Exhibit 2.2
XX XXXXX OPERATING PARTNERSHIP, L.P.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
April 22, 1998
The Swig Investment Company
000 Xxxxxxxxxx Xxxxxx - 00xx xxxxx
Xxx Xxxxxxxxx, XX 00000
Att: Xxxxxx X. Xxxxxxx, President
The Xxxxxx-Xxxxx Investment Company
1114 Avenue of the Americas - Suite 3400
New York, New York 10036
Att: Xxxx Xxxxxx
Re: 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
Dear Xxxxxx and Xxxx:
Set forth herein are the terms and conditions of an agreement among The
Swig Investment Company ("Swig"), TheWeiler-Xxxxx Investment Company ("WAIC")
and XX Xxxxx Operating Partnership, L.P. ("Green") with respect to a proposed
transaction involving 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx (the "Property").
The terms of the transaction are as follows:
1. (a) At the Closing (as hereinafter defined), the entity that owns the
fee estate in the Property (the "Fee Owner") shall liquidate and distribute to
each of Swig and WAIC or its affiliate a 50% undivided interest in the fee
estate. Immediately thereafter, Green or any affiliate of Green (such affiliate,
"SLG") will purchase the Swig's 50% undivided interest in the fee estate for
$19,000,000 in cash and the equivalent of $1,000,000 in limited partnership
interests in Green (the "OP Units"). Such equivalent shall be determined on the
basis of the average closing price of a common share of the REIT (as hereinafter
defined) on the New York Stock Exchange on the 20 trading days immediately prior
the Closing. Swig and WAIC shall each remain liable for 50% of any obligations
of the Fee Owner arising prior to the Closing which are neither directly related
to the operation of the Property nor otherwise obligations of the Leasehold
Owner.
(b) At the Closing, SLG and WAIC shall enter into a co-tenancy agreement
(the "Co-Tenancy Agreement") which will provide that all decisions will require
the consent of both co-tenants, except that, to avoid any real or potential
conflict of interest, at any time that the tenant under the Ground Lease (as
hereinafter defined) or the subtenant under the Sublease (as hereinafter
defined) is directly or indirectly "affiliated" (which term shall be defined in
the Co-Tenancy Agreement in a manner acceptable to WAIC) with the SLG co-tenant,
the WAIC co-tenant shall have the exclusive right, without the consent of the
SLG co-tenant, on behalf of the fee ownership, to administer the fee interest
vis-a-vis the Ground Lease and to take all actions, make all determinations,
exercise (or refrain from exercising) all rights and remedies and grant or
withhold all consents and approvals with respect to the Ground Lease, including,
without limitation, the right to (x) designate the arbitrator and exercise all
other rights of the fee ownership in any rent arbitration under the ground lease
(the "Ground Lease") dated July 29, 1988 between the Fee Owner and the owner of
the leasehold estate in the Property (the "Leasehold Owner"), (y) declare a
default under the Ground Lease and (z) make all decisions and exercise all
1
rights of consent concerning any subtenants of any tier, mortgages affecting the
leaseholds created by the Ground Lease and/or the Sublease or any other
sublease, requests for nondisturbance agreements, alterations, etc. This right
of WAIC described in the preceding sentence shall be set forth in both the
Co-Tenancy Agreement and the amendment of the Ground Lease described below (and
a memorandum thereof to be recorded) and all such documents shall contain an
irrevocable power of attorney from the SLG co-tenant to the WAIC co-tenant in
furtherance thereof. Each co-tenant shall have a right of first offer with
respect to the sale of the other co-tenant's interest in the fee ownership. The
Co-Tenancy Agreement shall prohibit either co-tenant from seeking partition of
the fee estate. The Co-Tenancy Agreement shall not be deemed to create any
partnership or joint venture relationship or any fiduciary obligations. All
references in this Paragraph 1(b) to "SLG co-tenant" and "WAIC co-tenant" shall
be deemed to include their respective successors and assigns (whether affiliated
or unaffiliated).
