CONTINGENT CONSIDERATION AGREEMENT
This CONTINGENT CONSIDERATION AGREEMENT (this "Agreement") is made and
entered into this ______ day of November, 1996 by and between HARBORSIDE
EXCHANGE PLACE LIMITED PARTNERSHIP, a New Jersey limited partnership, having an
office c/x Xxxxx Xxxx Xxxxxxx Realty Advisors, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 ("Seller") and CALI HARBORSIDE (FEE) ASSOCIATES L.P., having an
office c/o Cali Realty Corporation, 00 Xxxxxxxx Xxxxx, Xxxxxxxx, Xxx Xxxxxx
00000 ("Purchaser").
STATEMENT OF FACTS
Pursuant to an Agreement of Purchase and Sale (the "Purchase
Agreement") dated September 11, 1996, by and between, among others,
Seller and Cali Realty Corporation, Seller and Purchaser agreed, among
other things, to enter into this Agreement to evidence their respective
ongoing liabilities and obligations to the other with respect to
certain parcels of land commonly referred to as Plaza IV, Plaza V,
Plaza VI, the South Pier, the North Pier, the North Parking Garage and
the South Parking Garage (individually, a "Plaza" and collectively, the
"Premises") at the Harborside Financial Center in Jersey City, New
Jersey, which parcels are more particularly described on Schedule "A"
annexed hereto. On the date hereof, Purchaser has acquired title to,
among other things, the Premises.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. (a) If Purchaser or any affiliate shall commence construction at any
portion of the Premises for any improvements other than for at-grade parking or
a structured parking deck, then Purchaser shall pay to Seller an amount (the
"Contingent Construction Consideration") determined by multiplying the Per
Square Foot Development Consideration shown on Schedule "B" annexed hereto
allocable to the year in which said construction shall have commenced times the
number of square feet to be constructed on said portion of the Premises. For
purposes of this Agreement, construction shall be deemed to have commenced upon
the earlier of (i) excavation for, or the pouring or laying, as the case may be,
of, the foundations or footings for said improvements or (ii) the erection of
any improvements or parts thereof above grade level. Commencement of
construction shall not include demolition of any existing structures,
improvements or parking lots. The payment to Seller made at commencement of
construction (the "Initial Contingent Construction Payment") shall be based upon
the square footage permitted to be built for said improvements pursuant to the
building permit issued by the governmental agency having jurisdiction thereover.
A copy of the building permit shall be delivered to Seller promptly after
issuance thereof. In the event that at the commencement of construction there
shall not have been issued a building permit or other permit or approval setting
forth the allowed square footage to be built, then the square footage permitted
to be built shall, for purposes of calculating the Initial Contingent
Construction Payment, be deemed to be the square footage set forth in Section
2(a) below for the applicable Plaza. Upon completion of construction (as
evidenced by a temporary or permanent certificate of occupancy or similar permit
allowing the use of the improvements for their intended purpose), Purchaser
shall so advise Seller, and Purchaser or Seller, or both, may, at their own
expense, retain a duly licensed bona fide third party architect which is a
member of the American Institute of Architects to measure the square footage
actually built by Purchaser and certify such amount to Purchaser and Seller (the
"Architect's Certification"). Purchaser shall provide access to the building in
order for Seller's architect to make such measurement. A dispute arising out of
such measurement shall be resolved in accordance with Section 10 below. Upon
resolution of a dispute, if there should be one, or if there is no dispute, then
promptly following delivery of the Architect's Certification, if the actual
square footage built shall be greater than the square footage anticipated to be
built at the commencement of construction, Purchaser shall make a payment to
Seller equal to the Contingent Construction Consideration then due Seller (which
shall be based upon the per square foot amount due at the time of commencement
of construction) less the Initial Contingent Construction Payment paid by
Purchaser on account of said construction; if the actual square footage built
shall be less than the square footage anticipated to be built at the
commencement of construction, Seller shall refund to Purchaser an amount equal
to the Initial Contingent Construction Payment less the Contingent Construction
Consideration actually due on account of said construction. The Initial
Contingent Construction Payment shall constitute satisfaction of Purchaser's
obligations hereunder with respect to that portion of the Premises so improved
if neither party commissions an Architect's Certification within thirty (30)
days after the completion of construction or forwards an Architect's
Certification to the other party within sixty (60) days after completion of
construction. If Seller shall fail to reimburse Purchaser based upon the
Architect's Certification, then Purchaser shall have the right, among its other
remedies, to offset against any further Contingent Construction Consideration
which may be due hereunder any amounts which were to have been refunded by
Seller.
