had the
Company owned or placed such property in service for the entirety of 1998.
RETAIL PROPERTIES
The Company owned two stand-alone retail properties as of December 31, 1998,
described below:
The Company owns an 8,000 square foot restaurant, constructed in 1986,
located at 2 Executive Plaza 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 base rent of $265,000, with fully-reimbursed
real estate taxes, and operating expenses escalated based on the consumer price
index ("CPI") over a base year CPI. The lease, which expires in June 2012,
includes scheduled rent increases in July 2002 to approximately $300,000
annually, and in July 2007 to approximately $345,000 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. 1998 total
base rent for the property, calculated in accordance with GAAP, was
approximately $301,356.
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 base 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 in August 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. 1998 total base rent for
the property, calculated in accordance with GAAP, was approximately $195,000.
LAND LEASES
The Company owned two land leases as of December 31, 1998, described below:
The Company leases land 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
provided 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. 1998 total base rent under this
lease, calculated in accordance with GAAP, was approximately $143,972.
32
<PAGE>
The Company also leases five acres of land to Rake Realty, where a 103,500
square-foot 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 in November 2000. 1998 total base rent under this lease, calculated in
accordance with GAAP, was approximately $96,456. The lease also provides for
several renewal options which could extend the lease term for an additional 30
years.
MULTI-FAMILY RESIDENTIAL PROPERTIES
The Company owned two multi-family residential properties, as of December
31, 1998, 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 $721 per unit during 1998 and was approximately
98.2 percent leased as of December 31, 1998. The property had 1998 total base
rent of approximately $2.8 million, which represented approximately 0.6 percent
of the Company's 1998 total base rent. The average occupancy rate for the
property in each of 1998, 1997 and 1996 was 96.0 percent, 95.5 percent, and 95.3
percent, respectively.
25 MARTINE AVENUE, WHITE PLAINS, WESTCHESTER COUNTY, NEW YORK: The
Company's multi-family residential property, acquired in the RM Transaction and
known as 25 Martine Avenue, was built in 1987. The property contains 124
residential 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 $1,497
per unit during 1998 and was 97.6 percent leased as of December 31, 1998. The
property also has retail space. The property had 1998 total base rent of
approximately $2.3 million, which represented approximately 0.5 percent of the
Company's 1998 total base rent. The average occupancy rate for the property in
each of 1998, 1997 and 1996 was 96.4 percent, 97.6 percent, and 96.4 percent,
respectively.
REDEVELOPMENT OFFICE PROPERTY
As of December 31, 1998, the Company owned 2115 Linwood Avenue, a 68,000
square-foot vacant office building located in Fort Lee, Bergen County, New
Jersey, which the Company is redeveloping for future lease-up and operation.
OCCUPANCY
The table below sets forth the year-end percentage of square feet leased in
the Company's in-service Properties for the last five years:
<TABLE>
<CAPTION>
PERCENTAGE OF
YEAR ENDED DECEMBER 31, SQUARE FEET LEASED (%)
- ------------------------------------------------------------- -------------------------
<S> <C>
1998......................................................... 96.6
1997......................................................... 95.8
1996......................................................... 96.4
1995......................................................... 92.5
1994......................................................... 93.2
</TABLE>
33
<PAGE>
SIGNIFICANT TENANTS
The following table sets out a schedule of the Company's 20 largest tenants,
for wholly-owned properties as of December 31, 1998, based upon annualized base
rents:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPANY
ANNUALIZED ANNUALIZED BASE PERCENTAGE OF
NUMBER OF BASE RENTAL RENTAL REVENUE SQUARE FEET COMPANY LEASED YEAR OF LEASE
PROPERTIES REVENUE (1) (%) LEASED SQ. FT. (%) EXPIRATION
----------------- -------------- --------------- ----------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
AT&T Corporation................. 5 $ 13,825,038 3.2 971,501 3.8 2009(2)
Donaldson, Lufkin & Jenrette
Securities Corp................ 1 7,943,706 1.8 420,672 1.7 2009
AT&T Wireless Services........... 2 7,826,368 1.8 365,593 1.4 2007
International Business Machines
Corporation.................... 6 7,639,928 1.8 396,912 1.6 2007(3)
Dow Jones Telerate Systems
Inc............................ 1 7,436,452 1.7 373,132 1.5 2006(4)
Nabisco Inc...................... 3 5,921,014 1.4 321,735 1.3 2000(5)
Allstate Insurance Company....... 9 5,829,329 1.3 270,796 1.1 2009(6)
Prentice-Hall Inc................ 1 5,794,893 1.3 474,801 1.9 2014
Toys "R" Us--NJ, Inc............. 1 5,342,672 1.2 242,518 1.0 2012
American Institute of Certified
Public Accountants (AICPA)..... 1 4,981,357 1.1 249,768 1.0 2012
CMP Media Inc.................... 1 4,826,107 1.1 206,274 0.8 2014
Board of Gov./Federal Reserve.... 1 4,432,397 1.0 117,008 0.5 2009(7)
Winston & Strawn................. 1 3,765,833 0.9 94,283 0.4 2003
KPMG Peat Marwick, LLP........... 2 3,510,412 0.8 161,760 0.6 2007(8)
Bankers Trust Harborside Inc..... 1 3,272,500 0.8 385,000 1.5 2003
Morgan Stanley Dean Witter....... 1 3,188,532 0.7 179,131 0.7 2008
Deloitte & Touche USA LLP........ 1 3,162,933 0.7 118,864 0.5 2000
NTT Data Corporation............. 1 3,036,880 0.7 136,960 0.5 2005
PNC Bank N.A..................... 3 2,967,979 0.7 146,459 0.6 2003(9)
Cendant Operations Inc........... 1 2,854,614 0.7 135,934 0.5 2008
-------------- --- ----------- ---
Totals........................... $ 107,558,944 24.7 5,769,101 22.9
-------------- --- ----------- ---
-------------- --- ----------- ---
</TABLE>
- ------------------------------
(1) Annualized base rental revenue is based on actual December 1998 billing
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998 annualized base rental revenue is based on the first
month's billing times 12. As annualized base rental revenue is not derived
from historical GAAP results, historical results for the year ended December
31, 1998 may differ from those set forth above.
(2) 39,183 square feet expire February 2000; 66,268 square feet expire December
2000; 3,950 square feet expire August 2002; 475,100 square feet expire
January 2008; 387,000 square feet expire January 2009.
(3) 6,542 square feet expire April 1999; 29,157 square feet expire October 2000;
85,000 square feet expire December 2000; 26,749 square feet expire January
2002; 1,065 square feet expire November 2002; 248,399 square feet expire
December 2007.
(4) 39,985 square feet expire June 1999; 283,260 square feet expire June 2000;
4,700 square feet expire March 2001; 45,187 square feet expire June 2006.
(5) 21,357 square feet expire March 1999; 300,378 square feet expire December
2000.
(6) 22,444 square feet expire July 2001; 70,517 square feet expire June 2002;
71,030 square feet expire September 2002; 18,882 square feet expire April
2003; 2,867 square feet expire January 2004; 36,305 square feet expire
January 2005; 6,108 square feet expire August 2006; 31,143 square feet
expire April 2008; 11,500 square feet expire January 2009.
(7) 94,719 square feet expire May 2005; 22,289 square feet expire June 2009.
(8) 104,556 square feet expire September 2002; 57,204 square feet expire July
2007.
(9) 23,337 square feet expire October 1999; 107,320 square feet expire February
2000; 15,802 square feet expire August 2003.
34
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS
The following table sets forth a schedule of the lease expirations for the
total of the wholly-owned office, office/flex and industrial/warehouse
properties beginning January 1, 1999, assuming that none of the tenants
exercises renewal options:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE ANNUAL
NET RENTABLE TOTAL LEASED RENT PER NET PERCENTAGE OF
AREA SUBJECT SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE ANNUAL BASE
NUMBER OF TO EXPIRING REPRESENTED BY RENTAL REVENUE FOOT RENT UNDER
LEASES LEASES (SQ. EXPIRING LEASES UNDER EXPIRING REPRESENTED BY EXPIRING LEASES
YEAR OF EXPIRATION EXPIRING(1) FT.)(1) (%)(2) LEASES(3) EXPIRING LEASES (%)
- ---------------------------- ------------- ------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1999........................ 561 2,248,282 8.8 $ 39,556,954 $ 17.59 9.1
2000........................ 500 4,207,612 16.5 71,008,335 16.88 16.4
2001........................ 485 2,881,985 11.3 46,854,713 16.26 10.8
2002........................ 374 3,188,941 12.5 55,613,195 17.44 12.8
2003........................ 360 3,747,096 14.7 63,456,710 16.93 14.6
2004........................ 98 1,518,445 6.0 24,623,059 16.22 5.7
2005........................ 72 1,253,643 4.9 24,969,295 19.92 5.8
2006........................ 39 747,973 2.9 14,129,895 18.89 3.3
2007........................ 32 1,161,650 4.6 22,198,687 19.11 5.1
2008........................ 32 1,416,405 5.6 22,077,078 15.59 5.1
2009........................ 18 1,104,856 4.3 19,393,870 17.55 4.5
2010 and thereafter......... 28 1,962,960 7.9 29,696,020 15.13 6.8
----- ------------ ----- --------------- ------ -----
Totals/Weighted Average..... 2,599 25,439,848 100.0(4) $ 433,577,811 $ 17.04 100.0
----- ------------ ----- --------------- ------ -----
----- ------------ ----- --------------- ------ -----
</TABLE>
- ------------------------------
(1) Includes office, office/flex, industrial/warehouse and stand-alone retail
property tenants only. Excludes leases for amenity, retail, parking and
month-to-month tenants. Some tenants have multiple leases.
(2) Excludes all space vacant as of December 31, 1998.
(3) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rental revenue is based on the
first month's billing times 12. As annualized base rental revenue is not
derived from historical GAAP results, historical results for the year ended
December 31, 1998 may differ from those set forth above.
(4) Reconciliation to Company's total net rentable square footage is as follows:
<TABLE>
<CAPTION>
SQUARE FEET PERCENTAGE OF TOTAL
----------- -------------------
<S> <C> <C>
Square footage leased to commercial tenants.............................. 25,439,848 95.1%
Square footage used for corporate offices, management offices, building
use, retail tenants, food services, other anciliary service tenants and
occupancy adjustments.................................................. 407,609 1.5
Square footage vacant.................................................... 919,526 3.4
----------- -------
Total net rentable square footage (does not include residential, land
lease, retail or not-in-service properties)............................ 26,766,983 100.0%
----------- -------
----------- -------
</TABLE>
35
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: OFFICE PROPERTIES
The following table sets forth a schedule of the lease expirations for the
Office Properties beginning January 1, 1999, assuming that none of the tenants
exercises renewal options:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE ANNUAL
NET RENTABLE TOTAL LEASED RENT PER NET PERCENTAGE OF
AREA SUBJECT SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE ANNUAL BASE
NUMBER OF TO EXPIRING REPRESENTED BY RENTAL REVENUE FOOT RENT UNDER
LEASES LEASES (SQ. EXPIRING LEASES UNDER EXPIRING REPRESENTED BY EXPIRING LEASES
YEAR OF EXPIRATION EXPIRING(1) FT.)(1) (%)(2) LEASES(3) EXPIRING LEASES (%)
- ---------------------------- ------------- ------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1999........................ 479 1,768,091 8.3 $ 34,655,892 $ 19.60 8.9
2000........................ 419 3,515,089 16.5 63,697,337 18.12 16.4
2001........................ 400 2,254,109 10.6 39,609,773 17.57 10.2
2002........................ 299 2,509,326 11.7 48,215,382 19.21 12.4
2003........................ 302 3,172,457 14.9 57,869,143 18.24 14.9
2004........................ 78 1,220,194 5.7 21,135,616 17.32 5.4
2005........................ 57 1,062,346 5.0 22,897,475 21.55 5.9
2006........................ 32 554,481 2.6 10,838,389 19.55 2.8
2007........................ 27 1,049,969 4.9 20,625,703 19.64 5.3
2008........................ 30 1,314,545 6.2 21,612,570 16.44 5.6
2009........................ 15 1,057,956 5.0 18,757,850 17.73 4.8
2010 and thereafter......... 25 1,878,272 8.6 28,580,471 15.22 7.4
----- ------------ ----- --------------- ------ -----
Totals/Weighted Average..... 2,163 21,356,835 100.0 $ 388,495,601 $ 18.19 100.0
----- ------------ ----- --------------- ------ -----
----- ------------ ----- --------------- ------ -----
</TABLE>
- ------------------------------
(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, 1998.
(3) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rental revenue is based on the
first month's billing times 12. As annualized base rental revenue is not
derived from historical GAAP results, historical results for the year ended
December 31, 1998 may differ from those set forth above.
36
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: OFFICE/FLEX PROPERTIES
The following table sets forth a schedule of the lease expirations for the
Office/flex Properties beginning January 1, 1999, assuming that none of the
tenants exercises renewal options:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE ANNUAL
NET RENTABLE TOTAL LEASED RENT PER NET PERCENTAGE OF
AREA SUBJECT SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE ANNUAL BASE
NUMBER OF TO EXPIRING REPRESENTED BY RENTAL REVENUE FOOT RENT UNDER
LEASES LEASES (SQ. EXPIRING LEASES UNDER EXPIRING REPRESENTED BY EXPIRING LEASES
YEAR OF EXPIRATION EXPIRING(1) FT.)(1) (%)(2) LEASES(3) EXPIRING LEASES (%)
- ---------------------------- --------------- ------------ --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
1999........................ 77 471,356 12.7 $ 4,810,642 $ 10.21 11.7
2000........................ 76 626,479 16.9 6,651,722 10.62 16.2
2001........................ 81 599,329 16.2 6,676,885 11.14 16.2
2002........................ 74 669,465 18.1 7,293,268 10.89 17.7
2003........................ 55 483,165 13.0 5,161,814 10.68 12.5
2004........................ 14 132,031 3.6 1,697,843 12.86 4.1
2005........................ 15 191,297 5.2 2,071,820 10.83 5.0
2006........................ 7 193,492 5.2 3,291,506 17.01 8.0
2007........................ 5 111,681 3.0 1,572,984 14.08 3.8
2008........................ 2 101,860 2.8 464,508 4.56 1.1
2009........................ 3 46,900 1.3 636,020 13.56 1.5
2010 and thereafter......... 2 76,688 2.0 850,549 11.09 2.2
--- ------------ ----- --------------- ------ -----
Totals/Weighted Average..... 411 3,703,743 100.0 $ 41,179,561 $ 11.12 100.0
--- ------------ ----- --------------- ------ -----
--- ------------ ----- --------------- ------ -----
</TABLE>
- ------------------------------
(1) Includes office/flex tenants only. Excludes leases for amenity, retail,
parking and month-to-month office/flex tenants. Some tenants have multiple
leases.
(2) Excludes all space vacant as of December 31, 1998.
(3) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rental revenue is based on the
first month's billing times 12. As annualized base rental revenue is not
derived from historical GAAP results, historical results for the year ended
December 31, 1998 may differ from those set forth above.
37
<PAGE>
SCHEDULE OF LEASE EXPIRATIONS: INDUSTRIAL/WAREHOUSE PROPERTIES
The following table sets forth a schedule of the lease expirations for the
Industrial/Warehouse Properties beginning January 1, 1999, assuming that none of
the tenants exercises renewal options:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE ANNUAL
TOTAL LEASED RENT PER NET
NET RENTABLE SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE
NUMBER OF AREA SUBJECT TO REPRESENTED BY RENTAL REVENUE FOOT REPRESENTED
LEASES EXPIRING LEASES EXPIRING LEASES UNDER EXPIRING BY EXPIRING
YEAR OF EXPIRATION EXPIRING(1) (SQ. FT.)(1) (%)(2) LEASES(3) LEASES
- ------------------------ --------------- ---------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
1999.................... 5 8,835 2.4 $ 90,420 $ 10.23
2000.................... 5 66,044 18.2 659,276 9.98
2001.................... 4 28,547 7.9 568,055 19.90
2002.................... 1 10,150 2.8 104,545 10.30
2003.................... 3 91,474 25.3 425,753 4.65
2004.................... 5 156,920 43.4 1,594,600 10.16
--
------- ----- ------------------ ------
Totals/Weighted
Average............... 23 361,970 100.0 $ 3,442,649 $ 9.51
--
--
------- ----- ------------------ ------
------- ----- ------------------ ------
<CAPTION>
PERCENTAGE OF
ANNUAL BASE RENT
UNDER EXPIRING
LEASES
YEAR OF EXPIRATION (%)
- ------------------------ -----------------
<S> <C>
1999.................... 2.6
2000.................... 19.2
2001.................... 16.5
2002.................... 3.0
2003.................... 12.4
2004.................... 46.3
-----
Totals/Weighted
Average............... 100.0
-----
-----
</TABLE>
- ------------------------------
(1) Includes industrial/warehouse tenants only. Excludes leases for amenity,
retail, parking and month-to-month industrial/warehouse. Some tenants have
multiple leases.
(2) Excludes all space vacant as of December 31, 1998.
(3) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rent revenue is based on the first
month's billing times 12. As annualized base rental revenue is not derived
from historical GAAP results, the historical results for the year ended
December 31, 1998 may differ from those set forth above.
SCHEDULE OF LEASE EXPIRATIONS: STAND-ALONE RETAIL PROPERTIES
The following table sets forth a schedule of the lease expirations for the
stand-alone retail properties beginning January 1, 1999, assuming that none of
the tenants exercises renewal options:
<TABLE>
<CAPTION>
PERCENTAGE OF AVERAGE ANNUAL
TOTAL LEASED RENT PER NET
NET RENTABLE SQUARE FEET ANNUALIZED BASE RENTABLE SQUARE
NUMBER OF AREA SUBJECT TO REPRESENTED BY RENTAL REVENUE FOOT REPRESENTED
LEASES EXPIRING LEASES EXPIRING LEASES UNDER EXPIRING BY EXPIRING
YEAR OF EXPIRATION EXPIRING(1) (SQ. FT.)(1) (%) LEASES(2) LEASES
- ------------------------ --------------- ---------------- ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
2004.................... 1 9,300 53.8 $ 195,000 $ 20.97
2010.................... 1 8,000 46.2 265,000 33.13
--
------ ----- -------- ------
Totals/Weighted
Average............... 2 17,300 100.0 $ 460,000 $ 26.59
--
--
------ ----- -------- ------
------ ----- -------- ------
<CAPTION>
PERCENTAGE OF
ANNUAL BASE RENT
UNDER EXPIRING
LEASES
YEAR OF EXPIRATION (%)
- ------------------------ -----------------
<S> <C>
2004.................... 42.4
2010.................... 57.6
-----
Totals/Weighted
Average............... 100.0
-----
-----
</TABLE>
- ------------------------------
(1) Includes stand-alone retail property tenants only.
(2) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rental revenue is based on the
first month's billing times 12. As annualized base rental revenue is not
derived from historical GAAP results, historical results for the year ended
December 31, 1998 may differ from those set forth above.
38
<PAGE>
INDUSTRY DIVERSIFICATION
The following table lists the Company's 30 largest industry classifications
(NAICS) for its Properties, based on annualized base rent:
<TABLE>
<CAPTION>
PERCENTAGE OF
ANNUALIZED COMPANY ANNUALIZED PERCENTAGE OF
BASE RENTAL BASE RENTAL REVENUE SQUARE FEET COMPANY LEASED
INDUSTRY CLASSIFICATION (NAICS)(3) REVENUE (1)(2) (%) LEASED(2) SQ. FT. (%)
- --------------------------------------------- -------------- ------------------- ------------ -----------------
<S> <C> <C> <C> <C>
Manufacturing................................ $ 42,053,778 9.7 2,659,489 10.5
Securities, Commodity Contracts & Other
Financial.................................. 39,884,148 9.2 2,161,142 8.5
Telecommunications........................... 32,094,189 7.4 2,086,370 8.2
Computer System Design Svcs.................. 31,629,774 7.3 1,745,622 6.9
Insurance Carriers & Related Activities...... 30,595,287 7.1 1,647,337 6.5
Legal Services............................... 23,218,635 5.4 1,156,108 4.5
Credit Intermediation & Related Activities... 23,143,458 5.3 1,447,412 5.7
Wholesale Trade.............................. 20,339,326 4.7 1,428,770 5.6
Information Services......................... 19,299,991 4.5 956,470 3.8
Health Care & Social Assistance.............. 16,709,332 3.9 940,970 3.7
Accounting/Tax Prep.......................... 14,730,504 3.4 712,492 2.8
Other Professional........................... 13,300,651 3.1 853,559 3.4
Retail Trade................................. 11,750,806 2.7 706,635 2.8
Transportation............................... 11,020,770 2.5 794,014 3.1
Arts, Entertainment & Recreation............. 10,242,449 2.4 784,346 3.1
Public Administration........................ 8,703,697 2.0 311,210 1.2
Publishing Industries........................ 8,600,074 2.0 429,573 1.7
Other Services (except Public
Adminsitration)............................ 8,267,854 1.9 702,168 2.8
Advertising/Related Services................. 6,906,212 1.6 356,097 1.4
Real Estate & Rental & Leasing............... 6,624,316 1.5 381,873 1.5
Management of Companies & Finance............ 6,528,595 1.5 381,392 1.5
Data Processing Services..................... 6,126,999 1.4 286,533 1.1
Architectural/Engineering.................... 5,940,726 1.4 375,371 1.5
Scientific Research/Development.............. 5,052,728 1.2 323,815 1.3
Monetary Authorities--Central Banks.......... 4,520,606 1.0 266,340 1.0
Management/Scientific........................ 4,370,192 1.0 228,168 0.9
Educational Services......................... 4,194,159 1.0 254,678 1.0
Construction................................. 3,911,270 0.9 234,335 0.9
Admin & Support, Waste Mgt. & Remediation
Svcs....................................... 3,395,234 0.8 260,519 1.0
Utilities.................................... 3,250,727 0.7 170,797 0.7
Other........................................ 7,171,324 1.5 396,243 1.4
-------------- ----- ------------ -----
Totals....................................... $ 433,577,811 100.0 25,439,848 100.0
-------------- ----- ------------ -----
-------------- ----- ------------ -----
</TABLE>
- ------------------------------
(1) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rental revenue is based on the
first month's billing times 12. As annualized base rental revenue is not
derived from historical GAAP results, the historical results for the year
ended December 31, 1998 may differ from those set forth above.
(2) Includes office, office/flex, industrial/warehouse and stand-alone retail
property tenants only. Excludes leases for amenity, retail, parking and
month-to-month tenants. Some tenants have multiple leases.
(3) The Company's tenants are classified according to the U.S. Government's new
North American Industrial Classification System (NAICS) which is replacing
the Standard Industrial Code (SIC) system.
39
<PAGE>
MARKET DIVERSIFICATION
The following table lists the Company's 20 largest markets, by Metropolitan
Statistical Area (MSA), based on annualized base rent:
<TABLE>
<CAPTION>
PERCENTAGE OF
COMPANY PERCENTAGE OF
ANNUALIZED BASE ANNUALIZED BASE TOTAL SQUARE
RENTAL REVENUE RENTAL REVENUE TOTAL SQUARE FEET
MARKET (MSA) (1)(2) (%) FEET(2) (%)
- ------------------------------------------------ --------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C>
Bergen-Passaic, NJ.............................. $ 76,274,305 17.6 4,423,130 16.5
Newark, NJ (Essex-Morris-Union Counties)........ 69,282,808 16.0 3,671,218 13.7
New York, NY (Westchester-Rockland Counties).... 65,948,814 15.2 4,308,220 16.1
Jersey City, NJ................................. 43,335,031 10.0 2,508,700 9.4
Philadelphia, PA-NJ............................. 35,472,514 8.2 2,458,458 9.2
Denver, CO...................................... 16,299,545 3.8 1,007,931 3.8
Trenton, NJ (Mercer County)..................... 14,278,963 3.3 742,915 2.8
Dallas, TX...................................... 14,208,226 3.3 959,463 3.6
Washington, DC-MD-VA............................ 12,607,712 2.9 447,000 1.7
Middlesex-Somerset-Hunterdon, NJ................ 11,180,747 2.6 659,041 2.5
San Antonio, TX................................. 11,086,913 2.6 940,302 3.5
Stamford-Norwalk, CT............................ 8,387,008 1.9 461,250 1.7
Houston, TX..................................... 8,020,341 1.8 700,008 2.6
Monmouth-Ocean, NJ.............................. 6,724,616 1.6 577,423 2.2
Nassau-Suffolk, NY.............................. 6,215,482 1.4 261,849 1.0
Phoenix-Mesa, AZ................................ 6,067,186 1.4 536,268 2.0
Austin-San Marcos, TX........................... 5,322,896 1.2 270,703 1.0
Boulder-Longmont, CO............................ 3,450,304 0.8 270,421 1.0
San Francisco, CA............................... 3,376,861 0.8 267,446 1.0
Omaha, NE-IA.................................... 2,968,193 0.7 319,535 1.2
Other........................................... 13,069,346 2.9 975,702 3.5
--------------- ----- ------------- -----
Totals.......................................... $ 433,577,811 100.0 26,766,983 100.0
--------------- ----- ------------- -----
--------------- ----- ------------- -----
</TABLE>
- ------------------------------
(1) Annualized base rental revenue is based on actual December 1998 billings
times 12. For leases in effect at December 31, 1998 whose rent commences
after December 31, 1998, annualized base rental revenue is based on the
first month's billing times 12. As annualized base rental revenue is not
derived from historical GAAP results, the historical results for the year
ended December 31, 1998 may differ from those set forth above.
(2) Includes office, office/flex, industrial/warehouse and stand-alone retail
property tenants only. Excludes leases for amenity, retail, parking and
month-to-month tenants. Some tenants have multiple leases.
40
<PAGE>
THE COMPANY'S REAL ESTATE MARKETS
The Company's Properties are located primarily in the Northeast, including a
predominant presence in New Jersey, New York and Pennsylvania. The following is
a discussion of the markets within which substantially all of 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 six out of the
last seven years as a direct result of an increase in leasing activity and net
absorption levels. Build-to-suit activity is present, and selective speculative
construction exists. The Company owns and operates approximately 10.1 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, including 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
information 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 2.7 million
square feet of office and office/flex space in the Central New Jersey counties
of Union, Middlesex, Somerset, Mercer and Monmouth.
SUBURBAN PHILADELPHIA, PENNSYLVANIA
The Suburban Philadelphia market consists of six counties in Pennsylvania on
the west side of the Delaware River and eight counties in New Jersey on the east
side of the Delaware River. The Pennsylvania counties consist of Bucks, Chester,
Delaware, Montgomery, Lehigh and Northampton Counties. These six counties
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 as a result of
strong leasing activity and moderate new construction. The New Jersey counties
consist of Burlington, Camden, Atlantic, Ocean, Gloucester, Salem, Cumberland
and Cape May Counties. This market has extensive geographic boundaries,
stretching from the Delaware River to the Atlantic Ocean and Atlantic City. This
region is mainly suburban and is home to many affluent communities, and Atlantic
City, one of the nation's largest centers for gaming/tourism. The Company owns
and operates approximately 2.5 million square feet of office and office/flex
space and a 327-unit multi-family residential complex in Suburban Philadelphia.
WESTCHESTER COUNTY, NEW YORK
Westchester County, New York, is located immediately north of New York City
and is accessible to New York City by public transportation and through an
extensive road network. Westchester County has a population of almost 900,000
and is considered to be one of the most prestigious counties surrounding New
York City. The Company owns and operates approximately 3.7 million square feet
of office and
41
<PAGE>
office/flex space, 387,400 square feet of industrial/warehouse space, a 124-unit
multi-family residential property, two stand-alone retail properties, and two
land leases in Westchester County, New York.
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 or has an interest in approximately 412,000 square feet of
office and office/flex space in Rockland County.
FAIRFIELD COUNTY, CONNECTICUT
Fairfield County, Connecticut is the county in Connecticut closest in
proximity with New York City. It has direct access to New York City via public
transportation and through an extensive road network. The county is home to 10
Fortune 500 headquarters and there has been a substantial decline in vacancy
during the past three years. The Company owns and operates approximately 606,000
square feet of office and office/flex space in Fairfield County.
DALLAS-FORT WORTH, TEXAS
The Dallas-Fort Worth market includes Dallas, Tarrant and portions of Collin
and Denton Counties. The market includes the central business districts of both
Dallas and Fort Worth and the suburban areas primarily to the north of those
cities. Dallas-Forth Worth International Airport is one of the busiest airports
in the nation and is important to the growth of the area. This area is home to
the headquarters of numerous Fortune 500 high-technology and telecommunications
companies. The Company owns and operates approximately 1.0 million square feet
of office space in Dallas, Tarrant and Collin Counties.
HOUSTON, TEXAS
The Houston market is comprised primarily of the city of Houston and its
surrounding suburbs. Houston is a major location of Fortune 500 companies'
headquarters. Houston is also a major port serving the southern portion of the
United States. The Company owns and operates approximately 1.0 million square
feet of office space in the Houston market.
SAN ANTONIO, TEXAS
The San Antonio market consists primarily of Bexar County. San Antonio is
located at the cross roads of two major arteries, Interstate 35 and Interstate
10, and is a primary location of military facilities. San Antonio is the third
largest metropolitan area in Texas, behind Dallas and Houston. The Company owns
and operates approximately 940,000 square feet of office space in Bexar County.
PHOENIX, ARIZONA
The Phoenix market is comprised primarily of the city of Phoenix and several
suburbs to the north and west, including Scottsdale. Phoenix is the focal point
of Arizona, in addition to being the state capital. It is the location of
numerous corporate headquarters and regional headquarter facilities. The Phoenix
market has been considered one of the most rapidly growing markets in the
county. The Company owns and operates approximately 536,000 square feet of
office space in the Phoenix market.
DENVER, COLORADO
The Denver Market is comprised primarily of the city of Denver and several
suburbs to the north, east, and south. Denver is the focal point of Colorado, in
addition to being the state capital. It is the
42
<PAGE>
location of numerous corporate headquarters, with a large emergence of
high-technology and telecommunication industries. Its new airport could become a
major transportation artery for the near-western states. The Company owns and
operates approximately 1.3 million square feet of office space in the Denver
market.
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
Not applicable.
43
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The shares of the Company's common stock are traded on the New York Stock
Exchange ("NYSE") and the Pacific Exchange under the symbol "CLI".
MARKET INFORMATION
The following table sets forth the quarterly high, low, and closing price
per share of Common Stock reported on the NYSE for the years ended December 31,
1998 and 1997, respectively:
For the Year Ended December 31, 1998:
<TABLE>
<CAPTION>
HIGH LOW CLOSE
---------- ---------- ----------
<S> <C> <C> <C>
First Quarter............................................ $ 41.2500 $ 36.7500 $ 39.0625
Second Quarter........................................... $ 39.3125 $ 31.5000 $ 34.3750
Third Quarter............................................ $ 35.6250 $ 26.1250 $ 30.0000
Fourth Quarter........................................... $ 32.1250 $ 26.8750 $ 30.8750
</TABLE>
For the Year Ended December 31, 1997:
<TABLE>
<CAPTION>
HIGH LOW CLOSE
---------- ---------- ----------
<S> <C> <C> <C>
First Quarter............................................ $ 34.8750 $ 30.0000 $ 32.0000
Second Quarter........................................... $ 34.0000 $ 28.7500 $ 34.0000
Third Quarter............................................ $ 41.6250 $ 32.3750 $ 41.6250
Fourth Quarter........................................... $ 42.6875 $ 36.2500 $ 41.0000
</TABLE>
On March 1, 1999, the closing Common Stock sales price on the NYSE was
$28.750 per share.
HOLDERS
On March 1, 1999, the Company had 349 common shareholders of record.
RECENT SALES OF UNREGISTERED SECURITIES
Reference is made to Notes 3 (1997 Transactions) and 9 of the Consolidated
Financial Statements contained in Item 14 of this Form 10-K for a description of
equity issuances of common and preferred Units in the Operating Partnership (and
warrants exercisable for common units) which are redeemable under certain
circumstances for shares of Common Stock in the Company. All of such equity
issuances were issued to the holders directly by the Company without the use of
an underwriter or placement agent and without registration under the Securities
Act of 1933, as amended, pursuant to the private placement exemption contained
in Section 4(2) of such Act. Reference also is made to Note 14 (Stock Warrants)
contained in Item 14 of this Form 10-K for a description of equity issuances of
warrants to purchase Common Stock of the Company. All of such warrants were
issued to the holders (who are executives of the Company) directly by the
Company without the use of an underwriter or placement agent and without
registration under the Securities Act pursuant to the private placement
exemption contained in Section 4(2) of such Act.
DIVIDENDS AND DISTRIBUTIONS
The dividends and distributions payable by the Company at December 31, 1998
represents dividends payable to shareholders of record on January 6, 1999
(57,266,737 shares), distributions payable to minority interest common
unitholders (9,086,585 common units) on that same date and preferred
distributions to preferred unitholders (250,256 preferred units) for the fourth
quarter 1998. The fourth quarter 1998
44
<PAGE>
dividends and common unit distributions of $0.55 per share and per common unit
(pro-rated for units issued during the quarter), as well as the fourth quarter
preferred unit distribution of $16.875 per preferred unit, were approved by the
Board of Directors on December 15, 1998 and paid on January 26, 1999.
The dividends and distributions payable by the Company at December 31, 1997
represents dividends payable to shareholders of record on January 5, 1998
(49,856,289 shares), distributions payable to minority interest common
unitholders (6,097,477 common units) on that same date and preferred
distributions to preferred unitholders (230,562 preferred units) for the fourth
quarter 1997. The fourth quarter 1997 dividends and common unit distributions of
$0.50 per share and per common unit (pro-rated for units issued during the
quarter), as well as the fourth quarter preferred unit distribution of $16.875
per preferred unit (pro-rated for units issued during the quarter), were
approved by the Board of Directors on December 17, 1997 and paid on January 16,
1998.
45
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
SELECTED FINANCIAL DATA
Mack-Cali Realty Corporation and Subsidiaries
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 operating, balance sheet and cash flow data of the Company as of
December 31, 1998, 1997, 1996, 1995 and 1994, and for the periods then ended,
and the combined selected operating and cash flow data of the Cali Group for the
period ended August 30, 1994 have been derived from financial statements audited
by PricewaterhouseCoopers LLP, independent accountants.
OPERATING DATA
<TABLE>
<CAPTION>
The Company The Cali Group
August 31, January 1,
1994 to 1994 to
Year Ended December 31, December 31, August 30,
IN THOUSANDS, EXCEPT PER SHARE DATA 1998 1997 1996 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Total revenues $ 493,699 $ 249,801 $ 95,472 $ 62,335 $ 16,841 $ 33,637
Operating and other expenses $ 149,704 $ 75,150 $ 29,662 $ 20,705 $ 5,240 $ 11,155
General and administrative $ 25,572 $ 15,862 $ 5,800 $ 3,712 $ 1,079 $ 2,228
Depreciation and amortization $ 78,916 $ 36,825 $ 14,731 $ 10,655 $ 3,319 $ 5,093
Interest expense $ 88,043 $ 39,078 $ 13,758 $ 10,117 $ 2,213 $ 13,969
Non-recurring merger-related charges -- $ 46,519 -- -- -- --
Income (loss) before minority interest
and extraordinary item $ 151,464 $ 36,367 $ 37,179 $ 17,146 $ 4,990 $ (110)
Income (loss) before extraordinary item $ 118,951 $ 4,988 $ 32,419 $ 13,638 $ 3,939 $ (110)
Basic earnings per share-before
extraordinary item $ 2.13 $ 0.13 $ 1.76 $ 1.23 $ 0.38
Diluted earnings per share-before
extraordinary item $ 2.11 $ 0.12 $ 1.73 $ 1.22 $ 0.38
Dividends declared per common share $ 2.10 $ 1.90 $ 1.75 $ 1.66 $ 0.54
Basic weighted average shares outstanding 55,840 39,266 18,461 11,122 10,500
Diluted weighted average shares
outstanding 63,893 44,156 21,436 14,041 13,302
BALANCE SHEET DATA
<CAPTION>
The Company
December 31,
IN THOUSANDS 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Rental property, before accumulated
depreciation and amortization $ 3,467,799 $ 2,629,616 $ 853,352 $ 387,675 $ 234,470
Total assets $ 3,452,194 $ 2,593,444 $ 1,026,328 $ 363,949 $ 225,295
Mortgages and loans payable $ 1,420,931 $ 972,650 $ 268,010 $ 135,464 $ 77,000
Total liabilities $ 1,526,974 $ 1,056,759 $ 297,985 $ 150,058 $ 88,081
Minority interest $ 501,313 $ 379,245 $ 26,964 $ 28,083 $ 28,903
Stockholders' equity $ 1,423,907 $ 1,157,440 $ 701,379 $ 185,808 $ 108,311
OTHER DATA The Company The Cali Group
<CAPTION>
August 31, January 1,
1994 to 1994 to
Year Ended December 31, December 31, August 30,
IN THOUSANDS 1998 1997 1996 1995 1994 1994
<S> <C> <C> <C> <C> <C> <C>
Cash flows provided by operating activities $ 208,761 $ 98,142 $ 46,823 $ 28,446 $ 6,367 $ 6,328
Cash flows (used in) provided by
investing activities $ (749,067) $ (939,501) $ (307,752) $ (133,736) $ (8,947) $ 1,975
Cash flows provided by (used in)
financing activities $ 543,411 $ 639,256 $ 464,769 $ 99,863 $ 8,974 $ (1,038)
Funds from operations(1), before
distributions to preferred unitholders $ 216,949 $ 111,752 $ 45,220 $ 27,397 $ 8,404
Funds from operations(1), after distributions
to preferred unitholders $ 200,636 $ 110,864 $ 45,220 $ 27,397 $ 8,404
</TABLE>
(1) The Company considers funds from operations (after adjustment for
straight-lining of rents) one measure of REIT performance. Funds from
operations ("FFO") is defined as net income (loss) before minority interest
of unitholders (preferred and common) computed in accordance with generally
accepted accounting principles ("GAAP"), excluding gains (or losses) from
debt restructuring, other extraordinary and significant non-recurring items
and sales of property, plus real estate-related depreciation and
amortization. Funds from operations 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. Funds from operations presented
herein is not necessarily comparable to funds from operations presented by
other real estate companies due to the fact that not all real estate
companies use the same definition. However, the Company's funds from
operations is comparable to the funds from operations of real estate
companies that use the current definition of the National Association of
Real Estate Investment Trusts ("NAREIT"), after the adjustment for
straight-lining of rents. Refer to "Management's Discussion and Analysis of
Financial Condition and Results of Operations," contained elsewhere in this
Report, for the calculation of FFO for the periods presented.
46
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Mack-Cali Realty Corporation and Subsidiaries
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Mack-Cali Realty Corporation and the notes thereto.
Certain defined terms used herein have the meaning ascribed to them in the
Consolidated Financial Statements.
The following comparisons for the year ended December 31, 1998 ("1998"), as
compared to the year ended December 31, 1997 ("1997") and for 1997, as compared
to the year ended December 31, 1996 ("1996") make reference to the following:
(i) the effect of the "Same-Store Properties," which represents all properties
owned by the Company at December 31, 1996 (for the 1998 versus 1997 comparison),
and which represents all properties owned by the Company at December 31, 1995
(for the 1997 versus 1996 comparison), (ii) the effect of the acquisition of the
RM Properties on January 31, 1997, (iii) the effect of the acquisition of the
Mack Properties on December 11, 1997, and (iv) the effect of the "Acquired
Properties," which represents all properties acquired by the Company from
January 1, 1997 through December 31, 1998, excluding RM Properties and Mack
Properties (for the 1998 versus 1997 comparison), and which represents all
properties acquired by the Company from January 1, 1996 through December 31,
1997, excluding RM Properties and Mack Properties (for the 1997 versus 1996
comparison), and (v) the effect of the "Disposition" which refers to the
Company's sale of its Essex Road property on March 20, 1996.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Total revenues increased by $243.9 million, or 97.6 percent, for 1998 over 1997.
Base rents increased by $221.3 million, or 107.3 percent, of which an increase
of $138.9 million, or 67.3 percent, was due to the Mack Properties, an increase
of $75.1 million, or 36.4 percent, was attributable to the Acquired Properties,
an increase of $5.5 million, or 2.7 percent, was due to the RM Properties, and
an increase of $1.8 million, or 0.9 percent, was due to occupancy and rental
rate changes at the Same-Store Properties. Escalations and recoveries from
tenants increased by $20.8 million, or 67.0 percent, of which an increase of
$11.1 million, or 35.9 percent, was due to the Mack Properties, an increase of
$9.1 million, or 29.1 percent, was attributable to the Acquired Properties, an
increase of $0.4 million, or 1.3 percent, at the Same-Store Properties, and an
increase of $0.2 million, or 0.7 percent, due to the RM Properties. Parking and
other income increased by $3.8 million, or 55.0 percent, of which $3.3 million,
or 48.3 percent, was attributable to the Same-Store Properties, and an increase
of $0.5 million, or 6.7 percent, was due to the RM Properties. Interest income
decreased by $3.1 million, or 56.3 percent, due primarily to investment of the
funds held from the Company's October 1997 common stock offering in 1997.
Additionally, the Company recognized $1.1 million from equity in earnings of
unconsolidated joint ventures in 1998.
Total expenses for 1998 increased by $128.8 million, or 60.3 percent, as
compared to 1997. Real estate taxes increased by $22.3 million, or 85.8 percent,
for 1998 over 1997, of which an increase of $11.7 million, or 44.9 percent, was
due to the Mack Properties, an increase of $8.8 million, or 33.8 percent, was
attributable to the Acquired Properties, an increase of $1.0 million, or 3.9
percent, due to the RM Properties, and an increase of $0.8 million, or 3.2
percent, attributable to the Same-Store Properties. Additionally, operating
services increased by $32.1 million, or 103.7 percent, and utilities increased
by $20.2 million, or 110.7 percent, for 1998 over 1997. The aggregate increase
in operating services and utilities of $52.3 million, or 106.3 percent, consists
of an increase of $33.9 million, or 69.0 percent, due to the Mack Properties, an
increase of $18.3 million, or 37.2 percent, attributable to the Acquired
Properties and an increase of $0.9 million, or 1.8 percent, due to the RM
Properties, offset by a decrease of $0.8 million, or 1.7 percent, attributable
to the Same-Store Properties. General and administrative expense increased $9.7
million, or 61.2 percent, of which $6.6 million, or 41.4 percent, is due
primarily to an increase in payroll and related costs as a result of the
Company's expansion in late 1997 and 1998 and $3.1 million, or 19.8 percent, is
attributable to additional costs related to the Mack Properties. Depreciation
and amortization increased by $42.1 million, or 114.3 percent, for 1998 over
1997, of which $22.6 million, or 61.1 percent, was due to the Mack Properties,
an increase of $16.2 million, or 44.0 percent, relates to depreciation on the
Acquired Properties, an increase of $1.8 million, or 5.0 percent, due to the RM
Properties, and an increase of $1.5 million, or 4.2 percent, due to the
Same-Store Properties. Interest expense increased by $48.9 million, or 125.3
percent, for 1998 over 1997, of which $23.4 million, or 60.0 percent, was due to
assumed mortgages from the Mack Properties, an increase of $23.2 million, or
59.5 percent, due to net additional drawings from the Company's credit
facilities as a result of Company acquisitions and the $200 million Prudential
Term Loan obtained in December 1997, as well as changes in LIBOR, $1.2 million,
or 3.0 percent, was attributable to assumed mortgages on Acquired Properties,
and an increase of $1.1 million, or 2.8 percent, due to the TIAA Mortgage.
Non-recurring merger-related charges of $46.5 million were incurred in 1997, as
a result of the Mack Transaction.
Income before minority interest and extraordinary item increased to $151.5
million in 1998 from $36.4 million in 1997. The increase of $115.1 million was
due to the factors discussed above.
Net income increased by $115.2 million for 1998, from $1.4 million in 1997
to $116.6 million in 1998. This increase was a result of an increase in income
before minority interest and extraordinary item of $115.1 million, and an
extraordinary item of $3.6 million (net of minority interest), related to early
retirement of debt in 1997, offset by an extraordinary item of $2.4 million (net
of minority interest), related to early retirement of debt in 1998, and an
increase of $1.1 million in minority interest.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Total revenues increased $154.3 million, or 161.6 percent, for 1997 over 1996.
Base rents increased $129.3 million, or 168.1 percent, of which an increase of
$61.4 million, or 79.7 percent, was attributable to the Acquired Properties, an
increase of $58.4 million, or 75.9 percent, due to the RM Properties, an
increase of $8.0 million, or 10.4 percent, due to the Mack Properties and an
increase of $1.8 million, or 2.4 percent, due to occupancy and rental rate
changes at the Same-Store Properties, offset by a decrease of $0.3 million, or
0.3 percent, due to the Disposition. Escalations and recoveries increased $16.7
million, or 115.7 percent, of which an increase of $11.2 million, or 77.4
percent, was attributable to the Acquired Properties, an increase of $4.9
million, or 34.2 percent, due to the
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Mack-Cali Realty Corporation and Subsidiaries
RM Properties, an increase of $0.5 million, or 3.7 percent, due to the Mack
Properties, and an increase of $0.1 million, or 0.4 percent, due to occupancy
changes at the Same-Store Properties. Parking and other income increased $4.7
million, or 213.5 percent, of which $4.0 million, or 182.1 percent, was
attributable to the RM Properties and $0.8 million, or 37.6 percent, was
attributable to the Acquired Properties, offset by a decrease of $0.1
million, or 6.2 percent, due to the Same-Store Properties. Interest income
increased $3.6 million, or 189.3 percent, due primarily to investment of the
funds held from the Company's October 1997 common stock offering.
Total expenses for 1997 increased $149.4 million, or 233.7 percent, as
compared to 1996. Real estate taxes increased $16.6 million, or 176.7 percent,
for 1997 over 1996, of which an increase of $6.6 million, or 69.6 percent, was
attributable to the Acquired Properties, an increase of $9.0 million, or 95.9
percent, due to the RM Properties, an increase of $0.6 million, or 6.6 percent,
due to the Mack Properties, and an increase of $0.5 million, or 5.1 percent,
attributable to the Same-Store Properties, offset by a decrease of $0.1 million,
or 0.5 percent, due to the Disposition. Additionally, operating services
increased $18.7 million, or 154.9 percent, and utilities increased $10.1
million, or 124.2 percent, for 1997 over 1996. The aggregate increase in
operating services and utilities of $28.8 million, or 142.6 percent, consists of
$15.5 million, or 76.7 percent, attributable to the Acquired Properties, an
increase of $12.9 million, or 63.8 percent, due to the RM Properties, and an
increase of $1.7 million, or 8.2 percent, due to the Mack Properties, offset by
a decrease of $1.1 million, or 5.3 percent, attributable to the Same-Store
Properties and a decrease of $0.2 million, or 0.8 percent, due to the
Disposition. General and administrative expense increased $10.1 million, or
173.5 percent, of which $7.1 million, or 121.1 percent, is due primarily to an
increase in payroll and related costs as a result of the Company's expansion in
late 1996 and 1997 and $3.0 million, or 52.4 percent, is attributable to
additional costs related to the RM Properties. Depreciation and amortization
increased $22.1 million, or 150.0 percent, for 1997 over 1996, of which $10.4
million, or 70.4 percent, relates to depreciation on the Acquired Properties, an
increase of $10.0 million, or 67.7 percent, attributable to the RM Properties,
an increase of $1.0 million, or 6.6 percent, due to the Mack Properties, and an
increase of $0.8 million, or 5.8 percent, due to the Same-Store Properties,
offset by a decrease of $0.1 million, or 0.5 percent, due to the Disposition.
Interest expense increased $25.3 million, or 184.0 percent, for 1997 over 1996,
of which $12.2 million, or 88.6 percent, was attributable to the TIAA Mortgage,
$9.1 million, or 66.5 percent, due to the Harborside Mortgages, an increase of
$1.4 million, or 9.9 percent, due to assumed mortgages from the Mack Properties,
and an increase of $8.3 million, or 60.1 percent, due to net additional drawings
from the Company's credit facilities as a result of Company acquisitions and the
$200 million Prudential Term Loan obtained in December 1997, as well as changes
in LIBOR, offset by a decrease of $5.7 million, or 41.1 percent, due to the
August 1997 prepayment of the Mortgage Financing. Non-recurring merger-related
charges of $46.5 million were incurred in 1997, as a result of the Mack
Transaction.
Income before gain on sale of rental property, minority interest, and
extraordinary items increased to $36.4 million in 1997 from $31.5 million in
1996. The increase of $4.9 million was due to the factors discussed above.
Net income decreased $30.5 million for 1997, from $31.9 million in 1996 to
$1.4 million in 1997, primarily as a result of an increase in income allocable
to minority interests of $26.6 million, including the effect of the beneficial
conversion feature and distributions to preferred unitholders (See Note 9 to
Financial Statements). Net income was also effected by a gain on the sale of the
Disposition property of $5.7 million in 1996 and the recognition in 1997 of an
extraordinary loss of $3.6 million (net of minority interest), offset by an
increase in income before gain on sale of rental property, minority interest and
extraordinary items of $4.9 million, and the recognition in 1996 of an
extraordinary loss of $0.5 million (net of minority interest).
LIQUIDITY AND CAPITAL RESOURCES
STATEMENT OF CASH FLOWS
During the year ended December 31, 1998, the Company generated $208.8 million in
cash flows from operating activities, and together with $1.5 billion in
borrowings from the Company's credit facilities and funds from additional
mortgage debt, $288.4 million in net proceeds from the Company's common stock
offerings, $20.0 million received from a repayment of a mortgage note
receivable, $5.5 million in proceeds from stock options exercised, $1.7 million
in distributions received from unconsolidated joint ventures, and $0.8 million
in restricted cash, used an aggregate of approximately $2.0 billion to acquire
properties, land parcels and pay for other tenant improvements and building
improvements totaling $692.8 million, repay outstanding borrowings on its credit
facilities and other mortgage debt of $1.1 billion, pay quarterly dividends and
distributions of $139.8 million, invest $58.8 million in unconsolidated joint
ventures, repurchase 854,700 shares of its outstanding common stock for $25.1
million, provide $20.0 million for a mortgage note receivable, pay financing
costs of $10.1 million, and redeem 82,880 common units for $3.2 million.
CAPITALIZATION
During 1998, the Company issued 8.0 million shares in several offerings and
sales of its common stock (at a weighted average price of $37.38 per share)
raising aggregate net proceeds of approximately $288.4 million. Additionally,
during 1998, in conjunction with the funding of several of its property
acquisitions as well as redemption of certain of the contingent units issued in
the Mack Transaction, the Company issued a total of approximately 3.1 million
Common Units and 19,694 Preferred Units (convertible into 568,369 Common Units),
with a total value of approximately $126.3 million at time of issuance.
In August 1998, the Board of Directors of the Company authorized a share
repurchase program under which the Company was permitted to purchase up to
$100.0 million of the Company's outstanding common stock. Purchases could be
made from time to time in open market transactions at prevailing prices or
through privately negotiated transactions. Subsequently, the Company purchased,
for constructive retirement, 854,700 shares of its outstanding common stock for
an aggregate cost of approximately $25.1 million. Concurrent with these
purchases, the Company sold to the Operating Partnership 854,700 Common Units
for approximately $25.1 million.
At December 31, 1998, the Company's total mortgages and loans payable of
$1.4 billion (weighted average interest rate of 6.93 percent) was comprised of
$751.8 million of credit line borrowings and other variable rate mortgage debt
(average rate of 6.61 percent),
48
<PAGE>
fixed rate mortgage debt of $663.0 million (average rate of 7.32 percent), and a
Contingent Obligation of $6.2 million. The Company's total mortgage debt of
approximately $743.2 million was comprised of $663.0 million in fixed rate debt
and $80.2 million of variable rate mortgage debt with a weighted average annual
interest rate of 65 basis points over LIBOR.
At year-end, the Company had outstanding borrowings of $671.6 million under
its revolving credit facilities (with aggregate borrowing capacity of $1.1
billion). The outstanding borrowings were comprised of $671.6 million from its
unsecured $1.0 billion facility ("1998 Unsecured Facility"), with no outstanding
borrowings on its $100.0 million credit facility with Prudential Securities
Corp. ("Prudential Facility"). The 1998 Unsecured Facility, with 28 lender
banks, carries an interest rate of 90 basis points over LIBOR and matures in
April 2001. The Prudential Facility carries an interest rate of 110 basis points
over LIBOR and matures in December 1999.
The terms of the 1998 Unsecured Facility include certain restrictions and
covenants which limit, among other things, the payment of dividends (as
discussed below), the incurrence of additional indebtedness, the incurrence of
liens and the disposition of assets, and which require compliance with financial
ratios relating to the maximum leverage ratio, the maximum amount of secured
indebtedness, the minimum amount of tangible net worth, the minimum amount of
debt service coverage, the minimum amount of fixed charge coverage, the maximum
amount of unsecured indebtedness, the minimum amount of unencumbered property
debt service coverage and certain investment limitations. The dividend
restriction referred to above provides that, except to enable the Company to
continue to qualify as a REIT under the Code, the Company will not during any
four consecutive fiscal quarters make distributions with respect to common stock
or other equity interests in an aggregate amount in excess of 90 percent of
funds from operations for such period, subject to certain other adjustments. The
1998 Unsecured Facility also requires a 17.5 basis point fee on the unused
balance payable quarterly in arrears.
The Company has three investment grade credit ratings. Duff & Phelps Credit
Rating Co. ("DCR") and Standard & Poors Rating Services ("S&P") have each
assigned their BBB rating to prospective senior unsecured debt offerings of the
Operating Partnership. DCR and S&P have also assigned their BBB- rating to
prospective preferred stock offerings of the Company. Moody's Investors Service
has assigned its Baa3 rating to prospective senior unsecured debt of the
Operating Partnership and its Ba1 rating to prospective preferred stock
offerings of the Company.
In May 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
for 6.285 percent per annum on a notional amount of $24.0 million through August
1999.
In October 1998, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 4.089
percent per annum for the three-year U.S. Treasury Note effective November 4,
1999, on a notional amount of $50.0 million. The agreement will be used to fix
the Index Rate on $50.0 million of the Harborside Mortgages, for which the
Company's interest rate re-sets for three years beginning November 4, 1999 to
the interpolated three-year U.S. Treasury Note plus 110 basis points (see Note 8
to the Financial Statements--"Harborside Mortgages").
As of December 31, 1998, the Company had 167 unencumbered properties,
totaling 16.5 million square feet, representing 61.4 percent of the Company's
total portfolio on a square footage basis. An additional 55 properties,
aggregating 5.4 million square feet (20.3 percent of Company's portfolio) are
currently encumbered by $335.3 million of mortgage debt, which may be converted
to unsecured debt at the Company's option. The Company is currently reviewing
its options to convert any of the mortgage debt to unsecured debt.
The Company has an effective shelf registration statement with the SEC for
an aggregate amount of $2.0 billion in equity securities of the Company. The
Company and Operating Partnership also have an effective shelf registration
statement with the SECfor an aggregate of $2.0 billion in debt securities,
preferred stock and preferred stock represented by depositary shares. The
Company presently has not issued any securities under these registration
statements. The Company also has an effective registration statement with the
SEC for a dividend reinvestment and stock purchase plan which commenced on March
1, 1999.
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 borrowings under its credit facilities and
other debt and equity financing.
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 1998 Unsecured Facility and the Prudential Facility. The Company is
frequently examining potential property acquisitions and, at any 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 1998 Unsecured Facility and the Prudential Facility primarily to
fund property acquisitions.
The Company's total debt at December 31, 1998 had a weighted average term
to maturity of approximately 4.2 years. The Company expects to increase the
average term to maturity on its debt in 1999. The Company has commitments to
refinance $35.9 million of its mortgages which mature in the first quarter of
1999 with $45.5 million of new mortgage debt. The Company does not intend to
reserve funds to retire its TIAA Mortgage, Harborside Mortgages, $150.0 Million
Prudential Mortgage Loan, its other property mortgages or other long-term
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 debt or equity instruments. The Company is considering refinancing a
portion of its outstanding borrowings from the 1998 Unsecured Facility. The
Company is reviewing various refinancing options, including the issuance of
unsecured public debt, preferred stock, and/or obtaining additional mortgage
debt, some or all of which may be completed during 1999. The Company anticipates
that its available cash and cash equivalents and cash flows from operating
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MD&A
Mack-Cali Realty Corporation and Subsidiaries
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 REIT, the Company must make annual
distributions to its stockholders of at least 95 percent of its REIT taxable
income, determined without regard to the dividends paid deduction and by
excluding 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 $128.2 million on an
annualized 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.
FUNDS FROM OPERATIONS
The Company considers funds from operations ("FFO"), after adjustment for
straight-lining of rents, one measure of REIT performance. Funds from operations
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, other extraordinary and
significant non-recurring items, and sales of property, plus real estate-related
depreciation and amortization. Funds from operations 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. Funds from operations presented herein is
not necessarily comparable to funds from operations presented by other real
estate companies due to the fact that not all real estate companies use the same
definition. However, the Company's funds from operations is comparable to the
funds from operations of real estate companies that use the current definition
of the National Association of Real Estate Investment Trusts ("NAREIT"), after
the adjustment for straight-lining of rents.
NAREIT's definition of funds from operations indicates that the calculation
should be made before any extraordinary item (determined in accordance with
GAAP), and before any deduction of significant non-recurring events that
materially distort the comparative measurement of the Company's performance.
Funds from operations for the years ended December 31, 1998, 1997 and 1996
as calculated in accordance with NAREIT's definition as published in March 1995,
are summarized in the following table:
<TABLE>
<CAPTION>
IN THOUSANDS
YEAR ENDED DECEMBER 31, 1998 1997 1996
- ---------------------- ---- ---- ----
<S> <C> <C> <C>
Income before
non-recurring merger-
related charges, gain
on sale of rental
property, distributions
to preferred unitholders,
minority interest and
extraordinary item $ 151,464 $ 82,886 $ 31,521
Add: Real estate-related
depreciation and
amortization(1) 79,169 36,599 14,677
Deduct: Rental income
adjustment for
straight-lining of rents(1) (13,684) (7,733) (978)
Funds from operations,
after adjustment for
straight-lining of rents,
before distributions to
preferred unitholders $ 216,949 $111,752 $ 45,220
Deduct: Distributions to
preferred unitholders (16,313) (888) --
Funds from operations,
after adjustment for
straight-lining of rents,
after distributions to
preferred unitholders $ 200,636 $ 110,864 $ 45,220
Cash flows provided by
operating activities $ 208,761 $ 98,142 $ 46,823
Cash flows used in
investing activities $(749,067) $(939,501) $(307,752)
Cash flows provided by
financing activities $ 543,411 $ 639,256 $ 464,769
Basic weighted average
shares/units
outstanding(2) 63,438 43,356 21,172
Diluted weighted
average shares/units
outstanding(2) 70,867 44,351 21,436
</TABLE>
(1) Includes FFO adjustments in 1998 related to the Company's investments in
unconsolidated joint ventures.
(2) See calculations for the amounts presented in the reconciliation below.
50
<PAGE>
The following schedule reconciles the Company's basic weighted average
shares to the basic and diluted weighted average shares/units presented above:
<TABLE>
<CAPTION>
Year Ended December 31, 1998 1997 1996
- ----------------------- ---- ---- ----
<S> <C> <C> <C>
Basic weighted average
shares: 55,840 39,266 18,461
Add: Weighted average
common units 7,598 4,090 2,711
Basic weighted average
shares/units: 63,438 43,356 21,172
Add: Weighted average
preferred units 6,974 383 --
(after conversion to
common units)
Stock options 411 579 264
Stock warrants 44 33 --
Diluted weighted
average share/units: 70,867 44,351 21,436
</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.
DISRUPTION IN OPERATIONS DUE TO YEAR 2000 PROBLEMS
GENERAL The Year 2000 issue is the result of computer programs and embedded
chips using a two-digit format, as opposed to four digits, to indicate the year.
Such computer systems may be unable to interpret dates beyond the year 1999,
which could cause a system failure or other computer errors, leading to
disruptions in operations. We have developed a three-phase Year 2000 project
(the "Project") to determine our Year 2000 systems compliance. Phase I is to
identify those systems with which we have exposure to Year 2000 issues. Phase II
is the development and implementation of action plans to be Year 2000 compliant
in all areas by early 1999. Phase III, to be completed by mid-1999, is the final
testing of each major area of exposure to assure compliance. We have identified
three major areas critical for successful Year 2000 compliance: (i) our central
accounting and operating computer system at our Cranford, New Jersey
headquarters and local networks and related systems in our regional offices,
(ii) inquiries of our tenants and key vendors as to their Year 2000 readiness
and (iii) assessment of our individual buildings as to the Year 2000 readiness
of their operating systems. We believe that progress in all such areas is
proceeding on schedule and that we will experience no material adverse effect as
a result of the Year 2000 issue. There can, however, be no assurance that this
will be the case. Set forth below is a more detailed analysis of the Project and
its anticipated impact on us.
CENTRAL ACCOUNTING AND OPERATING SYSTEMS We have completed a review of key
computer hardware and software and other equipment, and have modified, upgraded
or replaced all identified hardware and equipment in our corporate and regional
offices that we believe may be affected by problems associated with Year 2000.
Such hardware includes desktop and laptop computers, servers, printers,
telecopier machines and telephones. We, as part of our routine modernization
efforts, have completed necessary upgrades to identified secondary software
systems, such as word processing, spreadsheet applications, telephone voicemail
systems and computer calendar programs. The software supplier of our accounting
system is currently completing its Year 2000 upgrade and is scheduled to supply
us with Year 2000 compliant software by March 31, 1999 at no cost to us. We are
confident that such software will be delivered as indicated. We anticipate
internal testing of such software to be completed by June 1999.
TENANT COMPLIANCE We believe that the completion of the Project as scheduled
will minimize Year 2000 related issues in our internal operations. However, we
may still be adversely impacted by Year 2000 related issues as a result of
problems outside our control, such as the inability of tenants to pay rent when
due. In order to gauge such risk, we sent questionnaires to each of our then
existing tenants in August 1998 to assess their Year 2000 compliance status. The
responses to these questionnaires continue to be received, reviewed and
evaluated. Based on the responses received, we do not anticipate any material
adverse impact on the orderly payment of monthly rent. Therefore, while there
can be no assurance that Year 2000 problems of tenants will not have a material
adverse effect on our operating results or financial condition, the information
available to us indicates such an occurrence is not likely.
PROPERTY COMPLIANCE Our property managers have completed Phase I of the Project,
a building by building survey of all of our properties to determine whether
building support systems such as heat, power, light, security, garages and
elevators will be affected by the advent of the Year 2000. Most of such systems
either are already Year 2000 compliant or contain no computerized parts. Our
property managers are currently completing Phase II of the Project, the
development and implementation of action plans to modify, upgrade or replace
non-compliant building systems. Once installed, these building systems will be
tested for compliance pursuant to Phase III of the Project.
We have communicated with vendors of building systems or other services to
our buildings regarding their Year 2000 compliance. In many instances, we will
rely on the written representations from these vendors regarding the Year 2000
compliance of their product or service. We are also relying on assurances
requested from utility providers of their Year 2000 compliance and their
continued ability to provide uninterrupted service to our buildings. We
anticipate incurring a total of approximately $1.0 million in costs to modify,
upgrade and/or replace identified building support systems for Year 2000
compliance.
WORST CASE EXPOSURE We are aware that it is generally believed that the Year
2000 problem, if uncorrected, may result in a worldwide economic crisis. We are
unable to determine whether such predictions are true or false. However, if such
predictions prove true, we assume that all companies (including ours) will
experience the effects in one way or another. The most reasonably likely worst
case scenario we anticipate in connection with the Year 2000 issue relates to
the failure of the upgrade to our accounting system to effectively become Year
2000 compliant. We believe that such an event is
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Mack-Cali Realty Corporation and Subsidiaries
unlikely, but an occurrence of the foregoing might have a material adverse
impact on our operations. We cannot currently assess the financial impact of
such a worst case scenario.
CONTINGENCY PLANS We are developing contingency plans to address the Year 2000
non-compliance of (i) critical building support systems and (ii) our accounting
system.
CRITICAL BUILDING SYSTEMS. We believe that the failure of any of the
following critical building support systems due to Year 2000 issues could
have a material adverse impact on the performance of an individual building:
security systems, elevator systems or fire/life safety systems. We believe
that in the event of a Year 2000 related failure in a building security
system, we would be able to maintain adequate security at the building
through the use of security guards. We believe that in the event of a Year
2000 related failure in a building elevator system, adequate access would
exist at most of our buildings through existing stairways. We believe that in
the event of a Year 2000 related failure in a building fire/life safety
system, our property management staff would be able to manually operate such
system.
ACCOUNTING SOFTWARE. We believe that failure of the Year 2000 compliance
upgrade to our accounting software might have a material adverse impact on
our operations. However, we believe that financial data within any given
fiscal year will remain intact and retrievable. We believe that alternative
accounting software and/or manual bookkeeping would minimize the impact of a
Year 2000 related failure of our current accounting software.
RISKS The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect our results of
operations, liquidity and financial condition. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000 readiness of third-party vendors and tenants, we are unable to
determine at this time whether the consequences of Year 2000 failures will have
a material impact on our results of operations, liquidity or financial
condition. The Project is expected to significantly reduce our level of
uncertainty about the Year 2000 problem. We believe that, with the
implementation and completion of the Project as scheduled, the possibility of
significant interruptions of normal operations should be reduced.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The Company considers portions of this information to be forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of The Securities Exchange Act of 1934. Although the Company
believes that the expectations reflected in such forward-looking statements are
based upon reasonable assumptions, it can give no assurance that its
expectations will be achieved.
52
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Approximately $669.1 million of the Company's long-term debt bears interest
at fixed rates, and therefore the fair value of these instruments is affected by
changes in the market interest rates. The following table presents principal
cash flows (in thousands) based upon maturity dates of the debt obligations and
the related weighted-average interest rates by expected maturity dates for the
fixed rate debt. The interest rate on the variable rate debt as of December 31,
1998 ranged from LIBOR plus 0.65% to LIBOR plus 0.90%.
December 31, 1998
<TABLE>
<CAPTION>
LONG-TERM
DEBT, INCLUDING FAIR
CURRENT PORTION 1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE
- -------------------- --------- --------- ---------- --------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate.......... $ 47,450 $ 9,069 $ 8,003 $ 11,783 $ 211,286 $ 381,536 $ 669,127 $ 679,156
Avg. Interest
Rate.............. 7.65% 7.30% 7.28% 7.10% 7.31% 7.23%
Variable Rate....... $ 8,000 $ 671,600 $ 72,204 $ 751,804 $751,804
</TABLE>
53
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted as a separate section of this Form
10-K. See Item 14.
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 from the
Company's definitive proxy statement for its annual meeting of shareholders to
be held on May 19, 1999.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of shareholders to
be held on May 19, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of shareholders to
be held on May 19, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference from the
Company's definitive proxy statement for its annual meeting of shareholders to
be held on May 19, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K
(A) 1. Financial Statements and Report of PricewaterhouseCoopers LLP,
Independent Accountants
Consolidated Balance Sheets as of December 31, 1998 and 1997
Consolidated Statements of Operations for the Years Ended December 31,
1998, 1997 and 1996
Consolidated Statement of Changes in Stockholders' Equity for the Years
Ended December 31, 1998, 1997 and 1996
Consolidated Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
(A) 2. FINANCIAL STATEMENT SCHEDULE
Schedule III--Real Estate Investments and Accumulated Depreciation as of
December 31, 1998
All other schedules are omitted because they are not required or the
required information is shown in the financial statements or notes thereto.
54
<PAGE>
(A) 3. EXHIBITS
The following exhibits are filed herewith or are incorporated by reference
to exhibits previously filed:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.1 Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23, 1998, by and
among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates
L.P.
10.2 Supplement to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23,
1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California
Development Associates L.P.
10.3 First Amendment to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of
October 8, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali
California Development Associates L.P.
10.4 Agreement of Limited Partnership of HPMC Lava Ridge Partners, L.P., dated as of July 21, 1998, by and
among HCG Development L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates
L.P.
10.5 Amendment No. 1 to Revolving Credit Agreement dated July 20, 1998, by and among Mack-Cali Realty, L.P.
and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto
10.6 Amendment No. 2 to Revolving Credit Agreement, dated as of December 30, 1998, among Mack-Cali Realty,
L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties
Thereto
23 Consent of PricewaterhouseCoopers LLP
27 Financial Data Schedule
</TABLE>
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated December 16, 1998,
during the quarter ended December 31, 1998. Items 5 and 7 were reported.
55
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Shareholders of Mack-Cali Realty Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a)(1) on page 54 present fairly, in all material
respects, the financial position of Mack-Cali Realty Corporation and its
subsidiaries at December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 14(a)(2) on page 54 presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements. These financial statements and
financial statement schedule are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements and
financial statement schedule based on 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/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
February 23, 1999
56
<PAGE>
CONSOLIDATED BALANCE SHEETS
Mack-Cali Realty Corporation and Subsidiaries
Dollars in thousands, except per share amounts
December 31,
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
Rental property
Land and leasehold interests $ 510,534 $ 374,242
Buildings and improvements 2,887,115 2,206,462
Tenant improvements 64,464 44,596
Furniture, fixtures and equipment 5,686 4,316
3,467,799 2,629,616
Less--accumulated depreciation and amortization (177,934) (103,133)
Total rental property 3,289,865 2,526,483
Cash and cash equivalents 5,809 2,704
Investments in unconsolidated joint ventures 66,508 --
Unbilled rents receivable 41,038 27,438
Deferred charges and other assets, net 39,020 18,989
Restricted cash 6,026 6,844
Accounts receivable, net of allowance for doubtful accounts of $670 and $327 3,928 3,736
Mortgage note receivable -- 7,250
Total assets $3,452,194 $2,593,444
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgages and loans payable $1,420,931 $ 972,650
Dividends and distributions payable 40,564 28,089
Accounts payable and accrued expenses 33,253 31,136
Rents received in advance and security deposits 29,980 21,395
Accrued interest payable 2,246 3,489
Total liabilities 1,526,974 1,056,759
Minority interest of unitholders in Operating Partnership 501,313 379,245
Commitments and contingencies
STOCKHOLDERS' EQUITY:
Preferred stock, 5,000,000 shares authorized, none issued -- --
Common stock, $.01 par value, 190,000,000 shares authorized,
57,266,137 and 49,856,289 shares outstanding 573 499
Additional paid-in capital 1,514,648 1,244,883
Dividends in excess of net earnings (91,314) (87,942)
Total stockholders' equity 1,423,907 1,157,440
Total liabilities and stockholders' equity $3,452,194 $2,593,444
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
57
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Mack-Cali Realty Corporation and Subsidiaries
In thousands, except per share amounts
Year Ended December 31,
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
REVENUES
Base rents $ 427,528 $ 206,215 $ 76,922
Escalations and recoveries from tenants 51,981 31,130 14,429
Parking and other 10,712 6,910 2,204
Interest income 2,423 5,546 1,917
Equity in earnings of unconsolidated joint ventures 1,055 -- --
Total revenues 493,699 249,801 95,472
EXPENSES
Real estate taxes 48,297 25,992 9,395
Utilities 38,440 18,246 8,138
Operating services 62,967 30,912 12,129
General and administrative 25,572 15,862 5,800
Depreciation and amortization 78,916 36,825 14,731
Interest expense 88,043 39,078 13,758
Non-recurring merger-related charges -- 46,519 --
Total expenses 342,235 213,434 63,951
Income before gain on sale of rental property, minority interest
and extraordinary item 151,464 36,367 31,521
Gain on sale of rental property -- -- 5,658
Income before minority interest and extraordinary item 151,464 36,367 37,179
Minority interest 32,513 31,379 4,760
Income before extraordinary item 118,951 4,988 32,419
Extraordinary item--loss on early retirement of debt
(net of minority interest's share of $297, $402 and $86) (2,373) (3,583) (475)
Net income $ 116,578 $ 1,405 $ 31,944
BASIC EARNINGS PER SHARE:
Income before extraordinary item $ 2.13 $ 0.13 $ 1.76
Extraordinary item--loss on early retirement of debt (0.04) (0.09) (0.03)
Net income $ 2.09 $ 0.04 $ 1.73
DILUTED EARNINGS PER SHARE:
Income before extraordinary item $ 2.11 $ 0.12 $ 1.73
EXTRAORDINARY item--loss on early retirement of debt (0.04) (0.08) (0.02)
Net income $ 2.07 $ 0.04 $ 1.71
Dividends declared per common share $ 2.10 $ 1.90 $ 1.75
Basic weighted average shares outstanding 55,840 39,266 18,461
Diluted weighted average shares outstanding 63,893 44,156 21,436
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
58
<PAGE>
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Mack-Cali Realty Corporation and Subsidiaries
<TABLE>
<CAPTION>
Additional Dividends in Unamortized Total
Common Stock Paid-In Excess of Stock Stockholders'
In thousands Shares Par Value Capital Net Earnings Compensation Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 15,105 $ 151 $ 192,971 $ (7,314) $ -- $ 185,808
Net income -- -- -- 31,944 -- 31,944
Dividends -- -- -- (37,666) -- (37,666)
Net proceeds from common
stock offerings 20,987 210 518,009 -- -- 518,219
Redemption of common units
for shares of common stock 101 1 1,072 -- -- 1,073
Proceeds from stock options
exercised 126 1 2,000 -- -- 2,001
Balance at December 31, 1996 36,319 363 714,052 (13,036) -- 701,379
Net income -- -- -- 1,405 -- 1,405
Dividends -- -- -- (76,311) -- (76,311)
Net proceeds from common
stock offerings 13,000 130 488,986 -- -- 489,116
Issuance of Stock Award Rights
and Stock Purchase Rights 351 4 12,522 -- (12,526) --
Amortization of stock
compensation -- -- -- -- 12,526 12,526
Beneficial conversion feature -- -- 26,801 -- -- 26,801
Redemption of common units
for shares of common stock 1 -- 17 -- -- 17
Proceeds from stock options
exercised 337 4 7,183 -- -- 7,187
Repurchase of common stock (152) (2) (4,678) -- -- (4,680)
Balance at December 31, 1997 49,856 499 1,244,883 (87,942) -- 1,157,440
Net income -- -- -- 116,578 -- 116,578
Dividends -- -- -- (119,950) -- (119,950)
Net proceeds from common
stock offerings 7,968 80 288,313 -- -- 288,393
Redemption of common units
for shares of common stock 29 -- 1,029 -- -- 1,029
Proceeds from stock options
exercised 268 3 5,472 -- -- 5,475
Repurchase of common stock (855) (9) (25,049) -- -- (25,058)
Balance at December 31, 1998 57,266 $573 $1,514,648 $ (91,314) $ -- $1,423,907
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
59
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Mack-Cali Realty Corporation and Subsidiaries
<TABLE>
<CAPTION>
In thousands
Year Ended December 31, 1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 116,578 $ 1,405 $ 31,944
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 78,916 36,825 14,731
Amortization of stock compensation -- 12,526 --
Amortization of deferred financing costs 1,580 983 1,081
Equity in earnings of unconsolidated joint ventures (1,055) -- --
Gain on sale of rental property -- -- (5,658)
Minority interest 32,513 31,379 4,760
Extraordinary item--loss on early retirement of debt 2,373 3,583 475
Changes in operating assets and liabilities:
Increase in unbilled rents receivable (13,600) (7,733) (979)
Increase in deferred charges and other assets, net (17,811) (9,507) (4,335)
Increase in accounts receivable, net (192) (1,663) (629)
Increase in accounts payable and accrued expenses 2,117 17,569 1,823
Increase in rents received in advance and
security deposits 8,585 10,614 2,911
(Decrease) increase in accrued interest payable (1,243) 2,161 699
Net cash provided by operating activities $ 208,761 $ 98,142 $ 46,823
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to rental property $ (692,766) $(928,974) $(318,145)
Issuance of mortgage note receivable (20,000) (11,600) --
Repayment of mortgage note receivable 20,000 -- --
Investments in unconsolidated joint ventures (58,844) -- --
Distributions from unconsolidated joint ventures 1,725 -- --
Proceeds from sale of rental property -- -- 10,324
Decrease in restricted cash 818 1,073 69
Net cash used in investing activities $ (749,067) $(939,501) $(307,752)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgages and loans payable $1,525,758 $669,180 $272,113
Repayments of mortgages and loans payable (1,098,065) (442,185) (294,819)
Debt prepayment premiums and other costs -- (1,812) (312)
Repurchase of common stock (25,058) (4,680) --
Redemption of common units (3,163) -- --
Payment of financing costs (10,110) (3,095) --
Net proceeds from common stock offerings 288,393 489,116 518,219
Proceeds from stock options exercised 5,475 7,187 2,001
Payment of dividends and distributions (139,819) (74,455) (32,433)
Net cash provided by financing activities $ 543,411 $639,256 $464,769
Net increase (decrease) in cash and cash equivalents $ 3,105 $(202,103) $203,840
Cash and cash equivalents, beginning of period 2,704 204,807 967
Cash and cash equivalents, end of period $ 5,809 $ 2,704 $204,807
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
60
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
1) ORGANIZATION AND BASIS OF PRESENTATION
ORGANIZATION
Mack-Cali Realty Corporation, a Maryland corporation, and subsidiaries (the
"Company"), 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, 1998, the Company owned or had interests in 249 properties plus
developable land (collectively, the "Properties"). The Properties aggregate
approximately 27.8 million square feet, and are comprised of 157 office and 80
office/flex buildings totaling approximately 27.4 million square feet (which
included four office properties and one office/flex property, aggregating 1.0
million square feet, owned by unconsolidated joint ventures in which the Company
has investment interests), six industrial/warehouse buildings totaling
approximately 387,400 square feet, two multi-family residential complexes
consisting of 453 units, two stand-alone retail properties and two land leases.
The Properties are located in 12 states, primarily in the Northeast, plus the
District of Columbia.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include all accounts of the
Company and its majority-owned subsidiaries, which consist principally of
Mack-Cali Realty, L.P. (the "Operating Partnership"). See Investments in
Unconsolidated Joint Ventures in Note 2 for the Company's treatment of
unconsolidated joint venture interests. All significant intercompany accounts
and transactions have been eliminated.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") 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 and
amortization. Costs directly related to the acquisition and development of
rental properties are capitalized. Capitalized development 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, which improve or extend the life
of the asset, are capitalized and depreciated over their estimated useful lives.
Fully-depreciated assets are removed from the accounts.
Properties are depreciated using the straight-line method over the
estimated useful lives of the assets. The estimated useful lives are as follows:
<TABLE>
<S> <C>
Leasehold interests Remaining lease term
Buildings and improvements 5 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. To the extent an impairment has
occurred, the loss shall be measured as the excess of the carrying amount of the
property over the fair value of the property. Management does not believe that
the value of any of its rental properties is impaired.
INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
The Company accounts for its investments in unconsolidated joint ventures under
the equity method of accounting as the Company exercises significant influence,
but does not control these entities. These investments are recorded initially at
cost, as Investments in Unconsolidated Joint Ventures, and subsequently adjusted
for equity in earnings (loss) and cash contributions and distributions. See Note
4.
CASH AND CASH EQUIVALENTS
All highly liquid investments with a maturity of three months or less when
purchased are considered to be cash equivalents.
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 is included in
interest expense and was $1,580, $983 and $1,081 for the years ended December
31, 1998, 1997 and 1996, 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 and included in
depreciation and amortization. Unamortized deferred leasing costs are charged to
amortization expense upon early termination of the lease. Certain employees of
the Operating Partnership provide leasing services to the Properties and receive
compensation based on space leased. Such compensation, which is capitalized and
amortized, approximated $3,509, $1,859 and $490 for the years ended December 31,
1998, 1997 and 1996, respectively.
61
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
REVENUE RECOGNITION
Base rental revenue is recognized 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.
Reimbursements are received from tenants for certain costs as provided in
the lease agreements. These costs generally include real estate taxes,
utilities, insurance, common area maintenance and other recoverable costs (see
Note 13).
INCOME AND OTHER TAXES
The Company has elected to be taxed as a REIT under Sections 856 through 860 of
the Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the
Company generally 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
and satisfies certain other requirements. 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 is subject to certain state and local
taxes.
INTEREST RATE CONTRACTS
Interest rate contracts are utilized by the Company to reduce interest rate
risks. The Company does not hold or issue derivative financial instruments for
trading purposes. The differentials to be received or paid under contracts
designated as hedges are recognized in income over the life of the contracts as
adjustments to interest expense.
In certain situations, the Company uses forward treasury lock agreements to
mitigate the potential effects of changes in interest rates for prospective
transactions. Gains and losses are deferred and amortized as adjustments to
interest expense over the remaining life of the associated debt to the extent
that such debt remains outstanding.
EARNINGS PER SHARE
In accordance with the Statement of Financial Accounting Standards No. 128
("FASB No. 128"), the Company presents both basic and diluted earnings per share
("EPS"). Basic EPS excludes dilution and is computed by dividing net income
available to common stockholders by the weighted average number of shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock, where such exercise or conversion
would result in a lower EPS amount.
DIVIDENDS AND DISTRIBUTIONS PAYABLE
The dividends and distributions payable at December 31, 1998 represents
dividends payable to shareholders of record on January 6, 1999 (57,266,737
shares), distributions payable to minority interest common unitholders
(9,086,585 common units) on that same date and preferred distributions to
preferred unitholders (250,256 preferred units) for the fourth quarter 1998. The
fourth quarter 1998 dividends and common unit distributions of $0.55 per share
and per common unit (pro-rated for units issued during the quarter), as well as
the fourth quarter preferred unit distribution of $16.875 per preferred unit,
were approved by the Board of Directors on December 15, 1998 and paid on January
26, 1999.
The dividends and distributions payable at December 31, 1997 represents
dividends payable to shareholders of record on January 5, 1998 (49,856,289
shares), distributions payable to minority interest common unitholders
(6,097,477 common units) on that same date and preferred distributions to
preferred unitholders (230,562 preferred units) for the fourth quarter 1997. The
fourth quarter 1997 dividends and common unit distributions of $0.50 per share
and per common unit (pro-rated for units issued during the quarter), as well as
the fourth quarter preferred unit distribution of $16.875 per preferred unit
(pro-rated for units issued during the quarter), were approved by the Board of
Directors on December 17, 1997 and paid on January 16, 1998.
EXTRAORDINARY ITEM
Extraordinary item represents the effect resulting from the early settlement of
certain debt obligations, including related deferred financing costs, prepayment
penalties, yield maintenance payments and other related items.
UNDERWRITING COMMISSIONS AND COSTS
Underwriting commissions and costs incurred in connection with the Company's
stock offerings are 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 No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations ("APB No. 25"). 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 closing market price of the
Company's stock on the business day preceding 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 No. 123, "Accounting for Stock Based
Compensation" ("FASB No. 123"). See Note 14.
NON-RECURRING CHARGES
The Company considers non-recurring charges as costs incurred specific to
significant non-recurring events that materially distort the comparative
measurement of the Company's performance.
62
<PAGE>
3) ACQUISITIONS/TRANSACTIONS
1998 TRANSACTIONS
OPERATING PROPERTY ACQUISITIONS The Company acquired the following operating
properties during the year ended December 31, 1998:
<TABLE>
<CAPTION>
ACQUISITION # OF RENTABLE INVESTMENT BY
DATE PROPERTY/PORTFOLIO NAME LOCATION BLDGS. SQUARE FEET COMPANY(A)
<S> <C> <C> <C> <C> <C>
OFFICE
2/05/98 500 West Putnam Avenue(b) Greenwich, Fairfield County, CT 1 121,250 $ 20,125
2/25/98 10 Mountainview Road Upper Saddle River, Bergen County, NJ 1 192,000 24,754
3/12/98 1250 Capital of Texas Highway South Austin, Travis County, TX 1 270,703 37,266
3/27/98 Prudential Business Campus(c) Parsippany, Morris County, NJ 5 703,451 130,437
3/27/98 Pacifica Portfolio--Phase I(d)(e) Denver & Colorado Springs, CO 10 620,017 74,966
3/30/98 Morris County Financial Center Parsippany, Morris County, NJ 2 301,940 52,763
5/13/98 3600 South Yosemite Denver, Denver County, CO 1 133,743 13,555
5/22/98 500 College Road East(f) Princeton, Mercer County, NJ 1 158,235 21,334
6/01/98 1709 New York Ave./1400 L Street N.W. Washington, D.C. 2 325,000 90,385
6/03/98 400 South Colorado Boulevard Denver, Denver County, CO 1 125,415 12,147
6/08/98 Pacifica Portfolio--Phase II(d)(e)(g) Denver & Colorado Springs, CO 6 514,427 85,910
7/16/98 4200 Parliament Drive(h) Lanham, Prince George's County, MD 1 122,000 15,807
9/10/98 40 Richards Avenue(d) Norwalk, Fairfield County, CT 1 145,487 19,587
9/15/98 Seven Skyline Drive(i) Hawthorne, Westchester County, NY 1 109,000 13,379
TOTAL OFFICE PROPERTY ACQUISITIONS: 34 3,842,668 $612,415
OFFICE/FLEX
1/30/98 McGarvey Portfolio(j) Moorestown, Burlington County, NJ 17 748,660 $ 47,526
7/14/98 1510 Lancer Road(k) Moorestown, Burlington County, NJ 1 88,000 3,700
TOTAL OFFICE/FLEX PROPERTY ACQUISITIONS: 18 836,660 $ 51,226
TOTAL OPERATING PROPERTY ACQUISITIONS: 52 4,679,328 $663,641
</TABLE>
PROPERTIES PLACED IN SERVICE The Company placed in service the following
properties through the completion of development or redevelopment during the
year ended December 31, 1998:
<TABLE>
<CAPTION>
DATE PLACED # OF RENTABLE INVESTMENT BY
IN SERVICE PROPERTY NAME LOCATION BLDGS. SQUARE FEET COMPANY(A)
<S> <C> <C> <C> <C> <C>
OFFICE
1/15/98 224 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 $ 7,796
8/01/98 228 Strawbridge Drive Moorestown, Burlington County, NJ 1 74,000 7,986
TOTAL OFFICE PROPERTIES PLACED IN SERVICE: 2 148,000 $15,782
OFFICE/FLEX
6/08/98 Two Center Court Totowa, Passaic County, NJ 1 30,600 $ 2,231
10/23/98 650 West Avenue Stamford, Fairfield County, CT 1 40,000 4,952
TOTAL OFFICE/FLEX PROPERTIES PLACED IN SERVICE: 2 70,600 $ 7,183
TOTAL PROPERTIES PLACED IN SERVICE: 4 218,600 $22,965
</TABLE>
(a) Unless otherwise noted, transactions were funded by the Company with funds
primarily made available through draws on the Company's credit facilities.
(b) The acquisition was funded with cash as well as the assumption of mortgage
debt (estimated fair value of approximately $12,104, with annual effective
interest rate of 6.52 percent.)
(c) The acquisition was funded primarily from proceeds received from the sale
of 2,705,628 shares of common stock (see Note 14). Also included in the
acquisition, but excluded from this schedule, are (i) Nine Campus Drive,
which the Company has a 50 percent interest through an unconsolidated joint
venture (see Note 4), and (ii) developable land adjacent to the acquired
portfolio (see "Redevelopment Properties/Developable Land Acquisitions.")
(d) The acquisition was funded with cash and the issuance of common units to
the seller (see Note 9).
(e) The Company may be required to pay additional consideration due to earn-out
provisions in the agreement. William L. Mack, a director and equity holder
of the Company, was an indirect owner of an interest in certain of the
buildings contained in the Pacifica portfolio. The Company is under
contract to acquire two remaining office buildings, encompassing 95,360
square feet (for an aggregate price of approximately $12,300).
(f) The property was acquired subject to a ground lease, which is prepaid
through 2031, and has two 10-year renewal options, at rent levels as
defined in the lease agreement.
(g) Also included in the acquisition, but excluded from this schedule, is
developable land adjacent to the acquired portfolio (see "Redevelopment
Properties/Developable Land Acquisitions.")
(h) Includes land adjacent to the operating property, which may be sub-divided
for future development.
(i) The property was acquired through the exercise of a purchase option
obtained in the RM Transaction.The acquisition was funded with cash, net of
the repayment by the seller of the remaining balance of the RM Note
Receivable (see Note 7).
(j) The acquisition was funded with cash as well as the assumption of mortgage
debt (aggregate estimated fair value of approximately $8,354, with weighted
average annual effective interest rate of 6.24 percent.) The Company is
under contract to acquire an additional four office/flex properties and has
a right of first refusal to acquire six additional office/flex properties.
(k) The property was acquired through the exercise of a purchase option
obtained in the acquisition of the McGarvey portfolio in January 1998.
63
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
REDEVELOPMENT PROPERTIES/DEVELOPABLE LAND ACQUISITIONS On January 23, 1998, the
Company acquired 10 acres of vacant land in the Stamford Executive Park, located
in Stamford, Fairfield County, Connecticut for approximately $1,341, funded from
the Company's cash reserves. In October 1998, the Company completed and placed
in service a 40,000 square-foot office/flex property on the acquired land (see
"Properties Placed in Service.")
On February 2, 1998, the Company acquired 2115 Linwood Avenue, a 68,000
square-foot vacant office building located in Fort Lee, Bergen County, New
Jersey. The building was acquired for approximately $5,164, which was made
available from drawing on one of the Company's credit facilities. The Company is
currently redeveloping the property for future lease-up and operation.
On March 27, 1998, as part of the purchase of the Prudential Business
Campus (see "Operating Property Acquisitions"), the Company acquired
approximately 95 acres of vacant land adjacent to the operating properties for
approximately $27,500.
On June 8, 1998, as part of the Pacifica portfolio-phase II acquisition
(see "Operating Property Acquisitions"), the Company acquired vacant land
adjacent to the operating properties for approximately $2,006.
On September 4, 1998, the Company acquired approximately 128 acres of
vacant land located at the Horizon Center Business Park, Hamilton Township,
Mercer County, New Jersey, through the exercise of a purchase option obtained in
the Company's acquisition of the Horizon Center Business Park in November 1995.
The land was acquired for approximately $1,698, which was funded from the
Company's cash reserves.
On November 10, 1998, the Company acquired approximately 10.1 acres of land
located at Three Vaughn Drive, Princeton, Mercer County, New Jersey. The Company
acquired the land for approximately $2,146, which was funded from the Company's
cash reserves.
On December 3, 1998, the Company acquired approximately 2.7 acres of land
located at 12 Skyline Drive, Hawthorne, Westchester County, New York. The
Company acquired the land for approximately $1,540, which was funded from the
Company's cash reserves.
1997 TRANSACTIONS
On January 31, 1997, the Company acquired 65 properties, aggregating
approximately 4.1 million square feet, ("RM Properties") from Robert Martin
Company, LLC and affiliates ("RM") for a total cost of approximately $450,000.
The cost of the transaction ("RM Transaction") was financed through the
assumption of $185,283 of mortgage indebtedness, the payment of approximately
$220,000 in cash, substantially all of which was obtained from the Company's
cash reserves, and the issuance of 1,401,225 common units, valued at $43,788.
On December 11, 1997, the Company acquired 54 office properties,
aggregating approximately 9.2 million square feet, ("Mack Properties") from the
Mack Company and Patriot American Office Group, pursuant to a Contribution and
Exchange Agreement ("Agreement"), for a total cost of approximately $1,102,024
("Mack Transaction"). With the completion of the Mack Transaction, the Cali
Realty Corporation name was changed to Mack-Cali Realty Corporation, and the
name of the Operating Partnership was changed from Cali Realty, L.P. to
Mack-Cali Realty, L.P.
The total cost of the Mack Transaction was financed as follows: (i)
$498,757 in cash made available from the Company's cash reserves and from the
$200,000 Prudential Term Loan (see Note 8), (ii) $291,879 in debt assumed by the
Company ("Mack Mortgages"), (iii) the issuance of 1,965,886 common units, valued
at approximately $66,373, (iv) the issuance of 15,237 Series A preferred units
and 215,325 Series B preferred units, valued at approximately $236,491
(collectively, the "Preferred Units"), (v) warrants to purchase 2,000,000 common
units ("Unit Warrants"), valued at approximately $8,524, and (vi) the issuance
of Contingent Units (see Note 9).
In accordance with the Agreement, Thomas A. Rizk remained Chief Executive
Officer and resigned as President of the Company, and Mitchell E. Hersh was
appointed as President and Chief Operating Officer. The Company's other officers
retained their existing positions and responsibilities, except that Brant Cali
resigned as Chief Operating Officer and John R. Cali resigned as Chief
Administrative Officer. Brant Cali and John R. Cali remained as officers of the
Company as Executive Vice Presidents.
Entering into new employment agreements with the Company after the Mack
Transaction were Thomas A. Rizk, Mitchell E. Hersh, Brant Cali and John R. Cali.
Entering into amended and restated employment agreements were Roger W. Thomas,
as Executive Vice President, General Counsel and Secretary, Barry Lefkowitz, as
Executive Vice President and Chief Financial Officer and Timothy M. Jones, as
Executive Vice President.
In connection with the Mack Transaction, under each of the Company's
executive officer's then existing employment agreements, due to a change of
control of the Company (as defined in each employment agreement), each of the
aforementioned officers received the benefit of the acceleration of (i) the
immediate vesting and issuance of his restricted stock, including tax gross-up
payments associated therewith, (ii) the forgiveness of his Stock Purchase Rights
loan, including tax gross-up payments associated therewith, and (iii) the
vesting of his unvested employee stock options and warrants. Additionally, under
each of Thomas Rizk's, Brant Cali's and John R. Cali's employment agreements
with the Company, each of these officers became entitled to receive certain
severance-type payments, as a result of certain provisions in each of their
agreements, triggered as a result of the Mack Transaction. Finally, certain
officers and employees of the Company were given transaction-based payments as a
reward for their efforts and performance in connection with the Mack
Transaction. The total expense associated with the acceleration of vesting of
restricted stock, the forgiveness of Stock Purchase Rights loans, and the
payment of certain severance-type payments, as well as performance payments and
related tax-obligation payments, which were approved by the Company's Board of
Directors and which took place simultaneous with completion of the Mack
Transaction, totaled $45,769. Such expenses are included in non-recurring
merger-related charges for the year ended December 31, 1997, (see Note 14).
In 1997, the Company also acquired 13 additional office and office/flex
properties, aggregating approximately 1.5 million square
64
<PAGE>
feet, in nine separate transactions with separate sellers, for an aggregate cost
of approximately $204,446. Such acquisitions were funded primarily from drawings
on the Company's credit facilities.
1996 TRANSACTIONS
In 1996, the Company acquired 15 office properties and placed in service two
office/flex properties, totaling approximately 3.3 million square feet, for a
total cost of approximately $451,623. The acquired and placed in service
properties are all located in New Jersey and Pennsylvania. Concurrently with the
acquisition of 103 Carnegie Center in Princeton, Mercer County, New Jersey, the
Company sold its office building at 15 Essex Road in Paramus, Bergen 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 15 Essex Road to acquire 103 Carnegie Center.
4) INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES
PRU-BETA 3 (NINE CAMPUS DRIVE)
On March 27, 1998, the Company acquired a 50 percent interest in an existing
joint venture with The Prudential Insurance Company of America ("Prudential"),
known as Pru-Beta 3, which owns and operates Nine Campus Drive, a 156,495
square-foot office building, located in the Prudential Business Campus office
complex in Parsippany, Morris County, New Jersey (see Note 3). The Company
performs management and leasing services for the property owned by the joint
venture and received $114 in fees for such services in 1998.
HPMC (CONTINENTAL GRAND II/SUMMIT RIDGE/LAVA RIDGE)
On April 23, 1998, the Company entered into a joint venture agreement with HCG
Development, L.L.C. and Summit Partners I, L.L.C. to form HPMC Development
Partners, L.P. and, on July 21, 1998, entered into a second joint venture named
HPMC Lava Ridge Partners, L.P. with these same parties. HPMC Development
Partners, L.P.'s efforts have focused on two development projects, commonly
referred to as Continental Grand II and Summit Ridge. Continental Grand II is a
4.2 acre site located in El Segundo, Los Angeles County, California, acquired by
the venture upon which it has commenced construction of a 237,000 square-foot
office property. Summit Ridge is a 7.3 acre site located in San Diego, San Diego
County, California, acquired by the venture upon which it has commenced
construction of a 132,000 square-foot office/flex property. HPMC Lava Ridge
Partners, L.P. has commenced construction of three two-story buildings
aggregating 183,200 square-feet of office space on a 12.1 acre site located in
Roseville, Placer County, California. The Company is required to make capital
contributions to the ventures totaling up to $26,566, pursuant to the
partnership agreements. Among other things, the partnership agreements provide
for a preferred return on the Company's invested capital in each venture, in
addition to 50 percent of such venture's profit above the preferred returns, as
defined in each agreement.