(c) ______ Each OP Unit referred to in this Agreement will be convertible
into one share of XX Xxxxx Realty Corp. (the "REIT"). No fractional OP Units
shall be issued, and therefore any fractional OP Unit shall be rounded up or
down. The OP Units shall have the same rights, privileges and other benefits as
other limited partnership interests in Green in existence as of the date hereof,
and are described in Form S-11 dated April 11, 1998. If Swig converts any OP
Units into stock in the REIT, Green shall at its expense cause such stock to be
registered the next time (after such conversion) that the REIT registers any
stock in the REIT. If said stock has not been registered within 90 days of such
conversion, Swig shall have the right to require Green to purchase said stock
for its equivalent value in cash.
2. _______ At the Closing, the Ground Lease shall remain unmodified except
that (a) the Net Annual Rent (as defined therein) from the Closing until July
28, 2011 shall be $2,700,000 [to be revised if the closing occurs after July 1,
1998 to give the fee owners the equivalent of $2,700,000 per annum from July 1,
1998 to July 28, 2011], (b) the Net Annual Rent for the period from July 29,
2011 through July 28, 2021, shall be $3,100,000 (rather than $2,700,000) or
7.75% of the Fair Market Value of the Land (as such terms are defined in the
Ground Lease), whichever is greater, (c) all payment of Net Annual Rent shall be
made 50% directly to the WAIC co-tenant and 50% directly to the SLG co-tenant,
and (d) as described in Section 1(b) above. Notwithstanding anything to the
contrary contained elsewhere in this Agreement, except as expressly provided in
this Xxxxxxxxx 0, XXXX shall not be required to agree to any modification of the
Ground Lease.
2
3. _______ (a) ______ Simultaneously herewith, Green has entered into a
contract of sale (the "Fund Contract") with the Comptroller of the State of New
York as Trustee for the New York State Common Retirement Fund (the "Fund"), to
purchase the existing mortgage loan encumbering the leasehold interest in the
Property (the "Mortgage Loan"). Green acknowledges that the Fund has commenced
an action to foreclose the Mortgage Loan (the "Foreclosure Action") and has had
a receiver appointed for the Property in connection therewith (the "Receiver").
The closing of the transactions contemplated hereby (the "Closing") will occur
simultaneously with the closing of the transactions under the Fund Contract.
(b) At the Closing, WAIC shall pay to SLG $1,050,000.00 as a lease
restructuring fee.
(c) ______ The Leasehold Owner shall continue to have the right to take
such steps with regard to the Mortgage Loan as it deems appropriate to protect
its interests in the Property, provided, however, that neither Swig nor WAIC
shall take any action on behalf of the Leasehold Owner that would impair its
ability to close the transactions contemplated hereby without the prior consent
of Green unless Swig or WAIC, as applicable, in good faith believes that such
action is necessary to prevent a loss of the Leasehold Owner's interest in the
Ground Lease or a material diminution in the value thereof. If a bankruptcy
petition is filed by or against (other than by SLG or Green) the Leasehold
Owner, Green may terminate this Agreement.
(d) ______ As among SIC, WAIC and Green, upon Closing, Green shall be
entitled to any and all monies held by the Fund and/or its advisor and/or the
Receiver in connection with the Property.
4. _______ At the Closing, Green and the Leasehold Owner shall modify the
Mortgage Loan as follows: (a) the Mortgage Loan shall be restructured as a
$45,000,000 loan maturing 15 years from the Closing, (b) the Mortgage Loan shall
be interest only with an interest rate of 7.75% per annum (360 day year), (c)
the Mortgage Loan shall be non-recourse to the Leasehold Owner (with no recourse
to Swig or WAIC, other than to the extent of their respective interests in the
Leasehold Owner), (d) the holder of the Mortgage Loan shall have no ability to
reduce same (other than upon payment by the Leasehold Owner) without the consent
of the Leasehold Owner, (e) the monetary grace period shall be 30 days after
notice and the nonmonetary grace period shall be 30 days after notice or such
longer period of time as is reasonably necessary to cure the default (including
any period of time reasonably necessary to obtain performance by any subtenant
of its obligations in respect of such default), (f) the Mortgage Loan shall be
modified to incorporate any lock box arrangements reasonably required by the
holder thereof with respect to the rent payable by the tenant under the
Sublease, and (g) the Foreclosure Action shall be discontinued, with prejudice.