(b) In the event that an amended building or other permit
shall be issued during construction, Purchaser shall be obligated to make a
payment to Seller calculated as if said amendment were part of the initial
permit issued, with such payment being due and payable within thirty (30) days
after the issuance thereof.
(c) Seller shall not be entitled to any payment from Purchaser
with respect to construction of any at-grade parking or structured parking deck.
In addition, in determining the square footage to be used in computing the
Contingent Construction Consideration, the square footage shall not include
mechanical or equipment rooms and basement space (unless the basement space is
actually used by third parties paying rent therefor).
(d) If Purchaser shall sub-divide any Plaza, then the
provisions of this Agreement shall apply on a pro-rata basis.
2. (a) If Purchaser shall sell all or any portion of any of the
Premises to a third party who is not affiliated with Purchaser, then Purchaser
shall pay to Seller an amount (the "Contingent Sale Consideration") which, for
Plaza IV, Plaza V, Plaza VI, the North Pier or the South Pier, shall be
determined by multiplying the Per Square Foot Development Consideration
allocable to the year in which the closing of said sale shall occur times the
amount of developable square footage allocable to the Plaza sold, which is
1,000,000 square feet for Plaza IV, 1,500,00 square feet for Plaza V, 1,500,00
square feet for Plaza VI, 250,000 square feet for the North Pier and 250,000
square feet for the South Pier; if the sale is of the North Parking Garage or
South Parking Garage, then if as part of the sale the use of said parcel is
restricted to parking, no Contingent Sale Consideration shall be due and if the
use is not so restricted, then the Contingent Sale Consideration shall be equal
to one-half (1/2) of the net sales proceeds. If as part of any sale, any portion
of the purchase price is paid by purchase money financing, then the net
proceeds, if any, available at the closing thereunder shall be paid to Seller on
account of the Contingent Sale Consideration then due. If any portion of the
Contingent Sale Consideration for such transaction remains unpaid, then the net
amount of any payments made by the mortgagor shall be paid over to Seller as
same are received by the mortgagee. Any portion of the Contingent Sale
Consideration remaining unpaid on account of said purchase money financing
transaction shall be paid on the fifth (5th) anniversary of the closing
thereunder. Unpaid portions of the Contingent Sale Consideration due as a result
of purchase money financing shall accrue interest at the greater of the same
rate paid by the mortgagor under the purchase money financing or the then
applicable minimum imputed interest rate (AFR) as determined under Internal
Revenue Code regulations.
(b) If Purchaser shall enter into one or more long-term ground
or net leases (each lease being referred to as a "Lease") with respect to all or
any portion of the Premises with a third party who is not affiliated with
Purchaser, then the provisions of Section 2(a) shall apply as if the Premises so
leased was sold, except that the amount due Seller shall be paid in five (5)
equal installments, with the first payment being due upon the commencement of
the payment of rent under the Lease and each subsequent payment being due on the
anniversary of the previous payment due date. Unpaid portions of the Contingent
Sale Consideration due as a result of a Lease shall accrue interest at the same
effective rate as Purchaser is then paying to US West Pension Trust, Investment
Management Company under that certain purchase money $___________ note dated on
or about the date hereof; if said note has been satisfied, then interest shall
accrue at the interest rate in effect immediately prior to the satisfaction of
the note.
