Contribution And Exchange Agreement

EXHIBIT 10-1


CONTRIBUTION AND EXCHANGE AGREEMENT


THIS CONTRIBUTION AND EXCHANGE AGREEMENT (the "AGREEMENT") is made as of this 6th day of August, 1999 by and among each of the Persons set forth in EXHIBIT A annexed hereto, each having the respective address set forth opposite such Person's name in EXHIBIT A attached hereto (collectively, the "CONTRIBUTORS"), AMERICAN REAL ESTATE INVESTMENT, L.P., a Delaware limited partnership ("PARTNERSHIP"), having an address at 620 West Germantown Pike, Suite 200, Plymouth Meeting, Pennsylvania 19462, Attention: President and AMERICAN REAL ESTATE INVESTMENT CORPORATION, a Maryland corporation (the "REIT"), having an address at 620 West Germantown Pike, Suite 200, Plymouth Meeting, Pennsylvania 19462, Attention: President.


RECITALS


A. Reckson Morris Operating Partnership, L.P. ("RMOP" or the "COMPANY"), a Delaware limited partnership, owns, develops and manages those certain parcels of real property described on SCHEDULE 1.1 attached hereto, together with all of the items of personal property described in Section 1 hereof which are located thereon or related thereto (collectively, the "STAGE I PROPERTIES").


B. On or prior to the Stage I Closing Date, Nixon Park, LLC, a Delaware limited liability company ("NIXON"), will own, develop and manage the parcel of real property described on SCHEDULE 1.2(A) attached hereto, together with all of the items of personal property described in Section 1 hereof which are located thereon or related thereto (the "NIXON PARK PROPERTY").


C. On or prior to the Stage I Closing Date, Joanna, LLC, a Delaware limited liability company ("JOANNA"), will own, develop and manage the parcel of real property described on SCHEDULE 1.2(B) attached hereto, together with all of the items of personal property described in Section 1 hereof which are located thereon or related thereto (the "6 JOANNA PROPERTY").


D. On or prior to the Stage I Closing Date, Stults, LLC, a Delaware limited liability company ("STULTS" and together with Nixon and Joanna, the "RMOP SUBS"), will own, develop and manage the parcel of real property described on SCHEDULE 1.2(C) attached hereto, together with all of the items of personal property described in Section 1 hereof which are located thereon or related thereto (the "STULTS PROPERTY" and together with the Nixon Property and the Joanna Property, the "STAGE II PROPERTIES").


E. One or more Subsidiaries (such Subsidiaries, the "ROP SUBS") of Reckson Operating Partnership, L.P., a Delaware limited partnership ("ROP"), own those certain parcels of real property described on SCHEDULE 1.3 attached hereto together with all of the items of


personal property described in Section 1 hereof which are located thereon or related thereto (the "STAGE III PROPERTIES").


F. Reckson Morris Industrial Interim GP, LLC, a Delaware limited liability company ("RMIIGP"), is currently the managing general partner of the Company.


G. Reckson Morris Industrial Trust, a Maryland real estate investment trust ("RMIT" OR THE "GP"), is a general partner of the Company.


H. Robert Morris, Joseph D. Morris, Ronald Schram, Mark M. Bava, The Drew Morris Trust, The Justin Morris Trust, The Keith Morris Trust, Joseph D. Morris Family Limited Partnership, and Robert Morris Family Limited Partnership (each, a "MORRIS CONTRIBUTOR" and collectively, the "MORRIS CONTRIBUTORS") are limited partners in the Company.


I. RMIIGP, RMIT and the Morris Contributors shall hereinafter be collectively referred to as the "RMOP CONTRIBUTORS."


J. The RMOP Contributors collectively own all of the partnership interests in and to RMOP. Each RMOP Contributor owns the respective percentage ownership interest in RMOP set forth on EXHIBIT A.


K. RMIT and the Morris Contributors collectively own all of the membership interests in the RMOP Subs. Each of RMIT and each Morris Contributor owns the respective percentage ownership interest in each of the RMOP Subs set forth on EXHIBIT A.