The holder of the Mortgage Loan shall have the right to pledge the same without
the consent of the Leasehold Owner. Swig and WAIC shall cause the Leasehold
Owner to cooperate with SLG, at no cost or expense to the Leasehold Owner, Swig,
or WAIC, in discharging the Receiver as soon as possible after the Closing.
3
5. _______ At the Closing, the Leasehold Owner will enter into a sublease
with SLG (the "Sublease"). The Sublease will be on the same terms as the Ground
Lease except that (a) the term shall be twenty-five years from the Closing, (b)
the fixed rent per annum will be equal to $6,247,937.50 for the period from the
Closing until July 28, 2011, and $6,647,937.50 plus the amount, if any, by which
the Fixed Annual Rent under the Ground Lease exceeds $3,100,000, for the period
from July 29, 2011 until the end of the term of the Sublease, (c) the subtenant
shall have the right, on behalf of the Leasehold Owner, to exercise the
Leasehold Owner's rights with respect to the determination of the Fixed Annual
Rent payable under the Ground Lease for the ten year period beginning July 29,
2011, (d) the subtenant shall have the unlimited right to obtain institutional
financing with respect to its interest in the Sublease, (e) the subtenant will
assume liability for all obligations relating to the operation, leasing,
management and ownership of the Property, including obligations in respect of
periods preceding the Closing and/or the receivership, and shall indemnify the
Leasehold Owner (and its predecessors in interests) therefor, (provided that the
foregoing assumption and indemnity as to "ownership" of the Property are not
intended to apply to an obligation of a present or past owner of the Property
where such obligation is not related to the Property), (f) the Sublease shall
contain an option on the part of the subtenant to purchase the interest of the
Leasehold Owner in the Ground Lease during the one year period beginning on the
twelfth anniversary of the Closing by taking title subject to the Mortgage Loan
or any substitute or replacement therefor which does not exceed $45,000,000 and
causing Green to deliver to the Leasehold Owner the equivalent of $1,000,000 in
OP Units (determined as of the date of the Closing in the manner provided in
Section 1(a) above, and adjusted for dilution and certain other extraordinary
events which affect the number and/or value of OP Units or shares of the REIT
(or the respective successors of Green or the REIT) outstanding, after the date
of Closing), if the subtenant is Green or an affiliate thereof (in which event
the transaction will be structured as a contribution pursuant to Section 721 of
the Internal Revenue Code), or such other amounts as shall be agreed to between
Green and the Leasehold Owner based upon the then value of such OP Units if the
subtenant is not Green or an affiliate thereof, or, in either event, if at the
time of such purchase there is no market or published price for REIT (or such
successors') shares, then the purchase price will be based on the last published
price for such shares, as increased by a rate equal to 5.5% per annum, (g) the
subtenant shall have a right of first offer with respect to the sale of the
interest of the Leasehold Owner in the Ground Lease or the sale by Swig and/or
WAIC of their interests in the Leasehold Owner (other than sales or transfers to
members or their affiliates), (h) the Property will be subleased "as is" to the
subtenant and the covenant of quiet enjoyment will be subject to the rights of
the holder of the Leasehold Mortgage, (i) if the Leasehold Mortgage is
foreclosed (whether or not the holder of the Leasehold Mortgage is then
affiliated with Green or the tenant under the Sublease) following a default by
the tenant under the Sublease, Green shall pay, as liquidated damages to each of
WAIC and Swig an amount equal to $185,000 multiplied by the then number of years
(including partial years) remaining until the 12th anniversary of the Closing
and (j) so long as the Ground Lease is in effect, the consent of the Leasehold
Owner to alterations by or on behalf of the tenant under the Sublease shall not
be required provided that (1) the alterations will not reduce the value of the
Property or the size of the improvements or result in the construction of a new
building and (2) any consent by the fee owners to such alterations required
pursuant to the terms of the Ground Lease has been obtained (provided that if
for any reason the Ground Lease is terminated and the Sublease becomes a direct
lease between the fee owners and the subtenant, the fee owners shall have the
same consent rights as to alterations as are provided for in the Ground Lease).