(c) Seller acknowledges that the provisions of Section 2(a)
shall not apply, and no payment shall be due Seller, upon any transfer or
conveyance in which Purchaser transfers or otherwise conveys all or any portion
of the Premises (i) to an entity which controls or is controlled by Purchaser,
or is controlled by the same entity controlling Purchaser at the time of the
conveyance or (ii) in connection with a joint venture development of the
Premises so conveyed in which Purchaser, or an entity which controls or is
controlled by Purchaser, or which is controlled by the same entity controlling
Purchaser at the time of the conveyance, has a fifty (50%) percent or more
interest. Any such transfer or conveyance, however, shall not release Purchaser
of any obligation it may have to make a Contingent Construction Payment to
Seller in accordance with Section 1 hereof or a Contingent Sale Payment to
Seller if such payment is subsequently due in accordance with Section 2 hereof.
Purchaser shall not be entitled to a release of any Plaza which is so
transferred pursuant to this paragraph (c). As part of said transfer or
conveyance, the transferee shall assume Purchaser's liability hereunder as
applicable to the transferred Plaza.
3. (a) Upon payment of each Initial Contingent Construction Payment or
payment of a Contingent Sale Consideration (collectively, the "Contingent
Consideration"), and provided that Purchaser shall not be in default of its
obligations hereunder, Seller shall deliver a release of this Agreement and such
other documents reasonable requested by Purchaser (the "Release Documents"),
executed in recordable form, releasing this Agreement and any other right, title
and interest of Seller from that portion of the Premises which is the subject of
the Contingent Consideration. The Release Documents shall also include an
acknowledgement setting forth the number of square feet for which payment is
being made. If the Contingent Sale Consideration is not paid in full upon the
commencement of a Lease or on the closing of a sale in which purchase money
financing is provided, all as more particularly provided for in Section 2(b)
above, then Seller nevertheless agrees to perform as required in the first
sentence of this Section 3 and Purchaser shall, at Seller's option, collaterally
assign to Seller or its designee the Lease (pursuant to a collateral assignment
of leases and rents) or the purchase money financing documents, as the case may
be, until payment in full of the Contingent Sale Consideration.
(b) In order to facilitate transactions affecting the Premises
or any portion thereof, Seller agrees that upon request of Purchaser given from
time to time, Seller shall deliver to the New Jersey office designated by
Purchaser of any nationally recognized title company, or authorized agent
thereof, ("Escrowee") the Release Documents for that portion of the Premises
described in Purchaser's request. Said request shall include a description of
the transaction Purchaser anticipates entering into or closing accompanied by a
copy of any letter of intent or contract (with financial terms redacted), the
anticipated Contingent Consideration due on account thereof and the anticipated
date(s) for payment. Escrowee shall hold the Release Documents in escrow,
pending Escrowee's receipt of the Contingent Consideration due on account of
said transaction. Escrowee shall be entitled to release the Release Documents
from escrow and record same, as appropriate, upon Escrowee's delivery to Seller
of the Contingent Consideration then due on account of said transaction.
(c) If Seller and Purchaser dispute the Contingent
Consideration due on account of a particular transaction, Purchaser shall
nevertheless be entitled to proceed with such transaction and close thereunder
so long as Purchaser shall (i) certify to Escrowee the Contingent Consideration
due on account of the transaction then being consummated and that said amount
was calculated in good faith (such certification to be accompanied by
appropriate back-up materials and a description of the transaction and premises
covered) and (ii) shall pay Escrowee, or cause to be paid, the Contingent
Consideration so calculated; provided, however, that if Seller has responded to
Purchaser's request for Release Documents and has calculated an amount which is
different than Purchaser's amount, Purchaser shall escrow the amount calculated
by Seller. If Purchaser shall have paid to Escrowee the Contingent Consideration
so calculated and Seller shall not have delivered the Release Documents,
Escrowee, or the title insurance company or abstract agency then insuring said
transaction, is hereby authorized and directed to insure said transaction free
and clear of this Agreement and any and all right, title and interest of Seller
in and to that portion of the Premises which is the subject of the transaction,
Seller in such event hereby waiving and releasing Escrowee, the company or
agency insuring said transaction and that portion of the Premises which is the
subject of the transaction, from any claim Seller may have with respect thereto.