G&G MARTCO (CONVENTION PLAZA)
On April 30, 1998, the Company acquired a 49.9 percent interest in an existing
joint venture, known as G&G Martco, which owns Convention Plaza, a 305,618
square-foot office building, located in San Francisco, San Francisco County,
California. A portion of its initial investment was financed through the
issuance of common units (see Note 9), as well as funds drawn from the Company's
credit facilities. The Company performs management and leasing services for the
property owned by the joint venture and received $20 in fees for such services
in 1998.
AMERICAN FINANCIAL EXCHANGE L.L.C.
On May 20, 1998, the Company entered into a joint venture agreement with
Columbia Development Corp. to form American Financial Exchange L.L.C. The
venture was initially formed to acquire land for future development, located on
the Hudson River waterfront in Jersey City, Hudson County, New Jersey, adjacent
to the Company's Harborside property. The Company holds a 50 percent interest in
the joint venture. Among other things, the partnership agreement provides for a
preferred return on the Company's invested capital in the venture, in addition
to the Company's proportionate share of the venture's profit, as defined in the
agreement. The joint venture acquired land on which it constructed a parking
facility, which is currently leased to a parking operator under a 10-year
agreement. Such parking facility serves a ferry service between the Company's
Harborside property and Manhattan.
RAMLAND REALTY ASSOCIATES L.L.C. (ONE RAMLAND ROAD)
On August 20, 1998, the Company entered into a joint venture agreement with S.B.
New York Realty Corp. to form Ramland Realty Associates L.L.C. The venture was
formed to own, manage and operate One Ramland Road, a 232,000 square-foot
office/flex building plus adjacent developable land, located in Orangeburg,
Rockland County, New York. The office/flex building is being redeveloped for
future lease-up and operation. The Company holds a 50 percent interest in the
joint venture.
ASHFORD LOOP ASSOCIATES L.P. (1001 SOUTH DAIRY ASHFORD/ 2100 WEST LOOP SOUTH)
On September 18, 1998, the Company entered into a joint venture agreement with
Prudential to form Ashford Loop Associates L.P. The venture was formed to own,
manage and operate 1001 South Dairy Ashford, a 130,000 square-foot office
building acquired on September 18, 1998 and 2100 West Loop South, a 168,000
square-foot office building acquired on November 25, 1998, both located in
Houston, Harris County, Texas. The Company holds a 20 percent interest in the
joint venture. The joint venture may be required to pay additional consideration
due to earn-out provisions in the acquisition contracts.The Company performs
management and leasing services for the properties owned by the joint venture
and received $30 in fees for such services in 1998.
65
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
SUMMARIES OF UNCONSOLIDATED JOINT VENTURES
The following is a summary of the financial position of the unconsolidated joint
ventures in which the Company has investment interests as of December 31, 1998:
<TABLE>
<CAPTION>
AMERICAN
G&G FINANCIAL RAMLAND ASHFORD COMBINED
PRU-BETA 3 HPMC MARTCO EXCHANGE REALTY LOOP TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Rental property, net $ 22,711 $ 30,278 $ 11,099 $ 10,621 $ 8,467 $ 19,166 $102,342
Other assets 3,995 1,097 4,058 389 1,101 378 11,018
Total assets $ 26,706 $ 31,375 $ 15,157 $ 11,010 $ 9,568 $ 19,544 $113,360
Liabilities and partners'/ members' capital:
Mortgage payable $-- $ 632 $ 39,762 $-- $-- $-- $ 40,394
Other liabilities 484 3,522 2,096 79 6 509 6,696
Partners'/members' capital 26,222 27,221 (26,701) 10,931 9,562 19,035 66,270
Total liabilities and
partners'/members' capital $ 26,706 $ 31,375 $ 15,157 $ 11,010 $ 9,568 $ 19,544 $113,360
Company's net investment in
unconsolidated joint ventures $ 17,980 $ 17,578 $ 10,964 $ 10,983 $ 4,851 $ 4,152 $ 66,508
</TABLE>
The following is a summary of the results of operations of the
unconsolidated joint ventures for the period in which the Company had investment
interests during the year ended December 31, 1998:
<TABLE>
<CAPTION>
AMERICAN
G&G FINANCIAL RAMLAND ASHFORD COMBINED
PRU-BETA 3 HPMC MARTCO EXCHANGE REALTY LOOP TOTAL
<S> <C> <C> <C> <C> <C>
Total revenues $3,544 $-- $4,103 $490 $-- $659 $8,796
Operating and other expenses (1,124) -- (1,704) (35) -- (286) (3,149)
Depreciation and amortization (1,000) -- (604) -- -- (76) (1,680)
Interest expense -- -- (2,097) -- -- -- (2,097)
Net income (loss) $1,420 $-- $ (302) $455 $-- $297 $1,870
Company's equity in earnings (loss) of
unconsolidated joint ventures $ 723 $-- $ (182) $455 $-- $ 59 $1,055
</TABLE>
5) DEFERRED CHARGES AND OTHER ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
<S> <C> <C>
Deferred leasing costs $ 35,151 $ 20,297
Deferred financing costs 9,962 3,640
45,113 23,937
Accumulated amortization (13,527) (9,535)
Deferred charges, net 31,586 14,402
Prepaid expenses and other assets 7,434 4,587
Total deferred charges and other
assets, net $ 39,020 $ 18,989
</TABLE>
6) RESTRICTED CASH
Restricted cash includes security deposits for the Company's residential
properties and certain commercial properties, 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:
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
<S> <C> <C>
Security deposits $5,696 $5,566
Escrow and other reserve funds 330 1,278
Total restricted cash $6,026 $6,844
</TABLE>
7) MORTGAGE NOTE RECEIVABLE
In connection with the RM Transaction on January 31, 1997, the Company provided
a $11,600 non-recourse mortgage loan ("RM Note Receivable") to entities
controlled by the RM principals, which bore interest at an annual rate of 450
basis points over the one-month London Inter-Bank Offered Rate ("LIBOR") (5.75
percent at December 31, 1998). The RM Note Receivable, which was secured by two
properties under purchase options ("Option Properties") and guaranteed by
certain of the RM principals, was scheduled to mature on February 1, 2000. In
conjunction with the acquisition of one of the Option Properties on August 15,
1997, the sellers of the property, certain RM principals, prepaid $4,350 of the
RM Note Receivable. The RM Note Receivable was subsequently prepaid in full in
connection with the acquisition of the second Option Property on September 15,
1998 (see Note 3). The Company received a prepayment fee of $152 with the
retirement of the RM Note Receivable.
On March 6, 1998, prior to the completion of the Pacifica portfolio-phase I
acquisition, the Company provided a $20,000 mortgage loan to an entity
controlled by certain principals of Pacifica Holding Company. The mortgage loan
was secured by an office property in California and bore interest at an annual
rate of 9.25 percent. The mortgage loan was subsequently prepaid in full by the
borrower on June 10, 1998. The Company received a prepayment fee of $200 with
the retirement of the mortgage loan.
66
<PAGE>
8) MORTGAGES AND LOANS PAYABLE
<TABLE>
<CAPTION>
DECEMBER 31, 1998 1997
<S> <C> <C>
Prudential Mortgages $ 210,265 $ 262,205
TIAA Mortgage 185,283 185,283
Harborside Mortgages 150,000 150,000
Mitsubishi Mortgages 72,204 72,204
CIGNA Mortgages 46,989 86,650
Other Mortgages 78,440 88,474
Revolving Credit Facilities 671,600 122,100
Contingent Obligation 6,150 5,734
Total mortgages and loans payable $1,420,931 $ 972,650
</TABLE>
Prudential Mortgages
The Company has mortgage debt from Prudential and its subsidiaries
("Prudential Mortgages") aggregating $210,265 and $262,205 as of December
31, 1998 and 1997, respectively, comprised of the following:
On April 30, 1998, the Company obtained a $150,000, interest-only,
non-recourse mortgage loan from Prudential ("$150,000 Prudential Mortgage
Loan"). The loan, which is secured by 12 of the Company's properties, has an
effective annual interest rate of 7.10 percent and a seven-year term. The
Company has the option to convert the mortgage loan to unsecured debt as a
result of the achievement of an investment grade credit rating. The mortgage
loan is prepayable in whole or in part subject to certain provisions, including
yield maintenance. The proceeds of the new loan were used, along with funds
drawn from the Company's credit facilities, to retire the Prudential Term Loan
(as defined below), as well as approximately $48,224 of certain other mortgages.
The Company also has certain other non-recourse mortgage debt, aggregating
$60,265 and $62,205 in principal as of December 31, 1998 and 1997, respectively,
with Prudential. Such mortgages, which are secured by three properties, bear
interest at a weighted average fixed rate of 8.25 percent per annum. The
mortgages require monthly payments of interest and principal, and mature between
October 2003 and October 2005.
On December 10, 1997, the Company obtained a $200,000 term loan
("Prudential Term Loan") from Prudential Securities Corp. ("PSC"). The proceeds
of the loan were used to fund a portion of the cash consideration in completion
of the Mack Transaction. The loan had a one-year term and interest payments were
required monthly at an interest rate of 110 basis points over one-month LIBOR.
The Prudential Term Loan was retired in April 1998, simultaneous with the
Company obtaining the $150,000 Prudential Mortgage Loan. On account of
prepayment fees, loan origination fees, legal fees and other costs incurred in
the retirement of the Prudential Term Loan, an extraordinary loss of $46, net of
minority interest's share of the loss ($6), was recorded for the year ended
December 31, 1998.
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 ("TIAA"), with interest only payable monthly at a fixed
annual rate of 7.18 percent ("TIAA Mortgage"). The TIAA Mortgage is secured and
cross-collateralized by 43 of the RM Properties and matures in December 2003.
The Company has the option to convert, without any yield maintenance obligation
or prepayment premium, the TIAA Mortgage to unsecured public debt as a result of
the achievement of an investment grade credit rating. The TIAA Mortgage is
prepayable in whole or in part subject to certain provisions, including yield
maintenance which is 100 basis points over United States Treasury obligations of
similar maturity to the remaining maturity of the TIAA Mortgage at the time
prepayment is being sought.
HARBORSIDE MORTGAGES
In connection with the acquisition of Harborside Financial Center ("Harborside")
on November 4, 1996, the Company assumed existing mortgage debt and was provided
seller-financed mortgage debt aggregating $150,000. The existing non-recourse
mortgage financing, with a principal balance of $101,852 and $104,768 as of
December 31, 1998 and 1997, respectively, bears interest at an annual fixed rate
of 7.32 percent and matures in January 2006. The seller-provided mortgage
financing, with a principal balance of $48,148 and $45,232 as of December 31,
1998 and 1997, respectively, matures in January 2006 and currently bears
interest at an annual 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 interpolated three-year treasury note at that
time with spreads of 110 basis points in years four through six and 130 basis
points in years seven through maturity. See "Interest Rate Contracts."
MITSUBISHI MORTGAGES
The Company has non-recourse, variable-rate mortgage debt aggregating $72,204 in
principal as of December 31, 1998 and 1997 with Mitsubishi Trust and Banking
Corporation ("Mitsubishi Mortgages"). Such mortgages assumed in the Mack
Transaction, which are secured by two of the Mack Properties, bear interest at a
variable rate of 65 basis points over LIBOR and mature between January 2008 and
January 2009.
CIGNA MORTGAGES
The Company has non-recourse mortgage debt aggregating $46,989 and $86,650 in
principal as of December 31, 1998 and 1997, respectively, with Connecticut
General Life Insurance Company ("CIGNA Mortgages"). Such mortgages assumed in
the Mack Transaction, which are secured by three of the Mack Properties, bear
interest at a weighted average annual fixed rate of 7.79 percent and require
monthly payments of interest and principal on various term amortization
schedules. The various mortgages mature between March 1999 and October 2003. In
1998, the Company retired certain of the CIGNA Mortgages with an aggregate
principal balance of $37,773, of which $27,886 was made available from the
$150,000 Prudential Mortgage Loan and $9,887 from drawing on the Company's
credit facilities.
67
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
OTHER MORTGAGES
The Company has mortgage debt aggregating $78,440 and $88,474 in principal as of
December 31, 1998 and 1997, respectively, with six different lenders, all of
which were assumed in the Mack Transaction as well as certain 1998 property
acquisitions, and are secured by 11 individual properties ("Other Mortgages").
The Other Mortgages bear interest at a weighted average annual fixed effective
rate of 6.95 percent. Certain of the mortgages require monthly payments of
principal, in addition to interest on various term amortization schedules. The
Other Mortgages mature between May 1999 and October 2005. Variable rate debt
included in Other Mortgages at December 31, 1997, aggregating $20,338, which
bore interest at 115 basis points over LIBOR, was retired in April 1998,
simultaneous with the Company obtaining the $150,000 Prudential Mortgage Loan.
On account of prepayment fees, legal fees and other costs incurred in the
retirement of certain of the Other Mortgages in April 1998, an extraordinary
loss of $124, net of minority interest's share of the loss ($16), was recorded
for the year ended December 31, 1998.
REVOLVING CREDIT FACILITIES
ORIGINAL UNSECURED FACILITY On August 6, 1997, the Company obtained an unsecured
revolving credit facility ("Original Unsecured Facility") in the amount of
$400,000 from a group of 13 lender banks. The facility carried a three-year term
and bore interest at 125 basis points over one-month LIBOR.
The terms of the Original Unsecured Facility included certain restrictions
and covenants which limited, among other things, dividend payments and
additional indebtedness and which required compliance with specified financial
ratios and other financial measurements. The facility also required a fee on the
unused balance payable quarterly in arrears, at a rate ranging from one-eighth
of one percent to one-quarter of one percent of such balance, depending on the
level of borrowings outstanding in relation to the total facility commitment.
The Company had outstanding borrowings of $122,100 at December 31, 1997,
under the Original Unsecured Facility. The Original Unsecured Facility was
repaid in full and retired in connection with the Company obtaining the 1998
Unsecured Facility in April 1998, as described below. On account of
prepayment fees, loan origination fees, legal fees and other costs incurred
in the retirement of the Original Unsecured Facility, an extraordinary loss
of $2,203, net of minority interest's share of the loss ($275), was recorded
for the year ended December 31, 1998.
1998 UNSECURED FACILITY On April 17, 1998, the Company repaid in full and
terminated the Original Unsecured Facility and obtained a new unsecured
revolving credit facility ("1998 Unsecured Facility") in the amount of $870,000
from a group of 26 lender banks. In July 1998, the 1998 Unsecured Facility was
expanded to $900,000 with the addition of two new lender banks into the
facility, bringing the total number of participants to 28. In December 1998, the
1998 Unsecured Facility was further expanded to $1,000,000. The 1998 Unsecured
Facility has a three-year term and bore interest at 110 basis points over LIBOR.
In November 1998, with the Company's achievement of investment grade unsecured
debt ratings, the interest rate was reduced to 90 basis points over LIBOR.
The terms of the 1998 Unsecured Facility include certain restrictions and
covenants which limit, among other things, the payment of dividends (as
discussed below), the incurrence of additional indebtedness, the incurrence of
liens and the disposition of assets, and which require compliance with financial
ratios relating to the maximum leverage ratio, the maximum amount of secured
indebtedness, the minimum amount of tangible net worth, the minimum amount of
debt service coverage, the minimum amount of fixed charge coverage, the maximum
amount of unsecured indebtedness, the minimum amount of unencumbered property
debt service coverage and certain investment limitations. The dividend
restriction referred to above provides that, except to enable the Company to
continue to qualify as a REIT under the Code, the Company will not during any
four consecutive fiscal quarters make distributions with respect to common stock
or other equity interests in an aggregate amount in excess of 90 percent of
funds from operations for such period, subject to certain other adjustments. The
1998 Unsecured Facility also requires a 17.5 basis point fee on the unused
balance payable quarterly in arrears.
The lending group for the 1998 Unsecured Facility consists of: The Chase
Manhattan Bank, as administrative agent; Fleet National Bank, as syndication
agent; PNC Bank, N.A. and NationsBank, as documentation agents; Bankers Trust,
Commerzbank, AG, The First National Bank of Chicago and First Union National
Bank, as managing agents; Creditanstalt Corporate Finance, Inc., Dresdner Bank,
AG, European American Bank, HypoBank, Societe Generale and Summit Bank, as
co-agents; and Kredietbank, N.V., Key Bank N.A., Mellon Bank, N.A., The Bank of
New York, Citizens Bank of Rhode Island, Crestar Bank, DG Bank Deutsche, The
Tokai Bank Limited, USTrust, Bayerische Landesbank Girozentrale, LaSalle
National Bank, Erste Bank, BankLeumi USA and Bank One, Arizona, NA.
PRUDENTIAL FACILITY The Company has a revolving credit facility ("Prudential
Facility") from PSC in the amount of $100,000, which currently bears interest at
110 basis points over one-month LIBOR, with a maturity date of December 31,
1999. The Prudential Facility is a recourse liability of the Operating
Partnership and is secured by the Company's equity interest in Harborside. The
Prudential Facility limits the ability of the Operating Partnership to make any
distributions during any fiscal quarter in an amount in excess of 100 percent of
the Operating Partnership's available funds from operations for the immediately
preceding fiscal quarter (except to the extent such excess distributions or
dividends are attributable to gains from the sale of the Operating Partnership's
assets or are required for the Company to maintain its status as a REIT under
the Code); provided, however, that the Operating Partnership may make
distributions and pay dividends in excess of 100 percent of available funds from
operations for the preceding fiscal quarter for not more than three consecutive
quarters. In addition to the foregoing, the Prudential Facility limits the liens
placed upon the subject property and certain collateral, the use of proceeds
from the Prudential Facility, and the maintenance of ownership of the subject
property and assets derived from said ownership. The Company had no outstanding
borrowings at December 31, 1998 and 1997 under the Prudential Facility.
68
<PAGE>
CONTINGENT OBLIGATION
As part of the Harborside acquisition in November 1996, the Company agreed to
make payments (with an estimated net present value of approximately $5,252 at
acquisition date) 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. The Company is currently in the
pre-development phase of a long-range plan to develop the Harborside site on a
multi-property, multi-use basis.
For the year ended December 31, 1998, interest was imputed on the
Contingent Obligation, thereby increasing the balance of the Contingent
Obligation from $5,734 as of December 31, 1997 to $6,150 as of December 31,
1998.
Mortgage Financing
On August 12, 1997, the Company retired certain mortgage financing
("Mortgage Financing") with funds made available primarily from drawing on the
Original Unsecured Facility. On account of prepayment fees, loan origination
fees, legal fees and other costs incurred in the retirement of the Mortgage
Financing, an extraordinary loss of $3,583, net of minority interest's share of
the loss ($402), was recorded for the year ended December 31, 1997.
INTEREST RATE CONTRACTS
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
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 a commercial bank. The swap agreement fixed the Company's
one-month LIBOR base to 5.265 percent per annum on a notional amount of $26,000.
The swap agreement expired in January 1999.
On November 20, 1997, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 5.88
percent per annum for the interpolated seven-year U.S. Treasury Note effective
March 1, 1998, on a notional amount of $150,000. The agreement was used to fix
the interest rate on the $150,000 Prudential Mortgage Loan. The Company settled
the agreement on March 2, 1998 for $2,035 which is being amortized to interest
expense over the term of the $150,000 Prudential Mortgage Loan.
On October 1, 1998, the Company entered into a forward treasury rate lock
agreement with a commercial bank. The agreement locked an interest rate of 4.089
percent per annum for the three-year U.S. Treasury Note effective November 4,
1999, on a notional amount of $50,000. The agreement will be used to fix the
Index Rate on $50,000 of the Harborside Mortgages, for which the company's
interest rate re-sets for three years beginning November 4, 1999 to the
three-year U.S. Treasury Note plus 110 basis points (see "Harborside
Mortgages").
The Company is exposed to credit loss in the event of non-performance by
the other parties to the interest rate contracts. However, the Company does not
anticipate non-performance by any of the counter parties. The Company is also
exposed to market risk from the movement in interest rates pertaining to the
forward treasury rate lock agreement.
SCHEDULED PRINCIPAL PAYMENTS
Scheduled principal payments and related weighted average interest rates on the
mortgages and loans payable, as of December 31, 1998, are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVG.
SCHEDULED PRINCIPAL INTEREST RATE OF
YEAR AMORTIZATION MATURITIES TOTAL FUTURE REPAYMENTS(A)
<S> <C> <C> <C> <C>
1999 $ 3,653 $ 51,797 $ 55,450 7.36%
2000 3,651 5,418 9,069 7.30%
2001 3,792 675,811 679,603 6.66%
2002 3,969 7,814 11,783 7.10%
2003 4,315 206,971 211,286 7.31%
Thereafter 5,279 448,461 453,740 7.10%
Totals/Weighted Average $ 24,659 $1,396,272 $1,420,931 6.93%
</TABLE>
(a) Assumes LIBOR rate at December 31, 1998 of 5.75 percent in calculating
credit line and other variable rate debt interest rates.
69
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
LOAN COMMITMENTS
The Company has obtained mortgage commitments amounting to $45,500 to refinance
two of the CIGNA Mortgages with principal balances aggregating $35,940 maturing
in 1999. The new mortgages will have a weighted average effective interest rate
of 6.91 percent per annum, versus the average rate of 7.60 percent per annum for
the maturing mortgages.
CASH PAID FOR INTEREST & INTEREST CAPITALIZED
Cash paid for interest for the years ended December 31, 1998, 1997 and 1996 was
$92,441, $36,917 and $12,096, respectively. Interest capitalized by the Company
for the years ended December 31, 1998, 1997 and 1996 was $3,547, $820 and $118,
respectively.
9) MINORITY INTEREST
Minority interest in the accompanying consolidated financial statements relates
to common units in the Operating Partnership, in addition to Preferred Units and
Unit Warrants issued in connection with the Mack Transaction, held by parties
other than the Company.
PREFERRED UNITS
As described in Note 3, in connection with the funding of the Mack Transaction,
the Company issued 15,237 Series A Preferred Units and 215,325 Series B
Preferred Units, with an aggregate value of $236,491. The Preferred Units have a
stated value of $1,000 per unit and are preferred as to assets over any class of
common units or other class of preferred units of the Company, based on
circumstances per the applicable unit certificates.
The quarterly distribution on each Preferred Unit (representing 6.75
percent of the Preferred Unit stated value of $1,000 on an annualized basis) is
an amount equal to the greater of (i) $16.875 or (ii) the quarterly distribution
attributable to a Preferred Unit determined as if such unit had been converted
into common units, subject to adjustment for customary anti-dilution rights.
Each of the Series A Preferred Units may be converted at any time into common
units at a conversion price of $34.65 per unit, and, after the one year
anniversary of the date of the Series A Preferred Units' initial issuance,
common units received pursuant to such conversion may be redeemed into common
stock. Each of the Series B Preferred Units may be converted at any time into
common units at a conversion price of $34.65 per unit, and, after the three year
anniversary of the date of the Series B Preferred Units' initial issuance,
common units received pursuant to such conversion may be redeemed into common
stock. Each of the common units are redeemable after one year for an equal
number of shares of common stock.
The Preferred Units, issued in the Mack Transaction, are convertible into
common units at $34.65 per common unit, which is an amount less than the
$39.0625 closing stock price on the date of closing of the Mack Transaction.
Accordingly, the Company recorded, on December 11, 1997, the financial value
ascribed to the beneficial conversion feature inherent in the Preferred Units
upon issuance, which totaled $26,801 ($29,361, before allocation to minority
common unitholders) and was recorded as beneficial conversion feature in
stockholders' equity. The beneficial conversion feature was amortized in full as
the Preferred Units were immediately convertible upon issuance; such
amortization was included in minority interest for the year ended December 31,
1997.
During 1998, the Company issued 19,694 additional Preferred Units (11,895
of Series A and 7,799 of Series B), convertible into 568,369 common units and
valued at approximately $20,200, in connection with the achievement of certain
performance goals at the Mack Properties in redemption of an equivalent number
of contingent Preferred Units. Such Preferred Units carry the identical terms as
those issued in the Mack Transaction. As of December 31, 1998, there are no
contingent Preferred Units outstanding, as all contingent Preferred Units were
redeemed for Preferred Units.
In January 1999, 20,952 Series A Preferred Units were converted into
604,675 common units.
COMMON UNITS
Certain individuals and entities own common units in the Operating Partnership.
A common 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.
Common units are redeemable by the common unitholders at their option,
subject to certain restrictions, on the basis of one common 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 common unit, minority interest is reduced and the Company's
investment in the Operating Partnership is increased.
During 1998, the Operating Partnership redeemed a total of 82,880 common
units in exchange for an aggregate of $3,163 in cash. Additionally, the
Operating Partnership redeemed an aggregate of 29,300 common units for an
equivalent number of shares of common stock in the Company.
As described in Note 3, the Company issued an aggregate of 3,408,532 common
units in 1997 in connection with the completion of the RM Transaction, the Mack
Transaction and a 1997 single-property acquisition.
On March 26, 1998, in connection with the Pacifica portfolio-phase I
acquisition, the Company issued 100,175 common units, valued at approximately
$3,779.
On April 30, 1998, in connection with the acquisition of a 49.9 percent
interest in the G&G Martco joint venture (see Note 4), the Company issued
218,105 common units, valued at approximately $8,334.
On June 8, 1998, in connection with the Pacifica portfolio-phase II
acquisition, the Company issued 585,263 common units, valued at approximately
$20,753.
On July 20, 1998, in connection with the expansion of one of the Mack
Properties, the Company issued 52,245 common units, valued at approximately
$1,632.
On September 10, 1998, in connection with the acquisition of 40 Richards
Avenue, the Company issued 414,114 common units, valued at approximately
$12,615.
During 1998, the Company also issued 1,731,386 common units, valued at
approximately $58,936, in connection with the achievement of certain performance
goals at the Mack Properties in
70
<PAGE>
redemption of an equivalent number of contingent common units. There were
275,046 contingent common units outstanding as of December 31, 1998.
In January 1999, the Operating Partnership redeemed an aggregate of
1,000,000 common units for an equivalent number of shares of common stock in the
Company.
CONTINGENT COMMON & PREFERRED UNITS
In conjunction with the completion of the Mack Transaction (see Note 3),
2,006,432 contingent common units, 11,895 Series A contingent Preferred Units
and 7,799 Series B contingent Preferred Units were issued as contingent
non-participating units. Such Contingent Units have no voting, distribution or
other rights until such time as they are redeemed into common units, Series A
Preferred Units, and Series B Preferred Units, respectively. Redemption of such
Contingent Units shall occur upon the achievement of certain performance goals
relating to certain of the Mack Properties, specifically the achievement of
certain leasing activity. When Contingent Units are redeemed for common and
Preferred Units, an adjustment to the purchase price of certain of the Mack
Properties is recorded, based on the value of the units issued. On account of
certain of the performance goals having been achieved during 1998, the Company
redeemed 1,731,386 contingent common units and 19,694 contingent Preferred Units
and issued an equivalent number of common and Preferred Units, as indicated
above. There were no contingent Preferred Units outstanding and 275,046
contingent common units outstanding as of December 31, 1998.
UNIT WARRANTS
As described in Note 3, in connection with the funding of the Mack Transaction,
the Company granted warrants to purchase 2,000,000 common units. The Unit
Warrants are exercisable at any time after one year from the date of their
issuance and prior to the fifth anniversary date thereof at an exercise price of
$37.80 per common unit.
MINORITY OWNERSHIP
As of December 31, 1998 and 1997, the minority interest common unitholders owned
13.7 percent (22.2 percent, including the effect of the conversion of Preferred
Units into common units) and 10.9 percent (20.4 percent including the effect of
the conversion of Preferred Units into common units) of the Operating
Partnership, respectively (excluding any effect for the exercise of Unit
Warrants).
10) EMPLOYEE BENEFIT PLAN
All employees of the Company who meet certain minimum age and period of service
requirements are eligible to participate in a 401(k) defined contribution plan
(the "Plan"). 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, although no employer contributions have been made to
date.
11) 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 judgement 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, 1998 and 1997. The use
of different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
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 had an aggregate carrying value of $1,420,931
and $972,650 as of December 31, 1998 and 1997, 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 amount to be received/(paid) to settle the Company's interest
rate contracts at December 31, 1998 and 1997, based on quoted market prices of
comparable contracts, was $339 and ($1,404), respectively.
Disclosure about fair value of financial instruments is based on pertinent
information available to management as of December 31, 1998 and 1997. 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, 1998 and current estimates of
fair value may differ significantly from the amounts presented herein.
12) COMMITMENTS AND CONTINGENCIES
TAX ABATEMENT AGREEMENTS
GROVE STREET PROPERTY Pursuant to an agreement with the City of Jersey City, New
Jersey, as amended, expiring in 2004, the Company is required to make payments
in lieu of property taxes ("PILOT") on its property at 95 Christopher Columbus
Drive, Jersey City, Hudson County, New Jersey. Such PILOT, as defined, is $1,267
per annum through May 31, 1999 and $1,584 per annum through May 31, 2004.
HARBORSIDE FINANCIAL CENTER PROPERTY Pursuant to an agreement with the City of
Jersey City, New Jersey obtained by the former owner of the Harborside property
in 1988 and assumed by the Company as part of the acquisition of the property in
November 1996, the Company is required to make PILOT payments on its Harborside
property. The agreement, which commenced in 1990, is for a term of 15 years.
Such PILOT is equal to two percent of Total Project Costs, as defined, in year
one and increases by $75 per annum through year fifteen. Total Project Costs, as
defined, are $145,644. Such PILOT totaled $2,570, $2,502 and $393 for the years
ended December 31, 1998, 1997 and 1996, respectively.
71
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
GROUND LEASE AGREEMENTS
Future minimum rental payments under the terms of all non-cancelable ground
leases, under which the Company is the lessee, as of December 31, 1998, are as
follows:
<TABLE>
<CAPTION>
Year Amount
<S> <C>
1999 $ 422
2000 425
2001 427
2002 427
2003 427
Thereafter 21,934
Total $24,062
</TABLE>
OTHER CONTINGENCIES
On December 10, 1997, a Shareholder's Derivative Action was filed in Maryland
Court on behalf of a shareholder. The complaint questioned certain executive
compensation decisions made by the Company's Board of Directors in connection
with the Mack Transaction. The Board's compensation decisions were discussed in
the proxy materials distributed in connection with the Mack Transaction and were
approved by in excess of 99 percent of the voting shareholders. Although the
Company believed that this lawsuit was factually and legally baseless, the
Company on May 4, 1998 agreed to a settlement which included making certain
changes to employment agreements of certain of its executive officers. The
Company incurred $750 in costs associated with this action, which was provided
for at December 31, 1997.
The Company is a defendant in other certain litigation arising in the
normal course of business activities. Management does not believe that the
resolution of these matters will have a materially adverse effect upon the
Company.
13) TENANT LEASES
The Properties are leased to tenants under operating leases with various
expiration dates through 2016. 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.
Future minimum rentals to be received under non-cancelable operating leases
at December 31, 1998, are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
<S> <C>
1999 $ 432,060
2000 391,417
2001 329,843
2002 281,748
2003 220,576
Thereafter 825,762
Total $2,481,406
</TABLE>
14) 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 at any time during the last half of any taxable year
of the Company, other than its initial taxable year (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.
COMMON STOCK
On May 15, 1997, the stockholders approved an increase in the authorized shares
of common stock in the Company to 190,000,000.
On October 15, 1997, the Company completed an underwritten public offer and
sale of 13,000,000 shares (the "1997 Offering") of its common stock. The Company
received approximately $489,116 in net proceeds (after offering costs) from the
1997 Offering. The Company used $160,000 of such proceeds to repay outstanding
borrowings on its Original Unsecured Facility and the remainder of the proceeds
to fund a portion of the purchase price of the Mack Transaction, for other
potential acquisitions, and for general corporate purposes.
On February 25, 1998, the Company completed an underwritten public offer
and sale of 2,500,000 shares of its common stock and used the net proceeds,
which totaled approximately $92,194 (after offering costs) to pay down a portion
of its outstanding borrowings under the Company's credit facilities and fund the
acquisition of 10 Mountainview Road (see Note 3).
On March 18, 1998, in connection with the acquisition of Prudential
Business Campus, the Company completed an offer and sale of 2,705,628 shares of
its common stock using the net proceeds of approximately $99,899 (after offering
costs) in the funding of such acquisition (see Note 3).
On March 27, 1998, the Company completed an underwritten public offer and
sale of 650,407 shares of its common stock and used the net proceeds, which
totaled approximately $23,690 (after offering costs) to pay down a portion of
its outstanding borrowings under the Company's credit facilities.
On April 29, 1998, the Company completed an underwritten offer and sale of
994,228 shares of its common stock and used the net proceeds, which totaled
approximately $34,570 (after offering costs), primarily to pay down a portion of
its outstanding borrowings under the Company's credit facilities.
On May 29, 1998, the Company completed an underwritten offer and sale of
984,615 shares of its common stock and used the net proceeds, which totaled
approximately $34,100 (after offering costs), primarily to pay down a portion of
its outstanding borrowings under the Company's credit facilities.
72
<PAGE>
On December 31, 1998, the Company completed an offer and sale of 132,710
shares of its common stock, using the net proceeds of approximately $3,940 for
general corporate purposes.
On August 6, 1998, the Board of Directors of the Company authorized a share
repurchase program ("Repurchase Program") under which the Company was permitted
to purchase up to $100,000 of the Company's outstanding common stock. Purchases
could be made from time to time in open market transactions at prevailing prices
or through privately negotiated transactions. For the year ended December 31,
1998, the Company purchased, for constructive retirement 854,700 shares of its
outstanding common stock for an aggregate cost of approximately $25,058.
Concurrent with these purchases, the Company sold to the Operating Partnership
854,700 common units for approximately $25,058.
REGISTRATION STATEMENTS
The Company filed a shelf registration statement with the Securities and
Exchange Commission ("SEC") for an aggregate of $2.0 billion in equity
securities of the Company, which was declared effective in January 1998.
The Company and the Operating Partnership filed a shelf registration
statement with the SEC for an aggregate of $2.0 billion in debt securities,
preferred stock and preferred stock represented by depositary shares, which was
declared effective in September 1998.
The Company filed a registration statement with the SEC for the Company's
dividend reinvestment and stock purchase plan ("Plan"), which was declared
effective in February 1999. The Plan commenced on March 1, 1999.
STOCK OPTION PLANS
In 1994, and as subsequently amended, the Company established the Mack-Cali
Employee Stock Option Plan ("Employee Plan") and the Mack-Cali Director Stock
Option Plan ("Director Plan") under which a total of 5,380,188 shares (subject
to adjustment) of the Company's common stock have been reserved for issuance
(4,980,188 shares under the Employee Plan and 400,000 shares 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 1998, 1997 and 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 terms of ten years. As of December 31, 1998, and 1997, the stock
options outstanding had a weighted average remaining contractual life of
approximately 8.5 and 9.0 years, respectively.
As a result of certain provisions contained in certain of the Corporation's
executive officers' employment agreements, on December 11, 1997, the Mack
Transaction triggered the accelerated vesting of unvested stock options held by
such officers on that date.
Information regarding the Company's stock option plans is summarized below:
<TABLE>
<CAPTION>
WEIGHTED
SHARES AVERAGE
UNDER EXERCISE
OPTIONS PRICE
<S> <C> <C>
Outstanding at January 1, 1995 625,000 $ 17.23
Granted 230,200 17.69
Exercised -- --
Lapsed or canceled (3,588) 17.25
Outstanding at December 31, 1995 851,612 17.36
Granted 809,700 23.97
Exercised (126,041) 17.25
Lapsed or canceled (7,164) 19.52
Outstanding at December 31, 1996 1,528,107 20.86
Granted 2,126,538 37.35
Exercised (337,282) 21.33
Lapsed or canceled (30,073) 22.62
Outstanding at December 31, 1997 3,287,290 31.47
Granted 1,048,620 35.90
Exercised (267,660) 20.47
Lapsed or canceled (128,268) 36.61
Outstanding at December 31, 1998 3,939,982 $ 33.22
Options exercisable at
December 31, 1997 1,004,618 $ 25.22
Options exercisable at
December 31, 1998 1,334,137 $ 27.84
Available for grant at
December 31, 1997 1,629,575
Available for grant at
December 31, 1998 709,223
</TABLE>
The weighted average fair value of options granted during 1998, 1997 and
1996 were $5.59, $6.66 and $2.41 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 of stock options:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Expected life (in years) 6 6 6
Risk-free interest rate 5.41% 5.84% 6.11%
Volatility 23.37% 23.76% 19.14%
Dividend yield 5.78% 5.29% 7.58%
</TABLE>
STOCK WARRANTS
On January 31, 1997, in conjunction with the completion of the RM Transaction,
the Company granted a total of 400,000 warrants to purchase an equal number of
shares of common stock ("Stock Warrants") at $33 per share (the market price at
date of grant) to Timothy Jones, Brad Berger and certain other Company employees
formerly with RM. Such warrants vest equally over a three-year period and have a
term of ten years. The unvested warrants held by Timothy Jones and Brad Berger
became immediately exercisable on December 11, 1997 as a result of provisions
contained in their employment agreements, which were triggered by the Mack
Transaction.
73
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
On December 12, 1997, in conjunction with the completion of the Mack
Transaction, the Company granted a total of 514,976 Stock Warrants to purchase
an equal number of shares of common stock at $38.75 per share (the market price
at date of grant) to Mitchell Hersh, and certain Company executives formerly
with the Patriot American Office Group. Such warrants vest equally over a
five-year period and have a term of ten years.
As of December 31, 1998, there were 914,976 Stock Warrants outstanding, of
which 565,991 were exercisable. As of December 31, 1998, no vested Stock
Warrants were exercised or canceled.
The weighted-average fair value of warrants granted during 1997 were $6.27
per warrant. No warrants were granted in 1998 or 1996. The fair value of each
warrant 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 calculation of warrants granted during 1997:
<TABLE>
<S> <C>
Expected life (in years) 6
Risk-free interest rate 5.96%
Volatility 22.77%
Dividend yield 5.29%
</TABLE>
FASB NO. 123
Under the above models, the value of stock options and warrants granted during
1998, 1997 and 1996 totaled approximately $5,281, $19,750 and $1,955,
respectively, which would be amortized ratably on a pro forma basis over the
appropriate vesting period. Had the Company determined compensation cost for
these granted securities in accordance with FASB No. 123, the Company's pro
forma net income (loss) and basic earnings (loss) per share and diluted earnings
(loss) per share would have been $110,061, $1.97 and $1.72 in 1998, ($3,153),
($0.08) and ($0.08) in 1997 and $31,980, $1.73 and $1.49 in 1996, respectively.
STOCK COMPENSATION
In January 1997, the Company entered into employment contracts with seven of its
key executives which provided for, among other things, compensation in the form
of stock awards ("Restricted Stock Awards") and Company-financed stock purchase
rights ("Stock Purchase Rights"), and associated tax obligation payments. In
connection with the Restricted Stock Awards, the executives were to receive
199,070 shares of the Company's common stock vesting over a five-year period
contingent on the Company meeting certain performance objectives. Additionally,
pursuant to the terms of the Stock Purchase Rights, the Company provided fixed
rate, non-recourse loans, aggregating $4,750, to such executives to finance
their purchase of 152,000 shares of the Company's common stock, which the
Company agreed to forgive ratably over five years, subject to continued
employment. Such loans were for amounts equal to the fair market value of the
associated shares at the date of grant. Subsequently, from April 18, 1997
through April 24, 1997, the Company purchased, for constructive retirement,
152,000 shares of its outstanding common stock for $4,680. 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 152,000 common units for $4,680.
The value of the Restricted Stock Awards and the balance of the loans
related to the Stock Purchase Rights at the grant date were recorded as
unamortized stock compensation in stockholders' equity. As a result of
provisions contained in certain of the Company's executive officers' employment
agreements, which were triggered by the Mack Transaction on December 11, 1997,
the loans provided by the Company under the Stock Purchase Rights were forgiven
by the Company, and the vesting and issuance of the restricted stock issued
under the Restricted Stock Awards was accelerated, and related tax obligation
payments were made. As a result, the accelerated cost of $16,788 affecting the
stock compensation described above was included in non-recurring merger-related
charges for the year ended December 31, 1997. With such accelerated vestings,
there was no remaining balance in unamortized stock compensation as of December
31, 1997.
Included in general and administrative expense for the year ended December
31, 1997 was $2,257 relating to the normal cost of Restricted Stock Awards and
Stock Purchase Rights.
EARNINGS PER SHARE
FASB No. 128 requires a dual presentation of basic and diluted EPS on the face
of the income statement for all companies with complex capital structures even
where the effect of such dilution is not material. Basic EPS excludes dilution
and is computed by dividing net income available to common stockholders by the
weighted average number of shares outstanding for the period. Diluted EPS
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock.
74
<PAGE>
The following information presents the Company's results for the years ended
December 31, 1998, 1997 and 1996 in accordance with FASB No. 128.
<TABLE>
<CAPTION>
1998 1997 1996
FOR THE YEAR ENDED DECEMBER 31, BASIC EPS DILUTED EPS BASIC EPS DILUTED EPS BASIC EPS DILUTED EPS
<S> <C> <C> <C> <C> <C> <C>
Net income $116,578 $116,578 $ 1,405 $ 1,405 $ 31,944 $ 31,944
Add: Net income attributable to potentially
dilutive securities -- 15,903 -- 143 -- 4,760
Adjusted net income $116,578 $132,481 $ 1,405 $ 1,548 $ 31,944 $ 36,704
Weighted average shares 55,840 63,893 39,266 44,156 18,461 21,436
Per Share $ 2.09 $ 2.07 $ 0.04 $ 0.04 $ 1.73 $ 1.71
</TABLE>
The following schedule reconciles the shares used in the basic EPS
calculation to the shares used in the diluted EPS calculation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997 1996
<S> <C> <C> <C>
Basic EPS Shares: 55,840 39,266 18,461
Add:
Operating
Partnership units 7,598 4,090 2,711
Stock options 411 579 264
Restricted Stock Awards -- 188 --
Stock Warrants 44 33 --
Diluted EPS Shares: 63,893 44,156 21,436
</TABLE>
The Preferred Units issued in 1998 and 1997 and Contingent Units issued in
1997 were not included in the computation of diluted EPS as such units were
anti-dilutive during the period.
Pursuant to the Repurchase Program, during 1998, the Company purchased for
constructive retirement, 854,700 shares of its outstanding common stock for
approximately $25,058.
75
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
15) SEGMENT REPORTING
The Company has adopted Statement of Financial Accounting Standards No. 131,
Disclosures about Segments of an Enterprise and Related Information ("FASB No.
131"), which establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
require that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders.
The Company operates in one business segment--real estate. The Company
provides leasing, management, acquisition, development, construction and
tenant-related services for its portfolio. The Company does not have any foreign
operations. The accounting policies of the segment are the same as those
described in Note 2, excluding straight-line rent adjustments and depreciation
and amortization.
The Company evaluates performance based upon net operating income from the
combined properties in the segment.
<TABLE>
<CAPTION>
TOTAL CORPORATE & TOTAL
SEGMENT OTHER(E) COMPANY
<S> <C> <C> <C>
Total contract revenues(a):
1998 $ 475,096 $ 4,919 $ 480,015(f)
1997 234,434 7,634 242,068(g)
1996 92,548 1,946 94,494(h)
Total operating and interest expenses(b):
1998 $ 162,612 $100,707 $ 263,319
1997 81,058 49,032 130,090
1996 32,664 16,556 49,220
Net operating income(c):
1998 $ 312,484 $ (95,788) $ 216,696(f)
1997 153,376 (41,398) 111,978(g)
1996 59,884 (14,610) 45,274(h)
Total assets:
1998 $ 3,430,865 $ 21,329 $3,452,194
1997 2,583,738 9,706 2,593,444
1996 822,989 203,339 1,026,328
Total long-lived assets(d):
1998 $ 3,393,313 $ 4,098 $3,397,411
1997 2,550,961 2,960 2,553,921
1996 804,139 308 804,447
</TABLE>
(a) Total contract revenues represents all revenues during the period
(including the Company's equity in earnings of unconsolidated joint
ventures), excluding adjustments for straight-lining of rents and the
Company's share of straight-line rent adjustments from unconsolidated joint
ventures. All interest income is excluded from the segment amounts and is
classified in Corporate and Other for all periods.
(b) Total operating and interest expenses represents the sum of real estate
taxes, utilities, operating services, general and administrative and
interest expense. All interest expense (including for property-level
mortgages) is excluded from the segment amounts and is classified in
Corporate and Other for all periods. Amounts presented exclude depreciation
and amortization of $78,916, $36,225 and $14,731 in 1998, 1997 and 1996,
respectively, and non-recurring merger-related charges of $46,519 in 1997.
(c) Net operating income represents total contract revenues [as defined in Note
(a)] less total operating and interest expenses [as defined in Note (b)]
for the period.
(d) Long-lived assets is comprised of total rental property, unbilled rents
receivable and investments in unconsolidated joint ventures.
(e) Corporate & Other represents all corporate-level items (including interest
income, interest expense and non-property general and administrative
expense) as well as intercompany eliminations necessary to reconcile to
consolidated Company totals.
(f) Excludes $13,575 of adjustments for straight-lining of rents and $109 for
the Company's share of straight-line rent adjustments from unconsolidated
joint ventures.
(g) Excludes $7,733 of adjustments for straight-lining of rents.
(h) Excludes $978 of adjustments for straight-lining of rents.
76
<PAGE>
16) IMPACT OF RECENTLY-ISSUED ACCOUNTING STANDARDS
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, Accounting for Derivative Instruments and Hedging Activities ("FASB No.
133"). FASB No. 133 is effective for all fiscal quarters of all fiscal years
beginning after June 15, 1999 (January 1, 2000 for the Company). FASB No. 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and, if it is, the type
of hedge transaction. Management of the Company anticipates that, due to its
limited use of derivative instruments, the adoption of FASB No. 133 will not
have a significant effect on the Company's results of operations or its
financial position.
17) PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
The following pro forma financial information for the years ended December 31,
1998 and 1997 are presented as if the RM Transaction, the Mack Transaction and
all other acquisitions and common stock offerings completed in 1998 and 1997 had
all occurred on January 1, 1997. The pro forma financial information excludes
any deduction for the non-recurring merger-related charges and beneficial
conversion feature charge included in the Company's historical information for
the year ended December 31, 1997. In management's opinion, all adjustments
necessary to reflect the effects of these transactions have been made.
This 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 January 1, 1997, nor do they represent the
results of operations of future periods.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 1997
<S> <C> <C>
Total revenues $522,661 $507,939
Operating and other expenses 157,698 153,084
General and administrative 26,901 27,789
Depreciation and amortization 83,410 74,615
Interest expense 102,828 105,709
Income before minority interest
and extraordinary item 151,824 146,742
Minority interest 33,244 30,547
Income before extraordinary item $118,580 $116,195
Basic earnings per share $ 2.06 $ 2.02
Diluted earnings per share $ 2.04 $ 2.00
Basic weighted average
shares outstanding 57,652 57,510
Diluted weighted average
shares outstanding 66,338 65,538
</TABLE>
77
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Mack-Cali Realty Corporation and Subsidiaries
(dollars in thousands, except per share or unit amounts)
18) CONDENSED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following summarizes the condensed quarterly financial information for
the Company:
<TABLE>
<CAPTION>
QUARTER ENDED 1998 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
<S> <C> <C> <C> <C>
Total revenues $ 134,941 $ 130,894 $ 122,041 $ 105,823
Operating and other expenses 41,444 40,595 36,598 31,067
General and administrative 6,864 6,118 6,394 6,196
Depreciation and amortization 22,379 21,213 19,093 16,231
Interest expense 23,896 23,881 21,786 18,480
Income before minority interest and extraordinary item 40,358 39,087 38,170 33,849
Minority interest 9,050 8,375 7,782 7,306
Income before extraordinary item 31,308 30,712 30,388 26,543
Extraordinary item--loss on early retirement debt
(Net of minority interest's share of $297) -- -- (2,373) --
Net income $ 31,308 $ 30,712 $ 28,015 $ 26,543
BASIC EARNINGS PER SHARE:
Income before extraordinary item $ 0.55 $ 0.53 $ 0.53 $ 0.52
Extraordinary item--loss on early retirement of debt -- -- (0.04) --
Net income $ 0.55 $ 0.53 $ 0.49 $ 0.52
DILUTED EARNINGS PER SHARE:
Income before extraordinary item $ 0.55 $ 0.53 $ 0.53 $ 0.51
Extraordinary item--loss on early retirement of debt -- -- (0.04) --
Net income $ 0.55 $ 0.53 $ 0.49 $ 0.51
Dividends declared per common share $ 0.55 $ 0.55 $ 0.50 $ 0.50
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED 1997 DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31
<S> <C> <C> <C> <C>
Total revenues $ 74,495 $ 62,609 $ 60,542 $ 52,155
Operating and other expenses 22,580 18,928 18,068 15,574
General and administrative 5,260 3,675 3,754 3,173
Depreciation and amortization 11,194 9,339 8,799 7,493
Interest expense 10,680 10,694 9,884 7,820
Non-recurring merger-related charges 46,519 -- -- --
(Loss) income before minority interest and
extraordinary item (21,738) 19,973 20,037 18,095
Minority interest 25,716 2,015 2,012 1,636
(Loss) income before extraordinary item (47,454) 17,958 18,025 16,459
Extraordinary item--loss on early retirement debt
(Net of minority interest's share of $402) -- (3,583) -- --
Net (loss) income $(47,454) $ 14,375 $ 18,025 $ 16,459
BASIC EARNINGS PER SHARE:
(Loss) income before extraordinary item $ (1.00) $ 0.49 $ 0.49 $ 0.45
Extraordinary item--loss on early retirement debt -- (0.10) -- --
Net (loss) income $ (1.00) $ 0.39 $ 0.49 $ 0.45
DILUTED EARNINGS PER SHARE:
(Loss) income before extraordinary item $ (1.00) $ 0.48 $ 0.49 $ 0.44
Extraordinary item--loss on early retirement debt -- (0.09) -- --
Net (loss) income $ (1.00) $ 0.39 $ 0.49 $ 0.44
Dividends declared per common share $ 0.50 $ 0.50 $ 0.45 $ 0.45
</TABLE>
78
<PAGE>
EXHIBIT INDEX:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT TITLE
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
10.1 Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23, 1998, by and
among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates
L.P.
10.2 Supplement to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of April 23,
1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali California
Development Associates L.P.
10.3 First Amendment to Agreement of Limited Partnership of HPMC Development Partners, L.P., dated as of
October 8, 1998, by and among HCG Development, L.L.C., Summit Partners I, L.L.C. and Mack-Cali
California Development Associates L.P.
10.4 Agreement of Limited Partnership of HPMC Lava Ridge Partners, L.P., dated as of July 21, 1998, by and
among HCG Development L.L.C., Summit Partners I, L.L.C. and Mack-Cali California Development Associates
L.P.
10.5 Amendment No. 1 to Revolving Credit Agreement dated July 20, 1998, by and among Mack-Cali Realty, L.P.
and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties Thereto
10.6 Amendment No. 2 to Revolving Credit Agreement, dated as of December 30, 1998, among Mack-Cali Realty,
L.P. and The Chase Manhattan Bank, Fleet National Bank and Other Lenders Which May Become Parties
Thereto
23 Consent of PricewaterhouseCoopers LLP, independent accountants
27 Financial Data Schedule
</TABLE>
79
<PAGE>
MACK-CALI REALTY CORPORATION
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.
<TABLE>
<S> <C> <C>
MACK-CALI REALTY CORPORATION.
(REGISTRANT)
Date: March 2, 1999 By: /s/ BARRY LEFKOWITZ
-----------------------------------------
Barry Lefkowitz
EXECUTIVE VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ JOHN J. CALI
- ------------------------------ Chairman of the Board March 2, 1999
John J. Cali
/s/ THOMAS A. RIZK
- ------------------------------ Chief Executive Officer March 2, 1999
Thomas A. Rizk and Director
/s/ MITCHELL E. HERSH
- ------------------------------ President, Chief Operating March 2, 1999
Mitchell E. Hersh Officer and Director
/s/ BARRY LEFKOWITZ Executive Vice President
- ------------------------------ and Chief Financial March 2, 1999
Barry Lefkowitz Officer
/s/ BRENDAN T. BYRNE, ESQ.
- ------------------------------ Director March 2, 1999
Brendan T. Byrne, Esq.
/s/ MARTIN D. GRUSS
- ------------------------------ Director March 2, 1999
Martin D. Gruss
/s/ JEFFREY B. LANE
- ------------------------------ Director March 2, 1999
Jeffrey B. Lane
</TABLE>
80
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ EARLE I. MACK
- ------------------------------ Director March 2, 1999
Earle I. Mack
/s/ WILLIAM L. MACK
- ------------------------------ Director March 2, 1999
William L. Mack
/s/ PAUL A. NUSSBAUM
- ------------------------------ Director March 2, 1999
Paul A. Nussbaum
/s/ ALAN G. PHILIBOSIAN
- ------------------------------ Director March 2, 1999
Alan G. Philibosian
/s/ DR. IRVIN D. REID
- ------------------------------ Director March 2, 1999
Dr. Irvin D. Reid
/s/ VINCENT TESE
- ------------------------------ Director March 2, 1999
Vincent Tese
/s/ MARTIN S. BERGER
- ------------------------------ Director March 2, 1999
Martin S. Berger
</TABLE>
81
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ATLANTIC COUNTY, NEW JERSEY
EGG HARBOR
100 Decadon Drive (O)................... 1987 1995 -- $ 300 $ 3,282 $ 130
200 Decadon Drive (O)................... 1991 1995 -- 369 3,241 162
BERGEN COUNTY, NEW JERSEY
FAIR LAWN
17-17 Rte 208 North (O)................. 1987 1995 $ 17,586 3,067 19,415 394
FORT LEE
2115 Linwood Avenue (O)................. 1981 1998 -- 474 4,419 2,543
One Bridge Plaza (O).................... 1981 1996 -- 2,439 24,462 1,376
LITTLE FERRY
200 Riser Road (O)...................... 1974 1997 6,849 3,888 15,551 231
MONTVALE
135 Chestnut Ridge Road (O)............. 1981 1997 -- 2,587 10,350 27
95 Chestnut Ridge Road (O).............. 1975 1997 2,135 1,227 4,907 44
PARAMUS
140 Ridgewood Avenue (O)................ 1981 1997 15,392 7,932 31,463 150
15 East Midland Avenue (O).............. 1988 1997 24,790 10,374 41,497 25
461 From Road (O)....................... 1988 1997 29,223 13,194 52,778 54
61 South Paramus Avenue (O)............. 1985 1997 15,776 9,005 36,018 2,639
650 From Road (O)....................... 1978 1997 23,316 10,487 41,949 194
ROCHELLE PARK
120 Passaic Street (O).................. 1972 1997 -- 1,354 5,415 6
365 West Passaic Street (O)............. 1976 1997 7,468 4,148 16,592 661
SADDLE RIVER
1 Lake Street (O)....................... 1994 1997 35,789 13,952 55,812 7
UPPER SADDLE RIVER
10 Mountainview Road (O)................ 1986 1998 -- 3,683 835 20,991
WOODCLIFF LAKE
300 Tice Boulevard (O).................. 1991 1996 -- 5,424 29,688 388
400 Chestnut Ridge Road (O)............. 1982 1997 14,983 4,201 16,802 1
470 Chestnut Ridge Road (O)............. 1987 1997 4,087 2,346 9,385 2
50 Tice Boulevard (O)................... 1984 1994 -- 4,500 -- 25,703
530 Chestnut Ridge Road (O)............. 1986 1997 4,032 1,860 7,441 3
BURLINGTON COUNTY, NEW JERSEY
BURLINGTON
3 Terri Lane (F)........................ 1991 1998 2,104 652 3,433 840
5 Terri Lane (F)........................ 1992 1998 2,372 564 3,792 1,265
DELRAN
Tenby Chase Apartments (M).............. 1970 1994 -- 396 -- 5,208
MOORESTOWN
1 Executive Drive (F)................... 1989 1998 -- 226 1,453 95
101 Commerce Drive (F).................. 1988 1998 -- 422 3,528 237
101 Executive Drive (F)................. 1990 1998 1,200 241 2,262 46
102 Executive Drive (F)................. 1990 1998 -- 353 3,607 117
1256 North Church (F)................... 1984 1998 -- 354 3,098 227
1507 Lancer Drive (F)................... 1995 1998 -- 119 1,106 37
1510 Lancer Drive (F)................... 1998 1998 -- 732 2,928 15
201 Commerce Drive (F).................. 1986 1998 1,121 254 1,694 74
224 Strawbridge Drive (O)............... 1984 1997 -- 766 4,334 2,698
225 Executive Drive (F)................. 1990 1998 1,353 323 2,477 91
228 Strawbridge Drive (O)............... 1984 1997 -- 767 4,333 2,885
30 Twosome Drive (F).................... 1997 1998 -- 234 1,954 38
40 Twosome Drive (F).................... 1996 1998 -- 297 2,393 51
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
ATLANTIC COUNTY, NEW JERSEY
EGG HARBOR
100 Decadon Drive (O)................... $ 300 $ 3,412 $ 3,712 $ 273
200 Decadon Drive (O)................... 369 3,403 3,772 300
BERGEN COUNTY, NEW JERSEY
FAIR LAWN
17-17 Rte 208 North (O)................. 3,067 19,809 22,876 1,949
FORT LEE
2115 Linwood Avenue (O)................. 474 6,962 7,436 --
One Bridge Plaza (O).................... 2,439 25,838 28,277 1,434
LITTLE FERRY
200 Riser Road (O)...................... 3,888 15,782 19,670 408
MONTVALE
135 Chestnut Ridge Road (O)............. 2,588 10,376 12,964 270
95 Chestnut Ridge Road (O).............. 1,227 4,951 6,178 128
PARAMUS
140 Ridgewood Avenue (O)................ 7,932 31,613 39,545 526
15 East Midland Avenue (O).............. 10,374 41,522 51,896 1,083
461 From Road (O)....................... 13,194 52,832 66,026 1,378
61 South Paramus Avenue (O)............. 9,005 38,657 47,662 946
650 From Road (O)....................... 10,487 42,143 52,630 1,096
ROCHELLE PARK
120 Passaic Street (O).................. 1,354 5,421 6,775 141
365 West Passaic Street (O)............. 4,148 17,253 21,401 435
SADDLE RIVER
1 Lake Street (O)....................... 13,953 55,818 69,771 1,457
UPPER SADDLE RIVER
10 Mountainview Road (O)................ 4,240 21,269 25,509 651
WOODCLIFF LAKE
300 Tice Boulevard (O).................. 5,424 30,076 35,500 1,572
400 Chestnut Ridge Road (O)............. 4,201 16,803 21,004 436
470 Chestnut Ridge Road (O)............. 2,346 9,387 11,733 245
50 Tice Boulevard (O)................... 4,500 25,703 30,203 10,401
530 Chestnut Ridge Road (O)............. 1,860 7,444 9,304 194
BURLINGTON COUNTY, NEW JERSEY
BURLINGTON
3 Terri Lane (F)........................ 658 4,267 4,925 151
5 Terri Lane (F)........................ 569 5,052 5,621 198
DELRAN
Tenby Chase Apartments (M).............. 396 5,208 5,604 3,283
MOORESTOWN
1 Executive Drive (F)................... 228 1,546 1,774 60
101 Commerce Drive (F).................. 425 3,762 4,187 139
101 Executive Drive (F)................. 243 2,306 2,549 82
102 Executive Drive (F)................. 356 3,721 4,077 122
1256 North Church (F)................... 356 3,323 3,679 123
1507 Lancer Drive (F)................... 120 1,142 1,262 37
1510 Lancer Drive (F)................... 734 2,941 3,675 37
201 Commerce Drive (F).................. 258 1,764 2,022 70
224 Strawbridge Drive (O)............... 767 7,031 7,798 126
225 Executive Drive (F)................. 326 2,565 2,891 97
228 Strawbridge Drive (O)............... 767 7,218 7,985 170
30 Twosome Drive (F).................... 235 1,991 2,226 89
40 Twosome Drive (F).................... 300 2,441 2,741 89
</TABLE>
82
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
50 Twosome Drive (F).................... 1997 1998 -- 301 2,330 35
MOORESTOWN
840 North Lenola Road (F)............... 1995 1998 -- 329 2,366 39
844 North Lenola Road (F)............... 1995 1998 -- 239 1,714 29
97 Foster Road (F)...................... 1982 1998 -- 208 1,382 44
WEST DEPTFORD
1451 Metropolitan Drive (F)............. 1996 1998 -- 203 1,189 23
ESSEX COUNTY, NEW JERSEY
MILLBURN
150 J.F.K. Parkway (O).................. 1980 1997 27,696 12,606 50,425 55
ROSELAND
101 Eisenhower Parkway (O).............. 1980 1994 -- 228 -- 14,149
103 Eisenhower Parkway (O).............. 1985 1994 -- -- -- 14,113
HUDSON COUNTY, NEW JERSEY
JERSEY CITY
95 Christopher Columbus Drive (O)....... 1989 1994 -- 6,205 -- 80,392
Harborside Financial Center Plaza I
(O)................................... 1983 1996 48,148 3,923 51,013 --
Harborside Financial Center Plaza II
(O)................................... 1990 1996 54,001 17,655 101,546 987
Harborside Financial Center Plaza III
(O)................................... 1990 1996 54,001 17,655 101,878 993
MERCER COUNTY, NEW JERSEY
HAMILTON TOWNSHIP
100 Horizon Drive (F)................... 1989 1995 -- 205 1,676 --
200 Horizon Drive (F)................... 1991 1995 -- 205 3,027 --
300 Horizon Drive (F)................... 1989 1995 -- 379 4,355 8
500 Horizon Drive (F)................... 1990 1995 -- 379 3,395 100
PRINCETON
5 Vaughn Drive (O)...................... 1987 1995 -- 657 9,800 371
400 Alexander Road (O).................. 1987 1995 -- 344 3,917 2,413
103 Carnegie Center (O)................. 1984 1996 -- 2,566 7,868 498
100 Overlook Center (O)................. 1988 1997 -- 2,378 21,754 52
MIDDLESEX COUNTY, NEW JERSEY
EAST BRUNSWICK
377 Summerhill Road (O)................. 1977 1997 -- 649 2,594 143
PLAINSBORO
500 College Road East (O)............... 1984 1998 -- 614 20,626 148
SOUTH BRUNSWICK
3 Independence Way (O).................. 1983 1997 -- 1,997 11,391 79
WOODBRIDGE
581 Main Street (O)..................... 1991 1997 17,500 3,237 12,949 12,406
MONMOUTH COUNTY, NEW JERSEY
NEPTUNE
3600 Route 66 (O)....................... 1989 1995 -- 1,098 18,146 40
WALL TOWNSHIP
1305 Campus Parkway (O)................. 1988 1995 -- 335 2,560 79
1320 Wykoff Avenue (F).................. 1986 1995 -- 255 1,285 19
1324 Wykoff Avenue (F).................. 1987 1995 -- 230 1,439 109
1325 Campus Parkway (F)................. 1988 1995 -- 270 2,928 61
1340 Campus Parkway (F)................. 1992 1995 -- 489 4,621 279
1350 Campus Parkway (O)................. 1990 1995 -- 454 7,134 407
1433 Highway 34 (F)..................... 1985 1995 -- 889 4,321 303
1345 Campus Parkway (F)................. 1995 1997 -- 1,023 5,703 21
MORRIS COUNTY, NEW JERSEY
FLORHAM PARK
325 Columbia Parkway (O)................ 1987 1994 -- 1,564 -- 15,596
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
50 Twosome Drive (F).................... 304 2,362 2,666 99
MOORESTOWN
840 North Lenola Road (F)............... 333 2,401 2,734 94
844 North Lenola Road (F)............... 241 1,741 1,982 68
97 Foster Road (F)...................... 211 1,423 1,634 47
WEST DEPTFORD
1451 Metropolitan Drive (F)............. 206 1,209 1,415 51
ESSEX COUNTY, NEW JERSEY
MILLBURN
150 J.F.K. Parkway (O).................. 12,606 50,480 63,086 1,317
ROSELAND
101 Eisenhower Parkway (O).............. 228 14,149 14,377 7,363
103 Eisenhower Parkway (O).............. 2,300 11,813 14,113 5,033
HUDSON COUNTY, NEW JERSEY
JERSEY CITY
95 Christopher Columbus Drive (O)....... 6,205 80,392 86,597 21,666
Harborside Financial Center Plaza I
(O)................................... 3,923 51,013 54,936 2,763
Harborside Financial Center Plaza II
(O)................................... 17,841 102,347 120,188 5,570
Harborside Financial Center Plaza III
(O)................................... 17,821 102,705 120,526 5,569
MERCER COUNTY, NEW JERSEY
HAMILTON TOWNSHIP
100 Horizon Drive (F)................... 205 1,676 1,881 133
200 Horizon Drive (F)................... 205 3,027 3,232 240
300 Horizon Drive (F)................... 379 4,363 4,742 348
500 Horizon Drive (F)................... 379 3,495 3,874 306
PRINCETON
5 Vaughn Drive (O)...................... 657 10,171 10,828 886
400 Alexander Road (O).................. 344 6,330 6,674 665
103 Carnegie Center (O)................. 2,566 8,366 10,932 656
100 Overlook Center (O)................. 2,378 21,806 24,184 635
MIDDLESEX COUNTY, NEW JERSEY
EAST BRUNSWICK
377 Summerhill Road (O)................. 649 2,737 3,386 69
PLAINSBORO
500 College Road East (O)............... 614 20,774 21,388 376
SOUTH BRUNSWICK
3 Independence Way (O).................. 1,997 11,470 13,467 381
WOODBRIDGE
581 Main Street (O)..................... 8,115 20,477 28,592 381
MONMOUTH COUNTY, NEW JERSEY
NEPTUNE
3600 Route 66 (O)....................... 1,098 18,186 19,284 1,443
WALL TOWNSHIP
1305 Campus Parkway (O)................. 335 2,639 2,974 242
1320 Wykoff Avenue (F).................. 255 1,304 1,559 103
1324 Wykoff Avenue (F).................. 230 1,548 1,778 141
1325 Campus Parkway (F)................. 270 2,989 3,259 248
1340 Campus Parkway (F)................. 489 4,900 5,389 411
1350 Campus Parkway (O)................. 454 7,541 7,995 677
1433 Highway 34 (F)..................... 889 4,624 5,513 458
1345 Campus Parkway (F)................. 1,024 5,723 6,747 274
MORRIS COUNTY, NEW JERSEY
FLORHAM PARK
325 Columbia Parkway (O)................ 1,564 15,596 17,160 5,558
</TABLE>
83
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
MORRIS PLAINS
201 Littleton Road (O).................. 1979 1997 -- 2,407 9,627 94
250 Johnson Road (O).................... 1977 1997 2,292 2,004 8,016 155
MORRIS TOWNSHIP
340 Mt. Kemble Avenue (O)............... 1985 1997 32,178 13,624 54,496 39
412 Mt. Kemble Avenue (O)............... 1986 1997 40,025 15,737 62,954 30
PARSIPPANY
2 Dryden Way (O)........................ 1990 1998 -- 778 420 13
2 Hilton Court (O)...................... 1991 1998 -- 1,971 32,007 83
600 Parsippany Road (O)................. 1978 1994 -- 1,257 5,594 569
7 Campus Drive (O)...................... 1982 1998 -- 1,932 27,788 106
7 Sylvan Way (O)........................ 1987 1998 -- 2,084 26,083 35
8 Campus Drive (O)...................... 1987 1998 -- 1,865 35,456 142
5 Sylvan Way (O)........................ 1989 1998 -- 1,160 25,214 169
1 Sylvan Way (O)........................ 1989 1998 -- 1,689 24,699 681
PASSAIC COUNTY, NEW JERSEY
CLIFTON
777 Passaic Avenue (O).................. 1983 1994 -- -- -- 7,135
TOTOWA
11 Commerce Way (F)..................... 1989 1995 -- 586 2,986 67
120 Commerce Way (F).................... 1994 1995 -- 228 -- 1,197
140 Commerce Way (F).................... 1994 1995 -- 229 -- 1,197
2 Center Court (F)...................... 1998 1998 -- 191 -- 2,537
20 Commerce Way (F)..................... 1992 1995 -- 516 3,108 28
29 Commerce Way (F)..................... 1990 1995 -- 586 3,092 227
40 Commerce Way (F)..................... 1987 1995 -- 516 3,260 379
45 Commerce Way (F)..................... 1992 1995 -- 536 3,379 138
60 Commerce Way (F)..................... 1988 1995 -- 526 3,257 232
80 Commerce Way (F)..................... 1996 1996 -- 227 -- 1,648
100 Commerce Way (F).................... 1996 1996 -- 226 -- 1,647
999 Riverview Drive (O)................. 1988 1995 -- 476 6,024 132
WAYNE
201 Willowbrook Boulevard (O)........... 1970 1997 10,918 3,103 12,410 418
SOMERSET COUNTY, NEW JERSEY
BASKING RIDGE
222 Mt. Airy Road (O)................... 1986 1996 -- 775 3,636 17
233 Mt. Airy Road (O)................... 1987 1996 -- 1,034 5,033 16
BRIDGEWATER
721 Route 202/206 (O)................... 1989 1997 23,000 6,730 26,919 101
UNION COUNTY, NEW JERSEY
CLARK
100 Walnut Avenue (O)................... 1985 1994 -- -- -- 17,608
CRANFORD
11 Commerce Drive (O)................... 1981 1994 -- 470 -- 6,088
12 Commerce Drive (O)................... 1967 1997 -- 887 3,549 26
20 Commerce Drive (O)................... 1990 1994 -- 2,346 -- 21,991
6 Commerce Drive (O).................... 1973 1994 -- 250 -- 2,704
65 Jackson Drive (O).................... 1984 1994 -- 541 -- 7,006
NEW PROVIDENCE
890 Mountain Road (O)................... 1977 1997 8,027 2,796 11,185 4,037
DUTCHESS COUNTY, NEW YORK
FISHKILL
300 South Lake Drive (O)................ 1987 1997 -- 2,258 9,031 86
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
MORRIS PLAINS
201 Littleton Road (O).................. 2,407 9,721 12,128 252
250 Johnson Road (O).................... 2,004 8,171 10,175 210
MORRIS TOWNSHIP
340 Mt. Kemble Avenue (O)............... 13,624 54,535 68,159 1,423
412 Mt. Kemble Avenue (O)............... 15,738 62,983 78,721 1,644
PARSIPPANY
2 Dryden Way (O)........................ 778 433 1,211 18
2 Hilton Court (O)...................... 1,971 32,090 34.061 741
600 Parsippany Road (O)................. 1,257 6,163 7,420 685
7 Campus Drive (O)...................... 1,932 27,894 29,826 617
7 Sylvan Way (O)........................ 2,084 26,118 28,202 616
8 Campus Drive (O)...................... 1,865 35,598 37,463 784
5 Sylvan Way (O)........................ 1,160 25,383 26,543 541
1 Sylvan Way (O)........................ 1,689 25,380 27,069 554
PASSAIC COUNTY, NEW JERSEY
CLIFTON
777 Passaic Avenue (O).................. 1,100 6,035 7,135 2,449
TOTOWA
11 Commerce Way (F)..................... 586 3,053 3,639 248
120 Commerce Way (F).................... 228 1,197 1,425 95
140 Commerce Way (F).................... 229 1,197 1,426 96
2 Center Court (F)...................... 191 2,537 2,728 56
20 Commerce Way (F)..................... 516 3,136 3,652 248
29 Commerce Way (F)..................... 586 3,319 3,905 324
40 Commerce Way (F)..................... 516 3,639 4,155 362
45 Commerce Way (F)..................... 536 3,517 4,053 327
60 Commerce Way (F)..................... 526 3,489 4,015 346
80 Commerce Way (F)..................... 227 1,648 1,875 203
100 Commerce Way (F).................... 226 1,647 1,873 202
999 Riverview Drive (O)................. 476 6,156 6,632 515
WAYNE
201 Willowbrook Boulevard (O)........... 3,103 12,828 15,931 325
SOMERSET COUNTY, NEW JERSEY
BASKING RIDGE
222 Mt. Airy Road (O)................... 775 3,653 4,428 228
233 Mt. Airy Road (O)................... 1,034 5,049 6,083 305
BRIDGEWATER
721 Route 202/206 (O)................... 6,730 27,020 33,750 703
UNION COUNTY, NEW JERSEY
CLARK
100 Walnut Avenue (O)................... 1,822 15,786 17,608 6,395
CRANFORD
11 Commerce Drive (O)................... 470 6,088 6,558 3,021
12 Commerce Drive (O)................... 887 3,575 4,462 93
20 Commerce Drive (O)................... 2,346 21,991 24,337 5,727
6 Commerce Drive (O).................... 250 2,704 2,954 1,545
65 Jackson Drive (O).................... 542 7,005 7,547 2,919
NEW PROVIDENCE
890 Mountain Road (O)................... 3,600 14,418 18,018 361
DUTCHESS COUNTY, NEW YORK
FISHKILL
300 South Lake Drive (O)................ 2,258 9,117 11,375 245
</TABLE>
84
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
NASSAU COUNTY, NEW YORK
NORTH HEMPSTEAD
111 East Shore Road (O)................. 1980 1997 8,000 2,093 8,370 94
600 Community Drive (O)................. 1983 1997 -- 11,018 44,070 12
ROCKLAND COUNTY, NEW YORK
SUFFERN
400 Rella Boulevard (O)................. 1988 1995 -- 1,090 13,412 975
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Warehouse Lane (I).................... 1957 1997 161 3 268 100
1 Westchester Plaza (F)................. 1967 1997 1,320 199 2,023 29
100 Clearbrook Road (O)................. 1975 1997 1,281 220 5,366 463
101 Executive Boulevard (O)............. 1971 1997 3,600 267 5,838 73
11 Clearbrook Road (F).................. 1974 1997 1,367 149 2,159 5
150 Clearbrook Road (F)................. 1975 1997 4,464 497 7,030 51
175 Clearbrook Road (F)................. 1973 1997 4,826 655 7,473 210
2 Warehouse Lane (I).................... 1957 1997 402 4 672 5
2 Westchester Plaza (F)................. 1968 1997 1,760 234 2,726 1
200 Clearbrook Road (F)................. 1974 1997 4,263 579 6,620 85
250 Clearbrook Road (F)................. 1973 1997 5,630 867 8,647 229
3 Warehouse Lane (I).................... 1957 1997 1,166 21 1,948 1
3 Westchester Plaza (F)................. 1969 1997 5,080 655 7,936 --
300 Executive Boulevard (F)............. 1970 1997 2,403 460 3,609 --
350 Executive Boulevard (F)............. 1970 1997 -- 100 1,793 --
399 Executive Boulevard (F)............. 1962 1997 4,560 531 7,191 12
4 Warehouse Lane (I).................... 1957 1997 8,044 84 13,393 63
4 Westchester Plaza (F)................. 1969 1997 2,400 320 3,729 59
400 Executive Boulevard (F)............. 1970 1997 2,403 2,202 1,846 118
5 Warehouse Lane (I).................... 1957 1997 2,855 19 4,804 4
5 Westchester Plaza (F)................. 1969 1997 1,200 118 1,949 --
50 Executive Boulevard (F).............. 1969 1997 1,680 237 2,617 --
500 Executive Boulevard (F)............. 1970 1997 2,643 258 4,183 1
525 Executive Boulevard (F)............. 1972 1997 -- 345 5,499 8
570 Taxter Road (O)..................... 1972 1997 3,847 438 6,078 40
6 Warehouse Lane (I).................... 1982 1997 2,654 10 4,419 6
6 Westchester Plaza (F)................. 1968 1997 1,280 164 1,998 21
7 Westchester Plaza (F)................. 1972 1997 2,720 286 4,321 9
700 Executive Boulevard (L)............. N/A 1997 -- 970 -- --
75 Clearbrook Road (F).................. 1990 1997 -- 2,314 4,716 --
77 Executive Boulevard (F).............. 1977 1997 3,982 34 1,104 6
8 Westchester Plaza (F)................. 1971 1997 3,378 447 5,262 634
85 Executive Boulevard (F).............. 1968 1997 1,562 155 2,507 12
HAWTHORNE
1 Skyline Drive (O)..................... 1980 1997 -- 66 1,711 11
10 Skyline Drive (F).................... 1985 1997 1,729 134 2,799 78
11 Skyline Drive (F).................... 1989 1997 -- -- 4,788 66
15 Skyline Drive (F).................... 1989 1997 -- -- 7,449 305
17 Skyline Drive (O).................... 1989 1997 -- -- 7,269 65
2 Skyline Drive (O)..................... 1987 1997 -- 109 3,128 10
200 Saw Mill River Road (F)............. 1965 1997 2,172 353 3,353 68
30 Saw Mill River Road (O).............. 1982 1997 21,553 2,355 34,254 2,802
4 Skyline Drive (F)..................... 1987 1997 -- 363 7,513 371
7 Skyline Drive (O)..................... 1987 1998 -- 330 13,013 36
8 Skyline Drive (F)..................... 1985 1997 2,734 212 4,410 85
TARRYTOWN
200 White Plains Road (O)............... 1982 1997 5,150 378 8,367 557
220 White Plains Road (O)............... 1984 1997 5,030 367 8,112 156
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
NASSAU COUNTY, NEW YORK
NORTH HEMPSTEAD
111 East Shore Road (O)................. 2,093 8,464 10,557 228
600 Community Drive (O)................. 11,018 44,082 55,100 1,194
ROCKLAND COUNTY, NEW YORK
SUFFERN
400 Rella Boulevard (O)................. 1,090 14,387 15,477 1,397
WESTCHESTER COUNTY, NEW YORK
ELMSFORD
1 Warehouse Lane (I).................... 3 368 371 13
1 Westchester Plaza (F)................. 199 2,052 2,251 101
100 Clearbrook Road (O)................. 220 5,829 6,049 273
101 Executive Boulevard (O)............. 267 5,911 6,178 290
11 Clearbrook Road (F).................. 149 2,164 2,313 104
150 Clearbrook Road (F)................. 497 7,081 7,578 338
175 Clearbrook Road (F)................. 655 7,683 8,338 396
2 Warehouse Lane (I).................... 4 677 681 32
2 Westchester Plaza (F)................. 234 2,727 2,961 131
200 Clearbrook Road (F)................. 579 6,705 7,284 324
250 Clearbrook Road (F)................. 867 8,876 9,743 424
3 Warehouse Lane (I).................... 21 1,949 1,970 93
3 Westchester Plaza (F)................. 655 7,936 8,591 380
300 Executive Boulevard (F)............. 460 3,609 4,069 173
350 Executive Boulevard (F)............. 100 1,793 1,893 86
399 Executive Boulevard (F)............. 531 7,203 7,734 345
4 Warehouse Lane (I).................... 85 13,455 13,540 651
4 Westchester Plaza (F)................. 320 3,788 4,108 188
400 Executive Boulevard (F)............. 2,202 1,964 4,166 88
5 Warehouse Lane (I).................... 19 4,808 4,827 232
5 Westchester Plaza (F)................. 118 1,949 2,067 93
50 Executive Boulevard (F).............. 237 2,617 2,854 125
500 Executive Boulevard (F)............. 258 4,184 4,442 200
525 Executive Boulevard (F)............. 345 5,507 5,852 265
570 Taxter Road (O)..................... 438 6,118 6,556 301
6 Warehouse Lane (I).................... 10 4,425 4,435 212
6 Westchester Plaza (F)................. 164 2,019 2,183 99
7 Westchester Plaza (F)................. 286 4,330 4,616 211
700 Executive Boulevard (L)............. 970 -- 970 --
75 Clearbrook Road (F).................. 2,314 4,716 7,030 226
77 Executive Boulevard (F).............. 34 1,110 1,144 53
8 Westchester Plaza (F)................. 447 5,896 6,343 321
85 Executive Boulevard (F).............. 155 2,519 2,674 120
HAWTHORNE
1 Skyline Drive (O)..................... 66 1,722 1,788 82
10 Skyline Drive (F).................... 134 2,877 3,011 148
11 Skyline Drive (F).................... -- 4,854 4,854 239
15 Skyline Drive (F).................... -- 7,754 7,754 454
17 Skyline Drive (O).................... -- 7,334 7,334 348
2 Skyline Drive (O)..................... 109 3,138 3,247 150
200 Saw Mill River Road (F)............. 353 3,421 3,774 168
30 Saw Mill River Road (O).............. 2,356 37,055 39,411 1,921
4 Skyline Drive (F)..................... 363 7,884 8,247 460
7 Skyline Drive (O)..................... 330 13,049 13,379 108
8 Skyline Drive (F)..................... 212 4,495 4,707 229
TARRYTOWN
200 White Plains Road (O)............... 378 8,924 9,302 492
220 White Plains Road (O)............... 367 8,268 8,635 418
</TABLE>
85
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
230 White Plains Road (R)............... 1984 1997 1,158 124 1,845 --
WHITE PLAINS
1 Barker Avenue (O)..................... 1975 1997 -- 207 9,629 143
1 Water Street (O)...................... 1979 1997 3,298 211 5,382 107
11 Martine Avenue (O)................... 1987 1997 15,465 127 26,833 1,900
25 Martine Avenue (M)................... 1987 1997 -- 120 11,366 129
3 Barker Avenue (O)..................... 1983 1997 -- 122 7,864 337
50 Main Street (O)...................... 1985 1997 27,918 564 48,105 1,425
YONKERS
1 Enterprise Boulevard (L).............. N/A 1997 -- 1,380 -- --
1 Executive Boulevard (O)............... 1982 1997 684 1,104 11,904 386
1 Odell Plaza (F)....................... 1980 1997 -- 1,206 6,815 47
100 Corporate Boulevard (F)............. 1987 1997 6,211 602 9,910 62
2 Executive Plaza (R)................... 1986 1997 7,722 89 2,439 --
200 Corporate Boulevard South (F)....... 1990 1997 -- 502 7,575 137
3 Executive Plaza (O)................... 1987 1997 -- 385 6,256 --
4 Executive Plaza (F)................... 1986 1997 1,528 584 6,134 275
5 Odell Plaza (F)....................... 1983 1997 -- 331 2,988 --
6 Executive Plaza (F)................... 1987 1997 -- 546 7,246 --
7 Odell Plaza (F)....................... 1984 1997 -- 419 4,418 59
CHESTER COUNTY, PENNSYLVANIA
BERWYN
1000 Westlakes Drive (O)................ 1989 1997 -- 619 9,016 97
1055 Westlakes Drive (O)................ 1990 1997 -- 1,951 19,046 200
1205 Westlakes Drive (O)................ 1988 1997 -- 1,323 20,098 287
1235 Westlakes Drive (O)................ 1986 1997 -- 1,417 21,215 332
DELAWARE COUNTY, PENNSYLVANIA
LESTER
100 Stevens Drive (O)................... 1986 1996 -- 1,349 10,018 114
200 Stevens Drive (O)................... 1987 1996 -- 1,644 20,186 296
300 Stevens Drive (O)................... 1992 1996 -- 491 9,490 76
MEDIA
1400 Providence Rd--Center I (O)........ 1986 1996 -- 1,042 9,054 616
1400 Providence Rd.--Center II(O)....... 1990 1996 -- 1,543 16,464 797
MONTGOMERY COUNTY, PENNSYLVANIA
LOWER PROVIDENCE
1000 Madison Avenue (O)................. 1990 1997 -- 1,713 12,559 88
PLYMOUTH MEETING
Five Sentry East (O).................... 1984 1996 -- 642 7,992 403
Five Sentry West (O).................... 1984 1996 -- 268 3,334 34
1150 Plymouth Meeting Mall (O).......... 1970 1997 -- 125 499 20,355
FAIRFIELD COUNTY, CONNECTICUT
GREENWICH
500 West Putnam Avenue (O).............. 1973 1998 11,471 3,300 16,734 200
NORWARK
40 Richards Avenue (O).................. 1985 1998 -- 1,087 18,399 143
SHELTON
1000 Bridgeport Avenue (O).............. 1986 1997 -- 773 14,934 12
STAMFORD
419 West Avenue (F)..................... 1986 1997 -- 4,538 9,246 5
500 West Avenue (F)..................... 1988 1997 -- 415 1,679 --
550 West Avenue (F)..................... 1990 1997 -- 1,975 3,856 4
650 West Avenue (F)..................... 1998 1998 -- 1,328 -- 3,624
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
230 White Plains Road (R)............... 124 1,845 1,969 88
WHITE PLAINS
1 Barker Avenue (O)..................... 207 9,772 9,979 477
1 Water Street (O)...................... 211 5,489 5,700 263
11 Martine Avenue (O)................... 127 28,733 28,860 1,295
25 Martine Avenue (M)................... 120 11,495 11,615 545
3 Barker Avenue (O)..................... 122 8,201 8,323 413
50 Main Street (O)...................... 564 49,530 50,094 2,401
YONKERS
1 Enterprise Boulevard (L).............. 1,380 -- 1,380 --
1 Executive Boulevard (O)............... 1,105 12,289 13,394 635
1 Odell Plaza (F)....................... 1,206 6,862 8,068 328
100 Corporate Boulevard (F)............. 602 9,972 10,574 477
2 Executive Plaza (R)................... 89 2,439 2,528 117
200 Corporate Boulevard South (F)....... 502 7,712 8,214 283
3 Executive Plaza (O)................... 385 6,256 6,641 301
4 Executive Plaza (F)................... 584 6,409 6,993 342
5 Odell Plaza (F)....................... 331 2,988 3,319 143
6 Executive Plaza (F)................... 546 7,246 7,792 347
7 Odell Plaza (F)....................... 419 4,477 4,896 236
CHESTER COUNTY, PENNSYLVANIA
BERWYN
1000 Westlakes Drive (O)................ 619 9,113 9,732 425
1055 Westlakes Drive (O)................ 1,951 19,246 21,197 904
1205 Westlakes Drive (O)................ 1,323 20,385 21,708 947
1235 Westlakes Drive (O)................ 1,418 21,546 22,964 979
DELAWARE COUNTY, PENNSYLVANIA
LESTER
100 Stevens Drive (O)................... 1,349 10,132 11,481 507
200 Stevens Drive (O)................... 1,644 20,482 22,126 1,016
300 Stevens Drive (O)................... 491 9,566 10,057 479
MEDIA
1400 Providence Rd--Center I (O)........ 1,042 9,670 10,712 676
1400 Providence Rd.--Center II(O)....... 1,544 17,260 18,804 1,258
MONTGOMERY COUNTY, PENNSYLVANIA
LOWER PROVIDENCE
1000 Madison Avenue (O)................. 1,714 12,646 14,360 418
PLYMOUTH MEETING
Five Sentry East (O).................... 642 8,395 9,037 445
Five Sentry West (O).................... 268 3,368 3,636 184
1150 Plymouth Meeting Mall (O).......... 125 20,854 20,979 407
FAIRFIELD COUNTY, CONNECTICUT
GREENWICH
500 West Putnam Avenue (O).............. 3,300 16,934 20,234 352
NORWARK
40 Richards Avenue (O).................. 1,087 18,542 19,629 157
SHELTON
1000 Bridgeport Avenue (O).............. 773 14,946 15,719 505
STAMFORD
419 West Avenue (F)..................... 4,538 9,251 13,789 445
500 West Avenue (F)..................... 415 1,679 2,094 80
550 West Avenue (F)..................... 1,975 3,860 5,835 185
650 West Avenue (F)..................... 1,328 3,624 4,952 30
</TABLE>
86
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BEXAR COUNTY, TEXAS
SAN ANTONIO
111 Soledad (O)......................... 1918 1997 -- 2,004 8,017 58
1777 N.E. Loop 410 (O).................. 1986 1997 -- 3,119 12,477 364
84 N.E. Loop 410 (O).................... 1971 1997 -- 2,295 10,382 97
200 Concord Plaza Drive (O)............. 1986 1997 -- 2,387 31,825 318
COLLIN COUNTY, TEXAS
PLANO
555 Republic Place (O).................. 1986 1997 -- 942 3,767 2
DALLAS COUNTY, TEXAS
DALLAS
3030 LBJ Freeway (O).................... 1984 1997 -- 6,098 24,366 734
3100 Monticello (O)..................... 1984 1997 -- 1,940 7,762 4,084
8214 Westchester (O).................... 1983 1997 -- 1,705 6,819 67
IRVING
2300 Valley View (O).................... 1985 1997 -- 1,913 7,651 342
RICHARDSON
1122 Alma Road (O)...................... 1977 1997 -- 754 3,015 100
HARRIS COUNTY, TEXAS
HOUSTON
10497 Town & Country Way (O)............ 1981 1997 -- 1,619 6,476 79
14511 Falling Creek (O)................. 1982 1997 -- 434 1,738 99
1717 St. James Place (O)................ 1975 1997 -- 909 3,636 116
1770 St. James Place (O)................ 1973 1997 -- 730 2,920 173
5225 Katy Freeway (O)................... 1983 1997 -- 1,403 5,610 156
5300 Memorial (O)....................... 1982 1997 -- 1,283 7,269 81
POTTER COUNTY, TEXAS
AMARILLO
6900 IH--40 West (O).................... 1986 1997 -- 287 1,147 48
TARRANT COUNTY, TEXAS
EULESS
150 West Park Way (O)................... 1984 1997 -- 852 3,410 56
TRAVIS COUNTY, TEXAS
AUSTIN
1250 Capital of Texas Hwy. South (O).... 1985 1998 -- 4,121 32,935 345
ARAPAHOE COUNTY, COLORADO
AURORA
750 South Richfield Street (O).......... 1997 1998 -- 2,680 23,125 27
DENVER
400 South Colorado Boulevard (O)........ 1983 1998 -- 1,461 10,620 133
ENGLEWOOD
5350 South Roslyn Street (O)............ 1982 1998 -- 862 6,831 30
9359 East Nichols Avenue (O)............ 1997 1998 -- 1,155 8,171 19
BOULDER COUNTY, COLORADO
BROOMFIELD
105 South Technology Court (O).......... 1997 1998 -- 653 4,936 14
303 South Technology Court-A (O)........ 1997 1998 -- 623 3,892 4
303 South Technology Court-B (O)........ 1997 1998 -- 623 3,892 4
LOUISVILLE
1172 Century Drive (O).................. 1996 1998 -- 707 4,647 16
248 Centennial Parkway (O).............. 1996 1998 -- 708 4,647 16
285 Century Place (O)................... 1997 1998 -- 889 10,133 13
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
BEXAR COUNTY, TEXAS
SAN ANTONIO
111 Soledad (O)......................... 2,004 8,075 10,079 212
1777 N.E. Loop 410 (O).................. 3,119 12,841 15,960 346
84 N.E. Loop 410 (O).................... 2,296 10,478 12,774 271
200 Concord Plaza Drive (O)............. 2,393 32,137 34,530 840
COLLIN COUNTY, TEXAS
PLANO
555 Republic Place (O).................. 942 3,769 4,711 98
DALLAS COUNTY, TEXAS
DALLAS
3030 LBJ Freeway (O).................... 6,098 25,100 31,198 685
3100 Monticello (O)..................... 2,511 11,275 13,786 257
8214 Westchester (O).................... 1,705 6,886 8,591 178
IRVING
2300 Valley View (O).................... 1,913 7,993 9,906 200
RICHARDSON
1122 Alma Road (O)...................... 754 3,115 3,869 80
HARRIS COUNTY, TEXAS
HOUSTON
10497 Town & Country Way (O)............ 1,619 6,555 8,174 181
14511 Falling Creek (O)................. 434 1,837 2,271 45
1717 St. James Place (O)................ 909 3,752 4,661 112
1770 St. James Place (O)................ 730 3,093 3,823 88
5225 Katy Freeway (O)................... 1,403 5,766 7,169 148
5300 Memorial (O)....................... 1,710 6,923 8,633 179
POTTER COUNTY, TEXAS
AMARILLO
6900 IH--40 West (O).................... 287 1,195 1,482 34
TARRANT COUNTY, TEXAS
EULESS
150 West Park Way (O)................... 852 3,466 4,318 89
TRAVIS COUNTY, TEXAS
AUSTIN
1250 Capital of Texas Hwy. South (O).... 4,121 33,280 37,401 760
ARAPAHOE COUNTY, COLORADO
AURORA
750 South Richfield Street (O).......... 2,682 23,150 25,832 444
DENVER
400 South Colorado Boulevard (O)........ 1,461 10,753 12,214 176
ENGLEWOOD
5350 South Roslyn Street (O)............ 862 6,861 7,723 169
9359 East Nichols Avenue (O)............ 1,155 8,190 9,345 154
BOULDER COUNTY, COLORADO
BROOMFIELD
105 South Technology Court (O).......... 653 4,950 5,603 101
303 South Technology Court-A (O)........ 623 3,896 4,519 98
303 South Technology Court-B (O)........ 623 3,896 4,519 98
LOUISVILLE
1172 Century Drive (O).................. 707 4,663 5,370 122
248 Centennial Parkway (O).............. 708 4,663 5,371 122
285 Century Place (O)................... 891 10,144 11,035 176
</TABLE>
87
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
DENVER COUNTY, COLORADO
DENVER
3600 South Yosemite (O)................. 1974 1998 -- 556 12,980 28
DOUGLAS COUNTY, COLORADO
ENGLEWOOD
384 Inverness Drive South (O)........... 1985 1998 -- 703 5,653 50
400 Inverness Drive (O)................. 1997 1998 -- 1,584 19,878 24
5975 South Quebec Street (O)............ 1996 1998 -- 855 11,551 39
67 Inverness Drive East (O)............. 1996 1998 -- 1,034 5,516 10
PARKER
9777 Pyramid Court (O).................. 1995 1998 -- 1,304 13,189 25
EL PASO COUNTY, COLORADO
COLORADO SPRINGS
1975 Research Parkway (O)............... 1997 1998 -- 1,397 13,221 --
JEFFERSON COUNTY, COLORADO
LAKEWOOD
141 Union Boulevard (O)................. 1985 1998 -- 774 6,891 276
MARICOPA COUNTY, ARIZONA
GLENDALE
5551 West Talavi Boulevard (O).......... 1991 1997 6,717 2,732 10,927 5,743
PHOENIX
19640 North 31st Street (O)............. 1990 1997 7,112 3,437 13,747 4
20002 North 19th Avenue (O)............. 1986 1997 3,386 1,843 7,371 15
SCOTTSDALE
9060 E. Via Linda Boulevard (O)......... 1984 1997 -- 3,720 14,879 --
SAN FRANCISCO COUNTY, CALIFORNIA
SAN FRANCISCO
760 Market Street (O)................... 1908 1997 -- 5,588 22,352 36,844
HILLSBOROUGH COUNTY, FLORIDA
TAMPA
501 Kennedy Boulevard (O)............... 1982 1997 -- 3,959 15,837 127
POLK COUNTY, IOWA
WEST DES MOINES
2600 Westown Parkway (O)................ 1988 1997 -- 1,708 6,833 39
DOUGLAS COUNTY, NEBRASKA
OMAHA
210 South 16th Street (O)............... 1894 1997 -- 2,559 10,236 81
DISTRICT OF COLUMBIA
WASHINGTON
1400 L Street, NW (O)................... 1987 1998 -- 13,054 27,423 166
1709 New York Avenue, NW (O)............ 1972 1998 -- 19,898 29,686 158
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
DENVER COUNTY, COLORADO
DENVER
3600 South Yosemite (O)................. 556 13,008 13,564 225
DOUGLAS COUNTY, COLORADO
ENGLEWOOD
384 Inverness Drive South (O)........... 703 5,703 6,406 129
400 Inverness Drive (O)................. 1,584 19,902 21,486 352
5975 South Quebec Street (O)............ 856 11,589 12,445 253
67 Inverness Drive East (O)............. 1,035 5,525 6,560 139
PARKER
9777 Pyramid Court (O).................. 1,305 13,213 14,518 320
EL PASO COUNTY, COLORADO
COLORADO SPRINGS
1975 Research Parkway (O)............... 1,397 13,221 14,618 256
JEFFERSON COUNTY, COLORADO
LAKEWOOD
141 Union Boulevard (O)................. 775 7,166 7,941 163
MARICOPA COUNTY, ARIZONA
GLENDALE
5551 West Talavi Boulevard (O).......... 3,593 15,809 19,402 336
PHOENIX
19640 North 31st Street (O)............. 3,437 13,751 17,188 359
20002 North 19th Avenue (O)............. 1,843 7,386 9,229 192
SCOTTSDALE
9060 E. Via Linda Boulevard (O)......... 3,720 14,879 18,599 388
SAN FRANCISCO COUNTY, CALIFORNIA
SAN FRANCISCO
760 Market Street (O)................... 13,499 51,285 64,784 852
HILLSBOROUGH COUNTY, FLORIDA
TAMPA
501 Kennedy Boulevard (O)............... 3,959 15,964 19,923 415
POLK COUNTY, IOWA
WEST DES MOINES
2600 Westown Parkway (O)................ 1,708 6,872 8,580 183
DOUGLAS COUNTY, NEBRASKA
OMAHA
210 South 16th Street (O)............... 2,559 10,317 12,876 271
DISTRICT OF COLUMBIA
WASHINGTON
1400 L Street, NW (O)................... 13,054 27,589 40,643 406
1709 New York Avenue, NW (O)............ 19,898 29,844 49,742 444
</TABLE>
88
<PAGE>
MACK-CALI REALTY CORPORATION
REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
SCHEDULE III
<TABLE>
<CAPTION>
INITIAL COSTS COSTS
YEAR ------------------------ CAPITALIZED
------------------------ RELATED BUILDING AND SUBSEQUENT TO
PROPERTY LOCATION(2) BUILT ACQUIRED ENCUMBRANCES LAND IMPROVEMENTS ACQUISITION
- ---------------------------------------- ----- ----------- ------------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
PRINCE GEORGE'S COUNTY, MARYLAND
LANHAM
4200 Parliament Place (O)............... 1989 1998 -- 2,114 13,546 198
PROJECTS UNDER DEVELOPMENT.............. -- 40,200 -- 4,418
FURNITURE, FIXTURES & EQUIPMENT......... -- -- -- 5,686
------------- --------- ------------- -------------
TOTALS.................................. $ 749,331 $ 488,872 $ 2,584,351 $ 394,576
------------- --------- ------------- -------------
------------- --------- ------------- -------------
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
CLOSE OF PERIOD(1)
-----------------------------------
BUILDING AND ACCUMULATED
PROPERTY LOCATION(2) LAND IMPROVEMENTS TOTAL DEPRECIATION
- ---------------------------------------- --------- ------------- --------- ------------
<S> <C> <C> <C> <C>
PRINCE GEORGE'S COUNTY, MARYLAND
LANHAM
4200 Parliament Place (O)............... 2,114 13,744 15,858 164
PROJECTS UNDER DEVELOPMENT.............. 40,200 4,418 44,618 4
FURNITURE, FIXTURES & EQUIPMENT......... -- 5,686 5,686 1,716
--------- ------------- --------- ------------
TOTALS.................................. $ 510,534 $ 2,957,265 $3,467,799 $ 177,934
--------- ------------- --------- ------------
--------- ------------- --------- ------------
</TABLE>
- ----------------------------------------
(1) The aggregate cost for federal income tax purposes at December 31, 1998 was
approximately $2.31 billion.
(2) Legend of Property Codes:
<TABLE>
<S> <C>
(O) = Office Property (M)= Multi-family Residential
Property
(F) = Office/Flex Property (R) = Stand-alone Retail Property
(I) = Industrial/Warehouse (L) = Land Lease
Property
</TABLE>
89
<PAGE>
MACK-CALI REALTY CORPORATION
NOTE TO SCHEDULE III
Changes in rental properties and accumulated depreciation for the periods
ended December 31, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ----------
<S> <C> <C> <C>
RENTAL PROPERTIES:
Balance at beginning of year.............................................. $ 2,629,616 $ 853,352 $ 387,675
Additions............................................................... 838,183 1,776,264 473,371
Retirements/Disposals................................................... -- -- (7,694)
------------ ------------ ----------
Balance at end of year.................................................... $ 3,467,799 $ 2,629,616 $ 853,352
------------ ------------ ----------
------------ ------------ ----------
Accumulated Depreciation:
Balance at beginning of year.............................................. $ 103,133 $ 68,610 $ 59,095
Depreciation expense.................................................... 74,801 34,523 12,810
Retirements/Disposals................................................... -- -- (3,295)
------------ ------------ ----------
Balance at end of year.................................................... $ 177,934 $ 103,133 $ 68,610
------------ ------------ ----------
------------ ------------ ----------
</TABLE>
90
<PAGE>
Exhibit 10.1
AGREEMENT OF LIMITED PARTNERSHIP
OF
HPMC DEVELOPMENT PARTNERS, L.P.
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF THE 23RD DAY OF APRIL, 1998
THE INTERESTS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED OR
QUALIFIED UNDER THE APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE SECURITIES ACT
AND THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION OR REGISTRATION UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
IN ADDITION, THE INTERESTS ISSUED UNDER THIS AGREEMENT MAY BE SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
HEREIN.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
HPMC DEVELOPMENT PARTNERS, L.P.
A DELAWARE LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP ("Agreement") is made and entered
into as of the 23rd day of April, 1998, by and among HCG DEVELOPMENT, L.L.C., a
Delaware limited liability company, as the managing general partner ("Highridge
GP" or for so long as Highridge GP is a General Partner, the "Managing General
Partner"), SUMMIT PARTNERS I, L.L.C., a Delaware limited liability company, as a
limited partner (the "Highridge Limited Partner"), and MACK-CALI CALIFORNIA
DEVELOPMENT ASSOCIATES L.P., a California limited partnership, as a limited
partner (the "Mack-Cali Limited Partner" and together with the Highridge Limited
Partner, the "Limited Partners"), with reference to the following:
RECITALS
--------
A. The Managing General Partner and the Limited Partners desire to form a
limited partnership pursuant to the provisions of the Revised Uniform Limited
Partnership Act of the State of Delaware, Delaware Code, Title 6 Sections
117-101, ET SEQ., as amended from time to time, and to constitute themselves as
HPMC DEVELOPMENT PARTNERS, L.P., a Delaware limited partnership (the
"Partnership") for the purposes set forth in Sections 1.5 and 1.11, and on the
terms and conditions set forth in this Agreement.
B. The Managing General Partner and each of the Limited Partners desires
to make its respective capital contributions to the Partnership as described in
this Agreement and to be admitted as a Partner of the Partnership.
C. In order to effect the foregoing, the parties hereto desire to enter
into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein (the receipt and sufficiency of which hereby are acknowledged
by each party hereto), the parties hereto, intending to be legally bound, agree
as follows:
<PAGE>
ARTICLE 1
GENERAL PROVISIONS
1.1 FORMATION. The Managing General Partner, as the general partner, and
the Highridge Limited Partner and the Mack-Cali Limited Partner, as limited
partners, hereby form the Partnership as a limited partnership pursuant to the
terms of this Agreement and the Act. This Agreement shall constitute the
agreement of limited partnership among the Partners. All capitalized terms used
and not otherwise defined herein shall have the meanings set forth in Section
1.10 and Exhibit A. The Partners further agree to take such other actions as
may from time to time be necessary or appropriate under the laws of the States
of Delaware and California with respect to the formation, operation,
qualification and continued good standing of the Partnership as a limited
partnership in such jurisdictions.
1.2 NAME OF PARTNERSHIP. Subject to Section 1.3., the name of the
Partnership shall be "HPMC DEVELOPMENT PARTNERS, L.P.," or such other name as
may be reasonably Approved by the General Partners from time to time.
1.3 CERTIFICATE OF LIMITED PARTNERSHIP. The Managing General Partner
shall execute the Certificate of Limited Partnership (the "CERTIFICATE") for the
Partnership, and the Managing General Partner shall (i) cause the Certificate to
be filed in the Office of the Secretary of State of the State of Delaware as
required by the Act, and (ii) cause the Partnership to take any other steps that
are necessary for the Partnership to own the Investments and operate the
Properties and to conduct the Partnership's business in Delaware and California,
promptly after the date hereof. The Certificate shall be amended whenever, and
within the time periods, required by the Act, or otherwise when reasonably
Approved by the Partners.
1.4 PRINCIPAL OFFICE, RESIDENT AGENT AND REGISTERED OFFICE. The principal
office of the Partnership shall be located at 300 Continental Boulevard, Suite
360, El Segundo, California 90245, or at such other place or places as from time
to time be reasonably Approved by the General Partners; PROVIDED, HOWEVER, that
the Partnership shall at all times maintain a registered agent and an office in
the State of Delaware and the State of California. The name and address of the
registered agent for service of process on the Partnership in the State of
Delaware is Paracorp Incorporated, 15 East North Street, Dover, Delaware 19901.
The address of the registered office of the Partnership in the State of Delaware
is c/o Paracorp Incorporated, 15 East North Street, Dover, Delaware 19901. The
name and address of the registered agent for service of process on the
Partnership in the State of California is Mark Abramson, Esq., 300 Continental
Boulevard, Suite 360, El Segundo, California 90245. The address of the
registered office of the Partnership in the State of California shall be the
principal office of the Partnership. Such principal office, registered agent or
registered office may be changed upon the reasonable Approval of the General
Partners, so long as in accordance with the Act; concurrently with any such
change, written notice thereof shall be
2
<PAGE>
given to each Partner. Promptly following execution and delivery of this
Agreement, and filing of the Certificate with the Secretary of State of the
State of Delaware, the Managing General Partner shall cause the Partnership to
register as a foreign limited partnership in the Office of the Secretary of
State of California and in such other jurisdictions as are necessary or
desirable. Such registration shall be amended by the General Partners whenever
required by the laws of each such jurisdiction.
1.5 PURPOSES OF PARTNERSHIP. The purposes of the Partnership shall be:
1.5.1 Subject to the other provisions of this Agreement, to
acquire the Investments for investment purposes, and to own, hold, rehabilitate,
develop with office buildings, manage, maintain, entitle, plat, subdivide,
operate, finance, refinance, rezone, improve, lease, and to sell, exchange or
otherwise dispose of the El Segundo Land (more particularly described on Exhibit
D-1) and the Summit Ridge Land (more particularly described on Exhibit D-2), and
any other property Approved by the Partners (as improved from time to time, the
"Properties") and interests therein, whether directly or through Investment
Entities formed by the Partnership as provided in Section 1.5.2.
1.5.2 Subject to the other provisions of this Agreement, to
acquire any other assets that are incidental to the foregoing which have been
Approved by the Partners (the Properties and other assets owned by the
Partnership, including interests in Entities owning Properties or interests
therein, are referred to as the "Investments"). The Partnership shall, unless
otherwise Approved by the Partners, cause each Property to be acquired,
developed and owned by a separate limited liability company or limited
partnership formed by the Partnership for the purpose of acquiring the same or
interests therein (each such partnership or limited liability company, together
with any Entity in which such limited liability company or partnership owns a
direct or indirect equity ownership interest, an "Investment Entity"), and the
Partnership may form one or more other subsidiaries to serve as a general
partner of any limited partnership or as a member of any limited liability
company formed for Partnership purposes on terms reasonably Approved by the
Partners. The Partnership may take all actions required or permitted to be
taken by it under each Investment Entity Agreement (such actions to be required
to be Approved by the Partners to the extent required by this Agreement). The
Partnership may engage in any and all other general business activities
incidental or reasonably related to the foregoing.
1.6 FUNDING PROPORTIONS; RESIDUAL PERCENTAGES
1.6.1 The respective Funding Proportions and Residual Percentages in
the Partnership of the Partners are set forth on Exhibit B.
1.6.2 Unless the context otherwise clearly indicates, the term
"interest" or "interests" in the Partnership shall include both General Partner
interests and Limited Partner interests. A Partner's interest in the
Partnership shall mean and include its share of the capital
3
<PAGE>
of the Partnership, its share of the Profits and Losses, its share of Gain or
Loss on Disposition and other tax items of the Partnership, its share of the
distributions of the Partnership, its Capital Account, and its other rights and
obligations, all as determined under this Agreement.
1.7 OTHER QUALIFICATIONS. At the expense of the Partnership, the General
Partners shall cause the Partnership to be qualified to do business in each
jurisdiction in which such qualification becomes necessary (including
California), on or before the date on which such qualification becomes
necessary.
1.8 TERM OF PARTNERSHIP. The term of the Partnership commenced as of the
date of filing the Certificate and shall continue until the Partnership shall be
dissolved, liquidated and terminated pursuant to the provisions of Article 8.
1.9 TITLE TO PARTNERSHIP PROPERTY. Unless otherwise Approved by the
Partners, legal title to all of the Partnership's assets, including the
Properties and the Investments, shall be held by the Partnership, either
directly or through Investment Entities formed by the Partnership to acquire
such assets. It is expressly understood and agreed that the manner of holding
title to Partnership property is solely for the convenience of the Partners;
accordingly, legal representatives, beneficiaries, distributees, partners,
shareholders, members, successors or assigns of any Partner shall have no right,
title or interest in or to any such Partnership property by reason of the manner
in which title is held, but all such property shall be treated as Partnership
property subject to the terms of this Agreement.
1.10 DEFINITIONS. Capitalized terms that are used in this Agreement shall
have the meanings set forth on Exhibit A.
1.11 AUTHORIZED ACTS. In furtherance of its purposes, and subject to the
provisions of this Agreement, the Partnership and its General Partners shall
have the full power and authority to take in the Partnership's name all actions
that are necessary, useful, appropriate or helpful in connection therewith,
including the actions described in Section 5.1.1 hereof.
4
<PAGE>
1.12 AUTHORIZED REPRESENTATIVES. The "Authorized Representatives" of a
Partner that is not a natural person shall be those representatives designated
by notice to all other Partners by such Partner from time to time to represent
such Partner in connection with the Partnership, unless and until replaced or
removed by notice from such Partner to all Partners. The written statements and
representations of an Authorized Representative for a Partner that is not a
natural Person shall be the only authorized statements and representations of
such Partner with respect to the matters covered by this Agreement. The initial
Authorized Representatives are (i) John S. Long, Eugene S. Rosenfeld, Steven A.
Berlinger and Jack Mahoney for the Highridge Partners, and (ii) Thomas Rizk,
Mitchell E. Hersh, Roger W. Thomas and Barry Lefkowitz for the Mack-Cali
Partners. The written statement or representation of any one Authorized
Representative of such Partner shall be sufficient to bind such Partner with
respect to all matters pertaining to the Partnership. The term "Approved by" or
"Consented to by" or "Consent of" or "satisfactory to" with respect to a Partner
that is not a natural Person means a decision or action which has been consented
to in writing by the Authorized Representative of such Partner (or orally to the
extent that the Partners have adopted a course of conduct pursuant to which
certain Approvals, other than those described below in this Section 1.12, are
granted orally), and with respect to a Partner who is an individual, means a
decision or action which has been consented to in writing by such individual.
In order for a decision or action to be "Approved by the Partners" (or any
variation thereof), the decision or action must be Approved by at least one
Authorized Representative of each Partner who then continues to have Approval
rights with respect to such action or decision under this Agreement. In order
for a decision or action to be "Approved by the General Partners" (or any
variation thereof), the decision or action must be Approved by at least one
Authorized Representative of each then General Partner. Notwithstanding
anything in this Agreement to the contrary (including any course of conduct
regarding oral Approvals that has been adopted by the Partners), the following
Approvals must be given in writing (to the extent Approval is required therefor)
in order to be effective: (1) acquisition by the Partnership or an Investment
Entity of a Property other than the El Segundo Land and the Summit Ridge Land
(the acquisition of which hereby is Approved by the Partners pursuant to the
Approved Development Plans with respect thereto that are described on Exhibit
C), (2) any borrowing by the Partnership or an Investment Entity, (3) the sale
or other disposition of any Investment or Property, (4) adopting or materially
modifying a Development Plan for any Property or any Approved Budget contained
therein, including any Approved Overhead Budget contained therein or Approved by
the Partners in connection therewith (the Partners hereby confirm that the
initial Approved Development Plan, Approved Budget, and Approved Overhead Budget
for each of the El Segundo Land and the Summit Ridge Land are described on
Exhibit C), (5) liquidating the Partnership or any Investment Entity and (6)
issuing a Funding Notice as provided in Section 2.1.2.1(ii). Section 5.1.6.2
sets forth the procedure for obtaining Approvals.
5
<PAGE>
ARTICLE 2
CAPITAL CONTRIBUTIONS
AND ADDITIONAL CONTRIBUTIONS
2.1 CAPITAL CONTRIBUTIONS.
2.1.1 INITIAL CAPITAL CONTRIBUTIONS. (a) Each Partner has
contributed the amount in cash to the capital of the Partnership that is set
forth for such Partner on Exhibit B as its Section 2.1.1 Contribution (Cash).
(b) The Highridge Partners hereby assign to the Partnership, by
contribution to the capital of the Partnership, their entire right, title and
interest in and to the land located in El Segundo California that is more
particularly described on Exhibit D-1 (the "El Segundo Land"). The aggregate
agreed value of the El Segundo Land (and its Gross Asset Value) that shall
constitute Section 2.1.1 Contributions of the Highridge Partners and shall be
credited to the Capital Accounts of the Highridge Partners (in the proportion
set forth on Exhibit B) equals $9,000,000, of which $7,000,000 shall constitute
Invested Capital of the Highridge Partners and $2,000,000 shall constitute the
"Highridge Subordinated Contributions" (on which Highridge Subordinated
Contribution Return accrues). The Partnership shall contribute its interest in
the El Segundo Land to an Investment Entity prior to its development. For
convenience, the foregoing contribution to the Partnership and subsequent
contribution by the Partnership to such Investment Entity may be accomplished by
a direct deed of title to the El Segundo Land from Affiliates of the Highridge
Partners to such Investment Entity (and such direct deed hereby is Approved by
the Partners). The Highridge Partners shall timely execute and record such
documents as are necessary to reflect the transfer of legal title to the El
Segundo Land to such Investment Entity (in form reasonably Approved by the
Mack-Cali Limited Partner).
2.1.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
2.1.2.1 GENERAL RULES. Except as provided in this Section
2.1.2, no Partner shall be required to make any Capital Contributions other than
those described in Sections 2.1.1, 3.5.4 and 4.3.2. Each Partner shall be
required to make additional Capital Contributions to the Partnership if any
General Partner or the Mack-Cali Limited Partner gives notice to all Partners (a
"Funding Notice") that meets the requirements of this Section 2.1.2. If a
Funding Notice is properly issued, the amount of additional Capital
Contributions so required from each Partner ("Required Additional
Contributions") shall be (except as otherwise provided in this Section 2.1.2)
the amount to be contributed by such Partner pursuant to the Sections of this
Agreement referenced below in this Section 2.1.2.1 upon the occurrence of the
circumstances giving rise to the obligation of one or more of the Partners to
make such Required Additional Contributions under this Agreement, as specified
in such
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Funding Notice (the collective dollar obligation of the Partners with respect
thereto for such Funding Notice is referred to as a "Shortfall"):
(i) the Mack-Cali Partners shall be required to fund 100% of any
additional Required Additional Contributions in order to make the Capital
Equalization Distribution described in Section 2.1.2.3;
(ii) except as specifically Approved in writing by the Partners after
the execution of this Agreement, no Funding Notice may be issued except to
the extent amounts described in preceding clause (i) or clause (iii) of
this Section 2.1.2.1, and/or in Sections 3.5.4 and 4.3.2 are required to be
contributed to the Partnership by one or more Partners; and
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(iii) Notwithstanding any provision of this Agreement to the
contrary, (a) if and to the extent that distributions have been made to the
Partners pursuant to the preferential distribution thereof described in
Sections 4.1.1 (d), (e) or (f) (but not pursuant to Section 2.1.2.3 except
as provided below, and not in payment of Undistributed Highridge
Subordinated Contributions or Undistributed Highridge Subordinated Return
pursuant to the preferential distribution thereof described in Section
4.1.2), such distributions shall be recontributed to satisfy any Shortfall
of the Partnership other than a Shortfall described in clause (i) of this
Section 2.2.2.1 (in the ratio distributed to the Partners under such
Sections) in response to a Funding Notice concerning such Shortfall (such
recontributions to constitute Required Additional Contributions for
purposes of this Agreement); and (b) if and to the extent distributions
have been made to the Highridge Partners pursuant to Section 2.1.2.3, the
Highridge Partners shall recontribute (and the Mack-Cali Limited Partner
shall contribute) in response to such Funding Notice (prior to making the
recontributions described in preceding clause (a)) such portion of such
distributions as are necessary for the Invested Capital of Highridge
Partners and the Mack-Cali Limited Partner (determined after taking into
account such recontribution by the Highridge Partners and contribution by
the Mack-Cali Limited Partner) to be in the ratio of their respective
Funding Proportions (such recontribution and contribution by such Partners
to constitute Required Additional Contributions for all purposes of this
Agreement).
Except as provided below, no Partner shall be required to issue a
Funding Notice under any circumstances. Notwithstanding the preceding
sentence, the Managing General Partner shall be required to issue a Funding
Notice within five (5) days after receiving notice from the Mack-Cali
Limited Partner that a Funding Notice is required in order to fund the
amounts described in this Section 2.1.2 that are then due and payable (the
Mack-Cali Limited Partner shall not be required to issue such a notice
under any circumstances). A Funding Notice may be issued by the Mack-Cali
Limited Partner if the Managing General Partner shall fail to do so within
such 5-day period. Each Funding Notice shall describe the Shortfall and
set forth the Required Additional Contribution of each Partner as
determined pursuant to this Section 2.1.2. If a Funding Notice is properly
issued as provided above in this Section 2.1.2, each Partner shall
contribute its Required Additional Contributions on or before the Due Date
therefor under Section 2.2.1. The provisions of this Section 2.1.2 which
provide that a Funding Notice must be validly issued before additional
Capital Contributions are required to be made shall not affect in any way
the obligation of any Partner to pay to the Partnership or to the other
Partners, as the case may be, any amount required to be paid by such
Partner to them under this Agreement (it being agreed that the issuance of
a Funding Notice shall not be required in order for the Partnership or any
Partner to enforce any such payment obligation).
2.1.2.2 SPECIAL DISTRIBUTION. Notwithstanding the other
provisions of this Agreement, to the extent the amount of the construction
financing for the El Segundo
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Land and Summit Ridge Land exceeds $27.2 million but does not exceed $28.2
million, a special distribution shall be made to the Mack-Cali Limited Partner,
which distribution (a) shall be deemed to have been made pursuant to Section
4.1.1(c) in partial repayment of the Invested Capital of the Mack-Cali Limited
Partner (such distribution not to exceed $1 million), and (b) shall be made
prior to any other distributions to the Partners under Article 4.
2.1.2.3 CAPITAL EQUALIZATION. Notwithstanding any other
provision of this Agreement, at any time after the later to occur of (a) the
date that is one year after the date of this Agreement or (b) the El Segundo
Valuation Date, Highridge GP may elect, by notice to the Mack-Cali Limited
Partner to cause a special distribution to be made by the Partnership to the
Highridge Partners as provided in this Section 2.1.2.3 (the "Capital
Equalization Distribution"). The Capital Equalization Distribution shall be
made from cash on hand of the Partnership that is available for distribution to
the Partners under Sections 4.1.1, 4.1.2 and 4.2.3 before any distribution is
made under those Sections to the Partners. To the extent there is insufficient
cash on hand to make the entire Capital Equalization Distribution, Highridge GP
may issue a Funding Notice to the Mack-Cali Limited Partner pursuant to which
the Mack-Cali Limited Partner shall be obligated to fund 100% of such deficit
(which amount shall be distributed to the Highridge Partners upon receipt by the
Partnership). Any such contribution by the Mack-Cali Limited Partner shall
constitute Capital Contributions (and Invested Capital) of the Mack-Cali Limited
Partner for all purposes of this Agreement. The maximum amount of such
contribution from the Mack-Cali Limited Partner shall not exceed the lesser of
(i) $4,000,000 or (ii) the maximum amount of Required Additional Contributions
then remaining with respect to the Mack-Cali Limited Partner. The Capital
Equalization Distribution shall be deemed to be a distribution made to the
Highridge Partners under Section 4.1.1(c) in repayment of the Highridge
Partners' Invested Capital (pro rata to each Highridge Partner in proportion to
the then Invested Capital of each Highridge Partner). The amount of the Capital
Equalization Distribution shall equal the amount that is necessary to cause the
Invested Capital of the Highridge Partners (determined after making the Capital
Equalization Distribution and taking into account any distributions to the
Partners made pursuant to Sections 2.1.1.2 above and 2.1.2.4 below) to equal 20%
of the aggregate Invested Capital of all Partners (determined after making the
Capital Equalization Distribution and after the Mack-Cali Limited Partner's
Invested Capital has been increased for purposes of this computation by any
Mack-Cali Limited Partner contribution that would then be required to be made
pursuant to this Section 2.1.2.3). Notwithstanding the foregoing, in no event
shall the Capital Equalization Distribution exceed $4,000,000.
2.1.2.4 MEZZANINE FINANCING. The Mack-Cali Limited
Partner shall have the right, upon notice to the Highridge Partners but subject
to the reasonable Approval of the Managing General Partner, to cause the
Partnership to obtain Third Party Mezzanine Financing (with respect to which no
Partner or its Affiliates shall be required to provide any personal guaranties
of repayment without such Partner's Approval), PROVIDED, HOWEVER, that if such
financing is obtained, the Mack-Cali Limited Partner shall cause the Capital
Equalization Distribution to be made to the Highridge Partners as provided
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in Section 2.1.2.3 prior to making any distributions to the Partners under
Article 4 thereafter (including distributions of the proceeds of such Third
Party Mezzanine Financing). As an alternative to Mack-Cali making the
contribution described in Section 2.1.2.3 in order to make such Capital
Equalization Distribution, the Partners may accomplish the same result by making
first distributions to the Highridge Partners from the proceeds of such Third
Party Mezzanine Financing as necessary to place the Partners' Invested Capital
in the same ratio as if the contribution and distribution described in Section
2.1.2.3 had occurred. Distributions to the Highridge Partners pursuant to this
Section 2.1.2.4 shall be deemed to have been made pursuant to Section 4.1.1(c)
in repayment of the Highridge Partners' Invested Capital.
2.1.3 CONTRIBUTIONS OF SERVICES. The Residual Percentage of any
Partner in excess of such Partner's Funding Proportion shall be deemed to be a
profits interest that has been received in exchange for services rendered or to
be rendered by such Partner to or for the benefit of the Partnership (such
excess Residual Percentage having no currently predictable distributions or
value).
2.2 THIRD-PARTY LOANS AND ADDITIONAL CAPITAL CONTRIBUTIONS AND CAPITAL
CALLS.
2.2.1 If a Funding Notice is properly given by a Partner pursuant
to Section 2.1.2, each Partner shall have the obligation, subject to the
limitations contained in Section 2.1.2, to contribute its Required Additional
Contributions within five (5) days after the later to occur of (i) the date on
which the Funding Notice with respect thereto has been received (or deemed
received under Section 9.5) or (ii) the required funding date that is set forth
in the Funding Notice (the expiration of such five-day period is referred to as
the "Due Date"). There shall be a cure period of five (5) days after the Due
Date for each Partner to contribute its Required Additional Contribution, as
provided in Section 2.2.2.
2.2.2 If any Partner fails to contribute the full amount of its
Capital Contributions required to be made pursuant to Section 2.1.2 and Section
2.2.1 within five (5) days after the Due Date thereunder (such Partner and any
other Partner in such Partner's Partner Group thereupon being collectively
referred to as the "Defaulting Partner"), then, as the exclusive remedies of the
Partnership and the other Partners who are not Defaulting Partners (the
"Non-Defaulting Partners"), the Non-Defaulting Partner shall have the following
remedies, exercisable by notice from the Non-Defaulting Partners to the
Defaulting Partner: (i) to elect to treat the Defaulting Partner as a Terminated
Partner under Section 7.9 (and pursue the remedies under this Agreement that
apply after a Partner becomes a Terminated Partner), (ii) to cause the
Partnership to sue the Defaulting Partner for actual (and not consequential)
damages that shall be limited to the portion of the Defaulting Partner's share
of the Shortfall Disbursement that was not received timely, plus interest at the
rate equal to the lesser of (x) fifteen percent (15%) per annum or (y) the
maximum interest rate permitted by law, and plus the costs of collection, and
(iii) to elect to lend (or to cause the Non-Defaulting Partners' Affiliates to
lend), to the Defaulting Partner or to the Partnership, as Approved by the
Non-Defaulting Partners, the amount of such Capital Contribution that was not
made
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timely by the Defaulting Partner. The remedies described in clauses (i), (ii)
and (iii) of this Section 2.2.2 shall be cumulative, and all or any of them may
be elected and apply simultaneously, except as provided in Section 2.2.2.1.
2.2.2.1 If the Non-Defaulting Partners choose to lend (or to
cause their Affiliates to lend) the amount of the Required Additional
Contribution not made timely by the Defaulting Partner, the loan shall be a
recourse loan to the Partnership or to the Defaulting Partner, as elected by the
Non-Defaulting Partners, and shall bear interest, compounded monthly, at the
rate equal to the lesser of (i) the maximum interest rate permitted by law or
(ii) fifteen percent (15%) per annum, from the date such loan is made until the
date of repayment. Such loan shall be deemed to have been made to the
Defaulting Partner (and not to the Partnership) only if the Non-Defaulting
Partners (or the Non-Defaulting Partners' Affiliate) has paid such amount
directly to the Partnership and specifies, by notice to the Partners given
within two (2) Business Days after such funding, that the loan is being made to
the Defaulting Partner, in which case (1) said amount shall be deemed to have
been contributed to the Partnership by the Defaulting Partner for purposes of
determining the Capital Contributions made by the Defaulting Partner, its
Invested Capital and the Preferred Return thereon, (2) the remedies against the
Defaulting Partner described in Sections 2.2.2(ii) and 9.2 shall not apply with
respect to said amount, and (3) the Defaulting Partner shall still be deemed to
be a Terminated Partner for purposes of applying the remedies contained in
Section 7.9 and for all other provisions of this Agreement. Repayment of any
such loan to the Defaulting Partner shall be effected by the General Partners
being required to cause the Partnership to pay directly to the Non-Defaulting
Partners all distributions otherwise payable to the Defaulting Partner under
this Agreement as and when payable, instead of making such distributions to the
Defaulting Partner (with such distributions being deemed for all purposes to
have been made to the Defaulting Partner and then paid by the Defaulting Partner
to the Non-Defaulting Partners or their Affiliates, as the case may be).
Repayment of any such loan to the Partnership shall be made as provided in
Section 4.1 and Section 4.2.2. Any payments made with respect to loans
described in this Section 2.2.2.1 shall first be deemed to pay accrued but
unpaid interest, and then be deemed to repay principal.
2.2.2.2 If none of the Partners timely contributes any portion
of its
Required Capital Contribution pursuant to a Funding Notice, there shall be no
remedy of any Partner or the Partnership against any other Partner by reason of
the failure to make such Required Capital Contributions.
2.2.3 Except as otherwise specifically set forth in this
Agreement, no Partner shall have the right (i) to withdraw such Partner's
Capital Contribution or to demand or receive the return of a Capital
Contribution or to make any claim to any portion of Partnership capital or (ii)
to demand or receive property other than cash in return for a Capital
Contribution or to receive any cash in return for a Capital Contribution.
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2.2.4 Except as expressly provided in this Agreement, no Partner
shall have personal liability to make any Capital Contribution.
2.2.5 A deficit Capital Account of a Partner (or of a partner,
member or venturer of a Partner) shall not be deemed to be a liability of such
Partner (or of such partner, member or venturer) or an asset or property of the
Partnership (or any Partner). Furthermore, no Partner shall have any obligation
to the Partnership, any other Partner or any creditor of any of them or of any
Investment Entity for any deficit balance in such Partner's Capital Account.
2.3 USE OF CAPITAL CONTRIBUTIONS; CERTAIN EXPENSES. The initial cash
Capital Contributions made pursuant to Section 2.1.1(a) shall be used as
follows: (i) to pay unpaid third-party formation and start-up costs of the
Partnership and the Investment Entities, the acquisition costs of the
Investments (including the costs of entering into and performing under the
Acquisition Documents) that have been Approved by the Partners, and any
reimbursements (limited to each Partner's cost) included in the Initial Approved
Budget contained in the Approved Development Plan attached as Exhibit C with
respect to due diligence, formation and start-up expenditures; including
attorneys' fees and expenses and formation and qualification costs (and to
reimburse each Partner, limited to such Partner's cost, for portions thereof
already paid by such Partner or its Affiliates), such amounts (a) to include the
Partners' attorneys fees and expenses in connection with the preparation of this
Agreement, and the documents contemplated hereby, and (b) to be paid or
reimbursed to the Partners by the Partnership out of such Capital Contributions
promptly after invoices for such amounts are submitted to the Partnership and to
each Partner, and (ii) the balance, if any, shall be held in reserves pending
expenditure as set forth in an Approved Budget (or otherwise as Approved by the
Partners) or as permitted without such Approval under Section 5.1.3.2, Section
5.1.3.3 or Section 5.1.3.4; PROVIDED, HOWEVER, that $1 million of the expense
reimbursement with respect to the El Segundo Land and the Summit Ridge Land
payable to the Highridge Partners that is described on Exhibit M shall not be
paid currently as provided above but shall instead be paid to the Highridge
Partners as a Partnership expense, together with interest at an annual rate of
10% per annum from the Agreement Date to the date of payment, on the date which
is thirty days after the date on which this Agreement has been executed and
delivered by all parties hereto. The Partners hereby confirm that the expense
reimbursements of the Highridge Partners that are described on Exhibit M have
been Approved by the Partners.
2.4 PARTNER LOANS. (a) If available cash flow, borrowings and Capital
Contributions are insufficient for the reasonable requirements of the
Partnership, the Mack-Cali Limited Partner if it is not a Terminated Partner,
shall have the unilateral right (but not the obligation) to finance (directly,
or through an Affiliate) any Partnership expenditure at an interest rate equal
to the lesser of (i) ten percent (10%) per annum or (ii) the maximum rate
permitted by law, provided, however, that prior to making any loan pursuant to
this Section 2.4(a), the Mack-Cali Limited Partner shall, unless a Highridge
Partner is a Terminated Partner, give at least ten (10) Business Days prior
written notice to the Highridge
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GP and offer to the Highridge Partners the opportunity to participate (in
proportion to the Partners' Funding Proportions) in such loan. Any notice from
the Mack-Cali Limited Partner pursuant to this Section 2.4(a) shall specify the
amount of such loan, the share thereof which the Highridge Partners may lend and
the earliest date on which such loan is to be made to the Partnership (which
date shall not, except in case of Emergency, be earlier than ten (10) Business
Days after such notice is received by the Highridge GP). The Highridge Partners
may participate in any loan pursuant to this Section 2.4(a), if at all, only by
delivery to the Mack-Cali Limited Partner, not later than the date specified in
such notice, of its share of such loan. All loans described in this Section
2.4(a) shall be repayable as provided for in Sections 4.1 and 4.2.
(b) [INTENTIONALLY OMITTED.]
2.5 CONTRIBUTIONS TO INVESTMENT ENTITIES. Notwithstanding anything in
this Agreement to the contrary, to the extent that the reasonable needs of the
business of any Investment Entity require funding of expenditures in excess of
the reserves, other assets and available borrowings of the Partnership and such
Investment Entity that have been Approved by the Partners (whether in an
Approved Budget, Approved Development Plan or otherwise) for the payment thereof
other than with respect to a Property that is the subject of an Abandonment
Decision, (a) the Mack-Cali Limited Partner may (but shall not be required to)
elect, by notice to the Managing General Partner, or (b) the Managing General
Partner may (but shall not be required to) elect, by notice to the Mack-Cali
Limited Partner, to cause the Partnership to retain (in lieu of distributing the
same under Article 4) otherwise distributable Net Available Cash, Net Mortgage
Proceeds and Capital Receipts from any source (including other Properties and
Investment Entities) and cause the Partnership to contribute such amounts to
such Investment Entity for use by it for the payment of such expenditures;
PROVIDED, HOWEVER, that the maximum aggregate amount of cash that is retained
pursuant to all notices given pursuant to this Section 2.5 with respect to any
Investment Entity shall not exceed twenty-five percent (25%) of the Capital
Contributions made by the Partnership to such Investment Entity for all periods
(regardless of whether distributed back to the Partnership), other than Capital
Contributions made by the Partnership to such Investment Entity pursuant to this
Section 2.5.
ARTICLE 3
INCOME TAX ALLOCATIONS
3.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS; PARTNERSHIP STATUS.
The General Partners shall establish and cause the Partnership to maintain a
single book Capital Account for each Partner which reflects each Partner's
Capital Contributions to the Partnership and a single tax capital account which
reflects the adjusted tax basis of the Capital Contributions (including the El
Segundo Land and the amounts described in Section 2.1.2.2)
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contributed by each Partner to the Partnership. Each Capital Account and tax
capital account shall also reflect the allocations and distributions made
pursuant to Articles 3 and 4 and otherwise be adjusted in accordance with Code
Section 704 and the principles set forth in Regulations Sections 1.704-l(b) and
1.704-2. In applying such principles, any expenditures of the Partnership
described in Code Section 705(a)(2)(B) or treated as Code Section 705(a)(2)(B)
expenditures pursuant to Regulations Section 1.704-l(b)(2)(iv)(i) shall be
allocated among the Partners in the same manner as such expenditures would be
allocated among the Partners pursuant to this Article 3 if such expenditures
were treated as additional items of deduction of the Partnership (as computed
for book purposes) that were recognized and required to be allocated among the
Partners pursuant to this Article 3 with respect to the Partnership Accounting
Year in which such expenditures were made. The Partners intend that the
Partnership be treated as a partnership for tax purposes.
3.2 PROFIT AND LOSS ALLOCATIONS. Except as expressly provided to the
contrary in this Section 3.2, for purposes of determining Capital Account
balances under this Section 3.2, (a) Profit and Loss with respect to any
Partnership Accounting Year shall be allocated prior to reducing Capital
Accounts by any distributions with respect to such Partnership Accounting Year,
and (b) Section 3.2 shall be applied before applying Section 3.3.
3.2.1 LOSS FROM OPERATIONS. For each Partnership Accounting Year
from the Agreement Date until the termination of the Partnership, Loss from
Partnership operations shall be allocated among the Partners in the following
order of priority:
3.2.1.1 First, among the Partners as necessary to cause each
Partner's
Capital Account balance to equal the sum of (i) the amount of Net Available Cash
that would be distributed to such Partner pursuant to Section 4.1 with respect
to such Partnership Accounting Year if the Partnership distributed all of the
Net Available Cash for such Partnership Accounting Year without any portion
thereof being withheld as reserves or reinvested, plus (ii) the amount that
would be distributed to such Partner pursuant to Sections 4.1 and 4.2.3 if the
Partnership (a) distributed all Capital Receipts and Net Mortgage Proceeds
received with respect to such Partnership Accounting Year (without any portion
thereof being retained as reserves or reinvested) pursuant to Section 4.1 and
(b) then sold all of its remaining assets (including its interest in every
Investment Entity) for their adjusted tax basis (or adjusted book basis in the
case of Revalued Property) and distributed the proceeds therefrom and its
reserves (net of debt repayments) to the Partners pursuant to Sections 4.1 and
4.2.3; and
3.2.1.2 Second, after giving effect to the allocations made
pursuant to Sections 3.2.1.1 among the Partners in proportion to the Partners'
respective Funding Proportions.
3.2.2 PROFIT FROM OPERATIONS. For purposes of applying Section
3.2.1 and this Section 3.2.2, a Partner's Capital Account balance shall be
deemed to be increased by such Partner's share of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum
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Gain determined as of the end of such Partnership Accounting Year. For each
Partnership Accounting Year, Profit from Partnership operations shall be
allocated among the Partners as necessary to cause the Capital Account balance
of each Partner to equal the sum of (i) the amount of Net Available Cash that
would be distributed to such Partner under Section 4.1 with respect to such
Partnership Accounting Year (if no portion thereof were withheld as reserves or
reinvested), plus (ii) the amount that would be distributed to such Partner
pursuant to Sections 4.1 and 4.2.3 if the Partnership (a) distributed all
Capital Receipts and Net Mortgage Proceeds received with respect to such
Partnership Accounting Year (without any portion thereof being retained as
reserves or reinvested) pursuant to Section 4.1, and (b) then sold all of its
remaining assets (including its interest in every Investment Entity) for their
adjusted tax basis (or adjusted book basis in the case of Revalued Property),
and distributed the proceeds therefrom and its reserves (net of debt repayments)
to the Partners pursuant to Sections 4.1 and 4.2.3.
3.3 ALLOCATIONS OF GAIN OR LOSS ON DISPOSITION. For purposes of
determining Capital Account balances under this Section 3.3, Gain or Loss on
Disposition shall be allocated prior to reducing Capital Accounts by the
distributions of Capital Receipts from the Disposition.
3.3.1 GAIN ON DISPOSITION. Gain on Disposition shall be allocated
to the Partners in the following order of priority:
3.3.1.1 First, to the Partners in proportion to, and to the
extent of, any deficit balances in their respective Capital Accounts until all
such Capital Accounts have been restored to zero; and
3.3.1.2 Second, after giving effect to the allocations made
pursuant to Section 3.3.1.1, among the Partners as necessary to cause the
Capital Account balance of each Partner to equal the sum of (i) the amount that
would be distributed to such Partner pursuant to Sections 4.1 if the Partnership
then distributed all of the proceeds received by the Partnership with respect to
such Disposition (net of debt repayments) and did not establish reserves or
reinvest any of the proceeds of such Disposition, plus (ii) the amount that
would be distributed to such Partner pursuant to Sections 4.1 and 4.2.3 if the
Partnership then sold all of its assets remaining after such Disposition and the
distribution of the proceeds of such Disposition for their adjusted tax basis
(or adjusted book basis in the case of Revalued Property) and distributed the
proceeds therefrom and its reserves (net of debt repayments) to the Partners
pursuant to Sections 4.1 and 4.2.3.
3.3.2 LOSS ON DISPOSITION. Loss on Disposition shall be allocated
to the Partners in the following order of priority:
3.3.2.1 First, among the Partners as necessary to cause each
Partner's
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Capital Account balance to equal the sum of (i) the amount that would be
distributed to such Partner pursuant to Section 4.1 with respect to such
Disposition if the Partnership then distributed all of the proceeds received by
the Partnership with respect to such Disposition under Section 4.1. (net of debt
repayments) and did not establish reserves or reinvest any of the proceeds of
such Disposition, plus (ii) the amount that would be distributed to such Partner
pursuant to Sections 4.1 and 4.2.3 if the Partnership then sold all of its
assets remaining after such Disposition and the distribution for the proceeds of
such Disposition for their adjusted tax basis (or adjusted book basis in the
case of Revalued Property) and distributed the proceeds therefrom and its
reserves (net of debt repayments) to the Partners pursuant to Sections 4.1 and
4.2.3; and
3.3.2.2 Second, after giving effect to the allocations made
pursuant to
Section 3.3.2.1, any balance among the Partners in proportion to the Partners'
respective Funding Proportions.
3.3.3 RULES OF CONSTRUCTION.
3.3.3.1 For purposes of applying Section 3.3 as a result
of a
Disposition, a Partner's Capital Account balance shall be deemed to be increased
by such Partner's share of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain remaining after such Disposition as determined under the
Regulations under Code Section 704(b).
3.3.2.2 Except as is otherwise provided in this Article 3, an
allocation of Partnership taxable income or taxable loss to a Partner shall be
treated as an allocation to such Partner of the same share of each item of
income, gain, loss and deduction that has been taken into account in computing
such taxable income or taxable loss.
3.4 MINIMUM GAIN CHARGEBACK AND QUALIFIED INCOME OFFSET.
3.4.1 NO IMPERMISSIBLE DEFICITS. Notwithstanding any other
provision of this Agreement, taxable loss or items of deduction (as computed for
book purposes) shall not be allocated to a Partner to the extent that the
Partner has or would have, as a result of such allocations, an Adjusted Capital
Account Deficit. Any taxable loss or items of deduction (as computed for book
purposes) which otherwise would be allocated to a Partner, but which cannot be
allocated to such Partner because of the application of the immediately
preceding sentence, shall instead be allocated to the other Partners.
3.4.2 QUALIFIED INCOME OFFSET. In order to comply with the
"qualified income offset" requirement of the Regulations under Code Section
704(b), and notwithstanding any other provision of this Agreement to the
contrary except Section 3.4.3 below, in the event a Partner for any reason
(whether or not expected) has an Adjusted Capital Account Deficit, items of
Profits and Gain on Disposition (consisting of a pro rata portion of each item
of
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income comprising the Partnership's Profits and Gain on Disposition, including
both gross income and gain for the taxable year, all as computed for book
purposes) shall be allocated to such Partner in an amount and manner sufficient
to eliminate as quickly as possible the Adjusted Capital Account Deficit.
3.4.3 MINIMUM GAIN CHARGEBACK. In order to comply with the
"minimum gain chargeback" requirements of Regulations Sections 1.704-2(f)(1) and
1.704-2(i)(4), and notwithstanding any other provision of this Agreement to the
contrary, in the event there is a net decrease in a Partner's share of
Partnership Minimum Gain and/or Partner Nonrecourse Debt Minimum Gain during a
Partnership taxable year, such Partner shall be allocated items of income and
gain (as computed for book purposes) for that year (and if necessary, other
years) as required by and in accordance with Regulations Sections 1.704-2(f)(1)
and 1.704-2(i)(4) before any other allocation is made.
3.5 OTHER TAX ALLOCATION PROVISIONS.
3.5.1 INCOME CHARACTERIZATION. For purposes of determining the
character (as ordinary income or capital gain) of any Gain on Disposition
allocated to the Partners pursuant to Section 3.3 or 3.4, such portion of the
taxable income of the Partnership allocated pursuant to such Sections which is
treated as ordinary income attributable to the recapture of depreciation shall,
to the extent possible, be allocated among the Partners in the proportion which
(i) the amount of depreciation previously allocated to each Partner bears to
(ii) the total of such depreciation allocated to all Partners. This Section
3.5.1 shall not alter the amount of allocations among the Partners pursuant to
Section 3.3 but merely the character of income so allocated.
3.5.2 CHANGE IN RESIDUAL PERCENTAGES. Notwithstanding the
foregoing, in
the event any Partner's Residual Percentage changes during a fiscal year for any
reason, including the Transfer of any interest in the Partnership or an
adjustment of the Partners' Residual Percentages hereunder, the allocations of
taxable income or loss under this Article 3, and distributions, shall be
adjusted as necessary to reflect the varying interests of the Partners during
such year using an interim closing of the books method as of the date of such
change, or such other method as is reasonably Approved by the Partners.
3.5.3 MANDATORY ALLOCATIONS -- SECTION 704(C) AND PARTNER
NONRECOURSE DEBT.
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3.5.3.1 Notwithstanding the foregoing, (i) in the event Code
Section 704(c) or Code Section 704(c) principles applicable under Regulations
Section 1.704-1(b)(2)(iv) require allocations of income or loss of the
Partnership in a manner different than that set forth above, the provisions of
Code Section 704(c) and the Regulations thereunder shall control such
allocations among the Partners; and (ii) all tax deductions and taxable losses
of the Partnership (as computed for book purposes) that, pursuant to Regulations
Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt for which a
Partner (or a Person related to such Partner under Treasury Regulations Section
1.752-4(b)) bears the economic risk of loss (within the meaning of Regulations
Section 1.752-2) shall be allocated to such Partner as required by Regulations
Section 1.704-2(c).
3.5.3.2 Any item of income, gain, loss and deduction with
respect to any property (other than cash) that has been contributed by a Partner
to the capital of the Partnership or which has been revalued for Capital Account
purposes pursuant to Regulations Section 1.704-1(b)(2)(iv) and which is required
or permitted to be allocated to such Partner for income tax purposes under Code
Section 704(c) so as to take into account the variation between the tax basis of
such property and its fair market value at the time of its contribution or at
the time of its revaluation for Capital Account purposes pursuant to Regulations
Section 1.704-1(b)(2)(iv) (such contributed or revalued property, including the
El Segundo Land, is referred to as "Revalued Property") shall be allocated
solely for income tax purposes in the manner so required or permitted under Code
Section 704(c) using the "traditional method" described in Regulations Section
1.704-3(b) (or any successor Regulation), such allocations to be made as shall
be reasonably Approved by the Partners; PROVIDED, HOWEVER, that curative
allocations consisting solely of the special allocation of gain or loss upon the
sale or other disposition of the Revalued Property shall be made in accordance
with Regulations Section 1.704-3(c) to the extent necessary to eliminate any
disparity, to the extent possible, between the Partners' Capital Accounts and
tax capital accounts attributable to such property; and FURTHER PROVIDED,
however, that any other method allowable under applicable Regulations may be
used in connection with any Revalued Property as shall be Approved by the
Mack-Cali Limited Partner. Allocations under this Section 3.5.3.2 are solely
for purposes of federal, state and local taxes and shall not affect, or in any
way be taken into account in computing, any Partner's Capital Account or share
of Profit, Loss, Gain or Loss on Disposition or other items or distributions
under any provision of this Agreement. Notwithstanding anything in this
Agreement to the contrary, the determination of Gross Asset Value for any asset
contributed to the Partnership, distributed from the Partnership or any other
Revalued Property shall be as Approved by the Partners or as determined pursuant
to the appraisal proceeding described in Section 5.10(iii). The Gross Asset
Value of the El Segundo Land is set forth in Section 2.1.1(b).
3.5.4 GUARANTEE OF PARTNERSHIP INDEBTEDNESS. Except for
arrangements expressly described in this Agreement (including loans described in
Section 2.2.2 or Section 2.4), and except for any guaranties issued by the
Managing General Partner and its Affiliates in connection with financing of the
Partnership (the "Managing General Partner Guaranties"),
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no Partner shall enter into (or permit any Person related to the Partner to
enter into) any arrangement with respect to any liability of the Partnership
that would result (for any reason other than the general liability of a General
Partner for the liabilities of the Partnership) in such Partner (or a Person
related to such Partner under Regulations Section 1.752-4(b)) bearing the
economic risk of loss (within the meaning of Regulations Section 1.752-2) with
respect to such liability unless such arrangement has been Approved by the
Partners or is otherwise permitted by this Agreement. This Section 3.5.4 shall
not prohibit any General Partner, Limited Partner or Affiliate of a Partner
electing to participate therein from making a loan described in Section 2.2.2 or
Section 2.4. To the extent a Partner is permitted to guarantee the repayment of
any Partnership indebtedness under this Agreement, each of the other Partners
shall be afforded the opportunity to guarantee such Partner's pro rata share of
such indebtedness, determined in accordance with the Partners' respective
Funding Proportions. If (a) a loan is to be made to the Partnership or any
Investment Entity, (b) such loan is guaranteed by any Partners or their
Affiliates (which guaranty shall occur only upon the Approval of such Partner),
(c) a Partner or an Affiliate of a Partner is required to pay, and pays, money
on account of such guaranty (including payments made pursuant to the Managing
General Partner Guaranties), and (d) the Partner making (or whose Affiliate
made) such payments is entitled to be indemnified by the Partnership with
respect to such payments under Section 5.5.2 and, after liquidating the
Partnership's assets in order to satisfy the indemnity contained in
Section 5.5.2, there are insufficient proceeds to entirely satisfy the indemnity
obligation of the Partnership to such Partner or such Affiliate with respect to
such payments, then the other Partners (the "Recontributing Partners") shall be
required to make Capital Contributions to the Partnership, within ten (10)
Business Days after receiving notice requesting reimbursement from the Partner
making (or whose Affiliate made) such payments, which notice may be given at any
time after the events described in clauses (a) through (d) of this Section 3.5.4
have occurred (or, if later, the Determination Date described in Section 5.9
with respect to such reimbursement), in the amount necessary for (i) the Partner
(and its Affiliates) making such payments, and (ii) the Recontributing Partners,
to bear the portion of such payments that has not been reimbursed under
Section 5.5.2 ("Unreimbursed Payments") in the "Appropriate Sharing Ratio"
(defined below). In no event shall a Partner be required to make Capital
Contributions pursuant to this Section 3.5.4 in excess of the aggregate amount
distributed to the Recontributing Partner pursuant to Sections 4.1.1 and 4.2.3
(but not distributions made pursuant to Section 4.1.2 in payment of
Undistributed Highridge Subordinated Contributions or Undistributed Highridge
Subordinated Return). Any such Capital Contributions so made shall immediately
be distributed to the Partner who made, or whose Affiliate made, such payments.
The Appropriate Sharing Ratios of the Partners with respect to
Unreimbursed Payments shall be determined as follows:
3.5.4.1 With respect to the portion of the Unreimbursed
Payments that does not exceed the aggregate amounts distributed to the Partners
for all periods pursuant to Sections 4.1.1(d), (e) and (f) (but not in payment
of Undistributed Highridge Subordinated
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Contributions or Undistributed Highridge Subordinated Return pursuant to the
preferential distribution thereof described in Section 4.1.2), such Appropriate
Sharing Ratio of each Partner shall be the percentage of such distributions so
received by such Partner; and
3.5.4.2 With respect to the portion of the Unreimbursed
Payments exceeding the aggregate amounts distributed to the Partners for all
periods pursuant to Sections 4.1.1(d), (e) and (f) (but not in payment of
Undistributed Highridge Subordinated Contributions or Undistributed Highridge
Subordinated Return pursuant to the preferential distribution thereof described
in Section 4.1.2), such Appropriate Sharing Ratio of each Partner shall be such
Partner's Funding Proportion.
3.5.5 REFERENCES TO REGULATIONS. Any reference in this Agreement
to a provision of final, proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision or the Partners otherwise so reasonably
Approve under applicable elections contained in such Regulations.
3.5.6 TAX DEFINITIONS.
3.5.6.1 "NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(c). The amount of Nonrecourse Deductions for a
Partnership Accounting Year equals the excess, if any, of the net increase, if
any, in the amount of Partnership Minimum Gain during that fiscal year, over the
aggregate amount of any distributions during that fiscal year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Partnership Minimum
Gain, determined according to the provisions of Regulations Section 1.704-2(c).
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3.5.6.2 "NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.704-2(b)(3).
3.5.6.3 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(2).
3.5.6.4 "PARTNER NONRECOURSE DEBT" has the meaning for
such term set forth in Regulations Section 1.704-2(b)(4).
3.5.6.5 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning
for such term set forth in Regulations Section 1.704-2(i). The amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Partnership Accounting Year equals the excess, if any, (i) of the net increase,
if any, in the amount of the Partnership Minimum Gain attributable to such
Partner Nonrecourse Debt during such Partnership Accounting Year, over (ii) the
aggregate amount of any distributions during such year to the Partner that bears
the economic risk of loss for such Partner Nonrecourse Debt to the extent such
distributions are from proceeds of such Partner Nonrecourse Debt and are
allocable to an increase in Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined according to the provisions of
Regulations Section 1.704-2(i).
3.5.6.6 "PARTNERSHIP MINIMUM GAIN" has the meaning
ascribed to such term in Regulations Section 1.704-2(d)(1) (and includes the
Partnership's share of the Partnership Minimum Gain of any Investment Entity).
3.6 INTENT OF ALLOCATIONS. The parties intend that the foregoing tax
allocation provisions of this Article 3 shall produce final Capital Account
balances of the Partners that would permit liquidating distributions, if such
distributions were made in accordance with final Capital Account balances
(instead of being made in the order of priorities set forth in Sections 4.1 and
4.2.3), to be made (after unpaid loans and interest thereon, including those
owed to Partners have been paid) in a manner identical to the order of
priorities set forth in Sections 4.1. and 4.2.3. To the extent that the tax
allocation provisions of this Article 3 would fail to produce such final Capital
Account balances, (i) such provisions shall be amended by the Partners if and to
the extent necessary to produce such result and (ii) taxable income and taxable
loss of the Partnership for prior open years (or items of gross income and
deduction of the Partnership for such years) shall be reallocated among the
Partners to the extent it is not possible to achieve such result with
allocations of items of income (including gross income) and deduction for the
current year and future years, as reasonably Approved by the Partners. This
Section 3.6 shall control notwithstanding any reallocation or adjustment of
taxable income, taxable loss, or items thereof by the Internal Revenue Service
or any other taxing authority.
3.7 BASIS ELECTIONS. In the event of a transfer of all or any part of a
Partner's interest in the Partnership, the Partnership shall elect to adjust the
basis of the Partnership's assets under Code Section 754 if reasonably Approved
by the Partners. The transferor or
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transferee of a Partnership interest shall pay all costs of preparing and filing
all instruments or documents necessary to effectuate such election if made.
3.8 GENERAL ALLOCATION RULES. The General Partners shall cause the Profit
and Loss of the Partnership and Gain or Loss on Disposition be allocated by the
Partnership's accountants with respect to each Partnership Accounting Year (or
part thereof) as of the end of, and within ninety (90) days after the end of,
such year, or as soon thereafter as is practically possible. All Profit and
Loss and Gain or Loss on Disposition shall be allocated to the Partners shown on
the records of the Partnership to have been Partners as of the last day of the
Partnership Accounting Year for which such allocation is to be made, except
that, if a Partner sells or exchanges its interest in the Partnership or
otherwise is admitted as a substituted Partner, the Profit or Loss and Gain or
Loss on Disposition shall be allocated between the transferor and the transferee
by taking into account their varying interests during the Partnership Accounting
Year in accordance with Code Section 706(d), using the interim closing of the
books method or such other method as shall be reasonably Approved by the
Partners.
3.9 SHARING OF PARTNERSHIP NONRECOURSE DEBT AND NONRECOURSE DEDUCTIONS.
Throughout the term of the Partnership, the nonrecourse debt of the Partnership
(other than Partner Nonrecourse Debt) and the Nonrecourse Deductions of the
Partnership shall be allocated for tax purposes among the Partners in accordance
with their respective Funding Proportions. To the extent that any Partner's
share of such nonrecourse debt as so specified exceeds the amounts referred to
in Regulations Sections 1.752-3(a)(1) and (2), it is intended that the foregoing
shares shall be viewed and treated as reasonably consistent with allocations
(which have substantial economic effect) of some significant item of partnership
income or gain within the meaning of Regulations Section 1.752-3(a)(3).
3.10 ADJUSTMENT OF GROSS ASSET VALUE. Gross Asset Value, with respect to
any asset, shall be the adjusted basis for federal income tax purposes of that
asset, except as follows:
3.10.1 The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the fair market value of the asset on the
date of the contribution, as reasonably Approved by the Partners. The Gross
Asset Value of the El Segundo Land is set forth in Section 2.2.1(b). The Gross
Asset Value of any Pre-Formation Property is set forth in Section 2.1.2.2.
3.10.2 The Gross Asset Values of all Partnership assets shall be
adjusted to equal the respective fair market values of the assets, as reasonably
Approved by the Partners (subject to Section 5.10(iii)):
3.10.2.1 If the Partners reasonably Approve that an adjustment
is necessary or appropriate to reflect the relative economic interests of the
Partners in the Partnership, as a result of (i) the acquisition of an additional
interest in the Partnership by any new or existing Partner in exchange for more
than a DE MINIMIS capital contribution; or (ii) the
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distribution by the Partnership to a Partner of more than a DE MINIMIS amount of
Partnership property as consideration for an interest in the Partnership; and
3.10.2.2 As of the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
3.10.3 The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market value of the asset on
the date of distribution as reasonably Approved by the Partners (subject to
Section 5.10(iii)), less any liabilities assumed by the distributee Partner or
to which such asset is subject as of the time of distribution.
3.10.4 The Gross Asset Values of Partnership assets shall be
increased or decreased to reflect any adjustment to the adjusted basis of the
assets under Code Section 734(b) or 743(b), but only to the extent that the
adjustment is taken into account in determining Capital Accounts under
Regulations Section 1.704-1(b)(2)(iv)(m), provided that Gross Asset Values shall
not be adjusted under this Section 3.10.4 to the extent that the Partners
reasonably Approve that an adjustment under Section 3.10.2 is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment under this Section 3.10.4.
After the Gross Asset Value of any asset has been determined or
adjusted under Section 3.10.1, 3.10.2 or 3.10.4, Gross Asset Value shall be
adjusted by the depreciation taken into account with respect to the asset for
purposes of computing Profits or Losses.
Section 8.3.8 contains special rules for valuing distributions of
property other than cash that is received by the Partnership in connection with
the disposition of Partnership (or Investment Entity) assets.
3.11 TAX PAYMENT LOANS. On or before April 15 of each year, the
Partnership shall, upon the written request of any Partner who is not a
Terminated Partner ("Borrowing Partner"), lend (to the extent the Partnership
has available funds, determined prior to making distributions for the preceding
calendar year) (a "Tax Payment Loan") to the Borrowing Partner an amount equal
to the lesser of (i) the excess of (a) the Borrowing Partner's allocation of
Profits (computed without regard to tax-exempt income), Gain on Disposition (as
recomputed for tax purposes with reference to adjusted tax basis) and other
items of taxable income of the Partnership for the preceding calendar year,
reduced by the Borrowing Partner's allocation of Losses (computed without regard
to tax- exempt income), Loss on Disposition (as recomputed for tax purposes with
reference to adjusted tax basis) and other tax deductible items of the
Partnership for the preceding calendar year, multiplied by the Maximum Tax Rate,
over (b) the Borrowing Partner's distributions from the Partnership for such
preceding calendar year; or (ii) the excess of (a) the Borrowing Partner's
cumulative allocations of Profits (computed without regard to tax-exempt
income), Gain on Disposition (as recomputed for tax purposes with reference to
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adjusted tax basis) and other items of taxable income of the Partnership from
the Agreement Date through the end of the preceding calendar year, reduced by
the Borrowing Partner's cumulative allocation of Losses (computed without regard
to tax-exempt income), Loss on Disposition (as recomputed for tax purposes with
reference to adjusted tax basis) and other tax deductible items of the
Partnership from the Agreement Date through the end of the preceding calendar
year, multiplied by the Maximum Tax Rate applicable to such allocations, over
(b) the sum of (x) the Borrowing Partner's cumulative distributions from the
Partnership from the Agreement Date through the end of the preceding calendar
year (net of repayments thereof under Section 4.3.2) and (y) the outstanding
balance(s) of all the unpaid Tax Payment Loans to such Borrowing Partner. A
copy of any request for a Tax Payment Loan shall be given by the requesting
Partner to the other Partner. Such loan shall bear interest at an annual rate
equal to the lesser of (1) ten percent (10%) per annum, or (2) the maximum
interest rate permitted by law, and shall be repayable both (A) out of future
distributions to the Borrowing Partner (such payment to be made by withholding
such distributions, with such distributions being deemed to have been
distributed to the Borrowing Partner and then paid by the Borrowing Partner to
the Partnership), and (B) if earlier, upon the liquidation of the Partnership or
upon demand following the Borrowing Partner's ceasing for any reason to be a
Partner hereunder, which payments shall be made from (x) the distributions
otherwise payable to such Partner in connection with the liquidation (such
amounts being deemed to have been distributed to such Partner and then paid by
such Partner to the Partnership) and (y) to the extent such distributions are
insufficient, from such Partner's other assets. If Tax Payment Loans are made
to any of the Highridge Partners, each of John S. Long and Eugene S. Rosenfeld
shall be personally and severally (but not jointly) liable for the payment of
fifty percent (50%) of (I) the unrepaid balance of any such Tax Payment Loan
made to the Highridge Partners after applying clauses (A) and (B) of the
preceding sentence of this Section 3.11 for all periods, plus (II) the costs of
collection, including reasonable attorneys fees and expenses. Payments shall
first be applied to unpaid interest and then principal. Tax Payment Loans made
to a Borrowing Partner shall be full recourse loans to such Borrowing Partner
and shall be evidenced by promissory notes in form Approved by the Partners. To
the extent an allocation of Profits, Gain on Disposition or other items of
taxable income to a Borrowing Partner with respect to which a Tax Payment Loan
is to be made are attributable to one or more Investment Entities and the
Partnership does not otherwise have sufficient funds to make any Tax Payment
Loan requested by such Borrowing Partner, the Partnership shall seek to borrow
from the Investment Entities the necessary amounts (each such loan an
"Investment Entity Tax Loan"). The Partners shall use reasonable efforts to
cause each Investment Entity Agreement, including those with third parties, to
provide for the making of Investment Entity Tax Loans to the Partnership to the
extent required. Each Investment Entity Tax Loan shall bear interest at the
same rate as a Tax Payment Loan and shall be repayable at the same time as the
related Tax Payment Loan is repayable above, with payments first being applied
to interest and then principal and paid by the Partnership to the appropriate
Investment Entity. Except as provided in this Section 3.11, in no event shall
the Partnership or any Investment Entity be required to borrow money or to sell
any asset in order to fund any Tax Payment Loan. Notwithstanding anything to
the contrary contained in this Section 3.11, no Tax Payment Loan shall be made
by the Partnership with respect to any calendar year without the Approval of the
Mack-Cali Limited Partner unless the Tax Payment Loan for such year is at least
$250,000.
3.12 APPROVALS RELATING TO TAX ISSUES.
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Notwithstanding anything to the contrary contained in this Agreement,
except as provided in this Section 3.12, during all periods except after the
Mack-Cali Limited Partner has become a Terminated Partner, all material tax
elections, other decisions relating to taxes and tax returns, require only the
reasonable Approval of the Mack-Cali Limited Partner unless it then is a
Terminated Partner, PROVIDED, HOWEVER, that Highridge GP (unless it is then a
Terminated Partner) shall reasonably Approve any settlement with the Internal
Revenue Service or any other tax authorities (whether under Section 5.4 or
otherwise), and any extension of the statute of limitations, with respect to the
Highridge Partners. Notwithstanding the other provisions of this Section 3.12,
and during all periods, the determination of Gross Asset Value for any property
shall require the reasonable Approval of the Partners, subject to the provisions
of Section 5.10(iii).
ARTICLE 4
LOAN REPAYMENTS AND
DISTRIBUTIONS
4.1 NET AVAILABLE CASH, NET MORTGAGE PROCEEDS AND CAPITAL RECEIPTS. The
General Partners shall cause the Partnership's accountants (i) at the end of
each quarter, to determine the amount of Net Available Cash and, (ii) upon the
occurrence of any event giving rise to Net Mortgage Proceeds or Capital
Receipts, to determine the amount of such Net Mortgage Proceeds and Capital
Receipts, if any. Subject to the Partnership's obligation, if any, to make the
Capital Equalization Distribution under Section 2.1.2.3, the distributions
described in Section 2.1.2.2 and 2.1.2.4, and to make Tax Payment Loans under
Section 3.11, all Net Available Cash, Net Mortgage Proceeds and Capital Receipts
for any period shall be distributed in the following order of priority, within
thirty (30) days after the end of each calendar quarter, after first repaying
any loans to the Partnership from the Partners under Sections 2.2.2.1 and 2.4
except as provided in this Section 4.1 (loans which have been outstanding the
longest shall be repaid first and if two or more Partners have loans which have
been outstanding for equal periods, repayment of such loans shall be made pro
rata, in proportion to such Partners' then respective loan balances, with
payments first repaying accrued but unpaid interest and then repaying
principal), and subject to the terms of Sections 4.2, 4.3 and 8.3.8 (and subject
to recontribution to the Partnership as provided in Section 4.3.2):
4.1.1 Prior to the El Segundo Valuation Date:
(a) First, distributions shall be made to the Mack-Cali Partners to
the extent of, and in proportion to, their respective Undistributed
Preferred Return;
(b) Next, the balance shall be distributed to the Highridge Partners
to the extent of, and in proportion to, their respective Undistributed
Preferred Return;
(c) Next, the balance shall be distributed to the Partners, pro rata,
to the extent of, and in proportion to, their respective Invested Capital;
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(d) Next, the balance shall be distributed to the Highridge Partners
to the extent of, and in proportion to, their respective Undistributed
Highridge Subordinated Return;
(e) Next, the balance shall be distributed to the Highridge Partners
to the extent of, and in proportion to, their respective Undistributed
Highridge Subordinated Contributions; and
(f) Next, the balance shall be distributed to the Partners, pro rata,
in proportion to their respective Residual Percentages.
Notwithstanding the priority distributions contained in this Section
4.1.1, distributions shall be made to the Highridge Partners as provided in
Section 2.1.2.3 (which distributions shall be deemed to have been made pursuant
to this Section 4.1.1 to the extent, and in the manner, provided in Section
2.1.2.3).
4.1.2 From and after the El Segundo Valuation Date, distributions
shall continue to be made in the order of priority set forth in Section 4.1.1
except that the provisions of Sections 4.1.1 (d) and 4.1.1 (e) shall cease to
apply, and notwithstanding the first paragraph of this Section 4.1, prior to
making distributions in the order of priority set forth in Section 4.1.1,
distributions shall (except as provided in Sections 2.1.2.2, 2.1.2.3 and
2.1.2.4) first be made to the Highridge Partners, pro rata, to the extent of,
and in proportion to, their respective Undistributed Highridge Subordinated
Return and Undistributed Highridge Subordinated Contributions (with such
distributions being deemed to first pay Undistributed Highridge Subordinated
Return and then to repay Undistributed Highridge Subordinated Contributions).
Notwithstanding anything in this Agreement to the contrary, the Mack-Cali
Limited Partner shall have the option, exercisable by notice to Highridge GP
given at any time if accompanied by a check in the correct aggregate amount
payable to the Highridge Partners, to contribute to the Partnership (as
additional Capital Contributions) 80% of the sum of the then Undistributed
Highridge Subordinated Contributions and Undistributed Highridge Subordinate
Return, which contribution shall thereupon be distributed to the Highridge
Partners in payment of such amounts (at which time the Highridge Partners shall
be deemed to have contributed the remaining 20% thereof to the Partnership in
cash, as additional Capital Contributions, and to thereupon have received a
distribution thereof in full payment of the entire Highridge Undistributed
Subordinated Return and Highridge Undistributed Subordinated Contributions).
4.2 PROCEEDS AND DISTRIBUTIONS IN LIQUIDATION. Subject to Section 8.3.8,
the proceeds received by the Partnership in connection with the liquidation and
winding up of the Partnership shall be applied in the following order of
priority:
4.2.1 First, to the payment of creditors of the Partnership (other
than the repayment of any unpaid Partner loans) except secured creditors whose
obligations will be assumed or otherwise transferred on a liquidation of the
Partnership property or assets;
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4.2.2 Next, to the payment of the expenses incurred in dissolution
and termination and then to the repayment of any unpaid Partner loans in the
same priority as is described in Section 4.1; and
4.2.3 The balance, if any, shall be distributed to the Partners in
the order of priority set forth in Sections 4.1.1 and 4.1.2.
4.3 GENERAL DISTRIBUTION RULES.
4.3.1 The timing and amount of all distributions shall be in
accordance with Sections 4.1, 4.2, 8.3.8, 8.5 and 8.6. All distributions of
cash shall be made to the Partners shown on the records of the Partnership to
have been Partners on the date of the distribution. All distributions, upon
request by a Partner, shall be made by wire transfer in immediately available
funds to such Partner's account specified in such request. Distributions of Net
Available Cash, Net Mortgage Proceeds and Capital Receipts made to a Partner
shall be deemed to be advances on account of such Partner's share of the
distributable amounts thereof. For purposes of this Agreement, the term
"distributable" with respect to such distributions shall mean the amount of such
distributions as finally determined pursuant to the provisions of this Agreement
by the Partnership's accountants for the Partnership Accounting Year in respect
of which they were made and for the term of the Partnership.
4.3.2 The Partnership's accountants shall determine whether there
has been an over-distribution to any Partner occurring by reason of a mistake at
the following times: (i) within one hundred twenty (120) days after the end of
each Partnership Accounting Year and (ii) cumulatively during the term of this
Agreement within One Hundred Twenty (120) days after any disposition of an
Investment by the Partnership or all or substantially all of the investments of
any Investment Entity. Any over-distribution to any Partner in respect of
either a Partnership Accounting Year or during the term of this Agreement shall
be repaid by such Partner to the Partnership and distributed to the Partner
which has received an under-distribution not later than thirty (30) days after
any Partner has given notice thereof to the other Partners, which notice shall
be given as soon as is practicable after the end of such Partnership Accounting
Year or such disposition of an Investment, as applicable. If not paid within
thirty (30) days of such notice, the amount of any over-distribution shall
thereafter accrue interest at the lesser of (i) fifteen percent (15%) per annum
or (ii) the highest rate, if any, that would be permitted by applicable law
under these conditions. Such returned over-distribution and any interest paid
with respect thereto as provided in this Section 4.3.2 shall be promptly
distributed by the Partnership to the Partners receiving any under-distribution
to the extent necessary to eliminate such under-distribution. Notwithstanding
anything to the contrary in this Agreement, the obligation of the Partner
receiving an over-distribution to return such over-distribution to the
Partnership and any interest thereon shall constitute a recourse obligation of
such Partner (but not to the partners, members, managers, officers or
shareholders of such Partner or its members or partners). Any over-distribution
returned to the Partnership shall have the same character as the character of
the corresponding, earlier distribution to the Partner which received such
over-distribution. To the extent that any Partner or its Affiliates receives
any commitment fee, finders fee or other compensation (that is not expressly
permitted by this Agreement) by reason of the Partnership's or an Investment
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Entity's participation in an Investment or a Property, such fee or compensation
shall be deemed to be Net Available Cash of the Partnership when paid, and to
the extent such fee or compensation is received by such Partner or its
Affiliates and not by the Partnership, such fee or compensation shall be deemed
to be an over-distribution to such Partner under this Section 4.3.2 that must be
paid to the Partnership (any such Partner shall notify the other Partners of the
receipt thereof immediately upon receipt by it or its Affiliates).
4.4 SOURCE OF DISTRIBUTIONS. Except as provided in Section 4.3.2, each
Partner shall look solely to the assets of the Partnership for the return of its
Capital Contributions and its share of distributions and shall have no recourse
upon dissolution or otherwise against the other Partners except as provided in
this Agreement. No holder of an interest in the Partnership shall have any
right to receive any distributions except as provided in this Agreement or any
right to demand or receive property other than cash upon dissolution and
termination of the Partnership.
ARTICLE 5
MANAGEMENT; DUTIES AND POWERS OF THE MANAGING GENERAL PARTNER; RIGHTS AND DUTIES
OF MANAGING GENERAL PARTNER
5.1 MANAGEMENT OF BUSINESS; OFFICERS; PARTNER OBLIGATIONS; REIMBURSEMENTS;
MAJOR DECISIONS; RETAINED APPROVALS.
5.1.1 MANAGEMENT; POWERS. Subject to the Approval rights of the
Partners under this Agreement, the Partnership shall be managed by the Managing
General Partner, and no Limited Partner shall take part in the control of the
Partnership's business. The Managing General Partner of the Partnership shall
be Highridge GP unless and until replaced by a Co-General Partner as provided in
Section 7.9.5 (thereafter, such Co-General Partner shall be the Managing General
Partner). Except as otherwise provided in this Agreement (including the right
of the Mack-Cali Limited Partner to Approve Major Decisions under Section 5.1.5
and certain other Approvals granted to the Mack-Cali Limited Partner under this
Agreement), the Managing General Partner shall be responsible for supervising
and undertaking the business of the Partnership, implementing the supervision
procedures set forth on Exhibit J for employees of the Highridge Partners and
Affiliates of the Highridge Partners who are performing work relating to the
Partnership and the Properties, and shall make all decisions affecting the
day-to-day operations of the Partnership and the Investments and the Properties.
Except to the extent the Approval of the Partners, or the Approval of the
General Partners, or the Approval of a Mack-Cali Partner is expressly required
under this Agreement, no consent or Approval of any Limited Partner or
Co-General Partner shall be required with respect to any action or decision of
the Managing General Partner regarding Partnership or Investment Entity matters.
Whenever the Approval of the Partners is required, the Partners shall act
through their Authorized Representatives as provided in Section 1.12. No
Partner shall receive any compensation for serving as a General Partner or as
the Managing General Partner. Each Partner shall cause each of its Authorized
Representatives to devote as much time as is reasonably necessary to fulfill
such Partner's obligations under this Agreement.
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The Managing General Partner, at Partnership expense, shall be
responsible for obtaining and providing the Partners (within a reasonable time
after request therefor has been made by any Partner) with any information that
the Managing General Partner reasonably deems appropriate (or that the Mack-Cali
Partners have requested) with respect to the Partnership, Investment Entities,
Investments and Properties, conducting due diligence concerning proposed
Investments and Properties, negotiating the purchase on behalf of the
Partnership of any Investments or Properties that are Approved by the Partners
for acquisition, and supervising and implementing the acquisition, financing,
development, stabilization and marketing programs that have been Approved by the
Partners, all pursuant to the supervision procedures set forth on Exhibit J.
The Partners hereby Approve the acquisition and development of the El Segundo
Land and the Summit Ridge Land pursuant to the Approved Development Plans with
respect thereto that are described on Exhibit C, and each Partner shall use its
reasonable efforts to cause the Partnership and/or the Investment Entities to
obtain construction financing on each of such Properties as soon as possible
after the execution and delivery of this Agreement as necessary to implement
such Approved Development Plans (any Partner may propose such financing to the
other Partners for their Approval). The due diligence documents provided to the
Mack-Cali Partners and their Affiliates prior to the execution and delivery of
this Agreement with respect to the El Segundo Land are listed on Exhibit K. At
Partnership expense, the Highridge Partners shall provide to the Mack-Cali
Partners any additional information in the possession of the Highridge Partners
or their Affiliates concerning the El Segundo land within a reasonable time
after written request therefor is received from the Mack-Cali Limited Partner.
Each General Partner, in extension and not in limitation of the powers given to
it by law or this Agreement, shall have full power and shall have the
obligation, without the necessity of obtaining the Approval of any other Partner
(except as otherwise set forth in this Agreement), and at the expense of the
Partnership, to take all actions required to conduct the day-to-day operations
of the Partnership and, subject to the availability of Partnership funds and the
funding limitations of Section 5.1.3.5, implement the Major Decisions and other
decisions that have been Approved by the Partners and pay expenses of the
Partnership to the extent the Approval of the other Partners with respect
thereto is not required under this Agreement. The Managing General Partner
shall not have the power to implement any Major Decision unless such Major
Decision has been Approved by the Partners, as set forth in Section 5.1.6.2
hereof. The Managing General Partner shall negotiate all documents with respect
to Investment and Property transactions that are Approved by the Partners (or
are permitted to be entered into without such Approval as provided in this
Agreement), including contracts with surveyors, architects, governmental
authorities and others concerning entitlements, easements, surveying,
landscaping, insuring, zoning, construction, grading, improvements, and the
like, all leases of space in the Properties on behalf of any Investment Entity,
offers and terms of sale of the Partnership and Investment Entity assets, and
contracts for necessary goods or services or borrowings regarding the
Investments and Properties; all to the extent Approved by the Partners from time
to time to the extent such Approval is required pursuant to this Agreement. The
execution by any General Partner of any document shall be sufficient to bind and
shall be binding upon the Partnership for all purposes, and third parties shall
be entitled to rely on the authority of the Managing General Partner to take any
action on behalf of the Partnership. Notwithstanding the foregoing, (i) the
Managing General Partner shall not take any action requiring Approval of the
Partners, or the Approval of the General Partners, or the Approval of a
Mack-Cali Partner
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under this Agreement unless the provisions of this Agreement concerning such
Approval have been satisfied, and (ii) except as otherwise provided in
Section 5.9, no Co-General Partner shall exercise any authority with respect to
the matters with respect to which authority and responsibility has been given to
the Managing General Partner hereunder unless and until (a) the Managing General
Partner has become a Terminated Partner or a Removal Default has occurred with
respect to the Managing General Partner (thereafter, the Mack-Cali Limited
Partner may cause any Co-General Partner appointed by it to become the Managing
General Partner and to assume such authority and responsibility as provided in
Section 7.9), or (b) a Performance Default has occurred with respect to the
Managing General Partner concerning an Investment or Property (thereafter, the
Mack-Cali Limited Partner shall have the rights described in Section 5.10(ii)
and Section 7.9.5 with respect to such Property). The Managing General Partner
(or a Co-Managing General Partner that has become the Managing General Partner
under Section 7.9) shall use its reasonable efforts to comply with all
provisions of this Agreement, and, at Partnership expense, to cause the
Partnership to comply with all applicable laws and regulations. The cost of
preparing any Investment Entity Agreement shall be a Partnership expense.
Subject to the other provisions of this Agreement including required
Approvals of the Partners under this Agreement, the Partnership, the General
Partners and the Partnership's officers appointed on its or their behalf under
Section 5.1.4.1 are hereby authorized:
5.1.1.1 Subject to the Approved Budget limitations of Article
5, to pursue any rights of the Partnership (and cause each Investment Entity to
pursue any rights of such Investment Entity) with respect to each Investment and
Property pursuant to any agreement to which it (or such Investment Entity) is a
party, and to own and operate any Investment or any other asset acquired by the
Partnership pursuant to the provisions of this Agreement, including taking the
actions described in Section 1.5;
5.1.1.2 To own the Investments (including Partnership
Interests) for investment purposes and to finance, sell, convey, assign,
transfer (including by contribution to a real estate investment trust or to a
partnership, limited liability Partnership or any other Entity in which a real
estate investment trust is a partner, member or owner of equity ownership
interests (collectively, a "REIT")) or mortgage the Investments (including the
Partnership Interests), any other asset of the Partnership or any of them, as
well as any personal property necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership, all on terms as shall be
Approved by the Partners;
5.1.1.3 To acquire by purchase or lease, any real or personal
property that may be necessary, convenient or incidental to other the
accomplishment of the purposes of the Partnership, including Investments and
interests in Investment Entities, and to cause Investment Entities to do so;
5.1.1.4 To operate, maintain, improve, develop and lease any
assets acquired by the Partnership (and to cause Investment Entities to do so
with respect to assets acquired by them);
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5.1.1.5 To cause the Partnership to take any and all actions
necessary convenient or appropriate as a general partner or limited partner of
any partnership or as a member and/or manager of any limited liability company
in which the Partnership has an interest and exercise all rights or powers
relating thereto and execute appropriate documents on behalf of the Partnership
in connection therewith;
5.1.1.6 To borrow money on behalf of itself or cause Investment
Entities to do so (whether secured or unsecured) and issue evidences of
indebtedness in furtherance of any or all of the purposes of the Partnership or
any Investment Entity, and to secure the same by mortgage, deed of trust, pledge
or other lien on any assets of the Partnership or any Investment Entity;
5.1.1.7 To borrow money on the general credit of the
Partnership or any Investment Entity (and to cause Investment Entities to do so)
for use in the Partnership or any Investment Entity business;
5.1.1.8 To enter into, perform and carry out contracts of any
kind, including contracts with Affiliates of any of the Partners, necessary to,
in connection with or incidental to the accomplishment of the purposes of the
Partnership or any Investment Entity;
5.1.1.9 To issue Funding Notices calling for additional Capital
Contributions in accordance with the provisions of this Agreement;
5.1.1.10 To enter into any kind of lawful activity and to
perform and carry out contracts of any kind necessary to or in connection with
or incidental to the accomplishment of the purposes of the Partnership, so long
as said activities and contracts may lawfully be carried on or performed by a
limited partnership under the laws of the states in which the Partnership is
qualified to do business. Each General Partner is hereby authorized to cause
the Partnership to execute and deliver all documents and instruments necessary
or appropriate, in the reasonable judgment of such General Partner, to close any
of the transactions that have been Approved by the Partners (or that do not
require the Approval of the Partners or the Approval of the General Partners).
Except as otherwise provided in this Agreement, no Partner shall cause the
Partnership to execute and deliver any acquisition, conveyance, loan or lease
documents without first obtaining the Approval of the Partners to the Material
terms of such document. The Material terms with respect to certain of the
entitlement, acquisition, development, and leasing documents for the Summit
Ridge Land and the El Segundo Land have been Approved by the Partners and are
contained in the Approved Development Plans referred to on Exhibit C. The
Material terms of any other document in connection with the acquisition,
entitlement, development, conveyance, loan or lease of a Property will be deemed
to have been Approved by the Partners if the actions described on Exhibit L
("Operating Approval Standards") have been Approved by the Partners with respect
to such Property. Notwithstanding anything to the contrary contained in this
Agreement, the Mack-Cali Limited Partner shall have the right to Approve the
final version of any acquisition, conveyance, loan or lease document to which
the Partnership or any Investment Entity is to become a party if the Mack-Cali
Limited Partner has specifically requested by notice to Highridge GP that it
Approve the final version of such document before it is entered into;
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PROVIDED, HOWEVER, that the Managing General Partner may, without the Approval
of any Mack-Cali Partner being required, execute and deliver on behalf of the
Partnership or any Investment Entity any lease of space in a Property unless any
of the following applies (in which case, the Mack-Cali Limited Partner shall
have the right to Approve such lease): (a) the lease has a term of less than
five (5) years (determined without regard to renewal rights granted to the
tenant thereunder and with regard to early termination rights of the tenant
thereunder), (b) the lease has a term of greater than ten (10) years (including
any tenant renewal rights that are not exerciseable at market rates in effect at
the time of renewal), (c) the lease covers greater than 15% of the rentable
space in a Property or greater than 20,000 square feet of the rentable space in
a Property, (d) the lease rents are more than 5% below the budgeted rental rate
set forth in the most recent Approved Budget with respect to such Property, (e)
the lease provides for payment by the Partnership or an Investment Entity of
tenant improvements that are more than 5% above the permitted tenant improvement
amount parameters that have been Approved in advance by the Partners for such
Property (or, if no such tenant improvement parameters have been Approved in
advance by the Partners, the lease provides for such payment of tenant
improvements that are more than $30 per square foot of rentable space), (f) the
aggregate leasing commissions payable by the Partnership and Investment Entities
in connection with the lease are more than 5% above the leasing commission
parameters that have been Approved by the Partners (or if no such leasing
commission parameters have been Approved in advance by the Partners, more than
5% above prevailing market rate commissions then in effect for similar
properties in similar locations), or (g) the lease form is materially different
from the standard form of lease that has been Approved in advance by the
Partners for such Property; PROVIDED, HOWEVER, that once the terms of such
documents have been Approved by the Partners, any General Partner may cause the
Partnership to execute and deliver any such documents with such changes thereto
as shall be reasonably Approved by the General Partners, without further
Approval of the Partners being required unless such change adversely affects the
Partnership in a Material manner, and only one General Partner's execution of
such documents shall be required on behalf of the Partnership in order for such
documents to be binding on the Partnership. Third parties shall be entitled to
rely on the authority of any General Partner to execute and deliver any document
on behalf of the Partnership without the execution thereof by any other Partner
being required. For purposes of this Agreement, the term "Material" (or any
variation thereof) means any item that (i) would result in a difference to the
Partnership of at least $100,000 with respect to any such item, or at least
$500,000 in the aggregate for all such items, in each case for any 12-month
period, or (ii) would result in a change in the scope of any Property
development as set forth in an Approved Development Plan. All construction
contracts having payments exceeding $100,000 shall require competitive bids,
copies of which shall be submitted to the Mack-Cali Limited Partner for review
before any such contract is entered into; and
5.1.1.11 To enter into and to perform the Partnership's
obligations under any other agreement to which it becomes a party (and cause any
Investment Entity to do so).
5.1.2 COMPENSATION; REIMBURSEMENT. No compensation shall be
payable by the Partnership to any Partner or to an Affiliate of any Partner
unless provision for such compensation is made (a) in the Approved Development
Plans (including the Approved
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Budgets and Approved Overhead Budgets) attached as Exhibit C that have been
Approved by the Partners, or (b) in any other subsequent Approved Development
Plan. Unless reimbursement is prohibited under Section 5.5 or another provision
of this Agreement, the Partnership shall reimburse each Partner for its actual
and reasonable out-of-pocket expenses incurred in connection with Partnership
business to the extent such Partner is authorized to take the action resulting
in such expenses and is not otherwise reimbursed with respect thereto under this
Agreement or pursuant to an Approved Development Plan, subject to Sections 2.3
and 5.5.
5.1.3 BUDGETS
5.1.3.1 ANNUAL OPERATING BUDGET; INVESTMENT BUDGETS; OVERHEAD
BUDGETS. The Managing General Partner shall include in each proposed
Development Plan a proposed budget in connection with each Property and related
Investment, including the reasonably anticipated cash receipts therefrom, and
the reasonably anticipated costs of owning and operating such Property and
Investment, including costs of acquisition, insurance, entitlement, zoning,
development, landscaping, easements, subdivision, grading, infrastructure,
surveying, advertising, governmental approvals, operation, development,
management, leasing (including tenant improvements to be funded by the
Partnership if Approved by the Partners), repair, maintenance and renovation of
the Property for each Partnership Accounting Year, and shall deliver the same to
the Mack-Cali Limited Partner for its review and Approval. Each such budget
shall contain the amount to be (i) expended from reserves with respect to each
Investment, and (ii) added to the reserves of the Partnership with respect to
each Investment, including reserves required by lenders to the Partnership. Each
such budget shall also forecast the amount and timing of distributions to the
Partnership with respect to each Investment for the period covered by such
budget. At least annually (within 30 days prior to year-end), the Managing
General Partner shall also prepare and submit to the Partners for Approval a
budget for the operation of the Partnership for the following year that covers
those projected costs, if any, of operating the Partnership to the extent the
same are not contained in the Approved Budgets in effect for the Investments and
Properties for such period (such budget to require the Approval of the Partners
before it becomes an Approved Budget). The initial Approved Partnership
operating budget is contained in the Approved Development Plans described on
Exhibit C. The Highridge Partners shall be entitled to receive non-accountable
overhead payments from the Partnership in connection with the services performed
by them, their Affiliates and the employees thereof for the benefit of the
Partnership and the Investment Entities with respect to the El Segundo Land and
the Summit Ridge Land (in full reimbursement of all of their internal costs with
respect thereto, and those of their Affiliates and employees and partners
thereof), payable in advance on the first day of each month in thirty (30) equal
monthly installments commencing as of January 1, 1998 (with the installments for
the months of January through April 1998 being payable upon the execution and
delivery of this Agreement by all of the Partners), equal (and limited in the
aggregate to) 2.5% of total development costs with respect thereto (the
"Overhead Payments") pursuant to the Approved Budget for such Properties (the
amount described in an Approved Budget for such Overhead Payments is referred to
as the "Approved Overhead Budget"). The obligation to make Overhead Payments
shall be a Partnership expense and shall be payable prior to making
distributions to Partners. The unpaid Overhead Payments that are payable to
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the Highridge Partners shall be limited to actual cost reimbursement (excluding
the salary, benefits and other compensation of John S. Long, Eugene S. Rosenfeld
and Steven A. Berlinger) from and after the date on which any Highridge Partner
has become a Terminated Partner or has committed a Removal Default. The initial
Approved Budget (including the Approved Overhead Budget) for each of the El
Segundo Land and the Summit Ridge Land is contained in the Approved Development
Plans for such Properties that are described in Exhibit C.
5.1.3.2 APPROVED BUDGETS. Each Authorized Representative of the
Mack-Cali Limited Partner shall have a period of ten (10) Business Days after a
proposed budget is submitted to them (whether or not submitted as part of a
proposed Development Plan) to notify the Managing General Partner in writing (i)
whether such Authorized Representative, on behalf of the Mack-Cali Limited
Partner, Approves the proposed budget or (ii) of any revisions such
representative believes should be made to such proposed budget. A proposed
budget (or any proposed revision thereof) shall not be deemed to have been
Approved by the Mack-Cali Limited Partner unless actually Approved by at least
one Authorized Representative of the Mack-Cali Limited Partner within such
ten-day period. If at least one Authorized Representative of the Mack-Cali
Limited Partner so Approves a proposed budget (or a Development Plan in which
such budget is contained), such budget shall be deemed Approved by the Partners
and shall constitute an "Approved Budget" for the Partnership for the applicable
Partnership Accounting Year covered thereby. If within such ten (10) Business
Day period, the Mack-Cali Limited Partner does not Approve a budget for the
applicable Partnership Accounting Year with respect to any Investment or
Property, then the most recent Approved Budget for such Investment or Property
other than items in such budget consisting of additional investment outlays that
may be made at the discretion of the Partnership (such discretionary outlays are
referred to as "Discretionary Outlays"), shall continue as the Approved Budget
for the next Partnership Accounting Year with the following exceptions: (a) all
extraordinary items for the current Partnership Accounting Year shall be
deleted; and (b) Non-Discretionary Items for the upcoming Partnership Accounting
Year shall be included at the actual cost.
5.1.3.3 INITIAL BUDGET; SUPPLEMENTS. The initial Approved
Budgets are contained in the Development Plans described in Exhibit C. The
Managing General Partner shall cause the Partnership to prepare supplements or
revisions to each Approved Budget from time to time within a reasonable time
after it is reasonably likely that such Approved Budget will not be met or after
a request for such a supplement or revision is received by the Managing General
Partner from the Mack-Cali Limited Partner, or if the Managing General Partner
otherwise desires to do so, which supplements or revisions shall be submitted to
the Mack-Cali Limited Partner for Approval in the same manner as that which is
provided for the Approval of budgets under Section 5.1.3.2 (if and when so
Approved, such supplement or, revision shall become part of the Approved Budget
to which it relates).
5.1.3.4 DEVELOPMENT PLANS. The initial acquisition and
development plan with respect to the acquisition, development, renovation and
capital improvements, financing, stabilization and marketing currently Approved
for each of the El Segundo Land and the Summit Ridge Land is described on
Exhibit C (together with any other development
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plan that has been Approved by the Partners from time to time, the "Development
Plans"). The Managing General Partner shall deliver to the Mack-Cali Limited
Partner (within a reasonable time after request therefor is made and the same
are available), for the Mack-Cali Limited Partner's Approval, all plans and
specifications and any schematic and conceptual presentations for the proposed
development of each Property, and shall also deliver to the Mack-Cali Limited
Partner within a reasonable time after request such other details and
information regarding the Partnership, Investment Entities, Investments and the
Properties as the Mack-Cali Limited Partner shall reasonably request from time
to time, including proposals as to the identity of architectural and engineering
firms, construction contractors, construction managers, property managers, and
other consultants to be used to implement the Subsequent Development Plan. No
architectural or engineering firm, construction contractor, construction manager
or property manager, shall be retained with respect to any Property without the
Mack-Cali Limited Partner's Approval. The Managing General Partner shall modify
and update any Development Plan on at least a quarterly basis, if necessary, and
submit such proposed modification or update to such Development Plan to the
Mack-Cali Limited Partner for its Approval in the same manner as provided in
Section 5.1.3.2 with respect to budgets. The Managing General Partner's
representatives shall meet with the Mack-Cali Limited Partner's representatives
no less frequently than monthly and at any other time reasonably requested by
the Mack-Cali Limited Partner (telephonically or in person) to discuss the
status of the Properties. In addition, the Managing General Partner shall
provide the Mack-Cali Limited Partner with a schedule of renovation and capital
improvement meetings (which shall be held weekly) and the Mack-Cali Limited
Partner shall have the right to participate in such meetings. The Managing
General Partner shall provide the Mack-Cali Limited Partner with a copy of any
minutes of such meetings and any materials distributed at such meetings,
promptly after such meeting.
5.1.3.5 PERMITTED EXPENDITURES. The Managing General Partner
shall not, without the Approval of the Mack-Cali Limited Partner, make any
expenditure of funds of the Partnership or an Investment Entity, or commit to
make any such expenditure, other than in response to an Emergency, except as
provided for in an Approved Budget (to the extent an expenditure is described in
an Approved Budget or is otherwise permitted without Approval under this
Section 5.1.3.5, it may be paid if the Partnership has sufficient available
funds, whether in reserves or otherwise, to pay such expenditure; and, except as
provided in Section 2.1.2, Funding Notices may be issued with respect thereto
only upon the Approval of the Mack-Cali Limited Partner); PROVIDED, HOWEVER, the
provisions of this Section 5.1.3 shall in no way limit a General Partner's
authority to cause the Partnership or an Investment Entity to pay (but not to
issue Funding Notices as necessary to do so unless permitted under Section
2.1.2) Emergency expenditures or Non-Discretionary Items when due that are
billed to or incurred by the Partnership or any Investment Entity in excess of
the amounts budgeted therefor; and PROVIDED, FURTHER, that the Managing General
Partner may cause the Partnership to incur up to 110% (less any contingency
percentage already contained in the Approved Budget) of the aggregate amount
budgeted for expenditures for any period in any Approved Budget (excluding
extraordinary expenditures such as acquisition cost and tenant improvements,
Overhead Payments and contingency amounts, contained in such Approved Budget)
without the further Approval of the Partners being required. Notice of
Emergency expenditures or actions shall be given by the General Partner making
such expenditures or
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taking such actions to the other Partners as soon as practicable after such
expenditures are made or actions are taken. The General Partners shall use
reasonable commercial efforts not to permit the Partnership or any Investment
Entity to commit waste with respect to any Property.
5.1.4 EMPLOYEES; DUTIES OF THE MANAGING GENERAL PARTNER.
5.1.4.1 EMPLOYEES. The Partnership shall have no employees
unless otherwise Approved by the Partners. The internal compensation and
reimbursement costs incurred by the Highridge Partners with respect to any
Highridge Partners' employees or partners (or those of their Affiliates)
providing services to the partnership or the Investment Entities are intended to
be reimbursed through Overhead Payments made pursuant to Section 5.1.3.1 (and,
except as provided in Section 5.2(a), additional reimbursement to the Highridge
Partners and their Affiliates shall not be made with respect to internal
personnel and operating costs).
5.1.4.2 MANAGING GENERAL PARTNER DUTIES. The Managing
General Partner shall use its reasonable efforts, subject to the availability of
Partnership funds, to acquire the Investments and cause the Investment Entities
to acquire the Properties that have been Approved by the Partners for
acquisition (limited as of the Agreement Date to the El Segundo Land and the
Summit Ridge Land), and to take the other actions that are described in
Section 1.5 and 1.11 that have been Approved by the Partners, (ii) cause the
Major Decisions and other actions that have been Approved by the Partners to be
implemented, (iii) cause proposed Development Plans and budgets to be prepared
and submitted to the Partners under Sections 5.1.3 and 5.1.4 for Approval as
required pursuant to Section 5.1.6.2, (iv) cause the Partnership to timely issue
the reports and tax returns required under this Agreement and (v) undertake its
other obligations under this Agreement. No General Partner shall be required to
conduct the Partnership's day-to-day operations and implement Major Decisions as
such General Partner's sole and exclusive function, and any Partner and its
Affiliates may (and expect to) have other business interests and may (and expect
to) engage in other activities in addition to those relating to the Partnership,
without having or incurring any obligation to offer any interest in such
activities to the Partnership, any Investment Entity, or any Partner (or their
Affiliates). The Managing General Partner shall be obligated to devote, and
cause its Controlling Persons to devote, as much of their business time to the
Partnership's business as shall be reasonably required to meet the Managing
General Partner's obligations hereunder, which shall be a significant portion of
such Controlling Persons' business time.
From and after the Approval of any transaction or action with respect
to the Investments or Properties by the Partners, any General Partner shall have
the authority, without the further Approval of the Partners being required,
(a) to cause the Partnership to proceed to document the transaction with respect
to the Investments and Properties on terms that have been Approved by the
Partners in all Material respects as provided in (and to the extent required by)
Section 5.1.1.10, with such changes thereto as shall be reasonably be Approved
by the Partners, without further Approval of the Partners being required unless
such change affects the Partnership in a Material manner (as described in
Section 5.1.1.10), and (b) to cause the Partnership to execute and deliver, and
cause the Partnership to perform its
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obligations under, the documents to be executed by the Partnership in connection
with such transaction (including the acquisition of Investments or Properties
pursuant to Acquisition Documents that have been Approved by the Partners),
subject to the conditions for doing so that were Approved by the Partners (to
the extent such Approval is required), the Approved Budget limitations of
Section 5.1.3.5 with respect thereto, and any restrictions on the General
Partners' authority that are contained in this Agreement and that may be
applicable from time to time.
5.1.5 MAJOR DECISIONS. The following are major decisions (the
"Major Decisions") requiring the Approval (or reasonable Approval, if so
indicated) of the Partners, except as otherwise provided in this Agreement;
PROVIDED, HOWEVER, that a Partner's Approval shall not be required after such
Partner has lost its Approval rights under Section 7.9 or another provision of
this Agreement except to the extent provided in Section 5.1.6.1:
5.1.5.1 Any act in contravention of this Agreement or extending
the term of the Partnership;
5.1.5.2 Any act which would make it impossible to carry on the
ordinary business of the Partnership, except the liquidation of the Partnership
under the circumstances permitted in Article 8, or the sale, exchange or other
disposition of any Partnership Interest or other Investment or any other
Partnership or Investment Entity assets that has been Approved by the Partners
or otherwise is permitted under this Agreement;
5.1.5.3 Any action which would cause the Partnership to become
an entity other than a Delaware limited partnership;
5.1.5.4 Changing the purposes of the Partnership;
5.1.5.5 Amending this Agreement;
5.1.5.6 Making in-kind distributions (except as provided in
Section 8.3.8), or causing any Investment Entity to take any action with respect
to any Investment Entity asset that would be a Major Decision if such action
were taken by the Partners or the Partnership with respect to a Partnership
asset;
5.1.5.7 Establishing or adjusting Gross Asset Value under
Section 3.10 for any contributed or distributed asset or other Revalued Property
(reasonable Approval only, subject to Sections 5.10(iii) and 8.3.8), or
Approving the terms of the tenancy-in-common agreement described in
Section 8.3.8;
5.1.5.8 Indemnification of any Person other than a Partner or
its Affiliates pursuant to Section 5.5.2 or otherwise as permitted by this
Agreement or as Approved by the Partners;
5.1.5.9 Except as provided in Sections 3.5.4, 3.11 and 4.3.2,
entering into any agreement (i) which would cause any Partner to become
personally liable on
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or in respect of or to guarantee any indebtedness of the Partnership or
(ii) which is not nonrecourse to such Partner;
5.1.5.10 Causing the Partnership to redeem or repurchase all or
any portion of the interest of a Partner except as provided in Section 7.9, or,
except as otherwise provided in Section 5.1.1.10, causing the Partnership to
enter into any contract in connection with the acquisition, development, leasing
or disposition of any Investment that is not in all Material respects consistent
with the description thereof contained in an Approved Development Plan or which
has not otherwise been Approved by the Partners (subject to Section 5.1.1.10,
the Approved Budget limitations of Section 5.1.3.5, and the other provisions of
this Section 5.1.5, no Approval of the Partners shall be required for any
contract under which the aggregate amount payable by the Partnership or the
Investment entities will be less than $100,000 per year, other than
acquisitions, borrowings, leases, and dispositions of assets; in each case,
except to the extent provided in Section 5.1.1.10); or to borrow money from a
Partner or its Affiliates except pursuant to Sections 2.2.2 or 2.4;
5.1.5.11 Causing or permitting the Partnership to be merged with
any other entity; selling Partnership or Investment Entity assets for
consideration, including notes payable, or otherwise disposing of Partnership or
Investment Entity assets, including contributions to a REIT;
5.1.5.12 Causing or permitting the Partnership to make a loan
to, or enter into any contract with, any Partner or any Affiliate of a Partner,
other than Tax Payment Loans permitted under Section 3.11, unless the terms of
such loan or contract comply in all material respects with the parameters with
respect thereto that have been Approved by the Partners or are contained in an
Approved Development Plan;
5.1.5.13 Dissolving, terminating or liquidating the Partnership,
except as provided in Article 8 of this Agreement;
5.1.5.14 Disposing of any Property or Investment (or any portion
thereof) or permitting an encumbrance to be placed on Partnership or Investment
Entity assets;
5.1.5.15 Incur or pay costs related to the Partnership any
Investment or Property by or on behalf of the Partnership in excess of the
amounts permitted under Sections 2.3.1 and 5.1.3.5 except pursuant to an
Approved Budget;
5.1.5.16 Obtain any third-party loans (including an operating
line of credit) on behalf of the Partnership or an Investment Entity, or,
execute or deliver on behalf of the Partnership any guarantee or other agreement
whereby the Partnership is or may become liable for any obligations of any other
Entity;
5.1.5.17 Acquire any Property or Investment other than pursuant
to Approved Development Plans, or take any action on behalf of the Partnership
that is not within the scope of the Partnership purposes as set forth in
Sections 1.4 and 1.11;
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5.1.5.18 Modify, prepay or refinance any indebtedness of the
Partnership, or any Investment Entity, or select any lenders to make loans to
the Partnership or any Investment Entity;
5.1.5.19 Make any distribution except as permitted under this
Agreement except in connection with the liquidation of the Partnership under
Article 8;
5.1.5.20 Commence, dismiss, terminate or settle any material
litigation matter, material condemnation claim, or any other matter or claim
(including an insurance claim) in connection with any Property exceeding an
aggregate for any Partnership Accounting Year of the greater of (a) $50,000 or
(b) 1% of the acquisition and development expenditures made by the Partnership
with respect to such Property;
5.1.5.21 Determine the terms of any participation (e.g.,
distribution and control issues) of third-party investors in the Partnership or
any Investment Entity;
5.1.5.22 Except as otherwise provided in Article 7, admit
additional or transferee Partners to the Partnership as substituted Partners or
enter into financing that participates in profits; or, except as provided in
Article 7, permit any Transfer of any interest in the Partnership to the extent
Approval of the Partners for such Transfer is required under this Agreement;
5.1.5.23 Confess any judgment against the Partnership or any
Investment Entity or cause the Partnership or any Investment Entity to file for
Bankruptcy or other relief from creditors;
5.1.5.24 Establish insurance requirements for the Partnership or
settle insurance claims in excess of the dollar limit in Section 5.1.5.20;
5.1.5.25 Establish or release reserves for use by the
Partnership except pursuant to an Approved Budget or as otherwise provided in
this Agreement (reasonable Approval only), or permitting (or requiring) any
Partner to make additional Capital Contributions to the Partnership except as
expressly provided in this Agreement or issue any Funding Notice except as
provided in Section 2.1.2.1(ii);
5.1.5.26 Except as provided in Section 5.1.4.2, voluntarily
deviate to a Material extent (as provided in Section 5.1.1.10) from the terms of
acquisition, disposition or other course of action with respect to any
Investment or Property (whether owned by the Partnership or a proposed
acquisition) that required the Approval of the Partners (regardless of whether
contained in an Approved Development Plan), except that, to the extent actions
are permitted to be taken hereunder in connection with an Emergency or an event
of Force Majeure and are not prohibited by contracts of the Partnership
(including contracts entered into in connection with the acquisition or
disposition of Partnership Assets), a General Partner may deviate from any
course of action Approved by the Partners as necessary to respond to such
Emergency or as is necessary as the result of such event of Force Majeure,
subject to the Approved Budget Limitations of Section 5.1.3.5;
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5.1.5.27 Engage attorneys or for the Partnership or any
Investment Entity (which attorneys shall be selected upon the reasonable
Approval of the Partners). Price Waterhouse or another national accounting firm
Approved by the Mack-Cali Limited Partner shall be the Partnership's accountants
for all purposes, and the Partners hereby Approve the following as the initial
attorneys authorized to perform services for the Partnership and the Investment
Entities: Battle Fowler LLP; Mark Abramson, Esq.; Pircher, Nichols & Meeks;
Pryor, Cashman, Sherman & Flynn; Farer, Siegal & Fersko; Ervin, Cohen & Jessup;
and L. David Cole, Esq.;
5.1.5.28 Approve the form of lease, tenant improvement allowance
or leasing commissions (except as provided in Section 5.1.1.10), project names
or any leasing agent for the Properties other than Highridge Partners or their
Affiliates as set forth in an Approved Development Plan or Approved Budget
(reasonable Approval only); or issue any press releases or otherwise speak with
the press concerning the terms of this Agreement (except that the Authorized
Representatives of a Partner may disclose the details of a Property acquisition,
development, financing, lease or disposition to the press after the same has
occurred or in connection with advertising a Property for lease or sale); or
5.1.5.29 Take any other action that is required to be Approved
by the Partners under this Agreement.
The enumeration of the foregoing rights shall not diminish or affect the
existence or exercise of other rights expressly granted to each of the Partners
under this Agreement. In the event of a deadlock in obtaining the Approval of
the Partners with respect to any Major Decision, the deadlock shall be resolved
as provided in Sections 5.10 and 5.11.
5.1.6 RETAINED APPROVALS; PROCEDURE FOR PARTNER REVIEW AND
APPROVAL.
5.1.6.1 RETAINED APPROVALS. Notwithstanding anything to the
contrary contained in this Agreement, after the loss of Approval rights by a
Partner under Section 7.9 (the "Non-Voting Partner"), the Non-Voting Partner
shall still retain Approval rights with respect to:
(a) The determination of Gross Asset Value for any
property (subject to Sections 5.10(iii) and 8.3.8);
(b) Any act in contravention of this Agreement or
extending the term of the Partnership;
(c) Any action which would cause the Partnership to
become an entity other than a Delaware limited liability Partnership;
(d) Changing the purposes of the Partnership;
(e) Amending this Agreement except as expressly
provided in this Agreement (but only to the extent such amendment would
materially and
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adversely affect the Non-Voting Partner or its Affiliates, unless such
amendment is permitted to be made without the Non-Voting Partner's Approval
under Section 7.9);
(f) Indemnification of any Person other than a
Partner or its Affiliates pursuant to Section 5.5.2 or except as otherwise
permitted by this Agreement;
(g) Except as provided in Sections 3.11 and 4.3.2,
entering into any agreement (A) which would cause the Non-Voting Partner or
its Affiliates to become personally liable on or in respect of or to
guarantee any indebtedness of the Partnership or (B) which is not
nonrecourse to the Non-Voting Partner and its Affiliates;
(h) Causing the Partnership to redeem or repurchase
all or any portion of the interest of a Partner except as provided in
Section 7.9;
(i) Borrow money from a Partner or its Affiliates
except pursuant to Sections 2.2.2 or 2.4;
(j) Acquire any Investment or cause any Investment
Entity to acquire any Property, other than Investments and Properties that
were Approved by the Partners for acquisition prior to the Non-Voting
Partner losing its Approval rights with respect thereto under Section 7.9,
take any action on behalf of the Partnership that is not within the scope
of the Partnership purposes as set forth in Sections 1.5 and 1.11, or
permit any Investment Entity to take any act that would require the
Approval of the Non-Voting Partner under this Section 5.1.6.1 if taken by
the Partnership;
(k) Unless in compliance with the requirements of
Section 5.2, pay any salary, fees or other compensation to, or enter into
any contract with, any Affiliate of any Partner (but only with respect to
contracts that do not satisfy clauses (i) and (ii) of Section 5.2) or make
loans to any Partner other than Tax Payment Loans;
(l) Prepay any Partnership indebtedness except
(i) in connection with the disposition of any Investment or Property,
(ii) in connection with the liquidation of the Partnership, (iii) to the
extent such indebtedness is refinanced or (iv) in connection with
restructuring of Partnership indebtedness; or enter into any borrowing,
refinancing or modification of an existing borrowing other than on
commercially reasonable terms for the reasonable needs of the Partnership's
business; or entering into any participating financing if the Partners'
interests are not diluted pro rata by such participation;
(m) With respect to the substitution of a
transferee or additional Partner as a Partner, except as otherwise provided
in Section 7.9, the Non-Voting Partner shall have the right to Approve the
admission of any new Partner (other than pursuant to Section 7.9) to the
extent that the Non-Voting Partner's interest in the
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Partnership is diluted by the admission of the new Partner on a basis that
is not pro rata with the dilution of the interests of all of the other
Partners of the Partnership; and
(n) Establish reserves for the Partnership, or make
expenditures from reserves, with respect to the Partnership or any
Investment Entity except as permitted by this Agreement, or issue any
Funding Notice except as provided in Section 2.1.2.1(ii).
5.1.6.2 APPROVAL PROCEDURE. Notice of the request for a
Partner's Approval of any matter for which such Approval is required pursuant to
this Agreement shall be delivered by the requesting Partner to each of the
Authorized Representatives of the other Partner, together with the requesting
Partner's summary and analysis of any matter for which such Approval is
requested and the requesting Partner's recommendations with respect to any
matter for which Approval is requested. Unless some other time is specified in
this Agreement, each Authorized Representative of such other Partner shall
approve or disapprove such matter by notice to the other Partner given within
ten (10) Business Days following delivery of such notice. Failure of any
Authorized Representative to timely respond by written notice (or orally, if
permitted under Section 1.12) to the requesting Partner, indicating Approval or
disapproval of such matter, shall be deemed withholding of the Approval by such
Authorized Representative of such matter for which Approval is requested. From
and after any such submission to such Authorized Representative, and continuing
until the matters addressed in such submission are Approved, each such
Authorized Representative shall, upon request to the Partner who has possession
thereof, be furnished promptly with access to or, if feasible, copies of such
additional pertinent information which become available to such Partner that are
requested by the Partner whose Approval has been sought. Notwithstanding
anything in this Agreement to the contrary, no Authorized Representative of a
Partner shall have the right to Approve any action if such Partner no longer has
Approval rights with respect to such issue under Sections 7.9 and 5.1.6.1.
Section 1.12 sets forth each Partner's Authorized Representatives and the
actions that constitute the granting of a Partner's Approval.
5.2 AFFILIATE TRANSACTIONS; EXCLUSIVITY; MACK-CALI PROPERTY MANAGEMENT
OPTION.
(a) AFFILIATE TRANSACTIONS. If all of the material terms thereof are
clearly identified and fully described in an Approved Development Plan or are
otherwise Approved by the Partners, any Partner or its Affiliates may provide
services, including property management services, accounting services,
construction services, legal or paralegal services (but only to the extent
permitted by law), office administration, and/or document control services, to
the Partnership and/or any Investment Entity, subject to the following
conditions: (i) the fees for such services must be no greater than the fees
charged generally by qualified, unaffiliated third-parties having comparable
expertise and performing similar services in the geographical area in which the
services are to be performed; and (ii) the other terms of the agreement pursuant
to which such services will be performed shall generally be no more onerous than
the terms of agreements used by qualified, unaffiliated third-parties having
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comparable experience performing similar services in the geographical area in
which the particular services are to be rendered.
(b) EXCLUSIVITY. Notwithstanding anything in this Agreement to the
contrary, there shall be no restriction against the acquisition or ownership by
any Partner or its Affiliates of any asset, including any office project,
regardless of whether the same is competitive with a Property owned by the
Partnership or an Investment Entity.
(c) MACK-CALI PROPERTY MANAGEMENT OPTION. The Mack-Cali Limited
Partner has the option to elect to allow the Partnership to serve as the
property manager for any property in which such Partner or such Partner's
Affiliates have an interest (but which is not a Property owned by the
Partnership or any Investment Entity) pursuant to the terms of a management
agreement (the "Management Agreement") to be Approved by the Partners. If
significant lease-up or rehabilitation services are required to be rendered by
the Partnership in connection with a property for which such election has been
made, the Highridge Partners or their Affiliates shall be entitled to receive a
lease-up and rehabilitation fee equal to 10% of the Mack-Cali Limited Partner's
(or such Affiliate's) profit from such property after it has recovered its
investment therein plus a 10% cumulative annual return thereon (compounded
quarterly), but only if such fee is Approved by the Mack-Cali Limited Partner in
connection with the election to allow the Partnership to manage such property
and the terms of such payment are set forth in the Management Agreement.
5.3 REPORTING REQUIREMENTS; FINANCIALS; MEETINGS.
5.3.1 GOVERNMENTAL REPORTS; MEETINGS. The Managing General
Partner shall, at Partnership expense, use reasonable efforts to cause to be
prepared and timely filed with appropriate federal, state and foreign regulatory
and administrative bodies, all reports required to be filed with such entities
under then current applicable laws, rules and regulations, subject to the
reasonable Approval of the Partners, other than reports filed with local
government agencies in connection with the entitlement and development of a
Property (copies of which shall be furnished to the Mack-Cali Limited Partner
within a reasonable time after the Mark-Cali Limited Partner has requested a
copy thereof by notice to Highridge GP). Such reports shall be prepared on the
accounting or reporting basis required by such regulatory bodies. Each Partner
shall be provided with a copy of any such report. No meeting of the Partners
shall be required unless requested by any Partner upon notice to all Partners,
which notice may be given by any Partner at any time. All Partners shall be
given written notice of any meeting of the Partnership at least twenty (20) days
prior to any such meeting by the Partner requesting such meeting. Any meetings
shall be held at the record-keeping office of the Partnership or at any other
reasonably convenient location within the United States as the requesting
Partner may reasonably Approve and specify in such notice. The Partners may
adopt a course of conduct that provides for such meetings to be held
telephonically.
5.3.2 ACCESS; AUDIT. The Managing General Partner shall permit
any Partner to review and copy, during normal business hours at the office of
the Partnership, all Partnership financial records and information. Each
Partner shall have the right to have such
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records and information audited at Partnership expense; PROVIDED, HOWEVER, if
such audit reveals material errors or omissions in such records and information
due to a Major Default by any Partner, such Partner's Partner Group shall
reimburse the Partnership for the expense of audit. The Managing General
Partner shall maintain (at the office of the Partnership) reports required or
otherwise prepared and delivered hereunder or under any Investment Entity
Agreement, copies of which shall be furnished to each Partner when available, at
the Partnership's expense, together with (upon request from any Partner) such
supplementary records and reports as are necessary to reflect the allocation
among the Partners of the tax items and distributions of the Partnership shown
on any reports furnished (or required to be furnished) to the Partners under
this Agreement.
5.3.3 FINANCIAL AND STATUS REPORTS. (a) The Managing General
Partner shall cause the following reports to be issued at Partnership expense:
(i) The Managing General Partner shall use reasonable efforts to cause to
be issued to the Partners annual financial reports, in reasonable detail, which
shall be prepared and audited by the Partnership's independent certified public
accountants at Partnership expense, by February 15 the following the close of
each year (including a balance sheet and income and expense statements, both on
an Investment-by-Investment basis and on a consolidated basis, showing sources
and uses of funds, cash on hand, distributions, changes in financial position,
tax information, Undistributed Preferred Return, Invested Capital, Undistributed
Highridge Subordinated Contributions, Undistributed Highridge Subordinated
Return, and unrepaid Partner loans on a Partner-by-Partner basis). Such
financial reports shall be prepared using GAAP, or such other method as shall be
Approved by the Mack-Cali Limited Partner from time to time upon reasonable
advance notice to the Managing General Partner;
(ii) The Managing General Partner shall use reasonable efforts to cause to
be issued to the Partners quarterly unaudited financial reports, in reasonable
detail, within twenty-five (25) days after the close of each calendar quarter
other than the fourth quarter of each year (commencing with the calendar quarter
ending on June 30, 1998), internally prepared by the Managing General Partner
and reviewed by the Partnership's accountants, including a balance sheet and
income and expense statements, both on an Investment-by-Investment basis and on
a consolidated basis (showing receipts on a tenant-by-tenant basis, and material
defaults, to the extent requested by the Mack-Cali Limited Partner upon
reasonable notice), sources and uses of funds, cash on hand, distributions,
changes in financial position, Undistributed Preferred Return, Invested Capital,
Undistributed Highridge Subordinated Contributions, Undistributed Highridge
Subordinated Return, and unrepaid Partner loans;
(iii) The Managing General Partner shall use reasonable efforts to
cause to be issued to the Partners a monthly income and expense statement, in
reasonable detail, internally prepared by the Managing General Partner on both
an Investment-by-Investment and consolidated basis within twenty (20) days after
the close of each month (including December), showing sources and uses of
Partnership funds and changes in the Partnership's financial position during
such month. In connection with preparing such monthly income and expense
statement, the Managing General Partner shall use commercially reasonable
efforts to review the data provided by third parties (including property
managers and accountants) that is to be
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presented in such income and expense statement, such review to be commenced and
completed to the extent possible, after using commercially reasonable efforts to
do so, before the Managing General Partner furnishes such statement to the
Partners. If such review is not completed prior to furnishing such statement,
such review shall be completed as soon as is practicable thereafter (with notice
being given to the Partners by the Managing General Partner of any variance from
such statement that is discovered by the Managing General Partner in such
review); and
(iv) The Managing General Partner shall keep the Mack-Cali Limited Partner
reasonably apprised of pending due diligence, acquisition, construction,
leasing, marketing and disposition efforts with respect to proposed and owned
Investments and Properties within a reasonable time after any material new
development has occurred or the Mack-Cali Limited Partner requests an update;
and
(b) In preparing reports required under this Agreement, the Managing
General Partner may rely on information furnished by third parties (including
property managers and accountants) to the extent that it is reasonable to do so.
(c) Notwithstanding anything in this Agreement to the contrary, (i)
all Partnership and Investment Entity financials shall be prepared on the basis
required by the auditors for the Mack-Cali Limited Partner, and (ii) the
Partners shall make such amendments to this Agreement that reduce or eliminate
the rights (but not the obligations) of the Mack-Cali Partners, or add to or
increase the rights (but not the obligations) of the Highridge Partners, under
this Agreement as are reasonably requested by the Mack-Cali Limited Partner from
time to time in consultation with its auditors, in order to accommodate the
objectives of: (A) the Mack-Cali Limited Partner not being required to
consolidate with the Partnership for accounting purposes and (B) the Mack-Cali
Limited Partner being able to report its share of the Partnership's income and
losses using the equity method of accounting.
5.4 TAX MATTERS PARTNER; TAX RETURNS. The Managing General Partner is
hereby designated as the "Tax Matters Partner", as such term is defined in
Section 6231(a)(7) of the Code, and it shall serve as such at Partnership
expense with all powers granted to a tax matters partner under the Code, except
that the Managing General Partner shall not take any action as the Tax Matters
Partner (including entering into any negotiation or settlement with any taxing
authority, or extending the statute of limitations with respect to any
Partnership item) without the reasonable Approval of the Mack-Cali Limited
Partner. The Mack-Cali Limited Partner may elect to serve as the Tax Matters
Partner instead of the Highridge GP, effective upon notice from the Mack-Cali
Limited Partner to the Highridge GP which may be given at any time after the
Highridge GP ceases to be a General Partner or has committed a Performance
Default. The Partners' Approval rights with respect to Approving tax decisions
(including settlements and extending the statute of limitations) are set forth
in Section 3.12. Each Partner shall give prompt notice to each other Partner of
any and all notices it receives from the Internal Revenue Service (or any other
taxing authority) concerning the Partnership, including any notice of audit, any
notice of action with respect to a revenue agent's report, any notice of a
30-day appeal letter and any notice of a deficiency in tax concerning the
Partnership's federal, state or local income tax returns. At Partnership
expense, the Tax Matters Partner
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shall furnish each Partner with status reports regarding any negotiation between
the Internal Revenue Service (or other taxing authority) and the Partnership
promptly after any material new development, and the Mack-Cali Limited Partner
shall be given sufficient advance notice by the Managing General Partner so that
it shall have the opportunity to participate, and permit its professional tax
advisers to participate, in person in all of such negotiations. The Tax Matters
Partner shall use its reasonable efforts to cause the Partnership's accountants
to prepare and file on a timely basis, with due regard to extensions (such
extensions to be applied for unless reasonably Approved to the contrary by the
Mack-Cali Limited Partner, all tax and information returns which the Partnership
may be required to file. No tax or information return shall be filed without
the reasonable Approval of the Mack-Cali Limited Partner. Drafts of the
Partnership's tax returns shall be submitted to the Mack-Cali Limited for review
and reasonable Approval at least thirty (30) days prior to the due date therefor
(determined with due regard for extensions). The Managing General Partner shall
cause the Partnership's accountants to prepare and deliver, at Partnership
expense, to each Partner on a timely basis an information reporting return (K-1)
reflecting each Partner's distributive share of all income, gain, loss,
deductions, allowances or credits of the Partnership for each Partnership
Accounting Year, as computed pursuant to Article 3. If there is a dispute as to
the content of the Partnership's or Investment Partnership's tax returns, such
returns shall be filed as directed by the Mack-Cali Limited Partner, with each
other Partner having the right to file an inconsistent position return with the
applicable taxing authority(ies).
5.5 INDEMNIFICATION AND LIABILITY OF THE PARTNERS. See Section 9.2 for
certain conventions concerning the extent to which the acts of Affiliates or
employees of a Partner or its Affiliates will not be taken into account for
purposes of this Section 5.5 in determining whether such Partner is liable (or
is not entitled to indemnification) with respect thereto.
5.5.1 No Partner shall be liable, responsible or accountable in
damages or otherwise to any of the other Partners or to the Partnership for any
act or omission performed or omitted by it on behalf of the Partnership, except
for a Major Default, gross negligence, and damages for a breach of this
Agreement by such Partner that is not cured within the time provided in
Section 9.2, or the breach by such Partner or its Affiliates of any agreement
with the Partnership or an Investment Entity that is not cured within the time
provided in such Agreement.
5.5.2 Except to the extent to the extent attributable to a Major
Default, gross negligence by a Partner or a Partner's Affiliates, a Partner's
breach of this Agreement that is not cured within the time provided in
Section 9.2, or the breach by such Partner or its Affiliates of any agreement
with the Partnership or an Investment Entity that is not cured within the time
provided in such Agreement, the Partnership shall indemnify and hold harmless
each Partner and its Affiliates (and their partners, shareholders, or members)
from and against any obligations, actual damages, penalties, actions, judgments,
suits, expenses, disbursements, losses, costs or liabilities of any kind or
nature whatsoever which may be imposed upon, incurred or asserted against such
Partner or its Affiliates (or their partners, shareholders, members and their
Affiliates), including reasonable attorneys' and paralegals' fees and court
costs, except to the extent the same are reimbursed to such Partner or its
Affiliates by insurance proceeds or indemnities from third parties, in
connection with, due to
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or arising out of (i) such Partner's serving as a Partner (including serving as
the Managing General Partner or as a Co-General Partner of the Partnership), or
(ii) the execution and delivery by such Partner (or its Affiliates) of any
guarantee or payment or performance (including the General Partner Guaranties),
any completion agreement or guarantee, any hazardous or toxic substance
indemnity or guarantee or any other agreement Approved by the Partners (or
permitted to be entered into without such Approval) whereby such Partner or
Affiliate undertakes any monetary, performance or indemnification obligation on
behalf of the Partnership or any Investment Entity in connection with the
ownership, operation or financing of an Investment or Property.
5.5.3 Each Partner shall indemnify and hold harmless each other
Partner and the Partnership from and against any direct (and not consequential
or incidental) obligations, actual damages, penalties, actions, judgments,
suits, expenses, disbursements, losses, costs or liabilities (collectively, the
"Liabilities") incurred or paid by such other Partner, the Partnership or an
Investment Entity, or their Affiliates (to the extent such Liabilities are not
reimbursed by insurance proceeds or indemnities from third parties), to the
extent such Liabilities are caused by such Partner's (or its Affiliate's) Major
Default, gross negligence, or breach of this Agreement that is not cured within
the time provided in Section 9.2, or the breach by such Partner or its
Affiliates of any agreement with the Partnership or an Investment Entity that is
not cured within the time provided in such agreement.
5.5.4 Each Partner hereby grants to each of the other Partners and
the Partnership, as security for the performance of all obligations of such
Partner pursuant to this Agreement, a security interest in and to its interest
in the Partnership, pursuant to and in accordance with the provisions of the
Uniform Commercial Code of California, and agrees in the event such Partner is
finally adjudicated to be liable to the Partnership or another Partner for any
amount and fails, within thirty (30) days thereafter to pay the amount owed, the
non-defaulting Partner(s) and the Partnership shall each have and are hereby
granted all the rights, remedies and recourse afforded a secured party under the
Uniform Commercial Code of California, including foreclosing upon the defaulting
Partner's interest in the Partnership and selling such interest at public or
private sale or retaining such interest in accordance with the Uniform
Commercial Code of California. To evidence such security interest, each Partner
shall from time to time execute and deliver such documents as may be reasonably
requested by any other General Partner, including a financing statement (which
may be recorded or filed in accordance with applicable law) and continuation
statements. If the Partnership interest of a defaulting Partner is foreclosed
and sold or the interest retained as aforesaid, each non-defaulting Partner is
hereby authorized on behalf of the defaulting Partner and designated the
attorney-in-fact of the defaulting Partner to execute any and all documents and
take such other action as may be required to effectuate the sale and transfer of
the defaulting Partner's Partnership interest. Such authorization and
designation shall be deemed coupled with an interest and shall be irrevocable.
5.5.5 In any case where indemnity is sought by a Partner, such
Partner shall give notice of the request for indemnification to the Partnership
and the other Partners from whom the indemnity is required and give them the
opportunity to the extent reasonably
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possible, to participate in the defense of the claim giving rise to the claim
for indemnity, all at Partnership expense.
5.5.6 All indemnity payments and reimbursements payable under this
Agreement to a Partner or an Affiliate of a Partner shall be treated as amounts
owed to a creditor of the Partnership, shall be paid in the ordinary course of
business, without regard to whether the Partnership has Net Available Cash, and,
shall be paid by the Partnership, PARI PASSU with other creditors of the
Partnership, in all cases prior to making distributions to Partners under
Sections 4.1 and 4.2. No Partner shall have any liability under this Agreement
for failing to take any action under this Agreement or any agreement with the
Partnership or an Investment Entity if (i) such Partner is prohibited from
taking such action without the Approval of a Partner in the other Partner Group
under this Agreement and (ii) such Partner in the other Partner Group fails to
grant such Approval to take such action. No Partner shall have any liability
for failing to grant any Approval permitted to be granted by it under this
Agreement.
5.5.7 Notwithstanding anything to the contrary contained in this
Agreement, no Partner Group or its Affiliates shall receive any reimbursement
from the Partnership or another Partner for any portion of the salaries or
benefits of its Controlling Persons or the rent or utility costs of such
Partner's offices except as Approved by the other Partner Group.
5.6 CONTROL CHANGE. If the Managing General Partner becomes a Terminated
Partner or commits a Removal Default, the Mack-Cali Limited Partner may appoint
a Co-General Partner, and such Co-General Partner may elect to become the
Managing General Partner and to assume the Managing General Partner's authority
and responsibilities under this Agreement as provided in Section 7.9.5 (subject
to Section 5.9). If the Managing General Partner has committed a Performance
Default with respect to an Investment or a Property, the Mack-Cali Limited
Partner shall have the rights with respect to such Investment or Property set
forth in Sections 5.10(ii) and 7.9.5 (including the appointment of a Co-General
Partner to take all actions with respect to such Investment or Property on
behalf of the Partnership, with the Managing General Partner having no further
Approval rights with respect to such Investment or Property except those set
forth in Section 5.1.6.1).
5.7 LIMITATION OF LIABILITY. Each Partner's liability shall be limited as
set forth in this Agreement, the Act and other applicable law. Except as
provided in Sections 2.1.2, 2.2.2.1, 3.5.4, 3.11, 4.3.2, 5.5.1, 5.5.3 or 7.6, a
Partner will not be personally liable for any debts or losses of the Partnership
beyond the Partner's interest in the Partnership, other than distributions
received by a Partner as to which, by terms of the Act, such Partner is
obligated to return. No partner, officer, director, shareholder or manager of a
Partner shall be liable for the obligations of such Partner to the Partnership
or the other Partners under any circumstances other than a Major Default that
has actually been committed by such partner, officer, director, shareholder or
manager or as provided in Section 3.11.
5.8 NO PRIORITIES. Except as specifically provided in this Agreement, no
Partner shall have any priority over any other Partner as to the return of his
or its Capital Contributions or as to distributions or allocations of Profits or
Losses or other tax items.
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5.9 DETERMINATION DATE FOR INDEMNITY PAYMENTS, REMOVAL DEFAULTS,
PERFORMANCE DEFAULTS AND MAJOR DEFAULTS; ARBITRATION.
5.9.1 For purposes of this Agreement, until the "Determination
Date" (defined below) has occurred, (i) no amount shall be due and owing by any
Partner to the Partnership or to another Partner pursuant to Section 3.5.4,
5.5.1 or 5.5.3, 7.6 or 9.2, and (ii) no Major Default, Performance Default or
Removal Default shall be deemed to have occurred and no Partner shall be deemed
to have become a Terminated Partner for purposes of applying Section 7.9 other
than by reason of such Partner becoming a Defaulting Partner under Section
2.2.2, in each case if there is a bona fide dispute as to whether such amount is
due or whether a Partner is a Terminated Partner (other than by reason of such
Partner becoming a Defaulting Partner under Section 2.2.2) or has committed a
Performance Default or Removal Default. Except for the purpose of determining
that a Control Change Notice issued by the Mack Cali Limited Partner is
effective as provided below in this Section 5.9 upon an alleged Major Default,
Performance Default or Removal Default by the Managing General Partner or
because the Managing General Partner is a Terminated Partner, the "Determination
Date" shall be deemed to have occurred only upon the earlier to occur of the
following: (a) the final determination by a Court described in Section 9.4 that
an amount described in Section 3.5.4, 5.5.1, 5.5.3, 7.6 or 9.2 is due and
payable, or the Major Default, Performance Default or Removal Default in
question has occurred or a Partner has become a Terminated Partner (as the case
may be) and the expiration of the time to file a notice of appeal from such
determination has expired without such notice having been filed; or (b) the
affirmation of a determination described in preceding clause (a) by the entry of
judgment to such effect by the court to which such determination has been
appealed.
5.9.2 Notwithstanding the provisions of this Section 5.9, if the
Mack-Cali Limited Partner alleges in good faith, by issuing a Control Change
Notice to the Managing General Partner stating that the Managing General Partner
has committed a Major Default Performance Default, or Removal Default or that
the Managing General Partner otherwise is a Terminated Partner, and the Managing
General Partner in good faith gives notice to the Mack-Cali Limited Partner
within five (5) Business Days after receiving such Control Change Notice that it
disputes whether such Major Default, Performance Default or Removal Default or
any event giving rise to Terminated Partner status has occurred, the Mack-Cali
Limited Partner may commence an expedited arbitration proceeding held in Los
Angeles, California pursuant to applicable California arbitration rules to
determine whether such Major Default, Performance Default or Removal Default or
other event giving rise to Terminated Partner status has occurred by giving
notice to the Managing General Partner appointing a qualified arbitrator and
stating that the Mack-Cali Limited Partner is invoking the arbitration
proceedings of this Section 5.9. Within five (5) Business Days after receiving
such notice, the Managing General Partner shall, by notice to the Mack-Cali
Limited Partner, appoint a second qualified arbitrator. If the Managing General
Partner fails timely to so appoint such second qualified arbitrator, or fails
timely to notify the Mack-Cali Limited Partner that the Managing General Partner
disputes whether such Major Default, Performance Default, Removal Event or
event giving rise to Terminated Partner status has occurred, the Determination
Date shall be deemed to have occurred solely for the purposes set forth below in
this Section 5.9. If the
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Managing General Partner timely so appoints such second qualified arbitrator,
the two arbitrators so appointed shall appoint a third qualified arbitrator
within five (5) Business Days after the notice of the appointment of the second
arbitrator is received from the Managing General Partner by the Mack-Cali
Limited Partner. Within five (5) Business Days after being appointed, the third
arbitrator shall (A) consider the evidence submitted by the Partners and (B)
upon notice to all Partners, determine (solely for purposes of determining
whether such Control Change Notice is valid and effective) whether the Managing
General Partner has committed a Major Default, Performance Default, or Removal
Event or event giving rise to Terminated Partner status. If the third
arbitrator determines that the Managing General Partner has committed a Major
Default, Performance Default, or Removal Event, or that any event giving rise to
Terminated Partner status has occurred, then the Determination Date shall be
deemed to have occurred solely for purposes of determining whether such Control
Change Notice is effective and thereby enabling (i) the Co-General Partner
appointed by the Mack-Cali Limited Partner pursuant to Section 7.9.5 to become
the Managing General Partner and permanently assume the Managing General
Partner's authority and responsibility under Section 7.9.5 if a Removal Default
or any event giving rise to Terminated Partner status was held to have occurred
in the arbitration, or who may, in the case of a Performance Default that is
held in the arbitration to have occurred with respect to an Investment or
Property, take all actions with respect to such Investment or Property on behalf
of the Partnership, with the Managing General Partner having no further Approval
rights with respect to such Investment or Property except those set forth in
Section 5.1.6.1, or (ii) the Mack-Cali Limited Partner to have the rights set
forth in Section 5.10(ii). The Determination Date shall not be deemed to have
occurred for any other purpose unless and until otherwise provided in this
Agreement. During the period beginning on the date on which such Control Change
Notice is received by the Managing General Partner and ending with the
determination by the foregoing arbitration that the subject Major Default,
Performance Default, Removal Event, or event giving rise to Terminated Partner
status has not occurred, all actions permitted to be taken under this Agreement
by the Managing General Partner without the consent of the Mack-Cali Limited
Partner in connection with the operation of the Partnership's business (or, in
the case of a Performance Default, in connection with the Investment or Property
that is the subject of the Performance Default being arbitrated) shall, upon the
election in writing by the Mack-Cali Limited Partner made by giving notice to
the Highridge Partners (which election may specify which Approval rights it
desires and may be supplemented by notice from the Mack-Cali Limited Partner to
add or remove Approval rights specified in such notice), require the Approval of
the Mack-Cali Limited Partner (and the Managing General Partner shall be
absolved of all responsibility and liability to the Partnership and the
Mack-Cali Partners for failing to undertake all such actions for which the
Mack-Cali Limited Partner has withheld its Approval during such period). The
costs of the arbitration shall be funded 50% by each Partner Group, and the
Partners shall bear their own attorneys fees, during the arbitration. The
prevailing Partner Group shall be repaid all of such expenses by the
non-prevailing Partner Group within ten (10) days after receiving notice of the
third arbitrator's decision. A "qualified arbitrator" means any Person who has
had over fifteen (15) years of experience in drafting, negotiating and/or
interpreting partnership and/or operating agreements involving the ownership and
operation of commercial real estate.
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5.10 DEADLOCK/PARTNER SALE RIGHTS. Either Highridge GP or the Mack-Cali
Limited Partner (provided such Partner has not become a Terminated Partner or
committed a Performance Default or Removal Event) may at any time give notice to
the other (a "Deadlock Notice") if such Partner asserts that there is an
irreconcilable difference of opinion among the Partner Groups (a "Deadlock") as
to the course of action to be taken with respect to any Major Decision on which
they both have Approval rights. The Deadlock Notice shall describe the Deadlock
and the resolution proposed by the Partner issuing the Deadlock Notice. If a
Deadlock Notice is properly issued, the Partners shall meet in good faith during
the 30-day period after the Deadlock Notice has been received. If the Major
Decision that is the subject of the Deadlock is not resolved within such 30-day
period, then:
(i) In the case of any Deadlock that occurs prior to the First
Offer Date (defined in Section 5.11), there shall be no mechanism to
resolve the Deadlock and arbitration or litigation shall not be used to
resolve any such Deadlock except as provided in Section 5.10 (iii), this
clause (i), in clauses (ii) and (iii) of this Section 5.10, or in Section
5.4 in the case of tax returns. In the case of a Deadlock occurring on or
after the First Offer Date, the provisions of this clause (i), Sections
5.10(ii) and (iii), 5.4 (tax returns) and 5.11 (the first-offer procedure)
shall apply. In the case of a Deadlock that occurs at any time regarding
(A) whether a Funding Notice is permitted or required to be issued under
Section 2.1(b), or (B) what actions should be taken with respect to the
sale or other disposition of assets that is being made in connection with
the liquidation of the Partnership where both the Highridge GP and the
Mack-Cali Limited Partner have Approval rights with respect thereto, the
dispute may be resolved through an expedited arbitration conducted in
accordance with a procedure that is analogous to that contained in Section
5.9.2 (with conforming changes being made to the terminology contained
therein and with either Highridge GP or the Mack-Cali Limited Partner being
able to invoke such arbitration proceeding by notice to the other).
(ii) SPECIAL RULES FOR PERFORMANCE DEFAULTS. From and after
the date on which a Performance Default with respect to an Investment or
Project has been held to have occurred under Section 5.9.2 for purposes of
issuing a Control Change Notice under Section 7.9.5, the Mack-Cali Limited
Partner may propose to the Highridge GP that any action be taken (or not be
taken) at any time by the Partnership or an Investment Entity with respect
to such Investment or Project. If Highridge GP does not agree with such
proposal, such Deadlock shall be resolved in the manner directed and
Approved by the Mack-Cali Limited Partner (and Highridge GP shall cause the
Partnership and such Investment Entity promptly to take, or refrain from
taking, as appropriate, such action in the manner so directed and Approved
by the Mack-Cali Limited Partner). In the case of a Performance Default,
the Mack-Cali Limited Partner shall also have the rights set forth in
Section 7.9.5 with respect to appointing a Co-General Partner.
(iii) GROSS ASSET VALUE DEADLOCKS. In the case of a Major
Decision described in Section 5.1.5.7 or 8.3.8, concerning the Gross Asset
Value of any property, the dispute concerning such Major Decision shall be
resolved in the following manner (subject to the special rules contained in
Section 8.3.8). Unless and
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until such Gross Asset Value has been Approved by the Partners or
determined as provided in this paragraph (iii), the transaction giving rise
to the determination of Gross Asset Value shall not be consummated by any
Partner. Either Highridge GP or the Mack-Cali Limited Partner (the
"Invoking Partner") may give notice to the other of them (the "Other
Partner") stating that such Partner is invoking the following procedure,
setting forth its proposed Gross Asset Value for such property (the "GAV
Notice"), and appointing a "qualified appraiser" (defined below). Within
five (5) Business Days after receiving a GAV Notice, the Other Partner
shall, by notice to the Invoking Partner, appoint a second qualified
appraiser. If the Other Partner fails timely to so appoint such second
qualified appraiser, the Gross Asset Value shall be deemed to be that set
forth in the GAV Notice. If the Other Partner timely so appoints such
second qualified appraiser, the two appraisers so appointed shall appoint a
third qualified appraiser within five (5) Business Days after the notice of
the appointment of the second appraiser is received by the Invoking
Partner. Within five (5) Business Days after being appointed, the third
appraiser shall (A) consider the evidence submitted by the such Partners
and (B) upon notice to both of such Partners, determine such Gross Asset
Value. The cost of the appraisal shall be funded by the Partnership, and
the Partner Groups shall bear their own attorneys fees, during the
appraisal. A "qualified appraiser" means any M.A.I. appraiser who has had
over fifteen (15) years of experience in valuing commercial real estate in
Los Angeles, California.
(iv) PARTNER SALE RIGHTS. The Mack-Cali Limited Partner
shall have the right to cause the Partnership to cause the sale or other
disposition of any Property at any time if (a) a Co-General Partner has
assumed the Managing General Partner's authority and responsibility, or the
Mack-Cali Limited Partner or a Co-General Partner has assumed control of
such Property, under Section 5.10(ii) or Section 7.9.5, (b) the Managing
General Partner becomes a Terminated Partner, (c) [INTENTIONALLY OMITTED]
or (d) the Mack-Cali Limited Partner reasonably determines prior to
completion of such Property that development of such Property should be
abandoned (an "Abandonment Decision"). The right to cause a sale or other
disposition of a Property pursuant to the foregoing clauses (a) through (c)
shall be hereinafter referred to as the "Mack-Cali Sale Right." If the
Mack-Cali Limited Partner becomes a Terminated Partner, the Managing
General Partner shall have the right to cause the Partnership to sell such
Property (or any or all Properties if the Mack-Cali Limited Partner has
become a Terminated Partner) at any time (the "Managing General Partner
Sale Right"). If the Co-General Partner makes an Abandonment Decision
pursuant to this Section 5.10(iv), the Partners' obligations to fund the
completion of such Property shall cease for any future development and the
Partners shall separately fund and bear, without reimbursement from the
Partnership, any Investment Partnership or any Partner or its Affiliates,
any abandonment costs (including any amounts that are due and payable by a
Partner or any Affiliate of a Partner under any Managing General Partner
Guaranty to the extent indemnification is available with respect thereto
under Section 5.5) in the ratio of 80% by the Mack-Cali Partners and 20% by
the Highridge Partners.
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Any Property to be sold in accordance with clause (d) of this Section
5.10(iv) or upon a liquidation in accordance with Article 8 that does not
occur as the result of the exercise of the Mack-Cali Sale Right or the
Managing General Partner Sale Right shall be sold in a manner reasonably
Approved by the Partners or, if necessary, as determined pursuant to the
procedure described in Section 5.10(i)(B). If the Mack-Cali Limited
Partner has the Mack-Cali Sale Right with respect to any Property, upon
notice to the Managing General Partner, the Mack-Cali Limited Partner shall
have the right to cause the Partnership to sell or otherwise dispose of
such Property as it shall Approve, including the right to cause the
Partnership to sell or contribute such Property to a REIT (whether or not
Controlled by Mack-Cali Realty or its Affiliates). Notwithstanding
anything to the contrary contained in this Agreement, if any Property has
achieved 95% Stabilization, the Co-General Partner shall have the right to
cause the Partnership to sell or contribute such Property to a REIT that is
Controlled by Mack-Cali Realty or its Affiliates. Any sale or contribution
of a Property by the Partnership or an Investment Entity (regardless of
whether made pursuant to the Mack-Cali Sale Right under this Section
5.10(iv), pursuant to Section 5.11 or any other provision of this
Agreement) to an Affiliate of any Mack-Cali Partner or to a REIT that is
Controlled by Mack-Cali-Realty or its Affiliate shall be made at fair
market value as determined through the "FMV Appraisal Procedure" set forth
herein, provided however, that if the Mack-Cali Limited Partner elects to
contribute a Property to a REIT instead of effecting a sale of the
Property, the Highridge Partners shall have the option to receive cash for
their indirect interests in such Property (equal to the amount they would
have received if the Property were sold for cash) instead of REIT stock or
partnership interests.
If Highridge GP does not Approve the value proposed by the Mack-Cali
Limited Partner, the "FMV Appraisal Procedure" which shall be invoked by
the Mack-Cali Limited Partner as a condition precedent to a transfer of a
Property to a REIT Controlled by the Mack-Cali Limited Partner or its
Affiliates is as follows. The Mack-Cali Limited Partner shall give notice
to the Managing General Partner stating that the Mack-Cali Limited Partner
is invoking the FMV Appraisal Procedure, setting forth its proposed fair
market value for the Property (the "FMV Notice"), and appointing a
"qualified appraiser" (defined below). Within five (5) Business Days after
receiving an FMV Notice, the Managing General Partner shall, by notice to
the Co-General Partner, appoint a second qualified appraiser. If the
Managing General Partner fails timely to so appoint such second qualified
appraiser, the fair market value shall be deemed to be that set forth in
the FMV Notice. If the Managing General Partner timely so appoints such
second qualified appraiser, the two appraisers so appointed shall appoint a
third qualified appraiser within ten (10) Business Days after the notice of
the appointment of the second appraiser is received from Highridge GP by
the Managing General Partner. Within five (5) Business Days after being
appointed, the appraisers shall (A) consider the evidence submitted by such
Partners and (B) upon notice to both of such Partners, determine such fair
market value. The fair market value shall be the amount determined by the
three appraisers, or if there is a dispute among the three appraisers as to
value, the value established by the third appraiser shall be the fair
market value (but the fair market value shall not exceed the highest, or be
less than the lowest, value
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established by the other two appraisers). The cost of the appraisal shall
be funded by the Partnership, and the Partners shall bear their own
attorneys fees, during the appraisal. A "qualified appraiser" means any
M.A.I. appraiser who has had over fifteen (15) years of experience in
valuing commercial real estate in Los Angeles, California.
5.11 PROPERTY DEADLOCK. Notwithstanding the provisions of Sections 5.9
and 5.10, if (A) either Partner Group desires to sell or otherwise dispose of
any Property at any time after the expiration of thirty-six (36) months after
the completion of such Property if 95% Stabilization (as defined in Exhibit H)
has not occurred by such date and such Partner Group does not then have the
right to dispose of such Property pursuant to the Managing General Partner Sale
Right or the Mack-Cali Sale Right (as appropriate) under Section 5.10(iv), (B)
on or after the date on which 95% Stabilization of a Property has occurred,
either Partner Group desires to sell or otherwise dispose of such Property and
such Partner Group does not then have the right to dispose of such Property
pursuant to the Mack-Cali Sale Right or the Managing General Partner Sale Right
(as appropriate) under Section 5.10(iv), or (C) there is a dispute as to whether
any Major Decision (other than those described in the last sentence of Section
5.10(i)) should be Approved (or reasonably Approved) by the Partners with
respect to such Property (the events referred to in the preceding clauses (A),
(B) and (C) of this Section 5.11 are individually referred to as a "Property
Deadlock"), the resolution of such Property Deadlock shall only be made pursuant
to this Section 5.11.
(a) If a Property Deadlock occurs, either of the Highridge
Partners or the Mack-Cali Partners (the "Proponent Group") (provided no Partner
in such Partner Group shall be a Terminated Partner, shall have committed a
Performance Default with respect to such Property, or shall have committed a
Removal Default, and, PROVIDED, FURTHER, that no prior election to sell or
otherwise dispose of such Property shall have been made and be pending under
Section 5.10(iv) or otherwise shall have been Approved by the Partners and be
pending), may give the other Partner Group (the "Respondent Group") notice (the
"First Offer Notice") setting forth a gross value for such Property (the
"Proponent Group First Offer Price").
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Within ten (10) Business Days after receiving the First Offer Notice, the
Respondent Group may give notice to the Proponent Group (the "Appraisal Notice")
electing to establish the gross value of the Property by appraisal (in lieu of
using the Proponent Group First Offer Price). In order for the Appraisal
Notice to be effective, the Appraisal Notice must both (1) appoint the first of
the three qualified appraisers who will establish the gross value of the
Property (including any reserves of the Partnership and any Investment Entity
allocable to such Property) by appraisal (the "Appraised First Offer Price"),
and (2) elect one of the following procedures:
(i) BUY-OUt. If elected by the Respondent Group, the Respondent
Group irrevocably elects to purchase the Proponent Group's interest in the
Property for the amount the Proponent Group would receive if the Property
were sold for the Appraised First Offer Price and the net proceeds thereof
(after repayment of Partnership or Investment Entity debt allocable to such
Property and after deducting reasonable reserves for contingencies for such
Property) were paid and/or distributed by the Partnership to the Partners
pursuant to Sections 4.1 and 4.2 ("Proponent Group Interest Purchase
Price"); or
(ii) NON-BINDING APPRAISAL. If elected by the Respondent Group, the
Proponent Group shall have the option, exercisable by notice to the
Respondent Group given within thirty (30) days (or 60 days if the Proponent
Group is the Highridge Group and an All-Cash Election has been made under
Section 5.11(b)) after receiving the Appraised First Offer Price, to
purchase the interest of the Respondent Group in such Property for the
amount the Respondent Group would receive if the Property were sold for the
Appraised First Offer Price and the net proceeds thereof (after repayment
of Partnership or Investment Entity debt allocable to such Property and
after deducting reasonable reserves for contingencies for such Property)
were paid and/or distributed by the Partnership (the "Respondent Group
Interest Purchase Price"). If within the foregoing 30 or 60-day period (as
applicable), the Proponent Group does not elect to purchase the Respondent
Group's interest in such Property pursuant to the foregoing, then, the
Respondent Group shall have the option to elect by notice to Proponent
Group, given within the thirty (30) day period (or 60-day period if the
Respondent Group is the Highridge Partners and an All-Cash Election has
been made by the Mack-Cali Partners as provided in Section 5.11(b)) after
the expiration of such 30-day period (or 60-day period, as applicable), to
purchase the Proponent Group's interest in such Property for the Proponent
Group Interest Purchase Price. If within the foregoing thirty 30 or 60-day
period (as applicable), the Respondent Group does not elect to purchase the
Proponent Group's interest in such Property pursuant to the foregoing, then
the Proponent Group shall have the right to unilaterally cause the sale of
the Property (without the Approval of any other Partner being required) for
a price not less favorable to the Partnership than the Appraised First
Offer Price. The Proponent Group shall have one hundred twenty (120) days
to close such sale (which period shall be extended to one hundred eighty
(180) days if a binding, non-contingent, sale contract has been executed
prior to expiration of such 120 day period).
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If an Appraisal Notice is timely given by the Respondent Group within ten
(10) Business Days after receiving a First Offer Notice, the Proponent Group
shall, within five (5) Business Days after receiving such Appraisal Notice,
appoint a second appraiser to establish the Appraised First Offer Price as set
forth above. If the Proponent Group does not timely appoint the second
appraiser, the value established by the first appraiser shall control. Within
five (5) Business Days after the first appraiser receives notice of the identity
of the second appraiser, the first and second appraisers shall appoint a third
appraiser. Within ten (10) business days after the third appraiser is
appointed, the appraisers shall issue to the Proponent Group and the Respondent
Group their determination of the Appraised First Offer Price. In the case of a
dispute among the three appraisers as to value, the value established by the
third appraiser shall be the Appraised First Offer Price for the purpose of this
Section 5.11 (but the Appraised First Offer Price shall not exceed the highest,
or be less than the lowest, value established by the other two appraisers). The
cost of the appraisal shall be borne 50% by the Proponent Group and 50% by the
Respondent Group.
If an Appraisal Notice is not timely given by the Respondent Group within
the ten (10) Business Day period prescribed above, then the Respondent Group
shall have thirty (30) days (or sixty (60) days if the Highridge Partners are
the Respondent Group and an All-Cash Election has been made by the Proponent
Group) after receiving the First Offer Notice to elect, by giving notice to the
Proponent Group, to purchase the Proponent Group's interest in the Property for
the amount the Proponent Group would receive if the Property were sold for the
Proponent Group's First Offer Price and the net proceeds (after repayment of
Partnership and Investment Entity debt allocable to the Property and after
deducting reasonable reserves for contingencies for such Property) were
distributed and/or paid by the Partnership pursuant to Sections 4.1 and 4.2
("Non-Appraisal Interest Purchase Price") to the Partners and, except as
provided in Section 5.11(c) below, the Respondent Group shall have sixty (60)
days thereafter to close on the purchase of the Proponent Group's interest in
the Property. If the Respondent Group fails to elect to purchase the interest
of the Proponent Group within the 30- or 60-day period (as applicable) after
receiving the First Offer Notice as specified above, the Proponent Group may
unilaterally cause the sale of the Property for a price not less favorable to
the Partnership than the Proponent Group's First Offer Price. In such event,
the Proponent Group shall have one hundred twenty (120) days after the
expiration of the specified 30- to 60-day period (as applicable) to close such
sale of the Property (which period shall be extended to one hundred eighty (180)
days if a binding, non-contingent, sale contract has been executed prior to the
expiration of the foregoing 120-day period).
(b) The Respondent Group or Proponent Group that elects to
purchase the other Partner Group's interest in a Property following invocation
of the first-offer procedure of this Section 5.11 shall have sixty (60) days
after the election to close the purchase of such interest in such Property,
PROVIDED, HOWEVER, that if: (x) the Mack-Cali Partners are the Proponent Group
and state in the First Offer Notice, or (y) the Mack-Cali Partners are the
Respondent Group and state in the Appraisal Notice, that they elect not to
permit deferred payment terms for the Highridge Partners as purchaser (an
"All-Cash Election"), then the Highridge Partners shall have sixty (60) days
(instead of 30 days) after the purchase price is established for the Mack-Cali
Partners' interest in such Property to elect to purchase and ninety (90) days
thereafter to close such purchase. If the Highridge Partners are
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the purchaser of the Mack-Cali Partners' interest in a Property and the
Mack-Cali Partners did not make an All-Cash Election, the terms of the purchase
shall be as follows: 25% of the interest purchase price shall be paid in cash as
the down payment at the closing, and the balance of the purchase price shall be
payable one year after closing. If the Mack-Cali Partners are the purchaser of
the Highridge Partners' interest in a Property, or if the Mack-Cali Partners
made an All-Cash Election, the entire purchase price for such interest shall be
paid at closing. At closing, (i) the Partnership shall distribute the Property
to the purchasing Partner Group, (ii) the selling Partner Group shall be deemed
to have received a distribution of the Proponent Group Interest Purchase Price
or the Respondent Group Interest Purchase Price (as applicable, depending on
whether the selling Partner Group is the Proponent Group or the Respondent
Group) under this Agreement, and (iii) the purchasing Partner Group shall be
deemed to have received a distribution of the Proponent Group First Offer Price
or the Appraised First Offer Price (as applicable), less allocable the debt, and
less the purchase price payable to the selling Partner Group. The purchasing
Partner Group shall be obligated to pay any release price to the Partnership's
or Investment Entity's lenders as necessary to permit the purchasing Partner
Group to own the Property if the debt encumbering the Property is not assumable
by the purchasing Partner Group, PROVIDED, HOWEVER, that if (A) the Highridge
Partners purchase the Mack-Cali Partners' interests in a Property, and (B) the
Mack-Cali Partners did not make an All-Cash Election, the Mack-Cali Partners
shall lend or arrange to have lent (subject in each case to any obligation not
to breach loan covenants on their debt and that of their Affiliates) to the
Highridge Partners 75% of such release price for a one-year period on a
non-recourse basis (subject to standard recourse carve-outs for environmental
liability and wrongful acts) at a rate equal to the greater of 100 basis points
over the Prime Rate or 300 basis points over LIBOR. If the purchasing Partner
Group wrongfully fails to close timely the purchase of the selling Partner
Group's interest in the Property, the selling Partner Group shall have as its
exclusive remedies for such failure the right to assume complete control over
the disposition of that Property (without the Approval of any other Partner
being required) and the right to purchase the breaching Partner Group's interest
in that Property (and receive a distribution of that Property in respect
thereof) for 80% of the amount that the breaching Partner Group would have
received if the Property were sold for the Proponent Group First Offer Price or
Appraised First Offer Price (as applicable), and the damage provisions of
Section 9.2 shall not apply to such breach.
The Proponent Group Interest Purchase Price, the Respondent Group
Interest Purchase Price and the Non-Appraisal Interest Purchase Price shall be
readjusted to account for the release of any reserves for contingencies
previously reducing such amounts when such amounts become available for
distribution to the Partners.
(c) Notwithstanding anything in this Agreement to the contrary, by
notice to Highridge GP given by the Mack-Cali Limited Partner at any time at
least five (5) Business Days before a payment of purchase price to the Highridge
Partners is required under this Section 5.11, the Mack-Cali Limited Partner may
elect to satisfy all or any portion of its obligation to pay the purchase price
payable to the Highridge Partners under this Section 5.11 by the delivery of
shares of common stock in Mack-Cali Realty that may be sold immediately on a
national securities exchange without further registration or restriction and
that constitute marginable securities (such shares to be valued at the average
closing price per share on a
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national securities exchange for the ten trading days preceding the date that is
five (5) Business Days prior to the date on which the payment in shares is being
made); PROVIDED, HOWEVER, that the Highridge Partners shall have the option,
exercisable by Highridge GP giving notice to the Mack-Cali Limited Partner prior
to the time such Mack-Cali Realty shares are issued to the Highridge Partners,
to contribute all of their interests in the Partnership to Mack-Cali Realty,
L.P. and to receive operating partnership units in Mack-Cali Realty, L.P. in
lieu of receiving such shares in Mack-Cali Realty (such operating partnership
units to be subject to the one-year holding period before conversion or
redemption that is customarily applicable to such units that are issued to
Persons contributing property in exchange therefor).
ARTICLE 6
BOOKS, RECORDS AND BANK ACCOUNTS
6.1 BOOKS AND RECORDS. At Partnership expense, the Managing General
Partner shall cause to be kept (at the office of the Partnership referred to in
Section 1.3.2) accurate, just and true books of account, in which shall be
entered fully and accurately each and every transaction of the Partnership. The
books and records of the Partnership shall separately identify, and account for,
the Partnership's investment in, and the Profits, Losses, Gain or Loss or
Disposition and distributions attributable to, each of the Investments,
Properties and each Investment Entity. The books shall be kept in accordance
with the Partnership's method of reporting for federal income tax purposes
(which shall be the accrual method of accounting). Tax accounting elections,
including methods of depreciation and deduction or capitalization of interest,
taxes and insurance premiums during a construction period, if any, shall be made
as the Mack-Cali Limited Partner shall reasonably Approve. The Partnership's
financial statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied.
6.2 BANK ACCOUNTS. The funds of the Partnership shall be deposited in the
name of the Partnership, in such bank account or accounts as the Partners shall
reasonably Approve and reasonably direct from time to time. Such funds shall be
invested by the Managing General Partner, or by the Mack-Cali Limited Partner at
its election made by giving notice to the Managing General Partner, in such high
quality, short term instruments as shall be reasonably Approved by the Partners
(which may or may not bear interest as the Partners shall reasonably Approve).
Each of the Managing General Partner and any Co-General Partner, unless it has
become a Terminated Partner or has committed a Removal Default, shall be
individual signatories on all Partnership accounts, with the signature of any
such Partner or its designee being sufficient to effect withdrawals.
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ARTICLE 7
TRANSFERS OF PARTNERSHIP INTERESTS
7.1 RESTRICTIONS ON TRANSFER. (a) Except as hereinafter provided, no
Partner shall be permitted to Transfer all or any part of its interest in the
Partnership or permit any Transfer of ownership interests in such Partner or, in
the case of the Highridge Partners, in the partners, members or shareholders of
such Partners (or in Persons owning, directly or indirectly through tiered
entities, an interest in such Partners). Any attempted or actual Transfer shall
be null and void AB INITIO and of no force and effect. Notwithstanding any
other provision of this Agreement, no interest in the Partnership or ownership
interest in any Partner may be pledged or hypothecated other than to its
Affiliates without the Approval of the Partners.
(b) Notwithstanding the foregoing, a Partner may Transfer all or part
of its interest in the Partnership, or allow the Transfer of ownership interests
in such Partner or in direct or indirect the partners, members or shareholders
thereof, as follows:
7.1.1 To the Partnership or another Partner or a partner, member,
shareholder or Affiliate of a Partner;
7.1.2 If the proposed transferor is a natural Person, by
succession or testamentary disposition upon his death;
7.1.3 If the proposed transferor is a natural Person, to a trust
for the benefit of any Family Member with respect to the proposed transferor,
but only if the proposed transferor retains Control of the interest so
transferred;
7.1.4 Any other Transfer which is Approved by the Partners
(excluding any Partner that is a Terminated Partner or who has committed a
Removal Default); and
7.1.5 Ownership interests in a Highridge Partner (or in the direct
or indirect partners, members or shareholders of the Highridge Partners) may be
Transferred (but not pledged or hypothecated to Persons other than Affiliates of
the Highridge Partners) without restriction if, at all times after such Transfer
of interests: (a) John S. Long, Eugene S. Rosenfeld, Steven A. Berlinger and/or
their Family Members continue to own (directly or indirectly through tiered
Entities) over 50% of the interests in capital and profits of each Highridge
Partner, and (b) John S. Long, Eugene S. Rosenfeld and/or Steven A. Berlinger
continue to have voting control (whether directly or through tiered Entities) of
each Highridge Partner with respect to Major Decisions;
7.1.6 The interests in the Partnership of the Mack-Cali Partners,
and ownership interests in the Mack-Cali Partners, may be Transferred without
restriction to a REIT (or other Entity) Controlled by the Mack-Cali Partners or
their Affiliates or successors;
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The following shall be conditions to any Transfer of any interest in the
Partnership pursuant to this Article 7: (i) the transferee shall assume in
writing each of the obligations of the transferor to the Partnership; (ii) such
transferee shall agree in writing to be bound by each of the terms and
conditions of this Agreement; (iii) the transferee shall deliver to the
Partnership instruments of assumption and security reasonably Approved by the
Partners other than the Partner Group making the Transfer, for the payment and
performance of all obligations of or attendant to the interest so transferred
and assumed; and (iv) the requirements of Sections 7.4 and 7.5 shall be
satisfied.
7.2 NO TAG-ALONG RIGHTS. There shall be no right of any Partner or its
Affiliates to participate in any Transfer permitted by another Partner under
this Agreement.
7.3 BANKRUPTCY OR DISSOLUTION OF PARTNERS. The Bankruptcy or dissolution
(without reconstitution within sixty (60) days thereafter) of any General
Partner (whether or not the Managing General Partner) shall dissolve (and
require the liquidation of) the Partnership, except as otherwise provided in
Section 8.4. The Bankruptcy or dissolution of a Limited Partner shall not
dissolve the Partnership. Upon the occurrence of a Bankruptcy or the
dissolution (without reconstitution within sixty (60) days thereafter) of any
Partner, such Partner shall become a Terminated Partner under Section 7.9, and
the trustee in Bankruptcy, receiver or other legal representative of the
Bankrupt Partner or other legal representatives of the dissolved Partner, shall
have all the rights of an assignee of the Partner, including the same right
(subject to the same limitations) as the Bankrupt or dissolved Partner would
have had under the provisions of Section 7.1 to assign its interest in the
Partnership, subject to the substitution rules of Section 7.4 and the provisions
of Section 7.9.
7.4 SUBSTITUTION OF PARTNER. Subject to the restrictions and Approval
rights of the Partners as set forth in Section 7.1 and the provisions of Section
7.5, the assignee of any Transfer by a Partner (a "Partner Assignee") shall
become a substitute Partner only if (i) the assignor Partner so provides in an
instrument of assignment, (ii) the Partner Assignee agrees in writing to be
bound by the provisions of this Agreement and of the Articles and any amendments
hereto and thereto and executes and delivers a copy of this Agreement
(appropriately modified to take account of the Transfer), and (iii) each Partner
Approves such substitution, which Approval may be given or withheld in its
reasonable discretion. If the foregoing conditions (and the other provisions of
this Article 7) are satisfied, the Partner Assignee shall become a substitute
Partner upon payment to the Partnership of all costs and expenses of reviewing
the instrument of assignment, if appropriate, and, if required by law, an
amendment to the Certificate to reflect such substitution. In such event, if
and as required by law, the Managing General Partner shall prepare or cause to
be prepared an amendment to the Certificate to be signed by the Managing General
Partner and, to the extent required, by the Partner Assignee. The Managing
General Partner shall attend to the due execution and filing of an amendment to
the Certificate, if such amendment is required. Unless admitted to the
Partnership as a Partner as provided in this Agreement, no Person shall be
considered a Partner, and the Partnership, each Partner and any other Persons
having business with the Partnership need deal only with the Partners so
admitted and shall not be required to deal with any other Person by reason of an
assignment or pledge by a Partner (or realization of a pledge) or by reason of
the death of a Partner (the Partners hereby confirming that no pledge or
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hypothecation of interests in the Partnership or interests in the Partners shall
be permitted to Persons who are not Affiliates of a Partner without the Approval
of the Partners). In the absence of the substitution of a Partner for a
deceased Partner as provided in Section 7.1(a) or this Section 7.4, any payment
to the executors, administrators or personal representatives of such deceased
Partner shall acquit the Partnership of all liability with respect to such
payment to any other Persons who may be interested in such payment by reason of
the death of such Partner. A Partner Assignee of an interest in the Partnership
who is not admitted as a substitute Partner as provided in this Section 7.4
shall be entitled to receive the economic benefits of the interest purported to
be Transferred, but shall not be considered a Partner for any purposes and shall
have no Approval rights under this Agreement and none of the rights of a Partner
under this Agreement or under the Act.
7.5 ADDITIONAL TRANSFER RESTRICTIONS.
7.5.1 Notwithstanding any provision of this Agreement to the
contrary, and subject to the limitations in Sections 7.1 through 7.4, a
Partner's ability to Transfer all or any portion of its Partnership interest, or
ownership interests in such Partner, or, in the case of any Highridge Partner,
to permit the Transfer of direct or indirect (through one or more
intermediaries) ownership interests in such Partner relating specifically or
generally to such Partner's interest in the Partnership, shall be subject to the
following additional restrictions:
7.5.1.1 No Transfer of all or any portion of such interest
shall be effective unless (i) such Transfer complies with the Transfer
restrictions in all agreements to which the Partnership, any Investment Entity
or such Partner is a party, and (ii) such interest is registered under the
Securities Act and any applicable state securities laws, or an exemption from
registration is available, and, for any direct Transfer of an interest in the
Partnership, the Partnership shall have received an opinion of counsel,
reasonably Approved by the Partners other than the Partner making the Transfer,
to such effect (unless the requirement that the Partnership receive such legal
opinion is waived by the Approval of the Partners other than the Partner making
the Transfer);
7.5.1.2 No Partner shall be permitted to Transfer any
portion of its Partnership interest or take any other action which would cause
the Partnership to be (i) treated as a "publicly traded partnership" within the
meaning of Code Section 7704 or (ii) classified as a corporation (or as an
association taxable as a corporation) within the meaning of Code Section
7701(a);
7.5.1.3 No Partner shall be permitted to Transfer all or
any portion of its Partnership interest or to take any other action (including,
in the case of any Partner which is a corporation, limited liability company or
partnership or a partner, member or shareholder of a partnership or limited
liability company which is a Partner, a Transfer of any interest in such
partnership, limited liability or corporation or in the partners, members or
shareholders thereof) which would result in a termination of the Partnership as
a partnership within the meaning of Code Section 708(b)(1)(B) (a "Tax
Termination") unless such Partner indemnifies the other Partners against any
adverse tax consequences suffered by the Partnership as a result thereof;
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7.5.1.4 Unless arrangements concerning withholding are
reasonably Approved by the Partners other than the Partner making the Transfer
(if such withholding is required of the Partnership), no Partner shall be
permitted to Transfer all or any portion of its interest in the Partnership to
any Person, unless such Person is a United States Person as defined in Code
Section 7701(a)(30) and is not subject to withholding of any federal tax; and
7.5.1.5 No Partner shall be permitted to Transfer all or
any portion of its Partnership interest if such Transfer will (i) cause the
assets of the Partnership or any Investment Entity to be deemed to be "plan
assets" under ERISA or its accompanying regulations or the Code or (ii) result
in any "prohibited transaction" under ERISA or its accompanying regulations
affecting the Partnership or any Investment Entity.
7.5.2 Any purported transfer or any other action taken in
violation of this Section 7.5 shall be void AB INITIO.
7.6 TRANSFER INDEMNIFICATION AND CONTRIBUTION PROVISIONS.
Each Partner shall indemnify, defend and hold the Partnership and each
other Partner, and the shareholders, partners, employees, agents, members and
Affiliates thereof, harmless from any Liabilities in any way arising from the
failure of a Transfer of any interest in the Partnership (including any Transfer
of an interest in any partners, members or shareholders of the indemnifying
Partner, or in the direct or indirect partners, members or shareholders therein,
and regardless of whether occurring before or after the date of this Agreement)
to comply with all applicable federal and state securities laws, including all
registration or qualification requirements and anti-fraud requirements, or
arising from the impact of such Transfer upon compliance of the Partnership and
its Partners with those securities laws in connection with any previous Transfer
of an interest in the Partnership. Should the preceding indemnity be
unenforceable to any extent, then, to such extent the Partner otherwise required
to so indemnify the Partnership and the other Partners shall be obligated to
contribute to any loss, liability, cost or expense resulting from the actions,
omissions or events set forth in the above indemnification to the extent of its
responsibility therefor, as determined by the trier of fact.
7.7 BASIS FOR RESTRICTIONS AND REMEDIES. The Partners acknowledge that
the relationship of each Partner to the other Partners is a personal
relationship and that the restrictions on the power of each Partner to withdraw
or Transfer its interest in the Partnership or permit the Transfer of ownership
interests in such Partner (and in indirect and direct owners of the Highridge
Partners), and the remedies of this Agreement, including Section 7.9 (and the
purchase and redemption rights contained therein), (i) are necessary to preserve
such personal relationship and safeguard the investment of the other Partners in
the Partnership, (ii) were a material inducement to the other Partners entering
into this Agreement, and (iii) shall be enforceable notwithstanding the
Bankruptcy of any Partner or its Affiliates, or any applicable prohibition
against restraints on alienation.
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7.8 REPRESENTATIONS, WARRANTIES AND COVENANTS.
Each Partner hereby represents and warrants to each of the other
Partners as follows:
7.8.1 Such Partner, if not a natural Person, is duly formed and
validly existing under the laws of the jurisdiction of its organization with
full power and authority to enter into this Agreement and to conduct its
business to the extent contemplated in this Agreement;
7.8.2 This Agreement has been duly authorized, executed and
delivered by such Partner and constitutes the valid and legally binding
agreement of such Partner, enforceable in accordance with its terms against such
Partner, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium and other similar laws relating to creditors' rights generally, by
general equitable principles and by any implied covenant of good faith and fair
dealing;
7.8.3 The execution and delivery of this Agreement by such Partner
and the performance of its duties and obligations hereunder do not result in a
breach of any of the terms, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, credit agreement, note or other
evidence of indebtedness, or any lease or other agreement, or any license,
permit, franchise or certificate to which such Partner or any of its Affiliates
is a party or by which any of them are bound or to which any of their properties
are subject, or require any authorization or approval under or pursuant to any
of the foregoing, or violate any statute, regulation, law, order, writ,
injunction, judgment or decree to which such Partner is subject;
7.8.4 Neither such Partner nor any of its Affiliates is in default
(nor has any event occurred which with notice, lapse of time, or both, would
constitute a default) in the performance of any obligation, agreement or
condition contained in any indenture, mortgage, deed of trust, credit agreement,
note or other evidence of indebtedness or any lease or other agreement, or any
license, permit, franchise or certificate, to which it is a party or by which it
is bound or to which any of its properties are subject, nor is it in violation
of any statute, regulation, law, order, writ, injunction, judgment or decree to
which it is subject; but only, in each case, if such default or violation would
materially and adversely affect such Partner's ability to carry out its
obligations under this Agreement;
7.8.5 There is no litigation, investigation or other proceeding
pending or, to the knowledge of such Partner, threatened against such Partner or
any of its Affiliates which, if adversely determined, would materially and
adversely affect such Partner's ability to carry out its obligations under this
Agreement, and, to the knowledge of such Partner and its Affiliates, (i) there
is no lawsuit pending against such Partner or its Affiliates alleging fraud
against them and (ii) there is no criminal investigation or indictment pending
against such Partner or its Affiliates;
7.8.6 To the knowledge of such Partner and such Partner's
Affiliates, no consent, approval or authorization of, or filing, registration or
qualification with, any court or
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governmental authority on the part of such Partner is required for the execution
and delivery of this Agreement by such Partner and the performance of its
obligations and duties hereunder;
7.8.7 Such Partner is acquiring its interest in the Partnership
for investment purposes and without a view toward its resale or distribution;
7.8.8 Such Partner is sophisticated in real estate transactions,
has been granted access to such financial and other material information
concerning the Partnership, its purchase of the initial Investments and
Properties, the Initial Development Plan and all Due Diligence Materials with
respect to the foregoing as it has requested or may require in connection with
its investment in the Partnership, is able, either directly or through its
agents and representatives, to evaluate such information and any Due Diligence
Materials provided or made available to it from time to time hereunder, and is
able to bear the financial risk of loss presented by an investment in the
Partnership (which includes the risk of loss of such Partner's entire
investment), particularly in light of the risks that would be disclosed by a
detailed analysis of the Initial Development Plan and any Due Diligence
Materials with respect to the initial Investments or Properties (its access to
which, to the full extent such Partner has requested, hereby is confirmed by
such Partner) and the fact that the initial Investments are subject to
unpredictable real estate values, and the other risks of owning equity or debt
investments concerning real estate;
7.8.9 Such Partner has consulted with independent counsel of its
choice and recognizes that, although Battle Fowler LLP ("BFLLP") serves as
special counsel to Affiliates of both Partner Groups on unrelated matters, BFLLP
has not represented the Highridge Partners or their Affiliates in connection
with the Partnership, is acting as the attorney for only the Mack-Cali Partners
in connection with the preparation and execution of this Agreement and the
formation of the Partnership and Investment Entities, and has not provided tax
or other legal advice to the Highridge Partners or their Affiliates in
connection therewith (the Highridge Partners and their Affiliates are relying on
Mark Abramson, Esq. as their counsel in connection therewith). Each Partner
hereby waives all potential conflicts of interest resulting from BFLLP's
representation of Mack-Cali Partners hereunder, of the Highridge Partners (or
their Affiliates) and the Mack-Cali Partners (or their Affiliates) in unrelated
transactions, and resulting from BFLLP's or Mark Abramson's representation of
the Partnership or any Investment Entity in the future on matters for which
BFLLP or Mark Abramson is retained as counsel by the Partnership or such
Investment Entity, PROVIDED, HOWEVER, that BFLLP shall not represent the
Partnership, any Partner, or any Partner's Affiliates in any adversarial
controversy among the Partnership, and/or any Partner or any Partner's
Affiliates (and no conflict waiver has been issued with respect to such
representation by BFLLP or by any Partner or its Affiliates in any such
controversy);
7.8.10 Such Partner is aware that transfers of interests in
the Partnership and within such Partner are subject to the restrictions set
forth in Article 7 hereof and that an investment in the Partnership is a
long-term investment, without liquidity;
7.8.11 Such Partner is not relying upon any of the other
Partners, nor any of their Affiliates as such Partner's agent to assess the
merits or risks of this investment, and such
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Partner understands that no projection of performance shall be actionable if not
achieved except in the circumstances specifically set forth in this Agreement;
7.8.12 None of the other Partners is acting as the
representative or agent or in any other capacity, fiduciary or otherwise, on
behalf of such Partner in connection with the Partnership, any Investment
Entity, the Investments or the other matters referred to in this Agreement;
7.8.13 None of the other Partners nor any of the other
Partner's agents or representatives has made any binding representations,
warranties, projections or assurances to such Partner with respect to the
Partnership, the Investments, the performance of the Partnership and the
Investments, the safety or the risks involved and/or the tax or economic
consequences thereof;
7.8.14 Such Partner is aware that the other Partner and/or the
other Partner's Affiliates now and in the future will be, and in the past have
been, engaged in businesses which are competitive with that of the Partnership
and/or the Investments, and that, no Partner or its Affiliates is required to
bring any Investments opportunities to the attention of the Partnership or any
Partner (or their Affiliates) for investment.
7.8.15 Such Partner is aware that compensation and
reimbursements may be payable to Affiliates of the Partners by the Partnership,
as addressed in this Agreement, including pursuant to the Approved Budget
attached as Exhibit C;
7.8.16 Such Partner understands that the federal, state and
local tax liability of such Partner with respect to the taxable income and gain
allocated to such Partner hereunder for any year may exceed the cash
distributions from the Partnership to such Partner and, if Tax Payment Loans are
unavailable for any reason, such Partner may have to look to sources other than
distributions from the Partnership to pay such tax;
7.8.17 Such Partner understands that it may lose its Approval
rights (and be subject to having such Partner's interest purchased by the
Partnership in certain circumstances) under Section 7.9 and the other provisions
of this Agreement if the Partner becomes a Terminated Partner or has committed a
Removal Default or Performance Default, and that it has waived its rights to a
trial by jury in any dispute concerning this Agreement or the Partnership under
Section 9.4;
7.8.18 Except as specifically provided in this Section 7.8,
such Partner is not relying upon any representation or warranty of any other
Partner, the Partnership, any Investment Entity or any of their respective
Affiliates, express or implied, oral or written, other than those contained in
this Agreement;
7.8.19 No Partner is required to cause the Controlling Persons
of such Partner to devote any specific portion of their time to Partnership
business other than as necessary to fulfill such Partner's obligations under
this Agreement, and such Controlling Persons are
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expected to spend substantial amounts of their time on activities that are
unrelated to the Partnership;
7.8.20 Such Partner understands that the Partnership and its
Partners are relying on the accuracy of the representations set forth in this
Section 7.8 (or contained elsewhere in this Agreement) in entering into this
Agreement without requiring that the interests in the Partnership be registered
under federal or state securities laws;
7.8.21 With respect to the El Segundo Land, the Highridge
Partners make the representations and warranties set forth on Exhibit H; and
7.8.22 Each Partner Group represents that the ownership
interests in such Partner Group (and, in the case of the Highridge Partners, in
the direct and indirect owners thereof through all tiered Entities) is as set
forth on Exhibit E, and each of the Highridge Partners represents that the
partnership agreement or operating agreement pursuant to which each of the
Highridge Partners (and each of the direct and indirect, through one or more
intermediaries, partners or members thereof) is operated will at all times
during the term of this Agreement contain Transfer restrictions that prohibit a
violation of the Transfer restrictions contained in this Agreement.
7.9 TERMINATED PARTNER; REMOVAL DEFAULTS; PERFORMANCE DEFAULTS; PURCHASE
RIGHTS; CONTROL CHANGE NOTICES.
7.9.1 When a Partner becomes a Terminated Partner or is a Partner
in a Partner Group in which any Partner has committed a Removal Default, such
Partner shall automatically cease to have any Approval or voting rights under
this Agreement with respect to the Partnership and the Investment entities (and
each Property and Investment), except as provided in Section 5.1.6.1. When a
Partner becomes a Terminated Partner, (i) such Partner shall cease to be a
General Partner as provided in Section 7.9.5, (ii) upon the election of the
Partner Group who is not the Terminated Partner (the "Electing Partner"), given
by notice from the Electing Partner to the Terminated Partner (a "Purchase
Notice") at any time after a Partner becomes a Terminated Partner, the
Terminated Partner shall sell the Terminated Partner's entire interest in the
Partnership to the Partnership (or to the Electing Partner Group or its designee
as set forth in Section 7.9.4), at a price (the "Buy-Out Price") to be
determined as hereinafter provided. The Electing Partner shall notify the
Terminated Partner in writing of its election (exercisable at any time after a
Partner becomes a Terminated Partner) under this clause (ii); and (iii) the
other provisions applicable by reason of becoming a Terminated Partner
(including Sections 7.9.5 and 8.1.1) shall apply.
If a Purchase Notice has been given under clause (ii) above, the Electing
Partner and the Terminated Partner shall attempt to agree upon the Buy-Out Price
of the Terminated Partner's entire interest in the Partnership. If such
agreement is not reached within thirty (30) days after the notice of election is
given, the Terminated Partner, on the one hand, and the Electing Partner, on the
other hand, shall each, within ten (10) additional days, appoint an M.A.I.
accredited appraiser by notice to the other. The two appraisers so appointed
shall, within five (5) additional days, appoint a third M.A.I. accredited
appraiser and the three
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appraisers shall meet to determine the gross proceeds which would have been
received by the Partnership if the Partnership and each Investment Entity sold,
on the Termination Date, all of their assets (other than interests in each
other) for cash at their then fair market value, less all costs and expenses of
sale, including closing costs, real estate brokerage commissions and fees, title
insurance premiums and escrow fees, appropriate reserves and legal and other
expenses incident to such sale (the "Appraised Value"). The Appraised Value
shall equal the amount determined by the three appraisers, or if there is a
dispute among the three appraisers as to value, the value established by the
third appraiser shall be the Appraised Value (but the Appraised Value shall not
exceed the highest, or be less than the lowest, value established by the other
two appraisers). The cost of such appraisal shall be borne 50% by the Electing
Partner and 50% by the Terminated Partner. The Buy-Out Price shall equal
(i) the amount the Terminated Partner would receive under Sections 4.1 and 4.2
if all of the assets of the Partnership and each Investment Entity (other than
interests in each other) were sold to a third party for the Appraised Value and
the Partnership were liquidated, after paying creditors and withholding
therefrom any amounts payable by the Terminated Partner under Sections 4.3.2,
5.5.3 and 9.2 and the other provisions of this Agreement, minus (ii) in the case
of a Major Default, 10% of the Buy-Out Price (determined before adjustment
thereof under this clause (ii)). If the Partnership redeems the Terminated
Partner, there shall be no discount in the Buy-Out Price for any encumbrances to
which such redeemed interest is subject, but the Partnership shall apply the
proceeds of such redemption to satisfy such encumbrances instead of making
distributions thereof to the Terminated Partner to the extent required by law
(such distributions being deemed for all purposes to have been made to the
Terminated Partner by the Partnership and then paid by the Terminated Partner to
satisfy such encumbrances). If the interest of the Terminated Partner is
purchased by the Electing Partner (or its designee), and not by the Partnership,
pursuant to Section 7.9.4, the Buy-Out Price for the Terminated Partner's
interest as determined above shall be reduced to the extent the Electing Partner
or its designee acquires the Terminated Partner's interest subject to (or
assumes) the encumbrances on such interest at the closing. Within ten (10) days
following the determination of the Buy-Out Price, the Electing Partner may
elect, in its sole and absolute discretion, by notice to the Terminated Partner,
to rescind any notice pursuant to this Section 7.9.1, in which event the right
to elect to cause the Terminated Partner to sell its interest to the Partnership
or to the other Partner (or its designee) pursuant to this Section 7.9.1 as a
result of the event(s) which led to the Purchase Notice (but not any future
event which would authorize any such notice) shall no longer be of any force or
effect.
7.9.2 The purchase and sale of the Terminated Partner's interest
in the Partnership pursuant to this Section 7.9 shall be consummated on or
before the thirtieth (30th) day following the date upon which the Buy-Out Price
was determined (whether by agreement of the Terminated Partner and the Electing
Partner or by appraisal), at the offices of the Partnership, or at such other
time and place as may be agreed upon by the Terminated Partner and the Electing
Partner. At the closing of such purchase and sale (the "Closing Date"), the
Terminated Partner shall execute and deliver to the Partnership (or the Electing
Partner or its designee, as appropriate) such instruments of assignment,
conveyance and transfer as the Electing Partner may reasonably deem necessary or
appropriate to consummate the purchase and sale, and the purchaser shall pay
cash to the Terminated Partner in the amount of the Buy-Out Price (adjusted for
encumbrances to the extent provided in Section 7.9.1).
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7.9.3 Following the Closing Date, (a) the Partnership shall
indemnify and hold the Terminated Partner harmless from and against all
liabilities of the Partnership arising from acts taken or omitted to be taken by
the Partnership after the date of the closing of the sale of the Terminated
Partner's interest to the Partnership (or to the Electing Partner or its
designee, as appropriate), and (b) the indemnity and liability provisions of
Sections 3.5.4 and 5.5 shall continue to apply with respect to the Terminated
Partner and its Affiliates.
7.9.4 The Partnership shall fund the purchase of the Terminated
Partner's interest pursuant to this Section 7.9 by borrowings or, if the
remaining Partner so Approves, by additional Capital Contributions from the
Electing Partner, such borrowings or Capital Contributions to occur when needed
to make the required payment of the Buy-Out Price. If the Electing Partner so
Approves, the interest of the Terminated Partner shall be purchased by the
Electing Partner (or its designee, which designee shall be admitted as a Partner
hereunder simultaneously with the closing of such purchase of the Terminated
Partner's interest in order to avoid a termination of the Partnership, if the
remaining Partner so elects by giving notice thereof to the Terminated Partner
prior to such closing).
7.9.5 (a) The Mack-Cali Limited Partner shall have the right to
appoint a Co-General Partner by notice to the Highridge Partners at any time
after it has issued (or simultaneously with its issuance of) a Control Change
Notice to the Highridge Partners under this Section 7.9.5, and such Co-General
Partner shall automatically be admitted as a general partner of the Partnership
under the Act, and become a General Partner of the Partnership under this
Agreement, upon the Co-General Partner and each other Mack-Cali Partner
executing and delivering to all of the Partners an amendment to this Agreement
pursuant to which the Co-General Partner agrees to be bound by the terms of this
Agreement (such amendment need not be executed or Approved by any Highridge
Partner in order to be valid). The interest in the Partnership granted to any
Co-General Partner shall be as specified by notice to the Highridge Partners
from the Mack-Cali Limited Partner and shall reduce the interest in the
Partnership of the Mack-Cali Limited Partner accordingly. Any Co-General
Partner shall be an Affiliate of the Mack-Cali Limited Partner.
At any time after the Managing General Partner has been deemed to be a
Terminated Partner or to have committed a Removal Default under Section 5.9, the
Mack-Cali Limited Partner may elect, effective immediately upon the Mack-Cali
Limited Partner giving notice to the Highridge Partners, that the Co-General
Partner shall become the Managing General Partner and shall assume the Managing
General Partner's authority and responsibility in connection with the operation
of the Partnership (but the Managing General Partner shall retain Approval
rights to the extent set forth in Section 5.1.6.1). Such assumption shall be
effective, the Managing General Partner shall cease to be the Managing General
Partner and shall have its entire interest reconstituted from a General
Partner's interest to that of a Limited Partner having equivalent distribution
and tax allocation rights to that previously held by it as a General Partner,
the Co-General Partner shall become the Managing General Partner, and the
Partnership shall be reconstituted and continued and shall not dissolve, upon
the later to occur of (i) five (5) Business Days after the receipt by the
Managing General Partner of such notice from the Mack-Cali Limited Partner that
it has elected such assumption by the Co-
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General Partner pursuant to this Section 7.9.5 (together with any notice
described in Section 7.9.5(b), a "Control Change Notice"), or (ii) if the
Managing General Partner in good faith denies the assertion that it is a
Terminated Partner or that it has committed a Removal Default by giving notice
of such denial to the Mack-Cali Limited Partner within five (5) Business Days
after receipt by the Managing General Partner of a Control Change Notice, the
Determination Date for purposes of this Section 7.9.5, as determined pursuant to
the procedure described in Section 5.9. Notwithstanding anything to the
contrary contained in this Agreement, the Co-General Partner shall have the
right to cause the Partnership to borrow money at any time pursuant to any loan
agreement (and/or other documents entered into by the Managing General Partner
and/or its Affiliates in connection with such agreement) that has been Approved
by the Managing General Partner prior to the Managing General Partner becoming a
Terminated Partner or being deemed to have committed a Removal Default under
this Agreement, even if under such agreement (and/or such other documents), the
Managing General Partner and/or its Affiliates would have personal liability
with respect to the repayment of such borrowings (but the indemnity provisions
of Article 5 shall continue to apply with respect to the Highridge Partners and
any such borrowing).
(b) If the Managing General Partner is deemed to have
committed a Performance Default with respect to a Property or Investment under
Section 5.9, and the Mack-Cali Limited Partner has appointed a Co-General
Partner as provided in this Section 7.9.5, such Co-General Partner shall be
entitled to assume complete control over the construction, stabilization,
operation and disposition of such Property or Investment. If the Mack-Cali
Limited Partner has not appointed a Co-General Partner, the Mack-Cali Limited
Partner shall nonetheless have the rights set forth in Section 5.10(ii) with
respect to such Property or Investment. The Mack-Cali Limited Partner may give
notice to the Managing General Partner at any time after it in good faith
believes that the Managing General Partner has committed a Performance Default
stating that it believes that such Performance Default has occurred (such notice
shall constitute a "Control Change Notice" for purposes of this Agreement). The
change in control described in this Section 7.9.5(b) (and the rights of the
Mack-Cali Limited Partner under Section 5.10(ii) to control certain actions and
decisions) shall be effective upon the later to occur of (i) five (5) Business
Days after the receipt by the Managing General Partner of the Control Change
Notice with respect to such Performance Default, or (ii) if the Managing General
Partner in good faith denies the assertion that it has committed a Performance
Default by giving notice of such denial to the Mack-Cali Limited Partner within
five (5) Business Days after receipt by it of a Control Change Notice, the
Determination Date for purposes of this Section 7.9.5, as determined pursuant to
the procedure described in Section 5.9.
7.9.6 The Partners have agreed to the remedies contained in this
Section 7.9 for the reasons set forth in Section 7.7.
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ARTICLE 8
TERM, DISSOLUTION AND TERMINATION
8.1 EVENTS OF DISSOLUTION. The Partnership shall continue until DECEMBER
31, 2005, or such later date as is Approved by the Partners; PROVIDED, HOWEVER,
that dissolution and liquidation shall occur prior to that date upon the
occurrence of any one of the following events:
8.1.1 An election to dissolve the Partnership being made in
writing by the Approval of the Partners other than any Terminated Partner or
Partner who has committed a Removal Default;
8.1.2 The sale for cash, exchange or other disposition of all or
substantially all of the assets of the Partnership and each Investment Entity;
8.1.3 The Bankruptcy or dissolution (without reconstitution within
sixty (60) days thereafter) of any General Partner, unless the Partnership is
reconstituted and continued as provided in Section 8.4; or
8.1.4 Any other event resulting in the dissolution or liquidation
of the Partnership that is expressly described in this Agreement.
8.2 LIMITATION ON DISSOLUTION. Until the dissolution of the Partnership
otherwise occurs, no Partner shall voluntarily retire, resign or withdraw from
the Partnership, take any step voluntarily to dissolve itself or voluntarily
cause a dissolution of the Partnership, except as provided in this Agreement
(including Section 8.1).
8.3 LIQUIDATION AND WINDING UP.
8.3.1 If the Partnership is dissolved for any reason and is not
reconstituted pursuant to Section 8.4.1, each of the Mack-Cali Limited Partner
and the Managing General Partner, unless such Partner is a Terminated Partner or
has committed a Removal Default (collectively, the "Liquidator") shall commence
to wind up the affairs of the Partnership, to liquidate and sell the Properties
and to liquidate the Investment Entities in an orderly manner as reasonably
Approved by the Partners (subject to Section 5.10(i)) as soon as is practicable
thereafter. A third-party liquidator may be appointed if Approved by the
Partners. Any Liquidator other than the Partners shall have sufficient business
expertise and competence to conduct the winding up and termination of the
business of the Partnership. No Liquidator who is a Partner shall be paid any
compensation or fee for conducting the liquidation of the Partnership or any
Investment Entity. Notwithstanding anything to the contrary contained in this
Agreement, if one Partner Group has the unilateral right (without the Approval
of the other Partner Group) to cause the sale or other disposition of a Property
or Investment under any provision of this Agreement, such Partner Group shall be
the Liquidator with respect to such Property or Investment and may sell or
otherwise dispose of such Property or Investment on such terms as shall be
Approved by such Partner Group (whether during the term of the
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Partnership or in liquidation), subject, however, to the restrictions on
transfers of such Property or Investment to Affiliates of such Partner Group
that are contained in this Agreement (including Section 5.11).
8.3.2 The Liquidator shall proceed with such liquidation in as
expeditious a manner as is reasonably practicable. The holders of interests in
the Partnership shall continue to share income and losses during the period of
liquidation in accordance with Article 4.
8.3.3 If a Partner or an Affiliate of a Partner desires to
purchase any of the Partnership's remaining assets, the price, terms and
conditions of such purchase shall be subject to the Approval of the Partners and
the restrictions described in this Agreement (including Section 5.11) on
transactions with Affiliates.
8.3.4 Except as expressly provided in this Article 8, any
Liquidator which is not a Partner shall have and may exercise all of the powers
conferred upon the Managing General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers), to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the Liquidator hereunder for and during the Liquidation Period.
8.3.5 If (i) the Partnership is dissolved for any reason and is
not reconstituted and continued pursuant to Section 8.4.1, (ii) all General
Partners have become Bankrupt or been dissolved, and (iii) within ninety (90)
days following the date of dissolution a Liquidator or successor Liquidator has
not been appointed by the remaining Partners pursuant to Section 8.3.1, any
interested party shall have the right to seek judicial supervision of the
winding up of the Partnership pursuant to the Act.
8.3.6 After making payment or provision for payment of all debts
and liabilities of the Partnership and all expenses of liquidation, the
Liquidator shall establish, for a period not to exceed twelve (12) months after
the date the liquidation is complete, such cash reserves as are reasonably
necessary for any foreseeable, contingent or unforeseen liabilities or
obligations of the Partnership, the Investment Entities or the Partners or their
Affiliates with respect to the Partnership obligations.
8.3.7 After the liquidation of the Partnership or the acquisition
of an Investment or Property from the Partnership by a Partner Group, the
Partners and/or their Affiliates may employ Persons who previously were employed
by the Partnership or an Investment Entity, PROVIDED, HOWEVER, that neither the
Mack-Cali Partners nor the Highridge Partners may engage the services of any
Partnership or Investment Entity employee (other than any on-site employee of a
Property in which all of the interests of the Partners have been acquired by one
Partner Group if such employee has no responsibilities with respect to any other
Property owned by the Partnership or an Investment Entity, E.G., a day porter)
except upon six months' prior notice to the other (whether within the first
twelve (12) months after the liquidation of the Partnership or otherwise), and
no employee of the Partnership shall render services simultaneously to the
Partnership or an Investment Entity and to any Partner or its Affiliates without
the Approval of both the Mack-Cali Partners and the Highridge Partners.
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8.3.8 This Section 8.3.8 shall apply if Partnership assets or
Investment Entity assets are sold for consideration that includes notes payable
to the Partnership (or payable to an Investment Entity) or interests in a REIT,
and the provisions of this Section 8.3.8 shall apply notwithstanding any other
provision of this Agreement.
(a) To the extent such consideration includes notes payable, such
notes payable shall, upon receipt by the Partnership or any Investment Entity,
be distributed in-kind to the Partners. The Gross Asset Value of such notes at
the time of such distribution shall be the principal amount payable under such
notes if held to maturity. Each Partner shall have an undivided interest in
such notes equal to the percentage obtained by multiplying the Gross Asset Value
of such notes by a fraction whose numerator equals the amount such Partner would
receive under Sections 4.1 and 4.2 if cash equal to such Gross Asset Value were
paid to the Partner pursuant to such Sections as loan repayments or
distributions instead of such notes, and whose denominator equals such Gross
Asset Value. The Partner shall own such notes pursuant to a tenancy-in-common
agreement to be reasonably Approved by the Partners at the time of such
disposition (such tenancy-in-common agreement shall be prepared at Partnership
expense).
(b) To the extent such consideration consists of interests in a REIT,
such interests shall, upon receipt by the Partnership or any Investment Entity,
be distributed in-kind to the Partners except as otherwise set forth below in
Section 8.3.8(c). The Gross Asset Value of such interests at the time of such
distribution ("REIT Share Value") shall be:
(i) in the case of publicly traded stock, the share
price at the time of such receipt by the Partnership multiplied by the
number of shares of stock received by the Partnership;
(ii) in the case of interests that are convertible into
publicly traded stock, the share price (at the time of the receipt by
the Partnership of such interests) of such publicly traded stock
multiplied by the number of shares of such stock into which such
interests are convertible;
(iii) in the case of interests that are neither
publicly traded nor convertible into publicly traded stock, the value
of the property of the Partnership or Investment Entity disposed of to
the REIT as set forth in the documents pursuant to which such
disposition was made to the REIT (or if no such value is set forth in
such documents, the fair market value of such property determined
under Section 5.10(iii), such determination to be made without regard
to any restrictions to which such interests are subject or any
minority or liquidity discount with respect thereto).
Each Partner shall receive a distribution of such portion of the interests in
the REIT equal to the percentage obtained by multiplying the aggregate REIT
Share Value of all interests in the REIT that are received by the Partnership or
Investment Entity by a fraction (A) whose numerator equals the amount such
Partner would receive under Sections 4.1 and 4.2 if cash
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equal to such aggregate REIT Share Value were paid to the Partners pursuant to
such Sections as loan repayments or distributions instead of such interests in
the REIT, and (B) whose denominator equals such aggregate REIT Share Value.
(c) Notwithstanding the provisions of Section 8.3.8(b), distributions
of interests in a REIT shall not be required (unless otherwise Approved by the
General Partners) for so long as such distribution is prohibited by the
documents pursuant to which such interests were received (the Partners
conducting the transaction with the REIT shall make reasonable, good faith
attempts to avoid such a prohibition). If the interests in the REIT are not
distributed to the Partners at the time of their receipt by reason of the
operation of this Section 8.3.8(c), (I) such interests shall nevertheless be
deemed to have been distributed to the Partners, for all purposes of this
Agreement, at the time of their receipt by the Partnership or Investment Entity
in proportion to the percentage thereof that each Partner would receive if such
interests were distributed at the time receipt under Section 8.3.8(b), and (II)
upon the ultimate distribution of such interests in the REIT or the proceeds
from the sale or other disposition thereof by the Partnership, each Partner
shall receive the percentage thereof determined pursuant to clause (I) of this
Section 8.3.8(c) (regardless of the value of such interests at the time of such
ultimate distribution or the amount of the proceeds from the sale or other
disposition thereof).
(d) The Partners conducting the transaction with the REIT shall use
reasonable good faith efforts to structure any disposition of Partnership or
Investment Entity assets for notes or interests in a REIT in a manner that will
facilitate compliance with this Section 8.3.8.
8.4 RECONSTITUTION AFTER BANKRUPTCY OR DISSOLUTION OF A GENERAL PARTNER.
8.4.1 Upon the Bankruptcy or dissolution (without reconstitution
within sixty (60) days thereafter) of any of the General Partners, the
Partnership shall be dissolved and liquidated unless within ninety (90) days
subsequent to such event the remaining Partners (other than Partners in the same
Partner Group as the Bankrupt General Partner) so elect, by giving notice to all
Partners, to reconstitute the Partnership and to continue the business of the
Partnership. If such election is made, then (i) the Partnership shall not be
dissolved and liquidated; (ii) the Partnership and the business of the
Partnership may be reconstituted and continued, under and pursuant to the
provisions of this Agreement; (iii) the Terminated Partner's interest in the
Partnership may be purchased as set forth in Section 7.9, and upon such
Bankruptcy or dissolution, the other rights against a Terminated Partner under
Section 7.9 shall also apply to the extent applicable; and (iv) the Certificate
shall be amended to reflect such continuation.
8.5 DISTRIBUTION UPON DISSOLUTION AND CAPITAL ACCOUNT ADJUSTMENTS. Upon
dissolution of the Partnership without reconstitution as permitted by this
Article 8, the Partnership's assets shall be sold or otherwise disposed of to
third parties as directed by the Liquidator (subject to Sections 5.10, 5.11 and
8.3.8), and, after paying or providing for liabilities owing to creditors and
the establishment of such reserves as are reasonably necessary for foreseeable,
contingent or unforeseen liabilities or obligations of the Partnership, the
Investment Entities, or the Partners or their Affiliates with respect to
Partnership or
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Investment Entity obligations for a period of up to twelve (12) months after the
liquidation has been completed, the remaining liquidation proceeds (and the
reserves, after the expiration of a reasonable period of time of up to twelve
(12) months after the liquidation has been completed) shall be distributed
pursuant to Section 4.2 (subject to Section 8.3.8).
8.6 COMPLIANCE WITH TIMING REQUIREMENTS OF TREASURY REGULATIONS.
Notwithstanding anything in this Article 8 to the contrary, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made to the Partners within the
time required by Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the extent
practicable. However, a liquidation occurring as a result of a Tax Termination
shall be treated as provided in Regulations Section 1.708-1(b)(1)(iv), or
otherwise as required by successor Regulations, if any.
ARTICLE 9
MISCELLANEOUS
9.1 OTHER INTERESTS. No Partner and no Affiliate of a Partner shall have
any right, by virtue of this Agreement or otherwise, to share or participate in
or to Approve any other investments or activities of any other Partner or the
income or proceeds derived therefrom. No Partner and no Affiliate of any
Partner shall be obligated to offer or to bring to the attention of the
Partnership, any other Partner or its Affiliates, any property or other business
investment or opportunity, whether or not within the scope of the Partnership's
purposes, and any Partner and any Affiliate of any Partner may at any time
during the term of the Partnership own, invest in, develop or manage, directly
or indirectly, any property or other business investment or opportunity, whether
or not competitive with the Partnership, any Investment Entity, the Properties,
the Investments or the Partnership's or any Investment Entity's other assets,
and whether or not within the scope of the Partnership purposes. Each of the
Partners acknowledges and agrees that each Partner and its Affiliates have
engaged or invested in, are now engaged and investing in and will in the future
be offered, consider, engage and/or invest in other business or real property
ventures of every kind and nature, including the ownership, acquisition,
financing, leasing, operating, management, syndication, brokerage and
development of real property and other investments and opportunities to make or
purchase loans which are competitive with the Properties and/or the Investments
and the business of the Partnership and the Investment Entities, and none of the
Partners or their Affiliates shall have any obligation or responsibility to
disclose, account for or offer any of such real properties, investments or
opportunities to the Partnership or any Partner or their Affiliates, and the
Partnership, the Partners and their Affiliates shall have no rights or interests
therein.
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9.2 DAMAGES; CERTAIN CURE RIGHTS; OFFSET. Each Partner shall be liable to
the Partnership and the other Partners for any actual (but not consequential or
incidental) damages arising from any breach of this Agreement. Except as
provided in Sections 2.1.2, 2.2.2.1, 3.5.4, 3.11, 4.3.2, 5.5.1, 5.5.3 or 7.6,
the liability of any Partner shall be limited to such Partner's interest in the
Partnership. Upon any alleged breach or default of this Agreement by any
Partner, it shall be a condition to any action against such Partner that such
Partner shall have received notice of such alleged breach or default (which may
be any notice otherwise required by this Agreement) and that such Partner shall
have failed to completely (at its expense, without right of reimbursement from
the Partnership or the other Partners) cure or commence to completely cure such
alleged breach or default within thirty (30) days following such notice and
failed, at all times thereafter, to use diligent efforts to pursue such cure to
completion, but in no event beyond ninety (90) days. Notwithstanding anything
in this Agreement to the contrary, (a) there shall be no cure period for a Major
Default, and (b) the only cure period for failure timely to make a Capital
Contribution under Article 2 is set forth in Sections 2.2.1 and 2.2.2.
Notwithstanding anything in this Agreement to the contrary, all amounts payable
to a Partner under this Agreement or to a Partner or an Affiliate of a Partner
under any agreement with the Partnership or an Investment Entity shall be
subject to offset for amounts owed to the Partnership or the other Partners and
their Affiliates by such Partner or its Affiliates under this Agreement or such
agreement with such Affiliate and shall be withheld and either retained by the
Partnership or reallocated to the other Partners in a reasonable manner, as the
case may be. If a Partner breaches this Agreement and fails to cure such breach
within the time required by this Section 9.2, the Partners of the other Partner
Group may take such actions (or cause the Partnership or any Investment Entity
to take such actions) as are reasonably necessary to cure such breach at the
breaching Partner's expense. If the Partners have established a course of
conduct of granting Approvals orally as provided in Section 1.12, no Partner
will be liable for any breach of this Agreement (regardless of whether such
breach is capable of being cured) if such Partner reasonably and in good faith
believed that such action was consented to orally by the other Partner Group;
PROVIDED, HOWEVER, that the foregoing shall not apply with respect to the
Approvals described in the last sentence of Section 1.12. Notwithstanding
anything in this Agreement to the contrary, (i) no Highridge Partner shall be
liable for any mistakes made by it in implementing the Development Plan for any
Property that are made in good faith and do not constitute gross negligence,
actual fraud or intentional misappropriation of funds and (ii) for purposes of
applying Section 5.5 and this Section 9.2, a Highridge Partner shall not be
liable for (or be ineligible to receive indemnification under Section 5.5 by
reason of) the acts of any Affiliate of the Highridge Partners or of any
employee of any Highridge Partner or their Affiliates, or be liable for (or be
ineligible to receive indemnification under Section 5.5 by reason of) the acts
of any Affiliate of any Highridge Partner, except to the extent that the act of
such employee or Affiliate in question (A) occurred as a result of the failure
of a Highridge Partner to conduct the employee and Affiliate supervision
procedures to the extent required under Exhibit J or (B) occurred with the prior
actual and specific knowledge of John S. Long, Eugene S. Rosenfeld or Steven A.
Berlinger.
9.3 NO AGENCY. Except as provided herein, nothing herein contained shall
be construed to constitute any Partner hereof the agent of any other Partner
hereof or to limit in any manner the carrying on of each Partner's respective
businesses or activities.
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9.4 GOVERNING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties hereto shall be determined in accordance with the
provisions of the laws of the State of Delaware as applicable to a limited
partnership formed under the Act. The United States District Court for the
Central District of California, the Superior Court for Los Angeles County,
California and the United States District Court for the Eastern District of New
York shall be the exclusive appropriate venues to litigate questions of
interpretation under this Agreement or the rights of the parties hereunder.
Each of the parties hereto hereby waives any and all rights to a trial by jury
with respect to any dispute among the Partners or their Affiliates or among a
Partner (or its Affiliates) and the Partnership concerning this Agreement, the
Partnership, any Investment Entity or any Investment or Property. In any
dispute among the Partners concerning the Partnership or this Agreement, the
prevailing Partner(s) shall be entitled to recover its reasonable attorneys'
fees and costs (including litigation and collection costs) from the
non-prevailing Partner(s).
9.5 NOTICES. Any notices or solicitations of Approval required or
permitted to be given under the terms of this Agreement shall be in writing and
shall be deemed to have been given when (i) personally delivered with signed
delivery receipt obtained, (ii) when transmitted by facsimile machine, if
followed by a mailing thereof pursuant to this Section 9.5 before the end of the
first business day thereafter, with printed confirmation of successful
transmission to the facsimile number set forth in the appropriate address listed
below being obtained by the sender from the sender's facsimile machine or
telephonically from the addressee, or (iii) when deposited in the United States
first class mail if sent postage prepaid by registered or certified mail, return
receipt requested, in each case addressed as follows:
IF TO ANY OF THE MACK-CALI PARTNERS, to it in care of:
Mr. Mitchell E. Hersh
Roger W. Thomas, Esq.
Mack-Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Phone: (908) 272-8000
Fax: (908) 272-0214
with a copy to:
Battle Fowler LLP
1999 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attn: Sanford C. Presant, Esq.
Phone: (310) 277-6625
Fax: (310) 277-6627
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IF TO ANY OF THE HIGHRIDGE PARTNERS, to it in care of:
Mr. John Long
Mr. Gene Rosenfeld
Mr. Steven Berlinger
c/o Highridge Partners, Inc.
300 Continental Boulevard, Suite 360
El Segundo, California 90245
Phone: (310) 648-7600
Fax: (310) 648-7619
with a copy to:
Mark Abramson, Esq.
300 Continental Boulevard, Suite 360
El Segundo, California 90245
Phone: (310) 648-7600
Fax: (310) 648-7619
The time to respond to any notice shall commence to run on the date of delivery
at the appropriate addresses (or attempted delivery if delivery is refused
during normal business hours). A Partner may change the address to which
notices shall be sent to it, or any of its Authorized Representatives, by
written notice to all Partners (said change of address or of Authorized
Representatives to be effective upon receipt by all Partners).
9.6 PRONOUNS AND PLURALS. References herein to the singular shall include
the plural and to the plural shall include the singular, and references to the
masculine gender shall include the feminine and neuter genders (and vice versa),
except where the same shall not be appropriate.
9.7 WAIVER. No consent or waiver, express or implied, by any Partner to
or of any breach or default by any other Partner in the performance by the other
of its obligations hereunder shall be deemed or construed to be a consent or
waiver to or of any other breach or default by the other in the performance by
such other party of the same or any other obligations of such Partner hereunder.
Failure on the part of any Partner to object to or complain of any act or
failure to act of any other Partner or to declare any other Partner in default,
irrespective of how long such failure continues, shall not constitute a waiver
by such Partner of its rights hereunder.
9.8 SEVERABILITY. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other Persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
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9.9 TITLES AND CAPTIONS. All Article or Section titles or captions
contained in this Agreement are for convenience only and shall not be deemed a
part of the content of this Agreement.
9.10 AGREEMENT IN COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument when taken together. In addition, this
Agreement may contain more than one counterpart of the signature page and the
Agreement may be executed by the affixing of the signatures of each of the
Partners to one or more of such counterpart signature pages; all of such
signature pages shall be read as though one, and shall have the same force and
effect as though all of the signers had signed a single signature page. A
Partner shall be deemed to have executed and delivered this Agreement if and
when it has manually executed a counterpart signature page to this Agreement,
transmitted a copy of the same by facsimile to the other Partners at such other
Partner's facsimile number set forth above, and received a printed confirmation
of the successful receipt thereof by such other Partner. This Agreement shall
not be binding on Partners hereto unless each Partner shall have executed and
delivered a copy of this Agreement to the other Partners. If this Agreement is
executed and delivered by facsimile, each Partner who transmits its signature
page for this Agreement by facsimile shall promptly forward a manually executed
signature page to the other Partner (but a Partner's failure to do so promptly
shall not affect the validity of its execution and delivery of this Agreement by
facsimile transmission).
9.11 BINDING AGREEMENT. This Agreement shall inure to the benefit of and be
binding upon the undersigned Partners and their respective heirs, executors,
legal or personal representatives, successors and assigns. Whenever in this
instrument a reference to any party or Partner is made, such reference shall be
deemed to include a reference to the heirs, executors, legal or personal
representatives, successors and assigns of such party or Partner.
9.12 FURTHER ASSURANCES. Each Partner shall execute and deliver such
further instruments and do such further acts and things as may reasonably be
required to carry out the intent and purposes of this Agreement promptly upon
request from any other Partner.
9.13 WAIVER OF PARTITION. Unless otherwise specifically provided in this
Agreement (including Article 8), no Partner shall, and each Partner hereby
irrevocably waives the right to, either directly or indirectly, take any action
to require partition or appraisement of the Partnership, any Property, any
Investment, any Investment Entity, or any part thereof, and, notwithstanding any
provision of applicable law to the contrary, each Partner hereby irrevocably
waives any and all right to maintain any action for partition or to compel any
sale with respect to its interest in the Partnership or with respect to the
assets of the Partnership or the Investment Entities, or any part thereof.
9.14 ENTIRE AGREEMENT. This Agreement contains the final and entire
agreement among the parties hereto with respect to the subject matter hereof,
including the Investments, and they shall not be bound by any terms, conditions,
statements or representations, oral or written, with respect thereto that are
not contained herein.
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9.15 AMENDMENTS. Except as expressly provided in this Agreement (including
Section 7.9.5), this Agreement may be modified or amended only upon the Approval
of the Partners.
9.16 NO DRAFTING PRESUMPTION. In interpreting the provisions of this
Agreement, no presumption shall apply against any Partner that otherwise would
operate against such Partner by reason of such document having been drafted by
such Partner or at the direction of such Partner or an Affiliate of such
Partner.
9.17 NO THIRD-PARTY BENEFICIARIES. Except for the representations
concerning conflict waivers pertaining to BFLLP in Section 7.8.9 (which shall
inure to the benefit of BFLLP), the provisions of this Agreement are not
intended to be for the benefit of any creditor or other Person (other than the
Partners in their capacities as such) to whom any debts, liabilities or
obligations are owed by (or who otherwise have a claim against or dealings with)
the Partnership or the Partners, and no such creditor or other Person shall
obtain any rights under any of such provisions (whether as a third-party
beneficiary or otherwise) or shall by reason of any such provisions make any
claim in respect to any debt, liability or obligation (or otherwise) including
any debt, liability or obligation with respect to Capital Contributions, against
the Partnership or the Partners. In addition, no deficit balance in any
Partner's Capital Account or in the capital account of any partner or Partner of
a Partner shall be an asset of the Partnership, and no Partner shall be
obligated to restore any such deficit balance.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement of Limited Partnership is executed, and
is effective for all purposes, as of the date first set forth above.
GENERAL PARTNER:
HCG DEVELOPMENT, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management, L.L.C.,
a Delaware limited liability company
By: Highridge Management, Inc.,
a California corporation, its
Managing Member
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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LIMITED PARTNERS:
SUMMIT PARTNERS I, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management, L.L.C.,
a Delaware limited liability company,
its Manager
By: Highridge Management Inc.,
a California corporation
its Managing Member
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
MACK-CALI CALIFORNIA DEVELOPMENT ASSOCIATES L.P.,
a California limited partnership
By: MACK-CALI SUB XXI, INC.,
a Delaware corporation, its general partner
By:
--------------------------------------
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
EXECUTED BY EACH OF THE UNDERSIGNED
SOLELY TO CONFIRM THE PROVISIONS OF
SECTION 3.11 THAT APPLY TO HIM:
- -------------------------
JOHN S. LONG
- -------------------------
EUGENE S. ROSENFELD
[END OF SIGNATURES]
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EXHIBIT A
DEFINED TERMS
Capitalized terms that are used in the Agreement of Limited Partnership to
which this Exhibit is attached shall have the meaning set forth below in this
Exhibit A:
"ABANDONMENT DECISION" is defined in Section 5.10(iv).
"ACQUISITION DOCUMENTS" means the documentation necessary to acquire any
Investment or Property that has been Approved by the Partners for acquisition,
including any acquisition loan documentation.
"ACT" shall mean the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time (Delaware Code, Title 6, Sections 17-101, ET SEQ.).
"ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant tax year, after giving effect to the following adjustments:
Credit to such Capital Account any amounts which such
Partner is obligated to restore or is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"AFFILIATE" shall mean (a) with respect to any Highridge Partner: John S.
Long, Eugene S. Rosenfeld, their Family Members, the Highridge GP, the Highridge
Limited Partner, and any Entity Controlled, Controlling or under common Control
(directly or indirectly) by or with one or more of them and/or their Affiliates,
and (b) with respect to any Mack-Cali Partner: the Mack-Cali Limited Partner,
any Co-General Partner and any Entity Controlled, Controlling or under Common
Control (directly or indirectly) by or with one or more of them and/or any of
their Affiliates. For the purposes of this Agreement, the term "Control," or
any derivative thereof (including "Controlled by" or "Controlling"), when used
with respect to any specified Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through ownership of voting securities or
partnership or other ownership interests, or by contract; PROVIDED, HOWEVER,
that, without limiting the generality of the foregoing, (a) any Person which,
together with its Affiliates, owns, directly or indirectly, securities
representing more than 50% of the value or ordinary voting power of a
corporation or more than 50% of the partnership, general partnership, membership
or other ownership interests (based upon
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value or vote) of any other Person is deemed to Control such corporation or
other Person, (b) a general partner shall always be deemed to Control any
partnership of which it is a general partner, and (c) a member-manager of a
limited liability company shall always be deemed to Control any limited
liability partnership of which it is a member- manager.
"AGREEMENT" shall mean and refer to this Agreement of Limited Partnership
and all Exhibits referred to herein and attached hereto, each of which is hereby
made a part hereof, as amended and in effect from time to time.
"AGREEMENT DATE" shall mean the date first written above as of which this
Agreement is effective.
"ALL CASH ELECTION" is defined in Section 5.11(b).
"APPRAISAL NOTICE" is defined in Section 5.11(a).
"APPRAISAL FIRST OFFER PRICE" is defined in Section 5.11(a).
"APPRAISED VALUE" is defined in Section 7.9.
"APPROVAL" (and any variation thereof) of a Partner shall mean the prior
written (or oral to the extent permitted by Section 1.12) consent or approval of
such Partner, which may be granted or withheld in its sole discretion unless
otherwise expressly provided to the contrary in this Agreement. Such Approval
shall be valid for a Partner who is not a natural person only if given by an
Authorized Representative of such Partner. Use of the term "reasonable" or
"reasonably" in connection with the term "Approval" or any variation thereof or
with the term "satisfactory" means that such Approval shall not be withheld or
delayed unreasonably. Unless either of such terms is used in connection with
the term "Approval" (or any variation thereof), such Approval may be granted or
withheld in a Partner's sole discretion. If the Approval of any Partner to any
action is required under this Agreement and such Partner shall not have given
notice of disapproval or Approval of such action to the other Partners within
ten (10) Business Days after receipt of the notice requesting that such Approval
be given (or such earlier or later date as may be established pursuant to this
Agreement for the giving or withholding of such Approval), such Partner shall be
deemed not to have given such Approval. Except as provided in Section 5.1, the
Approval of a Partner shall not be required from and after the date on which
such Partner has ceased to have Approval rights under this Agreement, regardless
of whether this Agreement otherwise requires the "Approval" of such Partner or
the "Approval" of the Partners". The terms "Approved by the Partners" and
"Approved by the General Partners" (or any variation of such terms) are defined
in Section 1.12.
"APPROVED DEVELOPMENT PLAN" means a Development Plan (or supplement
thereto) with respect to a Property or Investment that has been Approved by the
Partners as provided in Section 5.1.3.4 of this Agreement.
"APPROVED OVERHEAD BUDGET" is defined in Section 5.1.3.1.
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"APPROPRIATE SHARING RATIO" is defined in Section 3.5.4.
"AUTHORIZED REPRESENTATIVES" is defined in Section 1.12 hereof.
"BANKRUPT" shall mean, with respect to any Partner, if:
(a) such Partner, or a Person that Controls such Partner (the
"Controlling Person"), shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, administrator,
liquidator or the like of itself or of all or of a substantial portion of its
assets, (ii) admit in writing its inability, or be generally unable or deemed
unable under any applicable law, to pay its debts as such debts become due,
(iii) convene a meeting of creditors for the purpose of consummating an
out-of-court arrangement, or entering into a composition, extension or similar
arrangement, with creditors in respect of all or a substantial portion of its
debts, (iv) make a general assignment for the benefit of its creditors, (v)
place itself or allow itself to be placed, voluntarily or involuntarily, under
the protection of the law of any jurisdiction relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
or (vi) take any action for the purpose of effecting any of the foregoing; or
(b) a proceeding or case shall be commenced in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding-up, or composition or readjustment of debts, of such
Partner or a Controlling Person with respect thereto, (ii) the appointment of a
trustee, receiver, custodian, administrator, liquidator or the like of such
Partner or of a Controlling Person with respect thereto or of all or a
substantial portion of such Partner's or such Controlling Person's assets, or
(iii) similar relief in respect of such Partner or such Controlling Person under
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, without the consent of the other Partner and
such proceeding or case shall continue undismissed for a period of ninety (90)
days, or an order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect for a period of sixty (60)
days, or an order for relief or other legal instrument of similar effect against
such Partner or such Controlling Person shall be entered in an involuntary case
under such law and shall continue for a period of sixty (60) days.
"BANKRUPTCY" shall mean any condition described in the definition of
"Bankrupt" which renders a Partner a Bankrupt.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, 11 U.S.C.
Section 101 ET SEQ., as is now in effect or hereafter amended.
"BFLLP" is defined in Section 7.8.9.
"BORROWING MEMBER" is defined in Section 3.11.
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"BUSINESS DAY" shall mean any day on which commercial banks are authorized
to do business and are not required by law or executive order to close in both
Los Angeles, California and New York, New York.
"BUY-OUT PRICE" is defined in Section 7.9.1.
"CAPITAL ACCOUNT" shall mean, with respect to any Partner, the book Capital
Account maintained for such Partner in accordance with the provisions of Section
3.1.
"CAPITAL CONTRIBUTION" or "CAPITAL CONTRIBUTIONS" shall mean the amount of
cash and the net fair market value (as reasonably Approved by the Partners) of
any property contributed to the capital of the Partnership by the Partners
pursuant to this Agreement. The term "Capital Contributions" with respect to a
Partner shall include (i) the contributions of such Partner made pursuant to
Sections 2.1 and 2.2 and any other Section of this Agreement pursuant to which
Capital Contributions are deemed made by the Partners (including Section 4.1.2),
and (ii) such Partner's payments that are Approved by the Partners (to the
extent such Approval is required under this Agreement) which are made to
third-party creditors of the Partnership with respect to Partnership obligations
unless and until reimbursed by the Partnership, but only to the extent
reimbursable to such Partner under this Agreement. The Capital Contribution of
the Highridge Partners attributable to their contribution of the El Segundo Land
is set forth in Section 2.2.2(b).
"CAPITAL EQUALIZATION DISTRIBUTION" is defined in Section 2.1.2.3.
"CAPITAL RECEIPTS" shall mean (i) the sum of (a) the proceeds received by
the Partnership from the sale, exchange or any other disposition of all or any
portion of any Investment (including any Partnership Interest), plus (b) all
amounts received by the Partnership from any Investment Entity on account of the
sale, exchange or other disposition of all or any portion of any Property,
Investment or other asset owned by such Investment Entity reduced by (ii) the
sum of (a) all expenditures made by the Partnership in connection with such
sale, exchange or other disposition that are required in connection with such
sale, exchange or other disposition or that are reasonably Approved by the
Partners, plus (b) loan repayments made from such proceeds as are required
pursuant to loan documentation or otherwise Approved by the Partners, plus
(c) amounts set aside as reserves therefrom that have been reasonably Approved
by the Partners.
"CERTIFICATE" shall mean the Certificate of Limited Partnership of the
Partnership, as filed with the Office of the Secretary of State of the State of
Delaware in accordance with the Act, and as in effect from time to time.
"CLOSING DATE" is defined in Section 7.9.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time (or any corresponding provision of succeeding law).
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"CO-GENERAL PARTNER" means any General Partner appointed by the Mack-Cali
Limited Partner as provided in Section 7.9.5.
"CONTROL" or "Controlled by" or "Controlling", is defined in the definition
of "Affiliate."
"CONTROL CHANGE NOTICE" is defined in Section 7.9.5.
"CONTROLLING PERSON" is defined in the definition of the term "Bankrupt".
"DEADLOCK" is defined in Section 5.10.
"DEADLOCK NOTICE" is defined in Section 5.10.
"DEFAULTING PARTNER" shall have the meaning set forth in Section 2.2.2.
"DEVELOPMENT PLAN" is defined in Section 5.1.3.4.
"DETERMINATION DATE" is defined in Section 5.9.
"DISCRETIONARY OUTLAYS" is defined in Section 5.1.3.2.
"DISPOSITION" is defined in the definition of "Gain or Loss on
Disposition."
"DUE DATE" is defined in Section 2.2.1.
"DUE DILIGENCE MATERIALS" shall mean any documents that have been made
available to the Partners under Section 5.1.6.2 in connection with acquiring and
Approving Investments, including any Investment Entity's acquisition of a
Property, such as lease abstracts, contracts (including service contracts and
brokerage agreements), title reports, surveys, engineering and geological
studies and reports, environmental investigations and reports, cost analyses,
feasibility studies, financial projections, leases and other such materials
relating to any Investment, Property or proposed investment by the Partnership
or any Investment Entity, including the documents described on Exhibit K.
"ELECTING MEMBER(S)" is defined in Section 7.9.1.
"EL SEGUNDO LAND" is defined in Section 2.1.1(b).
"EL SEGUNDO VALUATION DATE" means the earlier to occur of (a) the sale or
other disposition of the El Segundo Land Property (as developed) for a gross
disposition price of at lest $55 million or (b) the Partnership receiving an
appraisal for the El Segundo Land Property (as then developed) from an appraiser
who has been Approved by the Partners of at least $55 million.
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"EMERGENCY" shall mean an event which reasonably requires immediate action
involving the expenditure of funds or other action in order to avert or mitigate
significant damage to Persons or property in connection with the Partnership,
any Investment Entity or any of their assets if it is not possible (after a
reasonable effort) for a Partner to reach or obtain the Approval of the other
Partners whose Approval to take such action otherwise would be required.
"ENTITY" shall mean any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
joint-stock company, cooperative, association or other firm or any governmental
or political subdivision or agency, department or instrumentality thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"FAMILY MEMBER" with respect to an individual shall mean such individual's
present or former spouse, brothers and sisters (whether by whole or half blood),
lineal ascendants or descendants or their respective spouses, or a trustee or
custodian for the benefit of any of them.
"FIRST OFFER NOTICE" is defined in Section 5.11.
"FMV APPRAISAL PROCEDURE" is defined in Section 5.11.
"FMV NOTICE" is defined in Section 5.10(iv).
"FORCE MAJEURE" shall mean any act of God (including weather disturbance,
earthquake, fire, mechanical failure of equipment, disease and the like), labor
strike or work stoppage or slowdown, material shortages, sabotage, war, riot,
moratorium, governmental action or inaction, or any other act of any third party
that reasonably prevents an action from being taken through no fault of the
Partner who is required to take such action or such Partner's Affiliates.
"FUNDING NOTICE" is defined in Section 2.1.2.
"FUNDING PROPORTION" shall mean the percentage set forth as such for each
Partner on Exhibit B hereto.
"GAIN" OR "LOSS" ON "DISPOSITION" shall mean (i) the gain or loss (as the
case may be) of the Partnership for federal income tax purposes (as computed for
book purposes), arising from a sale, exchange or other taxable disposition
(including casualty or condemnation) of all or a portion of any Investment
(including any Partnership Interest) and (ii) the Partnership's distributive
share of the gain or loss for federal income tax purposes arising from the sale,
exchange or other taxable disposition of all or a portion of any of the asset of
any Investment Entity. Gain or loss resulting from any disposition of Revalued
Property for which there is a difference between Gross Asset Value and adjusted
tax basis (as computed for tax as opposed
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to book purposes) shall be computed by reference to the Gross Asset Value (as
reasonably Approved by the Partners) of the property disposed of (as adjusted
for book purposes from time to time).
"GAV NOTICE" is defined in Section 5.10(iii).
"GENERAL PARTNER(S)" means the Managing General Partner and any Co-General
Partner for so long as such Partner shall be a General Partner under this
Agreement.
"GROSS ASSET VALUE" shall mean, with respect to any asset, the adjusted
basis of the asset for federal income tax purposes, adjusted as provided in
Section 3.10.
"HIGHRIDGE PARTNERS" shall mean the Managing General Partner, the Highridge
Limited Partner, and any other Person to whom either of them have transferred
all or a portion of their interest in the Partnership pursuant to this
Agreement.
"HIGHRIDGE SUBORDINATED CONTRIBUTION RETURN" shall mean an amount equal to
the Mezzanine Debt Rate (expressed as a percentage) for the actual numbers of
days for which the Highridge Subordinated Contribution Return is being
determined, cumulative and compounded quarterly, multiplied by the Undistributed
Highridge Subordinated Contributions outstanding from time to time, computed by
using April 23, 1998 as the date on which Highridge Subordinated Contributions
are deemed to have been made to the Partnership and using the actual dates on
which distributions in repayment thereof are made from time to time to the
Highridge Partners.
"HIGHRIDGE SUBORDINATED CONTRIBUTIONS" is defined in Section 2.1.1(b).
"INCLUDING" or "INCLUDING" shall mean "including, without limitation."
"INCOME TAX REGULATIONS" or "REGULATIONS" shall mean the final or temporary
regulations promulgated from time to time under the Code or, if no final or
temporary regulations with respect to a tax issue then are in effect, proposed
regulations then in effect if reasonably Approved by the Partners, and
administrative and judicial interpretations thereof.
"INDEPENDENT TAX COUNSEL" shall mean a nationally recognized tax counsel
reasonably Approved by the Partners that is capable of advising the Partnership
with respect to specified tax matters.
"INITIAL DEVELOPMENT PLAN" is defined in Section 5.1.3.4.
"INVESTED CAPITAL" with respect to each Partner shall mean the aggregate of
all Capital Contributions made from time to time to the Partnership by such
Partner other than the Highridge Subordinated Contributions, reduced by the
aggregate of all distributions previously made (or deemed made) to such Partner
pursuant to Section 4.1.1(c) in repayment of the Invested Capital of such
Partner.
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"INVESTMENT ENTITY" is defined in Section 1.5.1.
"INVESTMENT ENTITY AGREEMENT" shall mean, individually or collectively, the
operating agreement or limited partnership agreement pursuant to which each
Investment Entity is formed and operated, as in effect from time to time, with
such changes therein as may be Approved by the Partners.
"INVESTMENT ENTITY TAX LOAN" is defined in Section 3.11.
"INVESTMENTS" is defined in Section 1.5.2.
"INVOKING PARTNER" is defined in Section 5.10(iii).
"LIABILITIES" is defined in Section 5.5.3.
"LIQUIDATOR" is defined in Section 8.3.
"MACK-CALI LIMITED PARTNER" is defined in the Heading to this Agreement.
"MACK-CALI PARTNERS" shall mean the Mack-Cali Limited Partner, any
Co-General Partner, and any other Person to whom any of them have transferred
all or a portion of their interest in the Partnership pursuant to this
Agreement.
"MACK-CALI REALTY" means Mack-Cali Realty Corporation.
"MACK-CALI SALE RIGHT" is defined in Section 5.10(iv).
"MAJOR DECISIONS" is defined in Section 5.1.5.
"MAJOR DEFAULT NOTICE" is defined in Section 5.9.
"MAJOR DEFAULT" means, with respect to a Partner, that such Partner or any
of such Partner's Affiliates has engaged in actual fraud with respect to the
Partnership, an investment Entity, any Investment or any Property or has
intentionally misappropriated Partnership or Investment Entity Funds.
"MANAGING GENERAL PARTNER" is defined in the Heading to this Agreement.
"MANAGING GENERAL PARTNER GUARANTIES" is defined in Section 3.5.4.
"MANAGING GENERAL PARTNER SALE RIGHT" is defined in Section 5.10(iv).
"MANAGEMENT AGREEMENT" is defined in Section 5.2(b).
"MATERIAL" (and any variation thereof) is defined in Section 5.1.1.10.
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"MAXIMUM TAX RATE" shall mean the highest combined effective maximum tax
rate in effect from time to time with respect to any Partner (based on the
assumption that individual rates apply to such Partner) for federal, state and
local income tax purposes, computed by taking into account the tax savings
resulting from the deductibility of state and local income taxes to the extent
permitted for federal purposes and taking into account the tax on
self-employment income (also based on the assumption that each Member is an
individual taxpayer). The Maximum Tax Rate shall be computed by the
Partnership's accountants at the Borrowing Partners' expense whenever the
Maximum Tax Rate needs to be determined under Section 3.11.
"MEZZANINE DEBT RATE" shall mean (i) fifteen percent (15%) per annum unless
and until the Partnership or an Investment Entity obtains any Third Party
Mezzanine Financing with respect to the El Segundo Land, and (ii) from and after
such obtaining of such Third Party Mezzanine Financing, the interest rate in
effect from time to time on such Third Party Mezzanine Financing.
"NET AVAILABLE CASH," with respect to any period, shall mean (i) the sum of
all cash receipts of the Partnership during such period from all sources
(including Capital Contributions, cash on hand at the beginning of such period
to the extent not held in reserves, distributions from the Investment Entities
and any funds released during such period from cash reserves previously
established), minus (ii) the sum of (a) Capital Receipts, (b) Net Mortgage
Proceeds, (c) Operating Costs, and (d) any Investment Entity Tax Loans, for such
period.
"NET MORTGAGE PROCEEDS" shall mean (i) the sum of (a) the proceeds of any
loan made to the Partnership and the proceeds from refinancing any such loan,
plus (b) any amount released from cash escrow accounts established under any
loan to the Partnership, plus (c) the proceeds received by the Partnership from
any Investment Entity on account of any loan made to such Investment Entity and
the proceeds from refinancing any such loan received from any Investment Entity,
other than Investment Entity Tax Loans, reduced by (ii) the sum of (a) any
amounts required to fund the Partnership's expenditures that are reasonably
Approved by the Partners or that are otherwise permitted to be withheld from
such amounts for such purpose under this Agreement, (b) any and all expenses
incurred by the Partnership in connection with such loan or refinancing that are
reasonably Approved by the Partners, (c) amounts used as permitted under this
Agreement to repay other indebtedness of the Partnership, plus (d) amounts
thereof retained as reserves under this Agreement for Shortfall Disbursements by
the Partnership (such reserves to be reasonably Approved by the Partners).
"95% STABILIZATION" shall mean, with respect to a Property, the date on
which completion of such Property has occurred and binding leases for at least
95% of the leaseable space in such Property have been entered into for which
either (i) rent payments have commenced or (ii) all required building permits
with respect to such lease have been obtained, to the knowledge of the Highridge
Partners (as defined in Exhibit H), the tenant improvements required to be made
under such lease that are a condition precedent to the commencement of rent
payments under such lease ("Required Tenant Improvements") can be completed
within six months, and rent payments will commence within six months if all
Required Tenant Improvements were made before the expiration of such six-month
period.
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"NON-DEFAULTING MEMBER" is defined in Section 2.2.2.
"NON-DISCRETIONARY ITEMS" shall mean expenditures payable by the
Partnership or any Investment Entity for increases over the amount set forth in
the Partnership's most recent Approved Budget for the following items, but only
to the extent not reasonably anticipated at the time such Approved Budget was
submitted to the Partners for Approval under Section 5.1.3.1: taxes (including
real estate taxes, but excluding any Partner's tax liability), utilities,
bonding costs, insurance (including earthquake insurance, and insurance
described under Section 5.1.1 to the extent provided therein), debt service and
expenses or other amounts required to be paid by the Partnership or any
Investment Entity under contracts or agreements of the Partnership or any
Investment Entity that have been Approved by the Partners(or are permitted to be
entered into without such Approval).
"NONRECOURSE DEDUCTIONS" is defined in Section 3.5.6.
"NONRECOURSE LIABILITY" is defined in Section 3.5.6.
"NON-VOTING PARTNER" is defined in Section 5.1.6.1.
"OPERATING COSTS" for a period shall mean the sum of (i) all cash
expenditures of the Partnership (which expenditures shall be subject to the
Approved Budget limitations of Section 5.1.3) made during such period for
current costs and expenses (except to the extent constituting a reduction in
computing Net Mortgage Proceeds or Capital Receipts for such period), including
acquisition costs of the Investments (including the Partnership Interests), due
diligence expenditures, payments of interest and principal or other monetary
obligations due under any loan made to the Partnership; accounting, legal and
auditing fees; taxes payable by the Partnership; public or private utility
charges; sales, use, payroll taxes and withholding taxes related thereto; and
all other advertising, management, leasing, government approval, and other
operating, construction and development costs, expenses and capital expenditures
(including fees of land use consultants, engineers, architects, municipal
development fees, bond costs and the like) actually paid with respect to the
Investments or the Partnership's business generally (subject to the Approved
Budget limitations of Section 5.1.3) or reimbursed or paid to Partners
(including Overhead Payments), plus (ii) such reserves established from time to
time during such period upon the reasonable Approval of the Partners (except to
the extent constituting a reduction in computing Net Mortgage Proceeds or
Capital Receipts for such period), plus (iii) any amounts contributed by the
Partnership to any Investment Entity pursuant to the applicable Investment
Entity Agreement during such period (whether pursuant to Section 2.5 or
otherwise).
"OTHER PARTNER" is defined in Section 5.10(iii).
"OVERHEAD PAYMENTS" is defined in Section 5.1.3.1.
"PARTNER ASSIGNEE" is defined in Section 7.4.
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<PAGE>
"PARTNER GROUP" means either (a) the Highridge Partners or (b) the
Mack-Cali Partners (there are two Partner Groups).
"PARTNER NONRECOURSE DEBT" is defined in Section 3.5.6 hereof.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" is defined in Section 3.5.6 hereof.
"PARTNERS" shall mean the Managing General Partner, the Highridge Limited
Partner, the Mack-Cali Limited Partner and any Co-General Partner admitted as
such pursuant to this Agreement (each a "Partner"), in their respective
capacities as Partners, and any of their successors in their respective
capacities as Partners admitted to the Partnership as Partners hereunder, and
any other Person admitted as a Partner under this Agreement, for so long as any
such Person is a Partner under the terms of this Agreement.
"PARTNER NONRECOURSE DEDUCTIONS" is defined in Section 3.5.6 hereof.
"PARTNERSHIP" shall mean HPMC Development Partners, L.P., a Delaware
limited Partnership formed under the Act and operated pursuant to this
Agreement.
"PARTNERSHIP ACCOUNTING YEAR" shall mean and refer to the accounting year
of the Partnership ending on December 31 of each calendar year or such shorter
fiscal period during such year for which a relevant determination is being made
under this Agreement.
"PARTNERSHIP INTEREST" shall mean the interest in any Investment Entity
acquired by the Partnership, as in effect from time to time under the applicable
Investment Entity Agreement.
"PARTNERSHIP MINIMUM GAIN" is defined in Section 3.5.6 hereof.
"PERFORMANCE DEFAULT" with respect to the Managing General Partner and its
Affiliates shall be deemed to have occurred (subject to Section 5.9) with
respect to a Property or Investment if (a) the Managing General Partner shall
have failed to cause compliance with any Approved Development Plan with respect
to such Property or Investment in any Material respect for any reason other than
Force Majeure, or (b) if a Highridge Partner or an Affiliate of any Highridge
Partner has breached the provisions of any agreement entered into between such
Person and the Partnership or any Investment Entity and has failed to cure such
breach within the time required by such agreement (but this clause (b) shall
apply with respect to a Property or Investment only if such breach was not
willful and therefore does not constitute a Removal Default for which separate
remedies are provided elsewhere in this Agreement).
"PERSON" shall mean any individual or Entity.
"PREFERRED RETURN" shall mean an amount equal to ten percent (10%) per
annum, on a calendar year basis, for the actual number of days for which the
Preferred Return is being determined, cumulative and compounded quarterly,
multiplied by the Invested Capital of each of the Partners outstanding from time
to time, computed by using April 23, 1998 as the date which the Section 2.1.1
Contributions of the Partners shown on Exhibit B were made by the
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Partners, the actual dates on which a Partner's Capital Contributions (other
than such Section 2.1.1 Contributions and the Highridge Subordinated
Contributions) are made to the Partnership from time to time (if any), and using
the actual dates on which distributions are made (or deemed made) to such
Partner pursuant to Section 4.1.1(c).
"PRIME RATE" shall mean the so-called "Reference Rate" announced by Bank of
America N.T.&S.A. at Los Angeles, California, from time to time.
"PROFIT" OR "LOSS" shall mean, for each Partnership Accounting Year, an
amount equal to the Partnership's net taxable income or loss (as computed for
book purposes) for such Accounting Year (determined without regard to any items
of income, gain or deduction, as computed for book purposes, taken into account
in computing the Partnership's Gain or Loss on Disposition for such Accounting
Year), determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction, as computed for book purposes,
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in computing such taxable income or loss), including the Partnership's
allocated share thereof from any Investment Entity, with the following
adjustments:
Any income of the Partnership that is exempt from federal income tax and is
not otherwise taken into account in computing Profit or Loss shall be added to
such taxable income or loss (as computed for book purposes);
In the event the agreed fair market value of any Partnership asset is
adjusted pursuant to Regulations Section 1.704-l(b)(2)(iv)(f) or other pertinent
sections of such Regulations, the amount of such adjustment shall be taken into
account as Gain or Loss on Disposition of such asset for purposes of computing
Profit or Loss; and in lieu of the depreciation, amortization and other cost
recovery deductions taken into account in computing such taxable income or loss,
there shall be taken into account depreciation, amortization or other cost
recovery computed with reference to Gross Asset Value of Partnership property
reasonably Approved by the Partners (subject to Section 5.10(iii)) (if different
from its adjusted tax basis) pursuant to Regulations Section
1.704-l(b)(2)(iv)(g) for such Partnership Accounting Year; and
Notwithstanding any other provisions, any items which are specially
allocated pursuant to Sections 3.3, 3.4, 3.5, 3.6 and 3.9 shall not be taken
into account in computing Profit or Loss.
"PROPERTIES" is defined in Section 1.5.1.
"PROPERTY DEADLOCK" is defined in Section 5.11(a).
"PROPONENT GROUP" is defined in Section 5.11(a).
"PROPONENT GROUP FIRST OFFER PRICE" is defined in Section 5.11(a).
"PROPONENT GROUP INTEREST PURCHASE PRICE" is defined in Section 5.11(a).
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<PAGE>
"PURCHASE NOTICE" is defined in Section 7.9.1.
"RECONTRIBUTING MEMBER" is defined in Section 3.5.4.
"REGULATIONS" is defined in the definition of "Income Tax Regulations."
"REIT" is defined in Section 5.1.1.2.
"REIT SHARE VALUE" is defined in Section 8.3.8.
"REQUIRED ADDITIONAL CONTRIBUTIONS" is defined in Section 2.1.2.
"REMOVAL DEFAULT" means, with respect to the Managing General Partner, that
such Partner or any of such Partner's Affiliates has committed gross negligence
with respect to the Partnership, an Investment Entity, an Investment or a
Property, or has willfully breached the provisions of this Agreement, any
Investment Entity Agreement or any other agreement entered into between such
Person and the Partnership or any Investment Entity, in each case if the same is
not cured within the time required by Section 9.2 of this Agreement, such
Investment Entity Agreement, or such other agreement (as applicable).
"RESIDUAL PERCENTAGE" of a Partner as of any relevant time shall mean the
Residual Percentage set forth on Exhibit B for such Partner.
"RESPONDENT GROUP" is defined in Section 5.11(a).
"RESPONDENT GROUP INTEREST PURCHASE PRICE" is defined in Section 5.11(a).
"REVALUED PROPERTY" is defined in Section 3.5.3.2, and includes the El
Segundo Land.
"SECTION 2.2.1 CONTRIBUTION" is defined in Section 2.2.1.
"SHORTFALL" is defined in Section 2.1.2.
"SUBSEQUENT DEVELOPMENT PLAN" is defined in Section 5.1.3.4.
"SUMMIT RIDGE LAND" shall mean that certain parcel of real property that is
described on Exhibit D-2 (including improvements thereon) that is to be acquired
by purchase by the Partnership (or an Investment Entity formed by the
Partnership) from a seller who is not an Affiliate of any Partner.
"TAX MATTERS PARTNER" is defined in Section 5.4 (which references the
Code).
"TAX PAYMENT LOAN" is defined in Section 3.11.
"TAX TERMINATION" is defined in Section 7.5.1.3.
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<PAGE>
"TERMINATED PARTNER" shall mean (i) any Partner that has failed to make a
Capital Contribution when required and who has become a Defaulting Partner by
reason thereof under Section 2.2.2, (ii) any Partner that becomes Bankrupt,
(iii) any Partner which has been dissolved (and has not been reconstituted
within sixty (60) days thereafter) or, if an individual, who has died, (iv) any
Partner which has committed a Major Default or (v) any Partner who has breached
the restrictions on Transfer of its interest in the Partnership contained in
Article 7. If any Partner in a Partner Group is a Terminated Partner, all
Partners in such Partner Group shall also be deemed to be Terminated Partners,
and shall be subject to all of the remedies applicable against a Terminated
Partner under this Agreement, including the loss of its Approval rights and the
obligation to sell its interest in the Partnership as provided in Section 7.9.
"TERMINATION DATE" shall mean the date upon which a Partner became a
Terminated Partner.
"THIRD PARTY MEZZANINE FINANCING" with respect to a Property means that
portion of the Partnership's or Investment Entity's financing with respect to
such Property which, when added to the Partnership's conventional financing with
respect to such Property, will cause such Property to be 85% financed with debt.
"TRANSFER" shall mean (i) the issuance, transfer, sale, gift, grant,
conveyance, assignment, encumbrance, pledge, hypothecation or redemption,
directly or indirectly, of any equity ownership interest (whether stock, general
partnership interest, partnership interest, membership interest or otherwise) in
the Partnership or in any Person holding a direct (or indirect through tiered
Entities) interest in the Partnership, or the merger or consolidation of any
such Person into or with another Person, as the case may be; and (ii) the
execution and delivery by any Person holding a direct (or indirect through
tiered Entities) interest in the Partnership of a contract of sale, option or
other agreement providing for any of the foregoing.
"UNDISTRIBUTED HIGHRIDGE SUBORDINATED CONTRIBUTIONS" shall mean the
Highridge Subordinated Contributions less distributions previously made (or
deemed made) to the Highridge Partners under Section 4.1.1(e) and 4.1.2 (to the
extent deemed Undistributed to repay Highridge Subordinated Contributions under
Section 4.1.2).
"UNDISTRIBUTED HIGHRIDGE SUBORDINATED RETURN" means an amount equal to the
Highridge Subordinated Contribution Return accrued to the date the Undistributed
Highridge Subordinated Return is being determined, less all distributions made
(or deemed made) to the Highridge Partners pursuant to Sections 4.1.1(d) and
4.1.2 (to the extent deemed to pay Undistributed Highridge Subordinated Return
under Section 4.1.2).
"UNDISTRIBUTED PREFERRED RETURN" with respect to a Partner means an amount
equal to the Preferred Return of each Partner accrued to the date the
Undistributed Preferred Return is being determined, less all distributions made
(or deemed made) to such Partner pursuant to Sections 4.1.1(a) and (b).
"UNREIMBURSED PAYMENTS" is defined in Section 3.5.4.
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<PAGE>
EXHIBIT B
FUNDING PROPORTIONS, SECTION 2.1.1 CONTRIBUTIONS
AND RESIDUAL PERCENTAGES
Section 2.1.1 Funding Residual
Partner Contributions (Cash) Proportion Percentage
- ------- -------------------- ---------- ----------
Highridge GP $ 50,000 1% 1%
Highridge Limited Partner $ 950,000 19% 49%
Mack-Cali Limited Partner $19,200,000 80% 50%
----------- ---- ----
Total $20,200,000 100% 100%
=========== ==== ====
Section 2.1.1
Contributions
(Agreed Value of
El Segundo Land)
-----------------
Highridge
Invested Subordinated
Partner Capital Contributions
-------- -------- -------------
Highridge GP $ 350,000 $ 100,000
Highridge Limited Partner 6,650,000 1,900,000
---------- -----------
Totals $7,000,000 $ 2,000,000
========== ===========
Note: The Section 2.1.1 Contributions shown on this Exhibit B are deemed
contributed to the Partnership as of April 23, 1998. All additional
Capital Contributions shall be made only as provided in the
Partnership Agreement.
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<PAGE>
EXHIBIT C
INITIAL DEVELOPMENT PLAN
(INCLUDING APPROVED BUDGET AND APPROVED OVERHEAD BUDGET)
FOR THE EL SEGUNDO LAND AND
THE SUMMIT RIDGE (CARROLL MESA) LAND
For purposes of this Agreement, the Partners confirm that the
Development Plan (including the Approved Budget and Approved Overhead budget)
for each of the El Segundo Land and the Summit Ridge (Carroll Mesa) Land shall
be the document having such title that has been separately delivered and
Approved in writing by the Partners as of even date herewith.
C-1
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EXHIBIT D-1
LEGAL DESCRIPTION OF THE EL SEGUNDO LAND
[BEGINS NEXT PAGE]
D-1-1
<PAGE>
EXHIBIT D-2
LEGAL DESCRIPTION OF THE SUMMIT RIDGE (CARROLL MESA) LAND
[BEGINS NEXT PAGE]
D-2
<PAGE>
EXHIBIT E
OWNERSHIP OF PARTNERS
Members % Capital % Profits
Partner or Partners Interest Interest
- ------- ----------- --------- ---------
Highridge GP __________* _____% _____%
__________ _____% _____%
__________ _____% _____%
__________ _____% _____%
Highridge Limited
Partner __________* _____% _____%
__________ _____% _____%
__________ _____% _____%
__________ _____% _____%
Mack-Cali Limited General Partner: Aggregate Aggregate
Partner Mack-Cali Sub XXI, 100% 100%
Inc., a Delaware
corporation and
Limited Partner:
Mack-Cali Realty, L.P.,
a Delaware limited
partnership (both
Controlled by Mack-Cali
Realty Corporation)
- -----------------
- - SEE CHART ATTACHED AS EXHIBIT E-2 (BEGINS NEXT PAGE).
E-1
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EXHIBIT F
[INTENTIONALLY OMITTED]
F-1
<PAGE>
EXHIBIT G
CLAIMS AND ENCUMBRANCES
ON EL SEGUNDO LAND
(INCLUDING ENVIRONMENTAL)
None except those listed or described in the
Title Report and Survey or the Environmental
Reports (as such terms are defined in Exhibit H)
G-1
<PAGE>
EXHIBIT H
EL SEGUNDO LAND
REPRESENTATIONS AND WARRANTIES
In order to induce the Mack-Cali Limited Partner to enter into
the Partnership Agreement to which this Exhibit H is attached, each of the
Highridge Partners hereby represents and warrants the following with respect to
the El Segundo Land as of the date of the execution and delivery of this
Agreement and the Contribution of the El Segundo Land to the Partnership under
this Agreement (the term "knowledge" as used in this Exhibit H with respect to
the Highridge Partners means the actual and specific knowledge of any of John S.
Long, Eugene S. Rosenfeld, Steven A. Berlinger or Jack Mahoney):
(a) Immediately prior to their contribution of the El Segundo
Land to the Partnership pursuant to this Agreement, the Highridge Partners owned
good and marketable title to (and owned all of the ownership interests in) the
El Segundo Land, subject only to the matters shown on Exhibit G and the title
report and survey with respect to the El Segundo Land that were furnished by the
Highridge Partners to the Mack-Cali Limited Partner prior to executing this
Agreement, and any updates thereof (the "Title Report and Survey");
(b) Upon the execution and delivery of this Agreement by all of
the parties hereto, the Highridge Partners or their Affiliates will have no
remaining ownership interest in, or rights with respect to, the El Segundo Land
except for the indirect interest of the Highridge Partners therein as the owners
of interests as Partners in the Partnership;
(c) None of the Highridge Partners has assigned, pledged or
otherwise hypothecated or encumbered its ownership interests in the El Segundo
Land prior to the contribution of the El Segundo Land to the Partnership, and
none of the Highridge Partners has knowledge of any claims or encumbrances that
are pending with respect to the El Segundo Land other than those set forth on
Exhibit G, the Title Report and Survey or the Environmental Reports (defined in
paragraph (e) of this Exhibit H);
(d) The adjusted tax basis of the El Segundo Land of each of the
Highridge Partners at the date of their contribution of the El Segundo Land to
the Partnership is as set forth in the schedule that has been (or shall be,
within ten Business Days after the execution of this Agreement) provided to the
Mack-Cali Partners by the Highridge Partners, and such amount is the correct
amount to be credited to the Highridge Partners' tax capital accounts referred
to in Section 3.5.3.2 with respect to their contribution of the El Segundo Land;
(e) To the knowledge of the Highridge Partners, there are no
actions, suits, labor disputes, litigation or proceedings currently pending or
threatened against or related to all or any part of the El Segundo Land, the
environmental condition thereof, or the operation thereof, except as set forth
on Exhibit G, the Title Report and Survey or the Phase I environmental survey
and materials prepared in connection therewith that have been furnished
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<PAGE>
to the Mack-Cali Limited Partner by the Highridge Partners prior to the
execution of this Agreement that are listed on Exhibit K (collectively, the
"Environmental Reports");
(f) The Highridge Partners have provided the Mack-Cali Limited
Partner with the documentation and materials concerning the El Segundo Land that
are set forth on Exhibit K, and such documentation and materials are true copies
of such documentation and materials;
(g) To the knowledge of the Highridge Partners, (i) there are no
notices, suits, investigations or judgments relating to any violations
(including, without limitation, Environmental Laws, as defined in paragraph (k)
of this Exhibit H, of any laws, ordinances or regulations affecting the El
Segundo Land, (ii) no agency, board, bureau, commission, department, office or
body of any municipal, county, state or federal governmental unit, or any
subdivision thereof, having, asserting or acquiring jurisdiction over all or any
part of the El Segundo Land or the management, operation, use or improvement
thereof (collectively, the "GOVERNMENTAL AUTHORITIES") is contemplating the
issuance thereof, and (iii) there are no outstanding orders, judgments,
injunctions, decrees, directives or writ of any Governmental Authorities against
or involving the El Segundo Land;
(h) To the knowledge of the Highridge Partners, there are no
recorded leases (except as disclosed on the Title Report and Survey) or
unrecorded leases of any portion of the El Segundo Land;
(i) To the knowledge of the Highridge Partners, the Investment
Entity that will own the El Segundo Land (and/or the Partnership) has, or will
be able to obtain, all permits, licenses and approvals of all Governmental
Authorities (as defined in paragraph (g) of this Exhibit H) as are necessary to
develop the El Segundo Land with an office building as contemplated by the
Approved Development Plan with respect to the El Segundo Land that is described
in Exhibit C;
(j) Except as disclosed on Exhibit G or in the Environmental
Reports, and to the knowledge of the Highridge Partners:
(i) There are no Contaminants (as defined in paragraph (k)
of this Exhibit H) on, under, at, emanating from or affecting the El Segundo
Land, except those in compliance with all applicable Environmental Laws (as
defined in paragraph (k) of this Exhibit H);
(ii) Neither any of the Highridge Partners or their
Affiliates nor any current occupant, nor any prior owner or occupant, of the El
Segundo Land has received any Notice (as defined in paragraph (k) of this
Exhibit H) or advice from any Governmental Authority (as defined in paragraph
(g) of this Exhibit H) or any other third party with respect to Contaminants on,
under, at, emanating from or affecting the El Segundo Land, and no Contaminants
have been Discharged (as defined in this Exhibit H) which would allow a
Governmental Authority to demand that a cleanup be undertaken;
H-3
<PAGE>
(iii) No portion of the El Segundo Land has ever been
used by any of the Highridge Partners or their Affiliates or any former owner or
current or former occupant to generate, manufacture, refine, produce, treat,
store, handle, dispose of, transfer or process Contaminants, whether or not any
of those parties has received Notice or advice from any Governmental Authority
or any other third party with respect thereto;
(iv) None of the Highridge Partners or their Affiliates has
transported any Contaminants, and no current or former occupant or former owner
has transported any Contaminants, from the El Segundo Land to another location
which was not done in compliance with all applicable Environmental Laws;
(v) No Section 104(e) informational request has been
received by any of the Highridge Partners or their Affiliates that has been
issued pursuant to CERCLA (as defined in this Exhibit H);
(vi) There is no asbestos or asbestos containing material in
any friable state or otherwise in violation of Environmental Laws on the El
Segundo Land;
(vii) There are no transformers and capacitators
containing polychlorinated biphenyls ("PCBS"), or any "PCB Items," as defined in
40 C.F.R. Section 761.3, located on or affecting the El Segundo Land (or if
present, they are present in compliance with all Environmental Laws);
(viii) There are no above ground storage tanks or
Underground Storage Tanks (as defined in this Exhibit H) at the El Segundo Land,
regardless of whether such tanks are regulated tanks or not;
(ix) All pre-existing above ground storage tanks and
Underground Storage Tanks at the El Segundo Land have been removed and their
contents disposed of in accordance with and pursuant to Environmental Laws;
(x) The El Segundo Land has not been used as a transfer
station, incinerator, resource or recovery facility, landfill or other similar
facility, for receiving or treating, storing or disposing of Contaminants,
garbage and refuse, and other discarded materials resulting from, without
limitation, industrial, commercial, agricultural, domestic or community
activities, including, without limitation, sanitary, hazardous, medical, special
or other waste or as a sanitary landfill facility as defined in 42 U.S.C.
Section 6903(26);
(xi) The Highridge Partners and each occupant of the El
Segundo Land have all environmental certificates, licenses and permits
("PERMITS") required to operate the El Segundo Land and there is no violation of
any statute, ordinance, rule, regulation, order, code, directive or requirement,
including, without limitation, Environmental Laws, with respect to any Permit,
nor any pending application for any Permit;
(xii) The El Segundo Land is not subject to any
statutory land use regulation, including, without limitation, wetlands
regulations, administered by the United
H-3
<PAGE>
States of America, Army Corps of Engineers, the U.S. Environmental Protection
Agency or any other Governmental Authority;
(xiii) Except as provided in the Title Report and Survey
or in the Environmental Reports, there are no federal or state liens as referred
to under CERCLA or Cal. Water Code Section 13305, Cal. Health & Safety Code
Section 25365.6, or any other applicable Environmental Laws that have attached
to the El Segundo Land;
(xiv) The El Segundo Land is in compliance with the
warning requirements and discharge prohibitions of the California Safe Drinking
Water and Toxic Enforcement Act of 1986 ("Proposition 65"), Cal. Health & Safety
Code Section 25249.5 ET SEQ.;
(xv) None of the Highridge Partners or their Affiliates has
engaged in or has permitted any occupant to engage in any activity on the El
Segundo Land in violation of Environmental Laws; and
(xvi) The El Segundo Land is in material compliance with
Environmental Laws; and
(k) The following terms shall have the following meanings when
used in this Exhibit H:
(i) "Contaminants" shall include, without limitation, any
regulated substance, toxic substance, hazardous substance, hazardous waste,
pollution, pollutant or contaminant, as defined or referred to in the California
Hazardous Substance Account Act (Health & Safety Code Section 25300 et seq.);
Chapter 6.5 of Division 20 of the Health and Safety Code (Section 25100 et
seq.), entitled "Hazardous Waste Control," the Oil Spill Prevention and Response
Act (Government Code Section 8574.1 et seq. and Public Resources Code
Sections 13000 et seq.); the Porter-Cologne Water Quality Control Act (Water
Code Sections 8750 et seq.); the California Clean Air Act (Health & Safety Code
Sections 39000 et seq.); Chapter 6.95 of Division 20 of the Health and Safety
Code (Sections 25500 et seq.), entitled "Hazardous Materials Release Response
Plans and Inventory," Proposition 65, as defined above, the "Tanks Laws" as
defined below; the Resource Conservation and Recovery Act, AS AMENDED, 42 U.S.C.
Section 6901 ET SEQ.; the Comprehensive Environmental Response, Compensation and
Liability Act, AS AMENDED, 42 U.S.C. Section 9601 ET SEQ. ("CERCLA"); the Water
Pollution and Control Act, 33 U.S.C. Section 1251 ET SEQ.; together with any
amendments thereto, regulations promulgated thereunder and all substitutions
thereof, as well as words of similar purport or meaning referred to in any other
applicable federal, state, county or municipal environmental statute, ordinance,
code, rule or regulation, including, without limitation, lead-based paint,
radon, asbestos, polychlorinated biphenyls, urea formaldehyde and petroleum
products and petroleum-based derivatives. Where a statute, ordinance, code,
rule or regulation defines any of these terms more broadly than another, the
broader definition shall apply.
(ii) "Discharge" shall mean the releasing, spilling,
leaking, leaching, disposing, pumping, pouring, emitting, emptying, treating or
dumping of Contaminants at,
H-4
<PAGE>
into, onto or migrating from or onto the El Segundo Land, regardless of whether
the result of an intentional or unintentional action or omission.
(iii) "Environmental Documents" shall mean all
environmental documentation in the possession or under the control of Seller
concerning the El Segundo Land, or its environs, including without limitation,
all sampling plans, cleanup plans, preliminary assessment plans and reports,
site investigation plans and reports, remedial investigation plans and reports,
remedial action plans and reports, or the equivalent, sampling results, sampling
result reports, data, diagrams, charts, maps, analysis, conclusions, quality
assurance/quality control documentation, correspondence to or from any
Governmental Authority, submissions to any Governmental Authority and
directives, orders, approvals and disapprovals issued by any Governmental
Authority.
(iv) "Environmental Laws" shall mean each and every
applicable federal, state, county or municipal statute, ordinance, rule,
regulation, order, code, directive or requirement, together with all successor
statutes, ordinances, rules, regulations, orders, codes, directives or
requirements, of any Governmental Authority in any way related to Contaminants.
(v) "Governmental Authority" is defined in paragraph (g) of
this Exhibit H.
(vi) "Notice" shall mean, in addition to its ordinary
meaning, any written communication of any nature, whether in the form of
correspondence, memoranda, order, directive or otherwise.
(vii) "Tank Laws" shall mean Cal. Health & Safety Code
Section 25280 ET SEQ., the federal underground storage tank law (Subtitle I) of
the Resource Conservation and Recovery Act, AS AMENDED, 42 U.S.C. Section 6901
ET SEQ., and any other applicable state, county or municipal statute, ordinance,
code, rule or regulation applicable to underground or above ground tanks,
together with any amendments thereto, regulations promulgated thereunder, and
all substitutions thereof, and any successor legislation and regulations.
(viii) "Underground Storage Tank" shall mean each and
every "underground storage tank," whether or not subject to the Tank Laws, as
well as the "monitoring system," the "leak detection system," the "discharge
detection system" and the "tank system" associated with the "underground storage
tank," as those terms are defined by the Tank Laws.
H-5
<PAGE>
EXHIBIT I
[INTENTIONALLY OMITTED]
I-1
<PAGE>
EXHIBIT J
PROCEDURES FOR SUPERVISING
EMPLOYEE AND AFFILIATE COMPLIANCE
THE HIGHRIDGE PARTNERS SHALL BE RESPONSIBLE FOR THE FOLLOWING IN CONNECTION
WITH THE WORK TO BE PERFORMED FOR THE PARTNERSHIP AND THE INVESTMENT
ENTITIES BY AFFILIATES OF THE HIGHRIDGE PARTNERS AND THEIR EMPLOYEES:
1. JOHN S. LONG ("LONG"), EUGENE S. ROSENFELD ("ESR") AND/OR STEVEN A.
BERLINGER ("SAB"), OR AN OFFICER OF HIGHRIDGE PARTNERS APPOINTED BY THEM SHALL,
ON A MONTHLY BASIS, REVIEW THE BUDGETS, CASH FLOW SUMMARIES, LEASING SUMMARIES
(OR STATUS REPORTS) AND CONSTRUCTION OR DEVELOPMENT STATUS REPORTS AND GENERALLY
CONDUCT MONTHLY (OR MORE FREQUENTLY AS REQUIRED) MEETINGS WITH ALL HIGHRIDGE
PARTNERS' AND THEIR AFFILIATES' SUPERVISORY EMPLOYEES (JACK MAHONEY AND KEN
WHITE UNLESS AND UNTIL CHANGED BY THE HIGHRIDGE PARTNERS UPON NOTICE TO THE
MACK-CALI LIMITED PARTNER) WORKING ON THE PROPERTIES TO ASCERTAIN THE STATUS OF
THE PROPERTIES AND LONG, ESR AND/OR SAB SHALL PROVIDE DIRECTION AND GUIDANCE TO
SUCH EMPLOYEES AS REQUIRED FROM TIME TO TIME IN CONNECTION WITH THE PROPERTIES
AND INVESTMENTS.
2. LONG, ESR AND/OR SAB SHALL CAUSE TO BE FURNISHED TO EACH SUCH
SUPERVISORY EMPLOYEE AND AFFILIATE A COPY OF EACH APPROVED DEVELOPMENT PLAN AND
APPROVED BUDGET AND A LIST OF THE ACTIONS THAT REQUIRE THE CONSENT OF THE
MACK-CALI PARTNERS UNDER THIS AGREEMENT (INCLUDING ANY APPROVED LEASING
PARAMETERS) AND PERIODICALLY PROVIDE EACH SUCH SUPERVISORY EMPLOYEE AND
AFFILIATE WITH A LIST OF THE CHANGES IN THE APPROVED DEVELOPMENT PLAN AND/OR
APPROVED BUDGETS THAT HAVE BEEN APPROVED BY THE PARTNERS FROM TIME TO TIME, AND,
UPON ANY OF LONG, ESR AND/OR SAB HAVING ACTUAL KNOWLEDGE OF ANY ACT OF ANY
EMPLOYEE OF THE HIGHRIDGE PARTNERS OR THEIR AFFILIATES, OR ANY ACT OF AN
AFFILIATE OF THE HIGHRIDGE PARTNERS THAT WOULD BE A BREACH OF THIS AGREEMENT
(INCLUDING A MAJOR DEFAULT) IF THE ACTION WERE TAKEN BY A HIGHRIDGE PARTNER, OR
ACTUAL KNOWLEDGE OF ANY MATERIAL DEVIATION FROM ANY APPROVED DEVELOPMENT PLAN,
APPROVED BUDGET OR CONTRACT PREVIOUSLY APPROVED BY THE PARTNERS OR BY THE
MACK-CALI LIMITED PARTNER, THE HIGHRIDGE PARTNERS SHALL GIVE PROMPT NOTICE
THEREOF TO THE MACK-CALI LIMITED PARTNER.
3. IF LONG, ESR OR SAB SUSPECTS THAT AN EMPLOYEE OF THE HIGHRIDGE PARTNERS
OR THEIR AFFILIATES, OR THAT AN AFFILIATE OF HIGHRIDGE PARTNERS, HAS COMMITTED
FRAUD OR MISAPPROPRIATION OF FUNDS, THE HIGHRIDGE PARTNERS SHALL NOTIFY THE
MARK-CALI LIMITED PARTNER PROMPTLY, AND THE HIGHRIDGE GP AND THE PARTNERS SHALL
REASONABLY APPROVE THE COURSE OF ACTION TO BE TAKEN IN RESPONSE THERETO.
4. COPIES OF WRITTEN SUMMARIES OR STATUS OR PERFORMANCE REPORTS, ANY OTHER
INFORMATION REASONABLY REQUESTED BY THE MACK-CALI LIMITED PARTNER, AND NOTICE OF
ANY MATERIAL DEVIATION FROM AN APPROVED DEVELOPMENT PLAN, APPROVED BUDGET OR
CONTRACT APPROVED BY THE PARTNERS OR BY THE MACK-CALI LIMITED PARTNER THAT IS
RECEIVED FROM EMPLOYEES OF THE HIGHRIDGE PARTNERS OR THEIR AFFILIATES SHALL BE
FURNISHED BY THE HIGHRIDGE PARTNERS TO THE MACK-CALI LIMITED PARTNER PROMPTLY
AFTER BEING SUBMITTED TO ANY OF LONG, ESR AND/OR SAB.
J-1
<PAGE>
EXHIBIT K
DUE DILIGENCE MATERIALS
PROVIDED BY THE HIGHRIDGE PARTNERS TO
THE MACK-CALI LIMITED PARTNER
CONCERNING THE EL SEGUNDO LAND
[BEGINS NEXT PAGE]
K-1
<PAGE>
EXHIBIT L
OPERATING APPROVAL STANDARDS
[BEGINS NEXT PAGE]
L-1
<PAGE>
EXHIBIT M
HIGHRIDGE REIMBURSEMENT SCHEDULE FOR
THE EL SEGUNDO LAND AND SUMMIT RIDGE (CARROLL MESA) LAND
[BEGINS NEXT PAGE]
M-1
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Name of Partnership. . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Certificate of Limited Partnership . . . . . . . . . . . . . . . . 2
1.4 Principal Office, Resident Agent and Registered Office . . . . . . 2
1.5 Purposes of Partnership. . . . . . . . . . . . . . . . . . . . . . 3
1.6 Funding Proportions; Residual Percentages. . . . . . . . . . . . . 3
1.7 Other Qualifications . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Term of Partnership. . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Title to Partnership Property. . . . . . . . . . . . . . . . . . . 4
1.10 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Authorized Acts. . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Authorized Representatives . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 CAPITAL CONTRIBUTIONS AND ADDITIONAL CONTRIBUTIONS . . . . . . . . 5
2.1 Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Third-Party Loans and Additional Capital Contributions and Capital
Calls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Use of Capital Contributions; Certain Expenses . . . . . . . . . . 10
2.4 Partner Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.5 Contributions to Investment Entities . . . . . . . . . . . . . . . 11
ARTICLE 3 INCOME TAX ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . 12
3.1 Establishment and Maintenance of Capital Accounts;
Partnership Status . . . . . . . . . . . . . . . . . . . . . . . . 12
3.2 Profit and Loss Allocations. . . . . . . . . . . . . . . . . . . . 12
3.3 Allocations of Gain or Loss on Disposition . . . . . . . . . . . . 13
3.4 Minimum Gain Chargeback and Qualified Income Offset. . . . . . . . 15
3.5 Other Tax Allocation Provisions. . . . . . . . . . . . . . . . . . 15
3.6 Intent of Allocations. . . . . . . . . . . . . . . . . . . . . . . 19
3.7 Basis Elections. . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.8 General Allocation Rules . . . . . . . . . . . . . . . . . . . . . 20
3.9 Sharing of Partnership Nonrecourse Debt and Nonrecourse Deductions 20
3.10 Adjustment of Gross Asset Value. . . . . . . . . . . . . . . . . . 20
3.11 Tax Payment Loans. . . . . . . . . . . . . . . . . . . . . . . . . 21
3.12 Approvals Relating to Tax Issues.. . . . . . . . . . . . . . . . . 23
ARTICLE 4 LOAN REPAYMENTS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . 23
4.1 Net Available Cash, Net Mortgage Proceeds and Capital Receipts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.2 Proceeds and Distributions in Liquidation. . . . . . . . . . . . . 24
4.3 General Distribution Rules . . . . . . . . . . . . . . . . . . . . 25
4.4 Source of Distributions. . . . . . . . . . . . . . . . . . . . . . 26
-i-
<PAGE>
ARTICLE 5 MANAGEMENT; DUTIES AND POWERS OF THE MANAGING GENERAL PARTNER;
RIGHTS AND DUTIES OF MANAGING GENERAL PARTNER. . . . . . . . . . . 26
5.1 Management of Business; Officers; Partner Obligations; Reimbursements;
Major Decisions; Retained Approvals. . . . . . . . . . . . . . . . 26
5.2 Affiliate Transactions; Exclusivity; Mack-Cali Property Management
Option.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3 Reporting Requirements; Financials; Meetings . . . . . . . . . . . 41
5.4 Tax Matters Partner; Tax Returns . . . . . . . . . . . . . . . . . 43
5.5 Indemnification and Liability of the Partners. . . . . . . . . . . 44
5.6 Control Change . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.7 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . 46
5.8 No Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.9 Determination Date for Indemnity Payments, Removal Defaults,
Performance Defaults and Major Defaults; Arbitration . . . . . . . 46
5.10 Deadlock/Partner Sale Rights . . . . . . . . . . . . . . . . . . . 48
5.11 Property Deadlock.. . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 6 BOOKS, RECORDS AND BANK ACCOUNTS . . . . . . . . . . . . . . . . . 55
6.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 55
6.2 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 7 TRANSFERS OF PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . 56
7.1 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . 56
7.2 No Tag-Along Rights. . . . . . . . . . . . . . . . . . . . . . . . 57
7.3 Bankruptcy or Dissolution of Partners. . . . . . . . . . . . . . . 57
7.4 Substitution of Partner. . . . . . . . . . . . . . . . . . . . . . 57
7.5 Additional Transfer Restrictions . . . . . . . . . . . . . . . . . 58
7.6 Transfer Indemnification and Contribution Provisions . . . . . . . 59
7.7 Basis for Restrictions and Remedies. . . . . . . . . . . . . . . . 60
7.8 Representations, Warranties and Covenants. . . . . . . . . . . . . 60
7.9 Terminated Partner; Removal Defaults; Performance Defaults; Purchase
Rights; Control Change Notices . . . . . . . . . . . . . . . . . . 63
ARTICLE 8 TERM, DISSOLUTION AND TERMINATION. . . . . . . . . . . . . . . . . 67
8.1 Events of Dissolution. . . . . . . . . . . . . . . . . . . . . . . 67
8.2 Limitation on Dissolution. . . . . . . . . . . . . . . . . . . . . 67
8.3 Liquidation and Winding Up . . . . . . . . . . . . . . . . . . . . 67
8.4 Reconstitution After Bankruptcy or Dissolution of a General Partner 70
8.5 Distribution Upon Dissolution and Capital Account Adjustments. . . 71
8.6 Compliance with Timing Requirements of Treasury Regulations. . . . 71
ARTICLE 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.1 Other Interests. . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.2 Damages; Certain Cure Rights; Offset . . . . . . . . . . . . . . . 72
9.3 No Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-ii-
<PAGE>
9.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.6 Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . 74
9.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.9 Titles and Captions. . . . . . . . . . . . . . . . . . . . . . . . 75
9.10 Agreement in Counterparts. . . . . . . . . . . . . . . . . . . . . 75
9.11 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 75
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 75
9.13 Waiver of Partition. . . . . . . . . . . . . . . . . . . . . . . . 75
9.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.15 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.16 No Drafting Presumption. . . . . . . . . . . . . . . . . . . . . . 76
9.17 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . 76
EXHIBIT A DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B FUNDING PROPORTIONS, SECTION 2.1.1 CONTRIBUTIONS AND RESIDUAL
PERCENTAGES . . . . . . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C INITIAL DEVELOPMENT PLAN. . . . . . . . . . . . . . . . . . . C-1
EXHIBIT D-1 LEGAL DESCRIPTION OF THE EL SEGUNDO LAND. . . . . . . . . . D-1-1
EXHIBIT D-2 LEGAL DESCRIPTION OF THE SUMMIT RIDGE (CARROLL MESA) LAND . . D-2
EXHIBIT E OWNERSHIP OF PARTNERS . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G CLAIMS AND ENCUMBRANCES ON EL SEGUNDO LAND
(including environmental) . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H EL SEGUNDO LAND REPRESENTATIONS AND WARRANTIES. . . . . . . . H-1
EXHIBIT I [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT J PROCEDURES FOR SUPERVISING EMPLOYEE
AND AFFILIATE COMPLIANCE . . . . . . . . . . . . . . . . . . J-1
EXHIBIT K DUE DILIGENCE MATERIALS PROVIDED BY THE HIGHRIDGE PARTNERS TO
THE MACK-CALI LIMITED PARTNER CONCERNING THE EL SEGUNDO LAND. K-1
EXHIBIT L OPERATING APPROVAL STANDARDS. . . . . . . . . . . . . . . . . L-1
EXHIBIT M HIGHRIDGE REIMBURSEMENT SCHEDULE FOR THE EL SEGUNDO LAND AND
SUMMIT RIDGE (CARROLL MESA) LAND. . . . . . . . . . . . . . . M-1
-iii-
<PAGE>
Exhibit 10.2
SUPPLEMENT TO AGREEMENT OF LIMITED PARTNERSHIP
OF
HPMC DEVELOPMENT PARTNERS, L.P.,
A DELAWARE LIMITED PARTNERSHIP
This SUPPLEMENT TO AGREEMENT OF LIMITED PARTNERSHIP (the "Supplement")
is made and entered into as of the 23rd day of April, 1998, by and among HCG
DEVELOPMENT, L.L.C., a Delaware limited liability company, as the managing
general partner ("Highridge GP" or for so long as Highridge GP is a General
Partner, the "Managing General Partner"), SUMMIT PARTNERS I, L.L.C., a Delaware
limited liability company, as a limited partner (the "Highridge Limited
Partner"), and MACK-CALI CALIFORNIA DEVELOPMENT ASSOCIATES L.P., a California
limited partnership, as a limited partner (the "Mack-Cali Limited Partner" and
together with the Highridge Limited Partner, the "Limited Partners"), with
reference to the following:
RECITALS
A. The Managing General Partner and the Limited Partners have entered
into that certain Agreement of Limited Partnership of HPMC Development Partners,
L.P., a Delaware limited partnership dated as of April 23, 1998 (the
"Agreement").
B. The Managing General Partner and the Limited Partners desire that
this Supplement be an integral part of the Agreement and modify the terms of the
Agreement to the extent set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein (the receipt and sufficiency of which hereby are acknowledged
by each party hereto), the parties hereto, intending to be legally bound, agree
as follows:
1. Each of the Development Plans (including the budgets contained
therein) for the El Segundo Land and the Summit Ridge Land are hereby Approved
by the Partners and shall constitute the Approved Development Plans with respect
thereto.
2. Notwithstanding anything to the contrary contained in the Agreement:
(a) The Mack-Cali Limited Partner's Section 2.1.1 Contribution
(Cash) identified on Exhibit B of the Agreement shall be reduced to $5,000,000,
which sum shall be held as reserves until such time as the Mack-Cali Partners
have contributed the maximum amount of their Required Additional Capital
Contributions pursuant to Section 2(b) of this Supplement, provided, that the
Managing General Partner is
(1)
<PAGE>
authorized to make expenditures of the Mack-Cali Limited Partner's Section 2.1.1
Contributions (Cash) in accordance with the Approved Development Plans (and the
budgets contained therein), as needed from time to time to the extent the
Mack-Cali Partners fail to make any Required Additional Capital Contributions
pursuant to and in accordance with Section 2(b) of this Supplement (and the use
of such funds by the Managing General Partner shall not relieve the Mack-Cali
Partners of their obligations to make Required Additional Capital Contributions
under Section 2(b) of this Supplement).
(b) In addition to the Required Additional Capital
Contributions of the Mack-Cali Partners under Section 2.1.2 of the Agreement,
the Mack-Cali Partners shall make additional Capital Contributions to the
Partnership from time to time in accordance with a disbursement request in the
form of Exhibit N attached hereto (a "Disbursement Request") delivered by the
Managing General Partner, in order to fund the operations of the Partnership and
the Investment Entities in accordance with the Approved Development Plans
(including the budgets contained therein). The Managing General Partner may
issue Disbursement Requests from time to time in amounts then required within
the Approved Development Plans (and the budgets contained therein). The
Mack-Cali Partners shall make the Required Additional Contributions set forth in
each Disbursement Request within ten (10) days after the date on which the
Disbursement Request with respect thereto has been received (or deemed received
under Section 9.5 of the Agreement). To the extent a Disbursement Request
identifies progress payments or final payments with respect to construction of
improvements at the El Segundo Land or the Summit Ridge Land, the Disbursement
Request shall include a certificate from an engineer or architect licensed to
practice and qualified to do business in California (and acceptable to the
applicable construction lender) as to the accuracy of progress (or final)
payments sought in accordance with standard AIA guidelines and procedures. The
Partners shall use reasonable efforts to engage such engineer or architect,
subject to the reasonable Approval of the Partners as to who is engaged, as soon
as is practicable hereafter. In no event shall the Required Additional Capital
Contributions required under this Section 2(b) exceed $14,200,000, subject to
reduction pursuant to Section 3 of this Supplement.
(c) If the Mack-Cali Partners fail to contribute their
Required Additional Capital Contributions to the Partnership pursuant to Section
2(b) of this Supplement, the Highridge Partners shall have all of the remedies
available under Article II of the Agreement, and, in addition, such failure
shall result in the Mack-Cali Partners becoming Terminated Partners to the
extent provided in Section 2.2.2 of the Agreement.
3. Section 2.1.2.2 of the Agreement is hereby deleted. Notwithstanding
the other provisions of this Agreement, to the extent the amount of the
construction financing for the El Segundo Land and the Summit Ridge Land exceeds
$27,200,000, the maximum amount of Required Additional Capital Contributions of
the Mack-Cali Partners pursuant to Section 2(b) of this Supplement shall be
reduced by the difference between (a) the amount of such construction financing
(up to a maximum of $28,200,000), less (b) $27,200,000. In no event shall the
reduction of the maximum
(2)
<PAGE>
amount of the Mack-Cali Partners' Required Additional Capital Contributions
under Section 2(b) of this Supplement exceed $1,000,000.
4. Section 2.1.2.3 of the Agreement is modified such that the maximum
amount of the contributions from the Mack-Cali Partners thereunder shall be
limited to the maximum amount of Required Additional Contributions then
remaining with respect to the Mack-Cali Limited Partner (and not $4,000,000),
and (b) the last sentence of Section 2.1.2.3 of the Agreement is deleted, such
that there is no limit on the Capital Equalization Distribution thereunder. To
the extent the Mack-Cali Limited Partner has made contributions to the
Partnership under Section 2.1.2.3 of the Agreement, such contributions shall be
treated as Required Additional Capital Contributions made by it under Section
2.1.2.3 of the Agreement.
5. If any third party financing (other than Third Party Mezzanine
Financing governed by Section 2.1.2.4 of the Agreement, which provision shall
remain in full force and effect) is obtained for the development of the El
Segundo Land and/or the Summit Ridge Land, or refinancing in replacement
thereof, and proceeds therefrom may be used to distribute to the Partners, such
proceeds shall be made to the Highridge Partners as a Capital Equalization
Distribution as provided in Section 2.1.2.3 of the Agreement prior to making any
distributions to the Partners under Article 4. Distributions to the Highridge
Partners pursuant to this Section 5 of this Supplement shall be deemed to have
been made pursuant to Section 4.1.1(c) of the Agreement in repayment of the
Highridge Partners' Invested Capital.
6. Except as otherwise defined herein, capitalized terms in this
Supplement shall have the meaning given such terms in the Agreement.
7. Except as expressly supplemented or modified herein, all terms and
conditions of the Agreement shall remain in full force and effect.
8. This Supplement may be executed in several counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument when taken together. In addition, this Supplement may contain
more than one counterpart of the signature page and this Supplement may be
executed by the affixing of the signatures of each of the Partners to one or
more of such counterpart signature page. A Partner shall be deemed to have
executed and delivered this Supplement if and when it has manually executed a
counterpart signature page to this Supplement, transmitted a copy of the same by
facsimile to the other Partners at such other Partner's facsimile number set
forth in the Agreement, and received a printed confirmation of the successful
receipt thereof by such other Partner. This Supplement shall not be binding on
the Partners hereto unless each Partner shall have executed and delivered a copy
of both the Agreement and this Supplement to the other Partners. If this
Supplement is executed and delivered by facsimile, each Partner who transmits
its signature page for this Supplement by facsimile shall promptly forward a
manually executed signature page to the other
(3)
<PAGE>
Partner (but a Partner's failure to so promptly shall not affect the validity of
its execution and delivery of this Supplement by facsimile transmission).
9. This Supplement is executed by the Partners in the interest of time
in order to avoid any delays in amending and restating the Agreement to fully
reflect the provisions of this Supplement. The Partners shall use reasonable
good faith efforts to amend and restate the Agreement in accordance with the
terms of this Supplement as soon as is practicable hereafter.
[Signatures on next page]
(4)
<PAGE>
IN WITNESS WHEREOF, this Supplement is executed, and is effective for
all purposes, as of the date first set forth above.
GENERAL PARTNER
HCG DEVELOPMENT, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management,
L.L.C., a Delaware limited liability
company, Manager
By: Highridge Management, Inc.,
a California corporation,
Managing Member
By: _____________________________
Name:
Title:
LIMITED PARTNERS:
SUMMIT PARTNERS I, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management,
L.L.C., a Delaware limited liability
company, Manager
By: Highridge Management, Inc.,
a California corporation,
Managing Member
By: _____________________________
Name:
Title:
MACK-CALI CALIFORNIA
DEVELOPMENT ASSOCIATES L.P.,
a California limited partnership
By: Mack-Cali Sub XXI, Inc., a
Delaware corporation, its
general partner
By: _____________________________
Name:
Title:
(5)
<PAGE>
Exhibit 10.3
FIRST AMENDMENT TO
AGREEMENT OF LIMITED PARTNERSHIP
OF
HPMC DEVELOPMENT PARTNERS, L.P.
This First Amendment (the "Amendment") is entered into as of October 8,
1998 and amends that certain Agreement of Limited Partnership of HPMC
Development Partners, L.P. (the "Partnership"), dated as of April 23, 1998,
as previously amended by that certain Supplement thereto (the "Supplement")
dated as of April 23, 1998 (as amended by such Supplement, the "Partnership
Agreement"). Capitalized terms that are used in this Amendment but that are
not otherwise defined herein shall have the meanings set forth in the
Partnership Agreement.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which hereby are acknowledged by the Partners, the Partners
hereby agree as follows (with the Partnership Agreement hereby being amended
to the extent it is inconsistent with the following provisions):
1. USE OF RESERVES. The Partners hereby approve that $4.6 million of
the $5 million of Mack-Cali Capital Contributions that currently are being
held as reserves shall be used to balance the Sanwa construction loan for the
El Segundo Land (in lieu of such amount continuing to be held as reserves by
the Partnership or the Mack-Cali Partners being required to make Required
Additional Contributions to fund such balancing requirement).
2. CAPITAL EQUALIZATION; MEZZANINE FINANCING.
(a) DEFINITION OF "THIRD PARTY MEZZANINE FINANCING." For purposes
of applying Sections 2.1.2.3 ("Capital Equalization") and 2.1.2.4.
("Mezzanine Financing") of the Partnership Agreement, the term "conventional
financing" with respect to a Property (as used in the definition of the term
"Third-Party Mezzanine Financing") shall be deemed to mean the portion of the
Partnership's financing with respect to such Property which will cause such
Property's development costs to be 50% financed with debt.
(b) ADDITIONAL TRIGGER DATE FOR CAPITAL EQUALIZATION.
Notwithstanding the provisions of Sections 2.1.2.3 ("Capital Equalization")
and 2.1.2.4 ("Mezzanine Financing") of the Partnership Agreement, the Capital
Equalization Distribution required under Section 2.1.2.3 of the Partnership
Agreement (and the Required Additional Contributions of the Mack-Cali
Partners to make such distribution) shall be required upon the earlier to
occur of (i) the El Segundo Valuation Date (i.e., the $55 million valuation
for the El Segundo Land occurring as provided in the definition of such term
contained in the Partnership Agreement) or (ii) the closing of binding loan
documentation (the "Construction Loan Closings") for the construction
<PAGE>
financing for both the El Segundo Land and the Summit Ridge Land if the
aggregate amount permitted to be borrowed by the Partnership and the
Investment Entities under such financing ("Maximum Permitted Borrowings")
exceeds $27.2 million (the date on which the Construction Loan Closing has
occurred for both Properties is referred to as the "Special Financing
Equalization Date"). The amount of the Capital Equalization Distribution, and
the amount of the Required Additional Contributions required to be made by
the Mack-Cali Partners to fund the same on the Special Financing Equalization
Date, as a result of the Special Financing Equalization Date occurring by
reason of the circumstances described in preceding clause (ii) shall not
exceed the lesser of (A) 75% of the aggregate Third Party Mezzanine Financing
permitted to be borrowed by the Partnership and the Investment Entities under
the construction financing with respect to which the Construction Loan
closing has occurred, or (B) the amount necessary to reduce the Invested
Capital of the Highridge Partners to 20% of the excess of (1) the total
development costs of $54,411,200 for both Properties, minus (2) the aggregate
Maximum Permitted Borrowings under the construction financing for both
Properties. In addition to a Capital Equalization Distribution being
required to occur on the Special Financing Equalization Date, a Capital
Equalization Distribution may also occur under Section 2.1.2.3 of the
Partnership Agreement (as amended by the Supplement) if the El Segundo
Valuation Date has occurred. Notwithstanding anything contained in the
Partnership Agreement or in this Amendment to the contrary, the maximum
aggregate Capital Contributions required to be made by the Mack-Cali Partners
under the Partnership Agreement and this Amendment for all periods (including
their initial $5 million Capital contribution, the Required Additional
Contributions to be contributed by the Mack-Cali Partners under this
Amendment to make the Capital Equalization Distribution upon the occurrence
of the Special Financing Equalization Date, and all other Required Additional
contributions required to be made by the Mack-Cali partners under the
Partnership Agreement) shall not exceed $19,200,000 less one dollar ($1.00)
for each dollar by which the Maximum Permitted Borrowings exceed $27,200,000
(up to a maximum $1 million reduction to $18,200,000).
(c)PREFERRED RETURN/HIGHRIDGE SUBORDINATED RETURN RATES.
Notwithstanding anything in the Partnership Agreement to the contrary, from
and after the Equalization Date, the annual percentage rate to be used in
computing (i) the Highridge subordinated Contribution Return, and (ii) the
Preferred Return on the Required Additional Contributions of the Mack-Cali
Partners made by the Mack-Cali Partners to make the Capital Equalization
Distribution under Section 2.1.2.3 of the Partnership Agreement or
Section2(b) of this Amendment, shall thereafter accrue at an annual rate
equal to the 30-day LIBOR rate in effect at the close of each calendar
quarter plus seven-hundred and fifty (750) basis points, cumulative and
compounded quarterly (the "Adjusted Return Rate") (and adjusted at the close
of each calendar quarter). The distributions of the Partnership (A) under
Section 4.1.1(a) of the Partnership Agreement in repayment of the
Undistributed Preferred Return of the Mack-Cali Partners that is computed at
the Adjusted Return Rate and in repayment of the portion thereof that is
computed at a 10% annual rate, and (B) under Section 4.1.1(c) of the
Partnership Agreement in repayment of the Invested Capital of the Mack-Cali
Partners that bears a Preferred Return computed at the Adjusted Return Rate
and in repayment of the portion thereof that bears a Preferred Return
computed at a 10% annual rate, shall be deemed
2
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to have been made pro rate in repayment of such amounts under such Section
4.1.1(a) or Section 4.1.1(c), as applicable, in proportion to the amount
thereof that is computed at the Adjusted Return Rate and the amount thereof
computed at a 10% annual rate.
3. REMAINDER OF PARTNERSHIP AGREEMENT. Except as expressly amended
herein, all provisions of the Partnership Agreement shall remain in full
force and effect.
4. COUNTERPART EXECUTION. This Amendment may be executed in several
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument when taken together. In
addition, this Amendment may contain more than one counterpart of the
signature page and this Amendment may be executed by affixing the signatures
of each of the Partners to one or more of such counterpart signature pages. A
Partner shall be deemed to have executed and delivered this Amendment if and
when it has manually executed a counterpart signature page to this
Amendment, transmitted a copy of the same by facsimile to each other Partner
at such other Partner's facsimile number set forth in the Partnership
Agreement, and received a printed confirmation of the successful receipt
thereof by such other Partner. This Amendment shall not be binding on the
Partners hereto unless each Partner shall have executed and delivered a copy
of this Amendment to the other Partners. If this Amendment is executed and
delivered by facsimile, each Partner who transmits its signature page for
this Amendment by facsimile shall promptly forward a manually executed
signature page to each other Partner (but a Partner's failure to do so
promptly shall not affect the validity of its execution and delivery of this
Amendment by facsimile transmission).
5. CONTINUATION OF BUSINESS. The Partnership hereby is reconstituted and
its business continued pursuant to the Partnership Agreement, as amended by
this Amendment.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Supplement is executed, and is effective for
all purposes, as of the date first set forth above.
GENERAL PARTNER
HCG DEVELOPMENT, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management,
L.L.C., a Delaware limited liability
company, Manager
By: Highridge Management, Inc.,
a California corporation,
Managing Member
By: _____________________________
Name:
Title:
[SIGNATURES CONTINUED ON NEXT PAGE]
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LIMITED PARTNERS:
SUMMIT PARTNERS I, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management,
L.L.C., a Delaware limited liability
company, Manager
By: Highridge Management, Inc.,
a California corporation,
Managing Member
By: _____________________________
Name:
Title:
MACK-CALI CALIFORNIA
DEVELOPMENT ASSOCIATES L.P.,
a California limited partnership
By: Mack-Cali Sub XXI, Inc., a
Delaware corporation, its
general partner
By: _____________________________
Name:
Title:
[END OF SIGNATURES]
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<PAGE>
Exhibit 10.4
AGREEMENT OF LIMITED PARTNERSHIP
OF
HPMC LAVA RIDGE PARTNERS, L.P.
A DELAWARE LIMITED PARTNERSHIP
DATED AS OF THE 21ST DAY OF JULY, 1998
THE INTERESTS ISSUED UNDER THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR REGISTERED OR
QUALIFIED UNDER THE APPLICABLE STATE SECURITIES LAWS, IN RELIANCE UPON
EXEMPTIONS FROM REGISTRATION AND QUALIFICATION PROVIDED IN THE SECURITIES ACT
AND THE APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND
QUALIFICATION OR REGISTRATION UNDER THE APPLICABLE STATE SECURITIES LAWS, OR AN
OPINION OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION OR
QUALIFICATION IS NOT REQUIRED.
IN ADDITION, THE INTERESTS ISSUED UNDER THIS AGREEMENT MAY BE SOLD OR
TRANSFERRED ONLY IN COMPLIANCE WITH THE RESTRICTIONS ON TRANSFER SET FORTH
HEREIN.
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
HPMC LAVA RIDGE PARTNERS, L.P.
A DELAWARE LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP ("Agreement") is made and entered
into as of the 21st day of July, 1998, by and among HCG DEVELOPMENT, L.L.C., a
Delaware limited liability company, as the managing general partner ("Highridge
GP" or for so long as Highridge GP is a General Partner, the "Managing General
Partner"), SUMMIT PARTNERS I, L.L.C., a Delaware limited liability company, as a
limited partner (the "Highridge Limited Partner"), and MACK-CALI CALIFORNIA
DEVELOPMENT ASSOCIATES L.P., a California limited partnership, as a limited
partner (the "Mack-Cali Limited Partner" and together with the Highridge Limited
Partner, the "Limited Partners"), with reference to the following:
RECITALS
A. The Managing General Partner and the Limited Partners desire to form a
limited partnership pursuant to the provisions of the Revised Uniform Limited
Partnership Act of the State of Delaware, Delaware Code, Title 6 Sections
117-101, ET SEQ., as amended from time to time, and to constitute themselves as
HPMC LAVA RIDGE PARTNERS, L.P., a Delaware limited partnership (the
"Partnership") for the purposes set forth in Sections 1.5 and 1.11, and on the
terms and conditions set forth in this Agreement.
B. The Managing General Partner and each of the Limited Partners desires
to make its respective capital contributions to the Partnership as described in
this Agreement and to be admitted as a Partner of the Partnership.
C. In order to effect the foregoing, the parties hereto desire to enter
into this Agreement as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein (the receipt and sufficiency of which hereby are acknowledged
by each party hereto), the parties hereto, intending to be legally bound, agree
as follows:
<PAGE>
ARTICLE 1
GENERAL PROVISIONS
1.1 FORMATION. The Managing General Partner, as the general partner, and
the Highridge Limited Partner and the Mack-Cali Limited Partner, as limited
partners, hereby form the Partnership as a limited partnership pursuant to the
terms of this Agreement and the Act. This Agreement shall constitute the
agreement of limited partnership among the Partners. All capitalized terms used
and not otherwise defined herein shall have the meanings set forth in Section
1.10 and Exhibit A. The Partners further agree to take such other actions as
may from time to time be necessary or appropriate under the laws of the States
of Delaware and California with respect to the formation, operation,
qualification and continued good standing of the Partnership as a limited
partnership in such jurisdictions.
1.2 NAME OF PARTNERSHIP. Subject to Section 1.3., the name of the
Partnership shall be "HPMC LAVA RIDGE PARTNERS, L.P.," or such other name as may
be reasonably Approved by the General Partners from time to time.
1.3 CERTIFICATE OF LIMITED PARTNERSHIP. The Managing General Partner
shall execute the Certificate of Limited Partnership (the "CERTIFICATE") for the
Partnership, and the Managing General Partner shall (i) cause the Certificate to
be filed in the Office of the Secretary of State of the State of Delaware as
required by the Act, and (ii) cause the Partnership to take any other steps that
are necessary for the Partnership to own the Investments and operate the
Properties and to conduct the Partnership's business in Delaware and California,
promptly after the date hereof. The Certificate shall be amended whenever, and
within the time periods, required by the Act, or otherwise when reasonably
Approved by the Partners.
1.4 PRINCIPAL OFFICE, RESIDENT AGENT AND REGISTERED OFFICE. The principal
office of the Partnership shall be located at 300 Continental Boulevard, Suite
360, El Segundo, California 90245, or at such other place or places as from time
to time be reasonably Approved by the General Partners; PROVIDED, HOWEVER, that
the Partnership shall at all times maintain a registered agent and an office in
the State of Delaware and the State of California. The name and address of the
registered agent for service of process on the Partnership in the State of
Delaware is Paracorp Incorporated, 15 East North Street, Dover, Delaware 19901.
The address of the registered office of the Partnership in the State of Delaware
is c/o Paracorp Incorporated, 15 East North Street, Dover, Delaware 19901. The
name and address of the registered agent for service of process on the
Partnership in the State of California is Mark Abramson, Esq., 300 Continental
Boulevard, Suite 360, El Segundo, California 90245. The address of the
registered office of the Partnership in the State of California shall be the
principal office of the Partnership. Such principal office, registered agent or
registered office may be changed upon the reasonable Approval of the General
Partners, so long as in accordance with the Act; concurrently with any such
change, written notice thereof shall be
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<PAGE>
given to each Partner. Promptly following execution and delivery of this
Agreement, and filing of the Certificate with the Secretary of State of the
State of Delaware, the Managing General Partner shall cause the Partnership to
register as a foreign limited partnership in the Office of the Secretary of
State of California and in such other jurisdictions as are necessary or
desirable. Such registration shall be amended by the General Partners whenever
required by the laws of each such jurisdiction.
1.5 PURPOSES OF PARTNERSHIP. The purposes of the Partnership shall be:
1.5.1 Subject to the other provisions of this Agreement, to
acquire the Investments for investment purposes, and to own, hold, rehabilitate,
develop with office buildings, manage, maintain, entitle, plat, subdivide,
operate, finance, refinance, rezone, improve, lease, and to sell, exchange or
otherwise dispose of the Lava Ridge Land (more particularly described on Exhibit
D), and any other property Approved by the Partners (as improved from time to
time, the "Properties") and interests therein, whether directly or through
Investment Entities formed by the Partnership as provided in Section 1.5.2.
1.5.2 Subject to the other provisions of this Agreement, to
acquire any other assets that are incidental to the foregoing which have been
Approved by the Partners (the Properties and other assets owned by the
Partnership, including interests in Entities owning Properties or interests
therein, are referred to as the "Investments"). The Partnership shall, unless
otherwise Approved by the Partners, cause each Property to be acquired,
developed and owned by a separate limited liability company or limited
partnership formed by the Partnership for the purpose of acquiring the same or
interests therein (each such partnership or limited liability company, together
with any Entity in which such limited liability company or partnership owns a
direct or indirect equity ownership interest, an "Investment Entity"), and the
Partnership may form one or more other subsidiaries to serve as a general
partner of any limited partnership or as a member of any limited liability
company formed for Partnership purposes on terms reasonably Approved by the
Partners. The Partnership may take all actions required or permitted to be
taken by it under each Investment Entity Agreement (such actions to be required
to be Approved by the Partners to the extent required by this Agreement). The
Partnership may engage in any and all other general business activities
incidental or reasonably related to the foregoing.
1.6 FUNDING PROPORTIONS; RESIDUAL PERCENTAGES
1.6.1 The respective Funding Proportions and Residual Percentages in
the Partnership of the Partners are set forth on Exhibit B.
1.6.2 Unless the context otherwise clearly indicates, the term
"interest" or "interests" in the Partnership shall include both General Partner
interests and Limited Partner interests. A Partner's interest in the
Partnership shall mean and include its share of the capital of the Partnership,
its share of the Profits and Losses, its share of Gain or Loss on Disposition
3
<PAGE>
and other tax items of the Partnership, its share of the distributions of the
Partnership, its Capital Account, and its other rights and obligations, all as
determined under this Agreement.
1.7 OTHER QUALIFICATIONS. At the expense of the Partnership, the General
Partners shall cause the Partnership to be qualified to do business in each
jurisdiction in which such qualification becomes necessary (including
California), on or before the date on which such qualification becomes
necessary.
1.8 TERM OF PARTNERSHIP. The term of the Partnership commenced as of the
date of filing the Certificate and shall continue until the Partnership shall be
dissolved, liquidated and terminated pursuant to the provisions of Article 8.
1.9 TITLE TO PARTNERSHIP PROPERTY. Unless otherwise Approved by the
Partners, legal title to all of the Partnership's assets, including the
Properties and the Investments, shall be held by the Partnership, either
directly or through Investment Entities formed by the Partnership to acquire
such assets. It is expressly understood and agreed that the manner of holding
title to Partnership property is solely for the convenience of the Partners;
accordingly, legal representatives, beneficiaries, distributees, partners,
shareholders, members, successors or assigns of any Partner shall have no right,
title or interest in or to any such Partnership property by reason of the manner
in which title is held, but all such property shall be treated as Partnership
property subject to the terms of this Agreement.
1.10 DEFINITIONS. Capitalized terms that are used in this Agreement shall
have the meanings set forth on Exhibit A.
1.11 AUTHORIZED ACTS. In furtherance of its purposes, and subject to the
provisions of this Agreement, the Partnership and its General Partners shall
have the full power and authority to take in the Partnership's name all actions
that are necessary, useful, appropriate or helpful in connection therewith,
including the actions described in Section 5.1.1 hereof.
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<PAGE>
1.12 AUTHORIZED REPRESENTATIVES. The "Authorized Representatives" of a
Partner that is not a natural person shall be those representatives designated
by notice to all other Partners by such Partner from time to time to represent
such Partner in connection with the Partnership, unless and until replaced or
removed by notice from such Partner to all Partners. The written statements and
representations of an Authorized Representative for a Partner that is not a
natural Person shall be the only authorized statements and representations of
such Partner with respect to the matters covered by this Agreement. The initial
Authorized Representatives are (i) John S. Long, Eugene S. Rosenfeld, Steven A.
Berlinger and Jack Mahoney for the Highridge Partners, and (ii) Thomas Rizk,
Mitchell E. Hersh, Roger W. Thomas and Barry Lefkowitz for the Mack-Cali
Partners. The written statement or representation of any one Authorized
Representative of such Partner shall be sufficient to bind such Partner with
respect to all matters pertaining to the Partnership. The term "Approved by" or
"Consented to by" or "Consent of" or "satisfactory to" with respect to a Partner
that is not a natural Person means a decision or action which has been consented
to in writing by the Authorized Representative of such Partner (or orally to the
extent that the Partners have adopted a course of conduct pursuant to which
certain Approvals, other than those described below in this Section 1.12, are
granted orally), and with respect to a Partner who is an individual, means a
decision or action which has been consented to in writing by such individual.
In order for a decision or action to be "Approved by the Partners" (or any
variation thereof), the decision or action must be Approved by at least one
Authorized Representative of each Partner who then continues to have Approval
rights with respect to such action or decision under this Agreement. In order
for a decision or action to be "Approved by the General Partners" (or any
variation thereof), the decision or action must be Approved by at least one
Authorized Representative of each then General Partner. Notwithstanding
anything in this Agreement to the contrary (including any course of conduct
regarding oral Approvals that has been adopted by the Partners), the following
Approvals must be given in writing (to the extent Approval is required therefor)
in order to be effective: (1) acquisition by the Partnership or an Investment
Entity of a Property other than the Lava Ridge Land (the acquisition of which
hereby is Approved by the Partners pursuant to the Approved Development Plan
with respect thereto that is described on Exhibit C), (2) any borrowing by the
Partnership or an Investment Entity, (3) the sale or other disposition of any
Investment or Property, (4) adopting or materially modifying a Development Plan
for any Property or any Approved Budget contained therein, including any
Approved Overhead Budget contained therein or Approved by the Partners in
connection therewith (the Partners hereby confirm that the initial Approved
Development Plan, Approved Budget, and Approved Overhead Budget for the Lava
Ridge Land are described on Exhibit C), (5) liquidating the Partnership or any
Investment Entity and (6) issuing a Funding Notice as provided in Section
2.1.2.1(ii). Section 5.1.6.2 sets forth the procedure for obtaining Approvals.
5
<PAGE>
ARTICLE 2
CAPITAL CONTRIBUTIONS
AND ADDITIONAL CONTRIBUTIONS
2.1 CAPITAL CONTRIBUTIONS.
2.1.1 INITIAL CAPITAL CONTRIBUTIONS. (a) Each Partner has
contributed the amount in cash to the capital of the Partnership that is set
forth for such Partner on Exhibit B as its Section 2.1.1 Contribution (Cash).
(b) The Partnership shall contribute the Section 2.1.1 Contributions (less
Partnership expenses paid, or reserves funded, therefrom as set forth in the
Approved Budget or otherwise Approved by the Partners) to Lava Ridge Associates,
L.L.C. (a Delaware limited liability company that is owned by the Partnership
and is the Investment Entity that will acquire and develop the Lava Ridge Land)
in order to acquire the Lava Ridge Land. For convenience, the foregoing
contributions to the Partnership and subsequent contribution by the Partnership
to such Investment Entity may be accomplished by a direct payment of cash by the
Partners to such Investment Entity (and such direct payment hereby is Approved
by the Partners).
2.1.2 ADDITIONAL CAPITAL CONTRIBUTIONS.
2.1.2.1 GENERAL RULES. Except as provided in this Section
2.1.2, no Partner shall be required to make any Capital Contributions other than
those described in Sections 2.1.1, 3.5.4 and 4.3.2. Each Partner shall be
required to make additional Capital Contributions to the Partnership if any
General Partner or the Mack-Cali Limited Partner gives notice to all Partners (a
"Funding Notice") that meets the requirements of this Section 2.1.2. If a
Funding Notice is properly issued, the amount of additional Capital
Contributions so required from each Partner ("Required Additional
Contributions") shall be the amount described below with respect to such Partner
in this Section 2.1.2.1, and the Due Date for such Required Additional
Contributions shall be the date on which all conditions precedent thereto have
occurred (as set forth in the Development Plans or otherwise Approved by the
Partners). The amount and due date for such Required Additional Contributions
shall be specified in such Funding Notice (the collective dollar obligation of
the Partners with respect thereto for such Funding Notice is referred to as a
"Shortfall"). A Funding Notice may be issued only with respect to one or more
of the following events (and will be effective to the extent described below):
(i) Except as specifically Approved in writing by the Partners after
the execution of this Agreement, no Funding Notice may be issued to a
Partner except to the extent that the amounts of Required Capital
Contributions of such Partner described
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<PAGE>
therein are required to be made by such Partner under this clause (i),
clause (ii) or clause (iii) of this Section 2.1.2.1, and/or Section 3.5.4
or 4.3.2;
(ii) Except as provided in clause (i) above or clause (iii) below of
this Section 2.1.2.1., the Partners shall make additional Capital
Contributions to the Partnership, pro rata in proportion to their
respective Funding Proportions, from time to time in accordance with a
disbursement request in the form of Exhibit N attached hereto (a
"Disbursement Request") delivered by the Managing General Partner (or the
Mack-Cali Limited Partner if the Managing General Partner shall fail to do
so after a request to do so is received from the Mack-Cali Limited
Partner), in order to fund the operations of the Partnership and the
Investment Entities in accordance with the Approved Development Plans
(including the budgets contained therein) or as otherwise Approved by the
Partners. The Managing General Partner (or the Mack-Cali Limited Partner
if the Managing General Partner shall fail to do so after a request to do
so is received from the Mack-Cali Limited Partner) may issue one or more
Disbursement Requests from time to time to the extent Capital Contributions
are then due under the Approved Development Plans (and the budgets
contained therein). Each Partner shall make the Required Additional
Contributions set forth in each Disbursement Request within ten (10) days
after the date on which the Disbursement Request with respect thereto has
been received (or deemed received under Section 9.5 of the Agreement). To
the extent a Disbursement Request identifies progress payments or final
payments with respect to construction of improvements at any of the
Properties, the Disbursement Request shall include a certificate from an
engineer or architect licensed to practice and qualified to do business in
California (and acceptable to the applicable construction lender) as to the
accuracy of progress (or final) payments sought in accordance with standard
AIA guidelines and procedures. The Partners shall use reasonable efforts
to engage such engineer or architect, subject to the reasonable Approval of
the Partners as to who is engaged, as soon as is practicable hereafter. In
no event shall the aggregate Required Additional Capital Contributions
required from all of the Partners under this Section 2.1.2.1(ii) exceed $4
million (limited to $800,000 from the Highridge Group and $3,200,000 from
the Mack-Cali Group). A Disbursement Request shall constitute a Funding
Notice for purposes of this Agreement; or
(iii) Notwithstanding any provision of this Agreement to the
contrary, if and to the extent that distributions have been made to the
Partners pursuant to Section 4.1.1 (d), such distributions shall be
recontributed to satisfy any Shortfall of the Partnership (in the ratio
distributed to the Partners under such Section) in response to a Funding
Notice concerning such Shortfall (such recontributions to constitute
Required Additional Contributions for purposes of this Agreement).
Except as provided below, no Partner shall be required to issue a
Funding
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Notice under any circumstances. Notwithstanding the preceding sentence,
the Managing General Partner shall be required to issue a Funding Notice
within five (5) days after receiving notice from the Mack-Cali Limited
Partner that a Funding Notice is required in order to fund the amounts
described in this Section 2.1.2 that are then due and payable (the
Mack-Cali Limited Partner shall not be required to issue such a notice
under any circumstances). A Funding Notice may be issued by the Mack-Cali
Limited Partner if the Managing General Partner shall fail to do so within
such 5-day period. Each Funding Notice shall describe the Shortfall and
set forth the Required Additional Contribution of each Partner as
determined pursuant to this Section 2.1.2. If a Funding Notice is properly
issued as provided above in this Section 2.1.2, each Partner shall
contribute its Required Additional Contributions on or before the Due Date
therefor under Section 2.2.1. The provisions of this Section 2.1.2 which
provide that a Funding Notice must be validly issued before additional
Capital Contributions are required to be made shall not affect in any way
the obligation of any Partner to pay to the Partnership or to the other
Partners, as the case may be, any amount required to be paid by such
Partner to them under this Agreement (it being agreed that the issuance of
a Funding Notice shall not be required in order for the Partnership or any
Partner to enforce any such payment obligation).
2.1.2.2 MEZZANINE FINANCING. The Mack-Cali Limited Partner
shall have the right, upon notice to the Highridge Partners but subject to the
reasonable Approval of the Managing General Partner, to cause the Partnership to
obtain Third Party Mezzanine Financing (with respect to which no Partner or its
Affiliates shall be required to provide any personal guaranties of repayment
without such Partner's Approval).
2.1.3 CONTRIBUTIONS OF SERVICES. The Residual Percentage of any
Partner in excess of such Partner's Funding Proportion shall be deemed to be a
profits interest that has been received in exchange for services rendered or to
be rendered by such Partner to or for the benefit of the Partnership (such
excess Residual Percentage having no currently predictable distributions or
value).
2.2 THIRD-PARTY LOANS AND ADDITIONAL CAPITAL CONTRIBUTIONS AND CAPITAL
CALLS.
2.2.1 If a Funding Notice is properly given by a Partner pursuant
to Section 2.1.2, each Partner shall have the obligation, subject to the
limitations contained in Section 2.1.2, to contribute its Required Additional
Contributions within five (5) days (or ten (10) days in the case of Capital
Contributions described in Section 2.1.2.1(ii)) after the later to occur of
(i) the date on which the Funding Notice with respect thereto has been received
(or deemed received under Section 9.5) or (ii) the required funding date that is
set forth in the Funding Notice (the expiration of such five or ten day period
is referred to as the "Due Date"). There shall be a cure period of five (5)
days after the Due Date for each Partner to contribute its Required Additional
Contribution, as provided in Section 2.2.2.
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2.2.2 If any Partner fails to contribute the full amount of its
Required Additional Contributions within five (5) days (or ten (10) days in the
case of Capital Contributions described in Section 2.1.2.1(ii)) after the Due
Date thereof (such Partner and any other Partner in such Partner's Partner Group
thereupon being collectively referred to as the "Defaulting Partner"), then, as
the exclusive remedies of the Partnership and the other Partners who are not
Defaulting Partners (the "Non-Defaulting Partners"), the Non-Defaulting Partner
shall have the following remedies, exercisable by notice from the Non-Defaulting
Partners to the Defaulting Partner: (i) to elect to treat the Defaulting Partner
as a Terminated Partner under Section 7.9 (and pursue the remedies under this
Agreement that apply after a Partner becomes a Terminated Partner), (ii) to
cause the Partnership to sue the Defaulting Partner for actual (and not
consequential) damages that shall be limited to the portion of the Defaulting
Partner's share of the Shortfall Disbursement that was not received timely, plus
interest at the rate equal to the lesser of (x) fifteen percent (15%) per annum
or (y) the maximum interest rate permitted by law, and plus the costs of
collection, and (iii) to elect to lend (or to cause the Non-Defaulting Partners'
Affiliates to lend), to the Defaulting Partner or to the Partnership, as
Approved by the Non-Defaulting Partners, the amount of such Capital Contribution
that was not made timely by the Defaulting Partner. The remedies described in
clauses (i), (ii) and (iii) of this Section 2.2.2 shall be cumulative, and all
or any of them may be elected and apply simultaneously, except as provided in
Section 2.2.2.1.
2.2.2.1 If the Non-Defaulting Partners choose to lend (or to
cause their Affiliates to lend) the amount of the Required Additional
Contribution not made timely by the Defaulting Partner, the loan shall be a
recourse loan to the Partnership or to the Defaulting Partner, as elected by the
Non-Defaulting Partners, and shall bear interest, compounded monthly, at the
rate equal to the lesser of (i) the maximum interest rate permitted by law or
(ii) fifteen percent (15%) per annum, from the date such loan is made until the
date of repayment. Such loan shall be deemed to have been made to the
Defaulting Partner (and not to the Partnership) only if the Non-Defaulting
Partners (or the Non-Defaulting Partners' Affiliate) has paid such amount
directly to the Partnership and specifies, by notice to the Partners given
within two (2) Business Days after such funding, that the loan is being made to
the Defaulting Partner, in which case (1) said amount shall be deemed to have
been contributed to the Partnership by the Defaulting Partner for purposes of
determining the Capital Contributions made by the Defaulting Partner, its
Invested Capital and the Preferred Return thereon, (2) the remedies against the
Defaulting Partner described in Sections 2.2.2(ii) and 9.2 shall not apply with
respect to said amount, and (3) the Defaulting Partner shall still be deemed to
be a Terminated Partner for purposes of applying the remedies contained in
Section 7.9 and for all other provisions of this Agreement. Repayment of any
such loan to the Defaulting Partner shall be effected by the General Partners
being required to cause the Partnership to pay directly to the Non-Defaulting
Partners all distributions otherwise payable to the Defaulting Partner under
this Agreement as and when payable, instead of making such distributions to the
Defaulting Partner (with such distributions being deemed for all purposes to
have been made to the Defaulting Partner and then paid by the Defaulting Partner
to the Non-Defaulting Partners or their Affiliates, as the case may be).
Repayment of any such loan to the Partnership shall be made as provided in
Section 4.1 and Section 4.2.2. Any payments made
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with respect to loans described in this Section 2.2.2.1 shall first be deemed to
pay accrued but unpaid interest, and then be deemed to repay principal.
2.2.2.2 If none of the Partners timely contributes any portion
of its
Required Capital Contribution pursuant to a Funding Notice, there shall be no
remedy of any Partner or the Partnership against any other Partner by reason of
the failure to make such Required Capital Contributions.
2.2.3 Except as otherwise specifically set forth in this
Agreement, no Partner shall have the right (i) to withdraw such Partner's
Capital Contribution or to demand or receive the return of a Capital
Contribution or to make any claim to any portion of Partnership capital or (ii)
to demand or receive property other than cash in return for a Capital
Contribution or to receive any cash in return for a Capital Contribution.
2.2.4 Except as expressly provided in this Agreement, no Partner
shall have personal liability to make any Capital Contribution.
2.2.5 A deficit Capital Account of a Partner (or of a partner,
member or venturer of a Partner) shall not be deemed to be a liability of such
Partner (or of such partner, member or venturer) or an asset or property of the
Partnership (or any Partner). Furthermore, no Partner shall have any obligation
to the Partnership, any other Partner or any creditor of any of them or of any
Investment Entity for any deficit balance in such Partner's Capital Account.
2.3 USE OF CAPITAL CONTRIBUTIONS; CERTAIN EXPENSES. The initial cash
Capital Contributions made pursuant to Section 2.1.1(a) shall be used as
follows: (i) to pay unpaid third-party formation and start-up costs of the
Partnership and the Investment Entities, the acquisition costs of the
Investments (including the costs of entering into and performing under the
Acquisition Documents) that have been Approved by the Partners, and any
reimbursements (limited to each Partner's cost) included in the Initial Approved
Budget contained in the Approved Development Plan attached as Exhibit C with
respect to due diligence, formation and start-up expenditures; including
attorneys' fees and expenses and formation and qualification costs (and to
reimburse each Partner, limited to such Partner's cost, for portions thereof
already paid by such Partner or its Affiliates), such amounts (a) to include the
Partners' attorneys fees and expenses in connection with the preparation of this
Agreement, and the documents contemplated hereby, and (b) to be paid or
reimbursed to the Partners by the Partnership out of such Capital Contributions
promptly after invoices for such amounts are submitted to the Partnership and to
each Partner, and (ii) the balance, if any, shall be held in reserves pending
expenditure as set forth in an Approved Budget (or otherwise as Approved by the
Partners) or as permitted without such Approval under Section 5.1.3.2, Section
5.1.3.3 or Section 5.1.3.4. The Partners hereby confirm that the expense
reimbursements of the Highridge Partners that are described on Exhibit M have
been Approved by the Partners.
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2.4 PARTNER LOANS. If available cash flow, borrowings and Capital
Contributions are insufficient for the reasonable requirements of the
Partnership, the Mack-Cali Limited Partner if it is not a Terminated Partner,
shall have the unilateral right (but not the obligation) to finance (directly,
or through an Affiliate) any Partnership expenditure at an interest rate equal
to the lesser of (i) ten percent (10%) per annum or (ii) the maximum rate
permitted by law, provided, however, that prior to making any loan pursuant to
this Section 2.4(a), the Mack-Cali Limited Partner shall, unless a Highridge
Partner is a Terminated Partner, give at least ten (10) Business Days prior
written notice to the Highridge GP and offer to the Highridge Partners the
opportunity to participate (in proportion to the Partners' Funding Proportions)
in such loan. Any notice from the Mack-Cali Limited Partner pursuant to this
Section 2.4(a) shall specify the amount of such loan, the share thereof which
the Highridge Partners may lend and the earliest date on which such loan is to
be made to the Partnership (which date shall not, except in case of Emergency,
be earlier than ten (10) Business Days after such notice is received by the
Highridge GP). The Highridge Partners may participate in any loan pursuant to
this Section 2.4(a), if at all, only by delivery to the Mack-Cali Limited
Partner, not later than the date specified in such notice, of its share of such
loan. All loans described in this Section 2.4(a) shall be repayable as provided
for in Sections 4.1 and 4.2.
2.5 CONTRIBUTIONS TO INVESTMENT ENTITIES. Notwithstanding anything in
this Agreement to the contrary, to the extent that the reasonable needs of the
business of any Investment Entity require funding of expenditures in excess of
the reserves, other assets and available borrowings of the Partnership and such
Investment Entity that have been Approved by the Partners (whether in an
Approved Budget, Approved Development Plan or otherwise) for the payment thereof
other than with respect to a Property that is the subject of an Abandonment
Decision, (a) the Mack-Cali Limited Partner may (but shall not be required to)
elect, by notice to the Managing General Partner, or (b) the Managing General
Partner may (but shall not be required to) elect, by notice to the Mack-Cali
Limited Partner, to cause the Partnership to retain (in lieu of distributing the
same under Article 4) otherwise distributable Net Available Cash, Net Mortgage
Proceeds and Capital Receipts from any source (including other Properties and
Investment Entities) and cause the Partnership to contribute such amounts to
such Investment Entity for use by it for the payment of such expenditures;
PROVIDED, HOWEVER, that the maximum aggregate amount of cash that is retained
pursuant to all notices given pursuant to this Section 2.5 with respect to any
Investment Entity shall not exceed twenty-five percent (25%) of the Capital
Contributions made by the Partnership to such Investment Entity for all periods
(regardless of whether distributed back to the Partnership), other than Capital
Contributions made by the Partnership to such Investment Entity pursuant to this
Section 2.5.
ARTICLE 3
INCOME TAX ALLOCATIONS
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3.1 ESTABLISHMENT AND MAINTENANCE OF CAPITAL ACCOUNTS; PARTNERSHIP STATUS.
The General Partners shall establish and cause the Partnership to maintain a
single book Capital Account for each Partner which reflects each Partner's
Capital Contributions to the Partnership and a single tax capital account which
reflects the adjusted tax basis of the Capital Contributions contributed by each
Partner to the Partnership. Each Capital Account and tax capital account shall
also reflect the allocations and distributions made pursuant to Articles 3 and 4
and otherwise be adjusted in accordance with Code Section 704 and the principles
set forth in Regulations Sections 1.704-l(b) and 1.704-2. In applying such
principles, any expenditures of the Partnership described in Code Section
705(a)(2)(B) or treated as Code Section 705(a)(2)(B) expenditures pursuant to
Regulations Section 1.704-l(b)(2)(iv)(i) shall be allocated among the Partners
in the same manner as such expenditures would be allocated among the Partners
pursuant to this Article 3 if such expenditures were treated as additional items
of deduction of the Partnership (as computed for book purposes) that were
recognized and required to be allocated among the Partners pursuant to this
Article 3 with respect to the Partnership Accounting Year in which such
expenditures were made. The Partners intend that the Partnership be treated as
a partnership for tax purposes.
3.2 PROFIT AND LOSS ALLOCATIONS. Except as expressly provided to the
contrary in this Section 3.2, for purposes of determining Capital Account
balances under this Section 3.2, (a) Profit and Loss with respect to any
Partnership Accounting Year shall be allocated prior to reducing Capital
Accounts by any distributions with respect to such Partnership Accounting Year,
and (b) Section 3.2 shall be applied before applying Section 3.3.
3.2.1 LOSS FROM OPERATIONS. For each Partnership Accounting Year
from the Agreement Date until the termination of the Partnership, Loss from
Partnership operations shall be allocated among the Partners in the following
order of priority:
3.2.1.1 First, among the Partners as necessary to cause each
Partner's Capital Account balance to equal the sum of (i) the amount of Net
Available Cash that would be distributed to such Partner pursuant to Section 4.1
with respect to such Partnership Accounting Year if the Partnership distributed
all of the Net Available Cash for such Partnership Accounting Year without any
portion thereof being withheld as reserves or reinvested, plus (ii) the amount
that would be distributed to such Partner pursuant to Sections 4.1 and 4.2.3 if
the Partnership (a) distributed all Capital Receipts and Net Mortgage Proceeds
received with respect to such Partnership Accounting Year (without any portion
thereof being retained as reserves or reinvested) pursuant to Section 4.1 and
(b) then sold all of its remaining assets (including its interest in every
Investment Entity) for their adjusted tax basis (or adjusted book basis in the
case of Revalued Property) and distributed the proceeds therefrom and its
reserves (net of debt repayments) to the Partners pursuant to Sections 4.1 and
4.2.3; and
3.2.1.2 Second, after giving effect to the allocations made
pursuant to
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Sections 3.2.1.1 among the Partners in proportion to the Partners' respective
Funding Proportions.
3.2.2 PROFIT FROM OPERATIONS. For purposes of applying Section
3.2.1 and this Section 3.2.2, a Partner's Capital Account balance shall be
deemed to be increased by such Partner's share of Partnership Minimum Gain and
Partner Nonrecourse Debt Minimum Gain determined as of the end of such
Partnership Accounting Year. For each Partnership Accounting Year, Profit from
Partnership operations shall be allocated among the Partners as necessary to
cause the Capital Account balance of each Partner to equal the sum of (i) the
amount of Net Available Cash that would be distributed to such Partner under
Section 4.1 with respect to such Partnership Accounting Year (if no portion
thereof were withheld as reserves or reinvested), plus (ii) the amount that
would be distributed to such Partner pursuant to Sections 4.1 and 4.2.3 if the
Partnership (a) distributed all Capital Receipts and Net Mortgage Proceeds
received with respect to such Partnership Accounting Year (without any portion
thereof being retained as reserves or reinvested) pursuant to Section 4.1, and
(b) then sold all of its remaining assets (including its interest in every
Investment Entity) for their adjusted tax basis (or adjusted book basis in the
case of Revalued Property), and distributed the proceeds therefrom and its
reserves (net of debt repayments) to the Partners pursuant to Sections 4.1 and
4.2.3.
3.3 ALLOCATIONS OF GAIN OR LOSS ON DISPOSITION. For purposes of
determining Capital Account balances under this Section 3.3, Gain or Loss on
Disposition shall be allocated prior to reducing Capital Accounts by the
distributions of Capital Receipts from the Disposition.
3.3.1 GAIN ON DISPOSITION. Gain on Disposition shall be allocated
to the Partners in the following order of priority:
3.3.1.1 First, to the Partners in proportion to, and to the
extent of, any deficit balances in their respective Capital Accounts until all
such Capital Accounts have been restored to zero; and
3.3.1.2 Second, after giving effect to the allocations made
pursuant to Section 3.3.1.1, among the Partners as necessary to cause the
Capital Account balance of each Partner to equal the sum of (i) the amount that
would be distributed to such Partner pursuant to Sections 4.1 if the Partnership
then distributed all of the proceeds received by the Partnership with respect to
such Disposition (net of debt repayments) and did not establish reserves or
reinvest any of the proceeds of such Disposition, plus (ii) the amount that
would be distributed to such Partner pursuant to Sections 4.1 and 4.2.3 if the
Partnership then sold all of its assets remaining after such Disposition and the
distribution of the proceeds of such Disposition for their adjusted tax basis
(or adjusted book basis in the case of Revalued Property) and distributed the
proceeds therefrom and its reserves (net of debt repayments) to the Partners
pursuant to Sections 4.1 and 4.2.3.
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3.3.2 LOSS ON DISPOSITION. Loss on Disposition shall be allocated
to the Partners in the following order of priority:
3.3.2.1 First, among the Partners as necessary to cause each
Partner's Capital Account balance to equal the sum of (i) the amount that would
be distributed to such Partner pursuant to Section 4.1 with respect to such
Disposition if the Partnership then distributed all of the proceeds received by
the Partnership with respect to such Disposition under Section 4.1. (net of debt
repayments) and did not establish reserves or reinvest any of the proceeds of
such Disposition, plus (ii) the amount that would be distributed to such Partner
pursuant to Sections 4.1 and 4.2.3 if the Partnership then sold all of its
assets remaining after such Disposition and the distribution for the proceeds of
such Disposition for their adjusted tax basis (or adjusted book basis in the
case of Revalued Property) and distributed the proceeds therefrom and its
reserves (net of debt repayments) to the Partners pursuant to Sections 4.1 and
4.2.3; and
3.3.2.2 Second, after giving effect to the allocations made
pursuant to Section 3.3.2.1, any balance among the Partners in proportion to the
Partners' respective Funding Proportions.
3.3.3 RULES OF CONSTRUCTION.
3.3.3.1 For purposes of applying Section 3.3 as a result
of a
Disposition, a Partner's Capital Account balance shall be deemed to be increased
by such Partner's share of Partnership Minimum Gain and Partner Nonrecourse Debt
Minimum Gain remaining after such Disposition as determined under the
Regulations under Code Section 704(b).
3.3.2.2 Except as is otherwise provided in this Article 3, an
allocation of Partnership taxable income or taxable loss to a Partner shall be
treated as an allocation to such Partner of the same share of each item of
income, gain, loss and deduction that has been taken into account in computing
such taxable income or taxable loss.
3.4 MINIMUM GAIN CHARGEBACK AND QUALIFIED INCOME OFFSET.
3.4.1 NO IMPERMISSIBLE DEFICITS. Notwithstanding any other
provision of this Agreement, taxable loss or items of deduction (as computed for
book purposes) shall not be allocated to a Partner to the extent that the
Partner has or would have, as a result of such allocations, an Adjusted Capital
Account Deficit. Any taxable loss or items of deduction (as computed for book
purposes) which otherwise would be allocated to a Partner, but which cannot be
allocated to such Partner because of the application of the immediately
preceding sentence, shall instead be allocated to the other Partners.
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3.4.2 QUALIFIED INCOME OFFSET. In order to comply with the
"qualified income offset" requirement of the Regulations under Code Section
704(b), and notwithstanding any other provision of this Agreement to the
contrary except Section 3.4.3 below, in the event a Partner for any reason
(whether or not expected) has an Adjusted Capital Account Deficit, items of
Profits and Gain on Disposition (consisting of a pro rata portion of each item
of income comprising the Partnership's Profits and Gain on Disposition,
including both gross income and gain for the taxable year, all as computed for
book purposes) shall be allocated to such Partner in an amount and manner
sufficient to eliminate as quickly as possible the Adjusted Capital Account
Deficit.
3.4.3 MINIMUM GAIN CHARGEBACK. In order to comply with the
"minimum gain chargeback" requirements of Regulations Sections 1.704-2(f)(1) and
1.704-2(i)(4), and notwithstanding any other provision of this Agreement to the
contrary, in the event there is a net decrease in a Partner's share of
Partnership Minimum Gain and/or Partner Nonrecourse Debt Minimum Gain during a
Partnership taxable year, such Partner shall be allocated items of income and
gain (as computed for book purposes) for that year (and if necessary, other
years) as required by and in accordance with Regulations Sections 1.704-2(f)(1)
and 1.704-2(i)(4) before any other allocation is made.
3.5 OTHER TAX ALLOCATION PROVISIONS.
3.5.1 INCOME CHARACTERIZATION. For purposes of determining the
character (as ordinary income or capital gain) of any Gain on Disposition
allocated to the Partners pursuant to Section 3.3 or 3.4, such portion of the
taxable income of the Partnership allocated pursuant to such Sections which is
treated as ordinary income attributable to the recapture of depreciation shall,
to the extent possible, be allocated among the Partners in the proportion which
(i) the amount of depreciation previously allocated to each Partner bears to
(ii) the total of such depreciation allocated to all Partners. This Section
3.5.1 shall not alter the amount of allocations among the Partners pursuant to
Section 3.3 but merely the character of income so allocated.
3.5.2 CHANGE IN RESIDUAL PERCENTAGES. Notwithstanding the
foregoing, in the event any Partner's Residual Percentage changes during a
fiscal year for any reason, including the Transfer of any interest in the
Partnership or an adjustment of the Partners' Residual Percentages hereunder,
the allocations of taxable income or loss under this Article 3, and
distributions, shall be adjusted as necessary to reflect the varying interests
of the Partners during such year using an interim closing of the books method as
of the date of such change, or such other method as is reasonably Approved by
the Partners.
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3.5.3 MANDATORY ALLOCATIONS -- SECTION 704(C) AND PARTNER
NONRECOURSE DEBT.
3.5.3.1 Notwithstanding the foregoing, (i) in the event Code
Section 704(c) or Code Section 704(c) principles applicable under Regulations
Section 1.704-1(b)(2)(iv) require allocations of income or loss of the
Partnership in a manner different than that set forth above, the provisions of
Code Section 704(c) and the Regulations thereunder shall control such
allocations among the Partners; and (ii) all tax deductions and taxable losses
of the Partnership (as computed for book purposes) that, pursuant to Regulations
Section 1.704-2(i), are attributable to a Partner Nonrecourse Debt for which a
Partner (or a Person related to such Partner under Treasury Regulations Section
1.752-4(b)) bears the economic risk of loss (within the meaning of Regulations
Section 1.752-2) shall be allocated to such Partner as required by Regulations
Section 1.704-2(c).
3.5.3.2 Any item of income, gain, loss and deduction with
respect to any property (other than cash) that has been contributed by a Partner
to the capital of the Partnership or which has been revalued for Capital Account
purposes pursuant to Regulations Section 1.704-1(b)(2)(iv) and which is required
or permitted to be allocated to such Partner for income tax purposes under Code
Section 704(c) so as to take into account the variation between the tax basis of
such property and its fair market value at the time of its contribution or at
the time of its revaluation for Capital Account purposes pursuant to Regulations
Section 1.704-1(b)(2)(iv) (such contributed or revalued property is referred to
as "Revalued Property") shall be allocated solely for income tax purposes in the
manner so required or permitted under Code Section 704(c) using the "traditional
method" described in Regulations Section 1.704-3(b) (or any successor
Regulation), such allocations to be made as shall be reasonably Approved by the
Partners; PROVIDED, HOWEVER, that curative allocations consisting solely of the
special allocation of gain or loss upon the sale or other disposition of the
Revalued Property shall be made in accordance with Regulations Section
1.704-3(c) to the extent necessary to eliminate any disparity, to the extent
possible, between the Partners' Capital Accounts and tax capital accounts
attributable to such property; and FURTHER PROVIDED, however, that any other
method allowable under applicable Regulations may be used in connection with any
Revalued Property as shall be Approved by the Mack-Cali Limited Partner.
Allocations under this Section 3.5.3.2 are solely for purposes of federal, state
and local taxes and shall not affect, or in any way be taken into account in
computing, any Partner's Capital Account or share of Profit, Loss, Gain or Loss
on Disposition or other items or distributions under any provision of this
Agreement. Notwithstanding anything in this Agreement to the contrary, the
determination of Gross Asset Value for any asset contributed to the Partnership,
distributed from the Partnership or any other Revalued Property shall be as
Approved by the Partners or as determined pursuant to the appraisal proceeding
described in Section 5.10(iii).
3.5.4 GUARANTEE OF PARTNERSHIP INDEBTEDNESS. Except for
arrangements expressly described in this Agreement (including loans described in
Section 2.2.2 or Section 2.4), and except for any guaranties issued by the
Managing General Partner and its Affiliates
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in connection with financing of the Partnership (the "Managing General Partner
Guaranties"), no Partner shall enter into (or permit any Person related to the
Partner to enter into) any arrangement with respect to any liability of the
Partnership that would result (for any reason other than the general liability
of a General Partner for the liabilities of the Partnership) in such Partner (or
a Person related to such Partner under Regulations Section 1.752-4(b)) bearing
the economic risk of loss (within the meaning of Regulations Section 1.752-2)
with respect to such liability unless such arrangement has been Approved by the
Partners or is otherwise permitted by this Agreement. This Section 3.5.4 shall
not prohibit any General Partner, Limited Partner or Affiliate of a Partner
electing to participate therein from making a loan described in Section 2.2.2 or
Section 2.4. To the extent a Partner is permitted to guarantee the repayment of
any Partnership indebtedness under this Agreement, each of the other Partners
shall be afforded the opportunity to guarantee such Partner's pro rata share of
such indebtedness, determined in accordance with the Partners' respective
Funding Proportions. If (a) a loan is to be made to the Partnership or any
Investment Entity, (b) such loan is guaranteed by any Partners or their
Affiliates (which guaranty shall occur only upon the Approval of such Partner),
(c) a Partner or an Affiliate of a Partner is required to pay, and pays, money
on account of such guaranty (including payments made pursuant to the Managing
General Partner Guaranties), and (d) the Partner making (or whose Affiliate
made) such payments is entitled to be indemnified by the Partnership with
respect to such payments under Section 5.5.2 and, after liquidating the
Partnership's assets in order to satisfy the indemnity contained in
Section 5.5.2, there are insufficient proceeds to entirely satisfy the indemnity
obligation of the Partnership to such Partner or such Affiliate with respect to
such payments, then the other Partners (the "Recontributing Partners") shall be
required to make Capital Contributions to the Partnership, within ten (10)
Business Days after receiving notice requesting reimbursement from the Partner
making (or whose Affiliate made) such payments, which notice may be given at any
time after the events described in clauses (a) through (d) of this Section 3.5.4
have occurred (or, if later, the Determination Date described in Section 5.9
with respect to such reimbursement), in the amount necessary for (i) the Partner
(and its Affiliates) making such payments, and (ii) the Recontributing Partners,
to bear the portion of such payments that has not been reimbursed under
Section 5.5.2 ("Unreimbursed Payments") in the "Appropriate Sharing Ratio"
(defined below). In no event shall a Partner be required to make Capital
Contributions pursuant to this Section 3.5.4 in excess of the aggregate amount
distributed to the Recontributing Partner pursuant to Sections 4.1 and 4.2.3.
Any such Capital Contributions so made shall immediately be distributed to the
Partner who made, or whose Affiliate made, such payments.
The Appropriate Sharing Ratios of the Partners with respect to
Unreimbursed Payments shall be determined as follows:
3.5.4.1 With respect to the portion of the Unreimbursed
Payments that does not exceed the aggregate amounts distributed to the Partners
for all periods pursuant to Section 4.1(d), such Appropriate Sharing Ratio of
each Partner shall be the percentage of such distributions so received by such
Partner; and
3.5.4.2 With respect to the portion of the Unreimbursed Payments
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exceeding the aggregate amounts distributed to the Partners for all periods
pursuant to Section 4.1(d), such Appropriate Sharing Ratio of each Partner shall
be such Partner's Funding Proportion.
3.5.5 REFERENCES TO REGULATIONS. Any reference in this Agreement
to a provision of final, proposed and/or temporary Regulations shall, in the
event such provision is modified or renumbered, be deemed to refer to the
successor provision as so modified or renumbered, but only to the extent such
successor provision applies to the Partnership under the effective date rules
applicable to such successor provision or the Partners otherwise so reasonably
Approve under applicable elections contained in such Regulations.
3.5.6 TAX DEFINITIONS.
3.5.6.1 "NONRECOURSE DEDUCTIONS" has the meaning set forth in
Regulations Section 1.704-2(c). The amount of Nonrecourse Deductions for a
Partnership Accounting Year equals the excess, if any, of the net increase, if
any, in the amount of Partnership Minimum Gain during that fiscal year, over the
aggregate amount of any distributions during that fiscal year of proceeds of a
Nonrecourse Liability that are allocable to an increase in Partnership Minimum
Gain, determined according to the provisions of Regulations Section 1.704-2(c).
3.5.6.2 "NONRECOURSE LIABILITY" has the meaning set forth in
Regulations Section 1.704-2(b)(3).
3.5.6.3 "PARTNER NONRECOURSE DEBT MINIMUM GAIN" means an amount
with respect to each Partner Nonrecourse Debt, equal to the Partnership Minimum
Gain that would result if such Partner Nonrecourse Debt were treated as a
Nonrecourse Liability, determined in accordance with Regulations Section
1.704-2(i)(2).
3.5.6.4 "PARTNER NONRECOURSE DEBT" has the meaning for
such term set forth in Regulations Section 1.704-2(b)(4).
3.5.6.5 "PARTNER NONRECOURSE DEDUCTIONS" has the meaning
for such term set forth in Regulations Section 1.704-2(i). The amount of
Partner Nonrecourse Deductions with respect to a Partner Nonrecourse Debt for a
Partnership Accounting Year equals the excess, if any, (i) of the net increase,
if any, in the amount of the Partnership Minimum Gain attributable to such
Partner Nonrecourse Debt during such Partnership Accounting Year, over (ii) the
aggregate amount of any distributions during such year to the Partner that bears
the economic risk of loss for such Partner Nonrecourse Debt to the extent such
distributions are from proceeds of such Partner Nonrecourse Debt and are
allocable to an increase in Partner Nonrecourse Debt Minimum Gain attributable
to such Partner Nonrecourse Debt, determined according to the provisions of
Regulations Section 1.704-2(i).
3.5.6.6 "PARTNERSHIP MINIMUM GAIN" has the meaning
ascribed to such term in Regulations Section 1.704-2(d)(1) (and includes the
Partnership's share of the Partnership Minimum Gain of any Investment Entity).
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3.6 INTENT OF ALLOCATIONS. The parties intend that the foregoing tax
allocation provisions of this Article 3 shall produce final Capital Account
balances of the Partners that would permit liquidating distributions, if such
distributions were made in accordance with final Capital Account balances
(instead of being made in the order of priorities set forth in Sections 4.1 and
4.2.3), to be made (after unpaid loans and interest thereon, including those
owed to Partners have been paid) in a manner identical to the order of
priorities set forth in Sections 4.1. and 4.2.3. To the extent that the tax
allocation provisions of this Article 3 would fail to produce such final Capital
Account balances, (i) such provisions shall be amended by the Partners if and to
the extent necessary to produce such result and (ii) taxable income and taxable
loss of the Partnership for prior open years (or items of gross income and
deduction of the Partnership for such years) shall be reallocated among the
Partners to the extent it is not possible to achieve such result with
allocations of items of income (including gross income) and deduction for the
current year and future years, as reasonably Approved by the Partners. This
Section 3.6 shall control notwithstanding any reallocation or adjustment of
taxable income, taxable loss, or items thereof by the Internal Revenue Service
or any other taxing authority.
3.7 BASIS ELECTIONS. In the event of a transfer of all or any part of a
Partner's interest in the Partnership, the Partnership shall elect to adjust the
basis of the Partnership's assets under Code Section 754 if reasonably Approved
by the Partners. The transferor or transferee of a Partnership interest shall
pay all costs of preparing and filing all instruments or documents necessary to
effectuate such election if made.
3.8 GENERAL ALLOCATION RULES. The General Partners shall cause the Profit
and Loss of the Partnership and Gain or Loss on Disposition be allocated by the
Partnership's accountants with respect to each Partnership Accounting Year (or
part thereof) as of the end of, and within ninety (90) days after the end of,
such year, or as soon thereafter as is practically possible. All Profit and
Loss and Gain or Loss on Disposition shall be allocated to the Partners shown on
the records of the Partnership to have been Partners as of the last day of the
Partnership Accounting Year for which such allocation is to be made, except
that, if a Partner sells or exchanges its interest in the Partnership or
otherwise is admitted as a substituted Partner, the Profit or Loss and Gain or
Loss on Disposition shall be allocated between the transferor and the transferee
by taking into account their varying interests during the Partnership Accounting
Year in accordance with Code Section 706(d), using the interim closing of the
books method or such other method as shall be reasonably Approved by the
Partners.
3.9 SHARING OF PARTNERSHIP NONRECOURSE DEBT AND NONRECOURSE DEDUCTIONS.
Throughout the term of the Partnership, the nonrecourse debt of the Partnership
(other than Partner Nonrecourse Debt) and the Nonrecourse Deductions of the
Partnership shall be allocated for tax purposes among the Partners in accordance
with their respective Funding Proportions. To the extent that any Partner's
share of such nonrecourse debt as so specified exceeds the amounts referred to
in Regulations Sections 1.752-3(a)(1) and (2), it is intended that the foregoing
shares shall be viewed and treated as reasonably consistent with allocations
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(which have substantial economic effect) of some significant item of partnership
income or gain within the meaning of Regulations Section 1.752-3(a)(3).
3.10 ADJUSTMENT OF GROSS ASSET VALUE. Gross Asset Value, with respect to
any asset, shall be the adjusted basis for federal income tax purposes of that
asset, except as follows:
3.10.1 The initial Gross Asset Value of any asset contributed by a
Partner to the Partnership shall be the fair market value of the asset on the
date of the contribution, as reasonably Approved by the Partners.
3.10.2 The Gross Asset Values of all Partnership assets shall
be adjusted to equal the respective fair market values of the assets, as
reasonably Approved by the Partners (subject to Section 5.10(iii)):
3.10.2.1 If the Partners reasonably Approve that an adjustment
is necessary or appropriate to reflect the relative economic interests of the
Partners in the Partnership, as a result of (i) the acquisition of an additional
interest in the Partnership by any new or existing Partner in exchange for more
than a DE MINIMIS capital contribution; or (ii) the distribution by the
Partnership to a Partner of more than a DE MINIMIS amount of Partnership
property as consideration for an interest in the Partnership; and
3.10.2.2 As of the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
3.10.3 The Gross Asset Value of any Partnership asset
distributed to any Partner shall be the gross fair market value of the asset on
the date of distribution as reasonably Approved by the Partners (subject to
Section 5.10(iii)), less any liabilities assumed by the distributee Partner or
to which such asset is subject as of the time of distribution.
3.10.4 The Gross Asset Values of Partnership assets shall be
increased or decreased to reflect any adjustment to the adjusted basis of the
assets under Code Section 734(b) or 743(b), but only to the extent that the
adjustment is taken into account in determining Capital Accounts under
Regulations Section 1.704-1(b)(2)(iv)(m), provided that Gross Asset Values shall
not be adjusted under this Section 3.10.4 to the extent that the Partners
reasonably Approve that an adjustment under Section 3.10.2 is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment under this Section 3.10.4.
After the Gross Asset Value of any asset has been determined or
adjusted under Section 3.10.1, 3.10.2 or 3.10.4, Gross Asset Value shall be
adjusted by the depreciation taken into account with respect to the asset for
purposes of computing Profits or Losses.
Section 8.3.8 contains special rules for valuing distributions of
property other than cash that is received by the Partnership in connection with
the disposition of Partnership (or Investment Entity) assets.
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3.11 TAX PAYMENT LOANS. On or before April 15 of each year, the
Partnership shall, upon the written request of any Partner who is not a
Terminated Partner ("Borrowing Partner"), lend (to the extent the Partnership
has available funds, determined prior to making distributions for the preceding
calendar year) (a "Tax Payment Loan") to the Borrowing Partner an amount equal
to the lesser of (i) the excess of (a) the Borrowing Partner's allocation of
Profits (computed without regard to tax-exempt income), Gain on Disposition (as
recomputed for tax purposes with reference to adjusted tax basis) and other
items of taxable income of the Partnership for the preceding calendar year,
reduced by the Borrowing Partner's allocation of Losses (computed without regard
to tax- exempt income), Loss on Disposition (as recomputed for tax purposes with
reference to adjusted tax basis) and other tax deductible items of the
Partnership for the preceding calendar year, multiplied by the Maximum Tax Rate,
over (b) the Borrowing Partner's distributions from the Partnership for such
preceding calendar year; or (ii) the excess of (a) the Borrowing Partner's
cumulative allocations of Profits (computed without regard to tax-exempt
income), Gain on Disposition (as recomputed for tax purposes with reference to
adjusted tax basis) and other items of taxable income of the Partnership from
the Agreement Date through the end of the preceding calendar year, reduced by
the Borrowing Partner's cumulative allocation of Losses (computed without regard
to tax-exempt income), Loss on Disposition (as recomputed for tax purposes with
reference to adjusted tax basis) and other tax deductible items of the
Partnership from the Agreement Date through the end of the preceding calendar
year, multiplied by the Maximum Tax Rate applicable to such allocations, over
(b) the sum of (x) the Borrowing Partner's cumulative distributions from the
Partnership from the Agreement Date through the end of the preceding calendar
year (net of repayments thereof under Section 4.3.2) and (y) the outstanding
balance(s) of all the unpaid Tax Payment Loans to such Borrowing Partner. A
copy of any request for a Tax Payment Loan shall be given by the requesting
Partner to the other Partner. Such loan shall bear interest at an annual rate
equal to the lesser of (1) ten percent (10%) per annum, or (2) the maximum
interest rate permitted by law, and shall be repayable both (A) out of future
distributions to the Borrowing Partner (such payment to be made by withholding
such distributions, with such distributions being deemed to have been
distributed to the Borrowing Partner and then paid by the Borrowing Partner to
the Partnership), and (B) if earlier, upon the liquidation of the Partnership or
upon demand following the Borrowing Partner's ceasing for any reason to be a
Partner hereunder, which payments shall be made from (x) the distributions
otherwise payable to such Partner in connection with the liquidation (such
amounts being deemed to have been distributed to such Partner and then paid by
such Partner to the Partnership) and (y) to the extent such distributions are
insufficient, from such Partner's other assets. If Tax Payment Loans are made
to any of the Highridge Partners, each of John S. Long and Eugene S. Rosenfeld
shall be personally and severally (but not jointly) liable for the payment of
fifty percent (50%) of (I) the unrepaid balance of any such Tax Payment Loan
made to the Highridge Partners after applying clauses (A) and (B) of the
preceding sentence of this Section 3.11 for all periods, plus (II) the costs of
collection, including reasonable attorneys fees and expenses. Payments shall
first be applied to unpaid interest and then principal. Tax Payment Loans made
to a Borrowing Partner shall be full recourse loans to such Borrowing Partner
and shall be evidenced by promissory notes in form Approved by the Partners. To
the extent an allocation of Profits, Gain on Disposition or other items of
taxable income to a Borrowing Partner with respect to which a Tax Payment Loan
is to be made are
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attributable to one or more Investment Entities and the Partnership does not
otherwise have sufficient funds to make any Tax Payment Loan requested by such
Borrowing Partner, the Partnership shall seek to borrow from the Investment
Entities the necessary amounts (each such loan an "Investment Entity Tax Loan").
The Partners shall use reasonable efforts to cause each Investment Entity
Agreement, including those with third parties, to provide for the making of
Investment Entity Tax Loans to the Partnership to the extent required. Each
Investment Entity Tax Loan shall bear interest at the same rate as a Tax Payment
Loan and shall be repayable at the same time as the related Tax Payment Loan is
repayable above, with payments first being applied to interest and then
principal and paid by the Partnership to the appropriate Investment Entity.
Except as provided in this Section 3.11, in no event shall the Partnership or
any Investment Entity be required to borrow money or to sell any asset in order
to fund any Tax Payment Loan. Notwithstanding anything to the contrary
contained in this Section 3.11, no Tax Payment Loan shall be made by the
Partnership with respect to any calendar year without the Approval of the
Mack-Cali Limited Partner unless the Tax Payment Loan for such year is at least
$250,000.
3.12 APPROVALS RELATING TO TAX ISSUES.
Notwithstanding anything to the contrary contained in this Agreement,
except as provided in this Section 3.12, during all periods except after the
Mack-Cali Limited Partner has become a Terminated Partner, all material tax
elections, other decisions relating to taxes and tax returns, require only the
reasonable Approval of the Mack-Cali Limited Partner unless it then is a
Terminated Partner, PROVIDED, HOWEVER, that Highridge GP (unless it is then a
Terminated Partner) shall reasonably Approve any settlement with the Internal
Revenue Service or any other tax authorities (whether under Section 5.4 or
otherwise), and any extension of the statute of limitations, with respect to the
Highridge Partners. Notwithstanding the other provisions of this Section 3.12,
and during all periods, the determination of Gross Asset Value for any property
shall require the reasonable Approval of the Partners, subject to the provisions
of Section 5.10(iii).
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ARTICLE 4
LOAN REPAYMENTS AND
DISTRIBUTIONS
4.1 NET AVAILABLE CASH, NET MORTGAGE PROCEEDS AND CAPITAL RECEIPTS. The
General Partners shall cause the Partnership's accountants (i) at the end of
each quarter, to determine the amount of Net Available Cash and, (ii) upon the
occurrence of any event giving rise to Net Mortgage Proceeds or Capital
Receipts, to determine the amount of such Net Mortgage Proceeds and Capital
Receipts, if any. Subject to the Partnership's obligation, if any, to make Tax
Payment Loans under Section 3.11, all Net Available Cash, Net Mortgage Proceeds
and Capital Receipts for any period shall be distributed in the following order
of priority, within thirty (30) days after the end of each calendar quarter,
after first repaying any loans to the Partnership from the Partners under
Sections 2.2.2.1 and 2.4 except as provided in this Section 4.1 (loans which
have been outstanding the longest shall be repaid first and if two or more
Partners have loans which have been outstanding for equal periods, repayment of
such loans shall be made pro rata, in proportion to such Partners' then
respective loan balances, with payments first repaying accrued but unpaid
interest and then repaying principal), and subject to the terms of Sections 4.2,
4.3 and 8.3.8 (and subject to recontribution to the Partnership as provided in
Section 4.3.2):
(a) First, distributions shall be made to the Mack-Cali Partners to
the extent of, and in proportion to, their respective Undistributed
Preferred Return;
(b) Next, the balance shall be distributed to the Highridge Partners
to the extent of, and in proportion to, their respective Undistributed
Preferred Return;
(c) Next, the balance shall be distributed to the Partners, pro rata,
to the extent of, and in proportion to, their respective Invested Capital;
(d) Next, the balance shall be distributed to the Partners, pro rata,
in proportion to their respective Residual Percentages.
4.2 PROCEEDS AND DISTRIBUTIONS IN LIQUIDATION. Subject to Section 8.3.8,
the proceeds received by the Partnership in connection with the liquidation and
winding up of the Partnership shall be applied in the following order of
priority:
4.2.1 First, to the payment of creditors of the Partnership (other
than the repayment of any unpaid Partner loans) except secured creditors whose
obligations will be assumed or otherwise transferred on a liquidation of the
Partnership property or assets;
4.2.2 Next, to the payment of the expenses incurred in dissolution
and termination and then to the repayment of any unpaid Partner loans in the
same priority as is described in Section 4.1; and
4.2.3 The balance, if any, shall be distributed to the Partners in
the order of priority set forth in Section 4.1.
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4.3 GENERAL DISTRIBUTION RULES.
4.3.1 The timing and amount of all distributions shall be in
accordance with Sections 4.1, 4.2, 8.3.8, 8.5 and 8.6. All distributions of
cash shall be made to the Partners shown on the records of the Partnership to
have been Partners on the date of the distribution. All distributions, upon
request by a Partner, shall be made by wire transfer in immediately available
funds to such Partner's account specified in such request. Distributions of Net
Available Cash, Net Mortgage Proceeds and Capital Receipts made to a Partner
shall be deemed to be advances on account of such Partner's share of the
distributable amounts thereof. For purposes of this Agreement, the term
"distributable" with respect to such distributions shall mean the amount of such
distributions as finally determined pursuant to the provisions of this Agreement
by the Partnership's accountants for the Partnership Accounting Year in respect
of which they were made and for the term of the Partnership.
4.3.2 The Partnership's accountants shall determine whether there
has been an over-distribution to any Partner occurring by reason of a mistake at
the following times: (i) within one hundred twenty (120) days after the end of
each Partnership Accounting Year and (ii) cumulatively during the term of this
Agreement within One Hundred Twenty (120) days after any disposition of an
Investment by the Partnership or all or substantially all of the investments of
any Investment Entity. Any over-distribution to any Partner in respect of
either a Partnership Accounting Year or during the term of this Agreement shall
be repaid by such Partner to the Partnership and distributed to the Partner
which has received an under-distribution not later than thirty (30) days after
any Partner has given notice thereof to the other Partners, which notice shall
be given as soon as is practicable after the end of such Partnership Accounting
Year or such disposition of an Investment, as applicable. If not paid within
thirty (30) days of such notice, the amount of any over-distribution shall
thereafter accrue interest at the lesser of (i) fifteen percent (15%) per annum
or (ii) the highest rate, if any, that would be permitted by applicable law
under these conditions. Such returned over-distribution and any interest paid
with respect thereto as provided in this Section 4.3.2 shall be promptly
distributed by the Partnership to the Partners receiving any under-distribution
to the extent necessary to eliminate such under-distribution. Notwithstanding
anything to the contrary in this Agreement, the obligation of the Partner
receiving an over-distribution to return such over-distribution to the
Partnership and any interest thereon shall constitute a recourse obligation of
such Partner (but not to the partners, members, managers, officers or
shareholders of such Partner or its members or partners). Any over-distribution
returned to the Partnership shall have the same character as the character of
the corresponding, earlier distribution to the Partner which received such
over-distribution. To the extent that any Partner or its Affiliates receives
any commitment fee, finders fee or other compensation (that is not expressly
permitted by this Agreement) by reason of the Partnership's or an Investment
Entity's participation in an Investment or a Property, such fee or compensation
shall be deemed to be Net Available Cash of the Partnership when paid, and to
the extent such fee or compensation is received by such Partner or its
Affiliates and not by the Partnership, such fee or compensation shall be deemed
to be an over-distribution to such Partner under this Section 4.3.2 that must be
paid to the Partnership (any such Partner shall notify the other Partners of the
receipt thereof immediately upon receipt by it or its Affiliates).
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4.4 SOURCE OF DISTRIBUTIONS. Except as provided in Section 4.3.2, each
Partner shall look solely to the assets of the Partnership for the return of its
Capital Contributions and its share of distributions and shall have no recourse
upon dissolution or otherwise against the other Partners except as provided in
this Agreement. No holder of an interest in the Partnership shall have any
right to receive any distributions except as provided in this Agreement or any
right to demand or receive property other than cash upon dissolution and
termination of the Partnership.
ARTICLE 5
MANAGEMENT; DUTIES AND POWERS OF THE MANAGING GENERAL PARTNER;
RIGHTS AND DUTIES OF MANAGING GENERAL PARTNER
5.1 MANAGEMENT OF BUSINESS; OFFICERS; PARTNER OBLIGATIONS; REIMBURSEMENTS;
MAJOR DECISIONS; RETAINED APPROVALS.
5.1.1 MANAGEMENT; POWERS. Subject to the Approval rights of the
Partners under this Agreement, the Partnership shall be managed by the Managing
General Partner, and no Limited Partner shall take part in the control of the
Partnership's business. The Managing General Partner of the Partnership shall
be Highridge GP unless and until replaced by a Co-General Partner as provided in
Section 7.9.5 (thereafter, such Co-General Partner shall be the Managing General
Partner). Except as otherwise provided in this Agreement (including the right
of the Mack-Cali Limited Partner to Approve Major Decisions under Section 5.1.5
and certain other Approvals granted to the Mack-Cali Limited Partner under this
Agreement), the Managing General Partner shall be responsible for supervising
and undertaking the business of the Partnership, implementing the supervision
procedures set forth on Exhibit J for employees of the Highridge Partners and
Affiliates of the Highridge Partners who are performing work relating to the
Partnership and the Properties, and shall make all decisions affecting the
day-to-day operations of the Partnership and the Investments and the Properties.
Except to the extent the Approval of the Partners, or the Approval of the
General Partners, or the Approval of a Mack-Cali Partner is expressly required
under this Agreement, no consent or Approval of any Limited Partner or
Co-General Partner shall be required with respect to any action or decision of
the Managing General Partner regarding Partnership or Investment Entity matters.
Whenever the Approval of the Partners is required, the Partners shall act
through their Authorized Representatives as provided in Section 1.12. No
Partner shall receive any compensation for serving as a General Partner or as
the Managing General Partner. Each Partner shall cause each of its Authorized
Representatives to devote as much time as is reasonably necessary to fulfill
such Partner's obligations under this Agreement.
The Managing General Partner, at Partnership expense, shall be
responsible for obtaining and providing the Partners (within a reasonable time
after request therefor has been made by any Partner) with any information that
the Managing General Partner reasonably deems appropriate (or that the Mack-Cali
Partners have requested) with respect to the Partnership, Investment Entities,
Investments and Properties, conducting due diligence
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concerning proposed Investments and Properties, negotiating the purchase on
behalf of the Partnership of any Investments or Properties that are Approved by
the Partners for acquisition, and supervising and implementing the acquisition,
financing, development, stabilization and marketing programs that have been
Approved by the Partners, all pursuant to the supervision procedures set forth
on Exhibit J. The Partners hereby Approve the acquisition and development of
the Lava Ridge Land pursuant to the Approved Development Plan with respect
thereto that is described on Exhibit C, and each Partner shall use its
reasonable efforts to cause the Partnership and/or an Investment Entity to
obtain construction financing on such Property as soon as possible after the
execution and delivery of this Agreement as necessary to implement such Approved
Development Plan (any Partner may propose such financing to the other Partners
for their Approval). At Partnership expense, the Highridge Partners shall
provide to the Mack-Cali Partners any information in the possession of the
Highridge Partners or their Affiliates concerning the Lava Ridge Land or any
other Property within a reasonable time after written request therefor is
received from the Mack-Cali Limited Partner. Each General Partner, in extension
and not in limitation of the powers given to it by law or this Agreement, shall
have full power and shall have the obligation, without the necessity of
obtaining the Approval of any other Partner (except as otherwise set forth in
this Agreement), and at the expense of the Partnership, to take all actions
required to conduct the day-to-day operations of the Partnership and, subject to
the availability of Partnership funds and the funding limitations of Section
5.1.3.5, implement the Major Decisions and other decisions that have been
Approved by the Partners and pay expenses of the Partnership to the extent the
Approval of the other Partners with respect thereto is not required under this
Agreement. The Managing General Partner shall not have the power to implement
any Major Decision unless such Major Decision has been Approved by the Partners,
as set forth in Section 5.1.6.2 hereof. The Managing General Partner shall
negotiate all documents with respect to Investment and Property transactions
that are Approved by the Partners (or are permitted to be entered into without
such Approval as provided in this Agreement), including contracts with
surveyors, architects, governmental authorities and others concerning
entitlements, easements, surveying, landscaping, insuring, zoning, construction,
grading, improvements, and the like, all leases of space in the Properties on
behalf of any Investment Entity, offers and terms of sale of the Partnership and
Investment Entity assets, and contracts for necessary goods or services or
borrowings regarding the Investments and Properties; all to the extent Approved
by the Partners from time to time to the extent such Approval is required
pursuant to this Agreement. The execution by any General Partner of any
document shall be sufficient to bind and shall be binding upon the Partnership
for all purposes, and third parties shall be entitled to rely on the authority
of the Managing General Partner to take any action on behalf of the Partnership.
Notwithstanding the foregoing, (i) the Managing General Partner shall not take
any action requiring Approval of the Partners, or the Approval of the General
Partners, or the Approval of a Mack-Cali Partner under this Agreement unless the
provisions of this Agreement concerning such Approval have been satisfied, and
(ii) except as otherwise provided in Section 5.9, no Co-General Partner shall
exercise any authority with respect to the matters with respect to which
authority and responsibility has been given to the Managing General Partner
hereunder unless and until (a) the Managing General Partner has become a
Terminated Partner or a Removal Default has occurred with respect to the
Managing General Partner (thereafter, the Mack-Cali Limited Partner may cause
any Co-General Partner appointed by it to become the Managing General Partner
and to assume such authority and
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responsibility as provided in Section 7.9), or (b) a Performance Default has
occurred with respect to the Managing General Partner concerning an Investment
or Property (thereafter, the Mack-Cali Limited Partner shall have the rights
described in Section 5.10(ii) and Section 7.9.5 with respect to such Property).
The Managing General Partner (or a Co-Managing General Partner that has become
the Managing General Partner under Section 7.9) shall use its reasonable efforts
to comply with all provisions of this Agreement, and, at Partnership expense, to
cause the Partnership to comply with all applicable laws and regulations. The
cost of preparing any Investment Entity Agreement shall be a Partnership
expense.
Subject to the other provisions of this Agreement including required
Approvals of the Partners under this Agreement, the Partnership, the General
Partners and the Partnership's officers appointed on its or their behalf under
Section 5.1.4.1 are hereby authorized:
5.1.1.1 Subject to the Approved Budget limitations of Article
5, to pursue any rights of the Partnership (and cause each Investment Entity to
pursue any rights of such Investment Entity) with respect to each Investment and
Property pursuant to any agreement to which it (or such Investment Entity) is a
party, and to own and operate any Investment or any other asset acquired by the
Partnership pursuant to the provisions of this Agreement, including taking the
actions described in Section 1.5;
5.1.1.2 To own the Investments (including Partnership
Interests) for investment purposes and to finance, sell, convey, assign,
transfer (including by contribution to a real estate investment trust or to a
partnership, limited liability company or any other Entity in which a real
estate investment trust is a partner, member or owner of equity ownership
interests (collectively, a "REIT")) or mortgage the Investments (including the
Partnership Interests), any other asset of the Partnership or any of them, as
well as any personal property necessary, convenient or incidental to the
accomplishment of the purposes of the Partnership, all on terms as shall be
Approved by the Partners;
5.1.1.3 To acquire by purchase or lease, any real or personal
property that may be necessary, convenient or incidental to other the
accomplishment of the purposes of the Partnership, including Investments and
interests in Investment Entities, and to cause Investment Entities to do so;
5.1.1.4 To operate, maintain, improve, develop and lease any
assets acquired by the Partnership (and to cause Investment Entities to do so
with respect to assets acquired by them);
5.1.1.5 To cause the Partnership to take any and all actions
necessary convenient or appropriate as a general partner or limited partner of
any partnership or as a member and/or manager of any limited liability company
in which the Partnership has an interest and exercise all rights or powers
relating thereto and execute appropriate documents on behalf of the Partnership
in connection therewith;
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5.1.1.6 To borrow money on behalf of itself or cause Investment
Entities to do so (whether secured or unsecured) and issue evidences of
indebtedness in furtherance of any or all of the purposes of the Partnership or
any Investment Entity, and to secure the same by mortgage, deed of trust, pledge
or other lien on any assets of the Partnership or any Investment Entity;
5.1.1.7 To borrow money on the general credit of the
Partnership or any Investment Entity (and to cause Investment Entities to do so)
for use in the Partnership or any Investment Entity business;
5.1.1.8 To enter into, perform and carry out contracts of any
kind, including contracts with Affiliates of any of the Partners, necessary to,
in connection with or incidental to the accomplishment of the purposes of the
Partnership or any Investment Entity;
5.1.1.9 To issue Funding Notices calling for additional Capital
Contributions in accordance with the provisions of this Agreement;
5.1.1.10 To enter into any kind of lawful activity and to
perform and carry out contracts of any kind necessary to or in connection with
or incidental to the accomplishment of the purposes of the Partnership, so long
as said activities and contracts may lawfully be carried on or performed by a
limited partnership under the laws of the states in which the Partnership is
qualified to do business. Each General Partner is hereby authorized to cause
the Partnership to execute and deliver all documents and instruments necessary
or appropriate, in the reasonable judgment of such General Partner, to close any
of the transactions that have been Approved by the Partners (or that do not
require the Approval of the Partners or the Approval of the General Partners).
Except as otherwise provided in this Agreement, no Partner shall cause the
Partnership to execute and deliver any acquisition, conveyance, loan or lease
documents without first obtaining the Approval of the Partners to the Material
terms of such document. The Material terms with respect to certain of the
entitlement, acquisition, development, and leasing documents for the Lava Ridge
Land have been Approved by the Partners and are contained in the Approved
Development Plan referred to on Exhibit C. The Material terms of any other
document in connection with the acquisition, entitlement, development,
conveyance, loan or lease of a Property will be deemed to have been Approved by
the Partners if the actions described on Exhibit L ("Operating Approval
Standards") have been Approved by the Partners with respect to such Property.
Notwithstanding anything to the contrary contained in this Agreement, the
Mack-Cali Limited Partner shall have the right to Approve the final version of
any acquisition, conveyance, loan or lease document to which the Partnership or
any Investment Entity is to become a party if the Mack-Cali Limited Partner has
specifically requested by notice to Highridge GP that it Approve the final
version of such document before it is entered into; PROVIDED, HOWEVER, that the
Managing General Partner may, without the Approval of any Mack-Cali Partner
being required, execute and deliver on behalf of the Partnership or any
Investment Entity any lease of space in a Property unless any of the following
applies (in which case, the Mack-Cali Limited Partner shall have the right to
Approve such lease): (a) the lease has a term of less than five (5) years
(determined without regard to renewal rights granted to the tenant thereunder
and with regard to early termination rights of the tenant thereunder), (b) the
lease
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has a term of greater than ten (10) years (including any tenant renewal rights
that are not exerciseable at market rates in effect at the time of renewal), (c)
the lease covers greater than 15% of the rentable space in a Property or greater
than 20,000 square feet of the rentable space in a Property, (d) the lease rents
are more than 5% below the budgeted rental rate set forth in the most recent
Approved Budget with respect to such Property, (e) the lease provides for
payment by the Partnership or an Investment Entity of tenant improvements that
are more than 5% above the permitted tenant improvement amount parameters that
have been Approved in advance by the Partners for such Property (or, if no such
tenant improvement parameters have been Approved in advance by the Partners, the
lease provides for such payment of tenant improvements that are more than $30
per square foot of rentable space), (f) the aggregate leasing commissions
payable by the Partnership and Investment Entities in connection with the lease
are more than 5% above the leasing commission parameters that have been Approved
by the Partners (or if no such leasing commission parameters have been Approved
in advance by the Partners, more than 5% above prevailing market rate
commissions then in effect for similar properties in similar locations), or (g)
the lease form is materially different from the standard form of lease that has
been Approved in advance by the Partners for such Property; PROVIDED, HOWEVER,
that once the terms of such documents have been Approved by the Partners, any
General Partner may cause the Partnership to execute and deliver any such
documents with such changes thereto as shall be reasonably Approved by the
General Partners, without further Approval of the Partners being required unless
such change adversely affects the Partnership in a Material manner, and only one
General Partner's execution of such documents shall be required on behalf of the
Partnership in order for such documents to be binding on the Partnership. Third
parties shall be entitled to rely on the authority of any General Partner to
execute and deliver any document on behalf of the Partnership without the
execution thereof by any other Partner being required. For purposes of this
Agreement, the term "Material" (or any variation thereof) means any item that
(i) would result in a difference to the Partnership of at least $100,000 with
respect to any such item, or at least $500,000 in the aggregate for all such
items, in each case for any 12-month period, or (ii) would result in a change in
the scope of any Property development as set forth in an Approved Development
Plan. All construction contracts having payments exceeding $100,000 shall
require competitive bids, copies of which shall be submitted to the Mack-Cali
Limited Partner for review before any such contract is entered into; and
5.1.1.11 To enter into and to perform the Partnership's
obligations under any other agreement to which it becomes a party (and cause any
Investment Entity to do so).
5.1.2 COMPENSATION; REIMBURSEMENT. No compensation shall be
payable by the Partnership to any Partner or to an Affiliate of any Partner
unless provision for such compensation is made (a) in the Approved Development
Plan (including the Approved Budget and Approved Overhead Budget) attached as
Exhibit C that has been Approved by the Partners with respect to the Lava Ridge
Land, or (b) in any other subsequent Approved Development Plan. Unless
reimbursement is prohibited under Section 5.5 or another provision of this
Agreement, the Partnership shall reimburse each Partner for its actual and
reasonable out-of-pocket expenses incurred in connection with Partnership
business to the extent such Partner is authorized to take the action resulting
in such expenses and is not otherwise
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reimbursed with respect thereto under this Agreement or pursuant to an Approved
Development Plan, subject to Sections 2.3 and 5.5.
5.1.3 BUDGETS
5.1.3.1 ANNUAL OPERATING BUDGET; INVESTMENT BUDGETS; OVERHEAD
BUDGETS. The Managing General Partner shall include in each proposed
Development Plan a proposed budget in connection with each Property and related
Investment, including the reasonably anticipated cash receipts therefrom, and
the reasonably anticipated costs of owning and operating such Property and
Investment, including costs of acquisition, insurance, entitlement, zoning,
development, landscaping, easements, subdivision, grading, infrastructure,
surveying, advertising, governmental approvals, operation, development,
management, leasing (including tenant improvements to be funded by the
Partnership if Approved by the Partners), repair, maintenance and renovation of
the Property for each Partnership Accounting Year, and shall deliver the same to
the Mack-Cali Limited Partner for its review and Approval. Each such budget
shall contain the amount to be (i) expended from reserves with respect to each
Investment, and (ii) added to the reserves of the Partnership with respect to
each Investment, including reserves required by lenders to the Partnership. Each
such budget shall also forecast the amount and timing of distributions to the
Partnership with respect to each Investment for the period covered by such
budget. At least annually (within 30 days prior to year-end), the Managing
General Partner shall also prepare and submit to the Partners for Approval a
budget for the operation of the Partnership for the following year that covers
those projected costs, if any, of operating the Partnership to the extent the
same are not contained in the Approved Budgets in effect for the Investments and
Properties for such period (such budget to require the Approval of the Partners
before it becomes an Approved Budget). The initial Approved Partnership
operating budget is contained in the Approved Development Plan described on
Exhibit C. The Highridge Partners shall be entitled to receive non-accountable
overhead payments from the Partnership in connection with the services performed
by them, their Affiliates and the employees thereof for the benefit of the
Partnership and the Investment Entities with respect to the Lava Ridge Land (in
full reimbursement of all of their internal costs with respect thereto, and
those of their Affiliates and employees and partners thereof), payable in
advance on the first day of each month in twenty four (24) equal monthly
installments commencing as of August 1, 1998, equal (and limited in the
aggregate) to 2.5% of total development costs with respect thereto (the
"Overhead Payments") pursuant to the Approved Budget for such Properties (the
amount described in an Approved Budget for such Overhead Payments is referred to
as the "Approved Overhead Budget"). The obligation to make Overhead Payments
shall be a Partnership expense and shall be payable prior to making
distributions to Partners. The unpaid Overhead Payments that are payable to the
Highridge Partners shall be limited to actual cost reimbursement (excluding the
salary, benefits and other compensation of John S. Long, Eugene S. Rosenfeld and
Steven A. Berlinger) from and after the date on which any Highridge Partner has
become a Terminated Partner or has committed a Removal Default. The initial
Approved Budget (including the Approved Overhead Budget) for the Lava Ridge Land
is contained in the Approved Development Plan for such Property that is
described in Exhibit C and is hereby Approved by the Partners and shall
constitute the Approved Development Plan with respect thereto.
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5.1.3.2 APPROVED BUDGETS. Each Authorized Representative of the
Mack-Cali Limited Partner shall have a period of ten (10) Business Days after a
proposed budget is submitted to them (whether or not submitted as part of a
proposed Development Plan) to notify the Managing General Partner in writing (i)
whether such Authorized Representative, on behalf of the Mack-Cali Limited
Partner, Approves the proposed budget or (ii) of any revisions such
representative believes should be made to such proposed budget. A proposed
budget (or any proposed revision thereof) shall not be deemed to have been
Approved by the Mack-Cali Limited Partner unless actually Approved by at least
one Authorized Representative of the Mack-Cali Limited Partner within such
ten-day period. If at least one Authorized Representative of the Mack-Cali
Limited Partner so Approves a proposed budget (or a Development Plan in which
such budget is contained), such budget shall be deemed Approved by the Partners
and shall constitute an "Approved Budget" for the Partnership for the applicable
Partnership Accounting Year covered thereby. If within such ten (10) Business
Day period, the Mack-Cali Limited Partner does not Approve a budget for the
applicable Partnership Accounting Year with respect to any Investment or
Property, then the most recent Approved Budget for such Investment or Property
other than items in such budget consisting of additional investment outlays that
may be made at the discretion of the Partnership (such discretionary outlays are
referred to as "Discretionary Outlays"), shall continue as the Approved Budget
for the next Partnership Accounting Year with the following exceptions: (a) all
extraordinary items for the current Partnership Accounting Year shall be
deleted; and (b) Non-Discretionary Items for the upcoming Partnership Accounting
Year shall be included at the actual cost.
5.1.3.3 INITIAL BUDGET; SUPPLEMENTS. The initial Approved Budget
is contained in the Development Plan described in Exhibit C. The Managing
General Partner shall cause the Partnership to prepare supplements or revisions
to each Approved Budget from time to time within a reasonable time after it is
reasonably likely that such Approved Budget will not be met or after a request
for such a supplement or revision is received by the Managing General Partner
from the Mack-Cali Limited Partner, or if the Managing General Partner otherwise
desires to do so, which supplements or revisions shall be submitted to the
Mack-Cali Limited Partner for Approval in the same manner as that which is
provided for the Approval of budgets under Section 5.1.3.2 (if and when so
Approved, such supplement or, revision shall become part of the Approved Budget
to which it relates).
5.1.3.4 DEVELOPMENT PLANS. The initial acquisition and
development plan with respect to acquisition, development, renovation and
capital improvements, financing, stabilization and marketing currently Approved
for the Lava Ridge Land is described on Exhibit C (together with any other
development plan that has been Approved by the Partners from time to time, the
"Development Plan(s)"). The Managing General Partner shall deliver to the
Mack-Cali Limited Partner (within a reasonable time after request therefor is
made and the same are available), for the Mack-Cali Limited Partner's Approval,
all plans and specifications and any schematic and conceptual presentations for
the proposed development of each Property, and shall also deliver to the
Mack-Cali Limited Partner within a reasonable time after request such other
details and information regarding the Partnership, Investment Entities,
Investments and the Properties as the Mack-Cali Limited Partner shall reasonably
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request from time to time, including proposals as to the identity of
architectural and engineering firms, construction contractors, construction
managers, property managers, and other consultants to be used to implement the
Subsequent Development Plan. No architectural or engineering firm, construction
contractor, construction manager or property manager, shall be retained with
respect to any Property without the Mack-Cali Limited Partner's Approval. The
Managing General Partner shall modify and update any Development Plan on at
least a quarterly basis, if necessary, and submit such proposed modification or
update to such Development Plan to the Mack-Cali Limited Partner for its
Approval in the same manner as provided in Section 5.1.3.2 with respect to
budgets. The Managing General Partner's representatives shall meet with the
Mack-Cali Limited Partner's representatives no less frequently than monthly and
at any other time reasonably requested by the Mack-Cali Limited Partner
(telephonically or in person) to discuss the status of the Properties. In
addition, the Managing General Partner shall provide the Mack-Cali Limited
Partner with a schedule of renovation and capital improvement meetings (which
shall be held weekly) and the Mack-Cali Limited Partner shall have the right to
participate in such meetings. The Managing General Partner shall provide the
Mack-Cali Limited Partner with a copy of any minutes of such meetings and any
materials distributed at such meetings, promptly after such meeting.
5.1.3.5 PERMITTED EXPENDITURES. The Managing General Partner
shall not, without the Approval of the Mack-Cali Limited Partner, make any
expenditure of funds of the Partnership or an Investment Entity, or commit to
make any such expenditure, other than in response to an Emergency, except as
provided for in an Approved Budget (to the extent an expenditure is described in
an Approved Budget or is otherwise permitted without Approval under this
Section 5.1.3.5, it may be paid if the Partnership has sufficient available
funds, whether in reserves or otherwise, to pay such expenditure; and, except as
provided in Section 2.1.2, Funding Notices may be issued with respect thereto
only upon the Approval of the Mack-Cali Limited Partner); PROVIDED, HOWEVER, the
provisions of this Section 5.1.3 shall in no way limit a General Partner's
authority to cause the Partnership or an Investment Entity to pay (but not to
issue Funding Notices as necessary to do so unless permitted under Section
2.1.2) Emergency expenditures or Non-Discretionary Items when due that are
billed to or incurred by the Partnership or any Investment Entity in excess of
the amounts budgeted therefor; and PROVIDED, FURTHER, that the Managing General
Partner may cause the Partnership to incur up to 110% (less any contingency
percentage already contained in the Approved Budget) of the aggregate amount
budgeted for expenditures for any period in any Approved Budget (excluding
extraordinary expenditures such as acquisition cost and tenant improvements,
Overhead Payments and contingency amounts, contained in such Approved Budget)
without the further Approval of the Partners being required. Notice of
Emergency expenditures or actions shall be given by the General Partner making
such expenditures or taking such actions to the other Partners as soon as
practicable after such expenditures are made or actions are taken. The General
Partners shall use reasonable commercial efforts not to permit the Partnership
or any Investment Entity to commit waste with respect to any Property.
5.1.4 EMPLOYEES; DUTIES OF THE MANAGING GENERAL PARTNER.
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5.1.4.1 EMPLOYEES. The Partnership shall have no employees
unless otherwise Approved by the Partners. The internal compensation and
reimbursement costs incurred by the Highridge Partners with respect to any
Highridge Partners' employees or partners (or those of their Affiliates)
providing services to the partnership or the Investment Entities are intended to
be reimbursed through Overhead Payments made pursuant to Section 5.1.3.1 (and,
except as provided in Section 5.2(a), additional reimbursement to the Highridge
Partners and their Affiliates shall not be made with respect to internal
personnel and operating costs).
5.1.4.2 MANAGING GENERAL PARTNER DUTIES. The Managing
General Partner shall use its reasonable efforts, subject to the availability of
Partnership funds, to acquire the Investments and cause the Investment Entities
to acquire the Properties that have been Approved by the Partners for
acquisition (limited as of the Agreement Date to the Lava Ridge Land), and to
take the other actions that are described in Section 1.5 and 1.11 that have been
Approved by the Partners, (ii) cause the Major Decisions and other actions that
have been Approved by the Partners to be implemented, (iii) cause proposed
Development Plans and budgets to be prepared and submitted to the Partners under
Sections 5.1.3 and 5.1.4 for Approval as required pursuant to
Section 5.1.6.2, (iv) cause the Partnership to timely issue the reports and tax
returns required under this Agreement and (v) undertake its other obligations
under this Agreement. No General Partner shall be required to conduct the
Partnership's day-to-day operations and implement Major Decisions as such
General Partner's sole and exclusive function, and any Partner and its
Affiliates may (and expect to) have other business interests and may (and expect
to) engage in other activities in addition to those relating to the Partnership,
without having or incurring any obligation to offer any interest in such
activities to the Partnership, any Investment Entity, or any Partner (or their
Affiliates). The Managing General Partner shall be obligated to devote, and
cause its Controlling Persons to devote, as much of their business time to the
Partnership's business as shall be reasonably required to meet the Managing
General Partner's obligations hereunder, which shall be a significant portion of
such Controlling Persons' business time.
From and after the Approval of any transaction or action with respect
to the Investments or Properties by the Partners, any General Partner shall have
the authority, without the further Approval of the Partners being required,
(a) to cause the Partnership to proceed to document the transaction with respect
to the Investments and Properties on terms that have been Approved by the
Partners in all Material respects as provided in (and to the extent required by)
Section 5.1.1.10, with such changes thereto as shall be reasonably be Approved
by the Partners, without further Approval of the Partners being required unless
such change affects the Partnership in a Material manner (as described in
Section 5.1.1.10), and (b) to cause the Partnership to execute and deliver, and
cause the Partnership to perform its obligations under, the documents to be
executed by the Partnership in connection with such transaction (including the
acquisition of Investments or Properties pursuant to Acquisition Documents that
have been Approved by the Partners), subject to the conditions for doing so that
were Approved by the Partners (to the extent such Approval is required), the
Approved Budget limitations of Section 5.1.3.5 with respect thereto, and any
restrictions on the General Partners' authority that are contained in this
Agreement and that may be applicable from time to time.
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5.1.5 MAJOR DECISIONS. The following are major decisions (the
"Major Decisions") requiring the Approval (or reasonable Approval, if so
indicated) of the Partners, except as otherwise provided in this Agreement;
PROVIDED, HOWEVER, that a Partner's Approval shall not be required after such
Partner has lost its Approval rights under Section 7.9 or another provision of
this Agreement except to the extent provided in Section 5.1.6.1:
5.1.5.1 Any act in contravention of this Agreement or extending
the term of the Partnership;
5.1.5.2 Any act which would make it impossible to carry on the
ordinary business of the Partnership, except the liquidation of the Partnership
under the circumstances permitted in Article 8, or the sale, exchange or other
disposition of any Partnership Interest or other Investment or any other
Partnership or Investment Entity assets that has been Approved by the Partners
or otherwise is permitted under this Agreement;
5.1.5.3 Any action which would cause the Partnership to become
an entity other than a Delaware limited partnership;
5.1.5.4 Changing the purposes of the Partnership;
5.1.5.5 Amending this Agreement;
5.1.5.6 Making in-kind distributions (except as provided in
Section 8.3.8), or causing any Investment Entity to take any action with respect
to any Investment Entity asset that would be a Major Decision if such action
were taken by the Partners or the Partnership with respect to a Partnership
asset;
5.1.5.7 Establishing or adjusting Gross Asset Value under
Section 3.10 for any contributed or distributed asset or other Revalued Property
(reasonable Approval only, subject to Sections 5.10(iii) and 8.3.8), or
Approving the terms of the tenancy-in-common agreement described in
Section 8.3.8;
5.1.5.8 Indemnification of any Person other than a Partner or
its Affiliates pursuant to Section 5.5.2 or otherwise as permitted by this
Agreement or as Approved by the Partners;
5.1.5.9 Except as provided in Sections 3.5.4, 3.11 and 4.3.2,
entering into any agreement (i) which would cause any Partner to become
personally liable on or in respect of or to guarantee any indebtedness of the
Partnership or (ii) which is not nonrecourse to such Partner;
5.1.5.10 Causing the Partnership to redeem or repurchase all or
any portion of the interest of a Partner except as provided in Section 7.9, or,
except as otherwise provided in Section 5.1.1.10, causing the Partnership to
enter into any contract in connection with the acquisition, development, leasing
or disposition of any Investment that is not in all
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Material respects consistent with the description thereof contained in an
Approved Development Plan or which has not otherwise been Approved by the
Partners (subject to Section 5.1.1.10, the Approved Budget limitations of
Section 5.1.3.5, and the other provisions of this Section 5.1.5, no Approval of
the Partners shall be required for any contract under which the aggregate amount
payable by the Partnership or the Investment entities will be less than $100,000
per year, other than acquisitions, borrowings, leases, and dispositions of
assets; in each case, except to the extent provided in Section 5.1.1.10); or to
borrow money from a Partner or its Affiliates except pursuant to Sections 2.2.2
or 2.4;
5.1.5.11 Causing or permitting the Partnership to be merged with
any other entity; selling Partnership or Investment Entity assets for
consideration, including notes payable, or otherwise disposing of Partnership or
Investment Entity assets, including contributions to a REIT;
5.1.5.12 Causing or permitting the Partnership to make a loan
to, or enter into any contract with, any Partner or any Affiliate of a Partner,
other than Tax Payment Loans permitted under Section 3.11, unless the terms of
such loan or contract comply in all material respects with the parameters with
respect thereto that have been Approved by the Partners or are contained in an
Approved Development Plan;
5.1.5.13 Dissolving, terminating or liquidating the Partnership,
except as provided in Article 8 of this Agreement;
5.1.5.14 Disposing of any Property or Investment (or any portion
thereof) or permitting an encumbrance to be placed on Partnership or Investment
Entity assets;
5.1.5.15 Incur or pay costs related to the Partnership any
Investment or Property by or on behalf of the Partnership in excess of the
amounts permitted under Sections 2.3.1 and 5.1.3.5 except pursuant to an
Approved Budget;
5.1.5.16 Obtain any third-party loans (including an operating
line of credit) on behalf of the Partnership or an Investment Entity, or,
execute or deliver on behalf of the Partnership any guarantee or other agreement
whereby the Partnership is or may become liable for any obligations of any other
Entity;
5.1.5.17 Acquire any Property or Investment other than pursuant
to Approved Development Plans, or take any action on behalf of the Partnership
that is not within the scope of the Partnership purposes as set forth in
Sections 1.5 and 1.11;
5.1.5.18 Modify, prepay or refinance any indebtedness of the
Partnership, or any Investment Entity, or select any lenders to make loans to
the Partnership or any Investment Entity;
5.1.5.19 Make any distribution except as permitted under this
Agreement except in connection with the liquidation of the Partnership under
Article 8;
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5.1.5.20 Commence, dismiss, terminate or settle any material
litigation matter, material condemnation claim, or any other matter or claim
(including an insurance claim) in connection with any Property exceeding an
aggregate for any Partnership Accounting Year of the greater of (a) $50,000 or
(b) 1% of the acquisition and development expenditures made by the Partnership
with respect to such Property;
5.1.5.21 Determine the terms of any participation (e.g.,
distribution and control issues) of third-party investors in the Partnership or
any Investment Entity;
5.1.5.22 Except as otherwise provided in Article 7, admit
additional or transferee Partners to the Partnership as substituted Partners or
enter into financing that participates in profits; or, except as provided in
Article 7, permit any Transfer of any interest in the Partnership to the extent
Approval of the Partners for such Transfer is required under this Agreement;
5.1.5.23 Confess any judgment against the Partnership or any
Investment Entity or cause the Partnership or any Investment Entity to file for
Bankruptcy or other relief from creditors;
5.1.5.24 Establish insurance requirements for the Partnership or
settle insurance claims in excess of the dollar limit in Section 5.1.5.20;
5.1.5.25 Establish or release reserves for use by the
Partnership except pursuant to an Approved Budget or as otherwise provided in
this Agreement (reasonable Approval only), or permitting (or requiring) any
Partner to make additional Capital Contributions to the Partnership except as
expressly provided in this Agreement or issue any Funding Notice except as
provided in Section 2.1.2.1(i);
5.1.5.26 Except as provided in Section 5.1.4.2, voluntarily
deviate to a Material extent (as provided in Section 5.1.1.10) from the terms of
acquisition, disposition or other course of action with respect to any
Investment or Property (whether owned by the Partnership or a proposed
acquisition) that required the Approval of the Partners (regardless of whether
contained in an Approved Development Plan), except that, to the extent actions
are permitted to be taken hereunder in connection with an Emergency or an event
of Force Majeure and are not prohibited by contracts of the Partnership
(including contracts entered into in connection with the acquisition or
disposition of Partnership Assets), a General Partner may deviate from any
course of action Approved by the Partners as necessary to respond to such
Emergency or as is necessary as the result of such event of Force Majeure,
subject to the Approved Budget Limitations of Section 5.1.3.5;
5.1.5.27 Engage attorneys or for the Partnership or any
Investment Entity (which attorneys shall be selected upon the reasonable
Approval of the Partners). Price Waterhouse Coopers or another national
accounting firm Approved by the Mack-Cali Limited Partner shall be the
Partnership's accountants for all purposes, and the Partners hereby Approve the
following as the initial attorneys authorized to perform services for the
Partnership and the Investment Entities: Battle Fowler LLP; Mark Abramson,
Esq.; Pircher,
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Nichols & Meeks; Pryor, Cashman, Sherman & Flynn; Farer, Siegal & Fersko; Ervin,
Cohen & Jessup; and L. David Cole, Esq.;
5.1.5.28 Approve the form of lease, tenant improvement allowance
or leasing commissions (except as provided in Section 5.1.1.10), project names
or any leasing agent for the Properties other than Highridge Partners or their
Affiliates as set forth in an Approved Development Plan or Approved Budget
(reasonable Approval only); or issue any press releases or otherwise speak with
the press concerning the terms of this Agreement (except that the Authorized
Representatives of a Partner may disclose the details of a Property acquisition,
development, financing, lease or disposition to the press after the same has
occurred or in connection with advertising a Property for lease or sale); or
5.1.5.29 Take any other action that is required to be Approved
by the Partners under this Agreement.
The enumeration of the foregoing rights shall not diminish or affect the
existence or exercise of other rights expressly granted to each of the Partners
under this Agreement. In the event of a deadlock in obtaining the Approval of
the Partners with respect to any Major Decision, the deadlock shall be resolved
as provided in Sections 5.10 and 5.11.
5.1.6 RETAINED APPROVALS; PROCEDURE FOR PARTNER REVIEW AND
APPROVAL.
5.1.6.1 RETAINED APPROVALS. Notwithstanding anything to the
contrary contained in this Agreement, after the loss of Approval rights by a
Partner under Section 7.9 (the "Non-Voting Partner"), the Non-Voting Partner
shall still retain Approval rights with respect to:
(a) The determination of Gross Asset Value for any
property (subject to Sections 5.10(iii) and 8.3.8);
(b) Any act in contravention of this Agreement or
extending the term of the Partnership;
(c) Any action which would cause the Partnership to
become an entity other than a Delaware limited liability Partnership;
(d) Changing the purposes of the Partnership;
(e) Amending this Agreement except as expressly
provided in this Agreement (but only to the extent such amendment would
materially and adversely affect the Non-Voting Partner or its Affiliates,
unless such amendment is permitted to be made without the Non-Voting
Partner's Approval under Section 7.9);
(f) Indemnification of any Person other than a
Partner or its Affiliates pursuant to Section 5.5.2 or except as otherwise
permitted by this Agreement;
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(g) Except as provided in Sections 3.11 and 4.3.2,
entering into any agreement (A) which would cause the Non-Voting Partner or
its Affiliates to become personally liable on or in respect of or to
guarantee any indebtedness of the Partnership or (B) which is not
nonrecourse to the Non-Voting Partner and its Affiliates;
(h) Causing the Partnership to redeem or repurchase
all or any portion of the interest of a Partner except as provided in
Section 7.9;
(i) Borrow money from a Partner or its Affiliates
except pursuant to Sections 2.2.2 or 2.4;
(j) Acquire any Investment or cause any Investment
Entity to acquire any Property, other than Investments and Properties that
were Approved by the Partners for acquisition prior to the Non-Voting
Partner losing its Approval rights with respect thereto under Section 7.9,
take any action on behalf of the Partnership that is not within the scope
of the Partnership purposes as set forth in Sections 1.5 and 1.11, or
permit any Investment Entity to take any act that would require the
Approval of the Non-Voting Partner under this Section 5.1.6.1 if taken by
the Partnership;
(k) Unless in compliance with the requirements of
Section 5.2, pay any salary, fees or other compensation to, or enter into
any contract with, any Affiliate of any Partner (but only with respect to
contracts that do not satisfy clauses (i) and (ii) of Section 5.2) or make
loans to any Partner other than Tax Payment Loans;
(l) Prepay any Partnership indebtedness except
(i) in connection with the disposition of any Investment or Property,
(ii) in connection with the liquidation of the Partnership, (iii) to the
extent such indebtedness is refinanced or (iv) in connection with
restructuring of Partnership indebtedness; or enter into any borrowing,
refinancing or modification of an existing borrowing other than on
commercially reasonable terms for the reasonable needs of the Partnership's
business; or entering into any participating financing if the Partners'
interests are not diluted pro rata by such participation;
(m) With respect to the substitution of a
transferee or additional Partner as a Partner, except as otherwise provided
in Section 7.9, the Non-Voting Partner shall have the right to Approve the
admission of any new Partner (other than pursuant to Section 7.9) to the
extent that the Non-Voting Partner's interest in the Partnership is diluted
by the admission of the new Partner on a basis that is not pro rata with
the dilution of the interests of all of the other Partners of the
Partnership; and
(n) Establish reserves for the Partnership, or make
expenditures from reserves, with respect to the Partnership or any
Investment Entity except as permitted by this Agreement, or issue any
Funding Notice except as provided in Section 2.1.2.1(i).
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5.1.6.2 APPROVAL PROCEDURE. Notice of the request for a
Partner's Approval of any matter for which such Approval is required pursuant to
this Agreement shall be delivered by the requesting Partner to each of the
Authorized Representatives of the other Partner, together with the requesting
Partner's summary and analysis of any matter for which such Approval is
requested and the requesting Partner's recommendations with respect to any
matter for which Approval is requested. Unless some other time is specified in
this Agreement, each Authorized Representative of such other Partner shall
approve or disapprove such matter by notice to the other Partner given within
ten (10) Business Days following delivery of such notice. Failure of any
Authorized Representative to timely respond by written notice (or orally, if
permitted under Section 1.12) to the requesting Partner, indicating Approval or
disapproval of such matter, shall be deemed withholding of the Approval by such
Authorized Representative of such matter for which Approval is requested. From
and after any such submission to such Authorized Representative, and continuing
until the matters addressed in such submission are Approved, each such
Authorized Representative shall, upon request to the Partner who has possession
thereof, be furnished promptly with access to or, if feasible, copies of such
additional pertinent information which become available to such Partner that are
requested by the Partner whose Approval has been sought. Notwithstanding
anything in this Agreement to the contrary, no Authorized Representative of a
Partner shall have the right to Approve any action if such Partner no longer has
Approval rights with respect to such issue under Sections 7.9 and 5.1.6.1.
Section 1.12 sets forth each Partner's Authorized Representatives and the
actions that constitute the granting of a Partner's Approval.
5.2 AFFILIATE TRANSACTIONS; EXCLUSIVITY; MACK-CALI PROPERTY MANAGEMENT
OPTION.
(a) AFFILIATE TRANSACTIONS. If all of the material terms thereof are
clearly identified and fully described in an Approved Development Plan or are
otherwise Approved by the Partners, any Partner or its Affiliates may provide
services, including property management services, accounting services,
construction services, legal or paralegal services (but only to the extent
permitted by law), office administration, and/or document control services, to
the Partnership and/or any Investment Entity, subject to the following
conditions: (i) the fees for such services must be no greater than the fees
charged generally by qualified, unaffiliated third-parties having comparable
expertise and performing similar services in the geographical area in which the
services are to be performed; and (ii) the other terms of the agreement pursuant
to which such services will be performed shall generally be no more onerous than
the terms of agreements used by qualified, unaffiliated third-parties having
comparable experience performing similar services in the geographical area in
which the particular services are to be rendered.
(b) EXCLUSIVITY. Notwithstanding anything in this Agreement to the
contrary, there shall be no restriction against the acquisition or ownership by
any Partner or its Affiliates of any asset, including any office project,
regardless of whether the same is competitive with a Property owned by the
Partnership or an Investment Entity.
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(c) MACK-CALI PROPERTY MANAGEMENT OPTION. The Mack-Cali Limited
Partner has the option to elect to allow the Partnership to serve as the
property manager for any property in which such Partner or such Partner's
Affiliates have an interest (but which is not a Property owned by the
Partnership or any Investment Entity) pursuant to the terms of a management
agreement (the "Management Agreement") to be Approved by the Partners. If
significant lease-up or rehabilitation services are required to be rendered by
the Partnership in connection with a property for which such election has been
made, the Highridge Partners or their Affiliates shall be entitled to receive a
lease-up and rehabilitation fee equal to 10% of the Mack-Cali Limited Partner's
(or such Affiliate's) profit from such property after it has recovered its
investment therein plus a 10% cumulative annual return thereon (compounded
quarterly), but only if such fee is Approved by the Mack-Cali Limited Partner in
connection with the election to allow the Partnership to manage such property
and the terms of such payment are set forth in the Management Agreement.
5.3 REPORTING REQUIREMENTS; FINANCIALS; MEETINGS.
5.3.1 GOVERNMENTAL REPORTS; MEETINGS. The Managing General
Partner shall, at Partnership expense, use reasonable efforts to cause to be
prepared and timely filed with appropriate federal, state and foreign regulatory
and administrative bodies, all reports required to be filed with such entities
under then current applicable laws, rules and regulations, subject to the
reasonable Approval of the Partners, other than reports filed with local
government agencies in connection with the entitlement and development of a
Property (copies of which shall be furnished to the Mack-Cali Limited Partner
within a reasonable time after the Mark-Cali Limited Partner has requested a
copy thereof by notice to Highridge GP). Such reports shall be prepared on the
accounting or reporting basis required by such regulatory bodies. Each Partner
shall be provided with a copy of any such report. No meeting of the Partners
shall be required unless requested by any Partner upon notice to all Partners,
which notice may be given by any Partner at any time. All Partners shall be
given written notice of any meeting of the Partnership at least twenty (20) days
prior to any such meeting by the Partner requesting such meeting. Any meetings
shall be held at the record-keeping office of the Partnership or at any other
reasonably convenient location within the United States as the requesting
Partner may reasonably Approve and specify in such notice. The Partners may
adopt a course of conduct that provides for such meetings to be held
telephonically.
5.3.2 ACCESS; AUDIT. The Managing General Partner shall permit
any Partner to review and copy, during normal business hours at the office of
the Partnership, all Partnership financial records and information. Each
Partner shall have the right to have such records and information audited at
Partnership expense; PROVIDED, HOWEVER, if such audit reveals material errors or
omissions in such records and information due to a Major Default by any Partner,
such Partner's Partner Group shall reimburse the Partnership for the expense of
audit. The Managing General Partner shall maintain (at the office of the
Partnership) reports required or otherwise prepared and delivered hereunder or
under any Investment Entity Agreement, copies of which shall be furnished to
each Partner when available, at the Partnership's expense, together with (upon
request from any Partner) such supplementary records and reports as are
necessary to reflect the allocation among the Partners of the tax
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items and distributions of the Partnership shown on any reports furnished (or
required to be furnished) to the Partners under this Agreement.
5.3.3 FINANCIAL AND STATUS REPORTS. (a) The Managing General
Partner shall cause the following reports to be issued at Partnership expense:
(i) The Managing General Partner shall use reasonable efforts to cause to
be issued to the Partners annual financial reports, in reasonable detail, which
shall be prepared and audited by the Partnership's independent certified public
accountants at Partnership expense, by February 15 the following the close of
each year (including a balance sheet and income and expense statements, both on
an Investment-by-Investment basis and on a consolidated basis, showing sources
and uses of funds, cash on hand, distributions, changes in financial position,
tax information, Undistributed Preferred Return, Invested Capital, and unrepaid
Partner loans on a Partner-by-Partner basis). Such financial reports shall be
prepared using GAAP, or such other method as shall be Approved by the Mack-Cali
Limited Partner from time to time upon reasonable advance notice to the Managing
General Partner;
(ii) The Managing General Partner shall use reasonable efforts to cause to
be issued to the Partners quarterly unaudited financial reports, in reasonable
detail, within twenty-five (25) days after the close of each calendar quarter
other than the fourth quarter of each year (commencing with the calendar quarter
ending on September 30, 1998), internally prepared by the Managing General
Partner and reviewed by the Partnership's accountants, including a balance sheet
and income and expense statements, both on an Investment-by-Investment basis and
on a consolidated basis (showing receipts on a tenant-by-tenant basis, and
material defaults, to the extent requested by the Mack-Cali Limited Partner upon
reasonable notice), sources and uses of funds, cash on hand, distributions,
changes in financial position, Undistributed Preferred Return, Invested Capital,
and unrepaid Partner loans;
(iii) The Managing General Partner shall use reasonable efforts to
cause to be issued to the Partners a monthly income and expense statement, in
reasonable detail, internally prepared by the Managing General Partner on both
an Investment-by-Investment and consolidated basis within twenty (20) days after
the close of each month (including December), showing sources and uses of
Partnership funds and changes in the Partnership's financial position during
such month. In connection with preparing such monthly income and expense
statement, the Managing General Partner shall use commercially reasonable
efforts to review the data provided by third parties (including property
managers and accountants) that is to be presented in such income and expense
statement, such review to be commenced and completed to the extent possible,
after using commercially reasonable efforts to do so, before the Managing
General Partner furnishes such statement to the Partners. If such review is not
completed prior to furnishing such statement, such review shall be completed as
soon as is practicable thereafter (with notice being given to the Partners by
the Managing General Partner of any variance from such statement that is
discovered by the Managing General Partner in such review); and
(iv) The Managing General Partner shall keep the Mack-Cali Limited Partner
reasonably apprised of pending due diligence, acquisition, construction,
leasing, marketing and
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disposition efforts with respect to proposed and owned Investments and
Properties within a reasonable time after any material new development has
occurred or the Mack-Cali Limited Partner requests an update; and
(b) In preparing reports required under this Agreement, the Managing
General Partner may rely on information furnished by third parties (including
property managers and accountants) to the extent that it is reasonable to do so.
(c) Notwithstanding anything in this Agreement to the contrary, (i)
all Partnership and Investment Entity financials shall be prepared on the basis
required by the auditors for the Mack-Cali Limited Partner, and (ii) the
Partners shall make such amendments to this Agreement that reduce or eliminate
the rights (but not the obligations) of the Mack-Cali Partners, or add to or
increase the rights (but not the obligations) of the Highridge Partners, under
this Agreement as are reasonably requested by the Mack-Cali Limited Partner from
time to time in consultation with its auditors, in order to accommodate the
objectives of: (A) the Mack-Cali Limited Partner not being required to
consolidate with the Partnership for accounting purposes and (B) the Mack-Cali
Limited Partner being able to report its share of the Partnership's income and
losses using the equity method of accounting.
5.4 TAX MATTERS PARTNER; TAX RETURNS. The Managing General Partner is
hereby designated as the "Tax Matters Partner", as such term is defined in
Section 6231(a)(7) of the Code, and it shall serve as such at Partnership
expense with all powers granted to a tax matters partner under the Code, except
that the Managing General Partner shall not take any action as the Tax Matters
Partner (including entering into any negotiation or settlement with any taxing
authority, or extending the statute of limitations with respect to any
Partnership item) without the reasonable Approval of the Mack-Cali Limited
Partner. The Mack-Cali Limited Partner may elect to serve as the Tax Matters
Partner instead of the Highridge GP, effective upon notice from the Mack-Cali
Limited Partner to the Highridge GP which may be given at any time after the
Highridge GP ceases to be a General Partner or has committed a Performance
Default. The Partners' Approval rights with respect to Approving tax decisions
(including settlements and extending the statute of limitations) are set forth
in Section 3.12. Each Partner shall give prompt notice to each other Partner of
any and all notices it receives from the Internal Revenue Service (or any other
taxing authority) concerning the Partnership, including any notice of audit, any
notice of action with respect to a revenue agent's report, any notice of a
30-day appeal letter and any notice of a deficiency in tax concerning the
Partnership's federal, state or local income tax returns. At Partnership
expense, the Tax Matters Partner shall furnish each Partner with status reports
regarding any negotiation between the Internal Revenue Service (or other taxing
authority) and the Partnership promptly after any material new development, and
the Mack-Cali Limited Partner shall be given sufficient advance notice by the
Managing General Partner so that it shall have the opportunity to participate,
and permit its professional tax advisers to participate, in person in all of
such negotiations. The Tax Matters Partner shall use its reasonable efforts to
cause the Partnership's accountants to prepare and file on a timely basis, with
due regard to extensions (such extensions to be applied for unless reasonably
Approved to the contrary by the Mack-Cali Limited Partner, all tax and
information returns which the Partnership may be required to file. No tax or
information return shall be filed without the reasonable Approval of the
Mack-Cali Limited Partner.
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Drafts of the Partnership's tax returns shall be submitted to the Mack-Cali
Limited for review and reasonable Approval at least thirty (30) days prior to
the due date therefor (determined with due regard for extensions). The Managing
General Partner shall cause the Partnership's accountants to prepare and
deliver, at Partnership expense, to each Partner on a timely basis an
information reporting return (K-1) reflecting each Partner's distributive share
of all income, gain, loss, deductions, allowances or credits of the Partnership
for each Partnership Accounting Year, as computed pursuant to Article 3. If
there is a dispute as to the content of the Partnership's or Investment
Partnership's tax returns, such returns shall be filed as directed by the
Mack-Cali Limited Partner, with each other Partner having the right to file an
inconsistent position return with the applicable taxing authority(ies).
5.5 INDEMNIFICATION AND LIABILITY OF THE PARTNERS. See Section 9.2 for
certain conventions concerning the extent to which the acts of Affiliates or
employees of a Partner or its Affiliates will not be taken into account for
purposes of this Section 5.5 in determining whether such Partner is liable (or
is not entitled to indemnification) with respect thereto.
5.5.1 No Partner shall be liable, responsible or accountable in
damages or otherwise to any of the other Partners or to the Partnership for any
act or omission performed or omitted by it on behalf of the Partnership, except
for a Major Default, gross negligence, and damages for a breach of this
Agreement by such Partner that is not cured within the time provided in
Section 9.2, or the breach by such Partner or its Affiliates of any agreement
with the Partnership or an Investment Entity that is not cured within the time
provided in such Agreement.
5.5.2 Except to the extent to the extent attributable to a Major
Default, gross negligence by a Partner or a Partner's Affiliates, a Partner's
breach of this Agreement that is not cured within the time provided in
Section 9.2, or the breach by such Partner or its Affiliates of any agreement
with the Partnership or an Investment Entity that is not cured within the time
provided in such Agreement, the Partnership shall indemnify and hold harmless
each Partner and its Affiliates (and their partners, shareholders, or members)
from and against any obligations, actual damages, penalties, actions, judgments,
suits, expenses, disbursements, losses, costs or liabilities of any kind or
nature whatsoever which may be imposed upon, incurred or asserted against such
Partner or its Affiliates (or their partners, shareholders, members and their
Affiliates), including reasonable attorneys' and paralegals' fees and court
costs, except to the extent the same are reimbursed to such Partner or its
Affiliates by insurance proceeds or indemnities from third parties, in
connection with, due to or arising out of (i) such Partner's serving as a
Partner (including serving as the Managing General Partner or as a Co-General
Partner of the Partnership), or (ii) the execution and delivery by such Partner
(or its Affiliates) of any guarantee or payment or performance (including the
General Partner Guaranties), any completion agreement or guarantee, any
hazardous or toxic substance indemnity or guarantee or any other agreement
Approved by the Partners (or permitted to be entered into without such Approval)
whereby such Partner or Affiliate undertakes any monetary, performance or
indemnification obligation on behalf of the Partnership or any Investment Entity
in connection with the ownership, operation or financing of an Investment or
Property.
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5.5.3 Each Partner shall indemnify and hold harmless each other
Partner and the Partnership from and against any direct (and not consequential
or incidental) obligations, actual damages, penalties, actions, judgments,
suits, expenses, disbursements, losses, costs or liabilities (collectively, the
"Liabilities") incurred or paid by such other Partner, the Partnership or an
Investment Entity, or their Affiliates (to the extent such Liabilities are not
reimbursed by insurance proceeds or indemnities from third parties), to the
extent such Liabilities are caused by such Partner's (or its Affiliate's) Major
Default, gross negligence, or breach of this Agreement that is not cured within
the time provided in Section 9.2, or the breach by such Partner or its
Affiliates of any agreement with the Partnership or an Investment Entity that is
not cured within the time provided in such agreement.
5.5.4 Each Partner hereby grants to each of the other Partners and
the Partnership, as security for the performance of all obligations of such
Partner pursuant to this Agreement, a security interest in and to its interest
in the Partnership, pursuant to and in accordance with the provisions of the
Uniform Commercial Code of California, and agrees in the event such Partner is
finally adjudicated to be liable to the Partnership or another Partner for any
amount and fails, within thirty (30) days thereafter to pay the amount owed, the
non-defaulting Partner(s) and the Partnership shall each have and are hereby
granted all the rights, remedies and recourse afforded a secured party under the
Uniform Commercial Code of California, including foreclosing upon the defaulting
Partner's interest in the Partnership and selling such interest at public or
private sale or retaining such interest in accordance with the Uniform
Commercial Code of California. To evidence such security interest, each Partner
shall from time to time execute and deliver such documents as may be reasonably
requested by any other General Partner, including a financing statement (which
may be recorded or filed in accordance with applicable law) and continuation
statements. If the Partnership interest of a defaulting Partner is foreclosed
and sold or the interest retained as aforesaid, each non-defaulting Partner is
hereby authorized on behalf of the defaulting Partner and designated the
attorney-in-fact of the defaulting Partner to execute any and all documents and
take such other action as may be required to effectuate the sale and transfer of
the defaulting Partner's Partnership interest. Such authorization and
designation shall be deemed coupled with an interest and shall be irrevocable.
5.5.5 In any case where indemnity is sought by a Partner, such
Partner shall give notice of the request for indemnification to the Partnership
and the other Partners from whom the indemnity is required and give them the
opportunity to the extent reasonably possible, to participate in the defense of
the claim giving rise to the claim for indemnity, all at Partnership expense.
5.5.6 All indemnity payments and reimbursements payable under this
Agreement to a Partner or an Affiliate of a Partner shall be treated as amounts
owed to a creditor of the Partnership, shall be paid in the ordinary course of
business, without regard to whether the Partnership has Net Available Cash, and,
shall be paid by the Partnership, PARI PASSU with other creditors of the
Partnership, in all cases prior to making distributions to Partners under
Sections 4.1 and 4.2. No Partner shall have any liability under this Agreement
for failing to take any action under this Agreement or any agreement with the
Partnership or an Investment Entity if (i) such Partner is prohibited from
taking such action without the
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Approval of a Partner in the other Partner Group under this Agreement and (ii)
such Partner in the other Partner Group fails to grant such Approval to take
such action. No Partner shall have any liability for failing to grant any
Approval permitted to be granted by it under this Agreement.
5.5.7 Notwithstanding anything to the contrary contained in this
Agreement, no Partner Group or its Affiliates shall receive any reimbursement
from the Partnership or another Partner for any portion of the salaries or
benefits of its Controlling Persons or the rent or utility costs of such
Partner's offices except as Approved by the other Partner Group.
5.6 CONTROL CHANGE. If the Managing General Partner becomes a Terminated
Partner or commits a Removal Default, the Mack-Cali Limited Partner may appoint
a Co-General Partner, and such Co-General Partner may elect to become the
Managing General Partner and to assume the Managing General Partner's authority
and responsibilities under this Agreement as provided in Section 7.9.5 (subject
to Section 5.9). If the Managing General Partner has committed a Performance
Default with respect to an Investment or a Property, the Mack-Cali Limited
Partner shall have the rights with respect to such Investment or Property set
forth in Sections 5.10(ii) and 7.9.5 (including the appointment of a Co-General
Partner to take all actions with respect to such Investment or Property on
behalf of the Partnership, with the Managing General Partner having no further
Approval rights with respect to such Investment or Property except those set
forth in Section 5.1.6.1).
5.7 LIMITATION OF LIABILITY. Each Partner's liability shall be limited as
set forth in this Agreement, the Act and other applicable law. Except as
provided in Sections 2.1.2, 2.2.2.1, 3.5.4, 3.11, 4.3.2, 5.5.1, 5.5.3 or 7.6, a
Partner will not be personally liable for any debts or losses of the Partnership
beyond the Partner's interest in the Partnership, other than distributions
received by a Partner as to which, by terms of the Act, such Partner is
obligated to return. No partner, officer, director, shareholder or manager of a
Partner shall be liable for the obligations of such Partner to the Partnership
or the other Partners under any circumstances other than a Major Default that
has actually been committed by such partner, officer, director, shareholder or
manager or as provided in Section 3.11.
5.8 NO PRIORITIES. Except as specifically provided in this Agreement, no
Partner shall have any priority over any other Partner as to the return of his
or its Capital Contributions or as to distributions or allocations of Profits or
Losses or other tax items.
5.9 DETERMINATION DATE FOR INDEMNITY PAYMENTS, REMOVAL DEFAULTS,
PERFORMANCE DEFAULTS AND MAJOR DEFAULTS; ARBITRATION.
5.9.1 For purposes of this Agreement, until the "Determination
Date" (defined below) has occurred, (i) no amount shall be due and owing by any
Partner to the Partnership or to another Partner pursuant to Section 3.5.4,
5.5.1 or 5.5.3, 7.6 or 9.2, and (ii) no Major Default, Performance Default or
Removal Default shall be deemed to have occurred and no Partner shall be deemed
to have become a Terminated Partner for purposes of applying Section 7.9 other
than by reason of such Partner becoming a Defaulting Partner under Section
2.2.2, in each case if there is a bona fide dispute as to whether such amount is
due or whether a
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Partner is a Terminated Partner (other than by reason of such Partner becoming a
Defaulting Partner under Section 2.2.2) or has committed a Performance Default
or Removal Default. Except for the purpose of determining that a Control Change
Notice issued by the Mack Cali Limited Partner is effective as provided below in
this Section 5.9 upon an alleged Major Default, Performance Default or Removal
Default by the Managing General Partner or because the Managing General Partner
is a Terminated Partner, the "Determination Date" shall be deemed to have
occurred only upon the earlier to occur of the following: (a) the final
determination by a Court described in Section 9.4 that an amount described in
Section 3.5.4, 5.5.1, 5.5.3, 7.6 or 9.2 is due and payable, or the Major
Default, Performance Default or Removal Default in question has occurred or a
Partner has become a Terminated Partner (as the case may be) and the expiration
of the time to file a notice of appeal from such determination has expired
without such notice having been filed; or (b) the affirmation of a determination
described in preceding clause (a) by the entry of judgment to such effect by the
court to which such determination has been appealed.
5.9.2 Notwithstanding the provisions of this Section 5.9, if the
Mack-Cali Limited Partner alleges in good faith, by issuing a Control Change
Notice to the Managing General Partner stating that the Managing General Partner
has committed a Major Default Performance Default, or Removal Default or that
the Managing General Partner otherwise is a Terminated Partner, and the Managing
General Partner in good faith gives notice to the Mack-Cali Limited Partner
within five (5) Business Days after receiving such Control Change Notice that it
disputes whether such Major Default, Performance Default or Removal Default or
any event giving rise to Terminated Partner status has occurred, the Mack-Cali
Limited Partner may commence an expedited arbitration proceeding held in Los
Angeles, California pursuant to applicable California arbitration rules to
determine whether such Major Default, Performance Default or Removal Default or
other event giving rise to Terminated Partner status has occurred by giving
notice to the Managing General Partner appointing a qualified arbitrator and
stating that the Mack-Cali Limited Partner is invoking the arbitration
proceedings of this Section 5.9. Within five (5) Business Days after receiving
such notice, the Managing General Partner shall, by notice to the Mack-Cali
Limited Partner, appoint a second qualified arbitrator. If the Managing General
Partner fails timely to so appoint such second qualified arbitrator, or fails
timely to notify the Mack-Cali Limited Partner that the Managing General Partner
disputes whether such Major Default, Performance Default, Removal Event or
event giving rise to Terminated Partner status has occurred, the Determination
Date shall
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be deemed to have occurred solely for the purposes set forth below in this
Section 5.9. If the Managing General Partner timely so appoints such second
qualified arbitrator, the two arbitrators so appointed shall appoint a third
qualified arbitrator within five (5) Business Days after the notice of the
appointment of the second arbitrator is received from the Managing General
Partner by the Mack-Cali Limited Partner. Within five (5) Business Days after
being appointed, the third arbitrator shall (A) consider the evidence submitted
by the Partners and (B) upon notice to all Partners, determine (solely for
purposes of determining whether such Control Change Notice is valid and
effective) whether the Managing General Partner has committed a Major Default,
Performance Default, or Removal Event or event giving rise to Terminated Partner
status. If the third arbitrator determines that the Managing General Partner
has committed a Major Default, Performance Default, or Removal Event, or that
any event giving rise to Terminated Partner status has occurred, then the
Determination Date shall be deemed to have occurred solely for purposes of
determining whether such Control Change Notice is effective and thereby enabling
(i) the Co-General Partner appointed by the Mack-Cali Limited Partner pursuant
to Section 7.9.5 to become the Managing General Partner and permanently assume
the Managing General Partner's authority and responsibility under Section 7.9.5
if a Removal Default or any event giving rise to Terminated Partner status was
held to have occurred in the arbitration, or who may, in the case of a
Performance Default that is held in the arbitration to have occurred with
respect to an Investment or Property, take all actions with respect to such
Investment or Property on behalf of the Partnership, with the Managing General
Partner having no further Approval rights with respect to such Investment or
Property except those set forth in Section 5.1.6.1, or (ii) the Mack-Cali
Limited Partner to have the rights set forth in Section 5.10(ii). The
Determination Date shall not be deemed to have occurred for any other purpose
unless and until otherwise provided in this Agreement. During the period
beginning on the date on which such Control Change Notice is received by the
Managing General Partner and ending with the determination by the foregoing
arbitration that the subject Major Default, Performance Default, Removal Event,
or event giving rise to Terminated Partner status has not occurred, all actions
permitted to be taken under this Agreement by the Managing General Partner
without the consent of the Mack-Cali Limited Partner in connection with the
operation of the Partnership's business (or, in the case of a Performance
Default, in connection with the Investment or Property that is the subject of
the Performance Default being arbitrated) shall, upon the election in writing by
the Mack-Cali Limited Partner made by giving notice to the Highridge Partners
(which election may specify which Approval rights it desires and may be
supplemented by notice from the Mack-Cali Limited Partner to add or remove
Approval rights specified in such notice), require the Approval of the Mack-Cali
Limited Partner (and the Managing General Partner shall be absolved of all
responsibility and liability to the Partnership and the Mack-Cali Partners for
failing to undertake all such actions for which the Mack-Cali Limited Partner
has withheld its Approval during such period). The costs of the arbitration
shall be funded 50% by each Partner Group, and the Partners shall bear their own
attorneys fees, during the arbitration. The prevailing Partner Group shall be
repaid all of such expenses by the non-prevailing Partner Group within ten (10)
days after receiving notice of the third arbitrator's decision. A "qualified
arbitrator" means any Person who has had over fifteen (15) years of experience
in drafting, negotiating and/or interpreting partnership and/or operating
agreements involving the ownership and operation of commercial real estate.
5.10 DEADLOCK/PARTNER SALE RIGHTS. Either Highridge GP or the Mack-Cali
Limited Partner (provided such Partner has not become a Terminated Partner or
committed a Performance Default or Removal Event) may at any time give notice to
the other (a "Deadlock Notice") if such Partner asserts that there is an
irreconcilable difference of opinion among the Partner Groups (a "Deadlock") as
to the course of action to be taken with respect to any Major Decision on which
they both have Approval rights. The Deadlock Notice shall describe the Deadlock
and the resolution proposed by the Partner issuing the Deadlock Notice. If a
Deadlock Notice is properly issued, the Partners shall meet in good faith during
the 30-day period after the Deadlock Notice has been received. If the Major
Decision that is the subject of the Deadlock is not resolved within such 30-day
period, then:
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(i) In the case of any Deadlock that occurs with respect to a
Property prior to the date on which 95% Stabilization has occurred with
respect to such Property, there shall be no mechanism to resolve the
Deadlock, and arbitration or litigation shall not be used to resolve any
such Deadlock except as provided in Section 5.10 (iii), this clause (i), in
clauses (ii) and (iii) of this Section 5.10, or in Section 5.4 in the case
of tax returns. In the case of a Deadlock with respect to a Property
occurring on or after the date on which 95% Stabilization has occurred with
respect to such Property, the provisions of this clause (i), Sections
5.10(ii) and (iii), 5.4 (tax returns) and 5.11 (the first-offer procedure)
shall apply. In the case of a Deadlock that occurs at any time regarding
(A) whether a Funding Notice is permitted or required to be issued under
Section 2.1(b), or (B) what actions should be taken with respect to the
sale or other disposition of assets that is being made in connection with
the liquidation of the Partnership where both the Highridge GP and the
Mack-Cali Limited Partner have Approval rights with respect thereto, the
dispute may be resolved through an expedited arbitration conducted in
accordance with a procedure that is analogous to that contained in Section
5.9.2 (with conforming changes being made to the terminology contained
therein and with either Highridge GP or the Mack-Cali Limited Partner being
able to invoke such arbitration proceeding by notice to the other).
(ii) SPECIAL RULES FOR PERFORMANCE DEFAULTS. From and after
the date on which a Performance Default with respect to an Investment or
Project has been held to have occurred under Section 5.9.2 for purposes of
issuing a Control Change Notice under Section 7.9.5, the Mack-Cali Limited
Partner may propose to the Highridge GP that any action be taken (or not be
taken) at any time by the Partnership or an Investment Entity with respect
to such Investment or Project. If Highridge GP does not agree with such
proposal, such Deadlock shall be resolved in the manner directed and
Approved by the Mack-Cali Limited Partner (and Highridge GP shall cause the
Partnership and such Investment Entity promptly to take, or refrain from
taking, as appropriate, such action in the manner so directed and Approved
by the Mack-Cali Limited Partner). In the case of a Performance Default,
the Mack-Cali Limited Partner shall also have the rights set forth in
Section 7.9.5 with respect to appointing a Co-General Partner.
(iii) GROSS ASSET VALUE DEADLOCKS. In the case of a Major
Decision described in Section 5.1.5.7 or 8.3.8, concerning the Gross Asset
Value of any property, the dispute concerning such Major Decision shall be
resolved in the following manner (subject to the special rules contained in
Section 8.3.8). Unless and until such Gross Asset Value has been Approved
by the Partners or determined as provided in this paragraph (iii), the
transaction giving rise to the determination of Gross Asset Value shall not
be consummated by any Partner. Either Highridge GP or the Mack-Cali
Limited Partner (the "Invoking Partner") may give notice to the other of
them (the "Other Partner") stating that such Partner is invoking the
following procedure, setting forth its proposed Gross Asset Value for such
property (the "GAV Notice"), and appointing a "qualified appraiser"
(defined below). Within five (5) Business Days after receiving a GAV
Notice, the Other Partner shall, by notice to the Invoking Partner, appoint
a second qualified appraiser. If the Other Partner fails
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timely to so appoint such second qualified appraiser, the Gross Asset Value
shall be deemed to be that set forth in the GAV Notice. If the Other
Partner timely so appoints such second qualified appraiser, the two
appraisers so appointed shall appoint a third qualified appraiser within
five (5) Business Days after the notice of the appointment of the second
appraiser is received by the Invoking Partner. Within five (5) Business
Days after being appointed, the third appraiser shall (A) consider the
evidence submitted by the such Partners and (B) upon notice to both of such
Partners, determine such Gross Asset Value. The cost of the appraisal
shall be funded by the Partnership, and the Partner Groups shall bear their
own attorneys fees, during the appraisal. A "qualified appraiser" means
any M.A.I. appraiser who has had over fifteen (15) years of experience in
valuing commercial real estate in Los Angeles, California.
(iv) PARTNER SALE RIGHTS. The Mack-Cali Limited Partner
shall have the right to cause the Partnership to cause the sale or other
disposition of any Property at any time if (a) a Co-General Partner has
assumed the Managing General Partner's authority and responsibility, or the
Mack-Cali Limited Partner or a Co-General Partner has assumed control of
such Property, under Section 5.10(ii) or Section 7.9.5, (b) the Managing
General Partner becomes a Terminated Partner, or (c) the Mack-Cali Limited
Partner reasonably determines prior to completion of such Property that
development of such Property should be abandoned (an "Abandonment
Decision"). The right to cause a sale or other disposition of a Property
pursuant to the foregoing clauses (a) through (b) shall be hereinafter
referred to as the "Mack-Cali Sale Right." If the Mack-Cali Limited
Partner becomes a Terminated Partner, the Managing General Partner shall
have the right to cause the Partnership to sell such Property (or any or
all Properties if the Mack-Cali Limited Partner has become a Terminated
Partner) at any time (the "Managing General Partner Sale Right"). If the
Mack-Cali Limited Partner makes an Abandonment Decision pursuant to this
Section 5.10(iv), the Partners' obligations to fund the completion of such
Property shall cease for any future development and the Partners shall
separately fund and bear, without reimbursement from the Partnership, any
Investment Partnership or any Partner or its Affiliates, any abandonment
costs (including any amounts that are due and payable by a Partner or any
Affiliate of a Partner under any Managing General Partner Guaranty to the
extent indemnification is available with respect thereto under Section 5.5)
in the ratio of 80% by the Mack-Cali Partners and 20% by the Highridge
Partners.
Any Property to be sold in accordance with clause (c) of this Section
5.10(iv) or upon a liquidation in accordance with Article 8 that does not
occur as the result of the exercise of the Mack-Cali Sale Right or the
Managing General Partner Sale Right shall be sold in a manner reasonably
Approved by the Partners or, if necessary, as determined pursuant to the
procedure described in Section 5.10(i)(B). If the Mack-Cali Limited
Partner has the Mack-Cali Sale Right with respect to any Property, upon
notice to the Managing General Partner, the Mack-Cali Limited Partner shall
have the right to cause the Partnership to sell or otherwise dispose of
such Property as it shall Approve, including the right to cause the
Partnership to sell or contribute such Property to a REIT (whether or not
Controlled by Mack-Cali Realty or its Affiliates). Notwithstanding
anything to the contrary contained in this Agreement, if any Property
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has achieved 95% Stabilization, the Mack-Cali Limited Partner shall have
the right to cause the Partnership to sell or contribute such Property to a
REIT that is Controlled by Mack-Cali Realty or its Affiliates. Any sale or
contribution of a Property by the Partnership or an Investment Entity
(regardless of whether made pursuant to the Mack-Cali Sale Right under this
Section 5.10(iv), pursuant to Section 5.11 or any other provision of this
Agreement) to an Affiliate of any Mack-Cali Partner or to a REIT that is
Controlled by Mack-Cali-Realty or its Affiliate shall be made at fair
market value as determined through the "FMV Appraisal Procedure" set forth
herein, provided however, that if the Mack-Cali Limited Partner elects to
contribute a Property to a REIT instead of effecting a sale of the
Property, the Highridge Partners shall have the option to receive cash for
their indirect interests in such Property (equal to the amount they would
have received if the Property were sold for cash) instead of REIT stock or
partnership interests.
If Highridge GP does not Approve the value proposed by the Mack-Cali
Limited Partner, the "FMV Appraisal Procedure" which shall be invoked by
the Mack-Cali Limited Partner as a condition precedent to a transfer of a
Property to a REIT Controlled by the Mack-Cali Limited Partner or its
Affiliates is as follows. The Mack-Cali Limited Partner shall give notice
to the Managing General Partner stating that the Mack-Cali Limited Partner
is invoking the FMV Appraisal Procedure, setting forth its proposed fair
market value for the Property (the "FMV Notice"), and appointing a
"qualified appraiser" (defined below). Within five (5) Business Days after
receiving an FMV Notice, the Managing General Partner shall, by notice to
the Co-General Partner, appoint a second qualified appraiser. If the
Managing General Partner fails timely to so appoint such second qualified
appraiser, the fair market value shall be deemed to be that set forth in
the FMV Notice. If the Managing General Partner timely so appoints such
second qualified appraiser, the two appraisers so appointed shall appoint a
third qualified appraiser within ten (10) Business Days after the notice of
the appointment of the second appraiser is received from Highridge GP by
the Managing General Partner. Within five (5) Business Days after being
appointed, the appraisers shall (A) consider the evidence submitted by such
Partners and (B) upon notice to both of such Partners, determine such fair
market value. The fair market value shall be the amount determined by the
three appraisers, or if there is a dispute among the three appraisers as to
value, the value established by the third appraiser shall be the fair
market value (but the fair market value shall not exceed the highest, or be
less than the lowest, value established by the other two appraisers). The
cost of the appraisal shall be funded by the Partnership, and the Partners
shall bear their own attorneys fees, during the appraisal. A "qualified
appraiser" means any M.A.I. appraiser who has had over fifteen (15) years
of experience in valuing commercial real estate in Los Angeles, California.
5.11 PROPERTY DEADLOCK. Notwithstanding the provisions of Sections 5.9
and 5.10, if (A) either Partner Group desires to sell or otherwise dispose of
any Property at any time after the expiration of thirty-six (36) months after
the completion of such Property if 95% Stabilization has not occurred by such
date and such Partner Group does not then have the right to dispose of
suchProperty pursuant to the Managing General Partner Sale Right or the
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Mack-Cali Sale Right (as appropriate) under Section 5.10(iv), (B) on or after
the date on which 95% Stabilization of a Property has occurred, either Partner
Group desires to sell or otherwise dispose of such Property and such Partner
Group does not then have the right to dispose of such Property pursuant to the
Mack-Cali Sale Right or the Managing General Partner Sale Right (as appropriate)
under Section 5.10(iv), or (C) on or after the date on which 95% Stabilization
of a Property has occurred, there is a dispute as to whether any Major Decision
(other than those described in the last sentence of Section 5.10(i)) should be
Approved (or reasonably Approved) by the Partners with respect to such Property
(the events referred to in the preceding clauses (A), (B) and (C) of this
Section 5.11 are individually referred to as a "Property Deadlock"), the
resolution of such Property Deadlock shall only be made pursuant to this Section
5.11.
(a) If a Property Deadlock occurs, either of the Highridge
Partners or the Mack-Cali Partners (the "Proponent Group") (provided no Partner
in such Partner Group shall be a Terminated Partner, shall have committed a
Performance Default with respect to such Property, or shall have committed a
Removal Default, and, PROVIDED, FURTHER, that no prior election to sell or
otherwise dispose of such Property shall have been made and be pending under
Section 5.10(iv) or otherwise shall have been Approved by the Partners and be
pending), may give the other Partner Group (the "Respondent Group") notice (the
"First Offer Notice") setting forth a gross value for such Property (the
"Proponent Group First Offer Price").
Within ten (10) Business Days after receiving the First Offer Notice, the
Respondent Group may give notice to the Proponent Group (the "Appraisal Notice")
electing to establish the gross value of the Property by appraisal (in lieu of
using the Proponent Group First Offer Price). In order for the Appraisal
Notice to be effective, the Appraisal Notice must both (1) appoint the first of
the three qualified appraisers who will establish the gross value of the
Property (including any reserves of the Partnership and any Investment Entity
allocable to such Property) by appraisal (the "Appraised First Offer Price"),
and (2) elect one of the following procedures:
(i) BUY-OUt. If elected by the Respondent Group, the Respondent
Group irrevocably elects to purchase the Proponent Group's interest in the
Property for the amount the Proponent Group would receive if the Property
were sold for the Appraised First Offer Price and the net proceeds thereof
(after repayment of Partnership or Investment Entity debt allocable to such
Property and after deducting reasonable reserves for contingencies for such
Property) were paid and/or distributed by the Partnership to the Partners
pursuant to Sections 4.1 and 4.2 ("Proponent Group Interest Purchase
Price"); or
(ii) NON-BINDING APPRAISAL. If elected by the Respondent Group, the
Proponent Group shall have the option, exercisable by notice to the
Respondent Group given within thirty (30) days (or 60 days if the Proponent
Group is the Highridge Group and an All-Cash Election has been made under
Section 5.11(b)) after receiving the Appraised First Offer Price, to
purchase the interest of the Respondent Group in such Property for the
amount the Respondent Group would receive if the Property were sold
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for the Appraised First Offer Price and the net proceeds thereof (after
repayment of Partnership or Investment Entity debt allocable to such
Property and after deducting reasonable reserves for contingencies for such
Property) were paid and/or distributed by the Partnership (the "Respondent
Group Interest Purchase Price"). If within the foregoing 30 or 60-day
period (as applicable), the Proponent Group does not elect to purchase the
Respondent Group's interest in such Property pursuant to the foregoing,
then, the Respondent Group shall have the option to elect by notice to
Proponent Group, given within the thirty (30) day period (or 60-day period
if the Respondent Group is the Highridge Partners and an All-Cash Election
has been made by the Mack-Cali Partners as provided in Section 5.11(b))
after the expiration of such 30-day period (or 60-day period, as
applicable), to purchase the Proponent Group's interest in such Property
for the Proponent Group Interest Purchase Price. If within the foregoing
thirty 30 or 60-day period (as applicable), the Respondent Group does not
elect to purchase the Proponent Group's interest in such Property pursuant
to the foregoing, then the Proponent Group shall have the right to
unilaterally cause the sale of the Property (without the Approval of any
other Partner being required) for a price not less favorable to the
Partnership than the Appraised First Offer Price. The Proponent Group
shall have one hundred twenty (120) days to close such sale (which period
shall be extended to one hundred eighty (180) days if a binding,
non-contingent, sale contract has been executed prior to expiration of such
120 day period).
If an Appraisal Notice is timely given by the Respondent Group within ten
(10) Business Days after receiving a First Offer Notice, the Proponent Group
shall, within five (5) Business Days after receiving such Appraisal Notice,
appoint a second appraiser to establish the Appraised First Offer Price as set
forth above. If the Proponent Group does not timely appoint the second
appraiser, the value established by the first appraiser shall control. Within
five (5) Business Days after the first appraiser receives notice of the identity
of the second appraiser, the first and second appraisers shall appoint a third
appraiser. Within ten (10) business days after the third appraiser is
appointed, the appraisers shall issue to the Proponent Group and the Respondent
Group their determination of the Appraised First Offer Price. In the case of a
dispute among the three appraisers as to value, the value established by the
third appraiser shall be the Appraised First Offer Price for the purpose of this
Section 5.11 (but the Appraised First Offer Price shall not exceed the highest,
or be less than the lowest, value established by the other two appraisers). The
cost of the appraisal shall be borne 50% by the Proponent Group and 50% by the
Respondent Group.
If an Appraisal Notice is not timely given by the Respondent Group within
the ten (10) Business Day period prescribed above, then the Respondent Group
shall have thirty (30) days (or sixty (60) days if the Highridge Partners are
the Respondent Group and an All-Cash Election has been made by the Proponent
Group) after receiving the First Offer Notice to elect, by giving notice to the
Proponent Group, to purchase the Proponent Group's interest in the Property for
the amount the Proponent Group would receive if the Property were sold for the
Proponent Group's First Offer Price and the net proceeds (after repayment of
Partnership and Investment Entity debt allocable to the Property and after
deducting reasonable reserves for contingencies for such Property) were
distributed and/or paid by the Partnership pursuant to Sections 4.1 and 4.2
("Non-Appraisal Interest Purchase Price") to the Partners and, except
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as provided in Section 5.11(c) below, the Respondent Group shall have sixty (60)
days thereafter to close on the purchase of the Proponent Group's interest in
the Property. If the Respondent Group fails to elect to purchase the interest
of the Proponent Group within the 30- or 60-day period (as applicable) after
receiving the First Offer Notice as specified above, the Proponent Group may
unilaterally cause the sale of the Property for a price not less favorable to
the Partnership than the Proponent Group's First Offer Price. In such event,
the Proponent Group shall have one hundred twenty (120) days after the
expiration of the specified 30- to 60-day period (as applicable) to close such
sale of the Property (which period shall be extended to one hundred eighty (180)
days if a binding, non-contingent, sale contract has been executed prior to the
expiration of the foregoing 120-day period).
(b) The Respondent Group or Proponent Group that elects to
purchase the other Partner Group's interest in a Property following invocation
of the first-offer procedure of this Section 5.11 shall have sixty (60) days
after the election to close the purchase of such interest in such Property,
PROVIDED, HOWEVER, that if: (x) the Mack-Cali Partners are the Proponent Group
and state in the First Offer Notice, or (y) the Mack-Cali Partners are the
Respondent Group and state in the Appraisal Notice, that they elect not to
permit deferred payment terms for the Highridge Partners as purchaser (an
"All-Cash Election"), then the Highridge Partners shall have sixty (60) days
(instead of 30 days) after the purchase price is established for the Mack-Cali
Partners' interest in such Property to elect to purchase and ninety (90) days
thereafter to close such purchase. If the Highridge Partners are the purchaser
of the Mack-Cali Partners' interest in a Property and the Mack-Cali Partners did
not make an All-Cash Election, the terms of the purchase shall be as follows:
25% of the interest purchase price shall be paid in cash as the down payment at
the closing, and the balance of the purchase price shall be payable one year
after closing. If the Mack-Cali Partners are the purchaser of the Highridge
Partners' interest in a Property, or if the Mack-Cali Partners made an All-Cash
Election, the entire purchase price for such interest shall be paid at closing.
At closing, (i) the Partnership shall distribute the Property to the purchasing
Partner Group, (ii) the selling Partner Group shall be deemed to have received a
distribution of the Proponent Group Interest Purchase Price or the Respondent
Group Interest Purchase Price (as applicable, depending on whether the selling
Partner Group is the Proponent Group or the Respondent Group) under this
Agreement, and (iii) the purchasing Partner Group shall be deemed to have
received a distribution of the Proponent Group First Offer Price or the
Appraised First Offer Price (as applicable), less allocable the debt, and less
the purchase price payable to the selling Partner Group. The purchasing Partner
Group shall be obligated to pay any release price to the Partnership's or
Investment Entity's lenders as necessary to permit the purchasing Partner Group
to own the Property if the debt encumbering the Property is not assumable by the
purchasing Partner Group, PROVIDED, HOWEVER, that if (A) the Highridge Partners
purchase the Mack-Cali Partners' interests in a Property, and (B) the Mack-Cali
Partners did not make an All-Cash Election, the Mack-Cali Partners shall lend or
arrange to have lent (subject in each case to any obligation not to breach loan
covenants on their debt and that of their Affiliates) to the Highridge Partners
75% of such release price for a one-year period on a non-recourse basis (subject
to standard recourse carve-outs for environmental liability and wrongful acts)
at a rate equal to the greater of 100 basis points over the Prime Rate or 300
basis points over LIBOR. If the purchasing Partner Group wrongfully fails to
close timely the purchase of the selling Partner Group's interest in the
Property, the selling
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Partner Group shall have as its exclusive remedies for such failure the right to
assume complete control over the disposition of that Property (without the
Approval of any other Partner being required) and the right to purchase the
breaching Partner Group's interest in that Property (and receive a distribution
of that Property in respect thereof) for 80% of the amount that the breaching
Partner Group would have received if the Property were sold for the Proponent
Group First Offer Price or Appraised First Offer Price (as applicable), and the
damage provisions of Section 9.2 shall not apply to such breach.
The Proponent Group Interest Purchase Price, the Respondent Group
Interest Purchase Price and the Non-Appraisal Interest Purchase Price shall be
readjusted to account for the release of any reserves for contingencies
previously reducing such amounts when such amounts become available for
distribution to the Partners.
(c) Notwithstanding anything in this Agreement to the contrary, by
notice to Highridge GP given by the Mack-Cali Limited Partner at any time at
least five (5) Business Days before a payment of purchase price to the Highridge
Partners is required under this Section 5.11, the Mack-Cali Limited Partner may
elect to satisfy all or any portion of its obligation to pay the purchase price
payable to the Highridge Partners under this Section 5.11 by the delivery of
shares of common stock in Mack-Cali Realty that may be sold immediately on a
national securities exchange without further registration or restriction and
that constitute marginable securities (such shares to be valued at the average
closing price per share on a national securities exchange for the ten trading
days preceding the date that is five (5) Business Days prior to the date on
which the payment in shares is being made); PROVIDED, HOWEVER, that the
Highridge Partners shall have the option, exercisable by Highridge GP giving
notice to the Mack-Cali Limited Partner prior to the time such Mack-Cali Realty
shares are issued to the Highridge Partners, to contribute all of their
interests in the Partnership to Mack-Cali Realty, L.P. and to receive operating
partnership units in Mack-Cali Realty, L.P. in lieu of receiving such shares in
Mack-Cali Realty (such operating partnership units to be subject to the one-year
holding period before conversion or redemption that is customarily applicable to
such units that are issued to Persons contributing property in exchange
therefor).
ARTICLE 6
BOOKS, RECORDS AND BANK ACCOUNTS
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6.1 BOOKS AND RECORDS. At Partnership expense, the Managing General
Partner shall cause to be kept (at the office of the Partnership referred to in
Section 1.3.2) accurate, just and true books of account, in which shall be
entered fully and accurately each and every transaction of the Partnership. The
books and records of the Partnership shall separately identify, and account for,
the Partnership's investment in, and the Profits, Losses, Gain or Loss or
Disposition and distributions attributable to, each of the Investments,
Properties and each Investment Entity. The books shall be kept in accordance
with the Partnership's method of reporting for federal income tax purposes
(which shall be the accrual method of accounting). Tax accounting elections,
including methods of depreciation and deduction or capitalization of interest,
taxes and insurance premiums during a construction period, if any, shall be made
as the Mack-Cali Limited Partner shall reasonably Approve. The Partnership's
financial statements shall be prepared in accordance with generally accepted
accounting principles, consistently applied.
6.2 BANK ACCOUNTS. The funds of the Partnership shall be deposited in the
name of the Partnership, in such bank account or accounts as the Partners shall
reasonably Approve and reasonably direct from time to time. Such funds shall be
invested by the Managing General Partner, or by the Mack-Cali Limited Partner at
its election made by giving notice to the Managing General Partner, in such high
quality, short term instruments as shall be reasonably Approved by the Partners
(which may or may not bear interest as the Partners shall reasonably Approve).
Each of the Managing General Partner and any Co-General Partner, unless it has
become a Terminated Partner or has committed a Removal Default, shall be
individual signatories on all Partnership accounts, with the signature of any
such Partner or its designee being sufficient to effect withdrawals.
ARTICLE 7
TRANSFERS OF PARTNERSHIP INTERESTS
7.1 RESTRICTIONS ON TRANSFER. (a) Except as hereinafter provided, no
Partner shall be permitted to Transfer all or any part of its interest in the
Partnership or permit any Transfer of ownership interests in such Partner or, in
the case of the Highridge Partners, in the partners, members or shareholders of
such Partners (or in Persons owning, directly or indirectly through tiered
entities, an interest in such Partners). Any attempted or actual Transfer shall
be null and void AB INITIO and of no force and effect. Notwithstanding any
other provision of this Agreement, no interest in the Partnership or ownership
interest in any Partner may be pledged or hypothecated other than to its
Affiliates without the Approval of the Partners.
(b) Notwithstanding the foregoing, a Partner may Transfer all or part
of its interest in the Partnership, or allow the Transfer of ownership interests
in such Partner or in direct or indirect the partners, members or shareholders
thereof, as follows:
7.1.1 To the Partnership or another Partner or a partner, member,
shareholder or Affiliate of a Partner;
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7.1.2 If the proposed transferor is a natural Person, by
succession or testamentary disposition upon his death;
7.1.3 If the proposed transferor is a natural Person, to a trust
for the benefit of any Family Member with respect to the proposed transferor,
but only if the proposed transferor retains Control of the interest so
transferred;
7.1.4 Any other Transfer which is Approved by the Partners
(excluding any Partner that is a Terminated Partner or who has committed a
Removal Default); and
7.1.5 Ownership interests in a Highridge Partner (or in the direct
or indirect partners, members or shareholders of the Highridge Partners) may be
Transferred (but not pledged or hypothecated to Persons other than Affiliates of
the Highridge Partners) without restriction if, at all times after such Transfer
of interests: (a) John S. Long, Eugene S. Rosenfeld, Steven A. Berlinger and/or
their Family Members continue to own (directly or indirectly through tiered
Entities) over 50% of the interests in capital and profits of each Highridge
Partner, and (b) John S. Long, Eugene S. Rosenfeld and/or Steven A. Berlinger
continue to have voting control (whether directly or through tiered Entities) of
each Highridge Partner with respect to Major Decisions;
7.1.6 The interests in the Partnership of the Mack-Cali Partners,
and ownership interests in the Mack-Cali Partners, may be Transferred without
restriction to a REIT (or other Entity) Controlled by the Mack-Cali Partners or
their Affiliates or successors;
The following shall be conditions to any Transfer of any interest in the
Partnership pursuant to this Article 7: (i) the transferee shall assume in
writing each of the obligations of the transferor to the Partnership; (ii) such
transferee shall agree in writing to be bound by each of the terms and
conditions of this Agreement; (iii) the transferee shall deliver to the
Partnership instruments of assumption and security reasonably Approved by the
Partners other than the Partner Group making the Transfer, for the payment and
performance of all obligations of or attendant to the interest so transferred
and assumed; and (iv) the requirements of Sections 7.4 and 7.5 shall be
satisfied.
7.2 NO TAG-ALONG RIGHTS. There shall be no right of any Partner or its
Affiliates to participate in any Transfer permitted by another Partner under
this Agreement.
7.3 BANKRUPTCY OR DISSOLUTION OF PARTNERS. The Bankruptcy or dissolution
(without reconstitution within sixty (60) days thereafter) of any General
Partner (whether or not the Managing General Partner) shall dissolve (and
require the liquidation of) the Partnership, except as otherwise provided in
Section 8.4. The Bankruptcy or dissolution of a Limited Partner shall not
dissolve the Partnership. Upon the occurrence of a Bankruptcy or the
dissolution (without reconstitution within sixty (60) days thereafter) of any
Partner, such Partner shall become a Terminated Partner under Section 7.9, and
the trustee in Bankruptcy, receiver or other legal representative of the
Bankrupt Partner or other legal representatives of the dissolved Partner, shall
have all the rights of an assignee of the Partner, including the same right
(subject to the same limitations) as the Bankrupt or dissolved Partner would
have had
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under the provisions of Section 7.1 to assign its interest in the Partnership,
subject to the substitution rules of Section 7.4 and the provisions of
Section 7.9.
7.4 SUBSTITUTION OF PARTNER. Subject to the restrictions and Approval
rights of the Partners as set forth in Section 7.1 and the provisions of Section
7.5, the assignee of any Transfer by a Partner (a "Partner Assignee") shall
become a substitute Partner only if (i) the assignor Partner so provides in an
instrument of assignment, (ii) the Partner Assignee agrees in writing to be
bound by the provisions of this Agreement and of the Articles and any amendments
hereto and thereto and executes and delivers a copy of this Agreement
(appropriately modified to take account of the Transfer), and (iii) each Partner
Approves such substitution, which Approval may be given or withheld in its
reasonable discretion. If the foregoing conditions (and the other provisions of
this Article 7) are satisfied, the Partner Assignee shall become a substitute
Partner upon payment to the Partnership of all costs and expenses of reviewing
the instrument of assignment, if appropriate, and, if required by law, an
amendment to the Certificate to reflect such substitution. In such event, if
and as required by law, the Managing General Partner shall prepare or cause to
be prepared an amendment to the Certificate to be signed by the Managing General
Partner and, to the extent required, by the Partner Assignee. The Managing
General Partner shall attend to the due execution and filing of an amendment to
the Certificate, if such amendment is required. Unless admitted to the
Partnership as a Partner as provided in this Agreement, no Person shall be
considered a Partner, and the Partnership, each Partner and any other Persons
having business with the Partnership need deal only with the Partners so
admitted and shall not be required to deal with any other Person by reason of an
assignment or pledge by a Partner (or realization of a pledge) or by reason of
the death of a Partner (the Partners hereby confirming that no pledge or
hypothecation of interests in the Partnership or interests in the Partners shall
be permitted to Persons who are not Affiliates of a Partner without the Approval
of the Partners). In the absence of the substitution of a Partner for a
deceased Partner as provided in Section 7.1(a) or this Section 7.4, any payment
to the executors, administrators or personal representatives of such deceased
Partner shall acquit the Partnership of all liability with respect to such
payment to any other Persons who may be interested in such payment by reason of
the death of such Partner. A Partner Assignee of an interest in the Partnership
who is not admitted as a substitute Partner as provided in this Section 7.4
shall be entitled to receive the economic benefits of the interest purported to
be Transferred, but shall not be considered a Partner for any purposes and shall
have no Approval rights under this Agreement and none of the rights of a Partner
under this Agreement or under the Act.
7.5 ADDITIONAL TRANSFER RESTRICTIONS.
7.5.1 Notwithstanding any provision of this Agreement to the
contrary, and subject to the limitations in Sections 7.1 through 7.4, a
Partner's ability to Transfer all or any portion of its Partnership interest, or
ownership interests in such Partner, or, in the case of any Highridge Partner,
to permit the Transfer of direct or indirect (through one or more
intermediaries) ownership interests in such Partner relating specifically or
generally to such Partner's interest in the Partnership, shall be subject to the
following additional restrictions:
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7.5.1.1 No Transfer of all or any portion of such interest
shall be effective unless (i) such Transfer complies with the Transfer
restrictions in all agreements to which the Partnership, any Investment Entity
or such Partner is a party, and (ii) such interest is registered under the
Securities Act and any applicable state securities laws, or an exemption from
registration is available, and, for any direct Transfer of an interest in the
Partnership, the Partnership shall have received an opinion of counsel,
reasonably Approved by the Partners other than the Partner making the Transfer,
to such effect (unless the requirement that the Partnership receive such legal
opinion is waived by the Approval of the Partners other than the Partner making
the Transfer);
7.5.1.2 No Partner shall be permitted to Transfer any
portion of its Partnership interest or take any other action which would cause
the Partnership to be (i) treated as a "publicly traded partnership" within the
meaning of Code Section 7704 or (ii) classified as a corporation (or as an
association taxable as a corporation) within the meaning of Code Section
7701(a);
7.5.1.3 No Partner shall be permitted to Transfer all or
any portion of its Partnership interest or to take any other action (including,
in the case of any Partner which is a corporation, limited liability company or
partnership or a partner, member or shareholder of a partnership or limited
liability company which is a Partner, a Transfer of any interest in such
partnership, limited liability or corporation or in the partners, members or
shareholders thereof) which would result in a termination of the Partnership as
a partnership within the meaning of Code Section 708(b)(1)(B) (a "Tax
Termination") unless such Partner indemnifies the other Partners against any
adverse tax consequences suffered by the Partnership as a result thereof;
7.5.1.4 Unless arrangements concerning withholding are
reasonably Approved by the Partners other than the Partner making the Transfer
(if such withholding is required of the Partnership), no Partner shall be
permitted to Transfer all or any portion of its interest in the Partnership to
any Person, unless such Person is a United States Person as defined in Code
Section 7701(a)(30) and is not subject to withholding of any federal tax; and
7.5.1.5 No Partner shall be permitted to Transfer all or
any portion of its Partnership interest if such Transfer will (i) cause the
assets of the Partnership or any Investment Entity to be deemed to be "plan
assets" under ERISA or its accompanying regulations or the Code or (ii) result
in any "prohibited transaction" under ERISA or its accompanying regulations
affecting the Partnership or any Investment Entity.
7.5.2 Any purported transfer or any other action taken in
violation of this Section 7.5 shall be void AB INITIO.
7.6 TRANSFER INDEMNIFICATION AND CONTRIBUTION PROVISIONS.
Each Partner shall indemnify, defend and hold the Partnership and each
other Partner, and the shareholders, partners, employees, agents, members and
Affiliates thereof, harmless from any Liabilities in any way arising from the
failure of a Transfer of any interest
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in the Partnership (including any Transfer of an interest in any partners,
members or shareholders of the indemnifying Partner, or in the direct or
indirect partners, members or shareholders therein, and regardless of whether
occurring before or after the date of this Agreement) to comply with all
applicable federal and state securities laws, including all registration or
qualification requirements and anti-fraud requirements, or arising from the
impact of such Transfer upon compliance of the Partnership and its Partners with
those securities laws in connection with any previous Transfer of an interest in
the Partnership. Should the preceding indemnity be unenforceable to any extent,
then, to such extent the Partner otherwise required to so indemnify the
Partnership and the other Partners shall be obligated to contribute to any loss,
liability, cost or expense resulting from the actions, omissions or events set
forth in the above indemnification to the extent of its responsibility therefor,
as determined by the trier of fact.
7.7 BASIS FOR RESTRICTIONS AND REMEDIES. The Partners acknowledge that
the relationship of each Partner to the other Partners is a personal
relationship and that the restrictions on the power of each Partner to withdraw
or Transfer its interest in the Partnership or permit the Transfer of ownership
interests in such Partner (and in indirect and direct owners of the Highridge
Partners), and the remedies of this Agreement, including Section 7.9 (and the
purchase and redemption rights contained therein), (i) are necessary to preserve
such personal relationship and safeguard the investment of the other Partners in
the Partnership, (ii) were a material inducement to the other Partners entering
into this Agreement, and (iii) shall be enforceable notwithstanding the
Bankruptcy of any Partner or its Affiliates, or any applicable prohibition
against restraints on alienation.
7.8 REPRESENTATIONS, WARRANTIES AND COVENANTS.
Each Partner hereby represents and warrants to each of the other
Partners as follows:
7.8.1 Such Partner, if not a natural Person, is duly formed and
validly existing under the laws of the jurisdiction of its organization with
full power and authority to enter into this Agreement and to conduct its
business to the extent contemplated in this Agreement;
7.8.2 This Agreement has been duly authorized, executed and
delivered by such Partner and constitutes the valid and legally binding
agreement of such Partner, enforceable in accordance with its terms against such
Partner, except as such enforceability may be limited by bankruptcy, insolvency,
moratorium and other similar laws relating to creditors' rights generally, by
general equitable principles and by any implied covenant of good faith and fair
dealing;
7.8.3 The execution and delivery of this Agreement by such Partner
and the performance of its duties and obligations hereunder do not result in a
breach of any of the terms, conditions or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, credit agreement, note or other
evidence of indebtedness, or any lease or other agreement, or any license,
permit, franchise or certificate to which such Partner or any of its Affiliates
is a party or by which any of them are bound or to which any of their properties
are
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subject, or require any authorization or approval under or pursuant to any of
the foregoing, or violate any statute, regulation, law, order, writ, injunction,
judgment or decree to which such Partner is subject;
7.8.4 Neither such Partner nor any of its Affiliates is in default
(nor has any event occurred which with notice, lapse of time, or both, would
constitute a default) in the performance of any obligation, agreement or
condition contained in any indenture, mortgage, deed of trust, credit agreement,
note or other evidence of indebtedness or any lease or other agreement, or any
license, permit, franchise or certificate, to which it is a party or by which it
is bound or to which any of its properties are subject, nor is it in violation
of any statute, regulation, law, order, writ, injunction, judgment or decree to
which it is subject; but only, in each case, if such default or violation would
materially and adversely affect such Partner's ability to carry out its
obligations under this Agreement;
7.8.5 There is no litigation, investigation or other proceeding
pending or, to the knowledge of such Partner, threatened against such Partner or
any of its Affiliates which, if adversely determined, would materially and
adversely affect such Partner's ability to carry out its obligations under this
Agreement, and, to the knowledge of such Partner and its Affiliates, (i) there
is no lawsuit pending against such Partner or its Affiliates alleging fraud
against them and (ii) there is no criminal investigation or indictment pending
against such Partner or its Affiliates;
7.8.6 To the knowledge of such Partner and such Partner's
Affiliates, no consent, approval or authorization of, or filing, registration or
qualification with, any court or governmental authority on the part of such
Partner is required for the execution and delivery of this Agreement by such
Partner and the performance of its obligations and duties hereunder;
7.8.7 Such Partner is acquiring its interest in the Partnership
for investment purposes and without a view toward its resale or distribution;
7.8.8 Such Partner is sophisticated in real estate transactions,
has been granted access to such financial and other material information
concerning the Partnership, its purchase of the initial Investments and
Properties, the Initial Development Plan and all Due Diligence Materials with
respect to the foregoing as it has requested or may require in connection with
its investment in the Partnership, is able, either directly or through its
agents and representatives, to evaluate such information and any Due Diligence
Materials provided or made available to it from time to time hereunder, and is
able to bear the financial risk of loss presented by an investment in the
Partnership (which includes the risk of loss of such Partner's entire
investment), particularly in light of the risks that would be disclosed by a
detailed analysis of the Initial Development Plan and any Due Diligence
Materials with respect to the initial Investments or Properties (its access to
which, to the full extent such Partner has requested, hereby is confirmed by
such Partner) and the fact that the initial Investments are subject to
unpredictable real estate values, and the other risks of owning equity or debt
investments concerning real estate;
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7.8.9 Such Partner has consulted with independent counsel of its
choice and recognizes that, although Battle Fowler LLP ("BFLLP") serves as
special counsel to Affiliates of both Partner Groups on unrelated matters, BFLLP
has not represented the Highridge Partners or their Affiliates in connection
with the Partnership, is acting as the attorney for only the Mack-Cali Partners
in connection with the preparation and execution of this Agreement and the
formation of the Partnership and Investment Entities, and has not provided tax
or other legal advice to the Highridge Partners or their Affiliates in
connection therewith (the Highridge Partners and their Affiliates are relying on
Mark Abramson, Esq. as their counsel in connection therewith). Each Partner
hereby waives all potential conflicts of interest resulting from BFLLP's
representation of Mack-Cali Partners hereunder, of the Highridge Partners (or
their Affiliates) and the Mack-Cali Partners (or their Affiliates) in unrelated
transactions, and resulting from BFLLP's or Mark Abramson's representation of
the Partnership or any Investment Entity in the future on matters for which
BFLLP or Mark Abramson is retained as counsel by the Partnership or such
Investment Entity, PROVIDED, HOWEVER, that BFLLP shall not represent the
Partnership, any Partner, or any Partner's Affiliates in any adversarial
controversy among the Partnership, and/or any Partner or any Partner's
Affiliates (and no conflict waiver has been issued with respect to such
representation by BFLLP or by any Partner or its Affiliates in any such
controversy);
7.8.10 Such Partner is aware that transfers of interests in
the Partnership and within such Partner are subject to the restrictions set
forth in Article 7 hereof and that an investment in the Partnership is a
long-term investment, without liquidity;
7.8.11 Such Partner is not relying upon any of the other
Partners, nor any of their Affiliates as such Partner's agent to assess the
merits or risks of this investment, and such Partner understands that no
projection of performance shall be actionable if not achieved except in the
circumstances specifically set forth in this Agreement;
7.8.12 None of the other Partners is acting as the
representative or agent or in any other capacity, fiduciary or otherwise, on
behalf of such Partner in connection with the Partnership, any Investment
Entity, the Investments or the other matters referred to in this Agreement;
7.8.13 None of the other Partners nor any of the other
Partner's agents or representatives has made any binding representations,
warranties, projections or assurances to such Partner with respect to the
Partnership, the Investments, the performance of the Partnership and the
Investments, the safety or the risks involved and/or the tax or economic
consequences thereof;
7.8.14 Such Partner is aware that the other Partner and/or the
other Partner's Affiliates now and in the future will be, and in the past have
been, engaged in businesses which are competitive with that of the Partnership
and/or the Investments, and that, no Partner or its Affiliates is required to
bring any Investments opportunities to the attention of the Partnership or any
Partner (or their Affiliates) for investment.
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7.8.15 Such Partner is aware that compensation and
reimbursements may be payable to Affiliates of the Partners by the Partnership,
as addressed in this Agreement, including pursuant to the Approved Budget
attached as Exhibit C;
7.8.16 Such Partner understands that the federal, state and
local tax liability of such Partner with respect to the taxable income and gain
allocated to such Partner hereunder for any year may exceed the cash
distributions from the Partnership to such Partner and, if Tax Payment Loans are
unavailable for any reason, such Partner may have to look to sources other than
distributions from the Partnership to pay such tax;
7.8.17 Such Partner understands that it may lose its Approval
rights (and be subject to having such Partner's interest purchased by the
Partnership in certain circumstances) under Section 7.9 and the other provisions
of this Agreement if the Partner becomes a Terminated Partner or has committed a
Removal Default or Performance Default, and that it has waived its rights to a
trial by jury in any dispute concerning this Agreement or the Partnership under
Section 9.4;
7.8.18 Except as specifically provided in this Section 7.8,
such Partner is not relying upon any representation or warranty of any other
Partner, the Partnership, any Investment Entity or any of their respective
Affiliates, express or implied, oral or written, other than those contained in
this Agreement;
7.8.19 No Partner is required to cause the Controlling Persons
of such Partner to devote any specific portion of their time to Partnership
business other than as necessary to fulfill such Partner's obligations under
this Agreement, and such Controlling Persons are expected to spend substantial
amounts of their time on activities that are unrelated to the Partnership;
7.8.20 Such Partner understands that the Partnership and its
Partners are relying on the accuracy of the representations set forth in this
Section 7.8 (or contained elsewhere in this Agreement) in entering into this
Agreement without requiring that the interests in the Partnership be registered
under federal or state securities laws; and
7.8.21 Each Partner Group represents that the ownership
interests in such Partner Group (and, in the case of the Highridge Partners, in
the direct and indirect owners thereof through all tiered Entities) is as set
forth on Exhibit E, and each of the Highridge Partners represents that the
partnership agreement or operating agreement pursuant to which each of the
Highridge Partners (and each of the direct and indirect, through one or more
intermediaries, partners or members thereof) is operated will at all times
during the term of this Agreement contain Transfer restrictions that prohibit a
violation of the Transfer restrictions contained in this Agreement.
7.9 TERMINATED PARTNER; REMOVAL DEFAULTS; PERFORMANCE DEFAULTS; PURCHASE
RIGHTS; CONTROL CHANGE NOTICES.
7.9.1 When a Partner becomes a Terminated Partner or is a Partner
in a Partner Group in which any Partner has committed a Removal Default, such
Partner shall
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automatically cease to have any Approval or voting rights under this Agreement
with respect to the Partnership and the Investment entities (and each Property
and Investment), except as provided in Section 5.1.6.1. When a Partner becomes
a Terminated Partner, (i) such Partner shall cease to be a General Partner as
provided in Section 7.9.5, (ii) upon the election of the Partner Group who is
not the Terminated Partner (the "Electing Partner"), given by notice from the
Electing Partner to the Terminated Partner (a "Purchase Notice") at any time
after a Partner becomes a Terminated Partner, the Terminated Partner shall sell
the Terminated Partner's entire interest in the Partnership to the Partnership
(or to the Electing Partner Group or its designee as set forth in Section
7.9.4), at a price (the "Buy-Out Price") to be determined as hereinafter
provided. The Electing Partner shall notify the Terminated Partner in writing
of its election (exercisable at any time after a Partner becomes a Terminated
Partner) under this clause (ii); and (iii) the other provisions applicable by
reason of becoming a Terminated Partner (including Sections 7.9.5 and 8.1.1)
shall apply.
If a Purchase Notice has been given under clause (ii) above, the Electing
Partner and the Terminated Partner shall attempt to agree upon the Buy-Out Price
of the Terminated Partner's entire interest in the Partnership. If such
agreement is not reached within thirty (30) days after the notice of election is
given, the Terminated Partner, on the one hand, and the Electing Partner, on the
other hand, shall each, within ten (10) additional days, appoint an M.A.I.
accredited appraiser by notice to the other. The two appraisers so appointed
shall, within five (5) additional days, appoint a third M.A.I. accredited
appraiser and the three appraisers shall meet to determine the gross proceeds
which would have been received by the Partnership if the Partnership and each
Investment Entity sold, on the Termination Date, all of their assets (other than
interests in each other) for cash at their then fair market value, less all
costs and expenses of sale, including closing costs, real estate brokerage
commissions and fees, title insurance premiums and escrow fees, appropriate
reserves and legal and other expenses incident to such sale (the "Appraised
Value"). The Appraised Value shall equal the amount determined by the three
appraisers, or if there is a dispute among the three appraisers as to value, the
value established by the third appraiser shall be the Appraised Value (but the
Appraised Value shall not exceed the highest, or be less than the lowest, value
established by the other two appraisers). The cost of such appraisal shall be
borne 50% by the Electing Partner and 50% by the Terminated Partner. The
Buy-Out Price shall equal (i) the amount the Terminated Partner would receive
under Sections 4.1 and 4.2 if all of the assets of the Partnership and each
Investment Entity (other than interests in each other) were sold to a third
party for the Appraised Value and the Partnership were liquidated, after paying
creditors and withholding therefrom any amounts payable by the Terminated
Partner under Sections 4.3.2, 5.5.3 and 9.2 and the other provisions of this
Agreement, minus (ii) in the case of a Major Default, 10% of the Buy-Out Price
(determined before adjustment thereof under this clause (ii)). If the
Partnership redeems the Terminated Partner, there shall be no discount in the
Buy-Out Price for any encumbrances to which such redeemed interest is subject,
but the Partnership shall apply the proceeds of such redemption to satisfy such
encumbrances instead of making distributions thereof to the Terminated Partner
to the extent required by law (such distributions being deemed for all purposes
to have been made to the Terminated Partner by the Partnership and then paid by
the Terminated Partner to satisfy such encumbrances). If the interest of the
Terminated Partner is purchased by the Electing Partner (or its designee), and
not by the Partnership, pursuant to Section 7.9.4, the Buy-Out Price for the
Terminated
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Partner's interest as determined above shall be reduced to the extent the
Electing Partner or its designee acquires the Terminated Partner's interest
subject to (or assumes) the encumbrances on such interest at the closing.
Within ten (10) days following the determination of the Buy-Out Price, the
Electing Partner may elect, in its sole and absolute discretion, by notice to
the Terminated Partner, to rescind any notice pursuant to this Section 7.9.1, in
which event the right to elect to cause the Terminated Partner to sell its
interest to the Partnership or to the other Partner (or its designee) pursuant
to this Section 7.9.1 as a result of the event(s) which led to the Purchase
Notice (but not any future event which would authorize any such notice) shall no
longer be of any force or effect.
7.9.2 The purchase and sale of the Terminated Partner's interest
in the Partnership pursuant to this Section 7.9 shall be consummated on or
before the thirtieth (30th) day following the date upon which the Buy-Out Price
was determined (whether by agreement of the Terminated Partner and the Electing
Partner or by appraisal), at the offices of the Partnership, or at such other
time and place as may be agreed upon by the Terminated Partner and the Electing
Partner. At the closing of such purchase and sale (the "Closing Date"), the
Terminated Partner shall execute and deliver to the Partnership (or the Electing
Partner or its designee, as appropriate) such instruments of assignment,
conveyance and transfer as the Electing Partner may reasonably deem necessary or
appropriate to consummate the purchase and sale, and the purchaser shall pay
cash to the Terminated Partner in the amount of the Buy-Out Price (adjusted for
encumbrances to the extent provided in Section 7.9.1).
7.9.3 Following the Closing Date, (a) the Partnership shall
indemnify and hold the Terminated Partner harmless from and against all
liabilities of the Partnership arising from acts taken or omitted to be taken by
the Partnership after the date of the closing of the sale of the Terminated
Partner's interest to the Partnership (or to the Electing Partner or its
designee, as appropriate), and (b) the indemnity and liability provisions of
Sections 3.5.4 and 5.5 shall continue to apply with respect to the Terminated
Partner and its Affiliates.
7.9.4 The Partnership shall fund the purchase of the Terminated
Partner's interest pursuant to this Section 7.9 by borrowings or, if the
remaining Partner so Approves, by additional Capital Contributions from the
Electing Partner, such borrowings or Capital Contributions to occur when needed
to make the required payment of the Buy-Out Price. If the Electing Partner so
Approves, the interest of the Terminated Partner shall be purchased by the
Electing Partner (or its designee, which designee shall be admitted as a Partner
hereunder simultaneously with the closing of such purchase of the Terminated
Partner's interest in order to avoid a termination of the Partnership, if the
remaining Partner so elects by giving notice thereof to the Terminated Partner
prior to such closing).
7.9.5 (a) The Mack-Cali Limited Partner shall have the right to
appoint a Co-General Partner by notice to the Highridge Partners at any time
after it has issued (or simultaneously with its issuance of) a Control Change
Notice to the Highridge Partners under this Section 7.9.5, and such Co-General
Partner shall automatically be admitted as a general partner of the Partnership
under the Act, and become a General Partner of the Partnership under this
Agreement, upon the Co-General Partner and each other Mack-Cali Partner
executing and delivering to all of the Partners an amendment to this Agreement
pursuant to which the Co-General Partner agrees to be bound by the terms of this
Agreement (such
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amendment need not be executed or Approved by any Highridge Partner in order to
be valid). The interest in the Partnership granted to any Co-General Partner
shall be as specified by notice to the Highridge Partners from the Mack-Cali
Limited Partner and shall reduce the interest in the Partnership of the
Mack-Cali Limited Partner accordingly. Any Co-General Partner shall be an
Affiliate of the Mack-Cali Limited Partner.
At any time after the Managing General Partner has been deemed to be a
Terminated Partner or to have committed a Removal Default under Section 5.9, the
Mack-Cali Limited Partner may elect, effective immediately upon the Mack-Cali
Limited Partner giving notice to the Highridge Partners, that the Co-General
Partner shall become the Managing General Partner and shall assume the Managing
General Partner's authority and responsibility in connection with the operation
of the Partnership (but the Managing General Partner shall retain Approval
rights to the extent set forth in Section 5.1.6.1). Such assumption shall be
effective, the Managing General Partner shall cease to be the Managing General
Partner and shall have its entire interest reconstituted from a General
Partner's interest to that of a Limited Partner having equivalent distribution
and tax allocation rights to that previously held by it as a General Partner,
the Co-General Partner shall become the Managing General Partner, and the
Partnership shall be reconstituted and continued and shall not dissolve, upon
the later to occur of (i) five (5) Business Days after the receipt by the
Managing General Partner of such notice from the Mack-Cali Limited Partner that
it has elected such assumption by the Co-General Partner pursuant to this
Section 7.9.5 (together with any notice described in Section 7.9.5(b), a
"Control Change Notice"), or (ii) if the Managing General Partner in good faith
denies the assertion that it is a Terminated Partner or that it has committed a
Removal Default by giving notice of such denial to the Mack-Cali Limited Partner
within five (5) Business Days after receipt by the Managing General Partner of a
Control Change Notice, the Determination Date for purposes of this Section
7.9.5, as determined pursuant to the procedure described in Section 5.9.
Notwithstanding anything to the contrary contained in this Agreement, the
Co-General Partner shall have the right to cause the Partnership to borrow money
at any time pursuant to any loan agreement (and/or other documents entered into
by the Managing General Partner and/or its Affiliates in connection with such
agreement) that has been Approved by the Managing General Partner prior to the
Managing General Partner becoming a Terminated Partner or being deemed to have
committed a Removal Default under this Agreement, even if under such agreement
(and/or such other documents), the Managing General Partner and/or its
Affiliates would have personal liability with respect to the repayment of such
borrowings (but the indemnity provisions of Article 5 shall continue to apply
with respect to the Highridge Partners and any such borrowing).
(b) If the Managing General Partner is deemed to have
committed a Performance Default with respect to a Property or Investment under
Section 5.9, and the Mack-Cali Limited Partner has appointed a Co-General
Partner as provided in this Section 7.9.5, such Co-General Partner shall be
entitled to assume complete control over the construction, stabilization,
operation and disposition of such Property or Investment. If the Mack-Cali
Limited Partner has not appointed a Co-General Partner, the Mack-Cali Limited
Partner shall nonetheless have the rights set forth in Section 5.10(ii) with
respect to such Property or Investment. The Mack-Cali Limited Partner may give
notice to the Managing General Partner at any time after it in good faith
believes that the Managing General Partner
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has committed a Performance Default stating that it believes that such
Performance Default has occurred (such notice shall constitute a "Control Change
Notice" for purposes of this Agreement). The change in control described in
this Section 7.9.5(b) (and the rights of the Mack-Cali Limited Partner under
Section 5.10(ii) to control certain actions and decisions) shall be effective
upon the later to occur of (i) five (5) Business Days after the receipt by the
Managing General Partner of the Control Change Notice with respect to such
Performance Default, or (ii) if the Managing General Partner in good faith
denies the assertion that it has committed a Performance Default by giving
notice of such denial to the Mack-Cali Limited Partner within five (5) Business
Days after receipt by it of a Control Change Notice, the Determination Date for
purposes of this Section 7.9.5, as determined pursuant to the procedure
described in Section 5.9.
7.9.6 The Partners have agreed to the remedies contained in this
Section 7.9 for the reasons set forth in Section 7.7.
ARTICLE 8
TERM, DISSOLUTION AND TERMINATION
8.1 EVENTS OF DISSOLUTION. The Partnership shall continue until DECEMBER
31, 2005, or such later date as is Approved by the Partners; PROVIDED, HOWEVER,
that dissolution and liquidation shall occur prior to that date upon the
occurrence of any one of the following events:
8.1.1 An election to dissolve the Partnership being made in
writing by the Approval of the Partners other than any Terminated Partner or
Partner who has committed a Removal Default;
8.1.2 The sale for cash, exchange or other disposition of all or
substantially all of the assets of the Partnership and each Investment Entity;
8.1.3 The Bankruptcy or dissolution (without reconstitution within
sixty (60) days thereafter) of any General Partner, unless the Partnership is
reconstituted and continued as provided in Section 8.4; or
8.1.4 Any other event resulting in the dissolution or liquidation
of the Partnership that is expressly described in this Agreement.
8.2 LIMITATION ON DISSOLUTION. Until the dissolution of the Partnership
otherwise occurs, no Partner shall voluntarily retire, resign or withdraw from
the Partnership, take any step voluntarily to dissolve itself or voluntarily
cause a dissolution of the Partnership, except as provided in this Agreement
(including Section 8.1).
8.3 LIQUIDATION AND WINDING UP.
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8.3.1 If the Partnership is dissolved for any reason and is not
reconstituted pursuant to Section 8.4.1, each of the Mack-Cali Limited Partner
and the Managing General Partner, unless such Partner is a Terminated Partner or
has committed a Removal Default (collectively, the "Liquidator") shall commence
to wind up the affairs of the Partnership, to liquidate and sell the Properties
and to liquidate the Investment Entities in an orderly manner as reasonably
Approved by the Partners (subject to Section 5.10(i)) as soon as is practicable
thereafter. A third-party liquidator may be appointed if Approved by the
Partners. Any Liquidator other than the Partners shall have sufficient business
expertise and competence to conduct the winding up and termination of the
business of the Partnership. No Liquidator who is a Partner shall be paid any
compensation or fee for conducting the liquidation of the Partnership or any
Investment Entity. Notwithstanding anything to the contrary contained in this
Agreement, if one Partner Group has the unilateral right (without the Approval
of the other Partner Group) to cause the sale or other disposition of a Property
or Investment under any provision of this Agreement, such Partner Group shall be
the Liquidator with respect to such Property or Investment and may sell or
otherwise dispose of such Property or Investment on such terms as shall be
Approved by such Partner Group (whether during the term of the Partnership or in
liquidation), subject, however, to the restrictions on transfers of such
Property or Investment to Affiliates of such Partner Group that are contained in
this Agreement (including Section 5.11).
8.3.2 The Liquidator shall proceed with such liquidation in as
expeditious a manner as is reasonably practicable. The holders of interests in
the Partnership shall continue to share income and losses during the period of
liquidation in accordance with Article 4.
8.3.3 If a Partner or an Affiliate of a Partner desires to
purchase any of the Partnership's remaining assets, the price, terms and
conditions of such purchase shall be subject to the Approval of the Partners and
the restrictions described in this Agreement (including Section 5.11) on
transactions with Affiliates.
8.3.4 Except as expressly provided in this Article 8, any
Liquidator which is not a Partner shall have and may exercise all of the powers
conferred upon the Managing General Partner under the terms of this Agreement
(but subject to all of the applicable limitations, contractual and otherwise,
upon the exercise of such powers), to the extent necessary or desirable in the
good faith judgment of the Liquidator to carry out the duties and functions of
the Liquidator hereunder for and during the Liquidation Period.
8.3.5 If (i) the Partnership is dissolved for any reason and is
not reconstituted and continued pursuant to Section 8.4.1, (ii) all General
Partners have become Bankrupt or been dissolved, and (iii) within ninety (90)
days following the date of dissolution a Liquidator or successor Liquidator has
not been appointed by the remaining Partners pursuant to Section 8.3.1, any
interested party shall have the right to seek judicial supervision of the
winding up of the Partnership pursuant to the Act.
8.3.6 After making payment or provision for payment of all debts
and liabilities of the Partnership and all expenses of liquidation, the
Liquidator shall establish, for a period not to exceed twelve (12) months after
the date the liquidation is complete, such cash
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reserves as are reasonably necessary for any foreseeable, contingent or
unforeseen liabilities or obligations of the Partnership, the Investment
Entities or the Partners or their Affiliates with respect to the Partnership
obligations.
8.3.7 After the liquidation of the Partnership or the acquisition
of an Investment or Property from the Partnership by a Partner Group, the
Partners and/or their Affiliates may employ Persons who previously were employed
by the Partnership or an Investment Entity, PROVIDED, HOWEVER, that neither the
Mack-Cali Partners nor the Highridge Partners may engage the services of any
Partnership or Investment Entity employee (other than any on-site employee of a
Property in which all of the interests of the Partners have been acquired by one
Partner Group if such employee has no responsibilities with respect to any other
Property owned by the Partnership or an Investment Entity, E.G., a day porter)
except upon six months' prior notice to the other (whether within the first
twelve (12) months after the liquidation of the Partnership or otherwise), and
no employee of the Partnership shall render services simultaneously to the
Partnership or an Investment Entity and to any Partner or its Affiliates without
the Approval of both the Mack-Cali Partners and the Highridge Partners.
8.3.8 This Section 8.3.8 shall apply if Partnership assets or
Investment Entity assets are sold for consideration that includes notes payable
to the Partnership (or payable to an Investment Entity) or interests in a REIT,
and the provisions of this Section 8.3.8 shall apply notwithstanding any other
provision of this Agreement.
(a) To the extent such consideration includes notes payable, such
notes payable shall, upon receipt by the Partnership or any Investment Entity,
be distributed in-kind to the Partners. The Gross Asset Value of such notes at
the time of such distribution shall be the principal amount payable under such
notes if held to maturity. Each Partner shall have an undivided interest in
such notes equal to the percentage obtained by multiplying the Gross Asset Value
of such notes by a fraction whose numerator equals the amount such Partner would
receive under Sections 4.1 and 4.2 if cash equal to such Gross Asset Value were
paid to the Partner pursuant to such Sections as loan repayments or
distributions instead of such notes, and whose denominator equals such Gross
Asset Value. The Partner shall own such notes pursuant to a tenancy-in-common
agreement to be reasonably Approved by the Partners at the time of such
disposition (such tenancy-in-common agreement shall be prepared at Partnership
expense).
(b) To the extent such consideration consists of interests in a REIT,
such interests shall, upon receipt by the Partnership or any Investment Entity,
be distributed in-kind to the Partners except as otherwise set forth below in
Section 8.3.8(c). The Gross Asset Value of such interests at the time of such
distribution ("REIT Share Value") shall be:
(i) in the case of publicly traded stock, the share
price at the time of such receipt by the Partnership multiplied by the
number of shares of stock received by the Partnership;
(ii) in the case of interests that are convertible into
publicly traded stock, the share price (at the time of the receipt by
the
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Partnership of such interests) of such publicly traded stock multiplied by
the number of shares of such stock into which such interests are
convertible;
(iii) in the case of interests that are neither
publicly traded nor convertible into publicly traded stock, the value
of the property of the Partnership or Investment Entity disposed of to
the REIT as set forth in the documents pursuant to which such
disposition was made to the REIT (or if no such value is set forth in
such documents, the fair market value of such property determined
under Section 5.10(iii), such determination to be made without regard
to any restrictions to which such interests are subject or any
minority or liquidity discount with respect thereto).
Each Partner shall receive a distribution of such portion of the interests in
the REIT equal to the percentage obtained by multiplying the aggregate REIT
Share Value of all interests in the REIT that are received by the Partnership or
Investment Entity by a fraction (A) whose numerator equals the amount such
Partner would receive under Sections 4.1 and 4.2 if cash equal to such aggregate
REIT Share Value were paid to the Partners pursuant to such Sections as loan
repayments or distributions instead of such interests in the REIT, and (B) whose
denominator equals such aggregate REIT Share Value.
(c) Notwithstanding the provisions of Section 8.3.8(b), distributions
of interests in a REIT shall not be required (unless otherwise Approved by the
General Partners) for so long as such distribution is prohibited by the
documents pursuant to which such interests were received (the Partners
conducting the transaction with the REIT shall make reasonable, good faith
attempts to avoid such a prohibition). If the interests in the REIT are not
distributed to the Partners at the time of their receipt by reason of the
operation of this Section 8.3.8(c), (I) such interests shall nevertheless be
deemed to have been distributed to the Partners, for all purposes of this
Agreement, at the time of their receipt by the Partnership or Investment Entity
in proportion to the percentage thereof that each Partner would receive if such
interests were distributed at the time receipt under Section 8.3.8(b), and (II)
upon the ultimate distribution of such interests in the REIT or the proceeds
from the sale or other disposition thereof by the Partnership, each Partner
shall receive the percentage thereof determined pursuant to clause (I) of this
Section 8.3.8(c) (regardless of the value of such interests at the time of such
ultimate distribution or the amount of the proceeds from the sale or other
disposition thereof).
(d) The Partners conducting the transaction with the REIT shall use
reasonable good faith efforts to structure any disposition of Partnership or
Investment Entity assets for notes or interests in a REIT in a manner that will
facilitate compliance with this Section 8.3.8.
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8.4 RECONSTITUTION AFTER BANKRUPTCY OR DISSOLUTION OF A GENERAL PARTNER.
8.4.1 Upon the Bankruptcy or dissolution (without reconstitution
within sixty (60) days thereafter) of any of the General Partners, the
Partnership shall be dissolved and liquidated unless within ninety (90) days
subsequent to such event the remaining Partners (other than Partners in the same
Partner Group as the Bankrupt General Partner) so elect, by giving notice to all
Partners, to reconstitute the Partnership and to continue the business of the
Partnership. If such election is made, then (i) the Partnership shall not be
dissolved and liquidated; (ii) the Partnership and the business of the
Partnership may be reconstituted and continued, under and pursuant to the
provisions of this Agreement; (iii) the Terminated Partner's interest in the
Partnership may be purchased as set forth in Section 7.9, and upon such
Bankruptcy or dissolution, the other rights against a Terminated Partner under
Section 7.9 shall also apply to the extent applicable; and (iv) the Certificate
shall be amended to reflect such continuation.
8.5 DISTRIBUTION UPON DISSOLUTION AND CAPITAL ACCOUNT ADJUSTMENTS. Upon
dissolution of the Partnership without reconstitution as permitted by this
Article 8, the Partnership's assets shall be sold or otherwise disposed of to
third parties as directed by the Liquidator (subject to Sections 5.10, 5.11 and
8.3.8), and, after paying or providing for liabilities owing to creditors and
the establishment of such reserves as are reasonably necessary for foreseeable,
contingent or unforeseen liabilities or obligations of the Partnership, the
Investment Entities, or the Partners or their Affiliates with respect to
Partnership or Investment Entity obligations for a period of up to twelve (12)
months after the liquidation has been completed, the remaining liquidation
proceeds (and the reserves, after the expiration of a reasonable period of time
of up to twelve (12) months after the liquidation has been completed) shall be
distributed pursuant to Section 4.2 (subject to Section 8.3.8).
8.6 COMPLIANCE WITH TIMING REQUIREMENTS OF TREASURY REGULATIONS.
Notwithstanding anything in this Article 8 to the contrary, in the event the
Partnership is "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), distributions shall be made to the Partners within the
time required by Regulations Section 1.704-1(b)(2)(ii)(b)(2) to the extent
practicable. A liquidation occurring as a result of a Tax Termination shall be
treated as provided in Regulations Section 1.708-1(b)(1)(iv), or otherwise as
required by successor Regulations, if any.
ARTICLE 9
MISCELLANEOUS
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9.1 OTHER INTERESTS. No Partner and no Affiliate of a Partner shall have
any right, by virtue of this Agreement or otherwise, to share or participate in
or to Approve any other investments or activities of any other Partner or the
income or proceeds derived therefrom. No Partner and no Affiliate of any
Partner shall be obligated to offer or to bring to the attention of the
Partnership, any other Partner or its Affiliates, any property or other business
investment or opportunity, whether or not within the scope of the Partnership's
purposes, and any Partner and any Affiliate of any Partner may at any time
during the term of the Partnership own, invest in, develop or manage, directly
or indirectly, any property or other business investment or opportunity, whether
or not competitive with the Partnership, any Investment Entity, the Properties,
the Investments or the Partnership's or any Investment Entity's other assets,
and whether or not within the scope of the Partnership purposes. Each of the
Partners acknowledges and agrees that each Partner and its Affiliates have
engaged or invested in, are now engaged and investing in and will in the future
be offered, consider, engage and/or invest in other business or real property
ventures of every kind and nature, including the ownership, acquisition,
financing, leasing, operating, management, syndication, brokerage and
development of real property and other investments and opportunities to make or
purchase loans which are competitive with the Properties and/or the Investments
and the business of the Partnership and the Investment Entities, and none of the
Partners or their Affiliates shall have any obligation or responsibility to
disclose, account for or offer any of such real properties, investments or
opportunities to the Partnership or any Partner or their Affiliates, and the
Partnership, the Partners and their Affiliates shall have no rights or interests
therein.
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9.2 DAMAGES; CERTAIN CURE RIGHTS; OFFSET. Each Partner shall be liable to
the Partnership and the other Partners for any actual (but not consequential or
incidental) damages arising from any breach of this Agreement. Except as
provided in Sections 2.1.2, 2.2.2.1, 3.5.4, 3.11, 4.3.2, 5.5.1, 5.5.3 or 7.6,
the liability of any Partner shall be limited to such Partner's interest in the
Partnership. Upon any alleged breach or default of this Agreement by any
Partner, it shall be a condition to any action against such Partner that such
Partner shall have received notice of such alleged breach or default (which may
be any notice otherwise required by this Agreement) and that such Partner shall
have failed to completely (at its expense, without right of reimbursement from
the Partnership or the other Partners) cure or commence to completely cure such
alleged breach or default within thirty (30) days following such notice and
failed, at all times thereafter, to use diligent efforts to pursue such cure to
completion, but in no event beyond ninety (90) days. Notwithstanding anything
in this Agreement to the contrary, (a) there shall be no cure period for a Major
Default, and (b) the only cure period for failure timely to make a Capital
Contribution under Article 2 is set forth in Sections 2.2.1 and 2.2.2.
Notwithstanding anything in this Agreement to the contrary, all amounts payable
to a Partner under this Agreement or to a Partner or an Affiliate of a Partner
under any agreement with the Partnership or an Investment Entity shall be
subject to offset for amounts owed to the Partnership or the other Partners and
their Affiliates by such Partner or its Affiliates under this Agreement or such
agreement with such Affiliate and shall be withheld and either retained by the
Partnership or reallocated to the other Partners in a reasonable manner, as the
case may be. If a Partner breaches this Agreement and fails to cure such breach
within the time required by this Section 9.2, the Partners of the other Partner
Group may take such actions (or cause the Partnership or any Investment Entity
to take such actions) as are reasonably necessary to cure such breach at the
breaching Partner's expense. If the Partners have established a course of
conduct of granting Approvals orally as provided in Section 1.12, no Partner
will be liable for any breach of this Agreement (regardless of whether such
breach is capable of being cured) if such Partner reasonably and in good faith
believed that such action was consented to orally by the other Partner Group;
PROVIDED, HOWEVER, that the foregoing shall not apply with respect to the
Approvals described in the last sentence of Section 1.12. Notwithstanding
anything in this Agreement to the contrary, (i) no Highridge Partner shall be
liable for any mistakes made by it in implementing the Development Plan for any
Property that are made in good faith and do not constitute gross negligence,
actual fraud or intentional misappropriation of funds and (ii) for purposes of
applying Section 5.5 and this Section 9.2, a Highridge Partner shall not be
liable for (or be ineligible to receive indemnification under Section 5.5 by
reason of) the acts of any Affiliate of the Highridge Partners or of any
employee of any Highridge Partner or their Affiliates, or be liable for (or be
ineligible to receive indemnification under Section 5.5 by reason of) the acts
of any Affiliate of any Highridge Partner, except to the extent that the act of
such employee or Affiliate in question (A) occurred as a result of the failure
of a Highridge Partner to conduct the employee and Affiliate supervision
procedures to the extent required under Exhibit J or (B) occurred with the prior
actual and specific knowledge of John S. Long, Eugene S. Rosenfeld or Steven A.
Berlinger.
9.3 NO AGENCY. Except as provided herein, nothing herein contained shall
be construed to constitute any Partner hereof the agent of any other Partner
hereof or to limit in any manner the carrying on of each Partner's respective
businesses or activities.
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9.4 GOVERNING LAW. It is the intent of the parties hereto that all
questions with respect to the construction of this Agreement and the rights and
liabilities of the parties hereto shall be determined in accordance with the
provisions of the laws of the State of Delaware as applicable to a limited
partnership formed under the Act. The United States District Court for the
Central District of California, the Superior Court for Los Angeles County,
California and the United States District Court for the Southern District of New
York shall be the exclusive appropriate venues to litigate questions of
interpretation under this Agreement or the rights of the parties hereunder.
Each of the parties hereto hereby waives any and all rights to a trial by jury
with respect to any dispute among the Partners or their Affiliates or among a
Partner (or its Affiliates) and the Partnership concerning this Agreement, the
Partnership, any Investment Entity or any Investment or Property. In any
dispute among the Partners concerning the Partnership or this Agreement, the
prevailing Partner(s) shall be entitled to recover its reasonable attorneys'
fees and costs (including litigation and collection costs) from the
non-prevailing Partner(s).
9.5 NOTICES. Any notices or solicitations of Approval required or
permitted to be given under the terms of this Agreement shall be in writing and
shall be deemed to have been given when (i) personally delivered with signed
delivery receipt obtained, (ii) when transmitted by facsimile machine, if
followed by a mailing thereof pursuant to this Section 9.5 before the end of the
first business day thereafter, with printed confirmation of successful
transmission to the facsimile number set forth in the appropriate address listed
below being obtained by the sender from the sender's facsimile machine or
telephonically from the addressee, or (iii) when deposited in the United States
first class mail if sent postage prepaid by registered or certified mail, return
receipt requested, in each case addressed as follows:
IF TO ANY OF THE MACK-CALI PARTNERS, to it in care of:
Mr. Mitchell E. Hersh
Roger W. Thomas, Esq.
Mack-Cali Realty Corporation
11 Commerce Drive
Cranford, New Jersey 07016
Phone: (908) 272-8000
Fax: (908) 272-0214
with a copy to:
Battle Fowler LLP
1999 Avenue of the Stars, Suite 2700
Los Angeles, California 90067
Attn: Sanford C. Presant, Esq.
Phone: (310) 277-6625
Fax: (310) 277-6627
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IF TO ANY OF THE HIGHRIDGE PARTNERS, to it in care of:
Mr. John Long
Mr. Gene Rosenfeld
Mr. Steven Berlinger
c/o Highridge Partners, Inc.
300 Continental Boulevard, Suite 360
El Segundo, California 90245
Phone: (310) 648-7600
Fax: (310) 648-7619
with a copy to:
Mark Abramson, Esq.
300 Continental Boulevard, Suite 360
El Segundo, California 90245
Phone: (310) 648-7600
Fax: (310) 648-7619
The time to respond to any notice shall commence to run on the date of delivery
at the appropriate addresses (or attempted delivery if delivery is refused
during normal business hours). A Partner may change the address to which
notices shall be sent to it, or any of its Authorized Representatives, by
written notice to all Partners (said change of address or of Authorized
Representatives to be effective upon receipt by all Partners).
9.6 PRONOUNS AND PLURALS. References herein to the singular shall include
the plural and to the plural shall include the singular, and references to the
masculine gender shall include the feminine and neuter genders (and vice versa),
except where the same shall not be appropriate.
9.7 WAIVER. No consent or waiver, express or implied, by any Partner to
or of any breach or default by any other Partner in the performance by the other
of its obligations hereunder shall be deemed or construed to be a consent or
waiver to or of any other breach or default by the other in the performance by
such other party of the same or any other obligations of such Partner hereunder.
Failure on the part of any Partner to object to or complain of any act or
failure to act of any other Partner or to declare any other Partner in default,
irrespective of how long such failure continues, shall not constitute a waiver
by such Partner of its rights hereunder.
9.8 SEVERABILITY. If any provision of this Agreement or the application
thereof to any Person or circumstance shall be invalid or unenforceable to any
extent, the remainder of this Agreement and the application of such provisions
to other Persons or circumstances shall not be affected thereby and shall be
enforced to the greatest extent permitted by law.
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9.9 TITLES AND CAPTIONS. All Article or Section titles or captions
contained in this Agreement are for convenience only and shall not be deemed a
part of the content of this Agreement.
9.10 AGREEMENT IN COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument when taken together. In addition, this
Agreement may contain more than one counterpart of the signature page and the
Agreement may be executed by the affixing of the signatures of each of the
Partners to one or more of such counterpart signature pages; all of such
signature pages shall be read as though one, and shall have the same force and
effect as though all of the signers had signed a single signature page. A
Partner shall be deemed to have executed and delivered this Agreement if and
when it has manually executed a counterpart signature page to this Agreement,
transmitted a copy of the same by facsimile to the other Partners at such other
Partner's facsimile number set forth above, and received a printed confirmation
of the successful receipt thereof by such other Partner. This Agreement shall
not be binding on Partners hereto unless each Partner shall have executed and
delivered a copy of this Agreement to the other Partners. If this Agreement is
executed and delivered by facsimile, each Partner who transmits its signature
page for this Agreement by facsimile shall promptly forward a manually executed
signature page to the other Partner (but a Partner's failure to do so promptly
shall not affect the validity of its execution and delivery of this Agreement by
facsimile transmission).
9.11 BINDING AGREEMENT. This Agreement shall inure to the benefit of and be
binding upon the undersigned Partners and their respective heirs, executors,
legal or personal representatives, successors and assigns. Whenever in this
instrument a reference to any party or Partner is made, such reference shall be
deemed to include a reference to the heirs, executors, legal or personal
representatives, successors and assigns of such party or Partner.
9.12 FURTHER ASSURANCES. Each Partner shall execute and deliver such
further instruments and do such further acts and things as may reasonably be
required to carry out the intent and purposes of this Agreement promptly upon
request from any other Partner.
9.13 WAIVER OF PARTITION. Unless otherwise specifically provided in this
Agreement (including Article 8), no Partner shall, and each Partner hereby
irrevocably waives the right to, either directly or indirectly, take any action
to require partition or appraisement of the Partnership, any Property, any
Investment, any Investment Entity, or any part thereof, and, notwithstanding any
provision of applicable law to the contrary, each Partner hereby irrevocably
waives any and all right to maintain any action for partition or to compel any
sale with respect to its interest in the Partnership or with respect to the
assets of the Partnership or the Investment Entities, or any part thereof.
9.14 ENTIRE AGREEMENT. This Agreement contains the final and entire
agreement among the parties hereto with respect to the subject matter hereof,
including the Investments, and they shall not be bound by any terms, conditions,
statements or representations, oral or written, with respect thereto that are
not contained herein.
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9.15 AMENDMENTS. Except as expressly provided in this Agreement (including
Section 7.9.5), this Agreement may be modified or amended only upon the Approval
of the Partners.
9.16 NO DRAFTING PRESUMPTION. In interpreting the provisions of this
Agreement, no presumption shall apply against any Partner that otherwise would
operate against such Partner by reason of such document having been drafted by
such Partner or at the direction of such Partner or an Affiliate of such
Partner.
9.17 NO THIRD-PARTY BENEFICIARIES. Except for the representations
concerning conflict waivers pertaining to BFLLP in Section 7.8.9 (which shall
inure to the benefit of BFLLP), the provisions of this Agreement are not
intended to be for the benefit of any creditor or other Person (other than the
Partners in their capacities as such) to whom any debts, liabilities or
obligations are owed by (or who otherwise have a claim against or dealings with)
the Partnership or the Partners, and no such creditor or other Person shall
obtain any rights under any of such provisions (whether as a third-party
beneficiary or otherwise) or shall by reason of any such provisions make any
claim in respect to any debt, liability or obligation (or otherwise) including
any debt, liability or obligation with respect to Capital Contributions, against
the Partnership or the Partners. In addition, no deficit balance in any
Partner's Capital Account or in the capital account of any partner or Partner of
a Partner shall be an asset of the Partnership, and no Partner shall be
obligated to restore any such deficit balance.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Agreement of Limited Partnership is executed, and
is effective for all purposes, as of the date first set forth above.
GENERAL PARTNER:
HCG DEVELOPMENT, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management, L.L.C.,
a Delaware limited liability company
By: Highridge Management, Inc.,
a California corporation, its
Managing Member
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
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LIMITED PARTNERS:
SUMMIT PARTNERS I, L.L.C.,
a Delaware limited liability company
By: Highridge Asset Management, L.L.C.,
a Delaware limited liability company,
its Manager
By: Highridge Management Inc.,
a California corporation
its Managing Member
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
MACK-CALI CALIFORNIA DEVELOPMENT ASSOCIATES L.P.,
a California limited partnership
By: MACK-CALI SUB XXI, INC.,
a Delaware corporation, its general partner
By:
----------------------------------------
By:
-----------------------------------
Name:
------------------------------
Title:
-----------------------------
EXECUTED BY EACH OF THE UNDERSIGNED
SOLELY TO CONFIRM THE PROVISIONS OF
SECTION 3.11 THAT APPLY TO HIM:
- -------------------------------
JOHN S. LONG
- -------------------------------
EUGENE S. ROSENFELD
[END OF SIGNATURES]
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EXHIBIT A
DEFINED TERMS
Capitalized terms that are used in the Agreement of Limited Partnership to
which this Exhibit is attached shall have the meaning set forth below in this
Exhibit A:
"ABANDONMENT DECISION" is defined in Section 5.10(iv).
"ACQUISITION DOCUMENTS" means the documentation necessary to acquire any
Investment or Property that has been Approved by the Partners for acquisition,
including any acquisition loan documentation.
"ACT" shall mean the Delaware Revised Uniform Limited Partnership Act, as
amended from time to time (Delaware Code, Title 6, Sections 17-101, ET SEQ.).
"ADJUSTED CAPITAL ACCOUNT DEFICIT" shall mean, with respect to any Partner,
the deficit balance, if any, in such Partner's Capital Account as of the end of
the relevant tax year, after giving effect to the following adjustments:
Credit to such Capital Account any amounts which such
Partner is obligated to restore or is deemed to be obligated to restore to the
Partnership pursuant to the penultimate sentences of Regulations Sections
1.704-2(g)(1) and 1.704-2(i)(5); and
Debit to such Capital Account the items described in
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6) of the Regulations.
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
"AFFILIATE" shall mean (a) with respect to any Highridge Partner: John S.
Long, Eugene S. Rosenfeld, their Family Members, the Highridge GP, the Highridge
Limited Partner, and any Entity Controlled, Controlling or under common Control
(directly or indirectly) by or with one or more of them and/or their Affiliates,
and (b) with respect to any Mack-Cali Partner: the Mack-Cali Limited Partner,
any Co-General Partner and any Entity Controlled, Controlling or under Common
Control (directly or indirectly) by or with one or more of them and/or any of
their Affiliates. For the purposes of this Agreement, the term "Control," or
any derivative thereof (including "Controlled by" or "Controlling"), when used
with respect to any specified Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through ownership of voting securities or
partnership or other ownership interests, or by contract; PROVIDED, HOWEVER,
that, without limiting the generality of the foregoing, (a) any Person which,
together with its Affiliates, owns, directly or indirectly, securities
representing more than 50% of the value or ordinary voting power of a
corporation or more than 50% of the partnership, general partnership, membership
or other ownership interests (based upon
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value or vote) of any other Person is deemed to Control such corporation or
other Person, (b) a general partner shall always be deemed to Control any
partnership of which it is a general partner, and (c) a member-manager of a
limited liability company shall always be deemed to Control any limited
liability partnership of which it is a member- manager.
"AGREEMENT" shall mean and refer to this Agreement of Limited Partnership
and all Exhibits referred to herein and attached hereto, each of which is hereby
made a part hereof, as amended and in effect from time to time.
"AGREEMENT DATE" shall mean the date first written above as of which this
Agreement is effective.
"ALL CASH ELECTION" is defined in Section 5.11(b).
"APPRAISAL NOTICE" is defined in Section 5.11(a).
"APPRAISAL FIRST OFFER PRICE" is defined in Section 5.11(a).
"APPRAISED VALUE" is defined in Section 7.9.
"APPROVAL" (and any variation thereof) of a Partner shall mean the prior
written (or oral to the extent permitted by Section 1.12) consent or approval of
such Partner, which may be granted or withheld in its sole discretion unless
otherwise expressly provided to the contrary in this Agreement. Such Approval
shall be valid for a Partner who is not a natural person only if given by an
Authorized Representative of such Partner. Use of the term "reasonable" or
"reasonably" in connection with the term "Approval" or any variation thereof or
with the term "satisfactory" means that such Approval shall not be withheld or
delayed unreasonably. Unless either of such terms is used in connection with
the term "Approval" (or any variation thereof), such Approval may be granted or
withheld in a Partner's sole discretion. If the Approval of any Partner to any
action is required under this Agreement and such Partner shall not have given
notice of disapproval or Approval of such action to the other Partners within
ten (10) Business Days after receipt of the notice requesting that such Approval
be given (or such earlier or later date as may be established pursuant to this
Agreement for the giving or withholding of such Approval), such Partner shall be
deemed not to have given such Approval. Except as provided in Section 5.1, the
Approval of a Partner shall not be required from and after the date on which
such Partner has ceased to have Approval rights under this Agreement, regardless
of whether this Agreement otherwise requires the "Approval" of such Partner or
the "Approval" of the Partners". The terms "Approved by the Partners" and
"Approved by the General Partners" (or any variation of such terms) are defined
in Section 1.12.
"APPROVED DEVELOPMENT PLAN" means a Development Plan (or supplement
thereto) with respect to a Property or Investment that has been Approved by the
Partners as provided in Section 5.1.3.4 of this Agreement.
"APPROVED OVERHEAD BUDGET" is defined in Section 5.1.3.1.
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"APPROPRIATE SHARING RATIO" is defined in Section 3.5.4.
"AUTHORIZED REPRESENTATIVES" is defined in Section 1.12 hereof.
"BANKRUPT" shall mean, with respect to any Partner, if:
(a) such Partner, or a Person that Controls such Partner
(the
"Controlling Person"), shall (i) apply for or consent to the appointment of, or
the taking of possession by, a receiver, custodian, trustee, administrator,
liquidator or the like of itself or of all or of a substantial portion of its
assets, (ii) admit in writing its inability, or be generally unable or deemed
unable under any applicable law, to pay its debts as such debts become due,
(iii) convene a meeting of creditors for the purpose of consummating an
out-of-court arrangement, or entering into a composition, extension or similar
arrangement, with creditors in respect of all or a substantial portion of its
debts, (iv) make a general assignment for the benefit of its creditors, (v)
place itself or allow itself to be placed, voluntarily or involuntarily, under
the protection of the law of any jurisdiction relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts,
or (vi) take any action for the purpose of effecting any of the foregoing; or
(b) a proceeding or case shall be commenced in any court of
competent jurisdiction, seeking (i) the liquidation, reorganization,
dissolution, winding-up, or composition or readjustment of debts, of such
Partner or a Controlling Person with respect thereto, (ii) the appointment of a
trustee, receiver, custodian, administrator, liquidator or the like of such
Partner or of a Controlling Person with respect thereto or of all or a
substantial portion of such Partner's or such Controlling Person's assets, or
(iii) similar relief in respect of such Partner or such Controlling Person under
any law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition or adjustment of debts, without the consent of the other Partner and
such proceeding or case shall continue undismissed for a period of ninety (90)
days, or an order, judgment or decree approving or ordering any of the foregoing
shall be entered and continue unstayed and in effect for a period of sixty (60)
days, or an order for relief or other legal instrument of similar effect against
such Partner or such Controlling Person shall be entered in an involuntary case
under such law and shall continue for a period of sixty (60) days.
"BANKRUPTCY" shall mean any condition described in the definition of
"Bankrupt" which renders a Partner a Bankrupt.
"BANKRUPTCY CODE" shall mean Title 11 of the United States Code, 11 U.S.C.
Section 101 ET SEQ., as is now in effect or hereafter amended.
"BFLLP" is defined in Section 7.8.9.
"BORROWING MEMBER" is defined in Section 3.11.
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"BUSINESS DAY" shall mean any day on which commercial banks are authorized
to do business and are not required by law or executive order to close in both
Los Angeles, California and New York, New York.
"BUY-OUT PRICE" is defined in Section 7.9.1.
"CAPITAL ACCOUNT" shall mean, with respect to any Partner, the book Capital
Account maintained for such Partner in accordance with the provisions of Section
3.1.
"CAPITAL CONTRIBUTION" or "CAPITAL CONTRIBUTIONS" shall mean the amount of
cash and the net fair market value (as reasonably Approved by the Partners) of
any property contributed to the capital of the Partnership by the Partners
pursuant to this Agreement. The term "Capital Contributions" with respect to a
Partner shall include (i) the contributions of such Partner made pursuant to
Sections 2.1 and 2.2 and any other Section of this Agreement pursuant to which
Capital Contributions are deemed made by the Partners, and (ii) such Partner's
payments that are Approved by the Partners (to the extent such Approval is
required under this Agreement) which are made to third-party creditors of the
Partnership with respect to Partnership obligations unless and until reimbursed
by the Partnership, but only to the extent reimbursable to such Partner under
this Agreement.
"CAPITAL RECEIPTS" shall mean (i) the sum of (a) the proceeds received by
the Partnership from the sale, exchange or any other disposition of all or any
portion of any Investment (including any Partnership Interest), plus (b) all
amounts received by the Partnership from any Investment Entity on account of the
sale, exchange or other disposition of all or any portion of any Property,
Investment or other asset owned by such Investment Entity reduced by (ii) the
sum of (a) all expenditures made by the Partnership in connection with such
sale, exchange or other disposition that are required in connection with such
sale, exchange or other disposition or that are reasonably Approved by the
Partners, plus (b) loan repayments made from such proceeds as are required
pursuant to loan documentation or otherwise Approved by the Partners, plus
(c) amounts set aside as reserves therefrom that have been reasonably Approved
by the Partners.
"CERTIFICATE" shall mean the Certificate of Limited Partnership of the
Partnership, as filed with the Office of the Secretary of State of the State of
Delaware in accordance with the Act, and as in effect from time to time.
"CLOSING DATE" is defined in Section 7.9.2.
"CODE" shall mean the Internal Revenue Code of 1986, as amended and in
effect from time to time (or any corresponding provision of succeeding law).
"CO-GENERAL PARTNER" means any General Partner appointed by the Mack-Cali
Limited Partner as provided in Section 7.9.5.
"CONTROL" or "Controlled by" or "Controlling", is defined in the definition
of "Affiliate."
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"CONTROL CHANGE NOTICE" is defined in Section 7.9.5.
"CONTROLLING PERSON" is defined in the definition of the term "Bankrupt".
"DEADLOCK" is defined in Section 5.10.
"DEADLOCK NOTICE" is defined in Section 5.10.
"DEFAULTING PARTNER" shall have the meaning set forth in Section 2.2.2.
"DEVELOPMENT PLAN" is defined in Section 5.1.3.4.
"DETERMINATION DATE" is defined in Section 5.9.
"DISBURSEMENT REQUEST" is defined in Section 2.1.2.1(ii).
"DISCRETIONARY OUTLAYS" is defined in Section 5.1.3.2.
"DISPOSITION" is defined in the definition of "Gain or Loss on
Disposition."
"DUE DATE" is defined in Section 2.2.1.
"DUE DILIGENCE MATERIALS" shall mean any documents that have been made
available to the Partners under Section 5.1.6.2 in connection with acquiring and
Approving Investments, including any Investment Entity's acquisition of a
Property, such as lease abstracts, contracts (including service contracts and
brokerage agreements), title reports, surveys, engineering and geological
studies and reports, environmental investigations and reports, cost analyses,
feasibility studies, financial projections, leases and other such materials
relating to any Investment, Property or proposed investment by the Partnership
or any Investment Entity.
"ELECTING MEMBER(S)" is defined in Section 7.9.1.
"EMERGENCY" shall mean an event which reasonably requires immediate action
involving the expenditure of funds or other action in order to avert or mitigate
significant damage to Persons or property in connection with the Partnership,
any Investment Entity or any of their assets if it is not possible (after a
reasonable effort) for a Partner to reach or obtain the Approval of the other
Partners whose Approval to take such action otherwise would be required.
"ENTITY" shall mean any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
joint-stock company, cooperative, association or other firm or any governmental
or political subdivision or agency, department or instrumentality thereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
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"FAMILY MEMBER" with respect to an individual shall mean such individual's
present or former spouse, brothers and sisters (whether by whole or half blood),
lineal ascendants or descendants or their respective spouses, or a trustee or
custodian for the benefit of any of them.
"FIRST OFFER NOTICE" is defined in Section 5.11.
"FMV APPRAISAL PROCEDURE" is defined in Section 5.11.
"FMV NOTICE" is defined in Section 5.10(iv).
"FORCE MAJEURE" shall mean any act of God (including weather disturbance,
earthquake, fire, mechanical failure of equipment, disease and the like), labor
strike or work stoppage or slowdown, material shortages, sabotage, war, riot,
moratorium, governmental action or inaction, or any other act of any third party
that reasonably prevents an action from being taken through no fault of the
Partner who is required to take such action or such Partner's Affiliates.
"FUNDING NOTICE" is defined in Section 2.1.2.
"FUNDING PROPORTION" shall mean the percentage set forth as such for each
Partner on Exhibit B hereto.
"GAIN" OR "LOSS" ON "DISPOSITION" shall mean (i) the gain or loss (as the
case may be) of the Partnership for federal income tax purposes (as computed for
book purposes), arising from a sale, exchange or other taxable disposition
(including casualty or condemnation) of all or a portion of any Investment
(including any Partnership Interest) and (ii) the Partnership's distributive
share of the gain or loss for federal income tax purposes arising from the sale,
exchange or other taxable disposition of all or a portion of any of the asset of
any Investment Entity. Gain or loss resulting from any disposition of Revalued
Property for which there is a difference between Gross Asset Value and adjusted
tax basis (as computed for tax as opposed to book purposes) shall be computed by
reference to the Gross Asset Value (as reasonably Approved by the Partners) of
the property disposed of (as adjusted for book purposes from time to time).
"GAV NOTICE" is defined in Section 5.10(iii).
"GENERAL PARTNER(S)" means the Managing General Partner and any Co-General
Partner for so long as such Partner shall be a General Partner under this
Agreement.
"GROSS ASSET VALUE" shall mean, with respect to any asset, the adjusted
basis of the asset for federal income tax purposes, adjusted as provided in
Section 3.10.
"HIGHRIDGE PARTNERS" shall mean the Managing General Partner, the Highridge
Limited Partner, and any other Person to whom either of them have transferred
all or a portion of their interest in the Partnership pursuant to this
Agreement.
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"INCLUDING" or "INCLUDING" shall mean "including, without limitation."
"INCOME TAX REGULATIONS" or "REGULATIONS" shall mean the final or temporary
regulations promulgated from time to time under the Code or, if no final or
temporary regulations with respect to a tax issue then are in effect, proposed
regulations then in effect if reasonably Approved by the Partners, and
administrative and judicial interpretations thereof.
"INDEPENDENT TAX COUNSEL" shall mean a nationally recognized tax counsel
reasonably Approved by the Partners that is capable of advising the Partnership
with respect to specified tax matters.
"INITIAL DEVELOPMENT PLAN" is defined in Section 5.1.3.4.
"INVESTED CAPITAL" with respect to each Partner shall mean the aggregate of
all Capital Contributions made from time to time to the Partnership by such
Partner, reduced by the aggregate of all distributions previously made (or
deemed made) to such Partner pursuant to Section 4.1(c) in repayment of the
Invested Capital of such Partner.
"INVESTMENT ENTITY" is defined in Section 1.5.1.
"INVESTMENT ENTITY AGREEMENT" shall mean, individually or collectively, the
operating agreement or limited partnership agreement pursuant to which each
Investment Entity is formed and operated, as in effect from time to time, with
such changes therein as may be Approved by the Partners.
"INVESTMENT ENTITY TAX LOAN" is defined in Section 3.11.
"INVESTMENTS" is defined in Section 1.5.2.
"INVOKING PARTNER" is defined in Section 5.10(iii).
"LAVA RIDGE LAND" shall mean that certain parcel of real property that is
described on Exhibit D (including improvements thereon) that is to be acquired
by purchase by an Investment Entity formed by the Partnership from a seller who
is not an Affiliate of any Partner.
"LIABILITIES" is defined in Section 5.5.3.
"LIQUIDATOR" is defined in Section 8.3.
"MACK-CALI LIMITED PARTNER" is defined in the Heading to this Agreement.
"MACK-CALI PARTNERS" shall mean the Mack-Cali Limited Partner, any
Co-General Partner, and any other Person to whom any of them have transferred
all or a portion of their interest in the Partnership pursuant to this
Agreement.
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"MACK-CALI REALTY" means Mack-Cali Realty Corporation.
"MACK-CALI SALE RIGHT" is defined in Section 5.10(iv).
"MAJOR DECISIONS" is defined in Section 5.1.5.
"MAJOR DEFAULT NOTICE" is defined in Section 5.9.
"MAJOR DEFAULT" means, with respect to a Partner, that such Partner or any
of such Partner's Affiliates has engaged in actual fraud with respect to the
Partnership, an investment Entity, any Investment or any Property or has
intentionally misappropriated Partnership or Investment Entity Funds.
"MANAGING GENERAL PARTNER" is defined in the Heading to this Agreement.
"MANAGING GENERAL PARTNER GUARANTIES" is defined in Section 3.5.4.
"MANAGING GENERAL PARTNER SALE RIGHT" is defined in Section 5.10(iv).
"MANAGEMENT AGREEMENT" is defined in Section 5.2(b).
"MATERIAL" (and any variation thereof) is defined in Section 5.1.1.10.
"MAXIMUM TAX RATE" shall mean the highest combined effective maximum tax
rate in effect from time to time with respect to any Partner (based on the
assumption that individual rates apply to such Partner) for federal, state and
local income tax purposes, computed by taking into account the tax savings
resulting from the deductibility of state and local income taxes to the extent
permitted for federal purposes and taking into account the tax on
self-employment income (also based on the assumption that each Member is an
individual taxpayer). The Maximum Tax Rate shall be computed by the
Partnership's accountants at the Borrowing Partners' expense whenever the
Maximum Tax Rate needs to be determined under Section 3.11.
"NET AVAILABLE CASH," with respect to any period, shall mean (i) the sum of
all cash receipts of the Partnership during such period from all sources
(including Capital Contributions, cash on hand at the beginning of such period
to the extent not held in reserves, distributions from the Investment Entities
and any funds released during such period from cash reserves previously
established), minus (ii) the sum of (a) Capital Receipts, (b) Net Mortgage
Proceeds, (c) Operating Costs, and (d) any Investment Entity Tax Loans, for such
period.
"NET MORTGAGE PROCEEDS" shall mean (i) the sum of (a) the proceeds of any
loan made to the Partnership and the proceeds from refinancing any such loan,
plus (b) any amount released from cash escrow accounts established under any
loan to the Partnership, plus (c) the proceeds received by the Partnership from
any Investment Entity on account of any loan made to such Investment Entity and
the proceeds from refinancing any such loan received from any Investment Entity,
other than Investment Entity Tax Loans, reduced by (ii) the sum of (a) any
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amounts required to fund the Partnership's expenditures that are reasonably
Approved by the Partners or that are otherwise permitted to be withheld from
such amounts for such purpose under this Agreement, (b) any and all expenses
incurred by the Partnership in connection with such loan or refinancing that are
reasonably Approved by the Partners, (c) amounts used as permitted under this
Agreement to repay other indebtedness of the Partnership, plus (d) amounts
thereof retained as reserves under this Agreement for Shortfall Disbursements by
the Partnership (such reserves to be reasonably Approved by the Partners).
"95% STABILIZATION" shall mean, with respect to a Property, the date on
which completion of such Property has occurred and binding leases for at least
95% of the leaseable space in such Property have been entered into for which
either (i) rent payments have commenced or (ii) all required building permits
with respect to such lease have been obtained, the tenant improvements required
to be made under such lease that are a condition precedent to the commencement
of rent payments under such lease ("Required Tenant Improvements"), to the
knowledge of the Highridge Partners (defined as the actual and specific
knowledge of John S. Long, Eugene S. Rosenfeld, Steven A. Berlinger or Jack
Mahoney), can be completed within six months, and rent payments will commence
within six months if all Required Tenant Improvements were made before the
expiration of such six-month period.
"NON-DEFAULTING MEMBER" is defined in Section 2.2.2.
"NON-DISCRETIONARY ITEMS" shall mean expenditures payable by the
Partnership or any Investment Entity for increases over the amount set forth in
the Partnership's most recent Approved Budget for the following items, but only
to the extent not reasonably anticipated at the time such Approved Budget was
submitted to the Partners for Approval under Section 5.1.3.1: taxes (including
real estate taxes, but excluding any Partner's tax liability), utilities,
bonding costs, insurance (including earthquake insurance, and insurance
described under Section 5.1.1 to the extent provided therein), debt service and
expenses or other amounts required to be paid by the Partnership or any
Investment Entity under contracts or agreements of the Partnership or any
Investment Entity that have been Approved by the Partners(or are permitted to be
entered into without such Approval).
"NONRECOURSE DEDUCTIONS" is defined in Section 3.5.6.
"NONRECOURSE LIABILITY" is defined in Section 3.5.6.
"NON-VOTING PARTNER" is defined in Section 5.1.6.1.
"OPERATING COSTS" for a period shall mean the sum of (i) all cash
expenditures of the Partnership (which expenditures shall be subject to the
Approved Budget limitations of Section 5.1.3) made during such period for
current costs and expenses (except to the extent constituting a reduction in
computing Net Mortgage Proceeds or Capital Receipts for such period), including
acquisition costs of the Investments (including the Partnership Interests), due
diligence expenditures, payments of interest and principal or other monetary
obligations due under any loan made to the Partnership; accounting, legal and
auditing fees; taxes payable by the Partnership; public or private utility
charges; sales, use, payroll taxes and withholding
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taxes related thereto; and all other advertising, management, leasing,
government approval, and other operating, construction and development costs,
expenses and capital expenditures (including fees of land use consultants,
engineers, architects, municipal development fees, bond costs and the like)
actually paid with respect to the Investments or the Partnership's business
generally (subject to the Approved Budget limitations of Section 5.1.3) or
reimbursed or paid to Partners (including Overhead Payments), plus (ii) such
reserves established from time to time during such period upon the reasonable
Approval of the Partners (except to the extent constituting a reduction in
computing Net Mortgage Proceeds or Capital Receipts for such period), plus
(iii) any amounts contributed by the Partnership to any Investment Entity
pursuant to the applicable Investment Entity Agreement during such period
(whether pursuant to Section 2.5 or otherwise).
"ORIGINAL AGREEMENT" is defined in the Recitals to this Agreement.
"OTHER PARTNER" is defined in Section 5.10(iii).
"OVERHEAD PAYMENTS" is defined in Section 5.1.3.1.
"PARTNER ASSIGNEE" is defined in Section 7.4.
"PARTNER GROUP" means either (a) the Highridge Partners or (b) the
Mack-Cali Partners (there are two Partner Groups).
"PARTNER NONRECOURSE DEBT" is defined in Section 3.5.6 hereof.
"PARTNER NONRECOURSE DEBT MINIMUM GAIN" is defined in Section 3.5.6 hereof.
"PARTNERS" shall mean the Managing General Partner, the Highridge Limited
Partner, the Mack-Cali Limited Partner and any Co-General Partner admitted as
such pursuant to this Agreement (each a "Partner"), in their respective
capacities as Partners, and any of their successors in their respective
capacities as Partners admitted to the Partnership as Partners hereunder, and
any other Person admitted as a Partner under this Agreement, for so long as any
such Person is a Partner under the terms of this Agreement.
"PARTNER NONRECOURSE DEDUCTIONS" is defined in Section 3.5.6 hereof.
"PARTNERSHIP" shall mean HPMC Lava Ridge Partners, L.P., a Delaware
limited Partnership formed under the Act and operated pursuant to this
Agreement.
"PARTNERSHIP ACCOUNTING YEAR" shall mean and refer to the accounting year
of the Partnership ending on December 31 of each calendar year or such shorter
fiscal period during such year for which a relevant determination is being made
under this Agreement.
"PARTNERSHIP INTEREST" shall mean the interest in any Investment Entity
acquired by the Partnership, as in effect from time to time under the applicable
Investment Entity Agreement.
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"PARTNERSHIP MINIMUM GAIN" is defined in Section 3.5.6 hereof.
"PERFORMANCE DEFAULT" with respect to the Managing General Partner and its
Affiliates shall be deemed to have occurred (subject to Section 5.9) with
respect to a Property or Investment if (a) the Managing General Partner shall
have failed to cause compliance with any Approved Development Plan with respect
to such Property or Investment in any Material respect for any reason other than
Force Majeure, or (b) if a Highridge Partner or an Affiliate of any Highridge
Partner has breached the provisions of any agreement entered into between such
Person and the Partnership or any Investment Entity and has failed to cure such
breach within the time required by such agreement (but this clause (b) shall
apply with respect to a Property or Investment only if such breach was not
willful and therefore does not constitute a Removal Default for which separate
remedies are provided elsewhere in this Agreement).
"PERSON" shall mean any individual or Entity.
"PREFERRED RETURN" shall mean an amount equal to ten percent (10%) per
annum, on a calendar year basis, for the actual number of days for which the
Preferred Return is being determined, cumulative and compounded quarterly,
multiplied by the Invested Capital of each of the Partners outstanding from time
to time, computed by using July 21, 1998 as the date which the Section 2.1.1
Contributions of the Partners shown on Exhibit B were made by the Partners, the
actual dates on which a Partner's Capital Contributions (other than such Section
2.1.1 Contributions) are made to the Partnership from time to time (if any), and
using the actual dates on which distributions are made (or deemed made) to such
Partner pursuant to Section 4.1(c).
"PRIME RATE" shall mean the so-called "Reference Rate" announced by Bank of
America N.T.&S.A. at Los Angeles, California, from time to time.
"PROFIT" OR "LOSS" shall mean, for each Partnership Accounting Year, an
amount equal to the Partnership's net taxable income or loss (as computed for
book purposes) for such Accounting Year (determined without regard to any items
of income, gain or deduction, as computed for book purposes, taken into account
in computing the Partnership's Gain or Loss on Disposition for such Accounting
Year), determined in accordance with Code Section 703(a) (for this purpose, all
items of income, gain, loss or deduction, as computed for book purposes,
required to be stated separately pursuant to Code Section 703(a)(1) shall be
included in computing such taxable income or loss), including the Partnership's
allocated share thereof from any Investment Entity, with the following
adjustments:
Any income of the Partnership that is exempt from federal income tax and is
not otherwise taken into account in computing Profit or Loss shall be added to
such taxable income or loss (as computed for book purposes);
In the event the agreed fair market value of any Partnership asset is
adjusted pursuant to Regulations Section 1.704-l(b)(2)(iv)(f) or other pertinent
sections of such Regulations, the amount of such adjustment shall be taken into
account as Gain or Loss on Disposition of such asset for purposes of computing
Profit or Loss; and in lieu of the depreciation, amortization
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and other cost recovery deductions taken into account in computing such taxable
income or loss, there shall be taken into account depreciation, amortization or
other cost recovery computed with reference to Gross Asset Value of Partnership
property reasonably Approved by the Partners (subject to Section 5.10(iii)) (if
different from its adjusted tax basis) pursuant to Regulations Section
1.704-l(b)(2)(iv)(g) for such Partnership Accounting Year; and
Notwithstanding any other provisions, any items which are specially
allocated pursuant to Sections 3.3, 3.4, 3.5, 3.6 and 3.9 shall not be taken
into account in computing Profit or Loss.
"PROPERTIES" is defined in Section 1.5.1.
"PROPERTY DEADLOCK" is defined in Section 5.11(a).
"PROPONENT GROUP" is defined in Section 5.11(a).
"PROPONENT GROUP FIRST OFFER PRICE" is defined in Section 5.11(a).
"PROPONENT GROUP INTEREST PURCHASE PRICE" is defined in Section 5.11(a).
"PURCHASE NOTICE" is defined in Section 7.9.1.
"RECONTRIBUTING MEMBER" is defined in Section 3.5.4.
"REGULATIONS" is defined in the definition of "Income Tax Regulations."
"REIT" is defined in Section 5.1.1.2.
"REIT SHARE VALUE" is defined in Section 8.3.8.
"REQUIRED ADDITIONAL CONTRIBUTIONS" is defined in Section 2.1.2.
"REMOVAL DEFAULT" means, with respect to the Managing General Partner, that
such Partner or any of such Partner's Affiliates has committed gross negligence
with respect to the Partnership, an Investment Entity, an Investment or a
Property, or has willfully breached the provisions of this Agreement, any
Investment Entity Agreement or any other agreement entered into between such
Person and the Partnership or any Investment Entity, in each case if the same is
not cured within the time required by Section 9.2 of this Agreement, such
Investment Entity Agreement, or such other agreement (as applicable).
"RESIDUAL PERCENTAGE" of a Partner as of any relevant time shall mean the
Residual Percentage set forth on Exhibit B for such Partner.
"RESPONDENT GROUP" is defined in Section 5.11(a).
"RESPONDENT GROUP INTEREST PURCHASE PRICE" is defined in Section 5.11(a).
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"REVALUED PROPERTY" is defined in Section 3.5.3.2.
"SECTION 2.2.1 CONTRIBUTION" is defined in Section 2.2.1.
"SHORTFALL" is defined in Section 2.1.2.
"SUBSEQUENT DEVELOPMENT PLAN" is defined in Section 5.1.3.4.
"TAX MATTERS PARTNER" is defined in Section 5.4 (which references the
Code).
"TAX PAYMENT LOAN" is defined in Section 3.11.
"TAX TERMINATION" is defined in Section 7.5.1.3.
"TERMINATED PARTNER" shall mean (i) any Partner that has failed to make a
Capital Contribution when required and who has become a Defaulting Partner by
reason thereof under Section 2.2.2, (ii) any Partner that becomes Bankrupt,
(iii) any Partner which has been dissolved (and has not been reconstituted
within sixty (60) days thereafter) or, if an individual, who has died, (iv) any
Partner which has committed a Major Default or (v) any Partner who has breached
the restrictions on Transfer of its interest in the Partnership contained in
Article 7. If any Partner in a Partner Group is a Terminated Partner, all
Partners in such Partner Group shall also be deemed to be Terminated Partners,
and shall be subject to all of the remedies applicable against a Terminated
Partner under this Agreement, including the loss of its Approval rights and the
obligation to sell its interest in the Partnership as provided in Section 7.9.
"TERMINATION DATE" shall mean the date upon which a Partner became a
Terminated Partner.
"THIRD PARTY MEZZANINE FINANCING" with respect to a Property means that
portion of the Partnership's or Investment Entity's financing with respect to
such Property which, when added to the Partnership's conventional financing with
respect to such Property, will cause such Property to be 85% financed with debt.
"TRANSFER" shall mean (i) the issuance, transfer, sale, gift, grant,
conveyance, assignment, encumbrance, pledge, hypothecation or redemption,
directly or indirectly, of any equity ownership interest (whether stock, general
partnership interest, partnership interest, membership interest or otherwise) in
the Partnership or in any Person holding a direct (or indirect through tiered
Entities) interest in the Partnership, or the merger or consolidation of any
such Person into or with another Person, as the case may be; and (ii) the
execution and delivery by any Person holding a direct (or indirect through
tiered Entities) interest in the Partnership of a contract of sale, option or
other agreement providing for any of the foregoing.
"UNDISTRIBUTED PREFERRED RETURN" with respect to a Partner means an amount
equal to the Preferred Return of each Partner accrued to the date the
Undistributed Preferred Return is
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being determined, less all distributions made (or deemed made) to such Partner
pursuant to Sections 4.1(a) and (b).
"UNREIMBURSED PAYMENTS" is defined in Section 3.5.4.
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EXHIBIT B
FUNDING PROPORTIONS, SECTION 2.1.1 CONTRIBUTIONS
AND RESIDUAL PERCENTAGES
Section 2.1.1 Funding Residual
Partner Contributions (Cash) Proportion Percentage
- ------- -------------------- ---------- ----------
Highridge GP $ 30,345 1% 1%
Highridge Limited Partner $ 578,265 19% 49%
Mack-Cali Limited Partner $ 2,434,800 80% 50%
----------- ---- ----
Total $ 3,043,500 100% 100%
=========== ==== ====
Note: The Section 2.1.1 Contributions shown on this Exhibit B are deemed
contributed to the Partnership as of July 21, 1998. All additional
Capital Contributions shall be made only as provided in the
Partnership Agreement.
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EXHIBIT C
INITIAL DEVELOPMENT PLAN
(INCLUDING APPROVED BUDGET AND APPROVED OVERHEAD BUDGET)
FOR THE LAVA RIDGE LAND
[See Attached.]
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EXHIBIT D
LEGAL DESCRIPTION OF THE LAVA RIDGE LAND
[BEGINS NEXT PAGE]
D-1-1
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EXHIBIT E
OWNERSHIP OF PARTNERS
Members % Capital % Profits
Partner or Partners Interest Interest
- ------- ----------- --------- ---------
Aggregate Aggregate
Highridge GP __________* 100% 100%
__________ _____% _____%
__________ _____% _____%
__________ _____% _____%
Highridge Limited Aggregate Aggregate
Partner __________* 100% 100%
__________ _____% _____%
__________ _____% _____%
__________ _____% _____%
Mack-Cali Limited General Partner: Aggregate Aggregate
Partner Mack-Cali Sub XXI, 100% 100%
Inc., a Delaware
corporation and
Limited Partner:
Mack-Cali Realty, L.P.,
a Delaware limited
partnership (both
Controlled by Mack-Cali
Realty Corporation)
- - SEE CHART ATTACHED AS EXHIBIT E-2 (BEGINS NEXT PAGE).
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EXHIBIT F
[INTENTIONALLY OMITTED]
F-1
<PAGE>
EXHIBIT G
[INTENTIONALLY OMITTED]
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EXHIBIT H
[INTENTIONALLY OMITTED]
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EXHIBIT I
[INTENTIONALLY OMITTED]
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EXHIBIT J
PROCEDURES FOR SUPERVISING
EMPLOYEE AND AFFILIATE COMPLIANCE
THE HIGHRIDGE PARTNERS SHALL BE RESPONSIBLE FOR THE FOLLOWING IN CONNECTION
WITH THE WORK TO BE PERFORMED FOR THE PARTNERSHIP AND THE INVESTMENT
ENTITIES BY AFFILIATES OF THE HIGHRIDGE PARTNERS AND THEIR EMPLOYEES:
1. JOHN S. LONG ("LONG"), EUGENE S. ROSENFELD ("ESR") AND/OR STEVEN A.
BERLINGER ("SAB"), OR AN OFFICER OF HIGHRIDGE PARTNERS APPOINTED BY THEM SHALL,
ON A MONTHLY BASIS, REVIEW THE BUDGETS, CASH FLOW SUMMARIES, LEASING SUMMARIES
(OR STATUS REPORTS) AND CONSTRUCTION OR DEVELOPMENT STATUS REPORTS AND GENERALLY
CONDUCT MONTHLY (OR MORE FREQUENTLY AS REQUIRED) MEETINGS WITH ALL HIGHRIDGE
PARTNERS' AND THEIR AFFILIATES' SUPERVISORY EMPLOYEES (JACK MAHONEY AND KEN
WHITE UNLESS AND UNTIL CHANGED BY THE HIGHRIDGE PARTNERS UPON NOTICE TO THE
MACK-CALI LIMITED PARTNER) WORKING ON THE PROPERTIES TO ASCERTAIN THE STATUS OF
THE PROPERTIES AND LONG, ESR AND/OR SAB SHALL PROVIDE DIRECTION AND GUIDANCE TO
SUCH EMPLOYEES AS REQUIRED FROM TIME TO TIME IN CONNECTION WITH THE PROPERTIES
AND INVESTMENTS.
2. LONG, ESR AND/OR SAB SHALL CAUSE TO BE FURNISHED TO EACH SUCH
SUPERVISORY EMPLOYEE AND AFFILIATE A COPY OF EACH APPROVED DEVELOPMENT PLAN AND
APPROVED BUDGET AND A LIST OF THE ACTIONS THAT REQUIRE THE CONSENT OF THE
MACK-CALI PARTNERS UNDER THIS AGREEMENT (INCLUDING ANY APPROVED LEASING
PARAMETERS) AND PERIODICALLY PROVIDE EACH SUCH SUPERVISORY EMPLOYEE AND
AFFILIATE WITH A LIST OF THE CHANGES IN THE APPROVED DEVELOPMENT PLAN AND/OR
APPROVED BUDGETS THAT HAVE BEEN APPROVED BY THE PARTNERS FROM TIME TO TIME, AND,
UPON ANY OF LONG, ESR AND/OR SAB HAVING ACTUAL KNOWLEDGE OF ANY ACT OF ANY
EMPLOYEE OF THE HIGHRIDGE PARTNERS OR THEIR AFFILIATES, OR ANY ACT OF AN
AFFILIATE OF THE HIGHRIDGE PARTNERS THAT WOULD BE A BREACH OF THIS AGREEMENT
(INCLUDING A MAJOR DEFAULT) IF THE ACTION WERE TAKEN BY A HIGHRIDGE PARTNER, OR
ACTUAL KNOWLEDGE OF ANY MATERIAL DEVIATION FROM ANY APPROVED DEVELOPMENT PLAN,
APPROVED BUDGET OR CONTRACT PREVIOUSLY APPROVED BY THE PARTNERS OR BY THE
MACK-CALI LIMITED PARTNER, THE HIGHRIDGE PARTNERS SHALL GIVE PROMPT NOTICE
THEREOF TO THE MACK-CALI LIMITED PARTNER.
3. IF LONG, ESR OR SAB SUSPECTS THAT AN EMPLOYEE OF THE HIGHRIDGE PARTNERS
OR THEIR AFFILIATES, OR THAT AN AFFILIATE OF HIGHRIDGE PARTNERS, HAS COMMITTED
FRAUD OR MISAPPROPRIATION OF FUNDS, THE HIGHRIDGE PARTNERS SHALL NOTIFY THE
MARK-CALI LIMITED PARTNER PROMPTLY, AND THE HIGHRIDGE GP AND THE PARTNERS SHALL
REASONABLY APPROVE THE COURSE OF ACTION TO BE TAKEN IN RESPONSE THERETO.
4. COPIES OF WRITTEN SUMMARIES OR STATUS OR PERFORMANCE REPORTS, ANY OTHER
INFORMATION REASONABLY REQUESTED BY THE MACK-CALI LIMITED PARTNER, AND NOTICE OF
ANY MATERIAL DEVIATION FROM AN APPROVED DEVELOPMENT PLAN, APPROVED BUDGET OR
CONTRACT APPROVED BY THE PARTNERS OR BY THE MACK-CALI LIMITED PARTNER THAT IS
RECEIVED FROM EMPLOYEES OF THE HIGHRIDGE PARTNERS OR THEIR AFFILIATES SHALL BE
FURNISHED BY THE HIGHRIDGE PARTNERS TO THE MACK-CALI LIMITED PARTNER PROMPTLY
AFTER BEING SUBMITTED TO ANY OF LONG, ESR AND/OR SAB.
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EXHIBIT K
[INTENTIONALLY OMITTED]
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EXHIBIT L
OPERATING APPROVAL STANDARDS
[BEGINS NEXT PAGE]
[ATTACH SAME STANDARDS AS IN EL SEGUNDO]
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EXHIBIT M
HIGHRIDGE REIMBURSEMENT SCHEDULE FOR
THE LAVA RIDGE LAND
[BEGINS NEXT PAGE]
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EXHIBIT N
FORM OF DISBURSEMENT REQUEST
[TO BE ATTACHED; SAME FORM AS USED FOR EL SEGUNDO/SUMMIT RIDGE]
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TABLE OF CONTENTS
ARTICLE 1 GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Formation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Name of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Certificate of Limited Partnership . . . . . . . . . . . . . . . . . 2
1.4 Principal Office, Resident Agent and Registered Office . . . . . . . 2
1.5 Purposes of Partnership. . . . . . . . . . . . . . . . . . . . . . . 3
1.6 Funding Proportions; Residual Percentages. . . . . . . . . . . . . . 3
1.7 Other Qualifications . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Term of Partnership. . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 Title to Partnership Property. . . . . . . . . . . . . . . . . . . . 4
1.10 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Authorized Acts. . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Authorized Representatives . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 2 CAPITAL CONTRIBUTIONS AND ADDITIONAL CONTRIBUTIONS . . . . . . . . . 5
2.1 Capital Contributions. . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Third-Party Loans and Additional Capital Contributions and Capital
Calls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 Use of Capital Contributions; Certain Expenses . . . . . . . . . . .10
2.4 Partner Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . .11
2.5 Contributions to Investment Entities . . . . . . . . . . . . . . . .11
ARTICLE 3 INCOME TAX ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . .12
3.1 Establishment and Maintenance of Capital Accounts; Partnership
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Profit and Loss Allocations. . . . . . . . . . . . . . . . . . . . .12
3.3 Allocations of Gain or Loss on Disposition . . . . . . . . . . . . .13
3.4 Minimum Gain Chargeback and Qualified Income Offset. . . . . . . . .15
3.5 Other Tax Allocation Provisions. . . . . . . . . . . . . . . . . . .15
3.6 Intent of Allocations. . . . . . . . . . . . . . . . . . . . . . . .19
3.7 Basis Elections. . . . . . . . . . . . . . . . . . . . . . . . . . .19
3.8 General Allocation Rules . . . . . . . . . . . . . . . . . . . . . .20
3.9 Sharing of Partnership Nonrecourse Debt and Nonrecourse Deductions .20
3.10 Adjustment of Gross Asset Value. . . . . . . . . . . . . . . . . . .20
3.11 Tax Payment Loans. . . . . . . . . . . . . . . . . . . . . . . . . .21
3.12 Approvals Relating to Tax Issues.. . . . . . . . . . . . . . . . . .23
ARTICLE 4 LOAN REPAYMENTS AND
DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.1 Net Available Cash, Net Mortgage Proceeds and Capital Receipts
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
4.2 Proceeds and Distributions in Liquidation. . . . . . . . . . . . . .24
4.3 General Distribution Rules . . . . . . . . . . . . . . . . . . . . .25
4.4 Source of Distributions. . . . . . . . . . . . . . . . . . . . . . .26
-i-
<PAGE>
ARTICLE 5 MANAGEMENT; DUTIES AND POWERS OF THE MANAGING GENERAL PARTNER;
RIGHTS AND DUTIES OF MANAGING GENERAL PARTNER. . . . . . . . . . . 26
5.1 Management of Business; Officers; Partner Obligations;
Reimbursements; Major Decisions; Retained Approvals. . . . . . . . 26
5.2 Affiliate Transactions; Exclusivity; Mack-Cali Property
Management Option. . . . . . . . . . . . . . . . . . . . . . . . . 40
5.3 Reporting Requirements; Financials; Meetings . . . . . . . . . . . 41
5.4 Tax Matters Partner; Tax Returns . . . . . . . . . . . . . . . . . 43
5.5 Indemnification and Liability of the Partners. . . . . . . . . . . 44
5.6 Control Change . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.7 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . 46
5.8 No Priorities. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
5.9 Determination Date for Indemnity Payments, Removal Defaults,
Performance Defaults and Major Defaults; Arbitration . . . . . . . 46
5.10 Deadlock/Partner Sale Rights . . . . . . . . . . . . . . . . . . . 48
5.11 Property Deadlock.. . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE 6 BOOKS, RECORDS AND BANK ACCOUNTS . . . . . . . . . . . . . . . . . 55
6.1 Books and Records. . . . . . . . . . . . . . . . . . . . . . . . . 55
6.2 Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE 7 TRANSFERS OF PARTNERSHIP INTERESTS . . . . . . . . . . . . . . . . 56
7.1 Restrictions on Transfer . . . . . . . . . . . . . . . . . . . . . 56
7.2 No Tag-Along Rights. . . . . . . . . . . . . . . . . . . . . . . . 57
7.3 Bankruptcy or Dissolution of Partners. . . . . . . . . . . . . . . 57
7.4 Substitution of Partner. . . . . . . . . . . . . . . . . . . . . . 57
7.5 Additional Transfer Restrictions . . . . . . . . . . . . . . . . . 58
7.6 Transfer Indemnification and Contribution Provisions . . . . . . . 59
7.7 Basis for Restrictions and Remedies. . . . . . . . . . . . . . . . 60
7.8 Representations, Warranties and Covenants. . . . . . . . . . . . . 60
7.9 Terminated Partner; Removal Defaults; Performance Defaults; Purchase
Rights; Control Change Notices . . . . . . . . . . . . . . . . . . 63
ARTICLE 8 TERM, DISSOLUTION AND TERMINATION. . . . . . . . . . . . . . . . . 67
8.1 Events of Dissolution. . . . . . . . . . . . . . . . . . . . . . . 67
8.2 Limitation on Dissolution. . . . . . . . . . . . . . . . . . . . . 67
8.3 Liquidation and Winding Up . . . . . . . . . . . . . . . . . . . . 67
8.4 Reconstitution After Bankruptcy or Dissolution of a
General Partner. . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.5 Distribution Upon Dissolution and Capital Account Adjustments. . . 71
8.6 Compliance with Timing Requirements of Treasury Regulations. . . . 71
ARTICLE 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.1 Other Interests. . . . . . . . . . . . . . . . . . . . . . . . . . 71
9.2 Damages; Certain Cure Rights; Offset . . . . . . . . . . . . . . . 72
9.3 No Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
-ii-
<PAGE>
9.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.6 Pronouns and Plurals . . . . . . . . . . . . . . . . . . . . . . . 74
9.7 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.9 Titles and Captions. . . . . . . . . . . . . . . . . . . . . . . . 75
9.10 Agreement in Counterparts. . . . . . . . . . . . . . . . . . . . . 75
9.11 Binding Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 75
9.12 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 75
9.13 Waiver of Partition. . . . . . . . . . . . . . . . . . . . . . . . 75
9.14 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.15 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.16 No Drafting Presumption. . . . . . . . . . . . . . . . . . . . . . 76
9.17 No Third-Party Beneficiaries . . . . . . . . . . . . . . . . . . . 76
EXHIBIT A DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B FUNDING PROPORTIONS, SECTION 2.1.1 CONTRIBUTIONS
AND RESIDUAL PERCENTAGES. . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C INITIAL DEVELOPMENT PLAN FOR LAVA RIDGE LAND. . . . . . . . . C-1
EXHIBIT D- LEGAL DESCRIPTION OF THE LAVA RIDGE LAND. . . . . . . . . . D-1-1
EXHIBIT E OWNERSHIP OF PARTNERS . . . . . . . . . . . . . . . . . . . . E-1
EXHIBIT F [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . F-1
EXHIBIT G [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . G-1
EXHIBIT H [INTENTIONALLY OMITTED
EXHIBIT I [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . I-1
EXHIBIT J PROCEDURES FOR SUPERVISING EMPLOYEE AND AFFILIATE COMPLIANCE J-1
EXHIBIT K [INTENTIONALLY OMITTED] . . . . . . . . . . . . . . . . . . . K-1
EXHIBIT L OPERATING APPROVAL STANDARDS. . . . . . . . . . . . . . . . . L-1
EXHIBIT M HIGHRIDGE REIMBURSEMENT SCHEDULE FOR THE LAVA RIDGE LAND. . . M-1
EXHIBIT N FORM OF DISBURSEMENT REQUEST. . . . . . . . . . . . . . . . . N-1
-iii-
<PAGE>
Exhibit 10.5
AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT
This AMENDMENT NO. 1 TO REVOLVING CREDIT AGREEMENT (this "AMENDMENT NO. 1")
is made as of July __, 1998 by and among (a) Mack-Cali Realty, L.P. (the
"BORROWER"), (b) The Chase Manhattan Bank; Fleet National Bank; Bankers Trust;
The Bank of New York; Bayerische Landesbank Girozentrale; Citizens Bank of Rhode
Island; Commerzbank Aktiengesellschaft, New York Branch; Creditanstalt Corporate
Finance, Inc.; Crestar Bank; DG Bank Deutsche Genossenschaftsbank, New York
Branch; Dresdner Bank AG, New York Branch and Grand Cayman Branch; European
American Bank; Erste Bank; The First National Bank of Chicago; First Union
National Bank; Bayerische Hypotheken- und Wechsel- Bank Aktiengesellschaft, New
York Branch; Key Bank; KBC Bank N.V. (f/k/a Kredietbank, N.V.); LaSalle National
Bank; Mellon Bank, N.A.; Nationsbank; PNC Bank, National Association; Societe
Generale; Summit Bank; The Tokai Bank, Limited - New York Branch; US Trust
(collectively, the "LENDERS"), (c) The Chase Manhattan Bank, as Administrative
Agent (in such capacity, the "ADMINISTRATIVE AGENT") for the Lenders; and (d)
Bank Leumi USA and Bank One, Arizona, NA (together, the "NEW LENDERS").
WHEREAS, the Borrower, the Lenders and the Administrative Agent are parties
to a Revolving Credit Agreement dated as of April 16, 1998 (the "CREDIT
AGREEMENT"), pursuant to which the Lenders have agreed to make loans to the
Borrower on the terms and conditions set forth therein;
WHEREAS, the Borrower has requested, and the Lenders and the Administrative
Agent have agreed to increase the credit limit of the Credit Agreement and add
the New Lenders as "Lenders" under the Credit Agreement;
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and fully intending to be legally bound by this Amendment No. 1,
the parties hereto agree as follows:
1. DEFINITIONS. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. As of the Effective Date (as defined
in Section 4 hereof) the Credit Agreement is hereby amended as follows:
<PAGE>
-2-
2.1. TOTAL COMMITMENT. In line 2 of the definition of TOTAL
COMMITMENT in Section 1.1 of the Credit Agreement, the amount
"$870,000,000" is hereby deleted and the amount "$900,000,000" is
substituted in place thereof.
2.2. INCREASE IN TOTAL COMMITMENT. In line 5 of Section 2.2 of the
Credit Agreement, the amount "$130,000,000" is hereby deleted and the
amount "$100,000,000" is substituted in place thereof.
2.3. COMMITMENT PERCENTAGES. SCHEDULE 1.2 to the Credit Agreement is
hereby deleted in its entirety and SCHEDULE 1.2 to this Amendment No. 1 is
substituted in place thereof.
2.4. NEW LENDERS. All references in the Credit Agreement to "Lenders"
shall be deemed to include the New Lenders. Each of the New Lenders
appoints and authorizes the Administrative Agent to take such action on its
behalf and to exercise such powers under the Credit Agreement and the other
Loan Documents as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto.
Each of the New Lenders agrees that it will perform in accordance with
their terms all the obligations which by the terms of the Credit Agreement
are required to be performed by it as a Lender.
2.5. CONSENT TO PARTICIPATION. The Borrower, the Administrative Agent
and each of the Lenders hereby consents to Bank Leumi USA's grant of a
participation interest to one of its Affiliates in an amount less than
$15,000,000.
3. PROVISIONS OF GENERAL APPLICATION.
3.1. NO OTHER CHANGES. Except as otherwise expressly provided or
contemplated by this Amendment No. 1, all of the terms, conditions and
provisions of the Credit Agreement remain unaltered and in full force and
effect. The Credit Agreement and this Amendment No. 1 shall be read and
construed as one agreement. The making of the amendments in this Amendment
No. 1 does not imply any obligation or agreement by the Administrative
Agent or any Lender to make any other amendment, waiver, modification or
consent as to any matter on any subsequent occasion.
3.2. GOVERNING LAW. This Amendment No. 1 is intended to take effect
as a sealed instrument and shall be deemed to be a contract under the laws
of the State of New York. This Amendment
<PAGE>
-3-
No. 1 and the rights and obligations of each of the parties hereto are
contracts under the laws of the State of New York and shall for all
purposes be construed in accordance with and governed by the laws of such
State (excluding the laws applicable to conflicts or choice of law).
3.3. ASSIGNMENT. This Amendment No. 1 shall be binding upon and inure
to the benefit of each of the parties hereto and their respective permitted
successors and assigns.
3.4. COUNTERPARTS. This Amendment No. 1 may be executed in any number
of counterparts, but all such counterparts shall together constitute but
one and the same agreement. In making proof of this Amendment No. 1, it
shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto.
4. EFFECTIVENESS OF THIS AMENDMENT NO. 1. This Amendment No. 1 shall
become effective on the date on which the following conditions precedent are
satisfied (such date being hereinafter referred to as the "EFFECTIVE DATE"):
(a) Execution and delivery to the Administrative Agent by each Lender
(including the New Lenders), the Borrower, the Guarantors and the Agents of
this Amendment No. 1.
(b) Execution and delivery to the Administrative Agent of a
certificate of the Borrower confirming that there have been no changes to
its charter documents since April 16, 1998.
(c) Delivery to the Administrative Agent of resolutions of the board
of directors of the general partner of the Borrower authorizing this
Amendment No. 1, including the increased loan amount requested.
(d) Execution and delivery to the Administrative Agent by the
Borrower of Revolving Credit Notes in favor of Bank Leumi USA in the amount
of $10,000,000 and Bank One, Arizona, NA in the amount of $20,000,000.
(e) Delivery to the Administrative Agent by Pryor, Cashman, Sherman &
Flynn, as counsel to the Borrower, of an opinion addressed to the Lenders,
the New Lenders and the Administrative
<PAGE>
-4-
Agent in form and substance reasonably satisfactory to the Lenders, the New
Lenders and the Administrative Agent.
(f) Payment by the Borrower of any LIBOR Breakage Costs, and
indemnification of the Administrative Agent and the Lenders as provided in
Section 4.8 of the Credit Agreement for any LIBOR Breakage Costs, arising
out of the addition of the New Lenders as "Lenders" under the Credit
Agreement.
(g) Payment by the Borrower of all fees payable pursuant to the last
sentence of the first paragraph of Section 2.2 of the Credit Agreement
which fees are set forth in a letter agreement of even date herewith.
<PAGE>
-5-
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Amendment No. 1 as of the date first set forth above.
MACK-CALI REALTY, L.P.
By: Mack-Cali Realty Corporation, its general
partner
By:
--------------------------------
Name: Barry Lefkowitz
Title: Vice President
<PAGE>
-6-
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent
By:
--------------------------------
Name: Marc E. Costantino
Title: Vice President
<PAGE>
-7-
FLEET NATIONAL BANK, individually and as
Syndication Agent
By:
--------------------------------
Name: Mark E. Dalton
Title: Senior Vice President
<PAGE>
-8-
BANKERS TRUST
By:
--------------------------------
Name:
Title:
<PAGE>
-9-
THE BANK OF NEW YORK
By:
--------------------------------
Name:
Title:
<PAGE>
-10-
BAYERISCHE LANDESBANK GIROZENTRALE
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-11-
CITIZENS BANK OF RHODE ISLAND
By:
--------------------------------
Name:
Title:
<PAGE>
-12-
COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-13-
CREDITANSTALT CORPORATE FINANCE, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-14-
CRESTAR BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-15-
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
<PAGE>
-16-
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-17-
EUROPEAN AMERICAN BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-18-
ERSTE BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-19-
THE FIRST NATIONAL BANK OF CHICAGO
By:
--------------------------------
Name:
Title:
<PAGE>
-20-
FIRST UNION NATIONAL BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-21-
BAYERISCHE HYPOTHEKEN- UND WECHSEL- BANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-22-
KEY BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-23-
KREDIETBANK, N.V.
By:
--------------------------------
Name:
Title:
<PAGE>
-24-
MELLON BANK, N.A.
By:
--------------------------------
Name:
Title:
<PAGE>
-25-
NATIONSBANK
By:
--------------------------------
Name:
Title:
<PAGE>
-26-
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------
Name:
Title:
<PAGE>
-27-
SOCIETE GENERALE
By:
--------------------------------
Name:
Title:
<PAGE>
-28-
SUMMIT BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-29-
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
<PAGE>
-30-
US TRUST
By:
--------------------------------
Name:
Title:
<PAGE>
-31-
LASALLE NATIONAL BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-32-
BANK LEUMI USA
By:
--------------------------------
Name:
Title:
<PAGE>
-33-
BANK ONE, ARIZONA, NA
By:
--------------------------------
Name:
Title:
<PAGE>
-34-
Each of the undersigned Guarantors hereby acknowledges the foregoing Amendment
No. 1 and reaffirms its guaranty of the Obligations (as defined in the Guaranty
executed and delivered by such Guarantor) under the Credit Agreement and the
other Loan Documents, each as amended hereby or in connection herewith, in
accordance with the Guaranty executed and delivered by such Guarantor.
MACK-CALI REALTY CORPORATION
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
11 COMMERCE DRIVE ASSOCIATES
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings VI, L.P., its general
partner
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-35-
SIX COMMERCE DRIVE ASSOCIATES
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings III, L.P., its general
partner
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
20 COMMERCE DRIVE ASSOCIATES
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings IX, L.P., its general
partner
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-36-
CENTURY PLAZA ASSOCIATES
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings II, L.P., its general
partner
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
C.W. ASSOCIATES
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings VII, L.P., its general
partner
By: Mack-Cali Sub II, Inc., its general partner
<PAGE>
-37-
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
D.B.C. ASSOCIATES
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings VIII, L.P., its general
partner
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI BUILDING V ASSOCIATES
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-38-
By: Cali Property Holdings I, L.P., its general
partner
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
500 COLUMBIA TURNPIKE ASSOCIATES
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings V, L.P., its general
partner
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CHESTNUT RIDGE ASSOCIATES
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-39-
By: Cali Property Holdings X, L.P., its general
partner
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
ROSELAND II LIMITED PARTNERSHIP
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
OFFICE ASSOCIATES, LTD.
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
GROVE STREET ASSOCIATES OF JERSEY CITY
LIMITED PARTNERSHIP
<PAGE>
-40-
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-41-
TENBY CHASE APARTMENTS
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings IV, L.P., its general
partner
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
600 PARSIPPANY ASSOCIATES, L.P.
By: Mack-Cali Sub V, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
400 RELLA REALTY ASSOCIATES, L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-42-
VAUGHN PRINCETON ASSOCIATES L.P.
By: Mack-Cali Sub V, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MONMOUTH/ATLANTIC REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
JUMPING BROOK REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-43-
HORIZON CENTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
COMMERCENTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
400 PRINCETON ASSOCIATES L.P.
By: Mack-Cali Sub V, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-44-
CAL-TREE REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MOUNT AIRY REALTY ASSOCIATES L.P.
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
FIVE SENTRY REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
300 TICE REALTY ASSOCIATES L.P.
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-45-
BRIDGE PLAZA REALTY ASSOCIATES L.P.
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI AIRPORT REALTY ASSOCIATES, L.P.
By: Mack-Cali Sub VIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CROSS WESTCHESTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-46-
MID-WESTCHESTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
SO. WESTCHESTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
WHITE PLAINS REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XIV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-47-
MARTINE AVENUE REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI STAMFORD REALTY ASSOCIATES L.P. D/B/A RM
STAMFORD REALTY ASSOCIATES
By: Mack-Cali Sub XII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI PENNSYLVANIA REALTY ASSOCIATES, L.P.
By: Mack-Cali Sub XV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-48-
SHELTON REALTY ASSOCIATES LIMITED PARTNERSHIP
By: Mack-Cali Sub XII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MOORESTOWN REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XVI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI PROPERTIES CO. #3
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-49-
MACK-CALI METROPOLITAN, LTD L.P.
By: Mack-Cali Sub XX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK PROPERTIES CO.
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI NORTH HILLS L.P.
By: Mack-Cali Sub XIV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
120 PASSAIC STREET LLC
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-50-
MACK-CALI TEXAS PROPERTY, L.P.
By: Mack-Cali Sub XVII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
BRANDEIS BUILDING INVESTORS, L.P.
By: Mack-Cali Sub XIX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI CENTURY III INVESTORS, L.P.
By: Mack-Cali Sub XVIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-51-
PHELAN REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XXI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
PRINCETON CORPORATE CENTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XVI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI PROPERTY TRUST
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-52-
SCHEDULE 1.2
LENDER COMMITMENT AMOUNT COMMITMENT PERCENTAGE
- ------ ----------------- ---------------------
The Chase Manhattan Bank $60,000,000 6.66667%
270 Park Avenue
New York, NY 10017
Fleet National Bank $60,000,000 6.66667%
111 Westminster Street
Providence, RI 02903
PNC Bank, National Association $60,000,000 6.66667%
Two Tower Center Blvd.
East Brunswick, NJ 08816
Bankers Trust Company $50,000,000 5.55556%
One Bankers Trust Plaza
New York, NY 10006
Commerzbank AG, New York $50,000,000 5.55556%
Branch
2 World Financial Center
New York, NY 10281-1050
The First National Bank $50,000,000 5.55556%
of Chicago
One First National Plaza
Suite 0151, 1-14
Chicago, IL 60670
First Union National Bank $50,000,000 5.55556%
One First Union Center
Charlotte, NC 28288-0166
Nationsbank $50,000,000 5.55556%
8300 Greensboro Drive
McLean, VA 22102
Creditanstalt Corporate $35,000,000 3.88889%
Finance, Inc.
2 Ravinia Drive
Atlanta, GA 30346
Dresdner Bank AG, New York $35,000,000 3.88889%
Branch and Grand Cayman Branch
75 Wall Street
New York, NY 10005
<PAGE>
-2-
Bayerische Hypothexen- Und $35,000,000 3.88889%
Wechsel- Bank Aktiengesellschaft
New York Branch
32 Old Slip, Financial Square
New York, NY 10005
Societe Generale $35,000,000 3.88889%
2001 Ross Avenue
Dallas, TX 75201
Summit Bank $35,000,000 3.88889%
750 Walnut Avenue
Cranford, NJ 07016
KBC Bank N.V. $30,000,000 3.33333%
(f/k/a Kredietbank, N.V.)
125 West 55th Street
New York, NY 10019
Key Bank127 Public Square $25,000,000 2.77778%
Cleveland, OH 44114-1306
Mellon Bank, N.A. $25,000,000 2.77778%
1735 Market Street
Philadelphia, PA 19103
Bank of New York $20,000,000 2.22222%
One Wall Street
New York, NY 10015
Citizens Bank of Rhode Island $20,000,000 2.22222%
1 Citizens Plaza
Providence, RI 02903-1339
Crestar Bank $20,000,000 2.22222%
8245 Boone Blvd.
Vienna, VA
DG Bank Deutsche $20,000,000 2.22222%
Genossenschaftsbank,
New York Branch
609 Fifth Avenue
New York, NY 10017-1021
The Tokai Bank Limited $20,000,000 2.22222%
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
US Trust $20,000,000 2.22222%
40 Court Street
Boston, MA 02108
<PAGE>
-3-
Bank One, Arizona, NA $20,000,000 2.22222%
241 North Cental Avenue
Phoenix, AZ 85004
European American Bank $17,500,000 1.94445%
335 Madison Avenue
New York, NY 10017
LaSalle National Bank $17,500,000 1.94445%
135 South LaSalle Street
Chicago, IL 60603
Bayerische Landesbank $15,000,000 1.66667%
Girozentrale
580 Lexington Avenue
New York, NY 10022
Erste Bank $15,000,000 1.66667%
280 Park Avenue, West Building
New York, NY 10017
Bank Leumi USA $10,000,000 1.11111%
565 Fifth Avenue
New York, NY 10036
------------ --------
TOTAL $900,000,000 100%
<PAGE>
Exhibit 10.6
AMENDMENT NO. 2 TO REVOLVING CREDIT AGREEMENT
among
MACK-CALI REALTY, L.P.
and
THE CHASE MANHATTAN BANK,
FLEET NATIONAL BANK and
OTHER LENDERS WHICH MAY BECOME
PARTIES THERETO
with
THE CHASE MANHATTAN BANK,
AS ADMINISTRATIVE AGENT,
FLEET NATIONAL BANK,
AS SYNDICATION AGENT,
PNC BANK, NATIONAL ASSOCIATION,
AS DOCUMENTATION AGENT
NATIONSBANK,
AS DOCUMENTATION AGENT
CHASE SECURITIES INC.
and FLEET NATIONAL BANK,
AS ARRANGERS
BANKERS TRUST,
COMMERZBANK AKTIENGESELLSCHAFT
NEW YORK BRANCH,
FIRST NATIONAL BANK OF CHICAGO, and
FIRST UNION NATIONAL BANK,
AS MANAGING AGENTS
and
CREDITANSTALT CORPORATE FINANCE, INC.,
DRESDNER BANK AG, NEW YORK
BRANCH AND GRAND CAYMAN BRANCH,
EUROPEAN AMERICAN BANK,
HYPOBANK,
SOCIETE GENERALE,
and SUMMIT BANK,
AS CO-AGENTS
Dated as of December 30, 1998
<PAGE>
AMENDMENT NO. 2 TO REVOLVING CREDIT AGREEMENT
This AMENDMENT NO. 2 TO REVOLVING CREDIT AGREEMENT (this "AMENDMENT NO. 2")
is made as of December 30, 1998 by and among (a) Mack-Cali Realty, L.P. (the
"BORROWER"), (b) The Chase Manhattan Bank; Fleet National Bank; Bankers Trust;
The Bank of New York; Bayerische Landesbank Girozentrale; Citizens Bank of Rhode
Island; Commerzbank Aktiengesellschaft, New York Branch; Creditanstalt Corporate
Finance, Inc.; Crestar Bank; DG Bank Deutsche Genossenschaftsbank, New York
Branch; Dresdner Bank AG, New York Branch and Grand Cayman Branch; European
American Bank; Erste Bank; The First National Bank of Chicago; First Union
National Bank; Bayerische Hypotheken- und Wechsel- Bank Aktiengesellschaft, New
York Branch; Key Bank; KBC Bank N.V. (f/k/a Kredietbank, N.V.); LaSalle National
Bank; Mellon Bank, N.A.; NationsBank; PNC Bank, National Association; Societe
Generale; Summit Bank; The Tokai Bank, Limited - New York Branch; USTrust; Bank
Leumi USA and Bank One, Arizona, NA (collectively, the "LENDERS"), and (c) The
Chase Manhattan Bank, as Administrative Agent (in such capacity, the
"ADMINISTRATIVE AGENT") for the Lenders.
WHEREAS, the Borrower, the Lenders (including PNC Bank, National
Association and NationsBank as Co-Documentation Agents) and the Administrative
Agent are parties to a Revolving Credit Agreement dated as of April 16, 1998, as
amended by Amendment No. 1 to Revolving Credit Agreement dated as of July 20,
1998 (the "CREDIT AGREEMENT"), pursuant to which the Lenders have agreed to make
loans to the Borrower on the terms and conditions set forth therein;
WHEREAS, the Borrower is exercising its right pursuant to Section 2.2 of
the Credit Agreement, to increase the total credit limit of the Credit
Agreement, with certain of the Lenders agreeing to increase their individual
Commitments;
NOW, THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and fully intending to be legally bound by this Amendment No. 2,
the parties hereto agree as follows:
<PAGE>
1. DEFINITIONS. Capitalized terms used herein without definition shall
have the meanings assigned to such terms in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT. As of the Effective Date (as defined
in Section 4 hereof) the Credit Agreement is hereby amended as follows:
2.1. TOTAL COMMITMENT. The definition of TOTAL COMMITMENT in Section
1.1 of the Credit Agreement is amended by (a) deleting the amount
"$900,000,000" in line 2 thereof and substituting in place thereof the
amount "$1,000,000,000" and (b) deleting the phrase ", as such amount may
be increased pursuant to Section 2.2 hereof".
2.2. COMMITMENT PERCENTAGES. SCHEDULE 1.2 to the Credit Agreement is
hereby deleted in its entirety and SCHEDULE 1.2 to this Amendment No. 2 is
substituted in place thereof.
3. PROVISIONS OF GENERAL APPLICATION.
3.1. NO OTHER CHANGES. Except as otherwise expressly provided or
contemplated by this Amendment No. 2, all of the terms, conditions and
provisions of the Credit Agreement remain unaltered and in full force and
effect. The Credit Agreement and this Amendment No. 2 shall be read and
construed as one agreement. The making of the amendments in this Amendment
No. 2 does not imply any obligation or agreement by the Administrative
Agent or any Lender to make any other amendment, waiver, modification or
consent as to any matter on any subsequent occasion.
3.2. GOVERNING LAW. This Amendment No. 2 is intended to take effect
as a sealed instrument and shall be deemed to be a contract under the laws
of the State of New York. This Amendment No. 2 and the rights and
obligations of each of the parties hereto are contracts under the laws of
the State of New York and shall for all purposes be construed in accordance
with and governed by the laws of such State (excluding the laws applicable
to conflicts or choice of law).
3.3. ASSIGNMENT. This Amendment No. 2 shall be binding upon and inure
to the benefit of each of the parties hereto and their respective permitted
successors and assigns.
3.4. COUNTERPARTS. This Amendment No. 2 may be executed in any number
of counterparts, but all such counterparts shall together constitute but
one and the same agreement. In making proof of this Amendment No. 2, it
shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto.
<PAGE>
4. EFFECTIVENESS OF THIS AMENDMENT NO. 2. This Amendment No. 2 shall
become effective on the date on which the following conditions precedent are
satisfied (such date being hereinafter referred to as the "EFFECTIVE DATE"):
(a) Execution and delivery to the Administrative Agent by each
Lender, the Borrower, and the Agents of this Amendment No. 2, and
reaffirmation of each Guaranty by each Guarantor.
(b) Execution and delivery to the Administrative Agent of a
certificate of the Borrower confirming that there have been no changes to
its charter documents since April 16, 1998, except for Amendment No. 1 to
Second Amended and Restated Agreement of Limited Partnership of Mack-Cali
Realty, L.P.
(c) Delivery to the Administrative Agent of resolutions of the board
of directors of the general partner of the Borrower authorizing this
Amendment No. 2, including the increased loan amount requested.
(d) Execution and delivery to the Administrative Agent by the
Borrower of Amended and Restated Revolving Credit Notes in favor of each
Lender that is increasing its Commitment hereunder in an amount equal to
such Lender's new Commitment hereunder.
(e) Delivery to the Administrative Agent by Pryor, Cashman, Sherman &
Flynn, as counsel to the Borrower, of an opinion addressed to the Lenders
and the Administrative Agent in form and substance reasonably satisfactory
to the Lenders and the Administrative Agent.
(f) Payment by the Borrower of any LIBOR Breakage Costs, and
indemnification of the Administrative Agent and the Lenders as provided in
Section 4.8 of the Credit Agreement for any LIBOR Breakage Costs, arising
out of the increase of the Total Commitment and certain of the Commitments
and the adjustment of the Commitment Percentages pursuant to this Amendment
No. 2.
(g) Payment by the Borrower of all fees payable pursuant to the last
sentence of the first paragraph of Section 2.2 of the Credit Agreement
which fees are set forth in a letter agreement of even date herewith.
<PAGE>
-5-
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Amendment No. 1 as of the date first set forth above.
MACK-CALI REALTY, L.P.
By: Mack-Cali Realty Corporation, its general
partner
By:
--------------------------------
Name: Barry Lefkowitz
Title: Vice President
<PAGE>
-6-
THE CHASE MANHATTAN BANK, individually and as
Administrative Agent
By:
--------------------------------
Name: Marc E. Costantino
Title: Vice President
<PAGE>
-7-
FLEET NATIONAL BANK, individually and as
Syndication Agent
By:
--------------------------------
Name: Mark E. Dalton
Title: Senior Vice President
<PAGE>
-8-
BANKERS TRUST
By:
--------------------------------
Name:
Title:
<PAGE>
-9-
THE BANK OF NEW YORK
By:
--------------------------------
Name:
Title:
<PAGE>
-10-
BAYERISCHE LANDESBANK GIROZENTRALE
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-11-
CITIZENS BANK OF RHODE ISLAND
By:
--------------------------------
Name:
Title:
<PAGE>
-12-
COMMERZBANK AKTIENGESELLSCHAFT, NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-13-
CREDITANSTALT CORPORATE FINANCE, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-14-
CRESTAR BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-15-
DG BANK DEUTSCHE GENOSSENSCHAFTSBANK,
NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
<PAGE>
-16-
DRESDNER BANK AG, NEW YORK BRANCH
AND GRAND CAYMAN BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-17-
EUROPEAN AMERICAN BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-18-
ERSTE BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-19-
THE FIRST NATIONAL BANK OF CHICAGO
By:
--------------------------------
Name:
Title:
<PAGE>
-20-
FIRST UNION NATIONAL BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-21-
BAYERISCHE HYPOTHEKEN- UND WECHSEL- BANK
AKTIENGESELLSCHAFT, NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
By:
--------------------------------
Name:
Title:
<PAGE>
-22-
KEY BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-23-
KREDIETBANK, N.V.
By:
--------------------------------
Name:
Title:
<PAGE>
-24-
MELLON BANK, N.A.
By:
--------------------------------
Name:
Title:
<PAGE>
-25-
NATIONSBANK
By:
--------------------------------
Name:
Title:
<PAGE>
-26-
PNC BANK, NATIONAL ASSOCIATION
By:
--------------------------------
Name:
Title:
<PAGE>
-27-
SOCIETE GENERALE
By:
--------------------------------
Name:
Title:
<PAGE>
-28-
SUMMIT BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-29-
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By:
--------------------------------
Name:
Title:
<PAGE>
-30-
US TRUST
By:
--------------------------------
Name:
Title:
<PAGE>
-31-
LASALLE NATIONAL BANK
By:
--------------------------------
Name:
Title:
<PAGE>
-32-
BANK LEUMI USA
By:
--------------------------------
Name:
Title:
<PAGE>
-33-
BANK ONE, ARIZONA, NA
By:
--------------------------------
Name:
Title:
<PAGE>
-34-
Each of the undersigned Guarantors hereby acknowledges the foregoing Amendment
No. 1 and reaffirms its guaranty of the Obligations (as defined in the Guaranty
executed and delivered by such Guarantor) under the Credit Agreement and the
other Loan Documents, each as amended hereby or in connection herewith, in
accordance with the Guaranty executed and delivered by such Guarantor.
MACK-CALI REALTY CORPORATION
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
11 COMMERCE DRIVE ASSOCIATES
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings VI, L.P., its general
partner
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-35-
SIX COMMERCE DRIVE ASSOCIATES
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings III, L.P., its general
partner
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
20 COMMERCE DRIVE ASSOCIATES
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings IX, L.P., its general
partner
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-36-
CENTURY PLAZA ASSOCIATES
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings II, L.P., its general
partner
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
C.W. ASSOCIATES
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings VII, L.P., its general
partner
By: Mack-Cali Sub II, Inc., its general partner
<PAGE>
-37-
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
D.B.C. ASSOCIATES
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings VIII, L.P., its general
partner
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI BUILDING V ASSOCIATES
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-38-
By: Cali Property Holdings I, L.P., its general
partner
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
500 COLUMBIA TURNPIKE ASSOCIATES
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings V, L.P., its general
partner
By: Mack-Cali Sub I, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CHESTNUT RIDGE ASSOCIATES
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-39-
By: Cali Property Holdings X, L.P., its general
partner
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
ROSELAND II LIMITED PARTNERSHIP
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
OFFICE ASSOCIATES, LTD.
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
GROVE STREET ASSOCIATES OF JERSEY CITY
LIMITED PARTNERSHIP
<PAGE>
-40-
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-41-
TENBY CHASE APARTMENTS
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
By: Cali Property Holdings IV, L.P., its general
partner
By: Mack-Cali Sub IV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
600 PARSIPPANY ASSOCIATES, L.P.
By: Mack-Cali Sub V, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
400 RELLA REALTY ASSOCIATES, L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-42-
VAUGHN PRINCETON ASSOCIATES L.P.
By: Mack-Cali Sub V, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MONMOUTH/ATLANTIC REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
JUMPING BROOK REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-43-
HORIZON CENTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
COMMERCENTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
400 PRINCETON ASSOCIATES L.P.
By: Mack-Cali Sub V, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-44-
CAL-TREE REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MOUNT AIRY REALTY ASSOCIATES L.P.
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
FIVE SENTRY REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
300 TICE REALTY ASSOCIATES L.P.
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-45-
BRIDGE PLAZA REALTY ASSOCIATES L.P.
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI AIRPORT REALTY ASSOCIATES, L.P.
By: Mack-Cali Sub VIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CROSS WESTCHESTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-46-
MID-WESTCHESTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
SO. WESTCHESTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub VI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
WHITE PLAINS REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XIV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-47-
MARTINE AVENUE REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI STAMFORD REALTY ASSOCIATES L.P. D/B/A RM
STAMFORD REALTY ASSOCIATES
By: Mack-Cali Sub XII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
CALI PENNSYLVANIA REALTY ASSOCIATES, L.P.
By: Mack-Cali Sub XV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-48-
SHELTON REALTY ASSOCIATES LIMITED PARTNERSHIP
By: Mack-Cali Sub XII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MOORESTOWN REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XVI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI PROPERTIES CO. #3
By: Mack-Cali Sub II, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-49-
MACK-CALI METROPOLITAN, LTD L.P.
By: Mack-Cali Sub XX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK PROPERTIES CO.
By: Mack-Cali Sub III, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI NORTH HILLS L.P.
By: Mack-Cali Sub XIV, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
120 PASSAIC STREET LLC
By: Mack-Cali Sub IX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-50-
MACK-CALI TEXAS PROPERTY, L.P.
By: Mack-Cali Sub XVII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
BRANDEIS BUILDING INVESTORS, L.P.
By: Mack-Cali Sub XIX, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI CENTURY III INVESTORS, L.P.
By: Mack-Cali Sub XVIII, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
-51-
PHELAN REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XXI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
PRINCETON CORPORATE CENTER REALTY ASSOCIATES L.P.
By: Mack-Cali Sub XVI, Inc., its general partner
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
MACK-CALI PROPERTY TRUST
By:
-------------------------------
Name: Barry Lefkowitz
Title: Vice President and Chief Financial
Officer
<PAGE>
Schedule 1.2
LENDER COMMITMENT AMOUNT COMMITMENT PERCENTAGE
The Chase Manhattan Bank $73,750,000 7.375%
270 Park Avenue
New York, NY 10017
Fleet National Bank $73,750,000 7.375%
111 Westminster Street
Providence, RI 02903
NationsBank $73,750,000 7.375%
8300 Greensboro Drive
McLean, VA 22102
PNC Bank, National Association $73,750,000 7.375%
Two Tower Center Blvd.
East Brunswick, NJ 08816
First Union National Bank $65,000,000 6.5%
One First Union Center
Charlotte, NC 28288-0166
Bankers Trust Company $50,000,000 5.0%
One Bankers Trust Plaza
New York, NY 10006
Commerzbank AG, New York Branch $50,000,000 5.0%
2 World Financial Center
New York, NY 10281-1050
The First National Bank of Chicago $50,000,000 5.0%
One First National Plaza
Suite 0151, 1-14
Chicago, IL 60670
Dresdner Bank AG, New York $45,000,000 4.5%
Branch and Grand Cayman Branch
75 Wall Street
New York, NY 10005
Bank Austria Creditanstalt $35,000,000 3.5%
Corporate Finance, Inc.
2 Ravinia Drive
Atlanta, GA 30346
<PAGE>
Bayerische Hypo-und Vereinsbank AG $35,000,000 3.5%
New York Branch
32 Old Slip, Financial Square
New York, NY 10005
Societe Generale $35,000,000 3.5%
2001 Ross Avenue
Dallas, TX 75201
Summit Bank $35,000,000 3.5%
750 Walnut Avenue
Cranford, NJ 07016
KBC Bank N.V. $30,000,000 3.0%
(f/k/a Kredietbank, N.V.)
125 West 55th Street
New York, NY 10019
Key Bank National Association $25,000,000 2.5%
127 Public Square
Cleveland, OH 44114-1306
Mellon Bank, N.A. $25,000,000 2.5%
1735 Market Street
Philadelphia, PA 19103
US Trust $25,000,000 2.5%
40 Court Street
Boston, MA 02108
Bank of New York $20,000,000 2.0%
One Wall Street
New York, NY 10015
Citizens Bank of Rhode Island $20,000,000 2.0%
1 Citizens Plaza
Providence, RI 02903-1339
Crestar Bank $20,000,000 2.0%
8245 Boone Blvd.
Vienna, VA
DG Bank Deutsche $20,000,000 2.0%
Genossenschaftsbank AG,
New York Branch
609 Fifth Avenue
New York, NY 10017-1021
The Tokai Bank Limited $20,000,000 2.0%
Park Avenue Plaza
55 East 52nd Street
New York, NY 10055
<PAGE>
Bank One, Arizona, NA $20,000,000 2.0%
241 North Cental Avenue
Phoenix, AZ 85004
Bayerische Landesbank $20,000,000 2.0%
Girozentrale
580 Lexington Avenue
New York, NY 10022
European American Bank $17,500,000 1.75%
335 Madison Avenue
New York, NY 10017
LaSalle National Bank $17,500,000 1.75%
135 South LaSalle Street
Chicago, IL 60603
Erste Bank $15,000,000 1.5%
280 Park Avenue, West Building
New York, NY 10017
Bank Leumi USA $10,000,000 1.0%
565 Fifth Avenue
New York, NY 10036
-------------- -------
TOTAL $1,000,000,000 100%
<PAGE>
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, 33-96542, 333-09081, 333-09875,
333-25475, 333-44433, 333-44441, 333-57103, 333-69029 and 333-71133) and the
Registration Statements on Form S-8 (Nos. 333-18275, 33-91822, 33-19831,
333-32661 and 333-44443) of Mack-Cali Realty Corporation of our report dated
February 23, 1999, appearing in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
- -----------------------------------
PricewaterhouseCoopers LLP
New York, New York
March 3, 1999
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<RECEIVABLES> 4,598
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