The Subtenant under the Sublease and the fee owners will enter into a
nondisturbance and attornment agreement in a form acceptable to WAIC. It is the
intention of the parties that the income taxes incurred by WAIC and Swig upon
the exercise of the option set forth in Section 5(f) above shall not exceed the
income taxes that would be payable by WAIC and Swig if the Leasehold Owner sold
its interest in the Ground Lease on the date hereof, assuming that the interest
in the Ground Lease were the only asset of WAIC and Swig and assuming no change
in any tax laws or rates, and the parties shall not take any action inconsistent
with such intent.
6. _______ Green will be responsible for any transfer taxes payable in
connection with the Closing, and shall pay for any title insurance it elects to
obtain. There shall be no prorations of any items of income or expense of the
Property.
7. _______ This letter agreement amends and restates in its entirety that
certain letter dated December 8, 1997 from Green to Swig, agreed to by Swig, and
that certain letter dated March 6, 1998 from Green to Swig, agreed to by Swig.
8. _______ During the term of this Agreement, Swig and WAIC shall provide,
to the extent in their possession, copies of such agreements and other
information relating to the Property, the Fee Owner and the Leasehold Owner as
Green shall reasonably request, including without limitation, partnership
agreements, tax returns, loan documents, title policies, surveys, leases,
service contracts, brokerage agreements, etc. Green shall keep the contents of
all such documents confidential in accordance with the provisions of the
agreement between Green and Swig dated October 29, 1997. Green shall also have
such access to the Property as may be made available to Green by the Receiver.
Green hereby agrees to indemnify and hold harmless the fee owners and the
Leasehold Owner and their direct and indirect partners and principals from and
against any and all losses and/or damages that either may incur by reason of any
such access by Green. During the term of this Agreement, (a) Swig and WAIC shall
not cause the Leasehold Owner to enter into or consent to the entering into of
any contract or lease relating to the Property without the prior written consent
of Green, which consent may be withheld by Green in its sole discretion (it
being understood that the Leasehold Owner may not have the right to consent to
all contracts and/or leases entered into by the Receiver), (b) Swig and WAIC
shall not admit additional beneficial owners into the Fee Owner or the Leasehold
Owner or modify any of the organizational documents of such entities in a manner
which would impair their obligations hereunder (but WAIC and/or Swig may convey
all or a portion of its interest in the Fee Owner and/or Leasehold Owner to an
affiliate and the Leasehold Owner may convert to a limited liability company)
and (c) for so long as the Fund Contract is in full force and effect, Swig and
WAIC shall not take any action in the Foreclosure Action which would have a
material adverse effect on Green without the prior written consent of Green,
except as set forth in Section 3(c)
4
9. _______ Each party hereby represents to the others that it dealt with no
broker, finder or other agent in connection with the transactions contemplated
herein. Each party shall indemnify the other parties from any liability incurred
as the result of a breach of the above-mentioned representation by the
indemnifying party.
10. ______ Each party shall pay its own legal fees and related expenses in
connection with the transactions contemplated herein.
11. ______ It shall be a condition of Green's obligations under this
Agreement that at the Closing (a) title to the Property shall be good,
marketable and insurable, free and clear of all liens, restrictions, easements,
encumbrances, leases and tenancies except for the items set forth in Lawyers
Title Insurance Corporation title commitment number MTM-8289-M dated November
30, 1977, as amended on February 25, 1998, and tenant leases, (b) Swig and WAIC
shall have performed all of their covenants, undertakings and obligations set
forth herein, (c) the closing of the acquisition by SLG of the Mortgage Loan
shall have occurred as set forth in the Fund Contract, (d) the Fee Owner shall
have been converted to a tenancy in common and WAIC and SLG shall have executed
the Co-Tenancy Agreement containing the provisions set forth in Section 1
hereof, (e) the Fee Owner and the Leasehold Owner shall have entered into an
amendment of the Ground Lease containing the provisions set forth in Section 2
hereof (the "Ground Lease Amendment"), (f) the garage portion of the Property
shall be delivered to SLG free of any leases, licenses or rights of occupancy,
(g) the Leasehold Owner and SLG shall have entered into the Sublease upon the
terms set forth in Section 5 hereof, (h) the Leasehold Owner and SLG shall have
modified the Mortgage Loan as set forth in Section 4 hereof, and (i) the
proposed lease with Crain's shall not have been entered into without Green's
consent, which consent may be withheld in Green's sole discretion.