The Escrowee is to invest the amount so paid, and interest is to be paid Seller
so long as Seller has provided Escrowee with a tax identification number. Upon a
resolution of any dispute, the Escrowee shall distribute the money, plus accrued
interest.
4. This Agreement shall expire and shall be of no further force or
effect on the earlier to occur of (a) the date which is thirty (30) years after
the date hereof (except that the provisions of this Agreement applicable to any
reconciliation of Contingent Consideration as to any development which commenced
prior to the expiration of the thirty (30) years shall survive) or (b) the
payment by Purchaser of Contingent Consideration allocable to two million
(2,000,000) square feet. Upon the expiration of this Agreement, Seller shall
execute and deliver to Purchaser, in recordable form, the Release Documents
applicable to any portion of the Premises which are still encumbered by this
Agreement.
5. Seller shall complete and file such returns and pay all realty
transfer fees and taxes on account of the payment to it of the Contingent
Consideration.
6. (a) This Agreement shall be subject and subordinate in all respects
to any and all mortgages and related security instruments, and to ground or
underlying leases affecting the Premises, and to all renewals, modifications,
consolidations, replacements and extensions thereof. This clause shall be
self-operative and no further instrument of subordination shall be required by
any ground or underlying lessee or by any mortgagees, trustees or other lenders
or representatives thereof. In confirmation of such subordination, Seller shall
execute promptly, at no expense to Purchaser, any instrument or certificate
which Purchaser may reasonably request. In consideration of Seller's
subordination, Purchaser agrees that in the event Purchaser places, refinances,
extends, consolidates or modifies any debt which is secured in whole or in part
by the Premises for which the outstanding principal balance exceeds one hundred
ten million ($110,000,000) dollars, then (i) Purchaser shall cause Cali Realty
Corporation or successor entity to execute a guaranty of the obligations of
Purchaser hereunder, which guaranty shall be in form and substance reasonably
satisfactory to Purchaser and Seller (for purposes of the guaranty, any
foreclosure, deed-in-lieu of foreclosure or similar event shall be deemed a sale
of the Premises) and (ii) the first ten million ($10,000,000) dollars of net
proceeds from any refinancing, extension, consolidation or modification of such
debt shall be shared equally by Purchaser and Seller. Any payment made to Seller
pursuant to the preceding sentence shall be deemed a payment of Contingent
Consideration, with the square footage applicable to said payment being
calculated by dividing the amount so paid by the Per Square Foot Development
Consideration; such payment shall also be on account of the payments described
in Section 7 below.
(b) Notwithstanding the foregoing provisions of this Section
6, this Agreement shall not be subordinate to any construction financing since,
pursuant to the terms hereof, Purchaser's obligations hereunder are to be
satisfied upon any construction for which such financing is to be applicable and
this Agreement is to be released from the applicable Plaza upon such payment. In
addition, if Purchaser has defaulted on any monetary obligation hereunder and
such default remains uncured after notice thereof from Seller and the passage of
ten (10) days to cure same, this Agreement will not be subordinate to any
financing which is consummated during the continuance of said default.
7. (a) From the date hereof through November __, 1999 (the "3 Year
Prepayment Period"), Purchaser shall have the right to satisfy all of its
obligations hereunder, and obtain the Release Documents, upon payment to Seller
of Six Million Four Hundred Seventy Five Thousand ($6,475,000) Dollars (the "3
Year Prepayment Amount"), which 3 Year Prepayment Amount shall be reduced dollar
for dollar by any payments made to Seller hereunder prior to said date.
