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EXHIBIT 10.2
FORM OF
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of __________
__, 1997, is entered into by and among Tower Realty Trust, Inc., a Maryland
corporation (the "COMPANY"), Tower Realty Operating Partnership, L.P., a
Delaware limited partnership (the "OPERATING PARTNERSHIP"), and the Persons
whose names are set forth on Exhibit A attached hereto (as it may be amended
from time to time).
R E C I T A L S:
(a) The Company, together with certain other limited partners, has
formed the Operating Partnership pursuant to the Agreement of
Limited Partnership of the Operating Partnership dated
__________ __, 1997 (as such agreement may be amended or
amended and restated from time to time, the "PARTNERSHIP
AGREEMENT").
(b) Pursuant to the Partnership Agreement, the Limited Partners
(as defined below) directly or indirectly hold units of
limited partnership interest ("OP UNITS") in the Operating
Partnership.
(c) The Operating Partnership has agreed to provide the Limited
Partners with certain direct or indirect rights to exchange
their OP Units for cash or, at the election of the Company,
for shares of the Company's common stock, par value $0.01 per
share (the "REIT STOCK").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE I
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner permitted under the Partnership Agreement, but who has
not become a substituted Limited Partner in accordance therewith.
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"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Stock Amount.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the Company
(i) declares or pays a dividend on its outstanding REIT Stock in REIT Stock or
makes a distribution to all holders of its outstanding REIT Stock in REIT Stock;
(ii) subdivides its outstanding REIT Stock; or (iii) combines its outstanding
REIT Stock into a smaller number of shares of REIT Stock, the Exchange Factor
shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of shares of REIT Stock issued and
outstanding on the record date for such dividend, contribution, subdivision or
combination assuming for such purpose that such dividend, distribution,
subdivision or combination has occurred as of such time, and the denominator of
which shall be the actual number of shares of REIT Stock (determined without the
above assumption) issued and outstanding on the record date for such dividend,
distribution, subdivision or combination. Any adjustment to the Exchange Factor
shall become effective immediately after the effective date of such event
retroactive to the record date, if any, for such event.
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"IPO" means an initial public offering by the Company of the REIT Stock
pursuant to a Registration Statement on Form S-11, filed with and declared
effective by the SEC.
"LIEN" means any lien, security interest, mortgage, deed of trust, charge,
claim, encumbrance, pledge, option, right of first offer or first refusal and
any other right or interest of others of any kind or nature, actual or
contingent, or other similar encumbrance of any nature whatsoever.
"LIMITED PARTNER" means any Person, other than the Company, named as a
Limited Partner on Exhibit A, as such Exhibit may be amended from time to time.
"LOCK-UP AGREEMENT" means, collectively, the several Lock-up Agreements
executed by each of the Limited Partners other than the Company, dated the date
hereof, which prohibit the transfer of the OP Units held by such Limited Partner
without the consent of ▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇, Incorporated
and/or the Operating Partnership
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
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"PERSON" shall mean an individual, partnership, corporation, limited
liability company, trust, estate, or unincorporated organization, or other
entity, or a government or agency or political subdivision thereof.
"REIT STOCK AMOUNT" means that number of shares of REIT Stock equal to the
product of the number of OP Units offered for exchange by an Exchanging Partner,
multiplied by the Exchange Factor as of the Valuation Date, provided, that in
the event the Company or the Operating Partnership issues to all holders of REIT
Stock rights, options, warrants or convertible or exchangeable securities
entitling the stockholders to subscribe for or purchase REIT Stock, or any other
securities or property (collectively, the "rights"), then the REIT Stock Amount
shall also include such rights that a holder of that number of shares of REIT
Stock would be entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Operating Partnership and the Company of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Operating Partnership
and the Company of a Notice of Exchange or, if such date is not a Business Day,
the first Business Day thereafter.
"VALUE" means, with respect to shares of REIT Stock, the average of the
daily market price for the five (5) consecutive trading days immediately
preceding the Valuation Date. The market price for each such trading day shall
be:
(i) if the REIT Stock are listed or admitted to trading on the New
York Stock Exchange (the "NYSE"), any other national securities exchange
or the Nasdaq Stock Market ("Nasdaq"), the closing price on such day, or
if no such sale takes place on such day, the average of the closing bid
and asked prices on such day; or
(ii) if the REIT Stock are not listed or admitted to trading on the
NYSE, any national securities exchange or Nasdaq, the last reported sale
price on such day or, if no sale takes place on such day, the average of
the closing bid and asked prices on such day, as reported by a reliable
quotation source designated by the Company.
In the event the REIT Stock Amount includes rights that a holder of REIT Stock
would be entitled to receive, then the Value of such rights shall be determined
by the independent directors of the Company acting in good faith on the basis of
such quotations and other information as they consider, in their reasonable
judgment, appropriate.
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ARTICLE II
EXCHANGE RIGHT
2.1 Exchange Right. (a) Subject to Sections 2.2, 2.3, 2.4 and 2.5 hereof,
and subject to any limitations under applicable law, the Operating Partnership
hereby grants to each Limited Partner and each Limited Partner hereby accepts
the right (the "EXCHANGE RIGHT"), exercisable on or after the date that is one
(1) year after the closing of the IPO, to exchange on a Specified Exchange Date
all or a portion of the OP Units held by such Limited Partner at an exchange
price equal to the Cash Amount.
(b) The Exchange Right shall be exercised pursuant to a Notice of Exchange
delivered to the Operating Partnership, with a copy delivered to the Company, by
the Limited Partner who is exercising the Exchange Right (the "EXCHANGING
PARTNER"); provided, however, that the Company, on behalf of the Operating
Partnership, may elect, after a Notice of Exchange is delivered, to satisfy the
Exchange Right which is the subject of such notice in accordance with Section
2.2.
(c) A Limited Partner may not exercise the Exchange Right for less than
one thousand (1,000) OP Units or, if such Limited Partner holds less than one
thousand (1,000) OP Units, all of the OP Units held by such Limited Partner.
(d) Any Assignee of a Limited Partner may exercise the rights of such
Limited Partner pursuant to this Article 2, and such Limited Partner shall be
deemed to have assigned such rights to such Assignee and shall be bound by the
exercise of such rights by such Assignee.
(e) In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount or the REIT Stock Amount, as the
case may be, shall be satisfied by the Operating Partnership or the Company, as
the case may be, directly to such Assignee and not to such Limited Partner.
2.2 Option of Company to Exchange for REIT Stock. (a) Notwithstanding the
provisions of Section 2.1, the Company may, on behalf of the Operating
Partnership, in its sole and absolute discretion, elect to satisfy an Exchanging
Partner's Exchange Right by exchanging REIT Stock and rights equal to the REIT
Stock Amount on the Specified Exchange Date for the OP Units offered for
exchange by the Exchanging Partner.
(b) In the event the Company shall elect to satisfy, on behalf of the
Operating Partnership, an Exchanging Partner's Exchange Right by exchanging REIT
Stock for the OP Units offered for exchange,
(i) the Company hereby agrees so to notify the Exchanging Partner
within five (5) Business Days after the receipt by the Company of such
Notice of Exchange,
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(ii) each Exchanging Partner hereby agrees to execute such documents
and instruments as the Company may reasonably require in connection with
the issuance of REIT Stock upon exercise of the Exchange Right, and
(iii) the Company hereby agrees to deliver stock certificates
representing fully paid and nonassessable shares of REIT Stock.
2.3 Prohibition of Exchange for REIT Stock. Notwithstanding anything
herein to the contrary, the Company shall not be entitled to satisfy an
Exchanging Partner's Exchange Right pursuant to Section 2.2 if the delivery of
REIT Stock to such Limited Partner by the Company pursuant to Section 2.2
(regardless of the Operating Partnership's obligations to the Limited Partner
under Section 2.1)
(a) would be prohibited under the Articles of Incorporation of the
Company,
(b) would otherwise jeopardize the REIT status of the Company, or
(c) would cause the acquisition of the REIT Stock by the Limited
Partner to be "integrated" with any other distribution of REIT Stock by
the Company for purposes of complying with the registration provisions of
the Securities Act.
2.4 Payment Date. Any Cash Amount to be paid to an Exchanging Partner
shall be paid on the Specified Exchange Date; provided, however, that the
Operating Partnership may elect to cause the Specified Exchange Date to be
delayed for up to an additional 180 days to the extent required for the Company
to cause additional REIT Shares to be issued to provide financing to be used to
make such payment of the Cash Amount by the Operating Partnership.
2.5 Exercise by Pledgee. Notwithstanding the provisions of this Article 2,
any person to whom OP Units have been pledged, in compliance with the terms of
the Lock-up Agreement, may exercise its Exchange Right prior to the date that is
one (1) year after the closing of the IPO, provided, however, such OP Units
shall only be exchangeable for the Cash Amount.
2.6 Expiration of Exchange Right. The Exchange Right shall expire with
respect to any OP Units for which an Exchange Notice has not been delivered to
the Operating Partnership and the Company on or before December 31, 2047.
2.7 Effect of Exchange. (a) Any exchange of OP Units pursuant to this
Article 2 shall be deemed to have occurred as of the Specified Exchange Date for
all purposes, including without limitation the payment of distributions or
dividends in respect of OP Units or REIT Stock, as applicable.
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(b) Any OP Units acquired by the Company pursuant to an exercise by any
Limited Partner of an Exchange Right shall be deemed to be acquired by and
reallocated or reissued to the Company.
(c) The Company, as general partner of the Operating Partnership, shall
amend the Partnership Agreement to reflect each such exchange and reallocation
or reissuance of OP Units and each corresponding recalculation of the OP Units
of the Limited Partners.
ARTICLE III
OTHER PROVISIONS
3.1 Covenants of the Company. (a) At all times during the pendency of the
Exchange Right, the Company shall reserve for issuance such number of shares of
REIT Stock as may be necessary to enable the Company to issue such shares in
full payment of the REIT Stock Amount in regard to all OP Units held by Limited
Partners which are from time to time outstanding.
(b) During the pendency of the Exchange Right, the Company shall deliver
to Limited Partners in a timely manner all reports filed by the Company with the
SEC to the extent the Company also transmits such reports to its stockholders
and all other communications transmitted from time to time by the Company to its
stockholders generally.
(c) The Company shall notify each Limited Partner, upon request, of the
then current Exchange Factor and such notice will include a reasonable
explanation of the Exchange Factor calculation to be applied at such time.
3.2 Fractional Shares. (a) No fractional shares of REIT Stock shall be
issued upon exchange of OP Units.
(b) The number of full shares of REIT Stock which shall be issuable upon
exchange of OP Units (or the cash equivalent amount thereof if the Cash Amount
is paid) shall be computed on the basis of the aggregate amount of OP Units so
surrendered.
(c) Instead of any fractional shares of REIT Stock which would otherwise
be issuable upon exchange of any OP Units, the Operating Partnership shall pay a
cash adjustment in respect of such fraction in an amount equal to the Cash
Amount of an OP Unit multiplied by such fraction.
3.3 Investment Representations and Warranties. By delivering to the
Company a Notice of Exchange, each Exchanging Partner will be deemed to
represent and warrant to the Company and the Operating Partnership that such
Exchanging Partner is aware of the Company's option to exchange such Exchanging
Partner's OP Units for REIT Stock pursuant to Section 2.2 hereof and that:
(a) (i) Such Exchanging Partner has received and reviewed
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(A) a copy of the prospectus contained in the Registration
Statement on Form S-11 filed by the Company in connection with the
IPO, any prospectus contained in any Registration Statement
subsequently filed by the Company, and any supplement or amendment
thereto (each, a "PROSPECTUS"), and
(B) copies of all reports and other filings (the "SEC
REPORTS"), including Annual Reports on Form 10-K, Quarterly Reports
on Form 10-Q and Current Reports on Form 8-K, made by the Company
with the SEC pursuant to the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder,
and understands the risks of, and other considerations relating to, an
investment in REIT Stock.
(ii) Such Exchanging Partner, by reason of its business and
financial experience, together with the business and financial experience
of those persons, if any, retained by it to represent or advise it with
respect to its investment in REIT Stock,
(A) has such knowledge, sophistication and experience in
financial and business matters and in making investment decisions of
this type that it is capable of evaluating the merits and risks of
and of making an informed investment decision with respect to an
investment in REIT Stock,
(B) is capable of protecting its own interest or has engaged
representatives or advisors to assist it in protecting its interests
and
(C) is capable of bearing the economic risk of such
investment.