12. ______ It shall be a condition of WAIC's obligations hereunder that at
the Closing (a) Green and Swig shall have performed all of their covenants,
undertakings and obligations set forth herein, (b) the closing of the
acquisition by SLG of the Mortgage Loan shall have occurred, (c) the Sublease,
the Co-Tenancy Agreement and the Ground Lease Amendment shall have been
executed, (d) the Mortgage Loan shall have been restructured as set forth in
Section 4 hereof and (e) the operating agreement of Leasehold Owner shall have
been amended to provide that WAIC may withdraw as a member thereof at any time.
13. ______ It shall be a condition of Swig's obligations hereunder that at
the Closing (a) Green and WAIC shall have performed all of their covenants,
undertakings and obligations set forth herein, (b) the closing of the
acquisition by SLG of the Mortgage Loan shall have occurred, (c) the Sublease
and the Ground Lease Amendment shall have been executed, and (d) the Mortgage
Loan shall have been restructured as set forth in Section 4 hereof.
14. ______ Green shall not extend the closing date under the Fund Contract
beyond August 15, 1998 without the prior written consent of WAIC and Swig.
15. ______ If the Fund Contract terminates or the Fund gives notice of such
termination or the closing under the Fund Contract has not occurred by August
15, 1998, any party hereto may terminate this Agreement.
5
16. ______ Green shall promptly deliver to WAIC and Swig copies of all
notices given or received by Green under or relating to the Fund Contract.
17. ______ If WAIC defaults under or breaches this Agreement, Green's sole
and exclusive remedy shall be at Green's election (i) specific performance or
(ii) to terminate this Agreement and seek damages; provided, however, that,
notwithstanding anything to the contrary contained in this Agreement: (x)
neither Green nor Swig shall have any recourse to any assets of WAIC other than
the interest of WAIC in the Leasehold Owner and (y) in no event whatsoever shall
any direct or indirect officer, employee, representative, agent, principal or
partner (whether disclosed or undisclosed) of WAIC have any liability for the
obligations of WAIC under this Agreement or arising from any breach hereof.
18. ______ If Swig defaults under or breaches this Agreement, Green's sole
and exclusive remedy shall be at Green's election (i) specific performance or
(ii) to terminate this Agreement and seek damages; provided, however, that,
notwithstanding anything to the contrary contained in this Agreement: (x)
neither Green nor WAIC shall have any recourse to any assets of Swig other than
the interest of Swig in the Leasehold Owner and (y) in no event whatsoever shall
any direct or indirect officer, employee, representative, agent, principal or
partner (whether disclosed or undisclosed) of Swig have any liability for the
obligations of Swig under this Agreement or arising from any breach hereof.
19. ______ WAIC and Swig shall, at SLG's request, cause the Leasehold Owner
to cooperate with SLG in connection with terminating any union agreements and/or
the employees thereunder; provided, however, that SLG shall pay any and all
amounts due in connection therewith and shall cause the REIT to indemnify,
defend and hold harmless WAIC, Swig and the Leasehold Owner (and their
respective direct and indirect principals and partners) from and against any and
all liability, claims, damages, costs and expenses (including attorney's fees)
incurred by any of WAIC, Swig and/or the Leasehold Owner (and their respective
direct and indirect principals and partners) in connection therewith.
6
Please indicate your agreement to the foregoing by signing this letter in
the location indicated below. This letter agreement shall become effective upon
the exchange of telecopy counterparts.
XX XXXXX OPERATING PARTNERSHIP, L.P.
By:XX Xxxxx Realty Corp., general partner
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------
Xxxxxxx X. Xxxxx, Chief Executive Officer
Accepted and Agreed To:
THE SWIG INVESTMENT COMPANY
By: /s/ Xxxxxx X. Xxxxxxx
-----------------------------------------
Xxxxxx X. Xxxxxxx,
President
THE XXXXXX-XXXXX INVESTMENT COMPANY
By: /s/ Xxxx X. Xxxxxx
-----------------------------------------
Xxxx X. Xxxxxx
Associate General Manager