(b) From November __, 1999 through November __, 2002 (the "6
Year Prepayment Date"), Purchaser shall have the right to satisfy all of its
obligations hereunder, and obtain the Release Documents, upon payment to Seller
of Eight Million Three Hundred Eighty Six Thousand ($8,386,000) Dollars (the "6
Year Prepayment Amount"), which 6 Year Prepayment Amount shall be reduced dollar
for dollar by any payments made to Seller hereunder prior to said date. If
during the 3 Year Prepayment Period Purchaser shall have made payments to Seller
of at least Three Million Two Hundred Thirty Seven Thousand Five Hundred
($3,237,500) Dollars, then the 6 Year Prepayment Amount shall be reduced to Four
Million One Hundred Ninety Two Thousand ($4,192,000) Dollars and further reduced
by the excess of any payments made to Seller during the 3 Year Prepayment Period
over Three Million Two Hundred Thirty Seven Thousand Five Hundred ($3,237,500)
Dollars.
(c) If Purchaser shall not have made the 3 Year Prepayment
Amount or 6 Year Prepayment Amount on or before the 6 Year Prepayment Date, then
for the period from the 6 Year Prepayment Date through the date which is 6
months following the date that Purchaser gives Seller notice of the 6 Year
Prepayment Date, Seller shall have the right to cause Purchaser to pay to it the
6 Year Prepayment Amount, as the same may have been reduced as provided in
paragraph (b) above. Simultaneous with such payment, Seller shall deliver to
Purchaser the Release Documents.
8. Within ten (10) days after written request of Seller or Purchaser
given from time to time, the other party shall certify, in recordable form, to
such parties as are requested of it, such matters as are reasonably requested,
including, without limitation, the date of this Agreement and any modifications
thereof, the remaining term of this Agreement based upon the number of days
elapsed, the portions of the Premises still encumbered by this Agreement, the
payments made to date and the date said payments were made, and the number of
square feet for which payment has been made. Any parties to whom said
certifications are made shall be entitled to rely on same.
9. Any payments to be made hereunder shall be deemed proper if made by
certified or bank check, drawn on an institution with an office in the State of
New Jersey or New York, and payable directly to the order of Seller or its
designee. Seller shall have the right to designate that funds be sent to it by
wire transfer, so long as said wire transfer instructions are sent to Purchaser
and Escrowee, if applicable, at least three (3) business days prior to the
anticipated date of funding.
10. Purchaser shall give Seller at least seven (7) days notice of the
date that Purchaser anticipates making a payment to Seller of Contingent
Consideration. All payments to be made to Seller shall be sent in a manner
permitted hereunder and shall be made to the Seller named in the introductory
paragraph of this Agreement unless and until (i) Seller gives a notice to
Purchaser in the manner required by this Agreement advising of a change of name,
address or both, of Seller and (ii) a statement of such change of name, address
or both is recorded against any Premises still encumbered by this Agreement at
the time of such change. Any notice to Purchaser is to state the name of this
Agreement and to provide that the notice is a notice changing the name, address,
or both, of the party to whom payments are to be made hereunder. Until Purchaser
receives notice of such changes, then so long as Purchaser forwards payment of
any Contingent Consideration in the manner so required, Purchaser shall be
deemed to have satisfied its obligation hereunder with respect to such delivery,
notwithstanding any failure of Seller to have an office at such address.
11. If Purchaser or Seller shall dispute the Architect's Certification
provided by the other, then the disputing party shall advise the other within
thirty (30) days of receipt of the Architect's Certification, and shall
commission an Architect's Certification to be completed within thirty (30) days
after delivery of the dispute notice. During said thirty (30) day period, the
party which commissioned the first Architect's Certification shall have the
right to cause its Architect's Certification to be revised. At the end of the
aforedescribed thirty (30) day period, Seller and Purchaser shall arrange for an
in-person simultaneous exchange of each party's Architect's Certification at any
of the existing buildings then comprising the Harborside Financial Center. If
the calculations set forth in each party's Architect's Certification shall
differ by no more than 5,000 square feet, then the square footage shall be the
average of the two calculations. If the difference in square footage shall be
greater than 5,000 square feet, then each party's architect shall designate a
third architect within five (5) days after said exchange, failing which the
architect shall be selected by the American Arbitration Association, which
selection and resolution of the dispute shall be conducted in accordance with
its then existing rules and procedures. Within thirty (30) days after the
designation of the third architect, the architects shall adopt, by a majority
decision, one of the calculations set forth in the Architect's Certification.