L. ROP owns or will own, as of the Stage III Closing Date (as hereinafter defined), all of the membership interests in each of the ROP Subs.


M. RMOP, the RMOP Subs and the ROP Subs shall hereinafter be collectively referred to as the "EXISTING OWNERS".


N. In order to effectuate the contribution and exchange of assets as herein provided, the Contributors have agreed to contribute all of the outstanding partnership, membership and/or other ownership interests in and to the Existing Owners (collectively, the "CONTRIBUTED INTERESTS") to the Partnership in exchange for a combination of cash, Units, REIT Common Stock and Preferred Stock.


NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound hereby, do hereby agree as follows:


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SECTION 1: SUBJECT OF CONTRIBUTION


Section 1.01. Subject to and in accordance with the terms and conditions of this Agreement, the Contributors shall contribute and convey or cause to be contributed and conveyed to the Partnership, the Contributed Interests. Upon receipt of such Contributed Interests, the Partnership shall, as the beneficial owner of the Existing Owners, own all of the Existing Owners' right, title and interest in the following:


(a) those certain parcels of real property situated, lying and being in the State of New Jersey and the State of New York and being more particularly described on SCHEDULE 1.1 - 1.3 HEREOF (the "LAND"), and all of the improvements, if any, located on the Land (individually, a "BUILDING"), including, but not limited to, any and all structures and facilities, plumbing, heating, ventilating, air conditioning, mechanical, electrical and other utility systems, water and sewage facilities (including wells and septic systems), parking lots, landscaping, sidewalks, signs and light fixtures, which are not owned by Tenants (collectively, the "IMPROVEMENTS");


(b) all rights, privileges, grants and easements appurtenant to the Land and Improvements, including without limitation, all of the Existing Owners' right, title and interest in and to all land lying in the bed of any public street, road or alley, and any and all insurance proceeds or condemnation awards received by or accrued for the benefit of the Existing Owners and the Contributors, to the extent such insurance proceeds and/or condemnation awards are in such Existing Owners' possession as of, and subsequent to the date hereof, in respect of the applicable Property, all mineral and water rights and all easements, licenses, covenants and rights-of-way or other appurtenances or other rights associated with the Property, used in connection with the beneficial use and enjoyment of the Land and Improvements and any development rights with respect to the Stults Property and any other development or other rights associated with any other Property (the Land and Improvements and all such rights, privileges, easements, grants and appurtenances are sometimes referred to herein as the "REAL PROPERTY");


(c) the fixtures, machinery, equipment, and other items of personal property owned by the Existing Owners, together with all replacements and substitutions therefor (the "PERSONAL PROPERTY") and used in connection with the ownership or operation of the Real Property and, to the extent that the value of any such machinery, equipment or such other personal property exceeds $25,000, listed on SCHEDULE 2 attached hereto;


(d) all existing surveys, blueprints, drawings, plans and specifications (including, without limitation, structural, HVAC, mechanical and plumbing, water and sewer plans and specifications) and other documentation for or with respect to the Properties, subject to any proprietary rights, if any, of the architects and/or engineers who worked on such documents;


(e) all leases and other agreements with respect to the use and occupancy of the Real Property, together with all amendments and modifications thereto and any guaranties or indemnities (including any environmental indemnities) provided thereunder as set forth on EXHIBIT B hereof (individually, a "LEASE", collectively, the "LEASES") and rents, additional rents, reimbursements, profits, income, receipts and the amounts deposited together with any interest


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earned thereon, if any, (individually, a "SECURITY DEPOSIT"; collectively, the "SECURITY DEPOSITS") under any such Leases in the nature of security for the performance of any Tenant's obligations thereunder including without limitation any letters of credit given by Tenants as security;


(f) (i) to the extent transferable, all governmental permits, licenses, approvals, variances, and certificates relating to the Properties (collectively, the "PERMITS AND LICENSES") and (ii) all contracts relating to the Properties, including, without limitation, purchase agreements, Leases and agreements for the servicing, maintenance, repair and operation of the Real Property (the "SERVICE CONTRACTS") and any brokerage agreements relating to the Leases (the "BROKERAGE AGREEMENTS");


(g) all books, records (including accounting books and records), promotional material, tenant data, keys, site plans, survey plans and plans and specifications which are used exclusively in connection with the acquisition, development, use and operation of the Real Property or Personal Property and all Title Policies (collectively, the "BOOKS AND RECORDS");


(h) all guaranties and warranties, to the extent transferable, owned by or for the benefit of the Existing Owners received in connection with any construction, repair or maintenance services performed with respect to the Real Property or Personal Property (the "WARRANTIES");


(i) all intangible personal property now or hereafter owned by the Existing Owners and used in connection with, or arising from, the business now or hereafter conducted on or from the Properties, or any part thereof, including without limitation, claims, chooses in action and contract rights, PROVIDED, HOWEVER, such intangible personal property shall not include telephone exchange numbers and either the Reckson or Morris name;


(j) correspondence regarding the Properties with past, present and prospective tenants, vendors, suppliers, utility companies and other third parties, to the extent such correspondence is in the possession or control of the Existing Owners and/or the Contributors; and


(k) all rights under the purchase option agreements described in SCHEDULE 5 attached hereto, including, without limitation, all rights as optionee to exercise the various purchase options (the "PURCHASE OPTIONS") with respect to the Land described therein, and all rights under agreements or otherwise with respect to the contract properties described in SCHEDULE 5 attached hereto (the "CONTRACT PROPERTIES").


The Real Property, the Personal Property, the Improvements, the Leases, the Security Deposits, the Permits and Licenses, the Service Contracts, the Brokerage Agreements, the Books and Records, the Warranties, the Purchase Options and all other property interests described in this Section 1 are hereinafter collectively referred to as the "PROPERTY", as they relate to each parcel of Land or the "PROPERTIES", as they relate to all the parcels of Land, in their entirety.


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SECTION 2: DEFINITIONS


Section 2.01. For all purposes of this Agreement, except as otherwise expressly provided or unless the context clearly indicates a contrary intent:


(i) the capitalized terms defined in this Section have the meanings
assigned to them in this Section, and include the plural as well as the
singular; and


(ii) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision.


"6 JOANNA PROPERTY" shall have the meaning set forth in the Recitals hereto.


"19.9% SHAREHOLDER APPROVAL" shall have the meaning set forth in Section 33.01 hereof.


"22 MADISON REMEDIATION AGREEMENT" shall have the meaning set forth in Section 29.05 hereof.


"ACCOUNTANTS" shall have the meaning set forth in Section 27.01 hereof.


"ACQUIROR MATERIAL ADVERSE EFFECT" shall have the meaning set forth in Section 12.01 hereof.


"ADDITIONAL SHAREHOLDER APPROVAL" shall have the meaning set forth in Section 33.01 hereof.


"ADDITIONAL STAGE I CONSIDERATION" shall have the meaning set forth in Section 3.01 hereof.


"AFFILIATE" as to any Person, shall mean any other Person which, directly or indirectly, is in control of, is controlled by, or is under common control with, such Person. For purposes of this definition, "control" of a Person means the power, directly or indirectly, either to (a) vote 50% or more of the securities having ordinary voting power for the election of directors of such Person or (b) direct or cause the direction of the management and policies of such Person whether by contract or otherwise.


"AGREEMENT" shall have the meaning set forth in the Recitals hereto.


"AMEX" shall mean the American Stock Exchange.


"APPROVAL PROXY" shall have the meaning set forth in Section 33.04 hereof.


"ARE" shall have the meaning set forth in Section 35.01 hereto.


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"ASSIGNMENT AND ASSUMPTION AGREEMENT" shall mean the Assignment and Assumption Agreement in the form of EXHIBIT J attached hereto.


"BOARD APPROVAL" shall have the meaning set forth in Section 33.01 hereof.


"BOARD OF ARE" shall have the meaning set forth in Section 31.01 hereof.


"BOARD DESIGNEES" shall have the meaning set forth in Section 31.01 hereof.


"BOOKS AND RECORDS" shall have the meaning set forth in Section 1.01 hereof.


"BROKERAGE AGREEMENTS" shall have the meaning set forth in Section 1.01 hereof.


"BUILDING" shall have the meaning set forth in Section 1.01 hereof.


"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or State of New York or federal legal holiday.


"C&I LEASE" shall mean that certain lease dated April 1997 between Mercrock Associates, L.P., as original landlord, and C&I Promotions, Inc., as tenant, as amended.


"CASUALTY NOTICE" shall have the meaning set forth in Section 8 hereof.


"CHARTER" shall have the meaning set forth in Section 23.04 hereof.


"CLOSINGS" shall mean closings collectively, of the transactions contemplated by this Agreement, including, the Stage I Closing, the Stage II Closings, the Stage III Closing and any other closing contemplated hereunder.


"CLOSING DATES" shall mean the dates when any of the Contributed Interests are transferred to the Partnership in accordance with the terms and conditions of this Agreement.


"CLOSING MONTH" shall have the meaning set forth in Section 7.01 hereof.


"CODE" shall mean the Internal Revenue Code of 1986, as amended.


"COMPANY" shall have the meaning set forth in the Recitals hereof.


"COMPANY PLAN" means a Plan which any applicable Existing Owner, or any ERISA Affiliate thereof sponsors, maintains, has any obligation to contribute to, has liability under or is otherwise a party to, or which otherwise provides benefits for employees, former employees, independent contractors or former independent contractors (or their dependents and beneficiaries) of such Existing Owner existing on the date of this Agreement or at any time subsequent thereto and on or prior to the applicable Closing and, in the case of a Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Section 412 of the Code or Title IV of ERISA, at any time during the five-year period preceding the date of this Agreement.


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"COMPLIANT PLAN" shall mean a Company Plan with the following characteristics:


(i) the Company Plan is, and its administration is and has been in
compliance with, and no applicable Existing Owner has received any claim or
notice that any such Company Plan is not in material compliance with, its
terms and all applicable laws, including, without limitation, the
requirements of ERISA and all tax rules compliance with which are necessary
for any intended favorable tax treatment;


(ii) all contributions, premiums and other payments required by law or
any Plan or applicable collective bargaining agreement to have been made
under any such Plan (without regard to any waivers granted under Section
412 of the Code) to any fund, trust or account established thereunder or in
connection therewith have been made by the due date thereof, and no amounts
are or will be due to the PBGC (except for premiums in the ordinary course
of business); and any and all contributions, premiums and other payments
with respect to compensation or service before and through the applicable
Closing, or otherwise with respect to periods before and through the
applicable Closing, due from the applicable Existing Owner or its
affiliates to, under or on account of each Company Plan shall have been
paid prior to the applicable Closing;


(iii) no Company Plan that is or has ever been subject to Part 3 of
Subtitle B of Title I of ERISA or Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined therein), whether or not
waived, no liability under Title IV of ERISA has been incurred or is
expected to be incurred with respect to any such Plan subject thereto
(other than premiums incurred and paid when due), nor has there been any
"reportable event" within the meaning of Section 4043(c) of ERISA with
respect to any such Plan (other than events as to which the 30-day notice
requirement has been waived);


(iv) the actuarial present value on a termination basis of accrued
benefits under each of the Company Plans sponsored by the applicable
Existing Owner or any ERISA Affiliate thereof which is subject to Title IV
of ERISA, based upon the interest rate assumptions that would be utilized
by the PBGC to value annuities for a pension plan termination and the other
actuarial assumptions and methods currently used for such Company Plan, did
not, as of its latest valuation date, exceed the then current value of the
assets of such Company Plan;


(v) neither the applicable Existing Owner nor any ERISA Affiliate has
at any time had any obligation to contribute to any "multiemployer plan" as
defined in Section 3(37) of ERISA; and


(vi) with respect to each such Plan, true, correct, and complete
copies of the applicable following documents have been made available to
the Partnership: (A) all current Plan documents and related trust
documents, and any amendment thereto; (B) Forms 5500, financial statements,
and actuarial reports for the last three Plan years; (C) the most recently
issued IRS determination letter; (D) summary plan descriptions and all
summaries of material modifications; and (E) all written communications to
employees relating to such Plans.


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"CONDEMNATION NOTICE" shall have the meaning set forth in Section 9 hereof.


"CONSIDERATION" shall mean, with respect to the Closings contemplated hereunder, the Stage I Consideration, the Additional Stage I Consideration, the Stage II Consideration and the Stage III Consideration.


"CONTINGENCY LLC" shall have the meaning set forth in Section 11.05 hereof.


"CONTRACT PERIOD" shall mean, with respect to each Property, the period commencing on the date of this Agreement and ending on the Closing Date with respect to the transfer of the Contributed Interests relating to such Property.


"CONTRACT PROPERTIES" shall have the meaning set forth in Section 1.01 hereof.


"CONTRACTS" shall mean the contracts of sale with respect to the acquisition of the Contract Properties, the Purchase Options, the Brokerage Agreements and the Service Contracts.


"CONTRIBUTED INTERESTS" shall have the meaning set forth in the Recitals hereof.


"CONTRIBUTORS" shall mean each of the Persons set forth in EXHIBIT A annexed hereto.


"DEVELOPMENT CONSULTING FEES" shall have the meaning set forth in Section 3.01 hereof.


"DEVELOPMENT LLC" shall have the meaning set forth in Section 34.01 hereof.


"DEVELOPMENT PROPERTY" shall have the meaning set forth in Section 34.01 hereof.


"DISPUTE PERIOD" shall mean the period ending thirty (30) calendar days following receipt by an Indemnifying Party of an Indemnity Notice.


"DOWNPAYMENT AMOUNT" shall have the meaning set forth in Section 3.04 hereof.


"ENVIRONMENTAL LAWS" shall mean all foreign, federal, state and local laws, regulations, rules and ordinances relating to pollution or protection of the environment, including, without limitation, laws relating to releases or threatened releases of hazardous substances, oils, pollutants or contaminants into the indoor or outdoor environment (including, without limitation, ambient air, surface water, groundwater, land, surface and subsurface strata) or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, release, transport or handling of hazardous substances, oils, pollutants or contaminants expressly intending to include without limitation asbestos.


"EQUITY" shall mean the Units, Preferred Stock and the REIT Common Stock.


"EQUITY HOLDERS" shall mean the holders of any Units, REIT Common Stock or Preferred Stock issued as part of the transaction contemplated hereunder.


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"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.


"ERISA AFFILIATE" means an entity required to be aggregated with any Existing Owner under Sections 414(b), (c), (m) or (o) of the Code or Section 4001 of ERISA.


"ESCROW AGENT" shall mean Commonwealth Land Title Insurance Company.


"EVIDENCE OF ISRA COMPLIANCE" shall have the meaning set forth in Section 29.01 hereof.


"EXISTING MORTGAGES" shall mean those certain mortgages, if any, described in SCHEDULE 3 attached hereto, which mortgages currently encumber certain of the Properties and have the respective outstanding principal balances set forth on SCHEDULE 3 attached hereto.


"EXISTING OWNERS" shall have the meaning set forth in the Recitals hereof.


"FORM OF OPERATING AGREEMENT" shall have the meaning set forth in Section 34.01 hereof.


"GAIN YEAR" shall have the meaning set forth in Section 30.02 hereof.


"GOVERNMENTAL OR REGULATORY AUTHORITY" shall mean any court or governmental department, commission, board, agency or instrumentality, of the United States or any state, county, city or other political subdivision.


"GP" shall have the meaning set forth in the Recitals hereto.


"GUARANTY" shall have the meaning set forth in Section 22.01 hereof.


"IMPROVEMENTS" shall have the meaning set forth in Section 1.01 hereof.


"INDEMNIFIED PARTY" shall mean any Person claiming indemnification under any provision of Section 35.03 hereof.


"INDEMNIFYING PARTY" shall mean any Person providing indemnification under any provision of Section 35.03 hereof.


"INDEMNITY NOTICE" shall mean written notification pursuant to Section 35 hereof of a claim for indemnity under Section 35.03 hereof by an Indemnified Party, specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim.


"INDEMNITY PERCENTAGE" shall have the meaning set forth in Section 30.02 hereof.


"INDEMNITY REMEDY" shall have the meaning set forth in Section 30.02 hereof.


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"INVESTED PRINCIPAL CAPITAL" shall have the meaning set forth in Section 34.01 hereof.


"ISRA" shall have the meaning set forth in Section 29.01 hereof.


"JOANNA" shall have the meaning set forth in the Recitals hereof.


"KRAFT PROPERTY" shall have the meaning set forth in Section 34.01 hereof.


"LAND" shall have the meaning set forth in Section 1.01 hereof.


"LANDLORD ESTOPPEL" shall have the meaning set forth in Section 32.01 hereof.


"LEASE BROKER" shall have the meaning set forth in Section 10.18 hereof.


"LEASES" shall have the meaning set forth in Section 1.01 hereof.


"LEASING GUIDELINES" shall mean leasing guidelines set forth on SCHEDULE 18 hereto with respect to the execution of new Leases of space in the Properties and the renewal and/or modification of any new or existing Leases.


"LETTER OF CREDIT" shall mean the letter of credit described in Section 3.04 hereof.


"LIEN" shall mean any mortgage, pledge, assessment, security interest, lease, lien, adverse claim, levy, charge or other encumbrance of any kind, or any conditional sale contract, title retention contract or other agreement to give any of the foregoing.


"LNA" shall have the meaning set forth in Section 29.01 hereof.


"LOAN REMEDY" shall have the meaning set forth in Section 30.02 hereof.


"LOSS" or "LOSSES" shall mean actual damage, loss, liability (including punitive or exemplary fines and penalties, and interest thereon) cost or expense (including reasonable costs of investigation and defense incurred in defending against and/or settling such damage, loss, cost or expense or claim therefor and any amounts paid in settlement thereof and reasonable fees and disbursements of counsel) imposed on, or incurred by, the REIT, the Partnership, the Contributors or the Existing Owners, as applicable.


"LP TAX LIABILITY" shall have the meaning set forth in Section 30.02 hereof.


"MAJOR TENANTS" shall mean the Tenants set forth on SCHEDULE 15 hereto.


"MATERIAL ADVERSE EFFECT" shall mean, with respect to any of the Existing Owners, the REIT, the Partnership or the Properties, one or more Losses that individually or in the aggregate exceed $20,000,000, unless such Loss or Losses result from or arise out of a misrepresentation or inaccuracy in, or breach of a representation or warranty set forth in Section 10.18(a) hereof, in which case a Material Adverse Effect shall mean any Loss or Losses that, individually or in the


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aggregate, exceed $3,500,000 or unless such Loss or Losses result from or arise out of a misrepresentation or inaccuracy in, or breach of a representation or warranty set forth in Section 10.18(b) or (c) hereof, in which case a Material Adverse Effect shall mean any Loss or Losses that, individually or in the aggregate, exceed $2,000,000 or unless such Loss or Losses result from or arise out of a misrepresentation or inaccuracy in, or breach of a representation or warranty set forth in Section 23, in which case a Material Adverse Effect shall mean any Loss or Losses.


"MATRIX" shall mean Matrix Development Group LLC, or ...