(iii) (A) Such Exchanging Partner is an "accredited investor" as
defined in Rule 501 of the regulations promulgated under the
Securities Act.
(B) If such Exchanging Partner has retained or retains a
person to represent or advise it with respect to its investment in
REIT Stock, such Exchanging Partner will advise the Company of such
retention and, at the Company's request, such Exchanging Partner
shall, prior to or at delivery of the REIT Stock hereunder,
(I) acknowledge in writing such representation and
(II) cause such representative or advisor to deliver a
certificate to the Company containing such representations as
may be reasonably requested by the Company.
(b) (i) Such Exchanging Partner understands that an investment in the
Company involves substantial risks.
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(ii) Such Exchanging Partner has been given the opportunity to make
a thorough investigation of the activities of the Company and has been
furnished with materials relating to the Company and its activities,
including, without limitation, each Prospectus and the SEC Reports.
(iii) Such Exchanging Partner has relied and is making its
investment decision based upon the Prospectus relating to the IPO and any
subsequent Prospectus, the SEC Reports and other written information
provided to the Exchanging Partner by or on behalf of the Company and, as
applicable, such Exchanging Partner's position as a director or executive
officer of the Company.
(c) (i) The REIT Stock to be issued to such Exchanging Partner hereunder
will be acquired by such Exchanging Partner for its own account, for
investment only and not with a view to, or with any intention of, a
distribution or resale thereof, in whole or in part, or the grant of any
participation therein.
(ii) Such Exchanging Partner was not formed for the specific purpose
of acquiring an interest in the Company.
(d) (i) Such Exchanging Partner acknowledges that
(A) the shares of REIT Stock to be issued to such Exchanging
Partner hereunder have not been registered under the Securities Act
or state securities laws by reason of a specific exemption or
exemptions from registration under the Securities Act and applicable
state securities laws and, the certificates representing such shares
of REIT Stock will bear a legend to such effect,
(B) the Company's and the Operating Partnership's reliance on
such exemptions is predicated in part on the accuracy and
completeness of the representations and warranties of such
Exchanging Partner contained herein,
(C) the REIT Stock to be issued to such Exchanging Partner
hereunder may not be resold or otherwise distributed unless
registered under the Securities Act and applicable state securities
laws, or unless an exemption from registration is available,
(D) there may be no market for unregistered shares of REIT
Stock, and
(E) the Company has no obligation or intention to register
such REIT Stock under the Securities Act or any state securities
laws or to take any action that would make available any exemption
from the registration requirements of such laws, except as provided
in the Registration Rights Agreement entered into by the Company and
the Exchanging Partner (the "REGISTRATION RIGHTS AGREEMENT").
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(ii) Such Exchanging Partner acknowledges that because of the
restrictions on transfer or assignment of such REIT Stock to be issued
hereunder, such Exchanging Partner may have to bear the economic risk of
its investment in REIT Stock issued hereunder for an indefinite period of
time, although the holder of any such REIT Stock will be afforded certain
rights to have such REIT Stock registered under the Securities Act and
applicable state securities laws pursuant to the Registration Rights
Agreement.
(e) The address set forth under such Exchanging Partner's name in the
Notice of Exchange is the address of the Exchanging Partner's principal place of
business or, if a natural person, the address of the Exchanging Partner's
residence, and such Exchanging Partner has no present intention of becoming a
resident of any country, state or jurisdiction other than the country and state
in which such principal place of business or residence is situated.
ARTICLE IV
GENERAL PROVISIONS
4.1 Addresses and Notice. Any notice, demand, request or report required
or permitted to be given or made to the Operating Partnership, the Company, a
Limited Partner or Assignee, as the case may be, under this Agreement shall be
in writing and shall be deemed given or made when delivered in person or when
sent by first class United States mail or by other similarly reliable means of
written communication to the Operating Partnership, the Company, a Limited
Partner or Assignee, as the case may be, (i) at the address listed on the
records of the Operating Partnership, with respect to a Limited Partner or
Assignee, and (ii) at ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, Attn:
President, with respect to the Operating Partnership or the Company.
4.2 Titles and Captions. All article or section titles or captions in this
Agreement are for convenience only. They shall not be deemed part of this
Agreement and in no way define, limit, extend or describe the scope or intent of
any provisions hereof. Except as specifically provided otherwise, references to
"Articles" and "Sections" are to Articles and Sections of this Agreement.
4.3 Pronouns and Plurals. Whenever the context may require, any pronoun
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns, pronouns and verbs shall include
the plural and vice versa.
4.4 Further Action and Additional Restrictions. The parties shall execute
and deliver all documents, provide all information and take or refrain from
taking action as may be necessary or appropriate to achieve the purposes of this
Agreement.
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4.5 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, successors, legal representatives and permitted assigns.
4.6 Waiver. No failure by any party to insist upon the strict performance
of any covenant, duty, agreement or condition of this Agreement or to exercise
any right or remedy consequent upon a breach thereof shall constitute waiver of
any such breach or any other covenant, duty, agreement or condition.
4.7 Counterparts. This Agreement may be executed in counterparts, all of
which together shall constitute one agreement binding on all of the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto.
4.8 Applicable Law. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland, without
regard to the principles of conflicts of law thereof.
4.9 Invalidity of Provisions. If any provision of this Agreement is or
becomes invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein shall not be
affected thereby.
4.10 Entire Agreement. This Agreement contains the entire understanding
and agreement among the Limited Partners, the Operating Partnership and the
Company with respect to the subject matter hereof and supersedes any other prior
written or oral understandings or agreements among them with respect thereto.
4.11 Amendment. This Agreement may be amended from time to time with the
consent of the Company by a vote of the Limited Partners in the same manner as
the Partnership Agreement (in accordance with Section 14.1(a) thereof) may be
amended as provided therein, provided, however, that the Company shall vote its
limited partnership interests in proportion to the votes of the other Limited
Partners.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE COMPANY:
TOWER REALTY TRUST, INC.
By:_________________________________
Name:
Title:
OPERATING PARTNERSHIP:
TOWER REALTY OPERATING PARTNERSHIP, L.P.
BY: Tower Realty Trust, Inc.,
its general partner
By:_________________________________
Name:
Title:
LIMITED PARTNERS:
_________________________________
Signature
_________________________________
Name (Please Print or Type)
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Exhibit A
Name and Address of Limited Partners
[To be attached]
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Exhibit B
Notice of Exchange
The undersigned Limited Partner hereby irrevocably (i) exchanges
___________ OP Units in Tower Realty Operating Partnership, L.P., in accordance
with the terms of the Exchange Rights Agreement, dated as of _________ __, 1997
(the "EXCHANGE RIGHTS AGREEMENT"), and the Exchange Right referred to therein;
(ii) surrenders such OP Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Stock Amount (as determined by the
Company) deliverable upon exercise of the Exchange Right be delivered to the
address specified below, and if REIT Stock is to be delivered, such REIT Stock
will be registered or placed in the name(s) and at the address(es) specified
below.
The undersigned hereby represents, warrants, and certifies that the
undersigned (a) has marketable and unencumbered title to such OP Units, free and
clear, other than any encumbrance arising pursuant to the Partnership Agreement,
of the rights or interests of any other person or entity; (b) has the full
right, power, and authority to exchange and surrender such OP Units as provided
herein; and (c) has obtained the consent or approval of all persons or entities,
if any, (other than consent or approval that may be required of the Company or
the Operating Partnership) having the right to consent or approve such exchange
and surrender on the part of the undersigned.
The undersigned hereby makes the representations and warranties contained
in Section 3.3 of the Exchange Rights Agreement as if such representations and
warranties had been set forth in full in this Notice of Exchange.
Dated: __________________________
______________________________________
Name of Limited Partner (Please Print)
Signature guaranteed by:
Signature of Limited Partner)
_____________________________
(Street Address)
(City) (State) (Zip Code)
If REIT Stock is to be issued, issue to:
Name:
Limited Partner's social security or tax
identification number:
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