Said determination shall be final and binding upon the parties hereto and
neither party shall have the right to appeal such decision.
12. All notices, demands, requests, or other writings in this agreement
provided to be given or made or sent, or which may be given or made or sent, by
either party hereto to the other shall be in writing and shall be delivered by
depositing the same with any nationally recognized overnight delivery service,
or by telecopy or fax machine, in either event with all transmittal fees
prepaid, properly addressed, and sent to the following addresses:
If to Purchaser: Cali Harborside (Fee) Associates L.P.
c/o Cali Realty Corporation
00 Xxxxxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
with a copy to: Pryor, Cashman, Xxxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
If to Seller: Harborside Exchange Place Limited Partnership
c/x Xxxxx Xxxx Xxxxxxx Realty Advisors
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx
with a copy to: Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
or to such other address as either party may from time to time designate by
written notice to the other. Notices given by (i) overnight delivery service as
aforesaid shall be deemed received and effective on the first business day
following such dispatch and (ii) telecopy or fax machine shall be deemed given
at the time and on the date of machine transmittal provided same is sent prior
to 4:00 p.m. on a business day (if sent later, then notice shall be deemed given
on the next business day) and if the sending party receives a written send
verification on its machines and forwards a copy thereof by regular mail
accompanied by such notice or communication. Notices may be given by counsel for
the parties described above, and such Notices shall be deemed given by Seller or
Purchaser, as the case may be, for all purposes hereunder.
13. This Agreement constitutes the entire agreement between the parties
and incorporates and supersedes all prior negotiations and discussions between
the parties.
14. This Agreement cannot be amended, waived or terminated orally, but
only by an agreement in writing signed by the party to be charged.
15. This Agreement shall be interpreted and governed by the laws of the
State of New Jersey and shall be binding upon, and inure to the benefit of, the
parties hereto and their respective successors and assigns. Seller shall have
the right to assign its rights hereunder to any affiliate of US West Pension
Trust so long as said affiliate assumes Seller's obligations hereunder and
Purchaser is delivered a copy of said assumption; no such assignment shall
relieve Seller of its obligations hereunder.
16. If any term, covenant or condition of this Agreement is held to be
invalid, illegal or unenforceable in any respect, this Agreement shall be
construed without such provision.
17. In the event that there shall be any subsequent development on a
Plaza following the release of same from the provisions of this Agreement,
Purchaser shall nevertheless be obligated to make a payment to Seller as a
result of such subsequent development, which payment shall be calculated and
paid in accordance with the terms and conditions hereof as if this Agreement
were still applicable to the Plaza.
18. This Agreement shall not be deemed to create any partnership or
joint venture between Seller and Purchaser with respect to the Premises.
19. Notwithstanding any other provision in this Agreement or default of
the Purchaser hereunder, the Seller hereby agrees and confirms that the
execution and delivery of the deed pursuant to the Purchase Agreement is
absolute and unconditional and conveys fee simple absolute title to the
Purchaser and the Seller agrees that in any action to enforce any provision of
this Agreement it will not challenge or in any manner whatsoever seek to impair
or void such conveyance in whole or in part.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SELLER:
HARBORSIDE EXCHANGE PLACE LIMITED PARTNERSHIP L.P.
By:_____________________________
Name:
Title:
PURCHASER:
CALI HARBORSIDE (FEE)
ASSOCIATES L.P.
By:_______________________________
Name:
Title:
