As filed with the Securities and Exchange Commission on July 30, 1997
Registration No. 333-_____
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-11
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_____________________
WELLSFORD REAL PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Governing Instruments)
610 Fifth Avenue
New York, New York 10020
(212) 333-2300
(Address and Telephone Number of Principal Executive Offices)______________
Edward Lowenthal
Wellsford Real Properties, Inc.
610 Fifth Avenue
New York, New York 10020
(212) 333-2300
(Name, Address and Telephone Number of Agent for Service)
___________________
Copies to:
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
(212) 541-2000
Attention: Alan S. Pearce, Esq.
Steven G. Scheinfeld, Esq.
____________________
Approximate date of commencement of the proposed sale to the public: As
soon as practicable after the Registration Statement becomes effective.
____________________
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: /_/
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering: /_/
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box: /_/
CALCULATION OF REGISTRATION FEE
Proposed Proposed Amount
Title of Each Maximum Maximum of
Class of Amount Offering Aggregate Regis-
Securities being Price Per Offering tration
to be Registered Registered Unit (1) Price (1) Fee
==============================================================================
Common Stock,
$.01 par value
per share. . . . 12,242,719 $11.0625 $135,435,079 $41,041
==============================================================================
(1) Estimated solely for purposes of calculating the registration fee.
Pursuant to Rule 457(c), the offering price and registration fee are
computed on the basis of the average of the high and low prices reported
on the American Stock Exchange as of July 25, 1997.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
Cross Reference Sheet
Showing Location in Prospectus of Information Required by Items in Form S-11
Form S-11 Item No. and Heading Location or Caption in Prospectus
------------------------------ ---------------------------------
1. Forepart of the Registration Statement
and Outside Front Cover Page of
Prospectus Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus Inside Front Cover Page;
Outside Back Cover Page;
Available Information
3. Summary Information, Risk Factors and Ratio
of Earnings to Fixed Charges Outside Front Cover Page;
Prospectus Summary; Risk
Factors; The Company
4. Determination of Offering Price Outside Front Cover Page;
Underwriting
5. Dilution Not Applicable
6. Selling Security Holders Not Applicable
7. Plan of Distribution Outside Front Cover Page;
Underwriting
8. Use of Proceeds Use of Proceeds
9. Selected Financial Data Selected Unaudited Combined
Financial Data
10. Management's Discussion and Analysis of
Financial Condition and Results of
Operations Management's Discussion and
Analysis of Financial
Conditions and Analysis of
Operations
11. General Information as to Registrant The Company; Management
12. Policy With Respect to Certain Activities The Company; Policies with
Respect to Certain
Activities
13. Investment Policies of Registrant The Company; Policies with
Respect to Certain
Activities
14. Description of Real Estate Business and Properties
15. Operating Data Business and Properties
16. Tax Treatment of Registrant and its
Security Holders Certain United States
Federal Income Tax
Considerations
17. Market Price of and Dividends on the
Registrant's Common Equity and Related
Stockholder Matters Dividend Policy; Price Range
of Common Stock and Dividend
History; Description of
Capital Stock; Shares
Available for Future Sale
18. Description of Registrant's Securities Description of Capital
Stock; Certain Provisions of
Maryland Law and of the
Company's Charter and Bylaws
19. Legal Proceedings Business and Properties --
Legal Proceedings
20. Security Ownership of Certain Beneficial
Owners and Management Principal Stockholders
21. Directors and Executive Officers Management
22. Executive Compensation Management -- Executive
Compensation
23. Certain Relationships and Related
Transactions Certain Transactions
24. Selection, Management and Custody of
Registrant's Investments Risk Factors; The Company;
Management; Principal
Stockholders
25. Policies With Respect to Certain
Transactions Certain Transactions
26. Limitations of Liability Certain Provisions of
Maryland Law and of the
Company's Charter and Bylaws
-- Limitation of Liability
and Indemnification
27. Financial Statements and Information Prospectus Summary; Summary
Unaudited Combined Financial
Data; Financial Statements
28. Interests of Named Experts and Counsel Experts; Legal Matters
29. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities Certain Provisions of
Maryland Law and of the
Company's Charter and Bylaws
-- Limitation of Liability
and Indemnification
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 30, 1997
PROSPECTUS
12,242,719 Shares
WELLSFORD REAL PROPERTIES, INC.
Common Stock
Wellsford Real Properties, Inc. (the "Company") was organized to create
and realize value by identifying and making opportunistic real estate
investments through the direct acquisition, rehabilitation, development,
financing and management of real properties and/or participation in these
activities through the purchase of debt instruments or equity interests of
entities engaged in such real estate businesses. Management is concentrating
its efforts on defining and building focused operating businesses with
recurring sources of income. The Company intends to maximize shareholder
value over time through growth in cash flow and net asset value per share.
All of the 12,242,719 shares (the "Shares") of Common Stock, $.01 par
value per share (the "Common Stock"), of the Company offered hereby are being
sold for the account of the Company's shareholders who acquired the Shares
from the Company in private placements, and for their beneficiaries, pledgees,
transferees, successors-in-interest and assignees (collectively, the "Selling
Shareholders"). See "Selling Shareholders." The Company will not receive any
of the proceeds from the sale of the Shares.
The Shares are listed on the American Stock Exchange (the "ASE") under
the symbol "WRP." On July 29, 1997, the last reported sale price of the
Company's Common Stock on the ASE was $11.50 per share.
Any sale by a Selling Shareholder will be made through customary
brokerage channels or private sales and may be made on the ASE, in the over-
the-counter market or otherwise at prices to be determined at the time of such
sales. See "Plan of Distribution."
No underwriter is being used in connection with the registration of the
Shares and, accordingly, the Shares are being offered without any underwriting
discounts. Normal brokerage commissions, discounts and fees are payable by
the Selling Shareholders.
See "Risk Factors" beginning on page 11 for certain factors relevant to
an investment in the Common Stock, including:
-------------------
o Competition in identifying and making investments and attracting
tenants.
o The inability of the Company to obtain significant amounts of capital.
o Risks of excessive costs and delays associated with the acquisition,
development, construction and renovation of properties.
o Vacancies at existing properties.
o Lack of limitation on the amount of debt that may be incurred and risks
of highly leveraged investments.
o Risks associated with debt instruments held by the Company, including
possible payment defaults and reductions in the value of collateral.
o Risks associated with investments in junior secured obligations and
commercial mortgage-backed securities.
o Illiquidity of the Company's real estate investments.
o The Company is a recently-formed entity with little prior operating
history.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION")
OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
-------------------
The date of this Prospectus is __________ __, 1997
<PAGE>
TABLE OF CONTENTS
PROSPECTUS SUMMARY. . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
The Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-1-
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-3-
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .-4-
Business Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . .-5-
Initial Investments. . . . . . . . . . . . . . . . . . . . . . . . . .-6-
Initial Capital and Financing. . . . . . . . . . . . . . . . . . . . .-7-
Dividends to Holders of Common Stock . . . . . . . . . . . . . . . . .-7-
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
SUMMARY UNAUDITED COMBINED FINANCIAL DATA . . . . . . . . . . . . . . . . .-8-
RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
General Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Difficulty of Locating Suitable Investments; Competition; Capital
Requirements. . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Risks of Acquisition, Development, Construction and Renovation
Activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . -11-
Risks of Vacancies at Existing Properties; Dependence on Rental
Income from Real Property . . . . . . . . . . . . . . . . . . . . -12-
Operating Risks. . . . . . . . . . . . . . . . . . . . . . . . . . . -13-
Adverse Consequences of Debt Financing . . . . . . . . . . . . . . . -13-
Risks of Investments in Debt Instruments . . . . . . . . . . . . . . -14-
Risks of Investments in Mortgage and Other Loans . . . . . . . . . . -14-
Lack of Control and Other Risks of Equity Investments in and with
Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Risk of Loss on Investments in Commercial Mortgage-Backed
Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . -15-
Nature of Investments Made by the Company May Involve High Risk;
Illiquidity of Real Estate Investments . . . . . . . . . . . . . . . -16-
Limitations on Remedies. . . . . . . . . . . . . . . . . . . . . . . -16-
Third-Party Bankruptcy Risks . . . . . . . . . . . . . . . . . . . . -16-
Recently Formed Entity . . . . . . . . . . . . . . . . . . . . . . . -16-
Risk of Registration Under Investment Company Act. . . . . . . . . . -16-
Risks of Uninsured Loss. . . . . . . . . . . . . . . . . . . . . . . -17-
Potential Environmental Liability Related to the Properties. . . . . -17-
Dependence on Key Personnel. . . . . . . . . . . . . . . . . . . . . -18-
Changes in Policies Without Shareholder Approval . . . . . . . . . . -18-
Absence of Public Market; Risk of Changes in Stock Price . . . . . . -18-
Costs of Compliance with the Americans with Disabilities Act and
Similar Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Noncompliance with Other Laws. . . . . . . . . . . . . . . . . . . . -19-
Effect on Common Stock Price of Shares Available for Future Sale . . -19-
Hedging Policies/Risks . . . . . . . . . . . . . . . . . . . . . . . -19-
Anti-Takeover Effect Resulting From a Staggered Board, Ability of
the Company to Issue Preferred Stock and Certain Provisions of
Maryland Law. . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Business Strategy. . . . . . . . . . . . . . . . . . . . . . . . . . -23-
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
DIVIDEND POLICY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY. . . . . . . . . . . . . -26-
CAPITALIZATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
SELECTED UNAUDITED COMBINED FINANCIAL DATA. . . . . . . . . . . . . . . . -28-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND ANALYSIS OF OPERATIONS. . . . . . . . . . . . . . -30-
Results of Operations. . . . . . . . . . . . . . . . . . . . . . . . -30-
Liquidity and Capital Resources. . . . . . . . . . . . . . . . . . . -30-
BUSINESS AND PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . -30-
Wellsford Commercial Properties. . . . . . . . . . . . . . . . . . . -30-
Cyanamid Office Portfolio. . . . . . . . . . . . . . . . . . . . . . -31-
Greenbrook Corporate Center. . . . . . . . . . . . . . . . . . . . . -32-
Chatham, New Jersey. . . . . . . . . . . . . . . . . . . . . . . . . -33-
Wellsford High Yield Investment Portfolio. . . . . . . . . . . . . . -34-
277 Park Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
Sonterra Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
Wellsford Property Development . . . . . . . . . . . . . . . . . . . -35-
Palomino Park. . . . . . . . . . . . . . . . . . . . . . . . . . . . -35-
Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . -37-
INITIAL CAPITAL AND FINANCING . . . . . . . . . . . . . . . . . . . . . . -37-
Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES . . . . . . . . . . . . . . . -38-
Investment Policies. . . . . . . . . . . . . . . . . . . . . . . . . -38-
Financing Policies . . . . . . . . . . . . . . . . . . . . . . . . . -39-
Policies with Respect to Other Activities. . . . . . . . . . . . . . -39-
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
Directors and Executive Officers . . . . . . . . . . . . . . . . . . -40-
Key Employee . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Compensation of Directors. . . . . . . . . . . . . . . . . . . . . . -42-
Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . -43-
Employment Agreements. . . . . . . . . . . . . . . . . . . . . . . . -43-
1997 Management Incentive Plan . . . . . . . . . . . . . . . . . . . -44-
Rollover Stock Option Plan . . . . . . . . . . . . . . . . . . . . . -45-
Compensation Committee Interlocks and Insider Participation. . . . . -45-
PRINCIPAL STOCKHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . -45-
CERTAIN TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
CERTAIN AGREEMENTS BETWEEN THE COMPANY AND ERP OPERATING PARTNERSHIP. . . -47-
Common Stock and Preferred Stock Purchase Agreement. . . . . . . . . -48-
Registration Rights Agreement. . . . . . . . . . . . . . . . . . . . -50-
Agreement Regarding Palomino Park. . . . . . . . . . . . . . . . . . -51-
Credit Enhancement Agreement . . . . . . . . . . . . . . . . . . . . -53-
DESCRIPTION OF CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . -54-
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
Classification or Reclassification of Common Stock or Preferred
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Power to Issue Additional Shares of Common Stock and Preferred
Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . -56-
Series A 8% Convertible Redeemable Preferred Stock . . . . . . . . . -56-
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S CHARTER AND BYLAWS. . . . . . . . . . . . . . . . . . . . . -61-
Classification of the Board of Directors . . . . . . . . . . . . . . -61-
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . . . -61-
Business Combinations. . . . . . . . . . . . . . . . . . . . . . . . -61-
Amendment to the Charter and Bylaws. . . . . . . . . . . . . . . . . -62-
Merger, Consolidation, Sale of Assets. . . . . . . . . . . . . . . . -62-
Dissolution of the Company . . . . . . . . . . . . . . . . . . . . . -62-
Advance Notice of Director Nominations and New Business. . . . . . . -62-
Meetings of Shareholders . . . . . . . . . . . . . . . . . . . . . . -62-
Limitation of Liability and Indemnification. . . . . . . . . . . . . -63-
SHARES AVAILABLE FOR FUTURE SALE. . . . . . . . . . . . . . . . . . . . . -64-
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS . . . . . . . . . -65-
PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
CERTAIN ERISA CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . -68-
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . -70-
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . .F-1
REPORT OF INDEPENDENT AUDITORS. . . . . . . . . . . . . . . . . . . . . . .F-2
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
COMBINED BALANCE SHEETS . . . . . . . . . . . . . . . . . . . . . . . . . .F-3
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
COMBINED STATEMENTS OF INCOME AND EQUITY. . . . . . . . . . . . . . . . . .F-4
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS . . . . . . . . . . . . . . . . . . . . .F-5
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . .F-6
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA COMBINED INCOME STATEMENT . . . . . . . . . . . . . . . . . . . F-11
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA COMBINED BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . F-14
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Prospectus Summary and under the captions "Risk
Factors," "Business and Properties" and elsewhere in this Prospectus
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company or industry results
to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following, which are discussed in greater
detail under "Risk Factors" herein: general economic and business conditions,
which will, among other things, affect demand for commercial and residential
properties, availability and credit worthiness of prospective tenants, lease
rents and the availability of financing; difficulty of locating suitable
investments; competition; risks of real estate acquisition, development,
construction and renovation; vacancies at existing commercial properties;
dependence on rental income from real property; adverse consequences of debt
financing; risks of investments in debt instruments, including possible
payment defaults and reductions in the value of collateral; illiquidity of
real estate investments; lack of prior operating history; and other changes
and factors referenced in this Prospectus.
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements included elsewhere in this Prospectus.
The Company began operations in January 1997 as a subsidiary of Wellsford
Residential Property Trust ("Wellsford Residential"), a Maryland real estate
investment trust. The Company began to operate independently following
consummation of a series of transactions, including the contribution (the
"Contribution") by Wellsford Residential of certain of its assets to the
Company, the distribution (the "Distribution") to the holders of common shares
of beneficial interest of Wellsford Residential of all of the shares of Common
Stock of the Company owned by Wellsford Residential, and the subsequent merger
(the "Merger") of Equity Residential Properties Trust ("EQR"), a Maryland real
estate investment trust, into Wellsford Residential. As used in this
Prospectus, except where the context requires otherwise, "Company" means
Wellsford Real Properties, Inc., a Maryland corporation, and its subsidiaries,
and "ERP Operating Partnership" means ERP Operating Limited Partnership, an
Illinois limited partnership of which EQR is the general partner and through
which EQR conducts substantially all of its operations relating to EQR's
properties, and its subsidiaries.
The Company
The Company was organized to create and realize value by identifying and
making opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties
and/or participation in these activities through the purchase of debt
instruments or equity interests of entities engaged in such real estate
businesses. Management is concentrating its efforts on defining and building
focused operating businesses with recurring sources of income. The Company
intends to maximize shareholder value over time through growth in cash flow
and net asset value per share.
The Company believes that while liquidity has returned to many real
estate markets and that the supply and demand of many real estate asset
classes are in relative equilibrium, there are specific opportunities which
are expected to continue to exist because of market inefficiencies and
impediments to investment, such as transactional complexity, time-consuming
regulatory approvals, the prospect of no or limited immediate cash flow and a
lack of available property information and market information analysis. In
this regard, the Company is initially focusing its investments on three
distinct aspects of the real estate business which management believes
currently offer such opportunities. They are (i) acquiring underperforming
office and other commercial properties below replacement cost, renovating
and/or repositioning them, and owning, operating and/or reselling such
properties, (ii) investing in real estate-related debt instruments with the
potential for high-yields or returns more characteristic of equity ownership
and (iii) engaging in selective property development when justified by
expected returns. As opportunities emerge, the Company may in the future
expand its real estate-related businesses and activities.
The Company currently does not intend to qualify as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code"). Consequently, the Company has the flexibility to respond
quickly to opportunities without the structural limitations inherent in REITs
and to operate, when deemed advantageous by management, on a more highly
leveraged basis than most REITs. By not qualifying as a REIT under the Code
(which would require the Company to distribute each year at least 95% of its
net taxable income, excluding capital gains), the Company has the ability and
currently intends to retain for reinvestment its cash flow generated from
operations and to sell properties without the substantial income tax penalties
which may be imposed on REITs in such transactions. In addition, the Company
differs from opportunity funds that are typically structured as private
partnerships. In that regard, the business of the Company is conducted
without the payment of acquisition, disposition or advisory fees to general
partners which should result in additional cash flow being available for
reinvestment as well as mitigate the potential for conflicts of interest. In
addition, unlike investors in opportunity funds, the Company's shareholders
are expected to have enhanced liquidity through their ability to sell or
margin their stock. The Company also hopes to attract a broader range of
investors because there will be no stipulated investment minimum. However,
unlike REITs and opportunity funds, the Company is subject to corporate level
taxation.
The Company's management includes the co-founders of Wellsford
Residential, Jeffrey H. Lynford, Chairman, and Edward Lowenthal, President and
Chief Executive Officer, supported by a management team experienced in real
estate acquisitions, development, asset management and finance. The Company
believes that the over 50 years of combined experience of management in real
estate, capital markets and public company operations, their knowledge,
credibility and business relationships, and their demonstrated track record of
recognizing and profiting from emerging real estate trends should help the
Company accomplish its business objectives. From the completion by Wellsford
Residential of the initial public offering of its common shares of beneficial
interest in November 1992 (the "Wellsford Residential IPO") until consummation
of the Merger in May 1997, Messrs. Lynford and Lowenthal, through Wellsford
Residential, acquired 69 multifamily properties containing 16,332 units. From
calendar year 1992 through calendar year 1996, the revenues of Wellsford
Residential and its predecessors increased from $26.5 million to $131.8
million, representing a compounded annual growth rate of approximately 49%,
and earnings before interest, depreciation and amortization ("EBITDA") of
Wellsford Residential and its predecessors increased from $13.8 million to
$72.8 million, representing a compounded annual growth rate of approximately
52%. In analyzing potential investments and market trends and inefficiencies,
management has reviewed, and will continue to review, current economic and
market information.
To date, the management of the Company has implemented its business
strategy by identifying, negotiating and consummating the following initial
investments: (i) six office buildings, five of which are vacant, located in
Northern New Jersey containing an aggregate of approximately 940,400 gross
square feet and acquired below replacement cost for an aggregate of
approximately $47.6 million, or approximately $50 per gross square foot of
building area, with respect to which the Company currently expects to spend an
aggregate of approximately $15.8 million in renovation and repositioning
costs; (ii) a $25 million subordinated secured mezzanine loan with respect to
a class A office building located at 277 Park Avenue, New York City, (iii) a
$17.8 million mortgage on, and option to purchase, a 344-unit class A
residential apartment complex in Tucson, Arizona and (iv) an approximate 80%
interest in Phases I, II and III of, and in options to acquire (at fixed
prices) and develop Phases IV and V of, a 1,880-unit class A multifamily
development in a suburb of Denver, Colorado. See "Business and Properties".
Upon consummation of the Merger, ERP Operating Partnership acquired
shares of the Company's Class A Common Stock, $.01 par value per share ("Class
A Common"), at a price per share equal to $10.30 (the book value per share of
the Common Stock on the date of the Merger), for an aggregate purchase price
of $3.5 million. On June 2, 1997, the Company sold 12,000,000 shares of
Common Stock in a private placement (the "Private Placement") primarily to
institutional investors at a price per share equal to $10.30 (the book value
per share of Common Stock on the date of closing of the Private Placement),
for an aggregate purchase price of $123.6 million. As of July 1, 1997, an
aggregate of approximately $74.4 million of the proceeds from the sale of the
shares of Class A Common and from the Private Placement had been applied by
the Company to, among other things, repay loans, the proceeds of which were
used by the Company to acquire its five commercial properties and to make an
investment of $20 million in the subordinated secured mezzanine loan described
above, and approximately $52.7 million was available to the Company.
In addition, the Company has available various other sources of capital,
financing and credit support, including (i) the commitment of ERP Operating
Partnership to acquire at the Company's option up to $25 million of the
Company's Series A 8% Convertible Redeemable Preferred Stock, $.01 par value
per share (liquidation preference of $25.00 per share) ("Series A Preferred"),
each share of which is convertible into Common Stock at a price of $11.124
(representing a premium of 8% in excess of the book value per share of the
Common Stock on the date of the Merger) (the "ERP Preferred Commitment") and
(ii) a two-year $50 million line of credit (extendible for one year) from
BankBoston, N.A. (formerly known as The First National Bank of Boston)
("BankBoston") and Morgan Guaranty Trust Company of New York ("Morgan
Guaranty") (the "Line of Credit") which initially bears interest at an annual
rate equal to LIBOR plus 175 basis points. The ERP Preferred Commitment is
pledged as security for the Line of Credit. See "Initial Capital and
Financing" and "Description of Capital Stock - Series A 8% Convertible
Redeemable Preferred Stock".
Risk Factors
Prospective investors should consider the matters discussed under "Risk
Factors" on page 11 of this Prospectus prior to any investment in the Company.
Some of the significant considerations include:
o Competition in identifying and making investments and attracting
tenants.
o The inability of the Company to obtain significant amounts of
capital.
o Risks of excessive costs and delays associated with the acquisition,
development, construction and renovation of properties.
o Vacancies at existing properties.
o Lack of limitation on the amount of debt that may be incurred and
risks of highly leveraged investments.
o Risks associated with debt instruments held by the Company,
including the possibility that borrowers may not be able to make payments when
due, that the value of collateral may be less than amounts owed and that
interest rates charged may be less than the Company's cost of funds.
o Risks associated with investments in mortgage loans and junior
secured obligations, including lack of control over the collateral and any
foreclosure procedures.
o Lack of control and risks associated with equity investments in and
with third parties.
o Risks associated with investments in commercial mortgage-backed
securities, resulting, in part, from the fact that the process of rating and
servicing such securities is difficult and existing credit support is
inadequate.
o Illiquidity of the Company's real estate investments.
o The Company is a recently-formed entity with little prior operating
history.
o Risk that the Company may have to register as an "investment
company" under the Investment Company Act of 1940, as amended.
o Risks of uninsured loss at the Company's properties.
o Potential liability for unknown or future environmental liabilities.
o The Company is dependent primarily upon the efforts of its Chairman
of the Board and President and Chief Executive Officer.
o The ability of the Company's Board of Directors to amend or revise
the Company's investment and other policies without a vote of shareholders.
o The potential antitakeover effect of certain provisions of the
Company's Articles of Amendment and Restatement (the "Charter") and Maryland
law.
Management
The management of the Company is led by members of the former senior
management of Wellsford Residential, including, as noted above, Messrs.
Lynford and Lowenthal. During the 11 years ending on the date of the
Distribution, Messrs. Lynford and Lowenthal, together with other members of
their team, succeeded in accomplishing the following:
o Researched and identified multifamily properties in the Southwestern
United States as an opportunity for above-market returns with modest
risk.
o Identified, evaluated and negotiated the acquisition of over 21,000
high-quality multifamily units in eight states. Wellsford
Residential owned 72 multifamily properties containing 19,004 units
at the time of the Merger. From calendar year 1992 through calendar
year 1996, the revenues of Wellsford Residential and its
predecessors increased from $26.5 million to $131.8 million,
representing a compounded annual growth rate of approximately 49%,
and EBITDA increased from $13.8 million to $72.8 million,
representing a compounded annual growth rate of approximately 52%.
o Completed a $100 million initial public offering of Wellsford
Residential, which was the first publicly-traded REIT dedicated
exclusively to the ownership of multifamily properties.
o Raised approximately $585 million in eight subsequent offerings of
Wellsford Residential's common shares, convertible preferred shares,
perpetual preferred shares and senior unsecured debt.
o Obtained an investment grade rating for Wellsford Residential's
senior unsecured debt and subsequently obtained a rating increase to
BBB by Standard & Poor's Rating Services, Inc. ("S&P") and Duff &
Phelps, Inc. ("Duff & Phelps").
o Obtained a $150 million unsecured line of credit for Wellsford
Residential from a consortium of domestic and foreign banks.
o Consummated one of the first public REIT mergers when Wellsford
Residential acquired Holly Residential Properties, Inc.
o Created an internal property management operation for Wellsford
Residential, which directly managed 84% of its properties.
o Consummated the Merger with EQR in a transaction that valued
Wellsford Residential at approximately $1 billion.
Further, investors who bought their common shares of beneficial interest
of Wellsford Residential ("Wellsford Common") at the initial public offering
in November, 1992, would have received an average annual return of
approximately 23.8% on their initial investment, based upon the closing market
price of a share of Wellsford Common on the New York Stock Exchange on May 30,
1997 (the date of the Merger) and assuming all distributions received on such
shares of Wellsford Common were immediately reinvested in Wellsford Common.
Business Strategy
In furtherance of its business strategy, the Company is initially
focusing its efforts in three distinct areas of the real estate business. As
opportunities emerge, the Company may in the future expand or modify its real
estate-related businesses and activities.
Commercial Properties. The Company will seek to acquire office and other
commercial properties below replacement cost and operate and/or resell the
properties after renovation, redevelopment and/or repositioning. The Company
believes that appropriate well-located commercial properties which are
currently underperforming can be acquired on advantageous terms and
repositioned with the expectation of achieving enhanced returns which are
greater than returns which could be achieved by acquiring a stabilized
property. The Company also believes that these types of properties are not
attractive acquisition candidates for REITs because the properties have no or
limited cash flow as a result of required rehabilitation or their not being
substantially leased.
High Yield Debt Investments. The Company will make loans that
constitute, or will invest in real estate-related senior, junior or otherwise
subordinated debt instruments, which may be unsecured or secured by liens on
real estate, interests therein or the economic benefits thereof, and which
have the potential for high yields or returns more characteristic of equity
ownership. These investments may include debt that is acquired at a discount,
mezzanine financing, commercial mortgage-backed securities ("CMBS"), secured
and unsecured lines of credit, distressed loans, and loans previously made by
foreign and other financial institutions. The Company believes that there are
opportunities to acquire real estate debt securitized by the use of CMBS,
especially in the low or below investment grade tranches, at significant
returns as a result of inefficiencies in pricing, while utilizing management's
real estate expertise to analyze the underlying properties and thereby
effectively minimizing risk.
Property Development. The Company will engage in selective development
activities as opportunities arise and when justified by expected returns. The
Company believes that by pursuing selective development activities it can
achieve returns which are greater than returns which could be achieved by
acquiring stabilized properties. Certain development activities may be
conducted in joint ventures with local developers who may bear the substantial
portion of the economic risks associated with the construction, development
and initial rent-up of properties. As part of its strategy, the Company may
seek to obtain bond financing from local governmental authorities which
generally bear interest at rates substantially below rates available from
conventional financing.
The Company may in the future make equity investments in entities owned
and/or operated by unaffiliated parties and which engage in real estate-
related businesses and activities or businesses that service the real estate
industry. Some of the entities in which the Company may invest may be start-
up companies or companies in need of additional capital. The Company may also
manage and lease properties owned by it or in which it has an equity or debt
investment.
Initial Investments
In furtherance of its business strategy, the Company has identified,
negotiated and consummated the acquisition of the following investments:
o Five properties consisting of six office buildings located in
Northern New Jersey, all of which are vacant except for Greenbrook Corporate
Center, which was approximately 88.6% occupied at July 1, 1997. The Company
currently intends to invest an aggregate of approximately $15.8 million to
renovate and reposition such properties. As of July 1, 1997, the Company had
incurred approximately $3.3 million of expenses. The Company also has
the right under existing local law to develop an additional 1.1 million square
feet of commercial space at these properties. The buildings are described as
follows:
<PAGE>
Planned
Improve-
Purchase ments Purchase
Price/ /Planned Price
Location Gross Purchase Improve- & Planned
Property in Area Price Per ments Impr. Per
Name New Jersey (Sq. Ft.) Sq. Ft.(1) Per Sq. Ft. Sq. Ft.(1)
- ------------ ---------- ------- ---------- ----------- ---------
Point View Wayne 560,000 $15.8 mil- $10.1 mil- $46.3
Corporate lion/$28 lion/$28
Park (two
buildings)(2)
Greenbrook Fairfield 190,000 23.7 mil- 0.5 mil- 127.4
Corp. Ctr. lion/125 lion/3
1700 Valley Wayne 70,600 1.0 mil- 0.2 mil- 17
Road(2) lion/14 lion/3
Chatham Chatham 65,000 5.1 mil- 3.1 mil- 126.2
Building(3) lion/78 lion/48
1800 Valley Wayne 54,800 2.0 mil- 1.9 mil- 71.2
Road(2) lion/36 lion/35
------- -------- -------- -----
Total/Weighted average 940,000 $47.6 mil- $14.8 mil- $67.4
lion/$50.6 lion/$17
======= ========== ========== ======
__________________
(1) Assumes no allocation of purchase price for undeveloped land.
(2) Point View Corporate Park, 1700 Valley Road and 1800 Valley Road were
recently assessed for real estate tax purposes at approximately $61.0
million in the aggregate by the local governmental authority.
(3) Approximately 22,000 square feet in the Chatham Building has been leased
to a new tenant for 10 years at an initial gross rent of $26.00 per net
rentable square foot, which increases to approximately $28.00 per net
rentable square foot starting in the sixth year.
o $25 million of an $80 million subordinated secured mezzanine loan
with respect to the approximately 1.74 million square foot, 52-story class A
office building located in mid-town Manhattan at 277 Park Avenue, New York
City (the "277 Park Loan"). The 277 Park Loan is payable in full in May, 2007
and bears interest payable monthly at the rate of approximately 12% per annum.
o A $17.8 million mortgage loan on (the "Sonterra Loan"), and option
(the "Sonterra Option") to purchase for approximately $20.5 million through
December, 1997 and for $21 million during 1998, a 344-unit, newly constructed
class A residential apartment project located in Tucson, Arizona known as
"Sonterra at Williams Centre." The Sonterra Loan was originated in July 1996,
and is payable in full on July 1, 1999 and bears interest at the rate of 9%
percent per annum.
o An approximate 80% interest in Phases I, II and III of, and in
options to acquire and develop Phases IV and V of, a 1,880-unit class A
multifamily development known as "Palomino Park," located on 182 acres, of
which 65 acres have been developed, in a suburb of Denver, Colorado. Palomino
Park is being constructed around a centrally located 24-acre park and has a
29,000-square-foot recreation center. Phase I, which is to consist of 456
units, is approximately 83% completed, approximately 64% leased and is
expected to be completed in late 1997. Construction on Phase II, which is to
consist of 304 units, is expected to be completed in late 1998 or early 1999.
As of March 31, 1997, an aggregate of approximately $23.9 million had been
invested in Palomino Park, exclusive of amounts advanced under the existing
construction loans for Phases I and II. ERP Operating Partnership has an
approximate 20% interest in Palomino Park.
Initial Capital and Financing
Upon consummation of the Merger, ERP Operating Partnership acquired
shares of the Company's Class A Common at a price per share equal to $10.30
(the book value per share of the Common Stock on the date of the Merger) and
for an aggregate purchase price of $3.5 million. On June 2, 1997, the Company
sold 12,000,000 shares of Common Stock in the Private Placement primarily to
institutional investors at a price per share equal to $10.30 (the book value
per share of Common Stock on the date of closing of the Private Placement) for
an aggregate purchase price of $123.6 million. As of July 1, 1997, an
aggregate of approximately $74.4 million of the proceeds from the sale of the
shares of Class A Common and from the Private Placement had been applied by
the Company to, among other things, repay loans, the proceeds of which were
used by the Company to acquire its five commercial properties and to make an
investment of $20 million in the 277 Park Loan, and approximately $52.7
million was available to the Company.
In addition, the Company has available the following other sources of
capital, financing and credit support:
o $25 million pursuant to the ERP Preferred Commitment to acquire
up to 1,000,000 shares of Series A Preferred at the request of the
Company and subject to certain limited conditions. Each share of Series
A Preferred is convertible into Common Stock at a price of $11.124
(representing a premium of 8% in excess of the book value per share of
the Common Stock on the date of the Merger). The ERP Preferred
Commitment is pledged as security for the Line of Credit.
o $50 million under a two-year line of credit obtained from
BankBoston and Morgan Guaranty. The Line of Credit initially bears
interest at an annual rate equal to LIBOR plus 175 basis points and is
extendible for an additional one-year period.
o Approximately $81.1 million in construction financing and
credit enhancement with respect to Palomino Park.
See "Initial Capital and Financing," "Description of Capital Stock" and
"Certain Agreements Between the Company and ERP Operating Partnership."
Dividends to Holders of Common Stock
The Company does not currently contemplate paying dividends on the Common
Stock. Earnings from the Company's investments are currently expected to be
reinvested by the Company in future acquisitions and investments. The Board
of Directors of the Company may determine in its discretion to pay dividends
on the Common Stock in the future, and any such determination will be
dependent upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant at that time by the
Company's Board of Directors.
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
SUMMARY UNAUDITED COMBINED FINANCIAL DATA
The following tables set forth the summary unaudited pro forma combined
financial data for the Company (Predecessor) as a combined entity, giving
effect to the Merger, Contribution, Distribution and Private Placement as if
they had occurred on the dates indicated herein, after giving effect to the
pro forma adjustments described in the notes to the unaudited pro forma
combined financial statements included elsewhere in this Prospectus.
The summary unaudited pro forma combined operating data are presented as
if the Merger, Contribution, Distribution and Private Placement had been
consummated on January 1, 1997. In addition to the Merger, Contribution,
Distribution and Private Placement, the pro forma combined operating data
gives effect to the origination of the 277 Park Loan and the purchase of five
commercial office properties, all of which occurred between January 1, 1997
and June 30, 1997, as if they had occurred on January 1, 1997.
The summary unaudited pro forma combined balance sheet data are presented
as if the Merger, Contribution, Distribution, Private Placement, sale of the
Class A Common to ERP Operating Partnership (the "Class A Sale") and Line of
Credit had been consummated on March 31, 1997. In addition to the Merger,
Contribution, Distribution, Private Placement, Class A Sale and Line of
Credit, the pro forma combined balance sheet data gives effect to certain
material events set forth in the previous paragraph which occurred between
April 1, 1997 and June 30, 1997 as if they had occurred on March 31, 1997, and
as if Phase I of Palomino Park had been acquired on March 31, 1997. See the
notes to the unaudited Pro Forma Combined Balance Sheet at March 31, 1997
included elsewhere in this Prospectus. In the opinion of management, all
adjustments necessary to reflect the effects of the Merger, Contribution,
Distribution and Private Placement have been made.
The summary unaudited pro forma combined financial data should be read in
conjunction with, and is qualified in its entirety by, the historical combined
financial statements and notes thereto of the Company included in this
Prospectus.
The summary unaudited pro forma combined operating and balance sheet data
are presented for comparative purposes only and are not necessarily indicative
of what the actual combined results of the Company would have been for the
period and as of the date presented, nor does such data purport to represent
the results of future periods, particularly because four of the five
commercial office properties were vacant on March 31, 1997.
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Summary Unaudited Combined Financial Data
Pro Forma Historical
Three Months Three Months Historical
Ended Ended Year Ended
March 31, March 31, December 31,
1997 1997 1996
---- ---- ----
(Unaudited) (Unaudited)
(In thousands except per share data)
OPERATING DATA:
Revenues:
Rental income $ 762
Other income 40
Interest income 1,135 $ 401 $ 757
-------------------------------------------
1,937 401 757
-------------------------------------------
Expenses:
Property operating
and maintenance 211
Real estate taxes 107
General and
administrative 438
Depreciation 128
Property management 34
-------------------------------------------
918 0 0
-------------------------------------------
Income before
income taxes 1,019 401 757
Provision for
income taxes 416
-------------------------------------------
Net income $ 603 $ 401 $ 757
===========================================
Net income per
common share $0.04
Weighted average
common shares
outstanding 16,888
<PAGE>
Pro Forma Historical Historical Historical
March 31, March 31, December 31, December 31,
1997 1997 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
(In thousands)
BALANCE SHEET DATA:
Real estate (prior
to depreciation) $ 129,889 $ 47,806 $ 21,306 $ 7,955
Mortgage notes and
interest receivable $ 42,934 $ 17,934 $ 17,934 $ 0
Cash and cash
equivalents $ 21,180 $ 0 $ 0 $ 0
Restricted cash $ 3,198 $ 3,198 $ 5,520 $ 10,414
Total assets $ 199,805 $ 68,938 $ 44,760 $ 18,369
Total debt $ 14,755 $ 36,366 $ 14,755 $ 14,755
Total equity $ 173,933 $ 32,572 $ 30,005 $ 3,614
Period from
Pro Forma Historical Historical Historical March 22 to
March 31, March 31, March 31, December 31, December 31,
1997 1997 1996 1996 1995
(Unaudited) (Unaudited) (Unaudited)
(In thousands)
OTHER DATA:
Funds from
operations $ 731 $ 401 $ 0 $ 757 $ 0
EBITDA $ 1,147 $ 401 $ 0 $ 757 $ 0
Cash flows
from operating
activities $ 2,925 $ 2,723 $ 1,082 $ 5,517 $ 4,341
Cash flows
from investing
activities $ (133,583) $ (26,500) $ (231) $ (31,151) $ (7,955)
Cash flows
from financing
activities $ 152,040 $ 23,777 $ (851) $ 25,634 $ 3,614
<PAGE>
RISK FACTORS
Ownership of the Common Stock involves the following material risks:
General Risks
If the properties of the Company, the properties of those entities in
which it invests or the properties of those entities to which it will lend
(collectively, the "Properties") do not generate revenue sufficient to meet
operating expenses, including debt service and capital expenditures, the
financial condition and results of operations of the Company may be adversely
affected. The Company's financial condition and results of operations may
also be adversely affected by a number of other factors, including
international and domestic general economic climate and local real estate
conditions (such as oversupply of or reduced demand for space and changes in
market rental rates); the perceptions of prospective tenants of the safety,
convenience and attractiveness of the Properties; the ability of the owner to
provide adequate management, maintenance and insurance; energy and supply
shortages; the ability to collect on a timely basis all rent from tenants and
interest from borrowers; the expense of periodically renovating, repairing and
reletting spaces; and increasing operating costs (including real estate taxes
and utilities) which may not be passed through to tenants. Certain
significant expenditures associated with investments in real estate (such as
mortgage payments, real estate taxes, insurance and maintenance costs) are
generally not reduced when circumstances cause a reduction in rental revenues
from the investment. If a Property is mortgaged to secure the payment of
indebtedness and if the Company or the entity in which the Company invests or
to which it lends is unable to meet its mortgage payments, a loss could be
sustained as a result of foreclosure on the property or the exercise of other
remedies by the mortgagee. In addition, real estate values and income from
properties are also affected by such factors as compliance with laws,
including tax laws, interest rate levels and the availability of financing.
Difficulty of Locating Suitable Investments; Competition; Capital Requirements
Identifying, completing and realizing on real estate investments has from
time to time been highly competitive, and involves a high degree of
uncertainty. The Company will be competing for investments with many public
and private real estate investment vehicles, including financial institutions
(such as mortgage banks, pension funds and real estate investment trusts) and
other institutional investors, as well as individuals. There can be no
assurance that the Company will be able to locate and complete investments
which satisfy the Company's rate of return objective or realize upon their
value or that it will be able to fully invest its available capital.
Many of those with whom the Company will compete for investments and its
services are far larger than the Company, may have greater financial resources
than the Company and may have management personnel with more experience than
the officers of the Company.
The success of the Company's business strategy is dependent upon being
able to obtain significant amounts of equity capital and proceeds from
borrowings on terms financially advantageous to the Company. The inability of
the Company to obtain such equity capital and debt proceeds on such terms may
have a material adverse effect on the Company.
Risks of Acquisition, Development, Construction and Renovation Activities
Acquisition. The Company intends to acquire existing properties to the
extent that they can be acquired on advantageous terms and meet the Company's
investment criteria. Acquisitions of properties entail general investment
risks associated with any real estate investment, including the risk that
investments will fail to perform as expected, that estimates of the cost of
improvements to bring an acquired property up to standards established for the
intended market position may prove inaccurate and the occupancy rates and
rents achieved may be less than anticipated.
Development, Construction and Renovation. The Company also intends to
pursue the selective development, construction and renovation of commercial
and residential properties for its own account or the account of, or through,
entities in which it owns an equity interest as opportunities arise. Risks
associated with the Company's development, construction and renovation
activities include the risks that: the Company may abandon development
opportunities after expending resources to determine feasibility; construction
and renovation costs of a project may exceed original estimates; occupancy
rates and rents at a newly completed property may not be sufficient to make
the property profitable; and development, construction, renovation and lease-
up may not be completed on schedule (including risks beyond the control of the
Company, such as weather or labor conditions or material shortages) resulting
in increased debt service expense and construction costs. Development,
construction and renovation activities are also subject to risks relating to
the inability to obtain, or delays in obtaining, all necessary zoning, land-
use, building, occupancy and other required governmental permits and
authorizations. These risks could result in substantial unanticipated delays
or expenses and, under certain circumstances, could prevent completion of
development, construction and renovation activities once undertaken, any of
which could adversely affect the financial condition and results of operations
of the Company. Properties under development or acquired for development may
generate little or no cash flow from the date of acquisition through the date
of completion of development and may experience operating deficits after the
date of completion. In addition, new development and renovation activities,
regardless of whether or not they are ultimately successful, typically require
a substantial portion of management's time and attention.
The Company may elect not to exercise its option to purchase the land
underlying Phases IV and/or V of Palomino Park, perhaps after having expended
money and time to determine the feasibility of developing such Phase. In
addition, the Company may elect, after having acquired the land underlying one
or more of the Phases and paid the purchase price therefor, not to commence
construction, or to delay construction, because of local occupancy rates or
rents, excessive construction or renovation costs, lack of satisfactory
financing or for any other reason.
Any properties developed and renovated by the Company will be subject to
the risks associated with the ownership and operation of real estate described
elsewhere in this section entitled "Risk Factors."
Risks of Vacancies at Existing Properties; Dependence on Rental Income from
Real Property
The Company currently owns five office properties consisting of six
buildings, five of which buildings are vacant. The sixth office building is
currently approximately 88.6% leased. The Company expects to incur
significant costs, including those relating to leasing commissions and tenant
improvements, in connection with the leasing of these properties and may be
required to offer tenant concessions, including free rental periods. The
failure of the Company to lease these properties in a timely manner and on
economically favorable terms may have a material adverse effect on the
Company.
The Company's cash flow, results of operations and value of its assets
would be adversely affected if a significant number of tenants of the
Properties failed to meet their lease obligations or if the Company or the
owner of a Property were unable to lease a significant amount of space on
economically favorable terms. In the event of a default by a lessee, the
owner may experience delays in enforcing its rights as lessor and may incur
substantial costs in protecting its investment. The bankruptcy or insolvency
of a major tenant may have an adverse effect on a property. At any time, a
tenant may also seek protection under the bankruptcy laws, which could result
in rejection and termination of such tenant's lease and thereby cause a
reduction in the cash flow of the property. If a tenant rejects its lease,
the owner's claim for breach of the lease would (absent collateral securing
the claim) be treated as a general unsecured claim. Generally, the amount of
the claim would be capped at the amount owed for unpaid pre-petition lease
payments unrelated to the rejection, plus the greater of one year's lease
payments or 15% of the remaining lease payments payable under the lease (but
not to exceed the amount of three years' lease payments). No assurance can be
given that the Properties will not experience significant tenant defaults in
the future.
Operating Risks
The Properties are subject to operating risks common to the particular
property type, any and all of which may adversely affect occupancy or rental
rates. Such properties are subject to increases in operating expenses such as
cleaning; electricity; heating, ventilation and air-conditioning; elevator
repair and maintenance; insurance and administrative costs; and other general
costs associated with security, landscaping, repairs and maintenance. While
commercial tenants are often obligated to pay a portion of these escalating
costs, there can be no assurance that they will agree to pay such costs or
that the portion that they agree to pay will fully cover such costs. If
operating expenses increase, the local rental market may limit the extent to
which rents may be increased to meet increased expenses without decreasing
occupancy rates. To the extent rents cannot be increased or costs controlled,
the cash flow of the Company and its financial condition may be adversely
affected.
Adverse Consequences of Debt Financing
Leverage. Some of the Company's real estate equity investments may
utilize a leveraged capital structure, in which case a third party lender
would be entitled to cash flow generated by such investments prior to the
Company receiving a return. As a result of such leverage, the Company would
be subject to the risks normally associated with debt financing, including the
risk that cash flow from operations and investments will be insufficient to
meet required payments of principal and interest, the risk that existing debt
(which in most cases will not have been fully amortized at maturity) will not
be able to be refinanced or that the terms of such refinancings will not be as
favorable to the Company and the risk that necessary capital expenditures for
such purposes as renovations and other improvements will not be able to be
financed on favorable terms or at all. While such leverage may increase
returns or the funds available for investment by the Company, it also will
increase the risk of loss on a leveraged investment. If the Company defaults
on secured indebtedness, the lender may foreclose and the Company could lose
its entire investment in the security for such loan. Because the Company may
engage in portfolio financings where several investments are cross-
collateralized, multiple investments may be subject to the risk of loss. As a
result, the Company could lose its interests in performing investments in the
event such investments are cross-collateralized with poorly performing or
nonperforming investments. In addition, recourse debt, which the Company
reserves the right to obtain, may subject other assets of the Company to risk
of loss.
Existing Debt Maturities; Foreclosures. The Company anticipates that
only a portion of the principal of the Company's indebtedness outstanding from
time to time will be repaid prior to maturity. However, the Company may not
have sufficient funds to repay such indebtedness at maturity; it may therefore
be necessary for the Company to refinance debt through additional debt
financing or equity offerings. If the Company is unable to refinance this
indebtedness on acceptable terms, the Company may be forced to dispose of
properties or other assets upon disadvantageous terms, which could result in
losses to the Company and adversely affect the amount of cash available for
further investment.
Risk of Rising Interest Rates. The Company may incur indebtedness in the
future that also bears interest at a variable rate or may be required to
refinance its debt at higher rates. Outstanding advances under the Company's
Line of Credit bear interest at a variable rate. Accordingly, increases in
interest rates could increase the Company's interest expense and adversely
effect the financial condition and results of operations of the Company.
Covenants. Various credit facilities or other debt obligations may
require the Company to comply with a number of financial and other covenants
on an ongoing basis. Failure to comply with such covenants may limit the
Company's ability to borrow funds or may cause a default under its then-
existing indebtedness.
No Limitation on Debt. The organizational documents of the Company do
not contain any limitation on the amount of indebtedness the Company may
incur. The Company also has the ability to use a more highly leveraged
business strategy than typically used by REITs. Accordingly, the Company could
become highly leveraged, resulting in an increase in debt service that could
increase the risk of default on the Company's indebtedness.
Risks of Investments in Debt Instruments
The Company intends to originate and participate in debt investments and
may acquire performing or nonperforming debt investments. In general, debt
instruments carry the risk that borrowers may not be able to make debt service
payments or to pay principal when due, the risk that the value of any
collateral may be less than the amounts owed, the risk that interest rates
payable on the debt instruments may be lower than the Company's cost of funds,
and the risk that the collateral may be mismanaged or otherwise decline in
value during periods in which the Company is seeking to obtain control of the
underlying real estate. The Company is also dependent on the ability of the
borrowers to operate successfully their properties. Such borrowers and their
properties will be subject to the other risks affecting the ownership and
operation of real estate set forth in this section entitled "Risk Factors."
Some of the loans may be structured so that all or a substantial portion of
the principal will not be paid until maturity, which increases the risk of
default at that time.
It is anticipated that a substantial portion of the debt in which the
Company invests will not be rated by any nationally-recognized rating agency.
Generally, the value of unrated classes is subject to more fluctuation due to
economic conditions than rated classes. The Company's acquisition of credit
supported classes of securitizations (which generally are expected to be first
loss classes) which are unrated at the time of acquisition and which have
lower ratings may increase the risk of nonpayment or of a significant delay in
payments on these classes. Should rated assets be downgraded, it may
adversely affect their value and may adversely affect the financial condition
and results of operations of the Company.
Risks of Investments in Mortgage and Other Loans
To the extent the Company invests in mortgage and other loans, such loans
may or may not be recourse obligations of the borrower and generally will not
be insured or guaranteed by governmental agencies or otherwise. In the event
of a default under such obligations, the Company may have to foreclose on its
mortgage or other collateral or protect its investment by acquiring title to
the collateral and, in the case of mortgage loans, thereafter making
substantial improvements or repairs in order to maximize the collateral's
investment potential. Borrowers may contest enforcement of foreclosure or
other remedies, seek bankruptcy protection against such enforcement and/or
bring claims for lender liability in response to actions to enforce mortgage
and other obligations. Relatively high "loan-to-value" ratios and declines in
the value of the collateral may prevent the Company from realizing an amount
equal to its loan upon foreclosure.
The Company may participate in loans originated by other financing
institutions. As a participant, the Company may not have the sole authority
to declare a default under the loan or to control the collateral or any
foreclosure.
Any investments in junior secured obligations which are subordinate to
liens of senior secured obligations would involve additional risks, including
the lack of control over the collateral and any related foreclosure
proceeding. In the event of a default on a senior secured obligation, the
Company may make payments to prevent foreclosure on the lien of the senior
lender without necessarily improving the Company's position with respect to
the subject collateral. In such event, the Company would be entitled to share
in the proceeds only after satisfaction of the amounts due to the holder of
the senior secured obligation.
Lack of Control and Other Risks of Equity Investments in and with Third
Parties
The Company may invest in shares of "REITs" or other entities that invest
in real estate assets, including debt instruments and equity interests. In
such cases, the Company will be relying on the assets, investments and
management of the REIT or other entity in which it is investing. Such entities
and their properties will be subject to the other risks affecting the
ownership and operation of real estate and investment in debt set forth in
this section entitled "Risk Factors."
The Company may also co-invest with third parties through partnerships,
joint ventures or other entities, acquiring non-controlling interests in or
sharing responsibility for managing the affairs of a property, partnership,
joint venture or other entity and, therefore, will not be in a position to
exercise sole decision-making authority regarding the property, partnership,
joint venture or other entity.
Investments in partnerships, joint ventures, or other entities may, under
certain circumstances, involve risks not present were a third party not
involved, including the possibility that the Company's partners or co-
venturers might become bankrupt or otherwise fail to fund their share of
required capital contributions, that such partners or co-venturers might at
any time have economic or other business interests or goals which are
inconsistent with the business interests or goals of the Company, and that
such partners or co-venturers may be in a position to take action contrary to
the instructions or the requests of the Company and contrary to the Company's
policies or objectives. Such investments may also have the potential risk of
impasse on decisions, such as a sale, because neither the Company nor the
partner or co-venturer would have full control over the partnership or joint
venture. Consequently, actions by such partner or co-venturer might result in
subjecting properties owned by the partnership or joint venture to additional
risk. In addition, the Company may in certain circumstances be liable for the
actions of its third-party partners or co-venturers.
Risk of Loss on Investments in Commercial Mortgage-Backed Securities
As noted above, the Company may seek to invest in real estate-related
debt instruments, which may include CMBS. Many of the risks of investing in
CMBS reflect the risks of investing directly in the real estate securing the
underlying mortgage loans. This may be especially true in the case of
commercial mortgage securities secured by, or evidencing an interest in, a
single commercial mortgage loan or a relatively small or less diverse pool of
commercial mortgage loans. See "-Risks of Investments in Mortgage Loans."
The risks of investing in commercial mortgage securities include risks
that the existing credit support will prove to be inadequate, either because
of unanticipated levels of losses or, if such credit support is provided by a
third party, because of difficulties experienced by such provider. Delays or
difficulties encountered in servicing commercial mortgage securities may cause
greater losses and, therefore, greater resort to credit support than was
originally anticipated, and may cause a rating agency to downgrade a security.
The Company may acquire subordinated tranches of CMBS issuances. In
general, subordinated tranches of CMBS are entitled to receive repayment of
principal only after all principal payments have been made on more senior
tranches and also have subordinated rights as to receipt of interest
distributions. In addition, an active secondary market for such subordinated
securities is not as well developed as the market for certain other mortgage-
backed securities. Accordingly, such subordinated CMBS may have limited
marketability and there can be no assurance that a more efficient secondary
market will develop.
Nature of Investments Made by the Company May Involve High Risk;
Illiquidity of Real Estate Investments
The Company may make investments in real estate-related assets and
businesses which have experienced severe financial difficulties, which
difficulties may never be overcome. Since the Company may only make a limited
number of investments and since many of the investments may involve a high
degree of risk, poor performance by one of the investments could severely
affect the financial condition and results of operations of the Company.
Equity and debt investments in real estate may be relatively illiquid.
Such illiquidity limits the ability of the Company to modify its portfolio in
response to changes in economic or other conditions. Illiquidity may result
from the absence of an established market for the investments as well as legal
or contractual restrictions on their resale by the Company.
Limitations on Remedies
Although the Company will have certain contractual remedies upon the
default by borrowers under certain debt instruments, such as foreclosing on
the underlying real estate or other collateral or collecting rents generated
therefrom, certain legal requirements (including the risks of lender
liability) may limit the ability of the Company to effectively exercise such
remedies.
The right of a mortgage lender to convert its loan position into an
equity interest may be limited or prevented by certain common law or statutory
prohibitions or delayed by legal proceedings.
Third-Party Bankruptcy Risks
Investments made in assets operating in workout modes or under Chapter 11
of the Bankruptcy Code could be subordinated or disallowed, and the Company
could be liable to third parties in such circumstances. Furthermore,
distributions made to the Company in respect of such investments could be
recovered if any such distribution is found to be a fraudulent conveyance or
preferential payment. Bankruptcy laws, including the automatic stay imposed
upon the filing of a bankruptcy petition, may delay the ability of the Company
to realize on collateral for loan positions held by it or may adversely affect
the priority of such loans through doctrines such as equitable subordination
or may result in a restructure of the debt through principles such as the
"cramdown" provisions of the bankruptcy laws.
Recently Formed Entity
It should be noted that the Company is a recently formed entity with
little prior operating history and that its properties and assets have only
been recently acquired.
Risk of Registration Under Investment Company Act
The Company is currently not registered as an investment company under
the Investment Company Act of 1940, as amended (the "Investment Company Act"),
since management believes that the Company either is not within the
definitions of "investment company" thereunder or, alternatively, is excluded
from regulation under the Investment Company Act by one or more exemptions.
In the future, the Company will seek to continue to conduct its operations so
as to avoid registration under the Investment Company Act. Therefore, the
assets that the Company may acquire or sell may be limited by the provisions
of the Investment Company Act. If the Company were to become an investment
company under the Investment Company Act and if it failed to qualify for an
exemption thereunder, it would be unable to conduct its business as presently
conducted which could have a material adverse effect on the Company and the
market price for the Common Stock.
Risks of Uninsured Loss
The Company will carry comprehensive liability, fire, extended coverage
and rental loss insurance with respect to all of the properties that it owns,
with policy specifications, insured limits and deductibles customarily carried
for similar properties. There are, however, certain types of losses (such as
losses arising from acts of war or relating to pollution) that are not
generally insured because they are either uninsurable or not economically
insurable. Should an uninsured loss or a loss in excess of insured limits
occur, the Company could lose its capital invested in a property, as well as
the anticipated future revenue from such property and would continue to be
obligated on any mortgage indebtedness or other obligations related to the
property. Any such loss would adversely affect the financial condition and
results of operations of the Company.
With respect to those properties in which the Company holds an interest
through a mortgage, as well as those properties owned by entities to whom the
Company makes unsecured loans, the borrowers will most likely be obligated to
maintain insurance on such properties and to arrange for the Company to be
covered as a named insured on such policies. The face amount and scope of
such insurance coverage may be less comprehensive than the Company would carry
if it held the fee interest in such property. Accordingly in such
circumstances, or in the event that the borrowers fail to maintain required
coverage, uninsured or underinsured losses may occur, which could have an
adverse impact on the Company's cash flow or financial condition.
Potential Environmental Liability Related to the Properties
Under various Federal, state and local laws, ordinances and regulations,
an owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
These laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The cost of any required remediation and the owners's
liability therefor as to any property is generally not limited under such
enactments and could exceed the value of the property and/or the aggregate
assets of the owner. The presence of such substances, or the failure to
properly remediate such substances, may adversely affect the owner's ability
to sell or rent such property or to borrow using such property as collateral.
Persons who arrange for the disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or remediation of such
substances at a disposal or treatment facility, whether or not such facility
is owned or operated by such person. Certain environmental laws govern the
removal, encapsulation or disturbance of asbestos-containing materials
("ACMs") when such materials are in poor condition, or in the event of
renovation or demolition. Such laws impose liability for release of ACMs into
the air and third parties may seek recovery from owners or operators of real
properties for personal injury associated with ACMs. In this regard, it
should be noted that the main headquarters building at the Cyanamid Office
Portfolio contains ACMs. The Company is currently proceeding with the removal
of ACMs in such building. The operation and subsequent removal of certain
underground storage tanks are also regulated by federal and state laws. In
connection with the ownership (direct or indirect), operation, management and
development of real properties, the Company may be considered an owner or
operator of such properties or as having arranged for the disposal or
treatment of hazardous or toxic substances, and, therefore, potentially liable
for removal or remediation costs, as well as certain other related costs,
including governmental fines and injuries to persons and property.
The properties described in this Prospectus that are owned by the Company
have had recent Phase I or similar environmental audits (which involved
general inspections without soil sampling, ground water analysis or radon
testing, and for the Properties constructed in 1978 or earlier, survey
inspections to ascertain the existence of ACMs were conducted) completed by
independent environmental consultant companies. These environmental audits
have not revealed any environmental liability that would have a material
adverse effect on the Company's business.
Dependence on Key Personnel
The Company is dependent primarily on the efforts of Jeffrey H. Lynford,
Chairman of the Board, and Edward Lowenthal, President and Chief Executive
Officer, and the loss of either of their services could have an adverse effect
on the operations of the Company. Mr. Lynford and Mr. Lowenthal have each
entered into employment agreements with the Company having a term ending
December 31, 2002. The Company intends to retain the services of individuals
with expertise and experience in certain activities to be conducted by the
Company, and the loss of the services of any of these individuals could also
have an adverse effect on the operations of the Company.
Changes in Policies Without Shareholder Approval
The investment, financing, borrowing and distribution policies of the
Company and its policies with respect to all other activities, growth, debt,
capitalization and operations, will be determined by the Company's Board of
Directors. Although it has no present intention to do so, the Board of
Directors may amend or revise these policies at any time and from time to time
at its discretion without a vote of the shareholders of the Company. A change
in these policies could adversely affect the Company's financial condition,
results of operations and the market price of the Common Stock. See "Policies
with Respect to Certain Activities."
Absence of Public Market; Risk of Changes in Stock Price
As of July 1, 1997, there were 16,572,043 shares of Common Stock issued
and outstanding. Although a trading market for the Common Stock exists, there
can be no assurance that an active trading market for the Common Stock will be
sustained in the future. In the absence of an active public trading market,
an investor may be unable to liquidate his investment in the Company. The
prices at which the Common stock trades will be determined by the marketplace
and may be influenced by many factors, including, among others, the depth and
liquidity of the market for the Common Stock, investor perception of the
Company and its businesses, the Company's dividend policy, interest rates and
general economic and market conditions. Prices at which the Common Stock may
trade in the future cannot be predicted.
Costs of Compliance with the Americans with Disabilities Act and Similar Laws
Under the Americans with Disabilities Act of 1980 (the "ADA"), places of
public accommodations and commercial facilities are required to meet certain
federal requirements related to access and use by disabled persons.
Compliance with ADA requirements could require both structural and non-
structural changes to the properties in which the Company invests and
noncompliance could result in imposition of fines by the United States
government or an award of damages to private litigants. Although management
of the Company believes that its properties are substantially in compliance
with present requirements of the ADA, the Company may incur additional costs
of compliance in the future. A number of additional Federal, state and local
laws exist which impose further burdens or restrictions on owners with respect
to access by disabled persons and may require modifications to properties in
which the Company invests, or restrict certain further renovations thereof,
with respect to access by disabled persons. Final regulations under the ADA
have not yet been promulgated and the ultimate amount of the cost of
compliance with the ADA or other such laws is not currently ascertainable.
While such costs are not expected to have a material effect on the Company,
they could be substantial. If required changes involve greater expense than
the Company currently anticipates, the Company's financial condition and
results of operations could be adversely affected.
Noncompliance with Other Laws
Real estate properties are also subject to various Federal, state and
local regulatory requirements, such as state and local fire and life safety
requirements. Failure to comply with these requirements could result in the
imposition of fines by governmental authorities or awards of damages to
private litigants. The Company believes that its properties are currently in
material compliance with all such regulatory requirements. However, there can
be no assurance that these requirements will not be changed or that new
requirements will not be imposed which would require significant unanticipated
expenditures by the Company and could have an adverse effect on the Company's
results of operations.
Effect on Common Stock Price of Shares Available for Future Sale
Sales of a substantial number of shares of the Common Stock, or the
perception that such sales could occur, could adversely affect prevailing
market prices of the Common Stock. In addition, upon registration of the
12,242,719 Shares offered hereby, the Shares may be sold in the public markets
from time to time. Also, 3,076,235 shares of Common Stock have been reserved
for issuance pursuant to the Company's stock option plans (options to purchase
1,873,610 of such shares have been granted, 1,326,235 of which were granted in
replacement for former Wellsford Residential share options), and approximately
5,000,000 shares of Common Stock have been reserved for issuance upon
conversion of the Series A Preferred and Class A Common. When issued, these
reserved shares and shares subject to options will be available for sale in
the public markets from time to time pursuant to exemptions from registration
requirements or upon registration. No prediction can be made about the effect
that future sales of the Common Stock will have on the market prices of the
Common Stock.
Hedging Policies/Risks
In connection with the financing of certain real estate investments, the
Company may employ hedging techniques designed to protect the Company against
adverse movements in currency and/or interest rates. While such transactions
may reduce certain risks, such transactions themselves may entail certain
other risks. Thus, while the Company may benefit from the use of these
hedging mechanisms, unanticipated changes in interest rates, securities
prices, or currency exchange rates may result in a poorer overall performance
for the Company than if it had not entered into such hedging transactions.
Anti-Takeover Effect Resulting From a Staggered Board, Ability of the Company
to Issue Preferred Stock and Certain Provisions of Maryland Law
The Company's Board of Directors is divided into three classes. The
initial terms of the first, second and third classes will expire in 1998, 1999
and 2000, respectively. Beginning in 1998, directors for each class will be
chosen for a three-year term upon the expiration of their then current term,
and each year one class of directors will be elected by the shareholders. The
staggered terms for directors may limit the shareholders' ability to change
control of the Company even if a change of control were in the interests of
shareholders.
The Company's Charter authorizes the Board of Directors to establish one
or more series of preferred shares and to determine, with respect to any
series of preferred shares, the preferences and other terms of such series.
Although the Board of Directors has no intention at the present time, it could
issue a series of preferred shares that could, depending on the terms of such
series, impede or prevent a merger, tender offer or other transaction that
some, or a majority, of the Company's shareholders might believe to be in
their best interest or in which shareholders might receive a premium for their
shares over the then current market price of such shares.
Under the Maryland General Corporation Law ("MGCL"), certain "business
combinations" (including certain issuances of equity securities) between a
Maryland corporation and any person who beneficially owns ten percent or more
of the voting power of the corporation's shares (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent
date on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, unless exempted in accordance with the MGCL, any such business
combination must be approved by two supermajority stockholder votes. The
directors of the Company have exempted from the Maryland statute any business
combinations with Jeffrey H. Lynford or Edward Lowenthal or any of their
affiliates or any other person acting in concert or as a group with any of
such persons and, consequently, the five-year prohibition and the
supermajority vote requirements will not apply to business combinations
between such persons and the Company. See "Certain Provisions of Maryland Law
and of the Company's Charter and Bylaws."
The provisions of the MGCL described above and the exemptions granted may
discourage a third party from making an acquisition proposal for the Company
and may have the effect of delaying, deferring or preventing a transaction
with or a change in control of the Company that might involve a premium price
for the Common Stock or otherwise be in the best interest of the stockholders.
Until May 30, 2007, pursuant to the Common Stock and Preferred Stock
Purchase Agreement between ERP Operating Partnership and the Company, the
Company has the right to direct the voting of all shares of the Series A
Preferred, the Class A Common and the Common Stock owned by ERP Operating
Partnership or any of its affiliates, except as to the election of the
director to be designated by ERP Operating Partnership or any matter relating
to the rights, preferences and privileges of the Series A Preferred or the
Class A Common. Such voting right may hinder a change in control.
THE COMPANY
General
The Company was organized to create and realize value by identifying and
making opportunistic real estate investments through the direct acquisition,
rehabilitation, development, financing and management of real properties
and/or participation in these activities through the purchase of debt
instruments or equity interests of entities engaged in such real estate
businesses. Management is concentrating its efforts on defining and building
focused operating businesses with recurring sources of income. The Company
intends to maximize shareholder value over time through growth in cash flow
and net asset value per share.
The Company believes that while liquidity has returned to many real
estate markets and that the supply and demand of many real estate asset
classes are in relative equilibrium, there are specific opportunities which
are expected to continue to exist because of market inefficiencies and
impediments to investment, such as transactional complexity, time-consuming
regulatory approvals, the prospect of no or limited immediate cash flow and a
lack of available property information and market information analysis. In
this regard, the Company is initially focusing its investments on three
distinct aspects of the real estate business which management believes
currently offer such opportunities. They are (i) acquiring underperforming
office and other commercial properties below replacement cost, renovating
and/or repositioning them, and owning, operating and/or reselling such
properties, (ii) investing in real estate-related debt instruments with the
potential for high-yields or returns more characteristic of equity ownership
and (iii) engaging in selective property development when justified by
expected returns. As opportunities emerge, the Company may in the future
expand its real estate-related businesses and activities.
The Company currently does not intend to qualify as a REIT under the
Code. Consequently, the Company has the flexibility to respond quickly to
opportunities without the structural limitations inherent in REITs and to
operate, when deemed advantageous by management, on a more highly leveraged
basis than most REITs. By not qualifying as a REIT under the Code (which
would require the Company to distribute each year at least 95% of its net
taxable income, excluding capital gains), the Company has the ability and
currently intends to retain for reinvestment its cash flow generated from
operations and to sell properties without the substantial income tax penalties
which may be imposed on REITs in such transactions. In addition, the Company
differs from opportunity funds that are typically structured as private
partnerships. In that regard, the business of the Company is conducted
without the payment of acquisition, disposition or advisory fees to general
partners which should result in additional cash flow being available for
reinvestment as well as mitigate the potential for conflicts of interest. In
addition, unlike investors in opportunity funds, the Company's shareholders
are expected to have enhanced liquidity through their ability to sell or
margin their stock. The Company also hopes to attract a broader range of
investors because there will be no stipulated investment minimum. However,
unlike REITs and opportunity funds, the Company is subject to corporate level
taxation.
The Company's management includes the co-founders of Wellsford
Residential, Jeffrey H. Lynford, Chairman, and Edward Lowenthal, President and
Chief Executive Officer, supported by a management team experienced in real
estate acquisitions, development, asset management and finance. The Company
believes that the over 50 years of combined experience of management in real
estate, capital markets and public company operations, their knowledge,
credibility, and business relationships, and their demonstrated track record
of recognizing and profiting from emerging real estate trends should help the
Company accomplish its business objectives. From the Wellsford Residential
IPO in November 1992 until consummation of the Merger in May 1997, Messrs.
Lynford and Lowenthal, through Wellsford Residential, acquired 69 multifamily
properties containing 16,332 units. From calendar year 1992 through calendar
year 1996, the revenues of Wellsford Residential and its predecessors
increased from $26.5 million to $131.8 million, representing a compounded
annual growth rate of approximately 49%, and EBITDA of Wellsford Residential
and its predecessors increased from $13.8 million to $72.8 million,
representing a compounded annual growth rate of approximately 52%. In
analyzing potential investments and market trends and inefficiencies,
management has reviewed, and will continue to review, current economic and
market information.
The Company is a Maryland corporation which was incorporated in January
1997. The Company's executive offices are located at 610 Fifth Avenue, New
York, New York 10020 and its telephone number is (212) 333-2300.
Management
The management of the Company is led by members of the former senior
management of Wellsford Residential, including Jeffrey H. Lynford, Chairman,
and Edward Lowenthal, President and Chief Executive Officer, of the Company,
who held the same offices at Wellsford Residential. Joining them are Gregory
F. Hughes and David M. Strong, who were Chief Financial Officer and Vice
President, respectively, of Wellsford Residential, and Richard R. Previdi, who
was previously a managing director of Emmes & Company, a real estate
investment company and a managing director of Trammell Crow N.E., Inc. and
Chief Executive Officer of that company's Northern Virginia Commercial
Division.
Wellsford Residential Acquisitions
Messrs. Lynford and Lowenthal formed Wellsford Group, Inc. ("WGI") with
an initial capitalization of $1 million provided primarily by William E.
Simon, Raymond Chambers and Frank Walsh, former principals of Wesray, a
private leveraged buy-out firm, and by principals of Eastdil Realty, Inc., a
private real estate investment banking firm. During the period from 1986
through November 1992, WGI and its affiliates acquired 19 multifamily
properties consisting of 5,255 units. After WGI and its affiliates
transferred their properties to Wellsford Residential in 1992, Wellsford
Residential commenced an aggressive acquisition strategy by purchasing 69
properties containing 16,332 multifamily units which increased the historical
cost of its total assets from $147 million at the time of the Wellsford
Residential IPO, to $756 million at December 31, 1996. These acquisitions
included 14 properties containing 5,100 units in Oklahoma purchased for $133
million in May 1994, and the $250 million acquisition by merger in December
1994 of Holly Residential Properties, Inc., a real estate investment trust
publicly traded on the New York Stock Exchange which developed, owned and
operated 34 properties containing over 5,000 multifamily units in the
Seattle/Tacoma area. In May 1997, Wellsford Residential consummated the
Merger with EQR in a transaction that valued Wellsford Residential at
approximately $1 billion.
Wellsford Residential Management and Development of Properties
During 1995 and 1996 Wellsford Residential focused its efforts on its
core portfolio and the development of new properties. Property management,
which had previously been contracted to third parties, was substantially
internalized. Immediately prior to the consummation of the Merger, Wellsford
Residential provided direct management for 84% of its properties. In
addition, Wellsford Residential developed three new properties consisting of
548 multifamily units during this period, helping to reduce the average age of
its portfolio. Wellsford Residential also commenced development of Palomino
Park, a 182-acre master planned class A multifamily residential community in
Highlands Ranch, a suburb of Denver, Colorado. See "Business and Properties-
Wellsford Property Development-Palomino Park."
Wellsford Residential Equity and Debt Financings
Wellsford Residential funded its acquisition and development activities
with various sources of capital including public and private debt and equity.
In November 1992, Wellsford Residential raised $100 million in the Wellsford
Residential IPO. Wellsford Residential was one of the first REITs to obtain a
corporate credit rating, when it received an implied senior rating of BBB -
from S&P and Duff & Phelps in September 1993. This rating facilitated the
issuance by Wellsford Residential in November 1993 of $100 million of
convertible preferred shares. In January 1995 Wellsford Residential became
one of the first REITs to access the unsecured debt markets with a $100
million issuance. In August 1995 Wellsford Residential's senior credit rating
was upgraded to BBB by S&P and Duff & Phelps, which helped facilitate the
issuance of $125 million of unsecured notes and $57.5 million of perpetual
preferred shares. Wellsford Residential's commitment to a conservative
corporate capital structure, including a 35% debt to total market
capitalization ratio, resulted in the investment grade rating and a gradual
reduction of its costs of capital, as reflected by the borrowing costs on its
line of credit. At the time of the Wellsford Residential IPO, Wellsford
Residential's line of credit was secured and bore an annual interest rate of
LIBOR plus 3.75%. Subsequently, Wellsford Residential's line of credit in the
amount of $150 million became unsecured with an annual interest rate of LIBOR
plus 1.50%. In November 1996, Wellsford Residential issued 3-year medium term
notes at an annual interest rate of LIBOR plus .32%.
Wellsford Residential Return to Shareholders
As a result of the above accomplishments, Wellsford Residential was able
to raise its dividend 15% during the period from the Wellsford Residential IPO
until the consummation of the Merger. Investors who bought their shares of
Wellsford Common in the Wellsford Residential IPO would have received an
average annual return of approximately 23.8% on their initial investment,
based upon the closing market price of a share of Wellsford Common on the New
York Stock Exchange on May 30, 1997 (the date of the Merger), and assuming all
distributions received on such shares of Wellsford Common were immediately
reinvested in Wellsford Common.
There can be no assurance that the Company's future performance or
average rate of return achieved by its investors will be similar to Wellsford
Residential's past accomplishments or the average rate of return achieved by
its shareholders. The Company's business strategy differs substantially from
that of Wellsford Residential's, which operated as a REIT and invested
primarily in multifamily properties.
Business Strategy
In furtherance of its business strategy, the Company is initially
focusing its efforts in three distinct areas of the real estate business. As
opportunities emerge and in response to changes in market, real estate and
general economic conditions, the Company may in the future retract from,
discontinue or expand its real estate related business and activities.
Commercial Properties. The Company will seek to acquire office and other
commercial properties below replacement cost and operate and/or resell such
properties after renovation, redevelopment and/or repositioning. The Company
believes that appropriate well-located commercial properties which are
currently underperforming can be acquired on advantageous terms and
repositioned with the expectation of achieving enhanced returns which are
greater than returns which could be achieved by acquiring a stabilized
property. The Company also believes that these types of properties are not
attractive acquisition candidates for REITs because the properties have no or
limited cash flow as a result of required rehabilitation or their not being
substantially leased. The Company's acquisitions to date demonstrate that the
Company is able to take advantage of existing opportunities in this area. The
Company has hired Richard R. Previdi, a former partner at Trammell Crow Co.
with significant leasing and redevelopment experience in major metropolitan
areas from Washington, D.C. to New York, to seek out such opportunities.
Initially, the Company will seek to apply its business strategy to suburban
office properties. In this regard, the Company has acquired five suburban
office properties, containing six buildings, all of which are located in
Northern New Jersey. As opportunities arise, the Company may seek to acquire
other types of commercial properties, including industrial properties. See
"Business and Properties."
High Yield Debt Investments. The Company will make loans that
constitute, or will invest in real estate-related senior, junior or otherwise
subordinated debt instruments, which may be unsecured or secured by liens on
real estate or the economic benefits thereof. The Company will focus on
investments of this type which have the potential for high yields or returns
more characteristic of equity ownership. These investments may contain
options to acquire, or be convertible into the right to acquire, all or a
portion of the underlying real estate, or contain the right to participate in
the cash flow and economic return which may be derived from the real estate.
These investments may include debt that is acquired at a discount, mezzanine
financing, commercial mortgage-backed securities, secured and unsecured lines
of credit, distressed loans, and loans previously made by foreign and other
financial institutions. In some cases the Company may only acquire a
participating interest in the debt instrument. The Company believes that
there are opportunities to acquire real estate debt, especially in the low or
below investment grade tranches, at significant returns as a result of
inefficiencies in pricing, while utilizing management's real estate expertise
to analyze the underlying properties and thereby effectively minimizing risk.
The Company will initially focus on opportunities arising in the following
areas, among others. First, where traditional CMBS buyers cannot or will not
invest, such as the purchase of subordinated real estate debt secured not by a
mortgage but by other indicia of ownership of an asset. Second, where the
Company believes that the market has mispriced an outstanding tranche of debt
because of insufficient asset specific information. The Company's investments
in the Sonterra Loan and the 277 Park Loan demonstrate its ability to take
advantage of opportunities in this area. See "Business and Properties."
Property Development. The Company will engage in selective development
activities as opportunities arise and when justified by expected returns. The
Company believes that by pursuing selective development activities it can
achieve returns which are greater than returns which could be achieved by
acquiring stabilized properties. In this regard, the Company will continue
the development of Palomino Park, its five-phase residential community begun
by Wellsford Residential, taking advantage of the fixed-price purchase options
for the land underlying such residential community obtained by Wellsford
Residential two years ago. This development may be retained for investment
and operated by the Company, sold, or converted to condominium ownership. The
Company may also acquire land for speculation, future development or
subdivision. Certain development activities may be conducted in joint
ventures with local developers who may bear the substantial portion of the
economic risks associated with the construction, development and initial rent-
up of properties. As part of its strategy, the Company may seek to obtain
bond financing from local governmental authorities which generally bear
interest at rates substantially below rates available from conventional
financing. See "Business and Properties."
The Company may in the future make equity investments in entities owned
by third parties and which engage in real estate-related businesses and
activities or businesses that service the real estate industry. Some of the
entities in which the Company may invest may be start-up companies or
companies in need of additional capital. The Company may also in the future
invest in retail, residential, hotel and other types of properties and may
also manage and lease properties owned by it or in which it has an equity or
debt investment.
In analyzing potential investments and market trends and inefficiencies,
management has reviewed, and will continue to review, current economic and
market information. Much of this information has been, and will continue to
be, provided by REIS Reports, Inc., a nationally recognized real estate market
database firm.
USE OF PROCEEDS
The Shares offered hereby are being registered for the account of Selling
Shareholders and, accordingly, the Company will not receive any of the
proceeds from the sale of the Shares by the Selling Shareholders.
SELLING SHAREHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of Shares by the Selling Shareholders as of July 1, 1997,
and the number of Shares being offered by this Prospectus. Each Selling
Shareholder will receive all of the net proceeds from the sale of its
respective Shares offered hereby.
Number Number
of Shares of Shares
Beneficially Being
Owned Registered
------------ ------------
Longleaf Partners Realty Fund 3,398,000 3,398,000
Mutual Qualified Fund 2,427,184 2,427,184
Yale University 964,932 964,932
BancBoston Investments Inc. 811,000 811,000
SVP-RPC Joint Venture 811,000 811,000
Morgan Stanley Institutional Fund
U.S. Real Estate Portfolio 654,898 654,898
Van Kampen American Capital LIT
Real Estate Portfolio 447,242 447,242
MS SICAV Real Estate 314,115 314,115
Wellsford Commercial Properties, LLC(1) 218,447 218,447
Morgan Stanley Real Estate Special
Situations Fund II, LP 210,146 210,146
Van Kampen American Capital Real Estate
Securities Fund 199,020 199,020
MOAB Investments, L.P. 173,600 173,600
Morgan Stanley Real Estate Special
Situations Fund I, LP 157,609 157,609
Stichting Pensioenfonds ABP 156,032 156,032
Gary C. Comer 151,300 151,300
Stichting Bedrijfspensioenfonds voor 104,023 104,023
J. Roderick MacArthur Foundation 97,000 97,000
Intermatic, Inc. Pension Trust 97,000 97,000
The Eugenia II Investment Holdings LTD. - REIT 63,630 63,630
Jesselson Foundation 60,000 60,000
Comer Foundation 48,500 48,500
Morgan Stanley Real Estate Special
Situations Inc. 48,334 48,334
Morgan Stanley U.S. Real Estate Portfolio 45,351 45,351
Lloyd G. Schermer as Trustee of
the Lloyd G. Schermer
Declaration of Trust Dated 11/17/89 38,800 38,800
Trust F/B/O A. Daniel Jesselson
U/W Ludwig Jesselson 37,000 37,000
Alice Albright Arlen, Trustee U/T/D
7/2/63 F/B/O Alice Albright Arlen 29,100 29,100
R.H. Newman Trustee or Successor
Trustee under the R.H.
Newman Living Trust U/A/D 4/18/89 29,100 29,100
William M. Cockrum, Trustee
of the William M. Cockrum
Trust dated 8/1/79(2) 24,272 24,272
Susan Burkhardt Living Trust Dated 8/18/69 19,400 19,400
Carol B. Cohen Trustee DTD 10/12/78 19,400 19,400
Earl E. Segerdahl 19,400 19,400
MRMB Charitable Remainder Trust II U/T/D 8/8/95 19,400 19,400
Alice Albright Arlen 19,400 19,400
Octagon Capital Association 19,400 19,400
David B. Heller P/T Rollover IRA 19,400 19,400
James Amend 19,400 19,400
Betty A. Schermer as Trustee
of the Betty A. Schermer
Declaration of Trust Dated 11/17/89 19,400 19,400
Principal Asset Allocation Fund - Real
Estate Account 15,777 15,777
Bergman Charitable Trust/Betsy Lynn Rosenfield 14,500 14,500
Bergman Charitable Trust/Robert Bergman 14,500 14,500
Richard C. Anderson 14,500 14,500
Bergman Charitable Trust/Carol Cohen 14,500 14,500
NTBG Gov Sec Endow I 14,500 14,500
Steven J. Stogel 12,000 12,000
Universal Funds - Real Estate Portfolio 11,007 11,007
Lloyd Schermer, IRA 9,700 9,700
Stephen C. Neal 9,700 9,700
Alicia M. Hoge Trust, D/T/D 12/30/83 9,700 9,700
NTBG Gov Sec Endow II 9,700 9,700
The R.H.N. Corporation 9,700 9,700
NTBG Gov Sec Endow III GVSEC 5-10 Yr. 9,700 9,700
Barbara S. Bluhm 9,700 9,700
Douglas E. Cohen 9,700 9,700
Tanya Wexler Trust #18 9,700 9,700
The Kampong Fund 9,700 9,700
Joseph P. Weil 9,700 9,700
William C. Mitchell, IRA 9,700 9,700
J. Wexler Revocable Trust F/B/O Susan Wexler 9,700 9,700
Scott D. Cohen 9,700 9,700
Carl C. Lang and Gail R. Lang 4,400 4,400
Total 12,242,719 12,242,719
========== ==========
(1) See "Certain Transactions" as to the ownership interests of Jeffrey H.
Lynford, Edward Lowenthal and the wife of Mark Germain in Wellsford
Commercial Properties, LLC.
(2) Mr. Cockrum was an advisor to Wellsford Residential and is an advisor to
the Company.
DIVIDEND POLICY
The Company does not currently contemplate paying dividends on the Common
Stock. Earnings from the investments of the Company are currently expected to
be reinvested by the Company to finance future acquisitions and investments.
The Board of Directors of the Company may determine in its discretion to pay
dividends on the Common Stock in the future, and any such determination will
be dependent upon the Company's results of operations, financial condition,
contractual restrictions and other factors deemed relevant at that time by the
Company's Board of Directors.
PRICE RANGE OF COMMON STOCK AND DIVIDEND HISTORY
The Company's shares of Common Stock have been listed on the ASE since June
2, 1997 under the symbol WRP. On July 29, 1997, the last reported sale price
of the shares of Common Stock on the ASE was $11.50. The following table sets
forth the high and low closing sale prices for the shares of Common Stock for
the fiscal periods indicated. No dividends were paid by the Company with
respect to such periods.
1997 High Low
---- ---- ---
June 2 to June 30 $11.19 $10.50
Third Quarter (through July 29, 1997) $11.50 $11.00
As of July 22, 1997, the Company transfer agent reported 347 record holders
of Common Stock, and the Depository Trust Company held Common Stock on behalf
of approximately 6,500 beneficial owners.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1997 on a historical basis, reflecting ownership by Wellsford Residential
of Palomino Park and the Sonterra Loan and Sonterra Option, and as adjusted to
give effect to the (i) Private Placement and the application of the net
proceeds therefrom, (ii) Contribution, Distribution and Merger, (iii) sale of
shares of Class A Common to ERP Operating Limited Partnership for an aggregate
purchase price of $3.5 million and the application of the net proceeds
therefrom, and (iv) purchase of five commercial office properties and the $25
million investment in the 277 Park Loan. The information set forth in the
table should be read in conjunction with the Company's combined financial
statements and notes thereto, and the Company's pro forma combined financial
statements and notes thereto, all of which are included herein.
<PAGE>
March 31, 1997
Actual As Adjusted
------ -----------
(In thousands)
DEBT:
Tax exempt mortgage note payable . . . . $14,755 $14,755
Note payable to Wellsford Residential. . 21,611 --
------- --------
Total debt. . . . . . . . . . . . . . . 36,366 14,755
------- --------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value per share;
197,650,000 shares authorized - 16,547,771
shares issued and outstanding, as
adjusted . . . . . . . . . . . . . . . . 1 166
Class A Common Stock, $.01 par value
per share; 350,000 shares authorized -
339,806 shares issued and outstanding,
as adjusted . . . . . . . . . . . . . . -- 3
Series A 8% Convertible Redeemable
Preferred Stock, $.01 par value
per share; 2,000,000 shares authorized;
no shares issued and outstanding . . . . -- --
Capital in excess of par value. . . . . . 30,321 173,764
Common Stock to be issued . . . . . . . . 2,250 --
------- --------
Total stockholders' equity. . . . . . . 32,572 173,933
------- --------
Total capitalization. . . . . . . . . . $68,938 $188,688
======= ========
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
SELECTED UNAUDITED COMBINED FINANCIAL DATA
Pro Forma Historical
Three Months Three Months Historical
Ended Ended Year Ended
March 31, March 31, December 31,
1997 1997 1996
---- ---- ----
(Unaudited) (Unaudited)
(In thousands except per share data)
OPERATING DATA:
Revenues:
Rental income $ 762
Other income 40
Interest income 1,135 $ 401 $ 757
-------------------------------------------
1,937 401 757
-------------------------------------------
Expenses:
Property operating
and maintenance 211
Real estate taxes 107
General and
administrative 438
Depreciation 128
Property management 34
-------------------------------------------
918 0 0
-------------------------------------------
Income before
income taxes 1,019 401 757
Provision for
income taxes 416
-------------------------------------------
Net income $ 603 $ 401 $ 757
===========================================
Net income per
common share $0.04
Weighted average
common shares
outstanding 16,888
<PAGE>
Pro Forma Historical Historical Historical
March 31, March 31, December 31, December 31,
1997 1997 1996 1995
(Unaudited) (Unaudited)
(In thousands)
BALANCE SHEET DATA:
Real estate (prior
to depreciation) $ 129,889 $ 47,806 $ 21,306 $ 7,955
Mortgage notes and
interest receivable $ 42,934 $ 17,934 $ 17,934 $ 0
Cash and cash
equivalents $ 21,180 $ 0 $ 0 $ 0
Restricted cash $ 3,198 $ 3,198 $ 5,520 $ 10,414
Total assets $ 199,805 $ 68,938 $ 44,760 $ 18,369
Total debt $ 14,755 $ 36,366 $ 14,755 $ 14,755
Total equity $ 173,933 $ 32,572 $ 30,005 $ 3,614
Period from
Pro Forma Historical Historical Historical March 22 to
March 31, March 31, March 31, December 31, December 31,
1997 1997 1996 1996 1995
(Unaudited) (Unaudited) (Unaudited)
(In thousands)
OTHER DATA:
Funds from
operations $ 731 $ 401 $ 0 $ 757 $ 0
EBITDA $ 1,147 $ 401 $ 0 $ 757 $ 0
Cash flows
from operating
activities $ 2,925 $ 2,723 $ 1,082 $ 5,517 $ 4,341
Cash flows
from investing
activities $ (133,583) $ (26,500) $ (231) $ (31,151) $ (7,955)
Cash flows
from financing
activities $ 152,040 $ 23,777 $ (851) $ 25,634 $ 3,614
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND ANALYSIS OF OPERATIONS
The following discussion should be read in conjunction with the Selected
Unaudited Combined Financial Data set forth above and the Combined Financial
Statements and Notes thereto included herein.
Results of Operations
The operations of the predecessor to the Company (the "Predecessor")
during the three months ended March 31, 1997 and the year ended December 31,
1996 consisted of owning the Sonterra mortgage note receivable originated in
July, 1996, upon which the Predecessor earned $401,000 and $757,000,
respectively, of interest income, and developing two phases of the Palomino
Park multifamily community located in a suburb of Denver, Colorado with a
total of 760 units under development.
Liquidity and Capital Resources
The Company expects to meet its short-term liquidity requirements
generally through its working capital and cash flow provided by operations.
The Company considers its ability to generate cash to be adequate and expects
it to continue to be adequate to meet operating requirements both in the short
and long terms.
The Company expects to meet its long-term liquidity requirements such as
refinancing mortgages, financing acquisitions and development, and financing
capital improvements and debt and equity investments in real estate companies
by long-term borrowings, through the issuance of debt and the offering of
additional debt and equity securities.
The Company has obtained a two-year $50 million credit facility from
BankBoston and Morgan Guaranty which is available to fund acquisitions, debt
and equity investments, development, capital expenditures, repayment of
indebtedness and related expenditures. The credit facility bears interest at
an annual rate of LIBOR plus 175 basis points and is extendible for an
additional one-year.
In December 1995, the Predecessor marketed and sold $14.8 million of tax-
exempt bonds to fund construction at Palomino Park. The bonds have a variable
rate of interest which is currently approximately 4% per annum and a term of
40 years. At March 31, 1997, $3.2 million of the bond proceeds were being
held in escrow pending their use for the funding of development.
BUSINESS AND PROPERTIES
The Company's assets consist primarily of five office properties
containing six buildings; the 277 Park Loan; the Sonterra Loan and the
Sonterra Option; and an approximately 80% interest in Phases I, II and III of,
and in options to acquire and develop Phases IV and V of, Palomino Park. Set
forth below is a brief description of these assets and the Company's plans
with respect thereto.
In the opinion of the Company's management, all of the properties
described below are adequately covered by insurance.
Wellsford Commercial Properties
Since its inception in January, 1997, the Company has acquired five
commercial properties. All the properties are located in suburban areas of
Northern New Jersey. These properties contain in the aggregate six office
buildings with approximately 940,400 gross square feet (or approximately
913,000 net rentable square feet) located on approximately 260 acres. The
aggregate purchase price for these properties was approximately $47.6 million
or approximately $50 per gross square foot of building area. None of the
properties is encumbered by mortgage liens. It is currently anticipated that
the Company will invest approximately $15.8 million (approximately $17 per
gross square foot of building) for renovation and repositioning of the
properties, and will pay approximately $19.7 million (approximately $21 per
gross square foot of building) for tenant improvements and leasing costs, for
a total cost to the Company of approximately $83 million. As of July 1, 1997,
the Company had invested approximately $3.3 million for renovation and
repositioning of the properties and approximately $375,000 for tenant
improvements and leasing costs. These acquisitions represent opportunities
which the Company believes are impractical for REITs because they provide
little or no immediate cash return.
Cyanamid Office Portfolio
The Company acquired the Cyanamid Office Portfolio ("Cyanamid") located
in Wayne, N.J. in February 1997. Cyanamid, formerly the international
headquarters for American Cyanamid Company, consists of (i) Point View
Corporate Park consisting primarily of two office buildings ("Point View");
and (ii) Valley Executive Center, consisting primarily of two smaller office
buildings, located at 1700 and 1800 Valley Road. All the buildings are
currently vacant. It is expected that renovations to each of these buildings
will be completed by mid-1998. Cyanamid was recently assessed for real estate
tax purposes at approximately $61.0 million in the aggregate by the local
governmental authority.
Point View
Point View consists of two parcels: (i) one parcel of approximately 194
acres on which two buildings consisting of an aggregate of approximately
560,000 gross square feet (approximately 530,000 net rentable square feet) are
situated and (ii) an approximately 10 acre site directly across from the
entrance to the two buildings which is zoned for approximately 7 - 8 single
family houses and has no existing structures. The approximately 194-acre
parcel is zoned for the development of an additional 1 million square feet of
office or research space. The larger of the two buildings on Point View (the
"Serpentine Building") was constructed in 1962, is a four-story class B+
building containing approximately 400,000 gross square feet. The Serpentine
Building contains a fully functional cafeteria area seating 800, separate
executive officer tower, separate executive dining area and overlooks a large
reservoir and the heliport for the complex. The smaller building (the "West
Building") was constructed in 1976, is a six-story class A building containing
approximately 160,000 gross square feet. The West Building is connected to
the Serpentine Building by an underground passageway and has a primarily
moveable wall interior partitioning system, a fitness center and an
auditorium. There are 1,720 parking spaces currently serving both buildings.
On a pro forma basis, Point View had a federal tax basis equal to its
purchase price of $15.8 million at December 31, 1996, and will be depreciated
straight-line over a 40-year estimated life. The current annual real estate
taxes on Point View are approximately $1.2 million, subject to pending
negotiations with the municipality of Wayne to reduce such taxes.
The Company currently contemplates a number of renovations to the
Serpentine Building and the West Building to, among other things, refurbish
the exterior, add new elevators, and renovate the lobby and other common
areas. Other renovations will (i) enable the buildings to comply with current
life safety and ADA requirements and become more energy efficient; and
(ii) eliminate potentially hazardous materials (such as spray-on asbestos
fireproofing in the Serpentine Building's structure). Removal of the spray-on
asbestos fire proofing will cost approximately $3.5 million, and the estimated
total cost of all planned renovations will be approximately $10.1 million. As
of July 1, 1997, the Company had incurred approximately $2 million of expenses
to renovate Point View. The Company is financing the renovations from its
working capital.
The purchase price for Point View was $15.8 million, or approximately
$28.00 per gross square foot of building area, and together with the cost of
planned renovations, is expected to be approximately $46.25 per gross square
foot.
Valley Executive Center
1700 Valley Road. The 1700 Valley Road property contains a two-story,
class B+ building consisting of approximately 70,600 gross square feet
(approximately 67,000 net rentable square feet) and is situated on a wooded
nine acre site. The building was constructed in two stages, during 1972 and
1979, and the interior was completely refurbished in 1993. The building
contains a full service dining area and 294 parking spaces. The Company
contemplates renovation of the building's facade, upgrading of the HVAC system
and various cosmetic improvements. The estimated cost of planned renovations
is $200,000, and the Company will finance such renovations from its working
capital. The property is zoned for the development of an additional 50,000
square feet of office space.
The purchase price for 1700 Valley Road was $1.0 million, or $14.00 per
gross square foot of building area, and together with the cost of planned
renovations, is expected to be $17.00 per gross square foot.
1800 Valley Road. The 1800 Valley Road property contains a two-story,
class B+ building consisting of approximately 54,800 gross square feet
(approximately 53,000 net rentable square feet) and is situated on a wooded 14
acre site. The building was constructed in 1980, contains a full service
dining area and has 260 parking spaces. The Company contemplates replacing
the roof and upgrading the HVAC system, and other renovations to comply with
existing life safety and ADA codes. The estimated cost of planned renovations
is $900,000, excluding the renovations to be made pursuant to the lease with
Reckitt & Coleman Inc. described below, and the Company will finance such
renovations from its working capital.
The Company has entered into a 6-year lease with Reckitt & Coleman Inc.,
a consumer products firm, for the entire 1800 Valley Road property at a net
rental of $12.10 per square foot. Pursuant to the terms of lease, the Company
has agreed to pay approximately $2.1 million for tenant improvements,
renovations and other leasing costs.
The purchase price for 1800 Valley Road was $2.0 million, or
approximately $36.00 per gross square foot of building area, and together with
the cost of planned renovations, is expected to be approximately $71.00 per
gross square foot.
Greenbrook Corporate Center
The Company acquired The Greenbrook Corporate Center ("Greenbrook") in
Fairfield, N.J. in April 1997. Greenbrook consists of (i) a class A suburban
three-story office building with approximately 190,000 gross square feet
situated on approximately 20 acres and (ii) a contiguous undeveloped
approximately seven acre parcel zoned for development of an additional 50,000
square feet of office and light industrial use. The entrance to the building
is a 35-foot atrium lobby and the second and third floors have terraces
overlooking a country club which border the rear of the site. The Company
intends to spend approximately $500,000 to renovate the building, and the
Company will finance such renovations from its working capital and its Line of
Credit. The renovations are expected to be completed by October, 1997.
Greenbrook, as the Company's only occupied commercial property, accounted
for 41% of the Company's pro forma revenues during the three months ended
March 31, 1997. The occupancy rate for Greenbrook as of July 1, 1997 was
approximately 88.6%, and the average annual gross rent per square foot is
approximately $20. The current asking gross rental rate per square foot is
approximately $23. On a pro forma basis, Greenbrook had a federal tax basis
equal to its purchase price of $23.7 million at December 31, 1996, and will be
depreciated straight-line over a 40-year estimated life. The current annual
real estate taxes on Greenbrook are approximately $428,000.
Greenbrook's two largest tenants are Information Resources, Inc. ("IRI"),
a market research firm, and the S.B. Thomas division of CPC International,
whose principal business is producing baked foods. IRI occupies 64,676
rentable square feet, with an annual rent of approximately $1.3 million (or
approximately $20 per rentable square foot), under two leases that expire
December 2003. The annual rent to be paid by IRI increases over the term of
the leases to approximately $1.5 million (or approximately $23.5 per rentable
square foot) by their expiration in December 2003. S.B. Thomas occupies
49,384 rentable square feet with an annual rent of approximately $.9 million
(or $19 per rentable square foot), under a lease that expires in 2005. S.B.
Thomas has the right to renew for two successive periods of five years each,
at 95% of the fair market value rent as of October 1st of the last lease year
prior to commencement of each renewal term. Greenbrook has nine additional
tenants, with aggregate annual rents of approximately $1.2 million.
The purchase price for this property was $23.7 million, or approximately
$125.00 per gross square foot of building area, and together with the cost of
planned renovations, is expected to be approximately $127.00 per gross square
foot.
Chatham, New Jersey
In January 1997, the Company acquired a class A three-story suburban
office building consisting of approximately 65,000 gross square feet
(approximately 63,300 net rentable square feet) located on approximately five
acres in Chatham, New Jersey.
The Company currently intends to spend approximately $3.1 million to make
various renovations to upgrade the building's status including, among other
things, to add a first class lobby and improve other common areas, renovate
the facade and replace the HVAC system and provide landscaping. The Company
is financing such renovations from its working capital and its Line of Credit,
and the renovations are expected to be completed by the end of the third
quarter of 1997. As of July 1, 1997, the Company had incurred approximately
$1.3 million of expenses to renovate this building. The Company is currently
marketing the building for rental.
The Company has entered into a lease with Quadrant HealthCom Inc., a
publisher of medical specialty magazines, for approximately 22,000 gross
square feet in the building which is approximately 33% of the gross leasable
area of the building. The lease is for a term of ten years (terminable after
seven years upon payment of six months' rent) at $26.00 per net rentable
square foot for years one through five and at approximately $28.00 per net
rentable square foot for years six through ten.
The purchase price for the property was $5.1 million, or approximately
$78.00 per gross square foot, of building area and together with the cost of
planned renovations, is expected to be approximately $126.00 per gross square
foot.
Wellsford High Yield Investment Portfolio
277 Park Loan
The Company and BankBoston have provided an $80 million loan to entities
which own substantially all of the equity interests (the "Equity Interests")
in the entity which owns a 52-story, approximately 1.75 million square foot
gross leasable area, class A office building located in New York City in mid-
town Manhattan at 277 Park Avenue (the "277 Park Property"). On April 25,
1997, the Company and BankBoston advanced $20 million and $60 million,
respectively, pursuant to the 277 Park Loan. On June 19, 1997, the Company
acquired from BankBoston an additional $5 million portion of the 277 Park
Loan, after which the Company and BankBoston effectively advanced $25 million
and $55 million, respectively, pursuant to the 277 Park Loan. The 277 Park
Loan is secured primarily by a pledge of the Equity Interests owned by the
borrowers. There is also a limited guarantee from the individual who
indirectly owns all the Equity Interests. The 277 Park Loan is subordinated
to a 10-year $345 million first mortgage loan (the "REMIC Loan") on the 277
Park Property, the proceeds for which were obtained by the sale of investment
grade rated commercial mortgage pass-through certificates in a real estate
mortgage investment conduit. The notes representing the REMIC Loan bear
interest at different rates which equate to a weighted average interest rate
of approximately 7 2/3% per annum. The 277 Park Loan bears interest at the rate
of approximately 12% per annum for the first nine years of its term and at a
floating annual rate during the tenth year equal to LIBOR plus 5.15% or
BankBoston base rate plus 5.15%, as elected by the borrowers. Interest on the
277 Park Loan will be payable monthly to the extent of available cash after
payment of interest on the REMIC Loan and the funding of various reserve
accounts under the REMIC Loan and provided there is no event of default under
the REMIC Loan. To the extent funds are not available to pay interest at a
rate in excess of 10% per annum, such excess interest will accrue and be added
to the principal amount of the 277 Park Loan. The principal amount of the 277
Park Loan and all accrued interest will be payable on May 1, 2007 which is
also the due date of the REMIC Loan. The 277 Park Loan is prepayable only in
full and then only after the fifth year of the loan and must be repaid if the
REMIC Loan is repaid or the 277 Park Property is sold. Any prepayment during
the sixth through ninth years of the loan must be accompanied by a yield
maintenance payment.
The 277 Park Property is currently 100% leased to 33 tenants, including
Donaldson, Lufkin & Jenrette, Inc. which has leased approximately 47% of the
gross leasable area pursuant to a lease expiring in 2016. The 277 Park
Property was appraised for $555 million as of July 1, 1996 by an independent
nationally recognized appraiser. The appraisal was not prepared on behalf of
the Company. An appraisal is only an opinion of value made by experts,
subject to the assumptions and limiting conditions contained therein
(including assumptions relating to the discounted cash flow analysis contained
therein).
Sonterra Assets
Sonterra Loan
The Company holds a $17.8 million mortgage loan made to the owner of
Sonterra, a 344-unit class A multifamily apartment complex located in Tucson,
Arizona, construction of which was completed in June, 1996. The Sonterra Loan
was originated in July, 1996 and the principal amount thereof is due on July
1, 1999. Until the maturity date, the borrower is to pay interest only,
monthly, at the rate of 9% percent per annum. The loan is non-recourse and
repayment of the loan is secured by a first mortgage on Sonterra and by a
personal guaranty of an individual affiliated with the owner. Under certain
circumstances, prepayment of the loan is subject to a prepayment premium equal
to 5% percent of the principal amount of the loan.
Sonterra Option Agreement
The Company also owns an option to acquire Sonterra free and clear of all
mortgages and other material liens for approximately $20.5 million through
December 31, 1997 and for approximately $21 million if the sale is consummated
during 1998. ERP Operating Partnership has a right of first offer to acquire
the Sonterra Option and a right to acquire the option if the Company does not
exercise it. If the Company acquires Sonterra, then the Company and ERP
Operating Partnership will enter into a "Right of First/Last Offer Agreement"
in substantially the same form as the Right of First/Last Offer Agreement
entered into pursuant to the Agreement Regarding Palomino Park. See "Certain
Agreements Between the Company and ERP Operating Partnership - Agreement
Regarding Palomino Park."
Wellsford Property Development
Palomino Park
Palomino Park is a master planned five-phase multifamily development
project comprising approximately 182 acres, of which 65 acres have been
developed, in suburban South East Denver, Colorado about 14 miles from
Denver's central business district. It is situated within Highlands Ranch, a
22,000 acre master planned community. Palomino Park is intended to be
developed as an integrated project comprising an 1,880-unit, class A
multifamily apartment community constructed around a centrally located 24 acre
park which will feature tennis courts, athletic fields, a putting green and an
amphitheater. There is also a 29,000 square foot recreation center which has
been completed and which includes a full-size gymnasium, fitness center,
indoor golf range, racquet ball courts, and a baby-sitting facility and has an
adjacent swimming pool. Palomino Park will also have a perimeter fence with a
guard at the entry gate.
Wellsford Park Highlands Corp. ("WPHC"), currently owned 80% by the
Company and 20% by ERP Operating Partnership, acquired fixed-price options in
1995 to purchase the land underlying each of the phases (referred to
collectively as "Phases" or individually as a "Phase" or specifically as
"Phase I," "Phase II," "Phase III," "Phase IV" or "Phase V") of Palomino Park.
The land underlying Phases I, II and III has been acquired. The land
underlying Phases IV and V is subject to options which expire in May, 1998 and
May, 1999, respectively. There can be no assurance that construction of Phase
III, Phase IV or Phase V will be commenced or if commenced, that it will be
completed. See "Risk Factors Risks of Acquisition, Development, Construction
and Renovation Activities". The purchase price for land acquired with respect
to any Phase is $73,500 per acre, subject to an increase of the purchase price
by 6% per annum from and after November 30, 1994. The land options should
reduce the Company's exposure to market cycles in Denver while enabling the
Company to develop a signature residential community in one of the fastest
growing counties in the country.
Upon completion of any or all of the Phases, the Company will either
operate and rent apartment units or convert all or a portion of them to
condominium ownership, which a REIT could not do because of the adverse tax
consequences thereof.
The development of Palomino Park calls for construction of the 1,880
units over a period of five years at a total estimated cost of approximately
$194 million. As of March 31, 1997, the Company had invested approximately
$23.9 million in the development of Palomino Park, exclusive of amounts
advanced under the existing construction loans for Phase I and II.
Phase I, referred to as Blue Ridge, will consist of 456 units of which
312 are constructed, 294 are leased and 233 are occupied. Rents range from
$760 per month for a one bedroom, one bathroom to $1,375 per month for a three
bedroom, two bathroom unit. Garages are available and washer and dryer hook-
ups exist in all the apartments. Completion of construction of this Phase is
expected in late 1997. The total estimated cost of Blue Ridge is
approximately $42.5 million.
Phase II, referred to as Red Canyon, is expected to consist of 304 units.
The total estimated cost of Red Canyon is approximately $33.6 million. Site
preparation for construction of Phase II has recently begun and construction
of Phase II is expected to be completed in late 1998 or early 1999.
Blue Ridge is owned by Park at Highlands LLC ("Phase I LLC"), a limited
liability company, the members of which are WPHC (99%) and Al Feld ("Feld")
(1%). Red Canyon is owned by Red Canyon at Palomino Park LLC ("Phase II
LLC"), a limited liability company, the members of which are WPHC (99%) and
Feld (1%). Al Feld is a Denver-based developer specializing in the
construction of luxury residential properties. He has constructed over 3,000
units since 1984.
Various development, construction and property management and guarantee
fees, as well as certain other fees designed to provide cost savings
incentives in connection with property construction and stabilization, are
being paid to Feld and his affiliates. These amounts are included in the cost
estimates for Phase I and Phase II described above. Feld has unconditionally
guaranteed completion of Phase I within 30 months and Phase II within 24
months, in each case after closing of the construction loan, and has agreed to
a one-year guarantee of such Phases against construction defects. In
addition, in the case of Blue Ridge, Feld has agreed, subject to certain
conditions, to fund deficits in development and operating costs, and in the
case of Red Canyon, Feld has agreed, subject to certain conditions, to fund
deficits in development costs. To secure his obligations to make deficit
payments and perform all of his other obligations under the operating
agreements, Feld has pledged his interests in Phase I LLC and Phase II LLC to
WPHC.
The operating agreements provide that neither member may transfer, pledge
or assign its interest in the Phase I LLC or Phase II LLC without the consent
of the other member, except that (i) WPHC may transfer a portion of its
interest provided it retains at least a 21% interest in Phase I LLC or Phase
II LLC, as the case may be, and (ii) WPHC has an option to acquire Feld's 1%
interest for fair market value at any time after completion of the Phase, and
Feld has an option to compel WPHC to buy his 1% interest for fair market value
upon completion of the Phase.
The construction loan on Blue Ridge is for approximately $36.8 million,
matures on December 31, 1998 (with a 6-month extension at the option of the
Phase I LLC upon fulfillment of certain conditions), and bears interest at the
prime rate, except that the Phase I LLC may elect to cause a portion of the
previously advanced principal to bear interest at LIBOR plus 175 basis points.
Feld has guaranteed repayment of this loan.
The construction loan on Red Canyon is for approximately $29.5 million,
matures on September 29, 1999 (with a 6-month extension at the option of the
Phase II LLC upon fulfillment of certain conditions), and bears interest at
the prime rate, except that the Phase II LLC may elect to cause a portion of
the previously advanced principal to bear interest at LIBOR plus 165 basis
points. Feld has also guaranteed repayment of this loan.
ERP Operating Partnership has agreed to purchase the Phase I loan and the
Phase II loan when due, assuming completion of construction, if they are not
paid off by the Phase I LLC (in the case of the Phase I loan) or the Phase II
LLC (in the case of the Phase II loan) or by Feld pursuant to his guaranties,
for the lesser of the loan balance or the final agreed upon budget. See
"Certain Agreements Between the Company and ERP Operating Partnership -
Agreement Regarding Palomino Park."
Palomino Park Public Improvements Corporation ("PPPIC"), a Colorado non-
profit corporation, has issued $14.8 million of tax exempt bonds due on
December 1, 2035 (the "Bonds") to finance the development of the park and
certain parts of the infrastructure within Palomino Park, which have a total
cost of approximately $18.3 million. The Bonds bear interest at a floating
rate, which is currently approximately 4% per annum, but may be converted to a
term rate or a fixed rate. Subject to certain restrictions, revenue
assessment liens are imposed against the Phases to secure the obligation of
the Phase owners to repay the portion of the Bonds' debt service attributed by
PPPIC to their respective Phases.
If it is determined to proceed with construction of Phases III, IV and/or
V, the ownership and transaction structure of each such Phase is expected to
be similar to that of Phases I and II, although neither Wellsford Residential
nor Feld has any obligation to continue the relationship for future Phases.
Legal Proceedings
Neither the Company nor the Properties are presently subject to any
material litigation nor, to the Company's knowledge, is any material
litigation threatened against the Company or the Properties, other than
routine litigation arising in the ordinary course of business and which is
expected to be covered by liability insurance.
INITIAL CAPITAL AND FINANCING
Upon consummation of the Merger, ERP Operating Partnership acquired
shares of the Company's Class A Common at a price per share equal to $10.30
(the book value per share of the Common Stock on the date of the Merger) and
for an aggregate purchase price of $3.5 million. On June 2, 1997, the Company
sold 12,000,000 shares of Common Stock in the Private Placement primarily to
institutional investors at a price per share equal to $10.30 (the book value
per share of Common Stock on the date of closing of the Private Placement) for
an aggregate purchase price of $123.6 million. As of July 1, 1997, an
aggregate of approximately $74.4 million of the proceeds from the sale of the
shares of Class A Common and from the Private Placement had been applied by
the Company to, among other things, repay loans, the proceeds of which were
used by the Company to acquire its five commercial properties and make an
investment of $20 million in the 277 Park Loan, and to pay for certain
renovations to, and tenant fit-out for, the five office properties. As of
July 1, 1997, approximately $52.7 million of such proceeds was available to
the Company.
In addition, the Company has available the following sources of capital,
financing and credit support:
o $25 million pursuant to the ERP Preferred Commitment to acquire up
to 1,000,000 shares of the Series A Preferred at the request of the
Company and subject to certain limited conditions. Each share of Series
A Preferred is convertible into Common Stock at a price of $11.124
(representing a premium of $8% in excess of the book value per share of
the Common Stock on the date of the Merger). The ERP Preferred
Commitment is pledged as security for the Line of Credit.
o $50 million under a two-year Line of Credit obtained from BankBoston
and Morgan Guaranty. The Line of Credit initially bears interest at an
annual rate equal to LIBOR plus 175 basis points and is extendible for an
additional one-year period. See "Line of Credit" below.
o $36.8 million, pursuant to an agreement with respect to the
construction financing for Phase I of Palomino Park, and $29.5 million,
pursuant to an agreement with respect to the construction financing for
Phase II of Palomino Park, in each case guaranteed by a third-party
developer and supported by the credit of ERP Operating Partnership
pursuant to its stand-by obligations.
o Approximately $14.8 million of credit enhancement from ERP Operating
Partnership with respect to the bonds issued to finance certain public
facilities at Palomino Park.
See "Description of Capital Stock" and "Certain Agreements Between
the Company and ERP Operating Partnership."
Line of Credit
The Company has a $50 million revolving line of credit from BankBoston
and Morgan Guaranty as to which each has agreed to lend up to $25 million.
The Line of Credit is currently secured inter alia by the Company's interest
in the Sonterra Loan, the 277 Park Loan and the ERP Preferred Commitment.
Under the Line of Credit, the Company pays interest only, monthly, at an
annual rate equal to, at the Company's option, either (i) LIBOR plus 175 basis
points or (ii) the higher of (A) the base rate of BankBoston or (B) 50 basis
points above the federal funds effective rate. The Line of Credit is for a
term of two years and is extendible by the Company with the consent of
BankBoston and Morgan Guaranty for one additional year. It includes customary
covenants, including, among others, (i) maintaining a ratio of liabilities to
assets of not in excess of .60 to 1.0, (ii) maintaining a debt service
coverage ratio of not less than 1.5 to 1.0, (iii) a prohibition on the payment
of dividends until May 30, 1998 and (vi) a prohibition on ground-up
development or construction (other than Palomino Park).
The Company's other sources of capital to finance its acquisition,
investment, development and other activities, may include retained earnings,
funds derived from the issuance of debt and equity securities, sales of
investments and bank borrowings. See "Policies with Respect to Certain
Activities."
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES
The following is a discussion of the Company's investment policies,
financing policies and policies with respect to certain other activities. The
Company's policies with respect to these activities have been determined by
the directors of the Company and may be amended or revised from time to time
at the discretion of the directors without a vote of the shareholders of the
Company.
Investment Policies
The Company intends to invest in real estate directly or indirectly
through entities that engage in real estate-related activities. These
investments may be in the form of debt or equity.
Debt investments may include the purchasing of mortgage loans, other
financial instruments collateralized by real estate or real estate interests,
or participations therein, real property tax liens or tax-exempt bonds
collateralized by real estate or tax-increment finance districts. These debt
instruments may be senior, junior or otherwise subordinated to the interests
of others. Further, the Company may provide credit enhancement or guarantees
of the obligations of others involved in real estate-related activities. The
Company may also invest in participating or convertible mortgages if the
Company concludes that it may benefit from the cash flow and/or any
appreciation in the value of the property. Such mortgages may be similar to
equity participations. The Company may also make mortgage loans or
participate in such loans and contemporaneously or otherwise obtain related
property purchase options.
Equity investments may include development projects directly or through
joint ventures, as well as the purchase of general or limited partnership
interests in limited partnerships, shares in publicly-traded or privately-held
corporations or interests in other entities that own real estate, make real
estate-related loans or invest in real estate-related debt instruments or
provide services or products to the real estate industry. The Company intends
to engage in active real estate businesses, which may include land
subdivisions, condominium conversions, property sales, and other businesses
considered ineligible or impractical investments for REITs. The Company may
also hold real estate or interests therein for investment. The Company may
purchase substantially leased, mostly unleased or vacant properties of any
type or geographic location. The Company intends to renovate and re-lease the
mostly unleased or vacant properties.
The activities described above often do not generate immediate cash flow,
and cash flow generated may be non-recurring. These investments may be
subject to existing debt financing and any such financing will have a priority
over the equity interests of the Company.
The Company may offer to exchange its securities for properties and
securities of other entities. Further, it may, from time to time, repurchase
its shares. The Company will seek investments generally with a duration of
one to five years.
Financing Policies
The Company will seek to finance its investments through both public and
private secured and unsecured debt financings, as well as public and private
placements of its equity securities. The equity securities will include both
common and preferred equity issuances of the Company and its subsidiaries.
The Company does not have a policy limiting the number or amount of mortgages
that may be placed on any particular property, but mortgage financing
instruments usually limit additional indebtedness on such properties. There
are currently no restrictions on the amount of debt that the Company may
incur.
Also, the Company does not plan to distribute dividends for the
foreseeable future, which will permit it to accumulate for reinvestment cash
flow from investments, disposition of investments and other business
activities.
The Company has a two-year $50 million line of credit from BankBoston and
Morgan Guaranty. This facility is subject to certain financial and other
covenants. In the future, the Company may seek to extend, expand, reduce or
renew such facility, or obtain an additional or a replacement facility. See
"Initial Capital and Financing."
Policies with Respect to Other Activities
The Company does not intend to qualify as a REIT, but it may, from time
to time, invest in REITs, sell properties or entities to REITs for cash and/or
securities. Further, it may spin-off to its common shareholders, shares of
its subsidiaries or shares of other entities it has acquired through the sale
of its properties, investments or otherwise. These spin-offs may be taxable
or non-taxable, depending upon the facts and circumstances. The Company's
policies with respect to its activities may be reviewed and modified from time
to time by the Company's directors without notice to or vote of its
shareholders.
<PAGE>
MANAGEMENT
Directors and Executive Officers
The executive officers and directors of the Company, their ages and their
positions are as follows:
Name Age Position Held
Jeffrey H. Lynford 49 Chairman of the Board,
Secretary and Director**
Edward Lowenthal 52 President, Chief Executive
Officer and Director*
Gregory F. Hughes 34 Chief Financial Officer
David Strong 38 Vice President for Development
Douglas Crocker II 56 Director**
Rodney F. Du Bois 60 Director*
Mark S. Germain 46 Director**
Frank J. Hoenemeyer 77 Director***
Frank J. Sixt 45 Director***
* Term expires 1998
** Term expires 1999
*** Term expires 2000
Jeffrey H. Lynford has been the Chairman of the Board, Secretary and
Director of the Company since its formation in January 1997. Mr. Lynford
served as the Chairman of the Board and Secretary of Wellsford Residential
from its formation in July 1992 until consummation of the Merger in May 1997
and was the Chief Financial Officer of Wellsford Residential from July 1992
until December 1994. Mr. Lynford currently serves as a trustee emeritus of
the National Trust for Historic Preservation and as a director of four mutual
funds: Cohen & Steers Total Return Realty Fund, Inc., Cohen & Steers Realty
Shares, Inc., Cohen & Steers Realty Income Fund, Inc. and Cohen & Steers
Special Equity Fund, Inc. He is also a member of the New York bar. Prior to
founding WGI, Mr. Lynford gained real estate and investment banking experience
as a partner of Bear Stearns & Co. and a managing director of A.G. Becker
Paribas, Inc.
Edward Lowenthal has been the President, Chief Executive Officer and
Director of the Company since its formation in January 1997. Mr. Lowenthal
served as the President and Chief Executive Officer and a trustee of Wellsford
Residential from its formation in July 1992 until consummation of the Merger
in May 1997. Mr. Lowenthal currently serves as a director of United American
Energy Corporation, a developer, owner and operator of hydroelectric and other
alternative energy facilities, a director of Corporate Renaissance Group,
Inc., a mutual fund, a director of Omega Healthcare, Inc., a REIT, a director
of Great Lakes REIT, Inc., a REIT that owns and operates office buildings, and
a trustee of Corporate Realty Income Trust, a REIT. He is also a member of
the executive committee and The Board of Governors of the NAREIT. Prior to
founding WGI, Mr. Lowenthal gained real estate and investment banking
experience as a partner of Bear Stearns & Co., a managing director of A.G.
Becker Paribas, Inc., and a partner in the law firm of Robinson Silverman
Pearce Aronsohn & Berman.
Gregory F. Hughes has been the Chief Financial Officer of the Company
since its formation in January 1997. Mr. Hughes served as a Vice President -
Chief Financial Officer of Wellsford Residential from December 1994 until
consummation of the Merger in May 1997. From March 1993 until December 1994
he was a Vice President and Chief Accounting Officer of Wellsford Residential.
During 1992, Mr. Hughes was a controller with Jones Lang Wootton Realty
Advisors, a firm that provides real estate asset management and investment
consultation services. From 1985 to 1991, Mr. Hughes was a manager with
Kenneth Leventhal & Company, a public accounting firm specializing in real
estate and financial services. Mr. Hughes is a certified public accountant.
David M. Strong has been a Vice President for Development of the Company
since its formation in January 1997. Mr. Strong served as a Vice President of
Wellsford Residential from July 1995 until consummation of the Merger in May
1997. From July 1994 until July 1995 he was Acquisitions and Development
Associate of Wellsford Residential. From 1991 to 1994, Mr. Strong was
President and owner of LPI Management, Inc., a commercial real estate company
providing management and consulting services. From 1984 to 1991, he was a
senior executive with the London Pacific Investment Group, a real estate
development, investment and management firm active in Southern California and
Western Canada. From 1979 to 1984, Mr. Strong was a manager with Arthur
Young, a public accounting firm. Mr. Strong is a member of the Canadian
Institute of Chartered Accountants.
Douglas Crocker II has been a director of the Company since consummation
of the Merger. Mr. Crocker has been President, Chief Executive Officer and a
Trustee of EQR, the general partner of ERP Operating Partnership, since March
1993. He is also a director of Horizon Group Incorporated, an owner,
developer and operator of outlet retail properties. Mr. Crocker has been
President and Chief Executive Officer of First Capital Financial Corporation,
a sponsor of public limited real estate partnerships ("First Capital"), since
December 1992 and a director of First Capital since January 1993. He has been
an executive vice president of Equity Financial and Management Company, a
subsidiary of Equity Group Investments, Inc., an owner, manager and financier
of real estate and corporations ("EGI"), providing strategic direction and
services for EGI's real estate and corporate activities since November 1992.
From September 1992 until November 1992, Mr. Crocker was a managing director
of investment banking with Prudential Securities, an investment banking firm.
He was a director and President of Republic Savings Bank, a national chartered
savings and loan association ("Republic"), from December 1988 to June 1992, at
which time the Resolution Trust Corporation took control of Republic.
Rodney F. Du Bois has been a director of the Company since May 1997. Mr.
Du Bois served as a trustee of Wellsford Residential from November 1992 until
consummation of the Merger in May 1997. Mr. Du Bois also has been President
and co-owner of Goshawk Corporation, which provides finance and general
corporate services, since 1982. Mr. Du Bois was a founder of Mountain Cable
Company, a cable TV multiple system operator, and its Chairman from 1985 until
the company's sale in 1988. Previously Mr. Du Bois served as Executive Vice
President and a director of C. Brewer and Co., Chairman of Alexander and
Baldwin Agribusiness, Inc., a managing director of Warburg, Paribas, Becker,
Inc. and a Professor of Real Estate at the Amos Tuck School of Business
Administration at Dartmouth College.
Mark S. Germain has been a director of the Company since May 1997. Mr.
Germain served as a trustee of Wellsford Residential from November 1992 until
consummation of the Merger in May 1997. Currently he is employed by Olmstead
Group L.L.C., which is a consultant to biotechnology and other high technology
companies. Mr. Germain also serves as a board member of several privately
held biotechnology companies. Previously, from 1990 to 1994, Mr. Germain was
employed by D. Blech & Company, Incorporated, a merchant bank. From 1986 to
1989, he was President and Chief Operating Officer of The Vista Organization,
Ltd., and from 1989 to 1990, its President and Chief Executive Officer. Mr.
Germain was a partner in a New York law firm prior to 1986.
Frank J. Hoenemeyer has been a director of the Company since May 1997.
Mr. Hoenemeyer served as a trustee of Wellsford Residential from November 1992
until consummation of the Merger in May 1997. Mr. Hoenemeyer also currently
serves as a director of American International Group, Inc., Mitsui Trust Bank
(U.S.A.), W.P. Carey Advisors, Inc. and Carey Fiduciary Advisors, Inc.
(subsidiaries of W.P. Carey & Co., Inc.) and ARIAD Pharmaceuticals, Inc. and
as Vice Chairman of the Investment Committee of W.P. Carey & Co., Inc. From
1947 to 1984, he was employed by The Prudential Insurance Company of America
where he served as Vice Chairman and Chief Investment Officer prior to his
retirement.
Frank J. Sixt has been a director of the Company since May 1997. Mr.
Sixt served as a trustee of Wellsford Residential from November 1992 until
consummation of the Merger in May 1997. Mr. Sixt also currently serves as an
executive director of Cheung Kong (Holdings) Limited, Cheung Kong
Infrastructure Holdings Limited and Hutchinson Whampoa Limited Group of
Companies. He also serves as a director of Husky Oil Limited, Concord
Property and Financial Company Limited and World Financial Properties Limited.
He is also a director of and Chairman of the Executive Committee of the Board
of Directors of Gordon Capital Corporation. Previously, from 1987 to 1990,
Mr. Sixt was a partner in the law firm of Stikeman Elliot.
Key Employee
Richard R. Previdi has been active in seeking to acquire commercial
properties on behalf of the Company and its predecessor since September 1996.
From May 1994 until June 1996, he was a managing director of Emmes & Company,
a real estate investment company. From April 1990 until May 1994, Mr. Previdi
was a managing director of Trammell Crow N.E., Inc., and Chief Executive
Officer of that company's Northern Virginia Commercial Division. Previously,
from October 1985 until April 1990, he was first a marketing principal, and
later a partner, of Trammell Crow Company. From October 1982 until October
1985, Mr. Previdi was a manager with Arthur Young and Company, a public
accounting firm.
Compensation of Directors
The Company pays to each of its directors who are not employees of the
Company (i) an annual fee of $16,000, payable quarterly in shares of the
Common Stock, and (ii) a fee of $2,250 payable in cash for each regular
quarterly Board of Directors meeting at which such director is present in
person or by telephone. Messrs. Du Bois, Germain, Hoenemeyer and Sixt also
each received options to purchase 42,750 shares of Common Stock and Mr.
Crocker received options to purchase 21,375 shares of Common Stock, all under
the Company's 1997 Management Incentive Plan and each will be eligible along
with other present and future directors to receive additional share options.
See "-1997 Management Incentive Plan." Directors who are employees of the
Company will not be paid any directors' fees. In addition, the Company will
reimburse the directors for travel expenses incurred in connection with their
activities on behalf of the Company.
Board Committees
The Board of Directors of the Company has established an Executive
Committee, a Compensation Committee and an Audit Committee. The Board does
not have a nominating committee or a committee performing the functions of a
nominating committee; the entire Board performs the usual functions of such
committee.
Executive Committee. The Executive Committee consists of Messrs.
Lynford, Lowenthal and Hoenemeyer. The Executive Committee has the authority
to acquire, dispose of and finance investments for the Company and execute
contracts and agreements, including those related to the borrowing of money by
the Company, and generally to exercise all other powers of the directors
except for those which require action by all directors or the independent
directors under the Articles of Incorporation or Bylaws of the Company or
under applicable law.
Compensation Committee. The Compensation Committee consists of Messrs.
Du Bois, Germain, Hoenemeyer and Sixt, none of whom are employees of the
Company. The Compensation Committee reviews the Company's compensation and
employee benefit plans, programs and policies, approves employment agreements
and monitors the performance and compensation of the executive officers and
other employees.
Audit Committee. The Audit Committee consists of Messrs. Du Bois,
Germain, Hoenemeyer and Sixt and makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves the
professional services provided by the independent public accountants, reviews
the independence of the independent public accountants, considers the range of
audit and non-audit fees, reviews the adequacy of the Company's internal
accounting controls and reviews related party transactions.
Executive Compensation
The following table sets forth certain information with respect to the
Chief Executive Officer and each of the other executive officers of the
Company whose cash compensation from the Company is expected to exceed
$100,000 on an annualized basis during the fiscal year ending December 31,
1997, and all executive officers as a group.
Name of Individual or
Number in Group Capacities in Which Serve Compensation
- ----------------------------- ------------------------- ------------
Jeffrey H. Lynford. . . . . Chairman of the Board and $275,000
Secretary
Edward Lowenthal. . . . . . President and Chief $275,000
Executive Officer
Gregory F. Hughes . . . . . Chief Financial Officer $200,000
David M. Strong . . . . . . Vice President for Development $125,000
All executive officers as
a group (consisting of the
four persons named above) . $875,000
The Company has also granted options to purchase 85,500 shares of Common
Stock under the 1997 Management Investment Plan to each of Messrs. Lynford,
Lowenthal, Hughes and Strong. See "-1997 Management Incentive Plan."
Employment Agreements
The Company has entered into employment agreements with Messrs. Lynford
and Lowenthal (the "Senior Executives"), pursuant to which Mr. Lynford will
serve as the Chairman of the Board of the Company and Mr. Lowenthal will serve
as its President and Chief Executive Officer. The Company has also entered
into employment agreements with Messrs. Hughes and Strong. The employment
agreements with Messrs. Lynford and Lowenthal will expire on December 31,
2002, and the employment agreements with Messrs. Hughes and Strong on May 29,
1999.
Each of the employment agreements is automatically extended for
additional one-year periods unless either the executive officer or the Company
gives prior notice not to extend the employment agreement, as specified in the
agreement.
Pursuant to the employment agreements, each of the executive officers is
also entitled to incentive compensation to be determined by the Compensation
Committee. Mr. Hughes is entitled to incentive compensation equal to at least
50% of his annual base salary.
In the event that either of the Senior Executives dies during the term of
his employment agreement, or if the Company elects to terminate his employment
agreement as a result of the Senior Executive's total disability, the Company
is required to pay additional compensation for the longer of 36 months after
such termination or for the remaining term of his agreement at the rate of his
then annual base salary.
If a Senior Executive's employment agreement is terminated by the Senior
Executive following a "change in control of the Company" (as defined in the
agreements), then the Senior Executive shall be entitled to receive a lump sum
cash payment generally equal to the sum of (i) the amount of compensation that
he would have been entitled to had the agreement not been so terminated and
(ii) 299% of his average annual compensation of every type and form includible
in gross income received during the three year period preceding the calendar
year in which employment is terminated. If a Senior Executive's employment
agreement is terminated by the Company other than for "proper cause" (as
defined in the agreements) or death or disability, then the Senior Executive
shall be entitled to receive a lump sum cash payment generally equal to the
greater of (i) the amount of compensation that he would have been entitled to
had the agreement not been so terminated or (ii) 299% of his average annual
compensation of every type and form includible in gross income received during
the three year period preceding the calendar year in which employment is
terminated.
The Senior Executives are also entitled to reimbursement of income taxes
on certain non-cash taxable income resulting from a change in control of the
Company, including taxable income resulting from accelerated loan forgiveness
or vesting of restricted shares or options. In addition, each Senior
Executive is entitled to receive an additional sum to cover certain resulting
income and excise tax liabilities that may be incurred on all of the
foregoing.
If following a "change in control of the Company" (as defined in the
agreements), the employment agreement of either Mr. Hughes or Mr. Strong is
terminated (a) by the Company, other than for "Cause" (as defined in the
agreements) or (b) by Mr. Hughes or Mr. Strong, as the case may be, then Mr.
Hughes or Mr. Strong, as the case may be, shall be entitled to receive a lump
sum cash payment generally equal to the greater of (i) the amount of
compensation that he would have been entitled to had the agreement not been so
terminated and (ii) 200% of his average annual compensation of every type and
form includible in gross income received during the three year period
preceding the calendar year in which employment is terminated.
1997 Management Incentive Plan
The Company has established its 1997 Management Incentive Plan (the
"Management Incentive Plan") for the purpose of aligning the interests of the
Company's directors, executive officers and employees with those of the
shareholders and to enable the Company to attract, compensate and retain
directors, executive officers and employees and provide them with appropriate
incentives and rewards for their performance. The existence of the Management
Incentive Plan should enable the Company to compete more effectively for the
services of such individuals. The Management Incentive Plan provides for
administration by a committee of two or more non-employee directors
established for such purpose.
Awards to directors, executive officers and other employees under the
Management Incentive Plan may take the form of stock options, including
corresponding stock appreciation rights and reload options, restricted stock
awards and stock purchase awards. The Company may also provide stock purchase
loans to enable Management Incentive Plan participants to pay for stock
purchase awards. The maximum number of shares of Common Stock that may be the
subject of awards under the Management Incentive Plan is 1,750,000 shares.
Options to acquire 547,375 shares of Common Stock were granted under the
Management Incentive Plan at the closing of the Merger to directors, executive
officers and employees of the Company.
Rollover Stock Option Plan
The Company has established a Rollover Stock Option Plan (the "Rollover
Plan"), which is substantially similar to the Management Incentive Plan, for
the purpose of granting options and corresponding rights to purchase Common
Stock in replacement for former Wellsford Residential share options. All
1,326,235 options issuable under the Rollover Plan were granted at the closing
of the Merger principally to certain executive officers and directors of the
Company.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee consists of four independent directors of the
Company: Rodney F. Du Bois, Mark S. Germain, Frank J. Hoenemeyer and Frank J.
Sixt, none of whom is, or has been, an officer or employee of the Company.
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of Common Stock by each person who is known by the Company to be the
beneficial owner of more than 5% of the aggregate number of shares of Common
Stock, by each director of the Company, by certain executive officers of the
Company and by all directors and executive officers of the Company as a group.
Each person named in the table has sole voting and investment power with
respect to all the Common Stock shown as beneficially owned by such person.
Name and Address of Amount and Nature of Percentage
Beneficial Owner (1) Beneficial Ownership of Class (2)
-------------------- -------------------- -----------
Jeffrey H. Lynford(3) . . . . . . . 623,085 3.57%
Edward Lowenthal(4) . . . . . . . . 627,124 3.59%
Gregory F. Hughes(5). . . . . . . . 202,074 1.18%
David M. Strong(6). . . . . . . . . 130,487 *
Rodney F. Du Bois(7)
32 Rip Road
Hanover, New Hampshire 03755. . . 44,500 *
Mark S. Germain(8)
6 Olmsted Road
Scarsdale, New York 10583. . . . 111,411 *
Frank J. Hoenemeyer(9)
7 Harwood Drive
Madison, New Jersey 07940. . . . 43,683 *
Frank J. Sixt(10)
c/o Cheung Kung (Holdings), Ltd.
China Building, 18-22 Floors
29 Queen's Road Central
Hong Kong . . . . . . . . . . . . 81,265 *
Douglas Crocker II(11)
c/o Equity Residential Properties
Trust
Two North Riverside Plaza
Chicago, Illinois 60606. . . . . 21,375 *
Longleaf Partners Realty Fund
6075 Poplar Avenue
Memphis, TN 38119. . . . . . . . 3,398,000 20.10%
Mutual Qualified Fund(12)
51 John F. Kennedy Parkway
Short Hills, NJ 07078. . . . . . 2,427,184 14.35%
Morgan Stanley Asset Management Inc.
1221 Avenue of the Americas
New York, NY 10036. . . . . . . . 2,427,184 14.35%
Yale University
230 Prospect Street
New Haven, CT 06511. . . . . . . 964,932 5.71%
All directors and executive
officers as a group (9 persons) . . 1,885,004 10.15%
___________________
*Less than 1.0%
(1) Unless otherwise indicated, the address of each person is c/o Wellsford
Real Properties, Inc., 610 Fifth Avenue, New York, New York 10020.
(2) Assumes the conversion of 339,806 shares of Class A Common issued to ERP
Operating Partnership pursuant to the Common Stock and Preferred Stock
Purchase Agreement (the "Stock Purchase Agreement") into 339,806 shares
of Common Stock.
(3) Includes 538,205 shares of Common Stock issuable upon the exercise of
options, none of which are currently exercisable. Options to purchase
452,705 of these shares represent replacement options for Wellsford
Residential share options which had exercise prices ranging from $18.94
to $26.375. Also includes 1,701 shares of Common Stock held in the
Company's 401(k) savings plan for the benefit of Mr. Lynford and 7,790
shares of Common Stock held by the Lynford Family Charitable Trust, u/a
dated December 16, 1984; Mr. Lynford disclaims beneficial ownership of
such shares.
(4) Includes 538,205 shares of Common Stock issuable upon the exercise of
options, none of which are currently exercisable. Options to purchase
452,705 of these shares represent replacement options for Wellsford
Residential share options which had exercise prices ranging from $18.94
to $26.375. Also includes 786 shares of Common Stock held in the
Company's 401(k) savings plan for the benefit of Mr. Lowenthal, 291
shares of Common Stock held by Ilene Lowenthal, Mr. Lowenthal's wife and
150 shares of Common Stock held by Jared Lowenthal, Mr. Lowenthal's son;
Mr. Lowenthal disclaims beneficial ownership of such shares.
(5) Includes 188,105 shares of Common Stock issuable upon the exercise of
options, none of which are currently exercisable. Options to purchase
102,605 of these shares represent replacement options for Wellsford
Residential share options which had exercise prices ranging from $18.94
to $29.375.
(6) Includes 126,126 shares of Common Stock issuable upon the exercise of
options, none of which are currently exercisable. Options to purchase
40,626 of these shares represent replacement options for Wellsford
Residential share options which had exercise prices ranging from $18.94
to $22.50.
(7) Includes 42,750 shares of Common Stock issuable upon the exercise of
options, all of which are immediately exercisable. Also includes 1,500
shares of Common Stock held by Carol Du Bois, Mr. Du Bois' wife; Mr. Du
Bois disclaims beneficial ownership of such shares.
(8) Includes 81,265 shares of Common Stock issuable upon the exercise of
options, all of which are immediately exercisable. Options to purchase
38,515 of these shares represent replacement options for Wellsford
Residential share options which had exercise prices ranging from $18.94
to $26.375. Also includes 30,146 shares of Common Stock held by Margery
Germain, Mr. Germain's wife; Mr. Germain disclaims beneficial ownership
of such shares.
(9) Includes 42,750 shares of Common Stock issuable upon the exercise of
options, all of which are currently exercisable. Also includes 933
shares of Common Stock held by the Frank J. Hoenemeyer Individual
Retirement Account.
(10) Represents 81,265 shares of Common Stock issuable upon the exercise of
options, all of which are immediately exercisable. Options to purchase
38,515 of these shares represent replacement options for Wellsford
Residential share options which had exercise prices ranging from $18.94
to $26.375.
(11) Represents 21,375 shares of Common Stock issuable upon exercise of
options, all of which are immediately exercisable. Excludes 339,806
shares of Class A Common issued to ERP Operating Partnership pursuant to
the Stock Purchase Agreement. Mr. Crocker is President and Chief
Executive Officer of EQR, the general partner of ERP Operating
Partnership, and disclaims beneficial ownership of such shares.
(12) Mutual Qualified Fund is one of the series comprising Franklin Mutual
Series Fund Inc., a publicly held open-end investment company registered
with the Commission under the Investment Company Act of 1940, as amended.
Its investment advisor is Franklin Mutual Advisers, Inc. ("FMAI"), an
investment adviser registered with the Commission under the Investment
Advisers Act of 1940, as amended. Pursuant to an investment advisory
agreement with Mutual Qualified Fund, FMAI has sole investment discretion
and voting authority with respect to the shares owned by Mutual Qualified
Fund. FMAI has no interest in dividends or proceeds from the sale of
such securities and disclaims beneficial ownership of all the securities
owned by Mutual Qualified Fund.
CERTAIN TRANSACTIONS
The contracts to purchase Chatham, the Cyanamid Office Portfolio and
Greenbrook were transferred to the Company by an entity ("Wellsford
Commercial") of which Messrs. Lynford and Lowenthal, the wife of Mark Germain,
and three unaffiliated parties are owners, for 218,447 shares of Common Stock
having an aggregate value of approximately $2.25 million and the Company's
agreement to repay a $1.0 million advance used for the down payment on the
Cyanamid Office Portfolio. Upon liquidation of Wellsford Commercial, Mr.
Lynford, Mr. Lowenthal and the wife of Mark Germain will each receive
approximately 16.4%, 16.4% and 13.8%, respectively, of the shares of Common
Stock to be issued to Wellsford Commercial, and the other three unaffiliated
owners will receive the remainder of the shares. The aggregate purchase price
for these commercial properties paid by the Company was approximately $47.6
million, including the approximately $2.25 million referred to above. The
above transfers to the Company, along with the Contribution and the purchase
of stock by ERP Operating Partnership under the Stock Purchase Agreement, were
made as part of a single plan intended to qualify as a tax-free transaction.
On May 30, 1997, the Company made short-term loans to Messrs. Lynford and
Lowenthal in the amounts of $590,000 and $119,000, respectively. The proceeds
of these loans, which were repaid on July 1, 1997, were used to satisfy
certain withholding tax obligations.
CERTAIN AGREEMENTS BETWEEN
THE COMPANY AND ERP OPERATING PARTNERSHIP
The following describes certain aspects of the agreements entered into by
the Company and ERP Operating Partnership upon consummation of the
Distribution and Merger. The following descriptions do not purport to be
complete and are qualified in their entirety by reference to the full text of
the agreements, copies of which have been filed with the Commission as
exhibits to the Registration Statement of which this Prospectus is a part and
are available from the Company upon request.
Common Stock and Preferred Stock Purchase Agreement
The Company has entered into the Stock Purchase Agreement with ERP
Operating Partnership, providing for the sale of Class A Common and Series A
Preferred to ERP Operating Partnership on the terms described below.
Class A Common Stock.
Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership purchased from the Company at the closing of the Merger 339,806
shares of Class A Common at a price per share equal to $10.30 for an aggregate
purchase price of $3.5 million. For a description of the Class A Common, see
"Description of Capital Stock - Class A Common."
Series A Preferred Stock.
Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership has agreed to purchase from the Company up to 1,000,000 shares of
Series A Preferred at $25.00 per share as requested by the Company over the
three-year period (the "Commitment Period") commencing on May 30, 1997.
Purchases of Class A Preferred are to be in minimum aggregate amounts of $1
million and in multiples of $500,000 in excess thereof. The obligations of
ERP Operating Partnership to acquire Series A Preferred are subject to, among
other matters, certain representations and warranties being true and correct
in all material respects and there being no event of default existing under
the Stock Purchase Agreement. If at the end of the Commitment Period, ERP
Operating Partnership has purchased less than 1,000,000 shares of Series A
Preferred, ERP Operating Partnership has the right to purchase the remainder
of the 1,000,000 shares of Series A Preferred not purchased prior to that
time.
In addition, the Company's rights to cause ERP Operating Partnership to
purchase shares of Series A Preferred under the Stock Purchase Agreement have
been pledged to the lenders under the Line of Credit as collateral to secure
the Company's obligations under the Line of Credit. See "Initial Capital and
Financing - Line of Credit".
For a description of the Series A Preferred, see "Description of Capital
Stock - Class A Preferred."
Company Board Member Nominated or Elected by ERP Operating Partnership.
Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership, as the holder of Class A Common, has agreed to nominate Douglas
Crocker II, President of EQR, for election to the Company's Board of
Directors. In the event Mr. Crocker (or other person subsequently nominated
by ERP Operating Partnership for election to the Company's Board of Directors)
is unable or unwilling to serve as a director or is no longer employed by ERP
Operating Partnership, ERP Operating Partnership and the Company will agree to
the nomination of another member of senior management of ERP Operating
Partnership for election to the Company's Board of Directors (Crocker or such
other individual being hereinafter referred to as the "Purchaser Nominee").
In the event the Purchaser Nominee is unable or unwilling to serve as a
director if elected or is no longer employed by ERP Operating Partnership
during such time as such person is a director of the Company, another member
of senior management of ERP Operating Partnership determined by ERP Operating
Partnership and the Company will have the right to attend all meetings and
other proceedings of the Board of Directors to which all members of the Board
of Directors have been invited until the next annual meeting of shareholders
of the Company. In the event a Purchaser Nominee is not elected to the Board
of Directors at any annual meeting of the shareholders of the Company, such
Purchaser Nominee or other member of senior management of ERP Operating
Partnership determined by ERP Operating Partnership and the Company will have
the right to attend all meetings and other proceedings of the Board of
Directors to which all members of the Board of Directors have been invited
until the next annual meeting of shareholders of the Company.
Upon the occurrence and continuation of an event of default under the
Stock Purchase Agreement, if a Purchaser Nominee is not a member of the Board
of Directors, the Company has agreed to amend its Bylaws to provide that the
Board of Directors of the Company will consist of no fewer than 11 directors.
In addition, upon the occurrence and continuation of an event of default under
the Stock Purchase Agreement, or upon receipt by ERP Operating Partnership of
a ruling from the Internal Revenue Service ("IRS") or an opinion of counsel
that the right to elect a director to the Company's Board of Directors will
not cause EQR to lose its status as a REIT under the Code, then ERP Operating
Partnership agrees to elect (and not just nominate) Douglas Crocker II,
President of EQR, to the Company's Board of Directors. In the event Mr.
Crocker (or other person subsequently elected by ERP Operating Partnership to
the Company's Board of Directors) is unable or unwilling to serve as a
director or is no longer employed by ERP Operating Partnership, ERP Operating
Partnership and the Company will agree to the election of another member of
senior management of ERP Operating Partnership to the Company's Board of
Directors (Crocker or such other individual elected by Class A Common
shareholders, called the "Class A Director").
Holders of the Class A Common, as a class, may nominate or elect a
director to the Board of Directors of the Company as described above until May
30, 1999 or, if later, so long as (i) ERP Operating Partnership is obligated
to purchase preferred stock in the Company pursuant to the Stock Purchase
Agreement; (ii) ERP Operating Partnership has obligations pursuant to the
Agreement Regarding Palomino Park or pursuant to the Credit Enhancement
Agreement; or (iii) the aggregate liquidation value of the shares of Series A
Preferred owned by ERP Operating Partnership is greater than $10 million.
Voting of Class A Common and Series A Preferred.
Until May 30, 2007, the Company has the right to direct the voting of all
shares of Series A Preferred, Class A Common and Common Stock owned by ERP
Operating Partnership or any of its affiliates, except as to the election of
the Class A Director or any matter relating to the rights, preferences and
privileges of the Series A Preferred or the Class A Common.
Sale of Stock.
Until May 30, 2007, ERP Operating Partnership shall first offer, in
writing (a "Notice of Proposed Sale"), to sell any shares of Common Stock,
Class A Common, Series A Preferred or warrants to purchase Common Stock owned
by it to the Company prior to selling such shares to any other entity. If the
Company has not agreed to purchase such shares within 20 days of receipt of
such notice, ERP Operating Partnership shall have the right to sell such
shares to any person or other entity for a period of 90 days provided any sale
is made on terms and conditions no more favorable to such person or entity
than specified in the Notice of Proposed Sale.
Events of Default.
An event of default occurs under the Stock Purchase Agreement upon the
occurrence of any of the following events, among others: (i) a judgment for
the payment of money in an aggregate amount in excess of $250,000 is rendered
against the Company and such judgement remains undischarged for 30 days; (ii)
a change in control of the Company (as defined in the Stock Purchase
Agreement); (iii) the Company fails to pay the dividend on the Series A
Preferred on three separate instances; or (iv) a change resulting in or that
could reasonably be expected to result in a material adverse effect on the
Company.
Remedies.
Upon the occurrence of an event of default, all obligations of ERP
Operating Partnership to purchase shares of Series A Preferred automatically
terminate unless the Company delivers a notice to ERP Operating Partnership
requesting the purchase by ERP Operating Partnership of Series A Preferred,
and the proceeds of such sale would cure such event of default. In addition,
in the event of the bankruptcy of the Company or if the Company fails to pay
the dividend on the Series A Preferred on three separate instances, ERP
Operating Partnership has the right to cause the Company to purchase the
Series A Preferred then held by ERP Operating Partnership.
Registration Rights Agreement
The Company and ERP Operating Partnership have entered into a
Registration Rights Agreement providing for registration rights at the
Company's expense with respect to shares of Class A Common, Series A Preferred
and Common Stock.
Demand Registration.
After May 30, 1998, upon request (a "Demand Notice") of ERP Operating
Partnership, the Company has agreed to file a registration statement providing
for the resale by ERP Operating Partnership of Registrable Securities and will
use its best efforts to cause any such registration statement to be declared
effective by the Commission. "Registrable Securities" means any of: (i)
Series A Preferred issuable or issued; (ii) Common Stock issuable or issued
upon conversion of shares of Series A Preferred or Class A Common, or (iii)
Common Stock issuable or issued upon the exercise of warrants issued pursuant
to the Articles Supplementary. The Company is entitled to postpone for a
reasonable period of time (but not in excess of 60 days) the filing of any
registration statement, if the Board of Directors of the Company determines
that such registration and offering would materially interfere with any
proposed material transaction involving the Company.
ERP Operating Partnership has the right to deliver one Demand Notice
during any calendar year, but not more than four Demand Notices during the
period ending May 30, 2002.
Incidental Registration.
If the Company proposes to register any Common Stock for public sale
pursuant to an underwritten offering it will give prompt written notice (a
"Registration Notice") to ERP Operating Partnership and upon request from ERP
Operating Partnership, the Company will include Registrable Securities in the
registration statement. The Company will not be required to effect any
registration if the Company is advised by a nationally recognized independent
investment banking firm selected by the Company to act as lead underwriter,
that a registration at that time of additional securities would materially and
adversely affect the offering.
ERP Operating Partnership has the right to deliver one Registration
Notice during any calendar year, but not more than four Registration Notices
during the period ending May 30, 2002.
Limit in Aggregate Amount.
The Company need not register Registrable Securities pursuant to a Demand
Notice or Registration Notice unless the Registrable Securities being
registered have an aggregate fair market value of (i) $5,000,000 during the
period ending May 30, 2000 ("Initial Period"), or (ii) $7,500,000 at any time
after the Initial Period.
Lockup.
In the event the Company proposes to effect the distribution of its
securities through an underwritten public offering, beginning seven days prior
to the pricing of such offering and ending thirty days after such pricing, ERP
Operating Partnership, in the event it beneficially owns in excess of 100,000
shares, will cease any sale or other disposition of any of the Registrable
Securities, if requested by the Company; provided, however, that ERP Operating
Partnership will not be subject to more than one lockup period during any 12
month period.
Agreement Regarding Palomino Park
General.
The Company currently owns 80% of the shares of WPHC, consisting of
voting Class A Shares (the "Class A Shares"), and ERP Operating Partnership
owns the remaining 20% of the shares of WPHC, consisting of non-voting Class B
Shares (the "Class B Shares"). WPHC, together with Feld, are the two members
of the limited liability companies - Park at Highlands LLC and Red Canyon at
Palomino Park LLC - which own Phase I and Phase II, respectively. The Company
and ERP Operating Partnership have entered into an agreement (the "Palomino
Agreement") regarding their rights and obligations as shareholders of WPHC and
certain aspects of the development of Palomino Park, including Phases I (Blue
Ridge) and II (Red Canyon). Certain of the terms are summarized below.
Capital Contributions.
WPHC is obligated to make capital contributions to the Phase I LLC and
Phase II LLC for certain acquisition costs, and to fund the deficit between
construction costs and construction loan proceeds, respectively. These
subsequent capital contribution obligations ("Phase Contributions") are
limited to the deficits as projected in the budgets originally adopted for
each Phase. The Company has guaranteed the Phase Contributions.
ERP Operating Partnership has no obligation to contribute capital to
WPHC.
Issuance of Additional WPHC Shares to the Company; Anti-Dilution
Provisions.
If additional shares of WPHC are issued to the Company or to one of its
subsidiaries, ERP Operating Partnership will have the right to purchase a
sufficient number of such shares to retain a 20% interest in WPHC. Any Class A
Shares acquired by ERP Operating Partnership will be converted into Class B
Shares.
Offers to Purchase Class A Shares or Class B Shares; Rights of First
Refusal; The Company's Drag Along Right.
ERP Operating Partnership may transfer all, but not part, of its Class B
Shares, except in a Tag Along transaction (described below).
The Company may transfer all or part of its Class A Shares after the
expiration of the lock-up period (i.e., the period during which ERP Operating
Partnership is liable to the construction lender under a Tri-Party Agreement,
as described below).
If the Company receives an offer to purchase all of the Class A Shares,
the Company has the right ("Drag Along Right") to compel ERP Operating
Partnership to sell all of its Class B Shares as part of that transaction to
enable the Company to effectuate a total sale of WPHC to a third party.
If ERP Operating Partnership or the Company shall receive an offer from a
bona fide third party to purchase all (or in the case of the Company any part)
of their shares in WPHC, then the selling shareholder shall be obligated to
offer to sell its shares to the other shareholder (i.e. the non-selling
shareholder) who shall have a preemptive right ("Right of First Refusal") to
purchase the offered shares on the same terms. The Right of First Refusal
granted to ERP Operating Partnership does not apply to a written offer from a
bona fide purchaser that is not an affiliate of the Company to purchase all of
the shares of WPHC owned by the Company and ERP Operating Partnership if the
Company validly exercises its Drag Along Rights in connection therewith.
ERP Operating Partnership's Tag Along Right.
ERP Operating Partnership has a right ("Tag Along Right") to compel the
Company to include ERP Operating Partnership's Class B Shares in a sale of the
Class A Shares, in such amount as will preserve the 80%-20% ratio between the
Class A Shares held by the Company and Class B Shares held by ERP Operating
Partnership.
The Put/Call Feature of One-Half of the Class B Shares.
One-half of ERP Operating Partnership's Class B Shares (the "Put/Call
Shares") are subject to a Put/Call agreement in favor of either ERP Operating
Partnership (the Put feature) or the Company (the Call feature) at the
Put/Call Price.
Pursuant to its Put right, ERP Operating Partnership may compel the
Company to purchase from ERP Operating Partnership the Put/Call Shares at any
time after the fifth year for the Put/Call Price.
Pursuant to its Call right, the Company may compel ERP Operating
Partnership to sell to the Company the Put/Call Shares at any time for the
Put/Call Price.
The Put/Call Price equals $1.9 million (adjusted, in the case of the
Call, for inflation after the fifth year), less any amounts previously
received by ERP Operating Partnership from sale and refinancing proceeds.
Consistent with the foregoing, one-half of the Class B Shares in any sale
transaction effected by means of either the Drag Along Right or the Tag Along
Right is deemed Put/Call Stock and (i) in the case of a sale transaction
effected by means of the Drag Along Right, entitled to receive the Put/Call
Price and (ii) in the case of a sale transaction effected by means of the Tag
Along Right, entitled to receive the greater of the purchase price in such
transaction or a pro-rated portion of the Put/Call Price.
Future Acquisitions of the Remaining Overall Property.
Any future Phase acquired by WPHC will be acquired by WPHC or in a
Colorado limited liability company substantially similar to the Phase II LLC.
ERP Operating Partnership's Right of First Offer if WPHC Elects to Assign
its Interest in the Land Contract.
If the Company, through WPHC, decides not to acquire a future Phase and
instead to assign the land contract to a third party for such future Phase,
then ERP Operating Partnership, subject to the similar interests of Feld, has
a preemptive right of first offer with respect to such proposed assignment.
ERP Operating Partnership's Right of First/Last Offer for Sale of Blue
Ridge and Red Canyon.
With the exception of sales pursuant to a condominium or townhome plan,
ERP Operating Partnership is accorded certain rights of first and last offer
with respect to a sale of either WPHC's interest in the Phase I LLC or the
Phase II LLC, or the sale of fee title to Phase I or Phase II by either of
said entities.
The Company and WHPC Loss of Control.
The Company has agreed not to lose its controlling interest in WPHC nor
to permit WPHC to lose its controlling interest in Phase I LLC, Phase II LLC
or any future entity formed with respect to another phase of Palomino Park
without first releasing ERP Operating Partnership from its obligations with
respect to the Credit Enhancement Agreement and ERP Guaranty (as defined
below).
Tri-Party Agreements and Standby Agreements.
Phase I Tri-Party Agreement. With respect to the development of Phase I,
NationsBank, N.A. ("NationsBank") has provided a construction loan of
approximately $36.8 million. ERP Operating Partnership has agreed ("Phase I
Tri-Party Agreement"), assuming completion of construction of Phase I, if the
loan is not paid when due, to pay NationsBank the lesser of the loan balance
or the final agreed upon budget.
Phase II Tri-Party Agreement. With respect to the development of Phase
II, NationsBank has provided a construction loan of approximately $29.5
million. ERP Operating Partnership has agreed ("Phase II Tri-Party
Agreement"), assuming completion of construction of Phase II, if the loan is
not paid when due, to pay NationsBank the lesser of the loan balance or the
final agreed upon budget. ERP Operating Partnership will receive a fee of (i)
1% of the committed construction loan amount for each of the first two years
and (ii) 1-1/2% of such amount for the third year.
The Standby Agreements. If ERP Operating Partnership does, in fact, pay
off the construction loan pursuant to its obligations under the Phase I Tri-
Party Agreement or Phase II Tri-Party Agreement, ERP Operating Partnership
shall be entitled to acquire fee title to the corresponding Phase for $100.
Events of Default. Upon an event of default (as described below), ERP
Operating Partnership may exercise all remedies available to it; provided,
however, ERP Operating Partnership may not disaffirm its obligations under the
Phase I Tri-Party Agreement or the Phase II Tri-Party Agreement. An event of
default includes, among other things, a material misrepresentation by the
Company, failure to make payments after a material default by the Company
under the Palomino Agreement or any document entered into pursuant to the
Palomino Agreement, an undischarged judgment against the Company in excess of
$250,000 and a change in control of the Company.
Credit Enhancement Agreement
Pursuant to a certain agreement (the "Bank Reimbursement Agreement"), (i)
Dresdner Bank, AG, NY Branch ("Dresdner") issued a letter of credit ("Dresdner
Letter of Credit") to insure the repayment of the Bonds and (ii) the Company
has undertaken to reimburse Dresdner if the Dresdner Letter of Credit is drawn
upon.
ERP Operating Partnership has entered into a Credit Enhancement Agreement
with the Company (the "Credit Enhancement Agreement") under which ERP
Operating Partnership has made its own credit available to Dresdner in the
form of a guaranty to Dresdner of the Company's obligations under the Bank
Reimbursement Agreement for a period of eight years from the consummation of
the Merger (the "ERP Guaranty").
The ERP Guaranty will be revised and made available with respect to any
similar letter of credit or credit facility issued in lieu or replacement of
the Dresdner Letter of Credit.
The Company has agreed to pay ERP Operating Partnership for the ERP
Guaranty an annual credit enhancement fee, payable quarterly, equal to .5% of
the face amount of the Dresdner Letter of Credit (or the face amount of any
alternate credit arrangement). Following an event of default by the Company,
ERP Operating Partnership will have the right, among other remedies, to select
an alternate interest rate on the Bonds and to direct the actions of PPPIC
under the Credit Enhancement Agreement. In addition, pursuant to the Credit
Enhancement Agreement there are certain restrictions on the ability to convert
the rate mode of the Bonds. The Company has agreed to reimburse ERP Operating
Partnership for any amounts it pays under the ERP Guaranty or any amendment
thereto, together with interest on such amount.
DESCRIPTION OF CAPITAL STOCK
The following summary of the terms of the Company's stock does not purport
to be complete and is subject to and qualified in its entirety by reference to
Maryland law and the Company's Charter and Bylaws, copies of which have been
filed with the Commission as exhibits to the Registration Statement of which
this Prospectus is a part and are available from the Company upon request.
General
The Charter provides that the Company may issue up to 200,000,000 shares of
Common Stock, $.01 par value per share. The Board of Directors may reclassify
any unissued shares of stock in one or more classes or series of stock. As of
July 1, 1997, the Board of Directors had reclassified 350,000 shares of Common
Stock as shares of Class A Common and 2,000,000 shares of Common Stock as
shares of Series A Preferred. As of July 1, 1997, there were 16,572,043
shares of Common Stock issued and outstanding and 339,806 shares of Class A
Common issued and outstanding. The Board of Directors has also authorized the
issuance of up to 2,000,000 shares of the Series A Preferred of which
1,000,000 shares are subject to issuance pursuant to the Stock Purchase
Agreement and 1,000,000 shares are subject to issuance pursuant to the
Company's right to pay dividends on the Series A Preferred by the issuance of
additional shares of the Series A Preferred. In addition, up to 1,750,000
shares of Common Stock have been reserved for issuance under the Company's
1997 Management Incentive Plan and 1,326,235 shares of Common Stock have been
reserved for issuance under the Company's Rollover Stock Option Plan.
Under Maryland law, shareholders generally are not liable for the
corporation's debts and obligations.
The Common Stock is listed on the American Stock Exchange. The United
States Trust Company of New York acts as transfer agent and registrar of the
Common Stock.
The Company intends to furnish to its shareholders an annual report
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm.
Common Stock
All of the Shares have been duly authorized, and are fully paid, validly
issued and nonassessable. Subject to the preferential rights of any other
class or series of stock, holders of the Common Stock are entitled to receive
dividends on such stock if, as and when authorized and declared by the Board
of Directors of the Company out of assets legally available therefor and to
share ratably in the assets of the Company legally available for distribution
to its shareholders in the event of its liquidation, dissolution or winding up
after payment of or adequate provision for all known debts and liabilities of
the Company and payment of liquidation preferences to holders of preferred
stock.
Each outstanding share of Common Stock entitles the holder to one vote on
all matters submitted to a vote of shareholders, including the election of
directors, and, except as provided with respect to any other class or series
of stock, the holders of such shares will possess exclusive voting power.
There is no cumulative voting in the election of directors, which means that,
except with respect to the director elected by the holders of Class A Common,
the holders of a majority of the outstanding shares of Common Stock can elect
all of the directors then standing for election and the holders of the
remaining shares will not be able to elect any directors. See "- Class A
Common Stock."
Holders of shares of Common Stock have no preference, conversion, exchange,
sinking fund, redemption or appraisal rights and have no preemptive rights to
subscribe for any securities of the Company. Except for the rights of the
Class A Common described below, shares of Common Stock will have equal
dividend, liquidation and other rights.
Under the Maryland General Corporation Law ("MGCL"), a Maryland corporation
generally may not dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or engage in
similar transactions outside the ordinary course of business unless approved
by the affirmative vote of shareholders holding at least two-thirds of the
shares entitled to vote on the matter unless a lesser percentage (but not less
than a majority of all of the votes entitled to be cast on the matter) is set
forth in the corporation's charter. The Charter provides for approval of
consolidations, share exchanges, mergers in which the Company is the
successor, and amendments to the charter (except amendments to the provisions
relating to the classification and removal of directors or any amendment
reducing supermajority voting requirements) by the affirmative vote of holders
of shares entitled to cast a majority of the votes entitled to be cast on the
matter.
Classification or Reclassification of Common Stock or Preferred Stock
The Charter authorizes the Board of Directors to reclassify any unissued
shares of stock from time to time in one or more classes or series of stock.
Prior to issuance of shares of each series, the Board is required by MGCL and
the Charter to set the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each such series.
Thus, the Board could authorize the issuance of shares of Preferred Stock with
terms and conditions which could have the effect of delaying, deferring or
preventing a transaction with or a change in control of the Company that might
involve a premium price for the holders of Common Stock or otherwise be in
their best interest. As of July 1, 1997, no shares of Preferred Stock were
outstanding, and the Company had no plans to issue any Preferred Stock, other
than pursuant to the Stock Purchase Agreement.
Power to Issue Additional Shares of Common Stock and Preferred Stock
The Company believes that the power of the Board of Directors to issue
additional authorized but unissued shares of Common Stock and to reclassify
any unissued shares of Common Stock and thereafter to cause the Company to
issue such reclassified shares of stock will provide the Company with
increased flexibility in structuring possible future financings and
acquisitions and in meeting other needs which might arise. The additional
classes or series, as well as the Common Stock, will be available for issuance
without further action by the Company's shareholders, unless such action is
required by applicable law or the rules of any stock exchange or automated
quotation system on which the Company's securities may be listed or traded.
Although the Board of Directors has no intention at the present time of doing
so, it could authorize the Company to issue a class or series that could,
depending on the terms of such class or series, delay, defer or prevent a
transaction or a change of control of the Company that might involve a premium
price for holders of common stock or otherwise be in their best interest.
Class A Common Stock
Rights Generally.
Each share of Class A common stock, par value $.01 per share, entitles its
holder to all the rights of a share of Common Stock in addition to the rights
described below. Holders of Class A Common do not have any preemptive rights
to acquire other securities of the Company.
Voting Rights.
Holders of Class A Common, as a class, may nominate or elect a director to
the Board of Directors of the Company, as described in "Certain Agreements
between the Company and ERP Operating Partnership - Common Stock and Preferred
Stock Purchase Agreement".
Optional and Automatic Conversion.
Holders of Class A Common have the right, exercisable at any time and from
time to time, to convert all or any shares of Class A Common into shares of
Common Stock at a conversion rate of one share of Common Stock for each share
of Class A Common, subject to adjustment. Any outstanding shares of Class A
Common will automatically convert, at the conversion rate, into shares of
Common Stock upon the sale, transfer, pledge or other disposition ("Transfer")
of such shares of Class A Common to any entity other than an affiliate of EQR
or ERP Operating Partnership.
Adjustment of Conversion Rate.
The conversion rate in effect at any time for Class A Common is subject to
adjustment from time to time as follows:
If the Company (a) reclassifies the outstanding shares of Common Stock into
shares of some other class or series of stock of the Company, (b) subdivides
the outstanding shares of Common Stock into a greater number of shares of
Common Stock or (c) combines the outstanding shares of Common Stock into a
smaller number of shares of Common Stock, the conversion rate immediately
prior to such action shall be adjusted so that the holder of any shares of
Class A Common thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock which he would have owned
immediately following such action had such shares of Class A Common been
converted immediately prior thereto.
Purchase of Shares of Voting Stock in Excess of REIT Ownership Limit.
If an event which is undertaken or caused by the Company occurs resulting in
ERP Operating Partnership, EQR or any of their affiliates collectively owning
outstanding shares of Class A Common in excess of the REIT ownership limits
(initially 9.9% of the value of the voting stock of the Company), then the
Company will purchase such shares of Class A Common in excess of the REIT
ownership limit at the market price thereof.
Series A 8% Convertible Redeemable Preferred Stock
General.
The Board of Directors of the Company has reclassified and designated
2,000,000 shares of Common Stock as shares of a series of preferred stock
designated Series A 8% Convertible Redeemable Preferred Stock, $.01 par value
per share. The maximum number of authorized shares of Series A Preferred is
2,000,000.
Seniority.
With respect to the right to receive dividends and to participate in
distributions or payments in the event of any liquidation, dissolution or
winding up of the Company, the Series A Preferred will rank (i) junior to any
other preferred stock of the Company ranking, as to dividends and upon
liquidation, prior to the Series A Preferred, (ii) on a parity with any other
preferred stock of the Company ranking, as to dividends and upon liquidation,
on a parity with the Series A Preferred, and (iii) senior to the Common Stock
and any other class or series of shares of stock of the Company ranking, as to
dividends and upon liquidation, junior to the Series A Preferred (collectively
the "Junior Shares"). Notwithstanding the foregoing, the Company may make
distributions or pay dividends in the Common Stock or in any other shares of
the Company ranking junior to the Series A Preferred as to distribution rights
and liquidation preference at any time.
Dividends.
The holders of the Series A Preferred are entitled to receive, when and as
declared by the Company's Board of Directors out of any funds legally
available therefor, dividends at the rate of $2.00 per share per year, payable
in cash, except as provided below, in equal amounts quarterly on the fifteenth
(or, if not a business day, the next succeeding business day) of January,
April, July and October each year (each such day being called a "Quarterly
Dividend Date" and each period ending on a Quarterly Dividend Date being
called a "Dividend Period"). The amount of any dividend payable for the
initial Dividend Period and for any Dividend Period shorter than a full
Dividend Period shall be prorated.
Notwithstanding the foregoing, for any 12 Dividend Periods, the Company has
the right to pay the dividend in additional shares of the Series A Preferred
determined by dividing the total amount of the dividend to be paid in shares
by $25.00.
In the event the Company fails to pay any dividend on the Series A Preferred
on any Quarterly Dividend Date, the Company shall not pay any dividends on any
other class of stock of the Company other than (i) pro rata with other
securities of the Company ranking pari passu with the Series A Preferred or
(ii) with Junior Shares until such dividend on the Series A Preferred has been
paid.
Distributions Upon Liquidation, Dissolution or Winding Up.
Upon the voluntary or involuntary dissolution, liquidation or winding up of
the Company, the holders of shares of the Series A Preferred will be entitled
to receive and to be paid out of the assets of the Company available for
distribution to its shareholders, before any payment or distribution is made
on any Junior Shares, the amount of $25.00 per share of the Series A Preferred
("Liquidation Value"), plus any accrued and unpaid dividends thereon. If,
upon any dissolution, liquidation, or winding up of the Company, the amounts
payable to the holders of shares of the Series A Preferred and holders of any
other shares of stock of the Company ranking as to any such distribution on a
parity with the Series A Preferred are not paid in full, the holders of the
Series A Preferred and of such other shares will share ratably in such
distribution of assets of the Company in proportion to the full respective
preference amounts to which they are entitled.
Redemption.
Optional Redemption. On and after May 30, 2002, the Company may, at its
option, redeem at any time all or any part of the outstanding the Series A
Preferred at a price per share (the "Redemption Price") equal to $25.00 per
share of the Series A Preferred, together with all accrued and unpaid
dividends to and including the date fixed for redemption (the "Redemption
Date"); provided, however, that no partial redemption of the Series A
Preferred may be effected if after giving effect thereto the aggregate
Liquidation Value of the Series A Preferred outstanding is less than
$10,000,000. The Redemption Price and all accrued and unpaid dividends will
be paid in cash; provided, however, that if (a) a holder of the Series A
Preferred desires to convert any of its Series A Preferred called for
redemption but such conversion would cause any direct or indirect holder which
is classified as a REIT under Section 856 of the Code, to own, directly or
indirectly, more than 9.9% of the outstanding voting stock of the Company or
would otherwise cause any direct or indirect holder of such outstanding voting
stock to lose its status as a REIT under the Code, and (b) such holder has so
notified the Company in writing prior to the Redemption Date, stating the
number of shares of the Series A Preferred which have been called for
redemption which such holder is unable to convert for such reason (such shares
being referred to as the "Unconvertible Shares"), then the Company shall pay,
in cash, the Redemption Price plus all accrued and unpaid dividends for each
Unconvertible Share and shall issue to such holder a warrant to purchase the
number of shares of the Common Stock equal to (i) the fair market value of a
share of the Common Stock on the Redemption Date (calculated pursuant to the
terms of the Articles Supplementary) over the Redemption Price, multiplied by
(ii) the number of shares of the Common Stock into which the Unconvertible
Shares redeemed from such holder were convertible immediately prior to such
redemption, and divided by (iii) the fair market value of a share of the
Common Stock on the Redemption Date. Such warrant shall be exercisable
without cost to the holder thereof at any time and from time to time for a
period of 10 years from the date of issuance of such warrant. The warrant
shall be on such terms and conditions as are customarily contained in like
warrants, including provisions to protect the holder of the warrant from
dilution. The Company shall have the right, at any time, to redeem such
warrant at a price equal to the fair market value of such warrant on the date
of any such redemption.
Required Redemption. Upon the (A) (i) non-payment by the Company of any
dividend on the Quarterly Dividend Date applicable to such dividend for three
Dividend Periods which need not be consecutive or (ii) failure by the Company
to comply with any term or obligations under the Articles Supplementary (the
occurrences in (i) and (ii) each called an "Event of Default") or (B) on and
after May 30, 2012, whichever comes first, the holder of any shares of the
Series A Preferred may, at its option, cause the Company to redeem at any time
all of the Series A Preferred held by such holder at $25.00 per share, payable
in cash, together with all accrued and unpaid dividends to and including the
Redemption Date. Notwithstanding the provisions of the previous sentence,
provided an Event of Default has not occurred, the Company has the right to
extend the date during which a required redemption is not permitted for three
separate additional five year periods if the dividend rate on the Series A
Preferred is changed to the then market rate of comparable preferred stock
(the "Market Rate") on the first day of each such additional five year period;
provided, however, in no event shall the dividend be reduced to less than
$2.00 per share of the Series A Preferred. The Market Rate shall be
determined by mutual agreement of the holders of the Series A Preferred Stock
and the Company or, if they cannot agree, by an investment banking firm under
the procedure set forth in the Articles Supplementary.
Voting Rights.
Until May 30, 2007, pursuant to the Stock Purchase Agreement, the Company
has the right to direct the voting of all shares of Series A Preferred owned
by ERP Operating Partnership or any of its affiliates, except as to any matter
relating to the rights, preferences and privileges of the Series A Preferred.
The holders of the Series A Preferred are not be entitled to vote on any
matter except as provided below; provided, however, the holders of the Series
A Preferred are not to have any voting rights to the extent such rights will
cause any holder of the Series A Preferred to own more than 9.9% of the
outstanding voting stock of the Company or otherwise cause any holder of the
Series A Preferred that is classified as a REIT under Section 856 of the Code
to lose its status as a REIT under the Code.
So long as any shares of the Series A Preferred remain outstanding, the
Company will not, without the affirmative vote of the holders of at least two-
thirds of the shares of the Series A Preferred outstanding at the time, (i)
authorize, create or issue, or increase the authorized or issued amount of any
class or series of shares of stock ranking prior to the Series A Preferred
with respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized shares of
stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase
any such shares; or (ii) amend, alter or repeal the provisions of the Charter
or the terms of the Articles Supplementary classifying the Series A Preferred,
whether by merger, consolidation or otherwise (an "Event"), so as to
materially and adversely affect any right, preference, privilege or voting
power of the Series A Preferred or the holders thereof; provided, however,
with respect to the occurrence of any of the Events set forth in (ii) above,
so long as the shares of the Series A Preferred remain outstanding with the
terms thereof materially unchanged, even if upon the occurrence of an Event,
the Company may not be the surviving entity, the occurrence of any such Event
will not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of the Series A Preferred
and provided further that (x) any increase in the amount of the authorized or
issued shares of preferred stock of the Company or the creation or issuance of
any other preferred stock of the Company, or (y) any increase in the amount of
authorized or issued shares of the Series A Preferred or any other preferred
stock of the Company, in each case ranking on a parity with or junior to the
Series A Preferred with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
Rights of Conversion.
Holders of the Series A Preferred have the right, exercisable at any time
and from time to time, except in the case of the Series A Preferred called for
redemption, to convert all or any of such the Series A Preferred into the
Common Stock at a conversion price per share of the Common Stock equal to
$11.124 (representing a premium of 8% in excess of the book value per share of
the Common Stock on the date of the Merger) (the "Conversion Price"). In the
case of the Series A Preferred called for redemption, conversion rights will
expire at the close of business on the last business day preceding the
Redemption Date.
Adjustments of Conversion Rate.
The conversion rate in effect at any time for the Series A Preferred is
subject to adjustment from time to time to protect against certain dilutive
events.
In case the Company (1) pays or makes a distribution in shares of Common
Stock to holders of the Common Stock, (2) reclassifies the outstanding the
Common Stock into shares of some other class or series of shares, (3)
subdivides the outstanding the Common Stock into a greater number of shares of
the Common Stock or (4) combines the outstanding Common Stock into a smaller
number of shares of the Common Stock, the conversion rate immediately prior to
such action shall be adjusted so that the holder of any shares of the Series A
Preferred thereafter surrendered for conversion will be entitled to receive
the number of shares of the Common Stock which he would have owned immediately
following such action had such the Series A Preferred been converted
immediately prior to such event.
In case the Company issues rights, options or warrants to all holders of
the Common Stock entitling them to subscribe for or purchase the Common Stock
(or securities convertible into the Common Stock) at a price per share less
than the current market price (as determined pursuant to the Articles
Supplementary) of the Common Stock on such record date, the number of shares
of the Common Stock into which each share of the Series A Preferred is
convertible will be adjusted so that the same shall be equal to the number
determined by multiplying the number of shares of the Common Stock into which
such share of the Series A Preferred was convertible immediately prior to such
record date by a fraction of which the numerator shall be the number of shares
of the Common Stock outstanding on such record date plus the number of
additional shares of the Common Stock offered (or into which the convertible
securities so offered are convertible), and of which the denominator shall be
the number of shares of the Common Stock outstanding on such record date, plus
the number of shares of the Common Stock which the aggregate offering price of
the additional shares of the Common Stock offered (or into which the
convertible securities so offered are convertible) would purchase at such
current market price.
In case the Company distributes to all holders of the Common Stock any class
of shares of capital stock other than the Common Stock, evidences of
indebtedness or assets of the Company (other than cash distributions out of
current or retained earnings), or distributes to all holders of the Common
Stock rights or warrants to subscribe for securities other than those referred
to in the immediately preceding paragraph, then in each case the number of
shares of the Common Stock into which each share of the Series A Preferred
will be convertible will be adjusted so that the same shall equal the number
determined by multiplying the number of shares of the Common Stock into which
such share of the Series A Preferred was convertible immediately prior to the
date of such distribution by a fraction of which the numerator shall be the
current market price of the Common Stock on the record date mentioned below,
and of which the denominator shall be such current market price of the Common
Stock, less the then fair market value (as determined by the Board of
Directors) of the portion of the securities or assets so distributed or of
such subscription rights or warrants applicable to one share of the Common
Stock. Notwithstanding the foregoing, in the event that the Company
distributes rights or warrants (other than those referred to in the
immediately preceding paragraph) ("Rights") pro rata to holders of the Common
Stock, the Company may, in lieu of making any adjustment described in this
paragraph make proper provision so that each holder of a share of the Series A
Preferred who converts such share after the record date for such distribution
and prior to the expiration or redemption of the Rights shall be entitled to
receive upon such conversion, in addition to the Common Stock issuable upon
such conversion (the "Conversion Shares"), a number of Rights to be determined
as follows: (1) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder
of a number of shares of the Common Stock equal to the number of Conversion
Shares is entitled at the time of such conversion in accordance with the terms
and provisions of and applicable to the Rights; and (2) if such conversion
occurs after the Distribution Date, the same number of Rights to which a
holder of the number of shares of the Common Stock into which a share of the
Series A Preferred so converted was convertible immediately prior to the
Distribution Date would have been entitled on the Distribution Date in
accordance with the terms and provisions of and applicable to the Rights.
Options.
So long as any Series A Preferred is outstanding, the Company may not issue
any options to purchase shares of the Company ("Employee Stock Options") to
officers, directors or employees of, or consultants to, the Company, whether
pursuant to employee stock option or purchase plans of the Company or
employment or consulting agreements or otherwise for an exercise price which
is less than the fair market value of such shares on the date of grant. In
the event the number of shares of Common Stock subject to Employee Stock
Options (excluding any Employee Stock Options issued on the date of the Merger
in exchange for Wellsford Residential share options) at any time exceeds, in
the aggregate, 10% of the Common Stock outstanding at such time, all Employee
Stock Options outstanding at such time in excess of such 10%, shall be deemed
for certain anti-dilution purposes to have an exercise price per share equal
to 20% of the average fair market value of a share of the Common Stock on the
date of grant of those shares subject to Employee Stock Options most recently
granted in excess of such 10%.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S CHARTER AND BYLAWS
The following is a summary of certain provisions of Maryland law and the
Company's Charter and Bylaws and is qualified in its entirety by reference to
the Company's Charter and Bylaws, copies of which have been filed with the
Commission as exhibits to the Registration Statement of which this Prospectus
is a part and are available from the Company upon request.
Classification of the Board of Directors
The Bylaws provide that the number of directors of the Company may be
established by the Board of Directors but may not be fewer than the minimum
number required by Maryland law, which is three, nor more than 15. Any
vacancy will be filled, at any regular meeting or at any special meeting
called for that purpose, by a majority of the remaining directors. A vacancy
resulting from an increase in the number of directors must be filled by a
majority of the entire Board of Directors.
Pursuant to the Charter, the Board of Directors is divided into three
classes of directors. The initial terms of the first, second and third
classes will expire at the annual meetings of shareholders to be held in 1998,
1999 and 2000, respectively. Beginning in 1998, directors of each class will
be chosen for three-year terms upon the expiration of their current terms and
each year one class of directors will be elected by the shareholders. The
members of each such class will hold office until their successors are duly
elected and qualified. The Company believes that classification of the Board
of Directors will help to assure the continuity and stability of the Company's
business strategies and policies as determined by the Board of Directors.
Holders of shares of the Common Stock have no right to cumulative voting in
the election of directors. Consequently, at each annual meeting of
shareholders, the holders of a majority of the shares of the Common Stock are
able to elect all of the successors of the class of directors whose terms
expire at that meeting.
Classification of the Board of Directors could have the effect of making the
removal of incumbent directors more time-consuming and difficult, which could
discourage a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its shareholders. At least two annual meetings of
shareholders, instead of one, will generally be required to effect a change in
a majority of the Board of Directors. Thus, the classified board provision
could increase the likelihood that incumbent directors will retain their
positions.
Removal of Directors
The Charter provides that, except as provided in the next sentence, a
director may be removed only for cause and by the affirmative vote of at least
two-thirds of the votes entitled to be cast for the election of directors
(i.e., the votes attributable to all outstanding shares of the Common Stock).
The Class A Director may be removed, without cause, only by the affirmative
vote of at least a majority of the Class A Common electing such Class A
Director.
Business Combinations
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between a Maryland
corporation and an Interested Stockholder or an affiliate of the corporation
who, at any time within the two-year period prior to the date in question, was
an Interested Stockholder or an affiliate of such an Interested Stockholder
are prohibited for five years after the most recent date on which the
Interested Stockholder becomes an Interested Stockholder. Thereafter, any
such business combination must be recommended by the board of directors of
such corporation and approved by the affirmative vote of at least (a) 80% of
the votes entitled to be cast by holders of outstanding shares of voting stock
of the corporation and (b) two-thirds of the votes entitled to be cast by
holders of voting stock of the corporation other than shares held by the
Interested Stockholder with whom (or with whose affiliate) the business
combination is to be effected, unless, among other conditions, the
corporation's common shareholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the
same form previously paid by the Interested Stockholder for its shares. These
provisions of Maryland law do not apply, however, to business combinations
that are approved or exempted by the board of directors of the corporation
prior to the time that the Interested Stockholder becomes an Interested
Stockholder. The directors of the Company have exempted from the Maryland
statute any business combinations with Jeffrey H. Lynford or Edward Lowenthal
or any of their affiliates or any other person acting in concert or as a group
with any of such persons.
Amendment to the Charter and Bylaws
The Charter may be amended only by the affirmative vote of a majority of all
of the votes entitled to be cast on the matter, except that any amendment to
the sections of the charter that address the number, classification or removal
of directors, or any amendment providing that the shareholders may approve an
action by a lesser percentage of votes than that required by law will be valid
only if approved by the affirmative vote of two-thirds of all of the votes
entitled to be cast on the matter. The Board of Directors of the Company has
the exclusive power to adopt, alter or repeal any provision of the Bylaws and
to make new Bylaws.
Merger, Consolidation, Sale of Assets
A sale of all or substantially all of the assets of the Company or a merger
in which the Company is not the successor must be approved by the affirmative
vote of two-thirds of all of the votes entitled to be cast on the matter. A
consolidation or share exchange or a merger in which the Company is the
successor need be approved only by the affirmative vote of holders of shares
entitled to cast a majority of all votes entitled to be cast on the matter.
Dissolution of the Company
The dissolution of the Company must be approved by the affirmative vote of
the holders of not less than two-thirds of all the votes entitled to be cast
on the matter.
Advance Notice of Director Nominations and New Business
The Bylaws of the Company provide that (a) with respect to an annual meeting
of shareholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by shareholders may be made only
(i) pursuant to the Company's notice of the meeting, (ii) by or at the
direction of the Board of Directors or (iii) by a stockholder who is entitled
to vote at the meeting and has complied with the advance notice procedures set
forth in the Bylaws and (b) with respect to special meetings of shareholders,
only the business specified in the Company's notice of meeting may be brought
before the meeting of shareholders and nominations of persons for election to
the Board of Directors may be made only (i) pursuant to the Company's notice
of the meeting, (ii) by or at the direction of the Board of Directors, or
(iii) provided that the Board of Directors has determined that directors shall
be elected at such meeting, by a stockholder who is entitled to vote at the
meeting and has complied with the advance notice provisions set forth in the
Bylaws.
Meetings of Shareholders
The Company's Bylaws provide that annual meetings of shareholders shall be
held on a date and at the time set by the Board of Directors during the month
of May each year (commencing in May 1998). Special meetings of the
shareholders may be called by (i) the Chairman of the Board of the Company,
(ii) the President of the Company, (iii) the Chief Executive Officer of the
Company or (iv) the Board of Directors. As permitted by the MGCL, the Bylaws
provide that special meetings must be called by the Secretary of the Company
upon the written request of the holders of shares entitled also to cast not
less than a majority of all of the votes entitled to be cast at the meeting.
The Company's Bylaws provide that any stockholder of record wishing to
nominate a director or have a stockholder proposal considered at an annual
meeting (except for stockholder proposals included in the Company proxy
materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) must provide written notice and certain
supporting documentation to the Company relating to the nomination or proposal
not later than 60 days nor earlier than 90 days prior to the anniversary date
of the prior year's annual meeting or special meeting in lieu thereof (the
"Anniversary Date"). In the event that the annual meeting is advanced by more
than 30 calendar days before or delayed more than 60 days from the Anniversary
Date, shareholders generally must provide written notice no earlier than 90
days prior to such annual meeting nor later than the later of 60 days prior to
such annual meeting or 10 days following the date on which notice of the
meeting is mailed to shareholders.
The purpose of requiring shareholders to give the Company advance notice of
nominations and other business is to afford the Board of Directors a
meaningful opportunity to consider the qualifications of the proposed nominees
or the advisability of the other proposed business and, to the extent deemed
necessary or desirable by the Board of Directors, to inform shareholders and
make recommendations about the qualifications or business, as well as to
provide a more orderly procedure for conducting meetings of shareholders.
Although the Company's Bylaws do not give the Board of Directors any power to
disapprove stockholder nominations for the election of directors or proposals
for action, they may have the effect of precluding a contest for the election
of directors or the consideration of stockholder proposals if the proper
procedures are not followed, and of discouraging or deterring a third party
from conducting a solicitation of proxies to elect its own slate of directors
or to approve its own proposal, without regard to whether consideration of the
nominees or proposals might be harmful or beneficial to the Company and its
shareholders.
Limitation of Liability and Indemnification
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its shareholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent
permitted by Maryland law.
The Charter authorizes the Company, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of the Company, and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee
benefit plan, limited liability company or any other enterprise as a director,
officer, partner, trustee, manager or member of such corporation, partnership,
joint venture, trust, employee benefit plan, limited liability company or
other enterprise. The Bylaws of the Company obligate it, to the maximum
extent permitted by Maryland law, to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer who is made a party to the proceeding by
reason of his service in that capacity or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee
benefit plan, limited liability company or any other enterprise as a director,
officer, partner, trustee, manager or member of such corporation, partnership,
joint venture, trust, employee benefit plan, limited liability company or
other enterprise and who is made a party to the proceeding by reason of his
service in that capacity. The Charter and Bylaws also permit the Company to
indemnify and advance expenses to any person who served a predecessor of the
Company in any of the capacities described above and to any employee or agent
of the Company or a predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any
proceeding to which they may be made a party by reason of their service in
those or other capacities unless it is established that (a) the act or
omission of the director or officer was material to the matter giving rise to
the proceeding and (i) was committed in bad faith or (ii) was the result of
active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Company, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Company as authorized by the
Bylaws and (b) a written statement by or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that
the standard of conduct was not met.
SHARES AVAILABLE FOR FUTURE SALE
As of July 1, 1997, there were 16,572,043 shares of Common Stock issued and
outstanding and 339,806 shares of Class A Common issued and outstanding. In
addition, 3,076,235 shares of Common Stock are available for issuance under
the Company's Management Incentive Plan and Rollover Stock Option Plan
(options to purchase 1,873,610 of such shares have been granted, 1,326,235 of
which were granted in replacement for former Wellsford Residential share
options), and approximately 5,000,000 shares of Common Stock have been
reserved for issuance upon conversion of the Series A Preferred and Class A
Common. Upon registration of the 12,242,719 Shares offered hereby, all of the
shares of Common Stock will be freely tradeable without registration or other
restrictions under the Securities Act, except for any of such shares of Common
Stock issued to an "affiliate" of the Company. The 3,076,235 shares of Common
Stock issuable under the Company's Management Incentive Plan and Rollover
Stock Option Plan will also be freely tradeable upon the registration of such
shares under the Securities Act. The shares of Class A Common and Series A
Preferred that have been or will be issued to ERP Operating Partnership and
the shares of Common Stock issuable upon conversion of the Class A Common and
the Series A Preferred will be "restricted" securities ("Restricted
Securities") within the meaning of Rule 144 under the Securities Act.
The Company has agreed to file, subject to certain limitations, one or more
registration statements with the Commission for the purpose of registering the
sale of the shares of Common Stock and Series A Preferred issued or issuable
to ERP Operating Partnership. Upon effectiveness of such registration
statement, ERP Operating Partnership may sell such shares in the secondary
market without being subject to the volume limitations or other requirements
of Rule 144. See "Certain Agreements Between the Company and ERP Operating
Partnership - Registration Rights Agreement".
In general, under Rule 144 as currently in effect, if one year has elapsed
since the later of the date of acquisition of Restricted Securities from the
Company or the date of acquisition of Restricted Securities from any
"affiliate" of the Company, as that term is defined under the Securities Act,
the acquiror or subsequent holder is entitled to sell within any three-month
period a number of shares of Common Stock that does not exceed the greater of
1% of the then-outstanding Common Stock or the average weekly trading volume
of Common Stock on all exchanges and reported through the automated quotation
system of a registered securities association during the four calendar weeks
preceding the date on which notice of the sale is filed with the Commission.
Sales under Rule 144 are also subject to certain restrictions on the manner of
sales, notice requirements and the availability of current public information
about the Company. If two years have elapsed since the date of acquisition of
Restricted Securities from the Company or from an "affiliate" of the Company,
and the acquiror or subsequent holder thereof is deemed not to have been an
affiliate of the Company at any time during the 90 days preceding a sale, such
person would be entitled to sell such Common Stock in the public market under
Rule 144(k) without regard to the volume limitations, manner of sale
provisions, public information requirements or notice requirements.
The effect, if any, that future market sales of Restricted Stock or the
availability of such Restricted Stock for sale will have on the market price
prevailing from time to time cannot be predicted. Nevertheless, sales of
substantial amounts of Restricted Stock in the public market might adversely
affect prevailing market prices for the shares of Common Stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Robinson Silverman Pearce Aronsohn & Berman LLP, counsel
to the Company, the following summarizes the material United States federal
income tax consequences of the ownership and disposition of shares of Common
Stock offered hereby applicable to U.S. Holders and Non-U.S. Holders of the
Common Stock. In general a "U.S. Holder" includes (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized
in the United States or under the law of the United States or any State, (iii)
an estate or trust whose income is includible in gross income for United
States federal income tax purposes regardless of its source or (iv) a trust if
a court within the United States is able to exercise primary supervision of
the administration of the trust and one or more United States fiduciaries have
the authority to control all substantial decisions of the trust. In general,
a "Non-U.S. Holder" is any holder other than a U.S. Holder.
This summary is based on the Code, judicial decisions, administrative
pronouncements, and existing and proposed Treasury regulations, changes to any
of which after the date of this Prospectus could have retroactive effect.
This summary is of a general nature only and is not intended to be legal or
tax advice to any particular holder and no representation with respect to the
United States federal income tax consequences to any particular holder is
made. This summary does not address all aspects of federal income taxation
and does not address any aspects of estate taxation or of state, local or non-
U.S. tax laws, except as set forth below. This summary does not consider any
specific facts or circumstances that may apply to a particular holder (such as
banks, insurance companies, tax-exempt organizations, dealers in securities,
or the fact that in the case of a Non-U.S. Holder that is a partnership, the
United States tax consequences of holding and disposing of shares of Common
Stock may be affected by certain determinations made at the partner level).
Accordingly, prospective purchasers of Common Stock are urged to consult their
tax advisors regarding the United States federal, state, local and non-U.S.
income and other tax consequences of holding and disposing of shares of the
Common Stock.
The following discussion is based on the assumption that shares of Common
Stock are held as capital assets within the meaning of Section 1221 of the
Code.
Dividends
Distributions, if any (see "Dividend Policy"), paid on the Common Stock will
be treated as dividends taxable as ordinary income to U.S. Holders to the
extent of the Company's current or accumulated earnings and profits as
determined under federal income tax principles. While the Company anticipates
having earnings and profits for federal income tax purposes in the current and
future years, there can be no assurance that the Company will have current or
accumulated earnings and profits in any of such years. To the extent that the
amount of distributions paid on the Common Stock exceeds the Company's current
or accumulated earnings and profits, such distributions will be treated as a
nontaxable return of capital and will be applied against and reduce the
adjusted tax basis of the Common Stock in the hands of each U.S. Holder (but
not below zero). The amount of any such distribution which exceeds the
adjusted tax basis of the Common Stock in the hands of the U.S. Holder will be
treated as capital gain and will be long-term capital gain if the U.S.
Holder's holding period for the Common Stock exceeds one year. Under current
law, long-term capital gains of noncorporate taxpayers are generally taxed at
rates more favorable than those applicable to other types of income.
Legislation has been proposed which, if passed, would further reduce the rate
of tax on capital gains. Under Section 243 of the Code, corporate
stockholders generally will be able, subject to certain exceptions and
restrictions, to deduct 70% of the amount of any distribution qualifying as an
ordinary income dividend.
Distributions, if any (see "Dividend Policy"), paid to a Non-U.S. Holder
generally will be subject to United States withholding tax at a 30% rate (or a
lower rate as may be prescribed by an applicable tax treaty) unless the
distributions are either (i) effectively connected with a trade or business of
the Non-U.S. Holder within the United States or (ii) if a tax treaty applies,
attributable to a United States permanent establishment maintained by the non-
U.S. holder. Distributions effectively connected with a trade or business or
attributable to such permanent establishment will generally not be subject to
withholding (if the Non-U.S. Holder properly files an executed United States
Internal Revenue Service Form 4224 with the payor of the distribution) and
generally will be subject to United States federal income tax in the manner
described above for U.S. Holders. In the case of a Non-U.S. Holder which is a
corporation, such effectively connected income also may be subject to the
branch profits tax (which is generally imposed on a foreign corporation at a
rate of 30% on the deemed repatriation from the United States of effectively
connected earnings and profits). The branch profits tax may not apply if the
recipient is a qualified resident of certain countries with which the United
States has an income tax treaty. To determine the applicability of a tax
treaty providing for a lower rate of withholding distributions paid to a
stockholder's address of record in a foreign country are presumed, under the
current IRS positions, to be paid to a resident of that country, unless the
payor has knowledge that such presumption is not warranted or an applicable
tax treaty (or United States Treasury Regulations thereunder) requires some
other method for determining a Non-U.S. Holder's residence. However, recently
proposed U.S. Treasury Regulations, if adopted, would modify the forms and
procedures for this certification.
Sale or Other Disposition of Common Stock
Gain or loss, if any, realized by a U.S. Holder on the sale or other
disposition of shares of Common Stock will be subject to United States federal
income taxation as capital gain or loss in an amount equal to the difference
between the U.S. Holder's adjusted tax basis in the shares of Common Stock and
the amount realized on the disposition. Any such gain or loss will generally
be treated as long-term or short-term capital gain or loss, depending on
whether the U.S. Holder's holding period with respect to the shares of Common
Stock is longer than one year. For United States federal income tax purposes,
capital losses are subject to limitations on deductibility.
Generally, a Non-U.S. Holder will not be subject to United States federal
income tax on any gain realized upon the sale or other disposition of such
holder's shares of Common Stock unless (i) the gain is effectively connected
with a trade or business carried on by the Non-U.S. Holder with the United
States; (ii) the Non-U.S. Holder is an individual who holds the shares of
Common Stock as a capital asset and is present in the United States for 183
days or more in the taxable year of the disposition and to whom such gain is
United States source; (iii) the Non-U.S. Holder is subject to tax pursuant to
the provisions of U.S. tax law applicable to certain former United States
citizens or residents; or (iv) the Company is or has been a "United States
real property holding corporation" for federal income tax purposes (which the
Company believes could very well be the case) at any time during the five-year
period ending on the date of disposition (or such shorter period that such
shares were held) and, provided the Common Stock is "regularly traded" on an
established securities market, the Non-U.S. Holder held, directly or
indirectly, more than five percent of the Common Stock.
Backup Withholding and Information Reporting
In general, a noncorporate U.S. Holder of the Common Stock may be subject to
backup withholding at the rate of 31% with respect to reportable payments of
dividends accrued with respect to, or the proceeds of a sale, exchange or
redemption of, the Common Stock. The payor will be required to deduct and
withhold the prescribed amount with respect to all such reportable payments if
(i) the payee fails to furnish a taxpayer identification number ("TIN") to the
payor or (ii) the Secretary of the Treasury notifies the payor that the TIN
furnished by the payee is incorrect. In addition, the payor will also be
required to deduct and withhold the prescribed amount with respect to dividend
payments if there has been a "notified payee underreporting," or there has
been a failure of the payee to certify to the payor under the penalty of
perjury that such payee is not subject to withholding. Amounts paid as backup
withholding do not constitute an additional tax and will be credited against
the U.S. Holder's federal income tax liabilities or may be refundable.
Dividends paid to Non-U.S. Holders that are subject to United States
withholding tax at the 30% statutory rate or at a reduced tax treaty rate and
dividends that are effectively connected with the conduct of a trade or
business in the United States (if certain certification and disclosure
requirements are met) are exempt from backup withholding of U.S. federal
income tax (although proposed U.S. Treasury Regulations would impose backup
withholding in certain situations). The Company must report annually to the
IRS and to each Non-U.S. Holder and to noncorporate U.S. Holders the amount of
dividends paid to and the tax withheld, if any, with respect to such holder.
These information reporting requirements apply regardless of whether
withholding was reduced by an applicable tax treaty. Copies of these
information returns may also be available under the provisions of a specific
treaty or agreement with the tax authorities in the country in which the Non-
U.S. Holder resides.
The payment of the proceeds from the disposition of shares of Common Stock
by a Non-U.S. Holder through the United States office of a broker will be
subject to information reporting and backup withholding unless the holder,
under penalties of perjury, certifies, among other things, its status as a
Non-U.S.Holder, or otherwise establishes an exemption. Generally, the payment
of the proceeds from the disposition of shares of Common Stock by a Non-U.S.
Holder to or through a non-U.S. office of a broker will not be subject to
backup withholding and will not be subject to information reporting. In the
case of the payment of proceeds from the disposition of shares of Common Stock
by a Non-U.S. Holder through a non-U.S. office of a broker that is a U.S.
person or a "U.S.-related person," existing regulations require information
reporting (but not backup withholding) on the payment unless the broker
receives a statement from the owner, signed under penalties of perjury,
certifying, among other things, its status as a Non-U.S. Holder, or the broker
has documentary evidence in its files that the owner is a Non-U.S. Holder and
the broker has no actual knowledge to the contrary. For tax purposes, a
"U.S.-related person" is (i) a "controlled foreign corporation" for United
States federal income tax purposes or (ii) a foreign person 50% or more of
whose gross income from all sources for the three-year period ending with the
close of its taxable year preceding the payment (or for such part of the
period that the broker has been in existence) is derived from activities that
are effectively connected with the conduct of a United States trade or
business.
Any amount withheld from a payment to a Non-U.S. Holder under the backup
withholding rules will be allowed as a credit against such holder's United
States federal income tax liability and may entitle such holder to a refund,
provided that the required information is furnished to the IRS. Non-U.S.
Holders should consult their tax advisors regarding the application of these
rules to their particular situations, the availability of an exemption
therefrom and the procedures for obtaining such an exemption, if available.
State, Local and Foreign Taxation
The Company and its shareholders may be subject to state, local or foreign
taxation in various state, local or foreign jurisdictions, including those in
which it or they transact business or reside. Such state, local or foreign
taxation may differ from the Federal income tax treatment described above.
Consequently, prospective holders of shares of Common Stock should consult
their own tax advisors regarding the effect of state, local and foreign tax
laws on an investment in the Company.
PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale by the Selling
Shareholders of the Shares offered hereby. The Shares may be sold from time
to time to purchasers directly by any of the Selling Shareholders.
Alternatively, any of the Selling Shareholders may from time to time offer the
Shares through underwriters, dealers or agents who may receive compensation in
the form of underwriting discounts, concessions or commissions from the
Selling Shareholders and/or the purchasers of the Shares for whom they may act
as agent. The Selling Shareholders and any such underwriters, dealers or
agents who participate in the distribution of the Shares may be deemed to be
underwriters, and any profits on the sale of the Shares by them and any
discounts, commissions or concessions received by any such underwriters,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act.
The Shares may be sold from time to time in one or more transactions at a
fixed offering price, which may be changed, or at varying prices determined at
the time of sale or at negotiated prices. Such prices will be determined by
the Selling Shareholders or by agreement between the Selling Shareholders and
underwriters or dealers.
The Company will pay substantially all of the expenses incident to the
registration, offering and sale of the Shares to the public other than (i)
discounts, commissions, fees and expenses of underwriters, dealers or agents
and (ii) other fees and expenses of the Selling Shareholders. The Company
also has agreed to indemnify the Selling Shareholders and any underwriter they
may utilize against certain liabilities, including liabilities under the
Securities Act.
In order to comply with certain states' securities laws, if applicable,
the Shares will be sold in such jurisdictions only through registered or
licensed brokers or dealers. In certain states the Shares may not be sold
unless the Shares have been registered or qualified for sale in such state, or
unless an exemption from registration or qualification is available and is
obtained.
CERTAIN ERISA CONSIDERATIONS
General Fiduciary Matters
In considering an investment in the Company of a portion of the assets of
any employee benefit plan (including a "Keogh" plan or an Individual
Retirement Account), whether or not subject to Employee Retirement Income
Security Act of 1974, as amended ("ERISA") or the Code (all hereinafter
referred to as a "Qualified Plan"), a fiduciary should consider (i) whether
the investment is in accordance with the documents and instruments governing
the Qualified Plan; (ii) whether the investment satisfies the diversification
requirements of Section 404(a)(1)(C) of ERISA, if applicable; (iii) whether
the investment provides sufficient liquidity to permit benefit payments to be
made as they become due; (iv) any requirement that the fiduciary annually
value the assets of the Qualified Plan; (v) whether the investment is prudent,
since there is a high degree of risk in purchasing the shares of Common Stock
offered hereby; and (vi) whether the investment is for the exclusive purpose
of providing benefits to participants and their beneficiaries. Furthermore,
ERISA and the Code prohibit fiduciaries of certain Qualified Plans from
engaging in various acts of self-dealing. Accordingly, absent an exemption,
the fiduciaries of a Qualified Plan should not purchase shares of Common Stock
with assets of any Qualified Plan if the Company or any of its affiliates are
a "party in interest" or "disqualified person" with respect to the Qualified
Plan.
Plan Assets
If the underlying assets of the Company (as opposed to shares of Common
Stock thereof) were to be deemed to be "plan assets" under ERISA, (i) the
prudence and other fiduciary responsibility standards of Part 4 of Subtitle B
of Title I of ERISA would extend to investments made by the Company; and
(ii) certain transactions in which the Company might seek to engage could
constitute "prohibited transactions" under ERISA and the Code.
Under the final regulation (Reg. Section 2510.3-101) (the "Final
Regulation") issued by the Department of Labor ("DOL"), the assets and
properties of corporations, partnerships and certain other entities in which a
plan makes an equity investment (other than an investment in a "publicly-
offered security" or a security issued by an investment company registered
under the 1940 Act) would be deemed to be assets of the investing plan unless
(i) the entity is an "operating company" (including a "venture capital
operating company" or a "real estate operating company") or (ii) equity
participation by benefit plan investors (e.g., Qualified Plans) is less than
25% of any class of equity of the entity, excluding equity interests held by
any person (other than a benefit plan investor) with discretionary authority
or control over the assets of the entity or any person who provides investment
advice for a fee (direct or indirect) with respect to such assets and any
affiliate thereof. For purposes of the 25% test, "benefit plan investors"
include all employee benefit plans, whether or not subject to ERISA or the
Code, including "Keogh" plans, Individual Retirement Accounts and pension
plans maintained by governmental entities or foreign corporations, as well as
any entity of which 25% or more of the value of any class of equity interests
is held by employee benefit plans. At such time, if ever, that the Company
registers the shares of Common Stock sold in the Offering, the Company
believes that the shares of Common Stock should constitute a "publicly-offered
security" and, therefore, the assets of the Company should not be deemed to
constitute "plan assets" of any Qualified Plan that invests in the Common
Stock. Because of the factual nature of the legal issues involved, however,
the Company can offer no assurances in this regard. The Company expects that
upon completion of this Offering, the exception described in (ii) above will
apply, and will continue to apply, until such time, if ever, that the shares
qualify as "publicly traded securities." The Company cannot, however, give
any assurance that this exception will be deemed to apply.
Plan Asset Consequences - Prohibited Transactions
If the Company's assets were to constitute "plan assets" and a prohibited
transaction were to occur, or the acquisition of shares of Common Stock in the
Company by a Qualified Plan were to constitute a prohibited transaction, then
any fiduciary or other "party in interest" which has engaged in any such
prohibited transaction or caused the Company to engage in any such prohibited
transaction could be required (i) to restore to the Qualified Plan any profit
realized on the transaction and (ii) to reimburse the Qualified Plan for any
losses suffered by the Qualified Plan as a result of such investment. In
addition, each "party in interest" involved could be subject to an excise tax
equal to 5% of the amount involved in the prohibited transaction for each year
such transaction continues and, unless such transaction were corrected within
statutorily required periods, to an additional tax of 100%. Plan fiduciaries
who make the decision to invest in shares of Common Stock of the Company
could, under certain circumstances, be liable for investing in the Company or
as co-fiduciaries for actions taken by the Company.
Furthermore, unless appropriate administrative exemptions were available
or were obtained, the Company would be restricted from acquiring an otherwise
desirable investment or from entering into an otherwise favorable transaction,
if such acquisition or transaction would constitute a "prohibited
transaction."
ANY FIDUCIARY FOR A QUALIFIED PLAN SHOULD CONSULT ITS LEGAL ADVISOR CONCERNING
THE ERISA CONSIDERATIONS DISCUSSED ABOVE BEFORE MAKING AN INVESTMENT IN THE
COMPANY.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman LLP, New York, New York. The legal
authorization and issuance of the Common Stock, as well as certain other legal
matters concerning Maryland law, will be passed upon for the Company by
Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. In addition, the
summary of Federal income tax consequences contained in this Prospectus in the
section captioned "Certain United States Federal Income Tax Considerations" is
based upon the opinion of Robinson Silverman Pearce Aronsohn & Berman LLP.
EXPERTS
The combined financial statements of Wellsford Real Properties, Inc.
(Predecessor) at December 31, 1996 and 1995 and for the year ended December
31, 1996, and for the period from March 22, 1995 to December 31, 1995,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
appearing elsewhere herein, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports, proxy statements and other
information with the Commission. Such reports, proxy statements and
information filed by the Company with the Commission pursuant to the
informational requirements of the Exchange Act may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional
offices located at Seven World Trade Center, 13th Floor, New York, New York
10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a Web sit that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the commission's Web site
is: http://www.sec.gov. In addition, the Common Stock is listed on the
American Stock Exchange and information concerning the Company may also be
inspected and copied at the offices of the American Stock Exchange, 86 Trinity
Place, New York, New York 10006.
The Company has filed with the Commission a registration statement (the
"Registration Statement," which term shall include any amendments thereto) on
Form S-11 under the Securities Act, with respect to the Shares. This
Prospectus does not contain all the information set forth in the Registration
Statement and the exhibits thereto, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. Statements
contained in this Prospectus as to the content of any contract or other
document are not necessarily complete, and in each instance reference is made
to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits thereto. For further information, reference
is hereby made to the Registration Statement and the exhibits thereto.
The Company is required to furnish holders of the Common Stock with
annual reports containing audited financial statements, with a report thereon
by the Company's independent certified public accountants.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
HISTORICAL
Report of Independent Auditors. . . . . . . . . . . . . . . .F-2
Combined Balance Sheets as of March 31, 1997
(Unaudited) and December 31, 1996 and 1995. . . . . . . . .F-3
Combined Statements of Income and Equity For the
Three Months Ended March 31, 1997 (Unaudited)
and Year Ended December 31, 1996. . . . . . . . . . . . . .F-4
Combined Statements of Cash Flows For the Three
Months Ended March 31, 1997 and 1996 (Unaudited),
the Year Ended December 31, 1996 and the Period
From March 22 to December 31, 1995. . . . . . . . . . . . .F-5
Notes to Combined Financial Statements. . . . . . . . F-6 to F-10
PRO FORMA
Combined Income Statement For the Three Months
Ended March 31, 1997 (Unaudited). . . . . . . . . F-11 to F-12
Notes to Unaudited Combined Income Statement. . . . . . . . F-13
Combined Balance Sheet, March 31, 1997
(Unaudited) . . . . . . . . . . . . . . . . . . . F-14 to F-15
Notes to Unaudited Combined Balance Sheet . . . . . . . . . F-16
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Directors of
Wellsford Real Properties, Inc.
We have audited the accompanying combined balance sheets of the
Predecessor to Wellsford Real Properties, Inc. (the "Company") as of December
31, 1996 and 1995, and the related combined statements of income and equity for
the year ended December 31, 1996, and cash flows for the year ended December
31, 1996 and for the period from March 22, 1995 (the date the assets were
acquired and liabilities incurred) to December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1, no operating revenues or expenses were incurred in
the period from March 22, 1995 through December 31, 1995. Accordingly, the
statement of income for the period ended December 31, 1995 has been omitted.
In our opinion, the combined financial statements referred to above
present fairly, in all material respects, the combined financial position of
the Company at December 31, 1996 and 1995, and the combined results of its
operations for the year ended December 31, 1996 and its cash flows for the year
ended December 31, 1996 and for the period from March 22, 1995 to December 31,
1995, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
-----------------------------
New York, New York
February 28, 1997
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
COMBINED BALANCE SHEETS
(In thousands)
March 31, December 31, December 31,
1997 1996 1995
---- ---- ----
(Unaudited)
ASSETS
Real estate assets, at cost:
Land $ 3,159 $ 0 $ 0
Buildings and improvements 17,902 0 0
------------------------------------
21,061 0 0
Construction in process 23,945 21,306 7,955
------------------------------------
45,006 21,306 7,955
Property held for sale 2,800 0 0
------------------------------------
47,806 21,306 7,955
Restricted cash 3,198 5,520 10,414
Mortgage note and interest receivable 17,934 17,934 0
------------------------------------
Total Assets $ 68,938 $ 44,760 $ 18,369
====================================
LIABILITIES AND EQUITY
Tax exempt mortgage note payable $ 14,755 $ 14,755 $14,755
Note payable to Wellsford 21,611 0 0
------------------------------------
Total Liabilities 36,366 14,755 14,755
------------------------------------
Commitments and contingencies -- -- --
Stockholders' Equity: 30,005 3,614
Common stock, $.01 par value per share,
100 shares issued and outstanding 1 0 0
Paid in capital in excess of par value 30,321 0 0
Common stock to be issued 2,250 0 0
------------------------------------
Total Equity 32,572 30,005 3,614
------------------------------------
Total Liabilities and Equity $ 68,938 $ 44,760 $18,369
====================================
See accompanying notes.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
COMBINED STATEMENTS OF INCOME AND EQUITY
(In thousands)
Three Months Year
Ended Ended
March 31, December 31,
1997 1996
---- ----
(Unaudited)
Interest income $ 401 $ 757
---------- ---------
Net income 401 757
---------- ---------
Equity, beginning of period 30,005 3,614
Equity contributions (distributions) 2,166 25,634
---------- ---------
Equity, end of period $ 32,572 $ 30,005
========== =========
See accompanying notes.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
COMBINED STATEMENTS OF CASH FLOWS
(In thousands)
Three Three Period
Months Months Year From
Ended Ended Ended March 22 to
March 31, March 31, December 31, December 31,
1997 1996 1996 1995
---- ---- ---- ----
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 401 $ 0 $ 757 $ 0
Adjustments to
reconcile net income to net
cash provided by operating
activities:
Decrease (increase) in assets:
Debt service reserve 2,322 1,082 4,894 4,341
Interest receivable 0 0 (134) 0
---------------------------------------------
Net cash provided by
operating activities 2,723 1,082 5,517 4,341
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate
assets (26,500) (231) (13,351) (7,955)
Investment in mortgage
note receivable 0 0 (17,800) 0
---------------------------------------------
Net cash (used) in
investing activities (26,500) (231) (31,151) (7,955)
---------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of note payable
to Wellsford 21,611 0 0 0
Proceeds from tax exempt
mortgage note payable 0 0 0 14,755
Funding of restricted cash
accounts 0 0 0 (14,755)
Equity contributions 2,166 0 25,634 3,614
Equity distributions 0 (851) 0 0
---------------------------------------------
Net cash provided by
financing activities 23,777 (851) 25,634 3,614
---------------------------------------------
Net increase (decrease) in
cash and cash equivalents 0 0 0 0
Cash and cash equivalents,
beginning of period 0 0 0 0
---------------------------------------------
Cash and cash equivalents,
end of period $ 0 $ 0 $ 0 $ 0
=============================================
Cash paid during the period
for interest $ 343 $ 99 $ 663 $ 335
=============================================
See accompanying notes.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS
[Information pertaining to the three months ended
March 31, 1997 and 1996 is unaudited]
(1) Organization and Basis of Presentation
Wellsford Real Properties, Inc. (the "Company") was formed on January 8,
1997, as a corporate subsidiary of Wellsford Residential Property Trust
("Wellsford"). On May 30, 1997, Wellsford merged (the "Merger") with
Equity Residential Properties Trust ("EQR"). Immediately prior to the
Merger, Wellsford contributed certain of its assets to the Company and the
Company assumed certain liabilities of Wellsford (the "Contribution").
Immediately after the contribution of assets to the Company and
immediately prior to the Merger, Wellsford distributed to its common
shareholders all the outstanding shares of the Company owned by Wellsford
(the "Spin-off"). The common shareholders of Wellsford received 0.25
common share of the Company for each common share of Wellsford owned.
Upon consummation of the Spin-off, the Company had issued and outstanding
approximately 4,572,043 shares of Common Stock and 339,806 shares of Class
A Common Stock. The Class A Common Stock was issued to ERP Operating
Limited Partnership of which EQR is the general partner and through which
EQR conducts substantially all of its operations (unaudited).
The accompanying combined financial statements of the Company or its
predecessor (the "Predecessor") include the assets and liabilities
contributed to and assumed by the Company from the time the assets and
liabilities were acquired or incurred, respectively, by Wellsford or the
applicable subsidiary of Wellsford. Such financial statements have been
prepared using the historical basis of the assets and liabilities and the
historical results of operations related to the Company's assets and
liabilities.
For the purpose of the Company, the assets were acquired and liabilities
incurred beginning on March 22, 1995. During the period from March 22,
1995 through December 31, 1996 the Company was principally involved in the
initial phase of construction development activities with no operating
revenues or expenses incurred. Accordingly, the income statements for the
three month period ended March 31, 1996 and the period from March 22, 1995
through December 31, 1995 have been omitted. The Company has earned
interest income on the Sonterra Mortgage (see Note 4) during the year
ended December 31, 1996.
(2) Summary of Significant Accounting Policies
Principles of Combination. All significant intercompany transactions
between Wellsford and its majority owned or controlled subsidiaries
relating to the assets and liabilities that were contributed to or assumed
by the Company have been eliminated in combination.
Income Recognition. Residential communities are leased under operating
leases with terms generally one year or less; rental revenue is recognized
monthly as it is earned. Commercial properties are leased under operating
leases; rental revenue is recognized on a straight-line basis over the
terms of the leases.
Cash and Cash Equivalents. The Company considers all demand and money
market accounts and short term investments in government funds with an
original maturity of three months or less to be cash and cash equivalents.
Real Estate and Depreciation. Costs directly related to the acquisition
and improvement of real estate are capitalized, including interest expense
incurred during and related to construction and including all improvements
identified during the underwriting of a property acquisition.
Depreciation is computed over the expected useful lives of depreciable
property on a straight line basis, principally 40 years for buildings and
improvements and 5 to 12 years for furnishings and equipment.
The Company has adopted Statement of Financial Accounting Standard
("SFAS") 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of" which requires that long-lived assets
to be held and used be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable and that long-lived assets to be disposed of be measured at
the lower of carrying amount or net realizable value. The adoption of
SFAS 121 has not had an impact on the Company's combined financial
position or results of operations.
Mortgage Note Receivable Impairment. The Company considers a note
impaired if, based on current information and events, it is probable that
all amounts due under the note agreement are not collectable. Impairment
is measured based upon the fair value of the underlying collateral. No
impairment has been recorded through March 31, 1997.
Financing Costs. Financing and refinancing costs are capitalized and
amortized over the term of the related loan under the interest method.
Credit facility fees are capitalized and amortized over the term of the
commitment on a straight-line basis.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Earnings per Share. In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, "Earnings per Share," which is required to
be adopted on December 31, 1997. At that time, the Company will be
required to change the method currently used to compute earnings per share
and to restate all prior periods. Under the new requirements for
calculating primary earnings per share, the dilutive effect of stock
options will be excluded. The Company has not yet determined the impact
of Statement No. 128 on the calculation of primary and fully diluted
earnings per share.
(3) Restricted Cash
Restricted cash primarily consists of the remaining proceeds from the
Palomino Park tax-exempt mortgage note (Note 5) which are restricted in
their use to construction costs and capitalized interest related to the
Palomino Park development project (Note 4).
(4) Multifamily Communities and Note Receivable
The Company holds a $17.8 million mortgage on a 344 unit, newly
constructed community in Tucson, Arizona known as Sonterra at Williams
Centre (the "Sonterra Mortgage"). The Sonterra Mortgage was originated in
July 1996, bears interest at 9% per annum and matures in July 1999. The
Company also has the exclusive option to purchase the community for $20.5
million through December 1997 and $21 million during 1998. Interest
receivable of $0.1 million is included in the March 31, 1997 balance. The
fair market value of the Company's mortgage note receivable, estimated by
using a discounted cash flow analysis, approximates the carrying amount.
The Company currently has two multifamily projects under development in a
suburb of Denver, Colorado, totaling 760 apartment units (collectively,
the "Development Communities"). The Development Communities are the first
two of five communities at Palomino Park, a 1,880 unit master-planned,
security controlled apartment/townhome community. The Company has the
option to develop phases three through five, but is not obligated to do
so. The 181.8 acre master site surrounds an amenity-filled, 24 acre park
and an approximately 29,000 square foot recreational center to be shared
by all phases. The Development Communities are being constructed pursuant
to fixed-price contracts, with a local developer, and are estimated to
cost approximately $76.1 million in total, including certain development
and incentive fees payable to the developer. The Company is committed to
purchase 100% of the Development Communities upon completion and the
achievement of certain occupancy levels. At March 31, 1997 the Company
had invested $24 million related to the land for the Development
Communities, the recreation center and general infrastructure work. A
portion of such infrastructure will become the property of certain local
governmental entities at the date of completion and retirement of the tax-
exempt mortgage note payable described in Note 5. In addition,
approximately $26.5 million was outstanding at March 31, 1997 on a
construction loan to the developer, which the Company would repay upon
purchase assuming completion and achievement of certain occupancy levels.
During the periods ended March 31, 1997, December 31, 1996, March 31,
1996, and December 31, 1995, respectively, the Company capitalized $0.3
million, $0.7 million, $0.1 million and $0.3 million of interest to the
Development Communities. The Company expects to fund the construction of
its Development Communities from its working capital and with proceeds
from a credit facility and a $14.8 million tax-exempt mortgage note (Note
5).
Subsequent to December 31, 1996, the Company entered into contracts on
five commercial office properties for $47.6 million in aggregate, and had
closed on four of the properties as of March 31, 1997. The purchase
prices for these commercial properties include approximately $2.25 million
in value of shares of Common Stock of the Company issued to an entity in
consideration for the assignment of the purchase contracts entered into by
such entity. This amount has been classified as Common Stock to be Issued
at March 31, 1997. Upon liquidation of such entity, each of the Chairman
of the Board and President of Wellsford, Messrs. Lynford and Lowenthal,
will receive approximately 16.4% of such shares, and the wife of Mark
Germain, a trustee of Wellsford, will receive approximately 13.8% of such
shares. Each are owners of such entity.
The cash portion of the purchase prices for these commercial properties
was funded with a loan from Wellsford which bore interest at LIBOR plus
1.50% and was repaid on the closing of the Merger (unaudited).
Greenbrook Corporate Center ($23.7 million) is a Class A, three-story
office building with a 35 foot atrium, located in Fairfield, NJ, and
comprising approximately 190,000 rentable square feet. It is situated on
a 20 acre developed site with 7 acres of additional, contiguous
undeveloped land.
The purchase of this building closed in April 1997 (unaudited).
Point View ($15.8 million) consists of 194 acres containing two office
buildings, totaling approximately 560,000 square feet, an adjacent 10-acre
undeveloped site, and a central utility plant located in Wayne, NJ. The
site is currently undergoing a major renovation. The purchase of this
building was closed in February 1997.
1700 Valley Road ($1.0 million) is a Class B+, two-story vacant office
building located in Wayne, NJ and comprising approximately 70,600 square
feet. It is situated on a nine acre site. The purchase of this building
was closed in February 1997.
1800 Valley Road ($2.0 million) is a Class B+, two-story vacant office
building located in Wayne, NJ and comprising approximately 54,800 square
feet. It is situated on a 14 acre site. The purchase of this building
was closed in February 1997.
The Chatham Building ($5.1 million) is a three-story office building
located in Chatham, NJ and comprising approximately 65,000 square feet.
The site is currently undergoing a major renovation. The purchase of this
building was closed in January 1997.
(5) Tax Exempt Mortgage Notes Payable
At March 31, 1997 and December 31, 1996, the Company had $14.8 million of
tax exempt mortgage notes payable outstanding. The Company's tax exempt
mortgage note payable is secured by certain infrastructure at the
Company's Palomino Park development and bears interest-only payments at a
variable rate (which approximates the Standard & Poor's / J.J. Kenney
index for short-term high grade tax-exempt bonds, currently approximately
3.65 %) until it matures in December 2035.
The tax-exempt mortgage note payable is security for tax-exempt bonds
which are backed by a letter of credit from a AAA rated financial
institution.
Subsequent to the Merger, the Company and EQR guaranteed the reimbursement
of the financial institution in the event that the letter of credit is
drawn upon (unaudited).
The fair market value of the variable rate tax exempt mortgage note is
considered to be the carrying amount.
(6) Commitments and Contingencies
The Company has entered into employment agreements with certain of its
officers. Such agreements are for terms which expire between 1999 and
2002, and provide for aggregate annual fixed payments of approximately
$1.0 million, $1.0 million and $0.6 million in 1997, 1998 and 1999
through 2002, respectively. The Company is obligated under an operating
lease covering its corporate headquarters for $0.2 million in 1997, $0.2
million in 1998, and $0.2 million in 1999, plus certain operating expense
escalations.
As a commercial real estate owner, the Company is subject to potential
environmental costs. The Company's Point View site contains asbestos
containing materials ("ACMs"); the Company is proceeding with the removal
of all ACMs in such property which is anticipated to cost approximately
$3.5 million. At this point in time, management of the Company is not
aware of any environmental concerns that would have a material adverse
effect on the Company's financial position or future results of operations
except as just described.
In 1997, the Company will adopt a defined contribution savings plan
pursuant to Section 401 of the Internal Revenue Code. Under such a plan
there are no prior service costs. All employees will be eligible to
participate in the plan after one year of service. Employer contributions
will be made based on a discretionary amount determined by the
Company's management. Employer contributions, if any, will be based upon
the amount contributed by an employee.
(7) Subsequent Events (unaudited)
Subsequent to March 31, 1997, the Company has loaned $25 million of an $80
million secured subordinated mezzanine loan to entities which own
substantially all of the equity interests (the "Equity Interests") in the
owner of a 52-story, approximately 1.75 million sq.ft. Class A office
building located at 277 Park Avenue, New York City (the "277 Park Loan").
The loan is secured primarily by a pledge of the Equity Interests owned by
the Borrowers. The 277 Park Loan is due in April 2007 and bears interest
at the rate of approximately 12% per annum.
In April, 1997, the Company established its 1997 Management Incentive Plan
(the "Management Incentive Plan") for the purpose of aligning the
interests of the Company's directors, executive officers and employees
with those of the shareholders and to enable the Company to attract,
compensate and retain directors, executive officers and employees and
provide them with appropriate incentives and rewards for their
performance. The existence of the Management Incentive Plan should enable
the Company to compete more effectively for the services of such
individuals. The Management Incentive Plan provides for administration by
a committee of two or more non-employee directors established for such
purpose.
Awards to directors, executive officers and other employees under the
Management Incentive Plan may take the form of stock options, including
corresponding stock appreciation rights and reload options, restricted
stock awards and stock purchase awards. The Company may also provide
stock purchase loans to enable Management Incentive Plan participants to
pay for stock purchase awards. The maximum number of shares of Common
Stock that may be the subject of awards under the Management Incentive
Plan is 1,750,000 shares. Options to acquire 547,375 shares of Common
Stock were granted under the Management Incentive Plan at the closing of
the Merger to directors, executive officers and employees of the Company.
The Company has established a Rollover Stock Option Plan (the "Rollover
Plan"), which is substantially similar to the Management Incentive Plan,
for the purpose of granting options and corresponding rights to purchase
Common Stock in replacement for former Wellsford share options. All
1,326,235 options issuable under the Rollover Plan were granted at the
closing of the Merger principally to certain executive officers and
directors of the Company.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA COMBINED INCOME STATEMENT
For the Three Months Ended March 31, 1997
(In Thousands Except Per Share Data)
(Unaudited)
During the period from January 1, 1997 to June 30, 1997, the Company
consummated the 277 Park Loan and purchased five commercial office properties.
One of the commercial office properties, the Greenbrook Corporate Center, is
currently occupied.
This unaudited Pro Forma Combined Income Statement is presented as if the
Company's transactions, each as referred to above, and the Merger, Distribution
and Private Placement had been consummated on January 1, 1997. All of the pro
forma adjustments shown are solely attributed to the transactions described.
In the opinion of the Company's management, all adjustments necessary to
reflect the effects of these transactions have been made.
This unaudited Pro Forma Combined Income Statement is presented for
comparative purposes only, and is not necessarily indicative of what the actual
results of operations of the Company would have been for the period presented;
nor does it purport to represent the results for future periods, particularly
because four of the five commercial office properties were vacant on March 31,
1997. This unaudited Pro Forma Combined Income Statement should be read in
conjunction with, and is qualified in its entirety by, the historical combined
financial statements and notes thereto of the Company included in this
Prospectus.
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Income Statement
Three Months Ended March 31, 1997
(In thousands)
(Unaudited)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUE
Rental income $762(A) $762
Other income 40(A) 40
Interest income $401 734(B) 1,135
----------------------------------
Total Revenue 401 1,536 1,937
----------------------------------
EXPENSES
Property operating and maintenance 211(A) 211
Real estate taxes 107(A) 107
General and administrative 438(C) 438
Depreciation 128(D) 128
Property management 34(A) 34
----------------------------------
Total Expenses 0 918 918
----------------------------------
Income before income taxes $401 $618 1,019
===================
Provision for income taxes 416(E)
---
Net Income $603
====
Net income per common share $0.04(F)
=====
Weighted average common
shares outstanding 16,888(F)
======
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Notes to Unaudited Pro Forma Combined Income Statement
March 31, 1997
(A) Represents historical operating revenues and expenses of Greenbrook
Corporate Center, which was acquired in April 1997, for the three months
ended March 31, 1997. The Company's other four commercial properties are
currently vacant.
(B) Represents interest income on the 277 Park Loan for three months ($25
million at approximately 12%).
(C) Represents the estimated general and administrative costs of the Company
for three months.
(D) Represents depreciation on Greenbrook Corporate Center for the three
months ended March 31, 1997 utilizing a 40 year estimated useful life.
(E) Represents provision for federal and state income taxes at rates of 35%
and 9%, respectively.
(F) Represents the aggregate of the shares of Common Stock issued in
connection with the Private Placement, the Distribution, the acquisition
of the commercial properties, and the purchase of Class A Common Stock by
ERP Operating Limited Partnership.
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA COMBINED BALANCE SHEET
March 31, 1997
(In Thousands)
(Unaudited)
This unaudited Pro Forma Combined Balance Sheet is presented as if the
Merger, Contribution, Distribution, Private Placement, the sale of the Class A
Common Stock to ERP Operating Limited Partnership (the "Class A Sale") and the
credit facility agreement with BankBoston and Morgan Guaranty had been
consummated on March 31, 1997, the 277 Park Loan had been originated on March
31, 1997 and the commercial office properties purchased by the Company and
Phase I of Palomino Park had been purchased on March 31, 1997, utilizing
proceeds from the Merger, Contribution, Private Placement and Class A Sale.
All of the assets and liabilities of the Company which are being transferred to
the Company in connection with the Merger, Contribution and Distribution are
recorded at their respective historical costs.
This unaudited Pro Forma Combined Balance Sheet is presented for
comparative purposes only, and is not necessarily indicative of what the actual
combined financial position of the Company would have been at March 31, 1997;
nor does it purport to represent the future combined financial position of the
Company. This unaudited Pro Forma Combined Balance Sheet should be read in
conjunction with, and is qualified in its entirety by, the historical combined
financial statements and notes thereto of the Company included in this
Prospectus.
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Balance Sheet
March 31, 1997
(In thousands)
(Unaudited)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
Real estate assets, at cost:
Land $ 3,159 $ 10,350 $ 13,509
Buildings and improvements 17,902 77,210 95,112
--------- --------- ---------
21,061 87,560 108,621
Construction in process 23,945 (2,677) 21,268
--------- --------- ---------
45,006 84,883 129,889
Property held for sale 2,800 (2,800)
--------- --------- ---------
47,806 82,083(A) 129,889
Cash and cash equivalents 0 21,180(B) 21,180
Restricted cash 3,198 3,198
Mortgage notes and interest receivable 17,934 25,000(C) 42,934
Other assets 0 2,604(D) 2,604
--------- --------- ---------
Total Assets $ 68,938 $ 130,867 $ 199,805
========= ========= =========
LIABILITIES AND EQUITY
Liabilities:
Tax exempt mortgage note payable $ 14,755 $ 14,755
Note payable to Wellsford 21,611 ($ 21,611)(E) 0
Other liabilities 0 711 (D) 711
--------- --------- ---------
Total Liabilities 36,366 (20,900) 15,466
--------- --------- ---------
Commitments and contingencies -- -- --
Minority interest 0 10,406(F) 10,406
Equity:
Common stock, $.01 par value
per share; 197,650,000 shares
authorized - 16,547,771 shares
issued and outstanding, as
adjusted 1 165 166
Class A Common Stock, $.01
par value per share; 350,000
shares authorized - 339,806
shares issued and outstanding,
as adjusted -- 3 3
Series A 8% Convertible Redeemable
Preferred Stock, $.01 par value
per share; 2,000,000 shares
authorized; no shares issued and
outstanding, as adjusted -- -- --
Paid in capital in excess of par
value 30,321 143,443 173,764
Common stock to be issued 2,250 (2,250) 0
--------- --------- ---------
Total Equity 32,572 141,361(G) 173,933
--------- --------- ---------
Total Liabilities and Equity $ 68,938 $ 130,867 $ 199,805
========= ========= =========
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Notes to Unaudited Pro Forma Combined Balance Sheet
March 31, 1997
(A) Represents the following:
Property
Construction Held
Land Building in Process for Sale Total
---- -------- ---------- -------- -----
Purchase of Greenbrook
Corp. Ctr. $3,555 $20,145 $23,700
Palomino Park construction
4/1/97-5/30/97 $3,023 3,023
Purchase of Palomino Park
Phase I 6,375 36,125 (5,700) 36,800
Commercial property
improvements and tenant
fit-out 18,560 18,560
Reclassification of 1800
Valley Road 420 2,380 ($2,800)
------- ------- ------ ------- -------
$10,350 $77,210 ($2,677) ($2,800) $82,083
======= ======= ====== ====== =======
Greenbrook Corporate Center is currently in operation. The Company's
other four commercial properties are currently vacant. The purchase
prices and commercial property improvements and tenant fit-out are being
funded primarily with proceeds from the Private Placement.
(B) Reflects the net cash effect of the following transactions (in thousands):
o Private Placement proceeds $123,025
o Cash contribution to the Company at Contribution 12,966
o ERP Operating Limited Partnership's purchase of
Class A Common Stock 3,500
o Acquisition and improvement of properties (71,700)
o Acquisition of 277 Park Loan (25,000)
o Repayment of Loan from Wellsford (21,611)
--------
$21,180
========
(C) Represents the 277 Park Loan, a $25 million portion of an $80 million
subordinated mezzanine loan bearing interest at approximately 12% per
annum.
(D) Represents miscellaneous assets and liabilities acquired in the
Contribution.
(E) Represents repayment of the loan from Wellsford.
(F) Represents ERP Operating Limited Partnership's 20% minority interest in
Palomino Park, which has been combined in the Company's Pro Forma Combined
Balance Sheet.
(G) Represents the aggregate of the shares of Common Stock issued in
connection with the Distribution, the acquisition of the commercial
properties, the purchase of Class A Common Stock by ERP Operating Limited
Partnership, and the Private Placement.
<PAGE>
===============================================================================
No dealer, salesperson or other individual has been authorized to give any
information or make any representations not contained in this Prospectus in
connection with the offering covered by this Prospectus. If given or made,
such information or representations must not be relied upon as having been
authorized by the Company. This Prospectus does not constitute an offer to sell
or a solicitation of an offer to buy the Shares in any jurisdiction where, or
to any person to whom, it is unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus, nor any sale made hereunder shall,
under any circumstances, create any implication that there has been no change
in the facts set forth in this Prospectus or in affairs of the Company since
the date hereof.
_________________
SUMMARY TABLE OF CONTENTS
Page
Prospectus Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Risk Factors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Selling Shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Price Range of Common Stock and Dividend History. . . . . . . . . . . . . . .26
Capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
Selected Unaudited Combined Financial Data. . . . . . . . . . . . . . . . . .28
Management's Discussion and Analysis
of Financial Conditions and Analysis
of Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Business and Properties . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Initial Capital and Financing . . . . . . . . . . . . . . . . . . . . . . . .37
Policies with Respect to Certain Activities . . . . . . . . . . . . . . . . .38
Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Principal Stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Certain Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
Certain Agreements Between The Company
and ERP Operating Partnership. . . . . . . . . . . . . . . . . . . . . .47
Description of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . .54
Certain Provisions of Maryland Law and of the
Company's Charter and Bylaws . . . . . . . . . . . . . . . . . . . . . .61
Shares Available for Future Sale. . . . . . . . . . . . . . . . . . . . . . .64
Certain United States Federal Tax Considerations. . . . . . . . . . . . . . .65
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . .68
Certain ERISA Considerations. . . . . . . . . . . . . . . . . . . . . . . . .68
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Additional Information. . . . . . . . . . . . . . . . . . . . . . . . . . . .70
Index to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . F-1
12,242,719 Shares
WELLSFORD REAL PROPERTIES, INC.
Common Stock
_________________
PROSPECTUS
_________________
July __, 1997
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 31. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by the Company in
connection with the offering of the Common Stock. All the amounts shown are
estimates except the Securities and Exchange Commission registration fee.
Item Amount
---- ------
Registration Fee -- Securities and
Exchange Commission $ 41,041
Legal Fees and Expenses (other than Blue Sky) 50,000
Accounting Fees and Expenses 20,000
Printing and Engraving Expenses 5,000
Blue Sky Fee and Expenses (including fees of counsel) 5,000
Miscellaneous Expenses 1,000
Total $122,041
========
Item 32. Sales to Special Parties.
See Item 33.
Item 33. Recent Sales of Unregistered Securities.
The following table is a summary of certain information relating to all
securities of the Company sold by the Company within the past three years that
were not registered under the Securities Act (the "Private Placements"):
Date Amount of Person or
Type of of Securities Class of Persons to
Securities Sold Sale Sold Whom Securities Sold Consideration
- --------------- ------- ---------- -------------------- -------------
Common Stock
2/28/97 218,447(1) Wellsford Commercial (2)
Properties, L.L.C.
Class A 5/30/97 339,806 ERP Operating $3,500,000
Common Stock Partnership
Common Stock 5/30/97 24,272 William M. Cockrum, $250,000
Trustee of the William
M. Cockrum Trust dated
8/1/79
Common Stock 6/2/97 12,000,000 "qualified institutional $123.6
buyers" and other million
"accredited investors"
(each as defined under
the rules of the
Securities Act)
(1) Reflects the adjustment made to the original number of shares issued to
Wellsford Commercial Properties, L.L.C., based upon the book value per
share of Common Stock on the date of the Merger.
(2) Wellsford Commercial Properties, L.L.C. transferred the contracts to
purchase the Cyanamid Office Portfolio, Greenbrook and Chatham in exchange
for shares of Common Stock having an aggregate value of approximately
$2.25 million and the Company's agreement to repay a $1.0 million advance
used for the down payment on the Cyanamid Office Portfolio.
The Company conducted the Private Placements pursuant to Section 4(2) of
the Securities Act. There was no underwriter involved in the Private
Placements.
Item 34. Indemnification of Directors and Officers.
The Maryland General Corporation Law ("MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money
damages except for liability resulting from (a) actual receipt of an improper
benefit or profit in money, property or services or (b) active and deliberate
dishonesty established by a final judgment as being material to the cause of
action. The Charter contains such a provision which eliminates such liability
to the maximum extent permitted by Maryland law.
The Charter authorizes the Company, to the maximum extent permitted by
Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (a) any
present or former director or officer or (b) any individual who, while a
director of the Company, and at the request of the Company, serves or has
served another corporation, partnership, joint venture, trust, employee benefit
plan, limited liability company or any other enterprise as a director, officer,
partner, trustee, manager or member of such corporation, partnership, joint
venture, trust, employee benefit plan, limited liability company or other
enterprise. The Bylaws of the Company obligate it, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer who is made a party to the proceeding by reason of
his service in that capacity or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, partnership, joint venture, trust, employee benefit plan, limited
liability company or any other enterprise as a director, officer, partner,
trustee, manager or member of such corporation, partnership, joint venture,
trust, employee benefit plan, limited liability company or other enterprise and
who is made a party to the proceeding by reason of his service in that
capacity. The Charter and Bylaws also permit the Company to indemnify and
advance expenses to any person who served a predecessor of the Company in any
of the capacities described above and to any employee or agent of the Company
or a predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Charter does not) to indemnify a director or officer who has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the
director or officer was material to the matter giving rise to the proceeding
and (i) was committed in bad faith or (ii) was the result of active and
deliberate dishonesty, (b) the director or officer actually received an
improper personal benefit in money, property or services or (c) in the case of
any criminal proceeding, the director or officer had reasonable cause to
believe that the act or omission was unlawful. However, a Maryland corporation
may not indemnify for an adverse judgment in a suit by or in the right of the
corporation. In addition, the MGCL requires the Company, as a condition to
advancing expenses, to obtain (a) a written affirmation by the director or
officer of his good faith belief that he has met the standard of conduct
necessary for indemnification by the Company as authorized by the Bylaws and
(b) a written statement by or on his behalf to repay the amount paid or
reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met.
Item 35. Treatment of Proceeds from Stock Being Registered.
Not applicable.
Item 36. Financial Statements and Exhibits.
(a) Financial Statements all of which are in the Prospectus
WELLSFORD REAL PROPERTIES, INC.
HISTORICAL
Combined Balance Sheets as of
March 31, 1997 (Unaudited) and
December 31, 1996 and 1995
Combined Statements of Income and
Equity for the Three Months Ended
March 31, 1997 (Unaudited)
and the Year Ended December 31, 1996
Combined Statements of Cash Flows
For the Three Months Ended
March 31, 1997 and 1996 (Unaudited),
the Year Ended December 31, 1996 and
the Period From March 22 to December 31, 1995
Notes to Combined Financial Statements
PRO FORMA
Combined Income Statement For the Three
Months Ended March 31, 1997 (Unaudited)
Notes to Unaudited Combined Income Statement
Combined Balance Sheet, March 31, 1997
(Unaudited)
Notes to Unaudited Combined Balance Sheet
(b) Financial Statement Schedules.
None
(c) Exhibits.
Exhibit No. Description
3.1 Articles of Amendment and Restatement of the Company.
3.2 Articles Supplementary Classifying 335,000 Shares of Common Stock as
Class A Common Stock.
3.3 Articles Supplementary Classifying 2,000,000 Shares of Common Stock
as Series A 8% Convertible Redeemable Preferred Stock.
3.4 Bylaws of the Company.
4.1 Specimen certificate for Common Stock.***
4.2 Specimen certificate for Class A Common Stock.
4.3 Specimen certificate for Series A 8% Convertible Redeemable Preferred
Stock.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding legality.
10.1 $17.8 million Loan Agreement, dated as of June 28, 1996, by and
between Wellsford Residential Property Trust, as lender, and
Specified Properties VIII, L.P., as borrower, relating to Sonterra.*
10.2 Option Agreement between Wellsford Residential Property Trust, as
purchaser, and Specified Properties VIII, as seller, dated as of June
28, 1996, relating to Sonterra.*
10.3 Sonterra Agreement by and between the Company and ERP Operating
Limited Partnership dated as of May 30, 1997.
10.4 Agreement Regarding Palomino Park by and between the Company and ERP
Operating Limited Partnership dated as of May 30, 1997
10.5 Operating Agreement of Park at Highlands LLC, dated as of April 27,
1995, between Wellsford Park Highlands Corp. and Al Feld, relating to
Blue Ridge.**
10.6 First Amendment to Operating Agreement of Park at Highlands LLC,
dated as of December 29, 1995, between Wellsford Park Highlands Corp.
and Al Feld, relating to Blue Ridge.*
10.7 Tri-Party Agreement by and among Park at Highlands LLC, NationsBank
of Texas, N.A., Wellsford Park Highlands Corp., Wellsford Residential
Property Trust and Al Feld dated December 29, 1995, relating to Blue
Ridge.*
10.8 Assignment and Assumption of Tri-Party Agreement by and among
Wellsford Residential Property Trust, ERP Operating Limited
Partnership, Park at Highlands LLC, Wellsford Park Highlands Corp.,
The Feld Company, Al Feld and Nationsbank of Texas, N.A. dated May
30, 1997, relating to Blue Ridge.
10.9 Agreement and Acknowledgement Regarding Tri-Party Agreement by and
among Nationsbank of Texas, N.A., Park at Highlands LLC, Wellsford
Park Highlands Corp. and ERP Operating Limited Partnership dated May
30, 1997, relating to Blue Ridge.
10.10 Operating Agreement of Red Canyon at Palomino Park LLC between
Wellsford Park Highlands Corp. and Al Feld, dated as of April 17,
1996, relating to Red Canyon.*
10.11 First Amendment to Operating Agreement of Red Canyon at Palomino Park
LLC between Wellsford Park Highlands Corp. and Al Feld, dated as of
May 19, 1997, relating to Red Canyon.
10.12 Tri-Party Agreement by and among NationsBank of Texas, N.A., Red
Canyon at Palomino Park LLC, Wellsford Park Highlands Corp.,
Wellsford Residential Property Trust, Al Feld and The Feld Company,
dated May 29, 1997, relating to Red Canyon.
10.13 Assignment and Assumption of Tri-Party Agreement by and among
Wellsford Residential Property Trust, ERP Operating Limited
Partnership, Red Canyon at Palomino Park LLC, Wellsford Park
Highlands Corp., The Feld Company, Al Feld and Nationsbank of Texas,
N.A. dated May 30, 1997, relating to Red Canyon.
10.14 Agreement and Acknowledgement Regarding Tri-Party Agreement by and
among Nationsbank of Texas, N.A., Red Canyon at Palomino Park LLC,
Wellsford Park Highlands Corp. and ERP Operating Limited Partnership
dated May 30, 1997, relating to Red Canyon.
10.15 Second Amended and Restated Vacant Land Purchase and Sale Agreement
between Mission Viejo Company and The Feld Company dated March 23,
1995, as amended by First Amendment, dated May 1, 1996, relating to
the land underlying Palomino Park.*
10.16 Trust Indenture, dated as of December 1, 1995, between Palomino Park
Public Improvements Corporation ("PPPIC") and United States Trust
Company of New York, as trustee, securing Wellsford Residential
Property Trust's Assessment Lien Revenue Bonds Series 1995 -
$14,755,000.**
10.17 Letter of Credit Reimbursement Agreement, dated as of December 1,
1995, between PPPIC, Wellsford Residential Property Trust and
Dresdner Bank AG, New York Branch.**
10.18 First Amendment to Letter of Credit Reimbursement Agreement, dated as
of May 30, 1997, between PPPIC, Wellsford Residential Property Trust,
Dresdner Bank AG, New York Branch and the Company.
10.19 Amendment to Wellsford Reimbursement Agreement by and between PPPIC,
Wellsford Residential Property Trust and the Company, dated as of May
30, 1997.
10.20 Assignment and Assumption Agreement by and between Wellsford
Residential Property Trust and the Company, dated as of May 30, 1997.
10.21 Credit Enhancement Agreement by and between the Company and ERP
Operating Limited Partnership, dated as of May 30, 1997, relating to
Palomino Park.
10.22 Reimbursement and Indemnification Agreement by and among the Company
and ERP Operating Limited Partnership, dated as of May 30, 1997,
relating to Palomino Park.
10.23 Guaranty by ERP Operating Limited Partnership for the benefit of
Dresdner Bank AG, New York Branch, dated as of May 30, 1997, relating
to Palomino Park.
10.24 Amended and Restated Promissory Note of the Company to the order of
Dresdner Bank AG, New York Branch, dated May 30, 1997, relating to
Palomino Park.
10.25 Contribution and Distribution Agreement by and between Wellsford
Residential Property Trust and the Company dated as of May 30, 1997.
10.26 Common Stock and Preferred Stock Purchase Agreement by and between
the Company and ERP Operating Limited Partnership dated as of May 30,
1997.
10.27 Registration Rights Agreement by and between the Company and ERP
Operating Limited Partnership dated as of May 30, 1997.
10.28 Purchase and Sale Agreement, dated as of November 21, 1996, between
Wellsford Commercial Properties, L.L.C. and American Cyanamid Company
relating to Cyanamid Office Portfolio, as amended by Amendment dated
January 13, 1997, Second Amendment dated February 13, 1997 and Third
Amendment dated February 28, 1997 and Indemnification and Stock
Transfer Agreement, dated February 28, 1997, between American
Cyanamid Company and Wellsford Wayne Corp.*
10.29 Agreement of Sale, dated December 2, 1996, between Wellsford
Commercial Properties, L.L.C. and Barlax, relating to Chatham, as
amended by Amendment dated December 23, 1996 and Second Amendment
dated April 1, 1997.*
10.30 Agreement of Sale, dated December 23, 1996, between Wellsford
Commercial Properties, L.L.C. and N.J. Greenbrook Partners, L.P,
relating to Greenbrook.*
10.31 Credit Agreement, dated as of April 25, 1997, between Park Avenue
Financing Company LLC, PAMC Co-Manager Inc., PAFC Management, Inc.,
Stanley Stahl, The First National Bank of Boston, the Company, Other
Banks that may become parties to the Agreement and The First National
Bank of Boston, as Agent, relating to 277 Park Avenue.**
10.32 Assignment of Member's Interest, dated as of April 25, 1997, by PAFC
Management, Inc. and Stanley Stahl to The First National Bank of
Boston, relating to 277 Park Avenue (relating to interests in the
Park Avenue Financing Company, LLC).**
10.33 Assignment of Member's Interest, dated as of April 25, 1997, by PAMC
Co-Manager Inc. and Park Avenue Financing, LLC to The First National
Bank of Boston, relating to 277 Park Avenue (relating to interests in
277 Park Avenue, LLC).**
10.34 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in Park Avenue Management Corporation).**
10.35 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in PAMC Co-Manager Inc.).**
10.36 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley Stahl
to The First National Bank of Boston, relating to 277 Park Avenue
(relating to stock in PAFC Management, Inc.).**
10.37 Conditional Guaranty of Payment and Performance, dated as of April
25, 1997, by Stanley Stahl, relating to 277 Park Avenue.**
10.38 Cash Collateral Account Security, Pledge and Assignment Agreement,
dated as of April 25, 1997, between 277 Park Avenue, LLC, Park Avenue
Management Corporation, Park Avenue Financing Company LLC, PAMC Co-
Manager Inc., Stanley Stahl and The First National Bank of Boston,
relating to 277 Park Avenue.**
10.39 Recognition Agreement, dated as of April 25, 1997, between The First
National Bank of Boston, the Company, Column Financial, Inc., Park
Avenue Financing Company LLC, PAMC Co-Manager, Inc. and 277 Park
Avenue, LLC, relating to 277 Park Avenue.**
10.40 Intercreditor Agreement, dated as of April 25, 1997, between the
Company and The First National Bank of Boston, as Agent, relating to
277 Park Avenue.**
10.41 Assignment and Acceptance Agreement, dated June 19, 1997, between
BankBoston, N.A. (formerly known as The First National Bank of
Boston) ("BankBoston") and the Company, relating to 277 Park Avenue.
10.42 Revolving Credit Agreement by and among the Company, BankBoston,
Morgan Guaranty Trust Company of New York ("Morgan Guaranty"), other
banks which may become parties and BankBoston, as agent, and Morgan
Guaranty, as co-agent dated as of May 30, 1997.
10.43 Agreement Regarding Common Stock and Preferred Stock Purchase
Agreement, dated as of May 30, 1997, among ERP Operating Limited
Partnership, the Company and BankBoston, as agent.
10.44 Assignment of Common Stock Agreements, dated as of May 30, 1997,
between the Company and BankBoston, as agent.
10.45 Collateral Assignment of Documents, Rights and Claims (including
Collateral Assignment of Deed of Trust, Assignment of Leases and
Rents, Security Agreement and Fixture Filing), made as of May 30,
1997, by the Company to BankBoston, as agent.
10.46 1997 Management Incentive Plan of the Company.**
10.47 Rollover Stock Option Plan of the Company.**
10.48 Employment Agreement between the Company and Jeffrey H. Lynford.
10.49 Employment Agreement between the Company and Edward Lowenthal.
10.50 Employment Agreement between the Company and Gregory F. Hughes.
10.51 Employment Agreement between the Company and David M. Strong.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ballard Spahr Andrews & Ingersoll (contained in Exhibit
5.1).
23.2 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP.
23.3 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on signature page).
______________________________
* Previously filed as an exhibit to the Form 10 filed on April 23, 1997.
** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed on
May 21, 1997.
*** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed on
May 28, 1997.
**** The Company acquired its interest in a number of these documents by
assignment.
Item 37. Undertakings.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to Directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the
Securities Act of 1933, the information omitted from the form of
prospectus filed as part of this registration statement in reliance upon
Rule 430A and contained in a form of prospectus filed by the registrant
pursuant to Rule 24(b)((1) or (4) or 497(h) under the Securities Act shall
be deemed to be part of this registration statement as of the time it was
declared effective.
(2) For the purposes of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-11 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York on July 30, 1997.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Jeffrey H. Lynford
--------------------------------
Jeffrey H. Lynford
Chairman of the Board, Secretary and Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Jeffrey H. Lynford and Edward Lowenthal,
and each or any of them, his true and lawful attorney-in-fact and agent, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the
same, with exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto each said attorney-in-
fact and agent full power and authority to do and perform each and every act
and thing requisite and necessary to be done, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent or either of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
--------- ----- ----
/s/ Jeffrey H. Lynford Chairman of the Board, July 30, 1997
- ------------------------------ Secretary and Director
Jeffrey H. Lynford
/s/ Edward Lowenthal President, Chief Executive July 30, 1997
- ------------------------------ Officer and Director
Edward Lowenthal
/s/ Gregory F. Hughes Chief Financial Officer July 30, 1997
- ------------------------------
Gregory F. Hughes
/s/ David M. Strong Vice President for Development July 30, 1997
- ------------------------------
David M. Strong
/s/ Douglas Crocker Director July 30, 1997
- ------------------------------
Douglas Crocker
/s/ Rodney F. Du Bois Director July 30, 1997
- --------------------------------
Rodney F. Du Bois
/s/ Mark S. Germain Director July 30, 1997
- ------------------------------
Mark S. Germain
/s/ Frank J. Hoenemeyer Director July 30, 1997
- ------------------------------
Frank J. Hoenemeyer
/s/ Frank J. Sixt Director July 30, 1997
- ------------------------------
Frank J. Sixt
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description of Document****
- ------ -----------------------
3.1 Articles of Amendment and Restatement of the Company.
3.2 Articles Supplementary Classifying 335,000 Shares of Common
Stock as Class A Common Stock.
3.3 Articles Supplementary Classifying 2,000,000 Shares of Common
Stock as Series A 8% Convertible Redeemable Preferred Stock.
3.4 Bylaws of the Company.
4.1 Specimen certificate for Common Stock.***
4.2 Specimen certificate for Class A Common Stock.
4.3 Specimen certificate for Series A 8% Convertible Redeemable
Preferred Stock.
5.1 Opinion of Ballard Spahr Andrews & Ingersoll regarding
legality.
10.1 $17.8 million Loan Agreement, dated as of June 28, 1996, by and
between Wellsford Residential Property Trust, as lender, and
Specified Properties VIII, L.P., as borrower, relating to
Sonterra.*
10.2 Option Agreement between Wellsford Residential Property Trust,
as purchaser, and Specified Properties VIII, as seller, dated
as of June 28, 1996, relating to Sonterra.*
10.3 Sonterra Agreement by and between the Company and ERP Operating
Limited Partnership dated as of May 30, 1997.
10.4 Agreement Regarding Palomino Park by and between the Company
and ERP Operating Limited Partnership dated as of May 30, 1997
10.5 Operating Agreement of Park at Highlands LLC, dated as of April
27, 1995, between Wellsford Park Highlands Corp. and Al Feld,
relating to Blue Ridge.**
10.6 First Amendment to Operating Agreement of Park at Highlands
LLC, dated as of December 29, 1995, between Wellsford Park
Highlands Corp. and Al Feld, relating to Blue Ridge.*
10.7 Tri-Party Agreement by and among Park at Highlands LLC,
NationsBank of Texas, N.A., Wellsford Park Highlands Corp.,
Wellsford Residential Property Trust and Al Feld dated December
29, 1995, relating to Blue Ridge.*
10.8 Assignment and Assumption of Tri-Party Agreement by and among
Wellsford Residential Property Trust, ERP Operating Limited
Partnership, Park at Highlands LLC, Wellsford Park Highlands
Corp., The Feld Company, Al Feld and Nationsbank of Texas, N.A.
dated May 30, 1997, relating to Blue Ridge.
10.9 Agreement and Acknowledgement Regarding Tri-Party Agreement by
and among Nationsbank of Texas, N.A., Park at Highlands LLC,
Wellsford Park Highlands Corp. and ERP Operating Limited
Partnership dated May 30, 1997, relating to Blue Ridge.
10.10 Operating Agreement of Red Canyon at Palomino Park LLC between
Wellsford Park Highlands Corp. and Al Feld, dated as of April
17, 1996, relating to Red Canyon.*
10.11 First Amendment to Operating Agreement of Red Canyon at
Palomino Park LLC between Wellsford Park Highlands Corp. and Al
Feld, dated as of May 19, 1997, relating to Red Canyon.
10.12 Tri-Party Agreement by and among NationsBank of Texas, N.A.,
Red Canyon at Palomino Park LLC, Wellsford Park Highlands
Corp., Wellsford Residential Property Trust, Al Feld and The
Feld Company, dated May 29, 1997, relating to Red Canyon.
10.13 Assignment and Assumption of Tri-Party Agreement by and among
Wellsford Residential Property Trust, ERP Operating Limited
Partnership, Red Canyon at Palomino Park LLC, Wellsford Park
Highlands Corp., The Feld Company, Al Feld and Nationsbank of
Texas, N.A. dated May 30, 1997, relating to Red Canyon.
10.14 Agreement and Acknowledgement Regarding Tri-Party Agreement by
and among Nationsbank of Texas, N.A., Red Canyon at Palomino
Park LLC, Wellsford Park Highlands Corp. and ERP Operating
Limited Partnership dated May 30, 1997, relating to Red Canyon.
10.15 Second Amended and Restated Vacant Land Purchase and Sale
Agreement between Mission Viejo Company and The Feld Company
dated March 23, 1995, as amended by First Amendment, dated May
1, 1996, relating to the land underlying Palomino Park.*
10.16 Trust Indenture, dated as of December 1, 1995, between Palomino
Park Public Improvements Corporation ("PPPIC") and United
States Trust Company of New York, as trustee, securing
Wellsford Residential Property Trust's Assessment Lien Revenue
Bonds Series 1995 - $14,755,000.**
10.17 Letter of Credit Reimbursement Agreement, dated as of December
1, 1995, between PPPIC, Wellsford Residential Property Trust
and Dresdner Bank AG, New York Branch.**
10.18 First Amendment to Letter of Credit Reimbursement Agreement,
dated as of May 30, 1997, between PPPIC, Wellsford Residential
Property Trust, Dresdner Bank AG, New York Branch and the
Company.
10.19 Amendment to Wellsford Reimbursement Agreement by and between
PPPIC, Wellsford Residential Property Trust and the Company,
dated as of May 30, 1997.
10.20 Assignment and Assumption Agreement by and between Wellsford
Residential Property Trust and the Company, dated as of May 30,
1997.
10.21 Credit Enhancement Agreement by and between the Company and ERP
Operating Limited Partnership, dated as of May 30, 1997,
relating to Palomino Park.
10.22 Reimbursement and Indemnification Agreement by and among the
Company and ERP Operating Limited Partnership, dated as of May
30, 1997, relating to Palomino Park.
10.23 Guaranty by ERP Operating Limited Partnership for the benefit
of Dresdner Bank AG, New York Branch, dated as of May 30, 1997,
relating to Palomino Park.
10.24 Amended and Restated Promissory Note of the Company to the
order of Dresdner Bank AG, New York Branch, dated May 30, 1997,
relating to Palomino Park.
10.25 Contribution and Distribution Agreement by and between
Wellsford Residential Property Trust and the Company dated as
of May 30, 1997.
10.26 Common Stock and Preferred Stock Purchase Agreement by and
between the Company and ERP Operating Limited Partnership dated
as of May 30, 1997.
10.27 Registration Rights Agreement by and between the Company and
ERP Operating Limited Partnership dated as of May 30, 1997.
10.28 Purchase and Sale Agreement, dated as of November 21, 1996,
between Wellsford Commercial Properties, L.L.C. and American
Cyanamid Company relating to Cyanamid Office Portfolio, as
amended by Amendment dated January 13, 1997, Second Amendment
dated February 13, 1997 and Third Amendment dated February 28,
1997 and Indemnification and Stock Transfer Agreement, dated
February 28, 1997, between American Cyanamid Company and
Wellsford Wayne Corp.*
10.29 Agreement of Sale, dated December 2, 1996, between Wellsford
Commercial Properties, L.L.C. and Barlax, relating to Chatham,
as amended by Amendment dated December 23, 1996 and Second
Amendment dated April 1, 1997.*
10.30 Agreement of Sale, dated December 23, 1996, between Wellsford
Commercial Properties, L.L.C. and N.J. Greenbrook Partners,
L.P, relating to Greenbrook.*
10.31 Credit Agreement, dated as of April 25, 1997, between Park
Avenue Financing Company LLC, PAMC Co-Manager Inc., PAFC
Management, Inc., Stanley Stahl, The First National Bank of
Boston, the Company, Other Banks that may become parties to the
Agreement and The First National Bank of Boston, as Agent,
relating to 277 Park Avenue.**
10.32 Assignment of Member's Interest, dated as of April 25, 1997, by
PAFC Management, Inc. and Stanley Stahl to The First National
Bank of Boston, relating to 277 Park Avenue (relating to
interests in the Park Avenue Financing Company, LLC).**
10.33 Assignment of Member's Interest, dated as of April 25, 1997, by
PAMC Co-Manager Inc. and Park Avenue Financing, LLC to The
First National Bank of Boston, relating to 277 Park Avenue
(relating to interests in 277 Park Avenue, LLC).**
10.34 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in Park Avenue Management
Corporation).**
10.35 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in PAMC Co-Manager Inc.).**
10.36 Stock Pledge Agreement, dated as of April 25, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in PAFC Management, Inc.).**
10.37 Conditional Guaranty of Payment and Performance, dated as of
April 25, 1997, by Stanley Stahl, relating to 277 Park
Avenue.**
10.38 Cash Collateral Account Security, Pledge and Assignment
Agreement, dated as of April 25, 1997, between 277 Park Avenue,
LLC, Park Avenue Management Corporation, Park Avenue Financing
Company LLC, PAMC Co-Manager Inc., Stanley Stahl and The First
National Bank of Boston, relating to 277 Park Avenue.**
10.39 Recognition Agreement, dated as of April 25, 1997, between The
First National Bank of Boston, the Company, Column Financial,
Inc., Park Avenue Financing Company LLC, PAMC Co-Manager, Inc.
and 277 Park Avenue, LLC, relating to 277 Park Avenue.**
10.40 Intercreditor Agreement, dated as of April 25, 1997, between
the Company and The First National Bank of Boston, as Agent,
relating to 277 Park Avenue.**
10.41 Assignment and Acceptance Agreement, dated June 19, 1997,
between BankBoston, N.A. (formerly known as The First National
Bank of Boston) ("BankBoston") and the Company, relating to 277
Park Avenue.
10.42 Revolving Credit Agreement by and among the Company,
BankBoston, Morgan Guaranty Trust Company of New York ("Morgan
Guaranty"), other banks which may become parties and BankBoston,
as agent, and Morgan Guaranty, as co-agent dated as of May 30,
1997.
10.43 Agreement Regarding Common Stock and Preferred Stock Purchase
Agreement, dated as of May 30, 1997, among ERP Operating
Limited Partnership, the Company and BankBoston, as agent.
10.44 Assignment of Common Stock Agreements, dated as of May 30,
1997, between the Company and BankBoston, as agent.
10.45 Collateral Assignment of Documents, Rights and Claims
(including Collateral Assignment of Deed of Trust, Assignment
of Leases and Rents, Security Agreement and Fixture Filing),
made as of May 30, 1997, by the Company to BankBoston, as agent.
10.46 1997 Management Incentive Plan of the Company.**
10.47 Rollover Stock Option Plan of the Company.**
10.48 Employment Agreement between the Company and Jeffrey H.
Lynford.
10.49 Employment Agreement between the Company and Edward Lowenthal.
10.50 Employment Agreement between the Company and Gregory F. Hughes.
10.51 Employment Agreement between the Company and David M. Strong.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Ballard Spahr Andrews & Ingersoll (contained in
Exhibit 5.1).
23.2 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP.
23.3 Consent of Ernst & Young LLP.
24.1 Powers of Attorney (included on signature page).
______________________________
* Previously filed as an exhibit to the Form 10 filed on April 23, 1997.
** Previously filed as an exhibit to the Form 10/A Amendment No. 1 filed
on May 21, 1997.
*** Previously filed as an exhibit to the Form 10/A Amendment No. 2 filed
on May 28, 1997.
**** The Company acquired its interest in a number of these documents by
assignment.
WELLSFORD REAL PROPERTIES, INC.
-------------------------------
ARTICLES OF AMENDMENT AND RESTATEMENT
FIRST: Wellsford Real
Properties, Inc., a Maryland
corporation (the "Corporation"), desires to amend and restate its charter as
currently in effect and as hereinafter amended.
SECOND: The following provisions
are all the provisions of the charter currently in effect and as hereinafter
amended:
ARTICLE I
INCORPORATOR
The undersigned, Tracy A. Bacigalupo, whose address is c/o
Ballard Spahr Andrews & Ingersoll, 300 East Lombard Street, Baltimore,
Maryland 21202, being at least 18 years of age, does hereby form a corporation
under the general laws of the State of Maryland.
ARTICLE II
NAME
The name of the corporation (the "Corporation") is:
Wellsford Real Properties, Inc.
ARTICLE III
PURPOSE
The purposes for which the Corporation is formed are to engage
in any lawful act or activity for which corporations may be organized under
the general laws of the State of Maryland as now or hereafter in force.
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
The address of the principal office of the Corporation in the
State of Maryland is c/o Ballard Spahr Andrews & Ingersoll, 300 East Lombard
Street, Baltimore, Maryland 21202, Attention: James J. Hanks, Jr. The name of
the resident agent of the Corporation in the State of Maryland is James J.
Hanks, Jr., whose post address is c/o Ballard Spahr Andrews & Ingersoll, 300
East Lombard Street, Baltimore, Maryland 21202. The resident agent is a
citizen of and resides in the State of Maryland.
ARTICLE V
PROVISIONS FOR DEFINING, LIMITING
AND REGULATING CERTAIN POWERS OF THE
CORPORATION AND OF THE STOCKHOLDERS AND DIRECTORS
Section 5.1 Number and Classification of Directors. The
business and affairs of the Corporation shall be managed under the direction
of the Board of Directors. The number of directors of the Corporation
initially shall be seven, which number may be increased or decreased pursuant
to the Bylaws, but shall never be less than the minimum number required by the
Maryland General Corporation Law. The names of the directors who shall serve
until the first annual meeting of stockholders and until their successors are
duly elected and qualify and the class of directors to which each is assigned
are:
Name Class
---- -----
Jeffrey H. Lynford II
Mark S. Germain II
Frank J. Hoenemeyer III
Frank J. Sixt III
Edward Lowenthal I
Rodney F. DuBois I
These directors may increase the number of directors and may fill any vacancy,
whether resulting from an increase in the number of directors or otherwise, on
the Board of Directors occurring before the first annual meeting of
stockholders in the manner provided in the Bylaws.
The directors (other than any director elected solely by holders of
one or more classes or series of Preferred Stock) shall be classified, with
respect to the terms for which they severally hold office, into three classes,
the Class I directors to hold office initially for a term expiring at the
annual meeting of stockholders in 1998, the Class II directors to hold office
initially for a term expiring at the annual meeting of stockholders in 1999
and the Class III directors to hold office initially for a term expiring at
the annual meeting of stockholders in 2000, with the members of each class to
hold office until their successors are duly elected and qualify. At each
annual meeting of the stockholders, the successors to the class of directors
whose term expires at such meeting shall be elected to hold office for a term
expiring at the annual meeting of stockholders held in the third year
following the year of their election.
Section 5.2 Mergers, Consolidations and Share Exchanges.
Notwithstanding any provision of law permitting or requiring such action to be
taken or authorized by the affirmative vote of the holders of shares entitled
to cast a greater number of votes, a consolidation or share exchange or a
merger in which the Corporation is the successor need be approved only by the
affirmative vote of holders of shares entitled to cast a majority of all the
votes entitled to be cast on the matter.
Section 5.3 Authorization by Board of Stock Issuance. The Board of
Directors may authorize the issuance from time to time of shares of stock of
the Corporation of any class or series, whether now or hereafter authorized,
or securities or rights convertible into shares of its stock of any class or
series, whether now or hereafter authorized, for such consideration as the
Board of Directors may deem advisable (or without consideration in the case of
a stock split or stock dividend), subject to such restrictions or limitations,
if any, as may be set forth in the charter or the Bylaws.
Section 5.4 Preemptive Rights. Except as may be provided by
contract or by the Board of Directors in setting the terms of classified or
reclassified shares of stock pursuant to Section 6.2, no holder of shares of
stock of the Corporation shall, as such holder, have any preemptive right to
purchase or subscribe for any additional shares of stock of the Corporation or
any other security of the Corporation which it may issue or sell.
Section 5.5 Removal of Directors. Subject to the rights of
holders of one or more classes or series of stock to nominate or elect one or
more directors, any director, or the entire Board of Directors, may be
removed, but only for cause and then only by the affirmative vote of the
holders of at least two thirds of the votes entitled to be cast in the
election of directors. For the purpose of this Section 5.5, "cause" shall
mean with respect to any particular director a final judgment of a court of
competent jurisdiction holding that such director caused demonstrable,
material harm to the Corporation through bad faith or active and deliberate
dishonesty.
Section 5.6 Transactions Between the Corporation and its
Directors, Officers, Employees and Agents. Subject to any express
restrictions in this charter or adopted by the Directors in the Bylaws or by
resolution, the Corporation may enter into any contract or transaction of any
kind (including, without limitation, for the purchase or sale of property or
for any type of services, including those in connection with underwriting the
offer or sale of securities of the Corporation) with any person or entity,
including any director, officer, employee or agent of the Corporation or any
person or entity affiliated with a director, officer, employee or agent of the
Corporation, whether or not any of them has a financial interest in such
transaction.
Section 5.7 Ambiguity. In case of any ambiguity in any provision
of this charter, the Board of Directors of the Corporation shall have the
power to determine the application of such provision with respect to any
situation based on the facts known to the Board and such determination shall
be final and conclusive.
ARTICLE VI
STOCK
Section 6.1 Authorized Shares. The Corporation has authority to
issue 200,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"). The aggregate par value of all authorized shares of stock having par
value is $2,000,000.
Section 6.2 Reclassified Shares. The Board of Directors may
reclassify any unissued shares of stock from time to time in one or more
classes or series of stock. Prior to issuance of reclassified shares of any
class or series, the Board of Directors by resolution shall: (a) designate
that class or series to distinguish it from all other classes and series of
stock of the Corporation; (b) specify the number of shares to be included in
the class or series; (c) set or change, subject to the express terms of any
class or series of stock of the Corporation outstanding at the time, the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
and conditions of redemption for each class or series; and (d) cause the
Corporation to file articles supplementary with the State Department of
Assessments and Taxation of Maryland ("SDAT"). Any of the terms of any class
or series of stock set or changed pursuant to clause (c) of this Section 6.2
may be made dependent upon facts or events ascertainable outside the charter
(including determinations by the Board of Directors or other facts or events
within the control of the Corporation) and may vary among holders thereof,
provided that the manner in which such facts, events or variations shall
operate upon the terms of such class or series of stock is clearly and
expressly set forth in the articles supplementary filed with the SDAT.
Section 6.3 Charter and Bylaws. All persons who shall acquire
stock in the Corporation shall acquire the same subject to the provisions of
the charter and the Bylaws.
ARTICLE VII
INDEMNIFICATION AND ADVANCE OF EXPENSES
The Corporation shall have the power, to the maximum extent
permitted by Maryland law in effect from time to time, to obligate itself to
indemnify, and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to, (a) any individual who is a present or former
director or officer of the Corporation or (b) any individual who, while a
director of the Corporation and at the request of the Corporation, serves or
has served as a director, officer, partner, trustee, manager or member of
another corporation, partnership, joint venture, trust, employee benefit plan,
limited liability company or any other enterprise from and against any claim
or liability to which such person may become subject or which such person may
incur by reason of his status as a present or former director or officer of
the Corporation. The Corporation shall have the power, with the approval of
the Board of Directors, to provide such indemnification and advancement of
expenses to a person who served a predecessor of the Corporation in any of the
capacities described in (a) or (b) above and to any employee or agent of the
Corporation or a predecessor of the Corporation.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to its charter, now or hereafter authorized by law, including any
amendment altering the terms or contract rights, as expressly set forth in
this charter, of any shares of outstanding stock. All rights and powers
conferred by the charter on stockholders, directors and officers are granted
subject to this reservation. Except as set forth in the following sentence,
any amendment to the charter shall be valid only if approved by the
affirmative vote of a majority of all the votes entitled to be cast on the
matter. Any amendment to Section 5.1, Section 5.5 or this sentence of the
charter or any amendment to the charter providing that the stockholders of the
Corporation may approve an action by a lesser percentage of votes than that
required by law shall be valid only if approved by the affirmative vote of two
thirds of all the votes entitled to be cast on the matter.
ARTICLE IX
LIMITATION OF LIABILITY
To the maximum extent that Maryland law in effect from time to time
permits limitation of the liability of directors and officers of a
corporation, no director or officer of the Corporation shall be liable to the
Corporation or its stockholders for money damages. Neither the amendment nor
repeal of this Article IX, nor the adoption or amendment of any other
provision of the charter or Bylaws inconsistent with this Article IX, shall
apply to or affect in any respect the applicability of the preceding sentence
with respect to any act or failure to act which occurred prior to such
amendment, repeal or adoption.
THIRD: The amendment to and restatement of the charter as
hereinabove set forth has been duly advised by the Board of Directors and
approved by the stockholders of the Corporation as required by law.
FOURTH: The current address of the principal office of the
Corporation is as set forth in Article IV of the foregoing amendment and
restatement of the charter.
FIFTH: The name and address of the Corporation's current resident
agent is as set forth in Article IV of the foregoing amendment and restatement
of the charter.
SIXTH: The number of directors of the Corporation and the names of
those currently in office are as set forth in Article V of the foregoing
amendment and restatement of the charter.
SEVENTH: The total number of shares of stock which the Corporation
had authority to issue immediately prior to this amendment and restatement was
10,000 shares, $.01 par value per share. The aggregate par value of all
shares of stock having par value was $100.00.
EIGHTH: The total number of shares of stock which the Corporation
has authority to issue pursuant to the foregoing amendment and restatement of
the charter is 200,000,000, consisting of 200,000,000 shares of Common Stock,
$.01 par value per share. The aggregate par value of all authorized shares of
stock having par value is $2,000,000.
NINTH: The undersigned President acknowledges these Articles of
Amendment and Restatement to be the corporate act of the Corporation and as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles of
Amendment and Restatement to be signed in its name and on its behalf by its
Chairman of the Board and attested to by its Assistant Secretary on this 30th
day of May, 1997.
ATTEST: WELLSFORD REAL PROPERTIES,
INC.
/s/ Gregory F. Hughes By:/s/ Jeffrey H. Lynford(SEAL)
- ----------------------------- --------------------------------
Gregory F. Hughes Jeffrey H. Lynford
Assistant Secretary Chairman of the Board
WELLSFORD REAL PROPERTIES, INC.
ARTICLES SUPPLEMENTARY
350,000 SHARES
CLASS A COMMON STOCK
Wellsford Real Properties, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Under a power contained in Section 6.2 of the charter of the
Corporation (the "Charter"), the Board of Directors of the Corporation (the
"Board of Directors"), by unanimous written consent dated May 28, 1997,
reclassified and designated 350,000 shares (the "Shares") of Common Stock (as
defined in the Charter) as shares of Class A Common Stock, $.01 par value per
share (the "Class A Common Stock"), with the preferences, conversion and other
rights, voting powers, restrictions, limitations as to dividends and other
distributions, qualifications and terms and conditions of redemption as set
forth as follows, which, upon any restatement of the Charter shall be made
part of Article VI, with any necessary or appropriate changes to the
enumeration or lettering of sections or subsections hereof.
CLASS A COMMON STOCK
Section 1. Certain Definitions. For purposes of the terms of the
Class A Common Stock the following terms have the following meanings:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified.
"Beneficial Ownership" shall mean ownership of stock by a REIT who would
be treated as an owner of such shares of stock under Section 856(c)(5) of the
Code. The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially
Owned" shall have correlative meanings.
"Business Day" shall mean any day, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which banking institutions in New York
City are authorized or required by law, regulation or executive order to
close.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Corporation.
"Class A Common Stock" shall mean the Class A common stock, $.01 par
value per share, of the Corporation.
"Closing Date" shall mean May 30, 1997.
"Control" including the terms "Controlling", "Controlled by" and "under
common Control with", shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Corporation" shall mean Wellsford Real Properties, Inc.
"Liquidation Value", when used in connection with Series A 8% Convertible
Redeemable Preferred Stock, shall mean $25.00 per share.
"Person" shall mean any natural person, corporation, business or real
estate investment trust, joint venture, association, company, partnership, or
government, or any agency or political subdivision thereof.
"Preferred Stock" shall mean all shares of stock of the Corporation
having a preference in the payment of dividends or any distribution of assets
upon liquidation, dissolution or winding-up of the Corporation to the Common
Stock or Class A Common Stock.
"REIT" shall mean a real estate investment trust under Section 856 of the
Code.
"REIT Ownership Limit" shall initially mean nine and nine-tenths percent
(9.9%) of the value of the outstanding Voting Stock of the Corporation.
"Responsible Officer" of any corporation shall mean any executive officer
of such corporation, and any other officer or similar official thereof
responsible for the administration of the obligations of such corporation in
respect of the terms of the Class A Common Stock.
"Transfer" shall mean any sale, transfer, redemption, gift,
hypothecation, pledge, assignment, devise or other disposition of Voting
Stock, whether voluntary or involuntary, whether of record, constructively or
beneficially and whether by operation of law or otherwise.
"Triggering Event" shall mean any event undertaken or caused by the
Corporation, which would result in ERP Operating Limited Partnership ("ERP
Operating Partnership"), Equity Residential Properties Trust or any Affiliate
of either of them collectively to Beneficially Own outstanding shares of Class
A Common Stock in excess of the REIT Ownership Limit.
"Voting Stock" shall mean the Class A Common Stock, the Common Stock and
any other outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors.
Section 2. Rights. The holders of Class A Common Stock shall have
all rights, including, but not limited to, voting, dividend, distribution,
liquidation and other rights of holders of shares of Common Stock; provided,
however, holders of Class A Common Stock shall have such additional rights as
provided herein.
Section 3.
(a) Nomination Rights. The holders of the Class A Common Stock, as a
class, shall be entitled to nominate one (1) nominee for election to the Board
of Directors of the Corporation at each annual meeting of shareholders of the
Corporation at which the Class II Directors are to be elected so long as (i)
ERP Operating Partnership is obligated to purchase Preferred Stock pursuant to
that certain Common Stock and Preferred Stock Purchase Agreement dated as of
May 30, 1997, between ERP Operating Partnership and the Corporation; (ii) ERP
Operating Partnership has obligations pursuant to that certain Agreement
Regarding Palomino Park dated as of May 30, 1997 between ERP Operating
Partnership and the Corporation; (iii) ERP Operating Partnership has
obligations pursuant to that certain Credit Enhancement Agreement dated as of
May 30, 1997 between ERP Operating Partnership and the Corporation; or (iv)
the aggregate Liquidation Value of the shares of Series A 8% Convertible
Redeemable Preferred Stock of the Corporation owned by ERP Operating
Partnership is greater than $10,000,000; provided, however, in no event shall
the period during which the holders of the Class A Common Stock are entitled
to nominate one (1) nominee for election to the Board of Directors be less
than two (2) years from the Closing Date.
(b) Appointment Rights. Upon (i) the occurrence and continuation of an
Event of Default (as such term is defined in that certain Common Stock and
Preferred Stock Purchase Agreement dated as of May 30, 1997 between ERP
Operating Partnership and the Corporation) or (ii) the receipt by Equity
Residential Properties Trust ("EQR") of a ruling from the Internal Revenue
Service or an opinion of counsel satisfactory to EQR that the rights in this
Section 3(b) will not cause EQR to lose its status as a REIT under the Code,
and in the event a person nominated by the holders of the Class A Common Stock
is not a member of the Board of Directors of the Corporation at such time, the
holders of the Class A Common Stock, as a class, shall be entitled to elect
one (1) member (the "Class A Director") of the Board of Directors of the
Corporation so long as (i) ERP Operating Partnership is obligated to purchase
Preferred Stock pursuant to that certain Common Stock and Preferred Stock
Purchase Agreement dated as of May 30, 1997 between ERP Operating Partnership
and the Corporation; (ii) ERP Operating Partnership has obligations pursuant
to that certain Agreement Regarding Palomino Park dated as of May 30, 1997
between ERP Operating Partnership and the Corporation; (iii) ERP Operating
Partnership has obligations pursuant to that certain Credit Enhancement
Agreement dated as of May 30, 1997 between ERP Operating Partnership and the
Corporation; or (iv) the aggregate Liquidation Value of the shares of Series A
8% Convertible Redeemable Preferred Stock of the Corporation owned by ERP
Operating Partnership is greater than $10,000,000; provided, however, (x) in
no event shall the period during which the holders of the Class A Common Stock
are entitled to elect the Class A Director be less than two (2) years from the
Closing Date, and (v) a Class A Director may not hold office as such a
director at the same time as a person nominated by the holders of the Class A
Common Stock pursuant to Section 3(a). The Class A Director may be removed
without cause, only by the affirmative vote of a majority of the Class A
Common Stock.
Section 4. Optional Conversion.
(a) Holders of Class A Common Stock shall have the right, exercisable at
any time and from time to time to convert all or any shares of Class A Common
Stock into shares of Common Stock at a conversion rate of one share of Common
Stock for each share of Class A Common Stock, subject to adjustment (the
"Conversion Rate"). Upon conversion, no adjustment or payment will be made
for distributions, but if any holder surrenders Class A Common Stock for
conversion after the close of business on the record date for the payment of a
dividend or distribution and prior to the opening of business on the related
payment date of such dividend or distribution then, notwithstanding such
conversion, the dividend or distribution payable on such payment date will be
paid to the registered holder of such shares on such record date.
(b) Any holder of one or more shares of Class A Common Stock electing to
convert such share or shares shall deliver the certificate or certificates
therefor to the principal office of any transfer agent for the Common Stock,
with the form of notice of election to convert as the Corporation shall
prescribe fully completed and duly executed and (if so required by the
Corporation or any conversion agent) accompanied by instruments of transfer in
form satisfactory to the Corporation and to any conversion agent, duly
executed by the registered holder or his duly authorized attorney, and
transfer taxes, stamps or funds therefor or evidence of payment thereof. The
conversion right with respect to any such shares shall be deemed to have been
exercised at the date upon which the certificates therefor accompanied by such
duly executed notice of election and instruments of transfer and such taxes,
stamps, funds or evidence of payment shall have been so delivered, and the
person or persons entitled to receive the shares of the Common Stock issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of the Common Stock upon said date.
(c) If a holder converts shares of Class A Common Stock, the Corporation
shall pay any documentary, stamp or similar issue or transfer tax due on the
issuance of shares of Common Stock upon the conversion. The holder, however,
shall pay to the Corporation the amount of any tax which is due (or shall
establish to the satisfaction of the Corporation payment thereof) if the
shares are to be issued in a name other than the name of such holder and shall
pay to the Corporation any amount required by the last sentence of Section
4(a) hereof.
(d) The Corporation shall reserve and shall at all times have reserved
out of its authorized but unissued shares of Common Stock a sufficient number
of shares of Common Stock to permit the conversion of the then outstanding
shares of Class A Common Stock. All shares of Common Stock which may be
issued upon conversion of shares of Class A Common Stock shall be validly
issued, fully paid and nonassessable, and not subject to preemptive or other
similar rights. In order that the Corporation may issue shares of Common
Stock upon conversion of shares of Class A Common Stock, the Corporation will
endeavor to comply with all applicable federal and state securities laws and
will endeavor to list such Common Stock to be issued upon conversion on each
securities exchange on which the Common Stock is listed.
(e) The Conversion Rate in effect at any time shall be subject to
adjustment from time to time as follows:
(i) If the Corporation shall (1) reclassify the outstanding
shares of Common Stock into shares of some other class or series of stock of
the Corporation, (2) subdivide the outstanding shares of Common Stock into a
greater number of shares of Common Stock or (3) combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the
conversion rate immediately prior to such action shall be adjusted so that
the holder of any shares of Class A Common Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock
which he would have owned immediately following such action had such shares
of Class A Common Stock been converted immediately prior thereto. An
adjustment made pursuant to this Section 4(e)(i) shall become effective
immediately after the effective date of a subdivision, combination or
reclassification.
(ii) The Market Price per share of the Common Stock on any date
shall be deemed to be the average of the daily closing prices for 30
consecutive trading days commencing 45 trading days before the date in
question. The closing price for each day shall be the last reported sales
price or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices, regular way, in either
case on the New York Stock Exchange, or if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if
not listed or admitted to trading on any national securities exchange, the
closing sale price of the Common Stock or, in case no reported sale takes
place, the average of the closing bid and asked prices, on NASDAQ or any
comparable system, or if the Common Stock is not quoted on NASDAQ or any
comparable system, the closing sale price or, in case no reported sale takes
place, the average of the closing bid and asked prices, as furnished by any
two members of the National Association of Securities Dealers, Inc. selected
from time to time by the Corporation for that purpose.
(iii) In any case in which this Section 4 shall require that an
adjustment be made immediately following a record date, the Corporation may
elect to defer (but only until five Business Days following the mailing of
the notice described in Section 4(j)) issuing to the holder of any Class A
Common Stock converted after such record date the Common Stock and other
shares of stock of the Corporation issuable upon such conversion over and
above the Common Stock and other shares of stock of the Corporation issuable
upon such conversion only on the basis of the conversion rate prior to
adjustment; and, in lieu of the shares the issuance of which is so deferred,
the Corporation shall issue or cause its transfer agents to issue
appropriate evidence of the right to receive such shares.
(f) No adjustment in the Conversion Rate shall be required until cumulative
adjustments result in a change of 1% or more of the conversion price as in
effect prior to the last adjustment of the Conversion Rate; provided, however,
that any adjustment which by reason of this Section 4(f) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the
nearest cent ($.01) or the nearest one-hundredth (1/100) of a share, as the
case may be.
(g) If, as a result of an adjustment made pursuant to Section 4(e), the
holder of any Class A Common Stock thereafter surrendered for conversion shall
become entitled to receive any shares of stock of the Corporation other than
Common Stock, thereafter the number of such other shares so receivable upon
conversion of any Class A Common Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to
the provisions with respect to the Common Stock contained in this Section 4.
(h) The Corporation may make such increases in the Conversion Rate, in
addition to those required by Section 4(e), as is considered to be advisable
in order that any event treated for federal income tax purposes as a
distribution of shares or share rights shall not be taxable to the recipients
thereof.
(i) Whenever the Conversion Rate is adjusted, the Corporation shall
promptly mail to all holders of record of Class A Common Stock a notice of the
adjustment and shall cause to be prepared a certificate signed by the
principal financial officer of the Corporation setting forth the adjusted
Conversion Rate and a brief statement of the facts requiring such adjustment
and the computation thereof; such certificate shall forthwith be filed with
each transfer agent for the Class A Common Stock.
(j) If:
(i) the Corporation takes any action which would require an
adjustment in the Conversion Rate, or
(ii) the Corporation consolidates or merges with, or transfers all
or substantially all of its assets to, another corporation
and shareholders of the Corporation must approve the
transaction,
the Corporation shall mail to holders of shares of Class A Common Stock a
notice stating the proposed record or effective date of the transaction, as
the case may be. The Corporation shall mail the notice at least 10 days
before such date; however, failure to mail such notice or any defect therein
shall not affect the validity of any transaction referred to in clauses (i) or
(ii) of this Section 4(j).
(k) If any of the following shall occur, namely: (i) any reclassification
or change of outstanding shares of Common Stock issuable upon conversion of
Class A Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination), (ii) any consolidation or merger to which the
Corporation is a party other than a consolidation or merger in which the
Corporation is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in name, or par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding shares of Common Stock
or (iii) any sale, transfer or lease of all or substantially all of the
property or business of the Corporation as an entirety, then the Corporation,
or such successor or purchasing corporation, as the case may be, shall, as a
condition precedent to such reclassification, change, consolidation, merger,
sale, transfer or lease, provide in its charter that each share of Class A
Common Stock shall be convertible into the kind and amount of shares of stock
and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale, transfer or lease by a
holder of the number of shares of Common Stock deliverable upon conversion of
such shares of Class A Common Stock immediately prior to such
reclassification, change, consolidation, merger, sale, transfer or lease.
Such provision in the charter document shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 4. If, in the case of any such reclassification,
change, consolidation, merger, sale, transfer or lease, the shares of stock or
other securities and property (including cash) receivable thereupon by a
holder of the Common Stock includes shares of stock or beneficial interest or
other securities and property of a corporation or other entity other than the
successor or purchasing corporation, as the case may be, in such
reclassification, change, consolidation, merger, sale, transfer or lease, then
the charter of such other corporation, as a condition precedent to such
transaction, shall contain such additional provisions to protect the interests
of the holders of Class A Common Stock as the Board of Directors shall
reasonably consider necessary by reason of the foregoing. The provisions of
this Section 4(k) shall similarly apply to successive consolidations, mergers,
sales, transfers or leases.
No holder of Class A Common Stock will possess any preemptive rights to
subscribe for or acquire any unissued shares of the Corporation (whether now
or hereafter authorized) or securities of the Corporation convertible into or
carrying a right to subscribe to or acquire shares of stock of the
Corporation.
Section 5. Automatic Conversion. Any outstanding shares of Class A
Common Stock shall automatically convert, at the Conversion Rate, into shares
of Common Stock upon the Transfer of such shares of Class A Common Stock to
any Person other than an Affiliate of Equity Residential Properties Trust or
ERP Operating Partnership. Such automatic conversion shall be deemed to have
occurred on the date of such Transfer.
Section 6. Purchase of Shares of Voting Stock in Excess of REIT
Ownership Limit. If, notwithstanding the other provisions contained in the
terms of the Class A Common Stock, a Triggering Event shall occur, then the
Corporation shall (i) immediately deliver written notice of such Triggering
Event to each of Equity Residential Properties Trust and ERP Operating
Partnership and (ii) purchase such shares of Class A Common Stock in excess of
the REIT Ownership Limit at a price per share equal to the Market Price per
share of the Common Stock no later than 25 days following the date of the
Triggering Event which resulted in the REIT Beneficially Owning shares of
Class A Common Stock in excess of the REIT Ownership Limit.
SECOND: The Shares have been classified and designated by the Board of
Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its Chairman of the
Board and attested to by its Assistant Secretary on this 30th of May, 1997.
ATTEST: WELLSFORD REAL PROPERTIES, INC
/s/ Gregory F. Hughes By:/s/ Jeffrey H.Lynford(SEAL)
- --------------------------- ------------------------------
Gregory F. Hughes Jeffrey H. Lynford
Assistant Secretary Chairman of the Board
WELLSFORD REAL PROPERTIES, INC.
ARTICLES SUPPLEMENTARY
2,000,000 SHARES
SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK
Wellsford Real Properties, Inc, a Maryland corporation (the "Corporation"),
hereby certifies to the State Department of Assessments and Taxation of
Maryland that:
FIRST: Under a power contained in Section 6.2 of the charter of the
Corporation (the "Charter"), the Board of Directors of the Corporation (the
"Board of Directors"), by unanimous written consent dated May 28, 1997,
reclassified and designated 2,000,000 shares (the "Shares") of Common Stock
(as defined in the Charter) as shares of Series A 8% Convertible Redeemable
Preferred Stock, $.01 par value per share (the "Series A Preferred Stock"),
with the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends and other distributions,
qualifications and terms and conditions of redemption as set forth as follows,
which upon any restatement of the Charter shall be made part of Article VI,
with any necessary or appropriate changes to the enumeration or lettering of
sections or subsections hereof.
SERIES A PREFERRED STOCK
Section 1. Certain Definitions
Unless the context otherwise requires, the terms defined in this
Section 1 shall have, for all purposes of determining the terms of the Series
A Preferred Shares, the meanings herein specified (with terms defined in the
singular having comparable meanings when used in the plural).
"Business Day" shall mean any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in New
York City are authorized or required by law, regulation or executive order to
close.
"Closing Date" shall mean May 30, 1997.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Common Stock" shall mean the common stock, $.01 par value per share,
of the Corporation.
"Class A Common Stock" shall mean the Class A common stock, $.01 par
value per share, of the Corporation.
"Dividend Period" shall have the meaning set forth in Section 4 below.
"Event of Default" shall mean (i) the non-payment of any dividend on
the Quarterly Dividend Date applicable to such dividend for three (3) Dividend
Periods which need not be consecutive; or (ii) the failure to comply with any
term, condition or obligation or failure to provide any right under the terms
of the Series A Preferred Shares.
"Gross Sales Price of a Share of Common Stock" shall mean (a) the gross
proceeds from all sales of Common Stock to institutional purchasers taking
place on or prior to the Closing Date and subject to written commitments to
purchase from institutional purchasers received on or prior to the Closing
Date, divided by (b) the aggregate number of shares so sold and subject to
such commitments.
"Junior Shares" shall have the meaning set forth in Section 3 below.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership, or government, or any agency
or political subdivision thereof.
"Liquidation Value" shall have the meaning set forth in Section 5
below.
"Net Book Value Per Share of Common Stock" shall mean the stockholders'
equity of the Corporation determined in accordance with generally accepted
accounting principles as adjusted for all liabilities, including all costs
related to the formation of the Corporation, as set forth in the financial
statements of the Corporation, less the Liquidation Value of all outstanding
Preferred Stock including Series A Preferred Stock, divided by the number of
shares of Common Stock of the Corporation outstanding on such date, excluding
the shares of Class A Common Stock being purchased by ERP Operating Limited
Partnership on the Closing Date. Net Book Value Per Share of Common Stock
shall be determined in accordance with the provisions in Section 2.1 of that
certain Common Stock and Preferred Stock Purchase Agreement dated as of May
30, 1997 between ERP Operating Limited Partnership and the Corporation.
"Preferred Stock" shall mean all shares of stock having a preference in
any manner to the Common Stock or Class A Common Stock.
"Quarterly Dividend Date" shall have the meaning set forth in Section 4
below.
"Record Date" shall have the meaning set forth in Section 4 below.
"Redemption Date" shall have the meaning set forth in Section 6 below.
"Redemption Price" shall have the meaning set forth in Section 6 below.
"Responsible Officer" of any corporation shall mean any executive
officer of such corporation, and any other officer or similar official thereof
responsible for the administration of the obligations of such corporation in
respect of the terms of the Series A Preferred Shares.
"Series A Preferred Stock" shall mean the Series A 8% Convertible
Redeemable Preferred Stock, $.01 par value per share, of the Corporation.
Section 2. Number. The maximum number of authorized shares of Series A
Preferred Stock shall be 2,000,000.
Section 3. Relative Seniority. In respect of rights to receive
dividends and to participate in distributions or payments in the event of any
liquidation, dissolution or winding up of the Corporation, the Series A
Preferred Stock shall rank (i) junior to any other Preferred Stock of the
Corporation ranking, as to dividends and upon liquidation, prior to the Series
A Preferred Stock, (ii) pari passu with any other Preferred Stock of the
Corporation ranking, as to dividends and upon liquidation, on parity with the
Series A Preferred Stock, and (iii) senior to the Common Stock and any other
class or series of shares of stock of the Corporation ranking, as to dividends
and upon liquidation, junior to the Series A Preferred Stock (collectively,
"Junior Shares"). Notwithstanding the foregoing, the Corporation may make
distributions or pay dividends in shares of Common Stock or in any other
shares of the Corporation ranking junior to the Series A Preferred Stock as to
distribution rights and liquidation preference at any time; provided, however,
the Corporation may make distributions or pay dividends on the Series A
Preferred Stock in shares of the Corporation only as provided herein.
Section 4. Dividends. The holders of the then outstanding Series A
Preferred Stock shall be entitled to receive, when and as declared by the
Board of Directors of the Corporation out of any funds legally available
therefor, dividends at the rate of $2.00 per share per year, payable in cash,
except as provided below, in equal amounts quarterly on the fifteenth day, or
if not a Business Day, the next succeeding Business Day, of January, April,
July and October in each year, beginning July 15, 1997 (each such day being
hereinafter called a "Quarterly Dividend Date" and each period ending on a
Quarterly Dividend Date being hereinafter called a "Dividend Period"), to
shareholders of record at the close of business on such date as shall be fixed
by the Board of Directors of the Corporation at the time of authorization of
the dividend (the "Record Date"), which shall be not fewer than 10 nor more
than 30 days preceding the Quarterly Dividend Date. The amount of any
dividend payable for the initial Dividend Period and for any other Dividend
Period shorter than a full Dividend Period shall be prorated and computed on
the basis of a 360-day year of twelve 30-day months. Dividends paid on the
Series A Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be allocated
pro rata on a per share basis among all such shares at the time outstanding.
Notwithstanding the foregoing, for any twelve Dividend Periods the
Company shall have the right to pay the dividend in additional shares of
Series A Preferred Stock determined by dividing the total amount of the
dividend to be paid in shares of Series A Preferred Stock by the Liquidation
Value (as defined herein) per share of Series A Preferred Stock. The issuance
of additional shares of Series A Preferred Stock pursuant to this Section 4
shall be evidenced by a stock certificate representing such shares issued on
the related Quarterly Dividend Date and delivered on or immediately
thereafter. Notwithstanding any other provision hereof, no fractional shares
of the Corporation shall be issued in connection with the payment of any
dividend on Series A Preferred Stock in additional shares of Series A
Preferred Stock. Instead, any holder of outstanding Series A Preferred Stock
having a fractional interest arising upon the payment of a dividend in
additional shares of Series A Preferred Stock shall, on the related Quarterly
Dividend Date, be paid an amount in cash equal to the Liquidation Value times
the fraction of a share of Series A Preferred Stock to which such holder would
otherwise be entitled.
In the event the Company fails to pay any dividend on the Series A
Preferred Stock on any Quarterly Dividend Date, the Company shall not pay any
dividends on any other class of stock of the Company (other than (i) pro rata
with other securities of the Company ranking pari passu with the Series A
Preferred Stock or (ii) with Junior Shares) until such dividend on the Series
A Preferred Stock has been paid.
Except as provided in the terms of the Series A Preferred Stock, the
Series A Preferred Stock shall not be entitled to participate in the earnings
or assets of the Corporation.
Section 5. Liquidation Rights
(a) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders of shares of the
Series A Preferred Stock then outstanding shall be entitled to receive and to
be paid out of the assets of the Corporation available for distribution to its
shareholders, before any payment or distribution shall be made on any Junior
Shares, the amount of $25.00 per share of Series A Preferred Stock
("Liquidation Value"), plus any accrued and unpaid dividends thereon.
(b) After the payment to the holders of the Series A
Preferred Stock of the full preferential amounts provided for in this Section
5, the holders of shares of the Series A Preferred Stock as such shall have no
right or claim to any of the remaining assets of the Corporation.
(c) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up the Corporation, the amounts payable to the holders
of shares of the Series A Preferred Stock pursuant to this Section 5 and
holders of any other shares of stock of the Corporation ranking as to any such
distribution on a parity with the Series A Preferred Stock are not paid in
full, the holders of the Series A Preferred Stock and of such other shares
will share ratably in any such distribution of assets of the Corporation in
proportion to the full respective preference amounts to which they are
entitled.
(d) Neither the sale of all or substantially all the
property or business of the Corporation, nor the merger or consolidation of
the Corporation into or with any other entity or the merger or consolidation
of any other entity into or with the Corporation, nor any dissolution,
liquidation, winding up or reorganization of the Corporation immediately
followed by the incorporation of another corporation to which the
Corporation's assets are distributed shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of the
terms of the Series A Preferred Stock.
(e) In determining whether a distribution by dividend,
redemption or other acquisition of shares of the Corporation or otherwise is
permitted under Maryland law, no effect shall be given to amounts that would
be needed, if the Corporation were to be dissolved at the time of the
distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights on dissolution are superior to those
receiving the distribution.
Section 6. Redemption
(a) Optional Redemption. On and after May 30, 2002, the
Corporation may, at its option, redeem at any time all of the outstanding
Series A Preferred Stock or a part of the outstanding Series A Preferred Stock
at a price per share (the "Redemption Price"), equal to $25.00 per share of
Series A Preferred Stock, together with all accrued and unpaid dividends to
and including the date fixed for redemption (the "Redemption Date"); provided,
however, that no partial redemption of the Series A Preferred Stock may be
effected if after giving effect thereto the aggregate Liquidation Value of the
Series A Preferred Stock outstanding is less than $10,000,000. The Redemption
Price and all accrued and unpaid dividends shall be paid in cash; provided,
however, that if (a) a holder of Series A Preferred Stock desires to convert
any of its Series A Preferred Stock called for redemption but such conversion
would cause any direct or indirect holder which is classified as a real estate
investment trust ("REIT") under Section 856 of the Code to own, directly or
indirectly, more than 9.9% of the outstanding voting stock of the Corporation
or would otherwise cause any direct or indirect holder of such outstanding
voting stock to lose its status as a REIT under the Code, and (b) such holder
has so notified the Corporation in writing prior to the Redemption Date,
stating the number of shares of Series A Preferred Stock which have been
called for redemption which such holder is unable to convert for such reason
(such shares being referred to as the "Unconvertible Shares"), then the
Corporation shall pay, in cash, the Redemption Price plus all accrued and
unpaid dividends for each Unconvertible Share and shall issue to such holder a
warrant to purchase the number of shares of Common Stock equal to (i) the fair
market value of a share of Common Stock on the Redemption Date over the
Redemption Price, multiplied by (ii) the number of shares of Common Stock into
which the Unconvertible Shares redeemed from such holder were convertible
immediately prior to such redemption, and divided by (iii) the fair market
value of a share of Common Stock on the Redemption Date. Such warrant shall
be exercisable without cost to the holder thereof at any time and from time to
time for a period of ten (10) years from the date of issuance of such warrant.
The warrant shall be on such terms and conditions as are customarily contained
in like warrants, including provisions to protect the holder of the warrant
from dilution. The Corporation shall have the right, at any time, to redeem
such warrant at a price equal to the fair market value of such warrant on the
date of any such redemption. The fair market value of a share of Common Stock
on the Redemption Date shall be deemed to be the average of the daily closing
prices of the Common Stock for 30 consecutive trading days commencing 45
trading days before the Redemption Date. The closing price for each day shall
be the last reported sales price or, in case no such reported sale takes place
on such date, the average of the reported closing bid and asked prices regular
way, in either case on the New York Stock Exchange, or if the Common Stock is
not listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the closing sale price of the Common Stock or, in case no reported sale takes
place, the average of the closing bid and asked prices, on Nasdaq or any
comparable system, or if the Common Stock is not quoted on Nasdaq or any
comparable system, the closing sale price or, in case no reported sale takes
place, the average of the closing bid and asked prices, as furnished by any
two members of the National Association of Securities Dealers, Inc. selected
from time to time by the Corporation for that purpose.
(b) Procedures for Redemption
(i) Notice of any redemption will be mailed by the
Corporation, postage prepaid, not less than 30 nor more than 90 days prior to
the Redemption Date, addressed to the holders of record of the Series A
Preferred Stock to be redeemed at their addresses as they appear on the share
transfer records of the Corporation. No failure to give such notice or any
defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series A Preferred Stock except as to
the holder to whom the Corporation has failed to give notice or except as to
the holder to whom notice was defective. In addition to any information
required by law or by the applicable rules of any exchange upon which Series A
Preferred Stock may be listed or admitted to trading, such notice shall state:
(a) the Redemption Date; (b) the Redemption Price; (c) the number of shares of
Series A Preferred Stock to be redeemed; (d) the place or places where
certificates for such shares are to be surrendered for payment of the
Redemption Price; (e) the date on which conversion rights shall expire, the
conversion price and the place or places where certificates for such shares
are to be surrendered for conversion; and (f) the number of shares of Common
Stock of the Corporation outstanding on the date of such notice.
(ii) If notice has been mailed in accordance with Section
6(b)(i) above and provided that on or before the Redemption Date specified in
such notice all funds necessary for such redemption shall have been
irrevocably set aside by the Corporation, separate and apart from its other
funds, in trust for the pro rata benefit of the holders of the Series A
Preferred Stock so called for redemption, so as to be, and to continue to be
available therefor, then, from and after the Redemption Date, distributions
shall no longer accrue on said shares and said shares shall no longer be
deemed to be outstanding and shall not have the status of Series A Preferred
Stock and all rights of the holders thereof as shareholders of the Corporation
(except the right to receive the Redemption Price) shall cease. Upon
surrender, in accordance with said notice, of the certificates for any shares
of Series A Preferred Stock so redeemed (properly endorsed or assigned for
transfer, if the Corporation shall so require and the notice shall so state),
such shares of Series A Preferred Stock shall be redeemed by the Corporation
at the Redemption Price. In case fewer than all the Series A Preferred Stock
represented by any such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed Series A Preferred
Stock without cost to the holder thereof.
(iii) Any funds deposited with a bank or trust
company for the purpose of redeeming shares of Series A Preferred Stock shall
be irrevocable except that:
(A) the Corporation shall be entitled to receive
from such bank or trust company the interest or other earnings, if any, earned
on any money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings;
(B) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series A Preferred Stock
entitled thereto at the expiration of one year from the applicable Redemption
Date shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of the
shares entitled to the funds so repaid to the Corporation shall look only to
the Corporation for payment without interest or other earnings; and
(C) any funds set aside to redeem Series A
Preferred Stock that is converted into Common Stock prior to the Redemption
Date shall be immediately delivered to the Corporation.
(iv) No Series A Preferred Stock may be redeemed except
with funds legally available for the payment of the Redemption Price.
(v) Unless a sum sufficient for the payment of the then
current dividend due for the then current Dividend Period is set apart, no
shares of Series A Preferred Stock shall be redeemed (unless all outstanding
shares of Series A Preferred Stock are simultaneously redeemed) or purchased
or otherwise acquired directly or indirectly (except by conversion into or
exchange for shares of the Corporation ranking junior to the shares of Series
A Preferred Stock as to dividends and upon liquidation); provided, however,
that the foregoing shall not prevent the purchase or acquisition of Series A
Preferred Stock pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of Series A Preferred Stock.
(vi) If the Redemption Date is after a Record Date and
before the related Quarterly Dividend Date, the dividend payable on such
Quarterly Dividend Date shall be paid to the holder in whose name the Shares
of Series A Preferred Stock to be redeemed are registered at the close of
business on such Record Date notwithstanding the redemption thereof between
such Record Date and the related Quarterly Dividend Date or the Corporation's
default in the payment of the dividend due.
(vii) In case of redemption of less than all of the
shares of Series A Preferred Stock at the time outstanding, the shares of
Series A Preferred Stock to be redeemed shall be selected pro rata from the
holders of record of such shares in proportion to the number of shares of
Series A Preferred Stock held by such holders (with adjustments to avoid
redemption of fractional shares) or by any other equitable method determined
by the Corporation.
(c) Required Redemption. Upon the occurrence of an Event of
Default or on and after May 30, 2012, whichever comes first, the holder of any
shares of Series A Preferred Stock may, at its option, cause the Corporation
to redeem at any time all of the Series A Preferred Stock held by such holder
at the Redemption Price, payable in cash, together with all accrued and unpaid
dividends to and including the Redemption Date. Notwithstanding the
provisions of this subsection (c), provided an Event of Default has not
occurred, the Corporation shall have the right to extend the date during which
a required redemption is not permitted under this subsection (c) for three
separate additional five (5) year periods if the dividend rate on the Series A
Preferred Stock is changed to the then market rate of comparable preferred
stock (the "Market Rate") on the first day of each such additional five year
period; provided, however, in no event shall the dividend be reduced to less
than $2.00 per share of Series A Preferred Stock. The Market Rate shall be
determined ten (10) days prior to the first Business Day of each such
additional five (5) year period by mutual agreement of the holders of Series A
Preferred Stock and the Corporation. In the event the holders of Series A
Preferred Stock and the Corporation cannot agree on such determination prior
to the first Business Day of such additional five (5) year period, the Market
Rate shall be determined as of the first Business Day of each such additional
five (5) year period as follows: (i) a majority of the holders of the Series A
Preferred Stock then outstanding shall choose an investment banking firm of
nationally recognized status and the Corporation shall choose an investment
banking firm of nationally recognized status; (ii) the investment banking
firms chosen by a majority of the holders of the Series A Preferred Stock then
outstanding and the Corporation shall mutually choose a third investment
banking firm of nationally recognized status (the "Independent Investment
Banker"); (iii) the Independent Investment Banker shall then determine, in its
sole discretion, the Market Rate and shall advise the holders of Series A
Preferred Stock and the Corporation of its determination; and (iv) the fees of
the Independent Investment Banker for making such determination shall be borne
fifty percent (50%) by the holders of Series A Preferred Stock and fifty
percent (50%) by the Corporation.
(d) Procedures for Required Redemption
(i) Notice of any required redemption shall be mailed
by the holder of the Series A Preferred Stock requesting redemption, postage
prepaid, not less than 30 nor more than 90 days prior to the Redemption Date,
addressed to the Corporation. In addition to any information required by law
or by the applicable rules of any exchange upon which Series A Preferred Stock
may be listed or admitted to trading, such notice shall state: (a) the
Redemption Date; (b) the Redemption Price; and (c) the number of shares of
Series A Preferred Stock to be redeemed.
(ii) If notice has been mailed in accordance with
Section 6(d)(i) above on or before the Redemption Date specified in such
notice all funds necessary for such redemption shall have been irrevocably set
aside by the Corporation, separate and apart from its other funds in trust for
the pro rata benefit of the holders of the Series A Preferred Stock requesting
redemption, so as to be, and to continue to be available therefor, then, from
and after the Redemption Date, said shares shall no longer be deemed to be
outstanding and shall not have the status of Series A Preferred Stock and all
rights of the holders thereof as shareholders of the Corporation (except the
right to receive the Redemption Price) shall cease. Upon surrender, in
accordance with said notice, of the certificates for any shares of Series A
Preferred Stock so redeemed, such shares of Series A Preferred Stock shall be
redeemed by the Corporation at the Redemption Price. In case fewer than all
the Series A Preferred Stock represented by any such certificate are redeemed,
a new certificate or certificates shall be issued representing the unredeemed
Series A Preferred Stock without cost to the holder thereof.
(iii) Any funds deposited with a bank or trust
company for the purpose of redeeming shares of Series A Preferred Stock shall
be irrevocable except that:
(A) the Corporation shall be entitled to receive
from such bank or trust company the interest or other earnings, if any, earned
on any money so deposited in trust, and the holders of any shares redeemed
shall have no claim to such interest or other earnings; and
(B) any balance of monies so deposited by the
Corporation and unclaimed by the holders of the Series A Preferred Stock
entitled thereto at the expiration of one year from the applicable Redemption
Date shall be repaid, together with any interest or other earnings earned
thereon, to the Corporation, and after any such repayment, the holders of the
shares entitled to the funds so repaid to the Corporation shall look only to
the Corporation for payment without interest or other earnings.
(iv) No Series A Preferred Stock may be redeemed except
with funds legally available for the payment of the Redemption Price.
(v) If the Redemption Date is after a Record Date and
before the related Quarterly Dividend Date, the dividend payable on such
Quarterly Dividend Date shall be paid to the holder in whose name the Series A
Preferred Stock to be redeemed are registered at the close of business on such
Record Date notwithstanding the redemption thereof between such Record Date
and the related Quarterly Dividend Date or the Corporation's default in the
payment of the dividend due.
(e) The Series A Preferred Stock redeemed, repurchased or
retired pursuant to the provisions of this Section 6(b) or surrendered to the
Corporation upon conversion shall thereupon be retired and may not be reissued
as Series A Preferred Stock but shall thereafter have the status of authorized
but unissued shares of the Corporation.
Section 7. Voting Rights. The holders of Series A Preferred Stock shall
not be entitled to vote on any matter except as provided below; provided,
however, the holders of Series A Preferred Stock shall not have any voting
rights to the extent such rights will cause any holder of a Series A Preferred
Stock to own more than 9.9 % of the outstanding voting stock of the
Corporation or otherwise cause any holder of Series A Preferred Stock that is
classified as a REIT under Section 856 of the Code to lose its status as a
REIT under the Code.
(a) So long as any shares of Series A Preferred Stock remain
outstanding, the Corporation will not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of Series A Preferred
Stock outstanding at the time, given in person or by proxy, either in writing
or at a meeting (such series voting separately as a class), (i) authorize,
create or issue, or increase the authorized or issued amount of any class or
series of shares of stock ranking prior to the Series A Preferred Stock with
respect to the payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up or reclassify any authorized shares of
stock of the Corporation into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase
any such shares; or (ii) amend, alter or repeal the provisions of the Charter
or the terms of the Series A Preferred Stock, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series A Preferred Stock or the
holders thereof; provided, however, with respect to the occurrence of any of
the Events set forth in (ii) above, so long as the shares of Series A
Preferred Stock remain outstanding with the terms thereof materially
unchanged, even if upon the occurrence of an Event the Corporation may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of Series A Preferred Stock and provided further that (x) any
increase in the amount of the authorized or issued shares of Preferred Stock
or the creation or issuance of any other Preferred Stock, or (y) any increase
in the amount of authorized or issued Series A Preferred Stock or any other
Preferred Stock, in each case ranking on a parity with or junior to the Series
A Preferred Stock with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up, shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers.
Nothing herein contained shall require such a vote or consent
(i) in connection with any increase in the total number of authorized or
issued shares of Common Stock, or (ii) in connection with the authorization or
issuance of any class or series of shares of stock ranking, as to distribution
rights and the liquidation preference, on a parity with or junior to the
Series A Preferred Stock.
The foregoing voting provisions will not apply if, at or
prior to the time when the act with respect to which such vote would otherwise
be required shall be effected, all outstanding shares of Series A Preferred
Stock shall have been redeemed or called for redemption and sufficient funds
shall have been deposited in trust to effect such redemption.
Section 8. Conversion
(a) Holders of Series A Preferred Stock shall have the
right, exercisable at any time and from time to time, except in the case of
Series A Preferred Stock called for redemption as set forth in Section 6
hereof, to convert all or any of such Series A Preferred Stock into Common
Stock at a conversion price per share of Common Stock equal to (i) the Net
Book Value Per Share of Common Stock on the Closing Date or (ii) in the event
any sales of Common Stock to any institutional purchasers have taken place on
or prior to the Closing Date or are subject to a commitment to purchase from
an institutional purchaser made on or prior to the Closing Date, the Gross
Sales Price of a Share of Common Stock; multiplied by 1.08 (the "Conversion
Price"). In the case of Series A Preferred Stock called for redemption,
conversion rights will expire at the close of business on the last Business
Day preceding the Redemption Date. Notice of redemption at the option of the
Corporation must be mailed not less than 60 days and not more than 90 days
prior to the Redemption Date as provided in Section 6(b) hereof. Upon
conversion, no adjustment or payment will be made for distributions, but if
any holder surrenders Class A Preferred Stock for conversion after the close
of business on the Record Date for the payment of a distribution and prior to
the opening of business on the related Quarterly Dividend Date, then,
notwithstanding such conversion, the distribution payable on such Quarterly
Dividend Date will be paid to the registered holder of such shares on such
Record Date. In such event, such shares, when surrendered for conversion
during the period between the close of business on any Record Date and the
opening of business on the corresponding Quarterly Dividend Date, must be
accompanied by payment of an amount equal to the distribution payable on such
Quarterly Dividend Date on the shares so converted (unless such shares were
converted after the issuance of a notice of redemption with respect to such
shares, in which event such shares shall be entitled to the distribution
payable thereon on such Quarterly Dividend Date without making such payment).
(b) Any holder of one or more shares of Series A Preferred
Stock electing to convert such share or shares shall deliver the certificate
or certificates therefor to the principal office of any transfer agent for the
Common Stock, with the form of notice of election to convert as the
Corporation shall prescribe fully completed and duly executed and (if so
required by the Corporation or any conversion agent) accompanied by
instruments of transfer in form satisfactory to the Corporation and to any
conversion agent, duly executed by the registered holder or his duly
authorized attorney, and transfer taxes, stamps or funds therefor or evidence
of payment thereof. The conversion right with respect to any such shares
shall be deemed to have been exercised at the date upon which the certificates
therefor accompanied by such duly executed notice of election and instruments
of transfer and such taxes, stamps, funds or evidence of payment shall have
been so delivered, and the person or persons entitled to receive the shares of
the Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of the Common Stock
upon said date.
(c) No fractional shares of Common Stock or scrip
representing a fractional share shall be issued upon conversion of Series A
Preferred Stock. If more than one share of Series A Preferred Stock shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock which shall be issuable upon conversion thereof shall
be computed on the basis of the aggregate number of shares of Series A
Preferred Stock so surrendered. Instead of any fractional shares of Common
Stock which would otherwise be issuable upon conversion of any shares of
Series A Preferred Stock, the Corporation shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the
closing price for the Common Stock on the last trading day preceding the date
of conversion. The closing price for such day shall be the last reported
sales price regular way or, in case no such reported sale takes place on such
date, the average of the reported closing bid and asked prices regular way, in
either case on the New York Stock Exchange, or if the Common Stock is not
listed or admitted to trading on such Exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or, if not listed or admitted to trading on any national securities exchange,
the closing sale price of the Common Stock or in case no reported sale takes
place, the average of the closing bid and asked prices, on Nasdaq or any
comparable system. If the Common Stock is not quoted on Nasdaq or any
comparable system, the Board of Directors shall in good faith determine the
current market price on the basis of such quotation as it considers
appropriate.
(d) If a holder converts shares of Series A Preferred Stock,
the Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issuance of shares of Common Stock upon the conversion. The
holder, however, shall pay to the Corporation the amount of any tax which is
due (or shall establish to the satisfaction of the Corporation payment
thereof) if the shares are to be issued in a name other than the name of such
holder and shall pay to the Corporation any amount required by the last
sentence of Section 8(a) hereof.
(e) The Corporation shall reserve and shall at all times
have reserved out of its authorized but unissued Common Stock a sufficient
number of shares of Common Stock to permit the conversion of the then
outstanding Series A Preferred Stock. All Common Stock which may be issued
upon conversion of Series A Preferred Stock shall be validly issued, fully
paid and nonassessable, and not subject to preemptive or other similar rights.
In order that the Corporation may issue Common Stock upon conversion of Series
A Preferred Stock, the Corporation will endeavor to comply with all applicable
federal and state securities laws and will endeavor to list such Common Stock
to be issued upon conversion on each securities exchange on which the Common
Stock is listed.
(f) The conversion rate in effect at any time shall be
subject to adjustment from time to time as follows:
(i) In case the Corporation shall (1) pay or make a
distribution in shares of Common Stock to holders of the Common Stock, (2)
reclassify the outstanding Common Stock into shares of some other class or
series of shares, (3) subdivide the outstanding Common Stock into a greater
number of shares of Common Stock or (4) combine the outstanding Common Stock
into a smaller number of shares of Common Stock, the conversion rate
immediately prior to such action shall be adjusted so that the holder of any
shares of Series A Preferred Stock thereafter surrendered for conversion shall
be entitled to receive the number of shares of Common Stock which he would
have owned immediately following such action had such Series A Preferred Stock
been converted immediately prior thereto. An adjustment made pursuant to this
Section 8(f)(i) shall become effective immediately after the record date in
the case of a distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
(ii) In case the Corporation shall issue rights, options
or warrants to all holders of the Common Stock entitling them to subscribe for
or purchase Common Stock (or securities convertible into Common Stock) at a
price per share less than the current market price (as determined pursuant to
Section 8(f)(iv)) of the Common Stock on such record date, the number of
shares of Common Stock into which each share of Series A Preferred Stock shall
be convertible shall be adjusted so that the same shall be equal to the number
determined by multiplying the number of shares of Common Stock into which such
share of Series A Preferred Stock was convertible immediately prior to such
record date by a fraction of which the numerator shall be the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible), and of which the denominator shall be the number of
shares of Common Stock outstanding on such record date, plus the number of
shares of Common Stock which the aggregate offering price of the additional
shares of Common Stock offered (or into which the convertible securities so
offered are convertible) would purchase at such current market price. Such
adjustments shall become effective immediately after such record date for the
determination of the holders of the Common Stock entitled to receive such
distribution. For purposes of this subsection (ii), the number of shares of
Common Stock at any time outstanding shall not include shares of Common Stock
held in the treasury of the Corporation.
(iii) In case the Corporation shall distribute to
all holders of the Common Stock any class of shares of stock other than Common
Stock, evidences of indebtedness or assets of the Corporation (other than cash
distributions out of current or retained earnings), or shall distribute to all
holders of the Common Stock rights or warrants to subscribe for securities
(other than those referred to in Section 8(f)(ii)), then in each such case the
number of Common Stock into which each share of Series A Preferred Stock shall
be convertible shall be adjusted so that the same shall equal the number
determined by multiplying the number of shares of Common Stock into which such
share of Series A Preferred Stock was convertible immediately prior to the
date of such distribution by a fraction of which the numerator shall be the
current market price (determined as provided in Section 8(f)(iv)) of the
Common Stock on the record date mentioned below, and of which the denominator
shall be such current market price of the Common Stock, less the then fair
market value (as determined by the Board of Directors, whose determination
shall be conclusive evidence of such fair market value) of the portion of the
securities or assets so distributed or of such subscription rights or warrants
applicable to one share of Common Stock. Such adjustment shall become
effective immediately after the record date for the determination of the
holders of the Common Stock entitled to receive such distribution.
Notwithstanding the foregoing, in the event that the Corporation shall
distribute rights or warrants (other than those referred to in Section
8(f)(ii)) ("Rights") pro rata to holders of the Common Stock, the Corporation
may, in lieu of making any adjustment pursuant to this Section 8(f)(iii), make
proper provision so that each holder of a share of Series A Preferred Stock
who converts such share after the record date for such distribution and prior
to the expiration or redemption of the Rights shall be entitled to receive
upon such conversion, in addition to the Common Stock issuable upon such
conversion (the "Conversion Shares"), a number of Rights to be determined as
follows: (1) if such conversion occurs on or prior to the date for the
distribution to the holders of Rights of separate certificates evidencing such
Rights (the "Distribution Date"), the same number of Rights to which a holder
of a number of shares of Common Stock equal to the number of Conversion Shares
is entitled at the time of such conversion in accordance with the terms and
provisions of and applicable to the Rights; and (2) if such conversion occurs
after the Distribution Date, the same number of Rights to which a holder of
the number of shares of Common Stock into which a share of Series A Preferred
Stock so converted was convertible immediately prior to the Distribution Date
would have been entitled on the Distribution Date in accordance with the terms
and provisions of and applicable to the Rights.
(iv) The current market price per share of the Common
Stock on any date shall be deemed to be the average of the daily closing
prices for 30 consecutive trading days commencing 45 trading days before the
date in question. The closing price for each day shall be the last reported
sales price or, in case no such reported sale takes place on such date, the
average of the reported closing bid and asked prices regular way, in either
case on the New York Stock Exchange, or if the Common Stock is not listed or
admitted to trading on such Exchange, on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, the closing
sale price of the Common Stock or, in case no reported sale takes place, the
average of the closing bid and asked prices, on Nasdaq or any comparable
system, or if the Common Stock is not quoted on Nasdaq or any comparable
system, the closing sale price or, in case no reported sale takes place, the
average of the closing bid and asked prices, as furnished by any two members
of the National Association of Securities Dealers, Inc. selected from time to
time by the Corporation for that purpose.
(v) In any case in which this Section 8 shall require
that an adjustment be made immediately following a record date, the
Corporation may elect to defer (but only until five Business Days following
the mailing of the notice described in Section 8(j)) issuing to the holder of
any Series A Preferred Stock converted after such record date the Common Stock
and other shares of stock of the Corporation issuable upon such conversion
over and above the Common Stock and other shares of stock of the Corporation
issuable upon such conversion only on the basis of the conversion rate prior
to adjustment; and, in lieu of the shares the issuance of which is so
deferred, the Corporation shall issue or cause its transfer agents to issue
appropriate evidence of the right to receive such shares.
(g) No adjustment in the conversion rate shall be required
until cumulative adjustments result in a change of 1% or more of the
conversion price as in effect prior to the last adjustment of the conversion
rate; provided, however, that any adjustment which by reason of this Section
8(g) is not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 8
shall be made to the nearest cent ($.01) or the nearest one-hundredth (1/100)
of a share, as the case may be. No adjustment to the conversion rate shall be
made for cash dividends.
(h) In the event that, as a result of an adjustment made
pursuant to Section 8(f), the holder of any Series A Preferred Stock
thereafter surrendered for conversion shall become entitled to receive any
shares of stock of the Corporation other than Common Stock, thereafter the
number of such other shares so receivable upon conversion of any Series A
Preferred Stock shall be subject to adjustment from time to time in a manner
and on terms as nearly equivalent as practicable to the provisions with
respect to the Common Stock contained in this Section 8.
(i) The Corporation may make such increases in the
conversion rate, in addition to those required by Sections 8(f)(i), (ii) and
(iii), as is considered to be advisable in order that any event treated for
federal income tax purposes as a distribution of shares or share rights shall
not be taxable to the recipients thereof.
(j) Whenever the conversion rate is adjusted, the
Corporation shall promptly mail to all holders of record of Series A Preferred
Stock a notice of the adjustment and shall cause to be prepared a certificate
signed by a principal financial officer of the Corporation setting forth the
adjusted conversion rate and a brief statement of the facts requiring such
adjustment and the computation thereof; such certificate shall forthwith be
filed with each transfer agent for the Series A Preferred Stock.
(k) In the event that:
(i) the Corporation takes any action which would
require an adjustment in the conversion rate,
(ii) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to, another corporation and
shareholders of the Corporation must approve the transaction, or
(iii) there is a dissolution, winding up or
liquidation of the Corporation,
a holder of Series A Preferred Stock may wish to convert some or all of such
shares into Common Stock prior to the record date for, or the effective date
of, the transaction so that he may receive the rights, warrants, securities or
assets which a holder of Common Stock on that date may receive. Therefore,
the Corporation shall mail to holders of Series A Preferred Stock a notice
stating the proposed record or effective date of the transaction, as the case
may be. The Corporation shall mail the notice at least ten days before such
date; however, failure to mail such notice or any defect therein shall not
affect the validity of any transaction referred to in clauses (i), (ii) or
(iii) of this Section 8(k).
(l) If any of the following shall occur, namely: (i) any
reclassification or change of outstanding Common Stock issuable upon
conversion of Series A Preferred Stock (other than a change in par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), (ii) any consolidation or merger to
which the Corporation is a party other than a consolidation or merger in which
the Corporation is the continuing corporation and which does not result in any
reclassification of, or change (other than a change in name, or par value, or
from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) in, outstanding Common Stock or (iii)
any sale, transfer or lease of all or substantially all of the property or
business of the Corporation as an entirety, then the Corporation, or such
successor or purchasing corporation, as the case may be, shall, as a condition
precedent to such reclassification, change, consolidation, merger, sale,
transfer or lease, provide in its charter document that each share of Series A
Preferred Stock shall be convertible into the kind and amount of shares of
stock and other securities and property (including cash) receivable upon such
reclassification, change, consolidation, merger, sale, transfer or lease by a
holder of the number of shares of Common Stock deliverable upon conversion of
such shares of Series A Preferred Stock immediately prior to such
reclassification, change, consolidation, merger, sale, transfer or lease.
Such charter document shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this
Section 8. The foregoing, however, shall not in any way affect the right that
a holder of Series A Preferred Stock may otherwise have, pursuant to clause
(2) of the last sentence of Section 8(f)(iii), to receive Rights upon
conversion of Series A Preferred Stock. If, in the case of any such
reclassification, change, consolidation, merger, sale, transfer or lease, the
shares of stock or other securities and property (including cash) receivable
thereupon by a holder of the Common Stock includes shares of stock or
beneficial interest or other securities and property of a corporation or other
entity other than the successor or purchasing corporation, as the case may be,
in such reclassification, change, consolidation, merger, sale, transfer or
lease, then the charter document of such other corporation shall contain such
additional provisions to protect the interests of the holders of Series A
Preferred Stock as the Board of Directors shall reasonably consider necessary
by reason of the foregoing. The provisions of this Section 8(l) shall
similarly apply to successive consolidations, mergers, sales, transfers or
leases.
No holder of Series A Convertible Preferred Stock will
possess any preemptive rights to subscribe for or acquire any unissued shares
of the Corporation (whether now or hereafter authorized) or securities of the
Corporation convertible into or carrying a right to subscribe to or acquire
shares of the Corporation.
Section 9. So long as any Series A Preferred Stock is outstanding,
the Corporation shall not issue any options to purchase shares of the
Corporation ("Employee Stock Options") to officers, directors or employees of,
or consultants to, the Corporation, whether pursuant to employee stock option
or purchase plans of the Corporation or employment or consulting agreements or
otherwise for an exercise price which is less than the fair market value of
such shares on the date of grant. In the event the number of shares of Common
Stock subject to Employee Stock Options, excluding any Employee Stock Options
which were issued on the Closing Date in exchange for options to purchase
shares of Wellsford Residential Property Trust, at any time exceeds, in the
aggregate, 10% of the Common Stock outstanding at such time, all Employee
Stock Options outstanding at such time in excess of such 10%, shall be deemed
for purposes of Section 8 hereof to have an exercise price per share equal to
20% of the average fair market value of a share of Common Stock on the date of
grant of those shares subject to Employee Stock Options most recently granted
in excess of such 10%.
Section 10. Exclusion of Other Rights. The Series A Preferred Stock
shall not have any voting powers, preferences and relative, participating,
optional or other special rights, other than those specifically set forth in
the terms of the Series A Preferred Stock (as such terms may be amended from
time to time) or in the charter of the Corporation. The Series A Preferred
Stock shall have no preemptive or subscription rights.
Section 11. Headings of Subdivisions. The headings of the various
subdivisions hereof are for convenience of reference only and shall not affect
the interpretation of any of the provisions hereof.
Section 12. Severability of Provisions. If any voting powers,
preferences and relative, participating, optional and other special rights of
the Series A Preferred Stock and qualifications, limitations and restrictions
thereof set forth in the terms of the Series A Preferred Stock (as such terms
may be amended from time to time) are invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other voting
powers, preferences and relative, participating, optional and other special
rights of Series A Preferred Stock and qualifications, limitations and
restrictions thereof set forth in the terms of the Series A Preferred Stock
(as so amended) which can be given effect without the invalid, unlawful or
unenforceable voting powers, preferences and relative, participating, optional
or other special rights of Series A Preferred Stock and qualifications,
limitations and restrictions thereof herein set forth shall not be deemed
dependent upon any other such voting powers, preferences and relative,
participating, optional or other special right of Series A Preferred Stock and
qualifications, limitations and restrictions thereof unless so expressed
herein.
SECOND: The Shares have been classified and designated by the Board of
Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to
all matters or facts required to be verified under oath, the undersigned
President acknowledges that to the best of his knowledge, information and
belief, these matters and facts are true in all material respects and that
this statement is made under the penalties for perjury.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its Chairman of the
Board and attested to by its Assistant Secretary on this 30th of May, 1997.
ATTEST: WELLSFORD REAL PROPERTIES, INC
/s/ Gregory F. Hughes By:/s/ Jeffrey H. Lynford(SEAL)
- ----------------------------- -------------------------------
Gregory F. Hughes Jeffrey H. Lynford
Assistant Secretary Chairman of the Board
WELLSFORD REAL PROPERTIES, INC.
BYLAWS
ARTICLE I
OFFICES
Section 1. PRINCIPAL OFFICE. The principal office of the
Corporation shall be located at such place or places as the Board of Directors
may designate.
Section 2. ADDITIONAL OFFICES. The Corporation may have
additional offices at such places as the Board of Directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. PLACE. All meetings of stockholders shall be held
at the principal office of the Corporation or at such other place within the
United States as shall be stated in the notice of the meeting.
Section 2. ANNUAL MEETING. An annual meeting of the
stockholders for the election of directors and the transaction of any business
within the powers of the Corporation shall be held on a date and at the time
set by the Board of Directors during the month of May in each year.
Section 3. SPECIAL MEETINGS. The chairman of the board,
president, chief executive officer or Board of Directors may call special
meetings of the stockholders. Special meetings of stockholders shall also be
called by the secretary of the Corporation upon the written request of the
holders of shares entitled to cast not less than a majority of all the votes
entitled to be cast at such meeting. Such request shall state the purpose of
such meeting and the matters proposed to be acted on at such meeting. The
secretary shall inform such stockholders of the reasonably estimated cost of
preparing and mailing notice of the meeting and, upon payment to the
Corporation by such stockholders of such costs, the secretary shall give
notice to each stockholder entitled to notice of the meeting.
Section 4. NOTICE. Not less than ten nor more than 90 days
before each meeting of stockholders, the secretary shall give to each
stockholder entitled to vote at such meeting and to each stockholder not
entitled to vote who is entitled to notice of the meeting written or printed
notice stating the time and place of the meeting and, in the case of a special
meeting or as otherwise may be required by any statute, the purpose for which
the meeting is called, either by mail or by presenting it to such stockholder
personally or by leaving it at his residence or usual place of business. If
mailed, such notice shall be deemed to be given when deposited in the United
States mail addressed to the stockholder at his post office address as it
appears on the records of the Corporation, with postage thereon prepaid.
Section 5. SCOPE OF NOTICE. Any business of the Corporation
may be transacted at an annual meeting of stockholders without being
specifically designated in the notice, except such business as is required by
any statute to be stated in such notice. No business shall be transacted at a
special meeting of stockholders except as specifically designated in the
notice.
Section 6. ORGANIZATION. At every meeting of stockholders,
the chairman of the board, if there be one, shall conduct the meeting or, in
the case of vacancy in office or absence of the chairman of the board, one of
the following officers present shall conduct the meeting in the order stated:
the vice chairman of the board, if there be one, the president, the vice
presidents in their order of rank and seniority, or a chairman chosen by the
stockholders entitled to cast a majority of the votes which all stockholders
present in person or by proxy are entitled to cast, shall act as chairman, and
the secretary, or, in his absence, an assistant secretary, or in the absence
of both the secretary and assistant secretaries, a person appointed by the
chairman shall act as secretary.
Section 7. QUORUM. At any meeting of stockholders, the
presence in person or by proxy of stockholders entitled to cast a majority of
all the votes entitled to be cast at such meeting shall constitute a quorum;
but this section shall not affect any requirement under any statute or the
charter of the Corporation for the vote necessary for the adoption of any
measure. If, however, such quorum shall not be present at any meeting of the
stockholders, the stockholders entitled to vote at such meeting, present in
person or by proxy, shall have the power to adjourn the meeting from time to
time to a date not more than 120 days after the original record date without
notice other than announcement at the meeting. At such adjourned meeting at
which a quorum shall be present, any business may be transacted which might
have been transacted at the meeting as originally notified.
Section 8. VOTING. Unless otherwise provided in the charter,
a plurality of all the votes cast at a meeting of stockholders duly called and
at which a quorum is present shall be sufficient to elect a director. Each
share may be voted for as many individuals as there are directors to be
elected and for whose election the share is entitled to be voted. A majority
of the votes cast at a meeting of stockholders duly called and at which a
quorum is present shall be sufficient to approve any other matter which may
properly come before the meeting, unless more than a majority of the votes
cast is required by statute or by the charter of the Corporation. Unless
otherwise provided in the charter, each outstanding share, regardless of
class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of stockholders.
Section 9. PROXIES. A stockholder may cast the votes
entitled to be cast by the shares of the stock owned of record by him either
in person or by proxy executed in writing by the stockholder or by his duly
authorized attorney in fact. Such proxy shall be filed with the secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided
in the proxy.
Section 10. VOTING OF STOCK BY CERTAIN HOLDERS. Stock of the
Corporation registered in the name of a corporation, partnership, trust or
other entity, if entitled to be voted, may be voted by the president or a vice
president, a general partner or trustee thereof, as the case may be, or a
proxy appointed by any of the foregoing individuals, unless some other person
who has been appointed to vote such stock pursuant to a bylaw or a resolution
of the governing body of such corporation or other entity or agreement of the
partners of a partnership presents a certified copy of such bylaw, resolution
or agreement, in which case such person may vote such stock. Any director or
other fiduciary may vote stock registered in his name as such fiduciary,
either in person or by proxy.
Shares of stock of the Corporation directly or indirectly owned by it
shall not be voted at any meeting and shall not be counted in determining the
total number of outstanding shares entitled to be voted at any given time,
unless they are held by it in a fiduciary capacity, in which case they may be
voted and shall
be counted in determining the total number of outstanding shares at any given
time.
The Board of Directors may adopt by resolution a procedure by which a
stockholder may certify in writing to the Corporation that any shares of stock
registered in the name of the stockholder are held for the account of a
specified person other than the stockholder. The resolution shall set forth
the class of stockholders who may make the certification, the purpose for
which the certification may be made, the form of certification and the
information to be contained in it; if the certification is with respect to a
record date or closing of the stock transfer books, the time after the record
date or closing of the stock transfer books within which the certification
must be received by the Corporation; and any other provisions with respect to
the procedure which the Board of Directors considers necessary or desirable.
On receipt of such certification, the person specified in the certification
shall be regarded as, for the purposes set forth in the certification, the
stockholder of record of the specified stock in place of the stockholder who
makes the certification.
Notwithstanding any other provision of the charter of the Corporation or
these Bylaws, Title 3, Subtitle 7 of the Corporations and Associations Article
of the Annotated Code of Maryland (or any successor statute) shall not apply
to any acquisition by any person of shares of stock of the Corporation. This
section may be repealed, in whole or in part, at any time, whether before or
after an acquisition of control shares and, upon such repeal, may, to the
extent provided by any successor bylaw, apply to any prior or subsequent
control share acquisition.
Section 11. INSPECTORS. At any meeting of stockholders, the
chairman of the meeting may appoint one or more persons as inspectors for such
meeting. Such inspectors shall ascertain and report the number of shares
represented at the meeting based upon their determination of the validity and
effect of proxies, count all votes, report the results and perform such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the stockholders.
Each report of an inspector shall be in writing and signed by him or by a
majority of them if there is more than one inspector acting at such meeting.
If there is more than one inspector, the report of a majority shall be the
report of the inspectors. The report of the inspector or inspectors on the
number of shares represented at the meeting and the results of the voting
shall be prima facie evidence thereof.
Section 12. NOMINATIONS AND PROPOSALS BY STOCKHOLDERS.
(a) Annual Meetings of Stockholders. (1) Nominations of persons for
election to the Board of Directors and the proposal of business to be
considered by the stockholders may be made at an annual meeting of
stockholders (i) pursuant to the Corporation's notice of meeting, (ii) by or
at the direction of the Board of Directors or (iii) by any stockholder of the
Corporation who was a stockholder of record both at the time of giving of
notice provided for in this Section 12(a) and at the time of the annual
meeting, who is entitled to vote at the meeting and who complied with the
notice procedures set forth in this Section 12(a).
(2) For nominations or other business to be properly brought
before an annual meeting by a stockholder pursuant to clause (iii) of
paragraph (a)(1) of this Section 12, the stockholder must have given timely
notice thereof in writing to the secretary of the Corporation and such other
business must otherwise be a proper matter for action by stockholders. To be
timely, a stockholder's notice shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the 60th day nor earlier than the close of business on the 90th
day prior to the first anniversary of the preceding year's annual meeting;
provided, however, that in the event that the date of the annual meeting is
advanced by more than 30 days or delayed by more than 60 days from such
anniversary date or if the Corporation has not previously held an annual
meeting, notice by the stockholder to be timely must be so delivered not
earlier than the close of business on the 90th day prior to such annual
meeting and not later than the close of business on the later of the 60th day
prior to such annual meeting or the tenth day following the day on which
public announcement of the date of such meeting is first made by the
Corporation. In no event shall the public announcement of a postponement or
adjournment of an annual meeting to a later date or time commence a new time
period for the giving of a stockholder's notice as described above. Such
stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director all
information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors in an election contest, or
is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including
such person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected); (ii) as to any other
business that the stockholder proposes to bring before the meeting, a brief
description of the business desired to be brought before the meeting, the
reasons for conducting such business at the meeting and any material interest
in such business of such stockholder and of the beneficial owner, if any, on
whose behalf the proposal is made; and (iii) as to the stockholder giving the
notice and the beneficial owner, if any, on whose behalf the nomination or
proposal is made, (x) the name and address of such stockholder, as they appear
on the Corporation's books, and of such beneficial owner and (y) the number of
shares of each class of stock of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(3) Notwithstanding anything in the second sentence of
paragraph (a)(2) of this Section 12 to the contrary, in the event that the
number of directors to be elected to the Board of Directors is increased and
there is no public announcement by the Corporation naming all of the nominees
for director or specifying the size of the increased Board of Directors at
least 70 days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 12(a) shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the secretary at the
principal executive offices of the Corporation not later than the close of
business on the tenth day following the day on which such public announcement
is first made by the Corporation.
(b) Special Meetings of Stockholders. Only such business shall be
conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting.
Nominations of persons for election to the Board of Directors may be made at a
special meeting of stockholders at which directors are to be elected
(i) pursuant to the Corporation's notice of meeting, (ii) by or at the
direction of the Board of Directors or (iii) provided that the Board of
Directors has determined that directors shall be elected at such special
meeting, by any stockholder of the Corporation who is a stockholder of record
both at the time of giving of notice provided for in this Section 12(b) and at
the time of the special meeting, who is entitled to vote at the meeting and
who complied with the notice procedures set forth in this Section 12(b). In
the event the Corporation calls a special meeting of stockholders for the
purpose of electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be) for election
to such position as specified in the Corporation's notice of meeting, if the
stockholder's notice containing the information required by paragraph (a)(2)
of this Section 12 shall be delivered to the secretary at the principal
executive offices of the Corporation not earlier than the close of business on
the 90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
tenth day following the day on which public announcement is first made of the
date of the special meeting and of the nominees proposed by the Board of
Directors to be elected at such meeting. In no event shall the public
announcement of a postponement or adjournment of a special meeting to a later
date or time commence a new time period for the giving of a stockholder's
notice as described above.
(c) General. (1) Only such persons who are nominated in accordance
with the procedures set forth in this Section 12 shall be eligible to serve as
directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this Section 12. The chairman of the meeting
shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made or proposed, as
the case may be, in accordance with the procedures set forth in this Section
12 and, if any proposed nomination or business is not in compliance with this
Section 12, to declare that such nomination or proposal shall be disregarded.
(2) For purposes of this Section 12, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable news service or in a document publicly
filed by the Corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
12, a stockholder shall also comply with all applicable requirements of state
law and of the Exchange Act and the rules and regulations thereunder with
respect to the matters set forth in this Section 12. Nothing in this Section
12 shall be deemed to affect any rights of stockholders to request inclusion
of proposals in, nor the rights of the Corporation to omit a proposal from,
the Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange
Act.
Section 13. VOTING BY BALLOT. Voting on any question or in any
election may be viva voce unless the presiding officer shall order or any
stockholder shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed under the direction of its Board of Directors.
Section 2. NUMBER, TENURE AND QUALIFICATIONS. At any regular
meeting or at any special meeting called for that purpose, a majority of the
entire Board of Directors may establish, increase or decrease the number of
directors, provided that the number thereof shall never be less than the
minimum number required by the Maryland General Corporation Law, nor more than
15, and further provided that the tenure of office of a director shall not be
affected by any decrease in the number of directors.
Section 3. ANNUAL AND REGULAR MEETINGS. An annual meeting of the
Board of Directors shall be held immediately after and at the same place as
the annual meeting of stockholders, no notice other than this Bylaw being
necessary. The Board of Directors may provide, by resolution, the time and
place, either within or without the State of Maryland, for the holding of
regular meetings of the Board of Directors without other notice than such
resolution.
Section 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the chairman of the board,
president or by a majority of the directors then in office. The person or
persons authorized to call special meetings of the Board of Directors may fix
any place, either within or without the State of Maryland, as the place for
holding any special meeting of the Board of Directors called by them.
Section 5. NOTICE. Notice of any special meeting of the Board of
Directors shall be delivered personally or by telephone, facsimile
transmission, United States mail or courier to each director at his business
or residence address. Notice by personal delivery, by telephone or a
facsimile transmission shall be given at least two days prior to the meeting.
Notice by mail shall be given at least five days prior to the meeting and
shall be deemed to be given when deposited in the United States mail properly
addressed, with postage thereon prepaid. Telephone notice shall be deemed to
be given when the director is personally given such notice in a telephone call
to which he is a party. Facsimile transmission notice shall be deemed to be
given upon completion of the transmission of the message to the number given
to the Corporation by the director and receipt of a completed answer-back
indicating receipt. Neither the business to be transacted at, nor the purpose
of, any annual, regular or special meeting of the Board of Directors need be
stated in the notice, unless specifically required by statute or these Bylaws.
Section 6. QUORUM. A majority of the directors shall constitute
a quorum for transaction of business at any meeting of the Board of Directors,
provided that, if less than a majority of such directors are present at said
meeting, a majority of the directors present may adjourn the meeting from time
to time without further notice, and provided further that if, pursuant to the
charter of the Corporation or these Bylaws, the vote of a majority of a
particular group of directors is required for action, a quorum must also
include a majority of such group.
The directors present at a meeting which has been duly called and
convened may continue to transact business until adjournment, notwithstanding
the withdrawal of enough directors to leave less than a quorum.
Section 7. VOTING. The action of the majority of the directors
present at a meeting at which a quorum is present shall be the action of the
Board of Directors, unless the concurrence of a greater proportion is required
for such action by applicable statute.
Section 8. TELEPHONE MEETINGS. Directors may participate in a
meeting by means of a conference telephone or similar communications equipment
if all persons participating in the meeting can hear each other at the same
time. Participation in a meeting by these means shall constitute presence in
person at the meeting.
Section 9. INFORMAL ACTION BY DIRECTORS. Any action required or
permitted to be taken at any meeting of the Board of Directors may be taken
without a meeting, if a consent in writing to such action is signed by each
director and such written consent is filed with the minutes of proceedings of
the Board of Directors.
Section 10. VACANCIES. If for any reason any or all the directors
cease to be directors, such event shall not terminate the Corporation or
affect these Bylaws or the powers of the remaining directors hereunder (even
if fewer than three directors remain). Any vacancy on the Board of Directors
for any cause other than an increase in the number of directors shall be
filled by a majority of the remaining directors, although such majority is
less than a quorum. Any vacancy in the number of directors created by an
increase in the number of directors may be filled by a majority vote of the
entire Board of Directors. Any individual so elected as director shall hold
office until the next annual meeting of stockholders and until his successor
is elected and qualifies.
Section 11. COMPENSATION. Directors shall not receive any stated
salary for their services as directors but, by resolution of the Board of
Directors, may receive compensation per year and/or per meeting and/or per
visit to real property or other facilities owned or leased by the Corporation
and for any service or activity they performed or engaged in as directors.
Directors may be reimbursed for expenses of attendance, if any, at each
annual, regular or special meeting of the Board of Directors or of any
committee thereof and for their expenses, if any, in connection with each
property visit and any other service or activity they performed or engaged in
as directors; but nothing herein contained shall be construed to preclude any
directors from serving the Corporation in any other capacity and receiving
compensation therefor.
Section 12. LOSS OF DEPOSITS. No director shall be liable for any
loss which may occur by reason of the failure of the bank, trust company,
savings and loan association, or other institution with whom moneys or stock
have been deposited.
Section 13. SURETY BONDS. Unless required by law, no director
shall be obligated to give any bond or surety or other security for the
performance of any of his duties.
Section 14. RELIANCE. Each director, officer, employee and agent
of the Corporation shall, in the performance of his duties with respect to the
Corporation, be fully justified and protected with regard to any act or
failure to act in reliance in good faith upon the books of account or other
records of the Corporation, upon an opinion of counsel or upon reports made to
the Corporation by any of its officers or employees or by the adviser,
accountants, appraisers or other experts or consultants selected by the Board
of Directors or officers of the Corporation, regardless of whether such
counsel or expert may also be a director.
Section 15. CERTAIN RIGHTS OF DIRECTORS, OFFICERS, EMPLOYEES AND
AGENTS. The directors shall have no responsibility to devote their full time
to the affairs of the Corporation. Any director or officer, employee or agent
of the Corporation, in his personal capacity or in a capacity as an affiliate,
employee, or agent of any other person, or otherwise, may have business
interests and engage in business activities similar to or in addition to or in
competition with those of or relating to the Corporation.
ARTICLE IV
COMMITTEES
Section 1. NUMBER, TENURE AND QUALIFICATIONS. The Board of
Directors may appoint from among its members an Executive Committee, an Audit
Committee, a Compensation Committee and other committees, composed of one or
more directors, to serve at the pleasure of the Board of Directors.
Section 2. POWERS. The Board of Directors may delegate to
committees appointed under Section 1 of this Article any of the powers of the
Board of Directors, except as prohibited by law.
Section 3. MEETINGS. Notice of committee meetings shall be given
in the same manner as notice for special meetings of the Board of Directors.
A majority of the members of the committee shall constitute a quorum for the
transaction of business at any meeting of the committee. The act of a
majority of the committee members present at a meeting shall be the act of
such committee. The Board of Directors may designate a chairman of any
committee, and such chairman or any two members of any committee may fix the
time and place of its meeting unless the Board shall otherwise provide. In
the absence of any member of any such committee, the members thereof present
at any meeting, whether or not they constitute a quorum, may appoint another
director to act in the place of such absent member. Each committee shall keep
minutes of its proceedings.
Section 4. TELEPHONE MEETINGS. Members of a committee of the
Board of Directors may participate in a meeting by means of a conference
telephone or similar communications equipment if all persons participating in
the meeting can hear each other at the same time. Participation in a meeting
by these means shall constitute presence in person at the meeting.
Section 5. INFORMAL ACTION BY COMMITTEES. Any action required or
permitted to be taken at any meeting of a committee of the Board of Directors
may be taken without a meeting, if a consent in writing to such action is
signed by each member of the committee and such written consent is filed with
the minutes of proceedings of such committee.
Section 6. VACANCIES. Subject to the provisions hereof, the
Board of Directors shall have the power at any time to change the membership
of any committee, to fill all vacancies, to designate alternate members to
replace any absent or disqualified member or to dissolve any such committee.
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ARTICLE V
OFFICERS
Section 1. GENERAL PROVISIONS. The officers of the Corporation
shall include a chief executive officer, a president, a secretary and a
treasurer and may include a chairman of the board, a vice chairman of the
board, one or more vice presidents, a chief operating officer, a chief
financial officer, one or more assistant secretaries and one or more assistant
treasurers. In addition, the Board of Directors may from time to time appoint
such other officers with such powers and duties as they shall deem necessary
or desirable. The officers of the Corporation shall be elected annually by
the Board of Directors at the first meeting of the Board of Directors held
after each annual meeting of stockholders, except that the chief executive
officer may appoint one or more vice presidents, assistant secretaries and
assistant treasurers. If the election of officers shall not be held at such
meeting, such election shall be held as soon thereafter as may be convenient.
Each officer shall hold office until his successor is elected and qualifies or
until his death, resignation or removal in the manner hereinafter provided.
Any two or more offices except president and vice president may be held by the
same person. In its discretion, the Board of Directors may leave unfilled any
office except that of president, treasurer and secretary. Election of an
officer or agent shall not of itself create contract rights between the
Corporation and such officer or agent.
Section 2. REMOVAL AND RESIGNATION. Any officer or agent of the
Corporation may be removed by the Board of Directors if in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Any officer of the Corporation may resign at any time by giving
written notice of his resignation to the Board of Directors, the chairman of
the board, the president or the secretary. Any resignation shall take effect
at any time subsequent to the time specified therein or, if the time when it
shall become effective is not specified therein, immediately upon its receipt.
The acceptance of a resignation shall not be necessary to make it effective
unless otherwise stated in the resignation. Such resignation shall be without
prejudice to the contract rights, if any, of the Corporation.
Section 3. VACANCIES. A vacancy in any office may be filled by
the Board of Directors for the balance of the term.
Section 4. CHIEF EXECUTIVE OFFICER. The Board of Directors may
designate a chief executive officer. The chief executive officer shall have
general responsibility for implementation of the policies of the Corporation,
as determined by the Board of Directors, and for the management of the
business and affairs of the Corporation.
Section 5. CHIEF OPERATING OFFICER. The Board of Directors may
designate a chief operating officer. The chief operating officer shall have
the responsibilities and duties as set forth by the Board of Directors or the
chief executive officer.
Section 6. CHIEF FINANCIAL OFFICER. The Board of Directors may
designate a chief financial officer. The chief financial officer shall have
the responsibilities and duties as set forth by the Board of Directors or the
chief executive officer.
Section 7. CHAIRMAN OF THE BOARD. The Board of Directors shall
designate a chairman of the board. The chairman of the board shall preside
over the meetings of the Board of Directors and of the stockholders at which
he shall be present and shall in general oversee all of the business and
affairs of the Corporation. The Chairman of the Board may execute any deed,
mortgage, bond, contract or other instrument, except in cases where the
execution thereof shall be expressly delegated by the directors or these
Bylaws to some other officer of the Corporation or shall be required by law to
be otherwise executed. The chairman of the board shall perform such other
duties as may be assigned to him or them by the Board of Directors.
Section 8. PRESIDENT. The president or chief executive officer,
as the case may be, shall in general supervise and control all of the business
and affairs of the Corporation. In the absence of a designation of a chief
operating officer by the Board of Directors, the president shall be the chief
operating officer. He may execute any deed, mortgage, bond, contract or other
instrument, except in cases where the execution thereof shall be expressly
delegated by the Board of Directors or by these Bylaws to some other officer
or agent of the Corporation or shall be required by law to be otherwise
executed; and in general shall perform all duties incident to the office of
president and such other duties as may be prescribed by the Board of Directors
from time to time.
Section 9. VICE PRESIDENTS. In the absence of the president or
in the event of a vacancy in such office, the vice president (or in the event
there be more than one vice president, the vice presidents in the order
designated at the time of their election or, in the absence of any
designation, then in the order of their election) shall perform the duties of
the president and when so acting shall have all the powers of and be subject
to all the restrictions upon the president; and shall perform such other
duties as from time to time may be assigned to him by the chairman of the
board, the president or the Board of Directors. The Board of Directors may
designate one or more vice presidents as executive vice president or as vice
president for particular areas of responsibility.
Section 10. SECRETARY. The secretary shall (a) keep the minutes
of the proceedings of the stockholders, the Board of Directors and committees
of the Board of Directors in one or more books provided for that purpose;
(b) see that all notices are duly given in accordance with the provisions of
these Bylaws or as required by law; (c) be custodian of the corporate records
and of the seal of the Corporation; (d) keep a register of the post office
address of each stockholder which shall be furnished to the secretary by such
stockholder; (e) have general charge of the share transfer books of the
Corporation; and (f) in general perform such other duties as from time to time
may be assigned to him by the chief executive officer, the president or by the
Board of Directors.
Section 11. TREASURER. The treasurer shall have the custody of
the funds and securities of the Corporation and shall keep full and accurate
accounts of receipts and disbursements in books belonging to the Corporation
and shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as may be designated by the
Board of Directors. In the absence of a designation of a chief financial
officer by the Board of Directors, the treasurer shall be the chief financial
officer of the Corporation.
The treasurer shall disburse the funds of the Corporation as may be
ordered by the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the president and Board of Directors, at
the regular meetings of the Board of Directors or whenever it may so require,
an account of all his transactions as treasurer and of the financial condition
of the Corporation.
If required by the Board of Directors, the treasurer shall give the
Corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the Corporation, in case of
his death, resignation, retirement or removal from office, of all books,
papers, vouchers, moneys and other property of whatever kind in his possession
or under his control belonging to the Corporation.
Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The
assistant secretaries and assistant treasurers, in general, shall perform such
duties as shall be assigned to them by the secretary or treasurer,
respectively, or by the chairman of the board, the president or the Board of
Directors. The assistant treasurers shall, if required by the Board of
Directors, give bonds for the faithful performance of their duties in such
sums and with such surety or sureties as shall be satisfactory to the Board of
Directors.
Section 13. SALARIES. The salaries and other compensation of the
officers shall be fixed from time to time by the Board of Directors and no
officer shall be prevented from receiving such salary or other compensation by
reason of the fact that he is also a director.
ARTICLE VI
CONTRACTS, LOANS, CHECKS AND DEPOSITS
Section 1. CONTRACTS. The Board of Directors may authorize any
officer or agent to enter into any contract or to execute and deliver any
instrument in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances. Any agreement, deed,
mortgage, lease or other document executed by one or more of the directors or
by an authorized person shall be valid and binding upon the Board of
Directors and upon the Corporation when authorized or ratified by action of
the Board of Directors.
Section 2. CHECKS AND DRAFTS. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or agent of the
Corporation in such manner as shall from time to time be determined by the
Board of Directors.
Section 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
may designate.
ARTICLE VII
STOCK
Section 1. CERTIFICATES. Each stockholder shall be entitled to a
certificate or certificates which shall represent and certify the number of
shares of each class of stock held by him in the Corporation. Each
certificate shall be signed by the chief executive officer, the president or a
vice president and countersigned by the secretary or an assistant secretary or
the treasurer or an assistant treasurer and may be sealed with the seal, if
any, of the Corporation. The signatures may be either manual or facsimile.
Certificates shall be consecutively numbered; and if the Corporation shall,
from time to time, issue several classes of stock, each class may have its own
number series. A certificate is valid and may be issued whether or not an
officer who signed it is still an officer when it is issued. Each certificate
representing shares which are restricted as to their transferability or voting
powers, which are preferred or limited as to their dividends or as to their
allocable portion of the assets upon liquidation or which are redeemable at
the option of the Corporation, shall have a statement of such restriction,
limitation, preference or redemption provision, or a summary thereof, plainly
stated on the certificate. If the Corporation has authority to issue stock of
more than one class, the certificate shall contain on the face or back a full
statement or summary of the designations and any preferences, conversion and
other rights, voting powers, restrictions, limitations as to dividends and
other distributions, qualifications and terms and conditions of redemption of
each class of stock and, if the Corporation is authorized to issue any
preferred or special class in series, the differences in the relative rights
and preferences between the shares of each series to the extent they have been
set and the authority of the Board of Directors to set the relative rights and
preferences of subsequent series. In lieu of such statement or summary, the
certificate may state that the Corporation will furnish a full statement of
such information to any stockholder upon request and without charge. If any
class of stock is restricted by the Corporation as to transferability, the
certificate shall contain a full statement of the restriction or state that
the Corporation will furnish information about the restrictions to the
stockholder on request and without charge.
Section 2. TRANSFERS. Upon surrender to the Corporation or the
transfer agent of the Corporation of a stock certificate duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, the Corporation shall issue a new certificate to the person entitled
thereto, cancel the old certificate and record the transaction upon its books.
The Corporation shall be entitled to treat the holder of record of
any share of stock as the holder in fact thereof and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
share or on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of the State
of Maryland.
Notwithstanding the foregoing, transfers of shares of any class of
stock will be subject in all respects to the charter of the Corporation and
all of the terms and conditions contained therein.
Section 3. REPLACEMENT CERTIFICATE. Any officer designated by
the Board of Directors may direct a new certificate to be issued in place of
any certificate previously issued by the Corporation alleged to have been
lost, stolen or destroyed upon the making of an affidavit of that fact by the
person claiming the certificate to be lost, stolen or destroyed. When
authorizing the issuance of a new certificate, an officer designated by the
Board of Directors may, in his discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or the owner's legal representative to advertise the same in such
manner as he shall require and/or to give bond, with sufficient surety, to the
Corporation to indemnify it against any loss or claim which may arise as a
result of the issuance of a new certificate.
Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
The Board of Directors may set, in advance, a record date for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or determining stockholders entitled to receive payment of any
dividend or the allotment of any other rights, or in order to make a
determination of stockholders for any other proper purpose. Such date, in any
case, shall not be prior to the close of business on the day the record date
is fixed and shall be not more than 90 days and, in the case of a meeting of
stockholders, not less than ten days, before the date on which the meeting or
particular action requiring such determination of stockholders of record is to
be held or taken.
In lieu of fixing a record date, the Board of Directors may provide
that the stock transfer books shall be closed for a stated period but not
longer than 20 days. If the stock transfer books are closed for the purpose
of determining stockholders entitled to notice of or to vote at a meeting of
stockholders, such books shall be closed for at least ten days before the date
of such meeting.
If no record date is fixed and the stock transfer books are not
closed for the determination of stockholders, (a) the record date for the
determination of stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day on which the notice
of meeting is mailed or the 30th day before the meeting, whichever is the
closer date to the meeting; and (b) the record date for the determination of
stockholders entitled to receive payment of a dividend or an allotment of any
other rights shall be the close of business on the day on which the resolution
of the directors, declaring the dividend or allotment of rights, is adopted.
When a determination of stockholders entitled to vote at any meeting
of stockholders has been made as provided in this section, such determination
shall apply to any adjournment thereof, except when (i) the determination has
been made through the closing of the transfer books and the stated period of
closing has expired or (ii) the meeting is adjourned to a date more than 120
days after the record date fixed for the original meeting, in either of which
case a new record date shall be determined as set forth herein.
Section 5. STOCK LEDGER. The Corporation shall maintain at its
principal office or at the office of its counsel, accountants or transfer
agent, an original or duplicate share ledger containing the name and address
of each stockholder and the number of shares of each class held by such
stockholder.
Section 6. FRACTIONAL STOCK; ISSUANCE OF UNITS. The Board of
Directors may issue fractional stock or provide for the issuance of scrip, all
on such terms and under such conditions as they may determine.
Notwithstanding any other provision of the charter or these Bylaws, the Board
of Directors may issue units consisting of different securities of the
Corporation. Any security issued in a unit shall have the same
characteristics as any identical securities issued by the Corporation, except
that the Board of Directors may provide that for a specified period securities
of the Corporation issued in such unit may be transferred on the books of the
Corporation only in such unit.
ARTICLE VIII
ACCOUNTING YEAR
The Board of Directors shall have the power, from time to time, to
fix the fiscal year of the Corporation by a duly adopted resolution.
ARTICLE IX
DISTRIBUTIONS
Section 1. AUTHORIZATION. Dividends and other distributions upon
the stock of the Corporation may be authorized and declared by the Board of
Directors, subject to the provisions of law and the charter of the
Corporation. Dividends and other distributions may be paid in cash, property
or stock of the Corporation, subject to the provisions of law and the charter.
Section 2. CONTINGENCIES. Before payment of any dividends or
other distributions, there may be set aside out of any assets of the
Corporation available for dividends or other distributions such sum or sums as
the Board of Directors may from time to time, in its absolute discretion,
think proper as a reserve fund for contingencies, for equalizing dividends or
other distributions, for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors shall
determine to be in the best interest of the Corporation, and the Board of
Directors may modify or abolish any such reserve in the manner in which it was
created.
ARTICLE X
INVESTMENT POLICY
Subject to the provisions of the charter of the Corporation, the
Board of Directors may from time to time adopt, amend, revise or terminate any
policy or policies with respect to investments by the Corporation as it shall
deem appropriate in its sole discretion.
ARTICLE XI
SEAL
Section 1. SEAL. The Board of Directors may authorize the
adoption of a seal by the Corporation. The seal shall contain the name of the
Corporation and the year of its incorporation and the words "Incorporated
Maryland." The Board of Directors may authorize one or more duplicate seals
and provide for the custody thereof.
Section 2. AFFIXING SEAL. Whenever the Corporation is
permitted or required to affix its seal to a document, it shall be sufficient
to meet the requirements of any law, rule or regulation relating to a seal to
place the word "(SEAL)" adjacent to the signature of the person authorized to
execute the document on behalf
of the Corporation.
ARTICLE XII
INDEMNIFICATION AND ADVANCE OF EXPENSES
To the maximum extent permitted by Maryland law in effect from time to
time, the Corporation shall indemnify and, without requiring a preliminary
determination of the ultimate entitlement to indemnification, shall pay or
reimburse reasonable expenses in advance of final disposition of a proceeding
to (a) any individual who is a present or former director or officer of the
Corporation and who is made a party to the proceeding by reason of his service
in that capacity or (b) any individual who, while a director of the
Corporation and at the request of the Corporation, serves or has served
another corporation, partnership, joint venture, trust, employee benefit plan,
limited liability company or any other enterprise as a director, officer,
partner, trustee, manager or member of such corporation, partnership, joint
venture, trust, employee benefit plan, limited liability company or other
enterprise and who is made a party to the proceeding by reason of his service
in that capacity. The Corporation may, with the approval of its Board of
Directors, provide such indemnification and advance for expenses to a person
who served a predecessor of the Corporation in any of the capacities described
in (a) or (b) above and to any employee or agent of the Corporation or a
predecessor of the Corporation.
Neither the amendment nor repeal of this Article, nor the adoption or
amendment of any other provision of the Bylaws or charter of the Corporation
inconsistent with this Article, shall apply to or affect in any respect the
applicability of the preceding paragraph with respect to any act or failure to
act which occurred prior to such amendment, repeal or adoption.
ARTICLE XIII
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to the charter of
the Corporation or these Bylaws or pursuant to applicable law, a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by statute. The attendance of any person at any meeting
shall constitute a waiver of notice of such meeting, except where such person
attends a meeting for the express purpose of objecting to the transaction of
any business on the ground that the meeting is not lawfully called or
convened.
ARTICLE XIV
AMENDMENT OF BYLAWS
The Board of Directors shall have the exclusive power to adopt, alter or
repeal any provision of these Bylaws and to make new Bylaws.
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND SHARES
A
WELLSFORD REAL PROPERTIES, INC.
SEE REVERSE FOR
CERTAIN DEFINITIONS
350,000 SHARES OF $0.1 PAR VALUE EACH
CLASS A COMMON STOCK
THIS CERTIFIES THAT IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK OF
WELLSFORD REAL PROPERTIES, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed. Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
Dated
- --------------------------- --------------------
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT--_________ Custodian_______
(Cust) (Minor)
under Union Gifts to Minors
Act_______________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received _________________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________
| |
|_____________________________|
_____________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________Attorney to transfer the
said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated_________________ 19______
In presence of
____________________________
_______________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
NUMBER INCORPORATED UNDER THE LAWS OF THE STATE OF MARYLAND SHARES
P
WELLSFORD REAL PROPERTIES, INC.
SEE REVERSE FOR
CERTAIN DEFINITIONS
2,000,000 SHARES $.01 PAR VALUE EACH
SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED STOCK
THIS CERTIFIES THAT IS THE OWNER OF
FULLY PAID AND NON-ASSESSABLE SERIES A 8% CONVERTIBLE REDEEMABLE PREFERRED
STOCK OF WELLSFORD REAL PROPERTIES, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this Certificate properly
endorsed. Witness, the seal of the Corporation and the signatures of its duly
authorized officers.
Dated
- --------------------------- --------------------
SECRETARY PRESIDENT
<PAGE>
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT--_________ Custodian_______
(Cust) (Minor)
under Union Gifts to Minors
Act_______________________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, _________________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________
| |
|_____________________________|
_____________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
_____________________________________________________________________________
_____________________________________________________________________________
_______________________________________________________________________Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
______________________________________________________Attorney to transfer the
said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated_________________ 19______
In presence of
____________________________
_______________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
July 30, 1997
Wellsford Real Properties, Inc.
610 Fifth Avenue
New York, New York 10020
Re: Registration Statement on Form S-11 relating
to 12,242,719 Shares of Common Stock
Ladies and Gentlemen:
We have served as Maryland counsel to Wellsford Real Properties,
Inc., a Maryland corporation (the "Company"), in connection with certain
matters of Maryland law arising out of the registration of 12,242,719 shares
of Common Stock, $.01 par value per share, of the Company (the "Shares"),
being sold for the account of certain stockholders of the Company and covered
by the above-referenced Registration Statement, and all amendments thereto
(the "Registration Statement"), under the Securities Act of 1933, as amended
(the "1933 Act"). Unless otherwise defined herein, capitalized terms used
herein shall have the meanings assigned to them in the Registration Statement.
In connection with our representation of the Company and as a
basis for the opinion hereinafter set forth, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of the following
documents (hereinafter collectively referred to as the "Documents"):
1. The Registration Statement and the related form of
prospectus included therein in the form in which it was transmitted to the
Securities and Exchange Commission under the 1933 Act;
2. The charter of the Company, certified as of a
recent date by the State Department of Assessments and Taxation of Maryland
(the "SDAT");
3. The Bylaws of the Company, certified as of a recent
date by an officer of the Company;
4. Resolutions adopted by the Board of Directors of
the Company relating to the issuance of the Shares, certified as of a recent
date by an officer of the Company;
5. The form of certificate representing a Share,
certified as of a recent date by an officer of the Company;
6. The Assignment and Assumption Agreement, dated
February 28, 1997, between Wellsford Commercial Properties, L.L.C., a Delaware
limited liability company, and the Company;
7. A certificate of the SDAT as to the good standing
of the Company, dated as of a recent date;
8. A certificate executed by Edward Lowenthal,
President of the Company, dated as of the date hereof; and
9. Such other documents and matters as we have deemed
necessary or appropriate to express the opinion set forth in this letter,
subject to the assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and
so far as is known to us there are no facts inconsistent with, the following:
1. Each individual executing any of the Documents,
whether on behalf of such individual or any other person, is legally competent
to do so.
2. Each individual executing any of the Documents on
behalf of a party (other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company)
executing any of the Documents has duly and validly executed and delivered
each of the Documents to which such party is a signatory, and such party's
obligations set forth therein are legal, valid and binding.
4. All Documents submitted to us as originals are
authentic. All Documents submitted to us as certified or photostatic copies
conform to the original documents. All signatures on all such Documents are
genuine. All public records reviewed or relied upon by us or on our behalf
are true and complete. All statements and information contained in the
Documents are true and complete. There are no oral or written modifications
or amendments to the Documents, by action or conduct of the parties or
otherwise.
The phrase "known to us" is limited to the actual knowledge,
without independent inquiry, of the lawyers at our firm who have performed
legal services in connection with the issuance of this opinion.
Based on the foregoing, and subject to the assumptions,
limitations and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and
existing under and by virtue of the laws of the State of Maryland and is in
good standing with the SDAT.
2. The Shares are duly authorized, validly issued,
fully paid and nonassessable.
The foregoing opinion is limited to the substantive laws of the
State of Maryland and we do not express any opinion herein concerning any
other law. We express no opinion as to compliance with the securities (or
"blue sky") laws or the real estate syndication laws of the State of Maryland.
We assume no obligation to supplement this opinion if any
applicable law changes after the date hereof or if we become aware of any fact
that might change the opinion expressed herein after the date hereof.
This opinion is being furnished to you solely for submission to
the Securities and Exchange Commission as an exhibit to the Registration
Statement and, accordingly, may not be relied upon by, quoted in any manner
to, or delivered to any other person or entity without, in each instance, our
prior written consent.
We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the use of the name of our firm in the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required by Section 7 of the
1933 Act.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL
==============================================================================
Sonterra Agreement
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of May 30, 1997
==============================================================================
<PAGE>
SONTERRA AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of May 30,
1997 by and between ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership ("ERQ OP"), and WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation ("Newco").
A. Newco has been formed as a wholly owned subsidiary of Wellsford
Residential Property Trust, a Maryland real estate investment trust ("WRPT"),
pursuant to the Contribution Agreement dated as of May 30, 1997 (the
"Contribution Agreement") referred to in that certain Agreement and Plan of
Merger dated as of January 16, 1997 (the "Merger Agreement") by and between
Equity Residential Properties Trust, a Maryland real estate investment trust
that is the general partner of EQR OP ("EQR"), and WRPT.
B. Pursuant to that certain Option Agreement dated as of June 28, 1996
(the "Option Agreement") by and between Specified Properties VIII, L.P., a
Texas limited partnership ("Specified"), and WRPT, a copy of which Option
Agreement is attached hereto as Exhibit A and made a part hereof, Specified
granted WRPT an option to purchase the land (the "Land") which is more fully
described on Exhibit B attached hereto and made a part hereof, together with
the buildings and improvements thereon erected, known as Sonterra at Williams
Centre, an apartment property located in the City of Tucson, County of Pima,
State of Arizona (the "Improvements") (the Land and the Improvements are
collectively referred to herein as the "Premises"), upon the terms and
conditions described in the Option Agreement.
C. Concurrently with the execution of the Option Agreement, WRPT and
Specified entered into that certain Loan Agreement dated as of June 28, 1996
(the "Loan Agreement") pursuant to which WRPT made a loan to Specified in the
original principal amount of $17,800,000.00, which loan is secured by the
Premises.
D. Pursuant to the Contribution Agreement, WRPT has assigned to Newco,
among other things, all of WRPT's rights and obligations under the Option
Agreement.
E. EQR OP and Newco are entering this Agreement pursuant to the Merger
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
(1) Assignment of Option. In the event that Newco has decided not to
exercise its option under the Option Agreement to purchase the Premises and
Newco has received an offer (an "Offer") from a prospective assignee, other
than Newco or the Surviving Trust (as defined in the Merger Agreement) or any
affiliate of either of such parties (each, an "Acceptable Assignee"), to
purchase all of Newco's rights and obligations under the Option Agreement,
Newco shall first offer in writing (a "Notice of Proposed Assignment") to
assign the Option Agreement to EQR OP. Any such assignment of the Option
Agreement to EQR OP shall be on the same terms and conditions as the Offer,
which terms and conditions shall be set forth in the Notice of Proposed
Assignment. If EQR OP does not provide Newco with written notice of its
intention to purchase Newco's rights and obligations under the Option
Agreement on or before the earlier of the date when notice of exercise of the
option must be given within thirty (30) days after the Notice of Proposed
Assignment, then Newco shall have the right to assign all of its rights and
obligations under the Option Agreement to such prospective assignee in
accordance with the terms of the Offer. If Newco fails to consummate such
assignment within one hundred fifty (150) days following EQR OP's rejection of
the offer in the Notice of Proposed Assignment, then the Option Agreement
shall again be subject to the restrictions of this Paragraph 1.
(2) Lapse of Option. In the event that Newco has decided not to exercise
its option to the purchase the Premises under the Option Agreement and Newco
has not received an offer to purchase all of Newco's rights and obligations
under the Option Agreement within thirty (30) days prior to the last day for
giving notice of exercise of the expiration of the option, then Newco shall
give EQR OP thirty (30) days written notice of such expiration of the option.
Upon timely giving such notice, EQR OP shall have the right to require Newco
to immediately assign all of its rights and obligations under the Option
Agreement to ERQ OP for One Hundred and 00/100 Dollars ($100.00).
(3) Exercise of Option. In the event that Newco, or the Acceptable
Assignee then holding the option under the Option Agreement, shall elect to
exercise its right under the Option Agreement to purchase the Premises, Newco
(i) as the exercising party, shall cause title to the Premises to be acquired
by Newco or a subsidiary or affiliate of Newco only or (ii) shall cause the
Acceptable Assignee exercising such option to cause the Premises to be so
titled. Newco shall give EQR OP written notice of the acquisition of the
Premises pursuant to the terms of the Option Agreement within ten (10) days
after acquisition. For the purposes hereof, an "affiliate" of Newco shall be
any entity controlled by, controlling or under common control with Newco.
(4) Right of First Offer Agreement. Promptly following (a) the acquisition
of the Premises by Newco or a subsidiary of Newco in accordance with Paragraph
3 hereof or (b) the taking of title to the Premises by Newco or a subsidiary
or affiliate of Newco by virtue of a foreclosure on the Premises, or the
taking of a deed in lieu of foreclosure on the Premises, based upon a default
under the Loan Agreement, Newco shall enter, or shall cause such subsidiary,
as titleholder to the Premises, to enter into, without further consideration,
a Right of First/Last Offer Agreement (the "Right of First/Last Offer
Agreement"), which shall be prepared by counsel to EQR OP and shall be in form
and substance satisfactory to EQR OP in the exercise of EQR OP's commercially
reasonable judgment, which agreement shall be in substantially the same form
as the Right of First/Last Offer Agreements entered into or required to be
entered into pursuant to Article 2 of that certain Agreement Regarding
Palomino Park of even date herewith.
(5) Memorandum. Upon execution of the Right of First/Last Offer Agreement,
Newco shall record, or shall cause the subsidiary of Newco holding title to
the Premises to record, a memorandum thereof against title to the Premises.
(6) Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
or sent by telecopy, as follows:
(i) if to Newco: Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Edward Lowenthal
Telecopy No.: (212) 333-2323
with a copy to: Robinson Silverman Pearce Aronsohn
& Berman LLP
1290 Avenue of the Americas
New York, New York 10104-0053
Attn: Alan S. Pearce, Esq.
Telecopy No.: (212) 541-1411
(ii) if to EQR OP: c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: President
Telecopy No.: (312) 207-5243
with a copy to: Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: Bruce C. Strohm, Esq.
Telecopy No.: (312) 454-0039
and to: Rudnick & Wolfe
203 North LaSalle Street
Suite 1800
Chicago, Illinois 60601
Attn: Errol R. Halperin, Esq.
Telecopy No.: (312) 236-7516
(7) Binding Effect. This Agreement shall become effective when it shall
have been executed by Newco and EQR OP, and thereafter shall be binding upon
and inure to the benefit of Newco, EQR OP and their respective successors and
assigns, except that Newco shall not have the right to assign its rights
hereunder or any interest herein without the prior consent of EQR OP.
(8) Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
(9) Waivers; Amendment.
(i) No failure or delay of EQR OP in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power. The rights
and remedies of EQR OP for a breach hereof are cumulative and are not
exclusive of any rights or remedies which they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by
Newco therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
No notice or demand on Newco in any case shall entitle Newco to any other or
further notice or demand in similar or other circumstances.
(ii) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by Newco and EQR OP.
(10) Entire Agreement. This Agreement, including any exhibits and schedules
hereto, constitutes the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party other
than the parties hereto and thereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(11) Waiver of Jury Trial. Each party hereto hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury
in respect of any litigation directly or indirectly arising out of, under or
in connection with this Agreement.
(12) Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
(13) Headings. Article and Section headings used herein are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
(14) Time is of the essence of this Agreement.
(15) Nothing in this Agreement shall require Newco to take any action that
would create any default under, or breach of any representations or covenants
under, the Option Agreement or the Loan Agreement or any documents relating to
either of the same.
(16) Jurisdiction; Consent to Service of Process.
(i) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS STATE
COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE CITY
OF CHICAGO OR THE CITY OF NEW YORK, AND ANY APPELLATE COURT THEREFROM, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
ILLINOIS OR NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
IN THE COURTS OF ANY JURISDICTION.
(ii) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY ILLINOIS OR
NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
<PAGE>
IN WITNESS WHEREOF, EQR OP and Newco have caused this Agreement to be signed
by their respective officers hereunto duly authorized all as of the date first
written above.
ERQ OP:
ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership
By: Equity Residential Properties Trust, a Maryland
real estate investment trust and its general
partner
By:/s/ Bruce C. Strohm
_________________________________________
Name: Bruce C. Strohm
Title: Executive Vice President
NEWCO:
WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation
By:/s/ Edward Lowenthal
______________________________________________
Name: Edward Lowenthal
Title: President
<PAGE>
EXHIBIT A
OPTION AGREEMENT
See Exhibit 10.2 to this Registration Statement
<PAGE>
EXHIBIT B
DESCRIPTION OF THE LAND
BLOCKS 19, 21, 22, 23 OF THE RESUBDIVISION OF WILLIAMS CENTRE, PIMA COUNTY,
ARIZONA ACCORDING TO THE PLAT OF RECORD IN THE OFFICE OF THE PIMA COUNTY
RECORDER IN BOOK 39 OF MAPS AT PAGE 28.
===========================================================================
Agreement Regarding Palomino Park
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of May 30, 1997
===========================================================================
<PAGE>
AGREEMENT REGARDING PALOMINO PARK
THIS AGREEMENT REGARDING PALOMINO PARK (this "Agreement") is made and
entered into as of May 30, 1997 by and between ERP OPERATING LIMITED
PARTNERSHIP, an Illinois limited partnership ("ERP Operating Partnership"),
and WELLSFORD REAL PROPERTIES, a Maryland corporation ("Newco").
A. Newco has been formed as a wholly-owned subsidiary of Wellsford
Residential Property Trust, a Maryland real estate investment trust
("Wellsford Parent"), pursuant to the Contribution Agreement ("Contribution
Agreement") referred to in that certain Agreement and Plan of Merger dated as
of January 16, 1997 (the "Merger Agreement") by and between Equity Residential
Properties Trust, a Maryland real estate investment trust that is the general
partner of ERP Operating Partnership ("EQR") and Wellsford Parent. Pursuant
to the Merger Agreement, Wellsford Parent has contributed to Newco, among
other things, one hundred percent (100%) of the issued and outstanding Class A
Common Stock (the "Class A Stock") of Wellsford Park Highlands Corp., a
Colorado corporation ("WPHC"). Wellsford Parent retained one hundred percent
(100%) of the issued and outstanding Class B Common Stock of WPHC (the "Class
B Stock"). Following the merger of Wellsford Parent and EQR in accordance
with the Merger Agreement, the Class B Stock continued to be held by the
Surviving Trust (as defined in the Merger Agreement). Pursuant to that
certain Contribution Agreement dated as of May 30, 1997 by and between the
Surviving Trust and ERP Operating Partnership, the Surviving Trust has
contributed the Class B Stock to ERP Operating Partnership.
B. Reference is hereby made to a certain Second Amended and Restated
Vacant Land Purchase and Sale Agreement (the "Original Land Contract"), made
and entered into as of March 23, 1995 by and between Mission Viejo Company, a
California corporation ("Mission"), and The Feld Company, a Colorado
corporation ("Feld Company"), relative to the purchase and sale of certain
property (the "Overall Property") containing approximately 181.803 acres
located in Douglas County, Colorado and legally described as Lots 1, 2, 3, 4
and 5, Highlands Ranch Filing 126-A. Feld Company assigned its rights with
respect to the Original Land Contract to WPHC pursuant to a certain Assignment
and Assumption-Purchase Agreement dated as of May 2, 1995, by and between Feld
Company and WPHC. The Original Land Contract has been amended pursuant to a
certain First Amendment to Second Amended and Restated Vacant Land Purchase
and Sale Agreement, made and entered into as of May 1, 1996, by and between
Mission and WPHC. The Original Land Contract, as so amended, is referred to
herein as the "Land Contract."
C. It is presently contemplated that the Overall Property will be
developed in five phases (each, a "Phase") together as an integrated project
(the "Project") consisting of a 1,880-unit gated apartment community
constructed around a centrally located 30-acre park (the "Park"), roads and a
centrally located clubhouse, swimming pool and health club (the "Recreation
Center"). The anticipated number of apartment units in each Phase is as
follows: Phase I - 456 units; Phase II - 304 units; Phase III - 316 units;
Phase IV - 452 units; and Phase V - 352 units.
D. Park at Highlands LLC, a Colorado limited liability company ("Park at
Highlands"), has been formed and continues as a limited liability company
under the laws of the State of Colorado pursuant to a certain Operating
Agreement of Park at Highlands LLC dated as of April 27, 1995 by and between
WPHC and Al Feld, an individual ("Al Feld"), as amended by First Amendment to
Operating Agreement of Park at Highlands LLC dated as of December 29, 1995 by
and between WPHC and Al Feld (collectively, the "Park at Highlands Operating
Agreement").
E. Pursuant to a certain Assignment and Assumption Agreement-Phase I dated
as of May 2, 1995, by and between WPHC and Park at Highlands, WPHC assigned to
Park at Highlands, and Park at Highlands assumed, all of WPHC's rights to
acquire certain land known as Lot 1 ("Lot 1"), Highlands Ranch Filing 126-A.
Park at Highlands subsequently acquired Lot 1 and Park at Highlands is
constructing on a portion of Lot 1, known as Lot 1A, Highlands Park Filing No.
126-A, First Amendment ("Lot 1A"), a certain multi-family rental apartment
complex, consisting of approximately 456 apartment units with related
facilities ("Phase I") (also known as Blue Ridge).
F. After acquiring Lot 1 from Mission, Park at Highlands transferred
certain property known as Lot 1B, Highlands Ranch Filing No. 126-A, First
Amendment ("Lot 1B") to WPHC. WPHC has constructed the Recreation Center on
Lot 1B. In addition, Park at Highlands transferred to Palomino Park Public
Improvements Corporation, a Colorado nonprofit corporation ("PPPIC"), legal
title to certain property known as Tracts A and B, Highlands Ranch Filing No.
126-A, First Amendment, on which land PPPIC has developed or is expected to
develop the Park, roads and certain infrastructure improvements.
G. Park at Highlands and WPHC have entered into a certain Rec Center Use
Agreement dated as of December 29, 1995, as amended, relating to the
development, operation and use of the Recreation Center constructed or to be
constructed by WPHC on Lot 1B.
H. Red Canyon at Palomino Park LLC, a Colorado limited liability company
("Red Canyon"), has been formed and continues as a limited liability company
under the laws of the State of Colorado pursuant to a certain Operating
Agreement of Red Canyon at Palomino Park LLC, dated as of April 17, 1996 by
and between WPHC and Al Feld, as amended on May 19, 1997 (the "Red Canyon
Operating Agreement"). The Red Canyon Operating Agreement and the Park at
Highlands Operating Agreement are sometimes referred to herein collectively as
the "Operating Agreements."
I. Pursuant to a certain Assignment and Assumption Agreement-Parcel 2,
made and entered into as of May 1, 1996, by and between WPHC and Red Canyon,
WPHC assigned to Red Canyon and Red Canyon assumed, all of WPHC's rights to
acquire certain land known as Lot 2A, Highlands Ranch Filing No. 126-A,
Douglas County, Colorado ("Lot 2A"). Red Canyon subsequently acquired Lot 2A
and Red Canyon anticipates constructing on Lot 2A a certain multi-family
rental apartment complex, consisting of approximately 304 apartment units with
related facilities ("Phase II").
J. Red Canyon and WPHC have entered into a certain Rec Center Use
Agreement dated as of May 2, 1996, relating to the development, operation and
use of the Recreation Center constructed or to be constructed by WPHC on Lot
1B.
K. On May 1, 1997, WPHC acquired certain land known as Lot 3A, Highlands
Ranch Filing No. 126-A, Douglas County, Colorado ("Lot 3A"). WPHC anticipates
constructing on Lot 3A a certain multi-family rental apartment complex,
consisting of approximately 316 apartment units with related facilities
("Phase III").
L. The portions of the Overall Property other than Lots 1A, 1B, 2A, and 3A
and Tracts A and B are sometimes referred to herein collectively as the
"Remaining Overall Property".
M. Palomino Park Public Improvements Corporation, a Colorado nonprofit
corporation ("PPPIC"), has issued $14,755,000 in bonds to finance the
construction of the roads and the Park and, in connection therewith, has been
empowered to impose certain revenue assessment liens against the Phases owned
by WPHC or a permitted assignee of WPHC to finance the payments due under the
bonds.
N. ERP Operating Partnership and Newco are entering into this Agreement
pursuant to the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
COVENANTS RELATING TO WPHC
ERP Operating Partnership and Newco, as the legal and beneficial owners of
all of the issued and outstanding capital stock of WPHC, agree to, and Newco
agrees to cause WPHC to (i) enter into a Shareholders' Agreement, which shall
be prepared by counsel to ERP Operating Partnership and shall be in form and
substance satisfactory to ERP Operating Partnership in the exercise of ERP
Operating Partnership's commercially reasonable judgment, which agreement
shall incorporate the following terms, and (ii) amend the Articles of
Incorporation of WPHC, to the extent permitted by Colorado law, which
amendment shall be prepared by counsel to ERP Operating Partnership and shall
be in form and substance satisfactory to Newco and ERP Operating Partnership
in the exercise of ERP Operating Partnership's commercially reasonable
judgment, which amendment shall incorporate the following terms:
1.1 ERP Operating Partnership shall have no obligation to contribute funds
or capital to WPHC, Red Canyon, Park at Highlands or any future Palomino Park
LLC (as hereinafter defined in Section 1.13) by virtue of its ownership of the
Class B Stock. Nothing in the preceding sentence or elsewhere in this
Agreement shall vitiate the obligation of ERP Operating Partnership to make
any payments to third parties pursuant to agreements entered into by ERP
Operating Partnership with respect to Phase I, Phase II and any Future
Palomino Park Phases including, without limitation, the Tri-Party Agreement
and the Credit Enhancement Agreement.
1.2 With respect to each Phase, to the extent that said amount is required
to be contributed by WPHC to Park at Highlands or Red Canyon, Newco shall be
required to contribute to the capital of WPHC (each such contribution being
referred to herein as a "Phase Contribution") an amount not to exceed the
amount (the "Phase Contribution Limit") budgeted to be contributed by WPHC to
the Palomino Park LLC developing such Phase in accordance with the terms of
the Operating Agreement for such Palomino Park LLC, pursuant to the budget in
effect for such Phase as of (a) the date hereof (in the case of Park at
Highlands), or (b) the date of the Merger Agreement (in the case of Red
Canyon); said budget of Red Canyon shall be subject to ERP Operating
Partnership's review and approval prior to the applicable dates set forth in
the preceding clause (b) of this Section 1.2 Under no circumstances shall
Newco be entitled to receive additional shares of the capital stock of WPHC
solely by virtue of its contribution of the relevant Phase Contribution to the
respective Phase of the Project.
1.3 WPHC shall not issue any additional capital stock except pursuant to
the anti-dilution provisions of Section 1.4 hereof. WPHC shall not issue any
additional capital stock for the purpose of raising the funds for any Phase
Contribution required to be made by Newco pursuant to Section 1.2 hereof.
1.4 (a) Subject to subparagraph (b) following, in the event any additional
shares of stock of WPHC are to be issued by WPHC, ERP Operating Partnership,
if a shareholder at the time of such issuance, shall have the right to
purchase a sufficient number of newly issued shares of stock of WPHC at the
then-established purchase price and terms to enable it to retain its then-
current percentage of ownership interest in WPHC.
(b) Notwithstanding the preceding subparagraph (a), ERP Operating
Partnership shall not have the preemptive right described above in connection
with the issuance by WPHC of additional shares of WPHC stock to a party other
than Newco or an Affiliate (as hereinafter defined) of Newco. The right of
WPHC to raise capital through the sale of additional WPHC stock to non-
Affiliates of Newco shall in no way detract from or otherwise affect Newco's
obligations under Section 1.2 to contribute capital to WPHC up to the Phase
Contribution Limit.
1.5 If ERP Operating Partnership or Newco (the "Selling Shareholder") shall
receive an offer from a bona fide prospective purchaser (the "Offer") to
purchase all (but not less than all, with respect to ERP Operating
Partnership) or any part or all (with respect to Newco) of its shares of the
capital stock of WPHC and the Selling Shareholder desires to sell such shares
in accordance with such Offer, the Selling Shareholder shall first offer in
writing (a "Notice of Proposed Sale") to sell such shares owned by it to the
other party (the "Non-Selling Shareholder"). Any such sale to the Non-Selling
Shareholder shall be on the same terms and conditions as the Offer, which
terms and conditions shall be specified in the Notice of Proposed Sale;
provided, however, that any Notice of Proposed Sale to ERP Operating
Partnership relating to an offer by Newco to sell its shares of Class A Stock
shall include a provision obligating Newco to first convert such Class A Stock
to Class B Stock if deemed necessary by ERP Operating Partnership. If the
Non-Selling Shareholder has not provided the Selling Shareholder with written
notice of its intention to purchase all of such shares in accordance with the
terms of the Notice of Proposed Sale within thirty (30) days of the Non-
Selling Shareholder's receipt of the Notice of Proposed Sale, then, subject to
Sections 1.5 and 1.6 hereof, the Selling Shareholder shall have the right to
sell its shares to such bona fide prospective purchaser in accordance with the
terms of the Offer; provided, however, that in connection with any such sale
by ERP Operating Partnership of its Class B Stock, WPHC shall agree to convert
such Class B Stock into Class A Stock if deemed necessary by ERP Operating
Partnership. If the Selling Shareholder fails to consummate such sale within
one hundred fifty (150) days following the Non-Selling Shareholder's rejection
of the offer in the Notice of Proposed Sale, then the Selling Shareholder's
shares shall again be subject to all the restrictions of this section.
Notwithstanding the foregoing, Newco shall not have the right to sell or
transfer all or any of its shares of capital stock of WPHC during the period
of time (the "Lock-Up Period") in which ERP Operating Partnership shall retain
any actual or contingent liability under any or all of the Tri-Party
Agreements described in Section 3.1 hereof. At no time shall ERP Operating
Partnership have the right to sell less than all of its shares of the capital
stock of WPHC, except with respect to a Tag Along Transaction under
Section 1.6. Notwithstanding anything herein to the contrary, the right of
first offer to be granted to ERP Operating Partnership shall not apply to a
written offer from a bona fide purchaser that is not an Affiliate of Newco to
purchase all of the shares of capital stock of WPHC owned by Newco and all of
the capital stock of WPHC owned by ERP Operating Partnership if Newco shall
validly exercise its Drag Along Rights in connection therewith, in accordance
with Section 1.7 hereof.
1.6 If (after the expiration of the Lock-Up Period) Newco shall desire to
sell or transfer to a bona fide prospective purchaser any part or all of its
shares of the capital stock of WPHC and provides ERP Operating Partnership
with a right of first refusal in accordance with Section 1.5 hereof which ERP
Operating Partnership rejects in accordance therewith, then Newco shall
provide ERP Operating Partnership with written notice of the pending sale (a
"Tag Along Notice"). ERP Operating Partnership may elect to participate in
such transaction (a "Tag Along Transaction") as an additional selling or
transferring party by delivering a written notice thereof (a "Tag Along
Election Notice") to Newco within thirty (30) days after delivery of such Tag
Along Notice. A Tag Along Election Notice shall specify the number of shares
which ERP Operating Partnership wishes to sell or transfer in such
transaction, which number shall be less than or equal to (i) the aggregate
number of shares of the capital stock of WPHC which Newco proposed to sell or
transfer in such transaction (i.e., all of Newco's shares of the capital stock
of WPHC), multiplied by (ii) a fraction, the numerator of which is the number
of shares of WPHC capital stock owned by ERP Operating Partnership, and the
denominator of which is the aggregate number of shares of the capital stock of
WPHC owned by ERP Operating Partnership and Newco. If ERP Operating
Partnership shall elect to sell or transfer shares in such transaction, the
aggregate number of shares of the capital stock of Newco to be sold or
transferred by Newco shall be reduced, so that the aggregate number of shares
of the capital stock of WPHC to be sold or transferred to such third party by
ERP Operating Partnership and Newco shall remain equal to the aggregate number
of shares of the capital stock of WPHC which Newco originally proposed to sell
or transfer in such transaction. Except as specifically provided below,
participation by ERP Operating Partnership in the offering of shares pursuant
to this Section 1.6 shall be at a price per share equal to the price being
offered to Newco and on terms identical to those terms being offered to Newco.
In the event that neither ERP Operating Partnership nor Newco has exercised
its put/call rights under Section 1.8 hereof on or before the closing of any
Tag Along Transaction, then fifty percent (50%) of the shares of WPHC stock to
be sold by ERP Operating Partnership in connection with the Tag Along
Transaction shall be deemed to be Put/Call Stock (the "P/C Tag Along Stock").
The per share purchase price for such P/C Tag Along Stock shall be equal to
the greater of (a) the Put Price (as hereinafter defined) which would be
applicable as of the date of the closing of the Tag Along Transaction divided
by the total number of shares of Put/Call Stock as of such date, or (b) the
per share purchase price being offered to Newco for the sale of its WPHC
shares in connection with the Tag Along Transaction. The aggregate purchase
price for all P/C Tag Along Stock sold in connection with a Tag Along
Transaction is hereinafter referred to as the "P/C Tag Along Price." The per
share purchase price for all shares sold by ERP Operating Partnership pursuant
to this Section 1.6 other than the P/C Tag Along Stock shall be equal to the
per share purchase price being offered to Newco for its WPHC shares. Newco
shall not sell or transfer all or any portion of its shares of the capital
stock of WPHC other than in accordance with Sections 1.5 and 1.6 hereof.
1.7 If, after the expiration of the Lock-Up Period, Newco shall receive a
written offer from a bona fide purchaser that is not an Affiliate of Newco to
purchase all of the shares of capital stock of WPHC owned by Newco and all of
the capital stock of WPHC owned by ERP Operating Partnership, then Newco shall
promptly give ERP Operating Partnership written notice thereof. If Newco
elects, ERP Operating Partnership agrees to sell or transfer all of the shares
of WPHC stock owned by ERP Operating Partnership in accordance with the terms
of such written offer, provided that, except as specifically provided below,
the sale of shares by ERP Operating Partnership pursuant to this Section 1.7
shall be on terms identical to those being offered to Newco (a "Drag Along
Right"). To the extent that the shares of WPHC stock owned by ERP Operating
Partnership and sold pursuant to this Section 1.7 include the shares of
Put/Call Stock, the aggregate purchase price for the Put/Call Stock being sold
pursuant to this Section 1.7 shall be the applicable Call Price (as
hereinafter defined) which would be applicable as of the date of the closing
of such Drag Along Transaction. The per share purchase price for all shares,
other than Put/Call Shares, of WPHC stock sold by ERP Operating Partnership as
part of a Drag Along Transaction shall be equal to the per share purchase
price offered to Newco.
1.8 Subject to Section 1.8(iv) hereof, fifty percent (50%) of the Class B
Stock owned by ERP Operating Partnership as of the date hereof (the "Put/Call
Stock") shall be subject to the following:
(i) At any time from and after the fifth (5th) anniversary of the date
hereof, ERP Operating Partnership shall have the right to "put" all (but not
less than all) of the Put/Call Stock to Newco for a sales price (the "Put
Price") equal to $1,900,000 less the amount of any "Sales or Refinancing
Proceeds" (as such term is defined in the applicable Operating Agreements)
received by ERP Operating Partnership (by reason of WPHC's interests in the
Palomino Park LLCs) to the extent allocable to the Put/Call Stock. The Put
Price shall not be subject to dilution based upon any underlying dilution in
the Put/Call Stock;
(ii) At any time from and after the date hereof, Newco shall have the
right to "call" all (but not less than all) of the Put/Call Stock. If Newco
calls the Put/Call Stock prior to the fifth (5th) anniversary of the date
hereof, then the purchase price (the "Call Price") shall be an amount equal
to $1,900,000 less the amount of any Sales or Refinancing Proceeds received
by ERP Operating Partnership to the extent allocable to the Put/Call Stock.
If Newco calls the Put/Call Stock on or after the fifth (5th) anniversary of
the date hereof, then the Call Price shall be an amount equal to $1,900,000
(in 2002 Equivalent Dollars, as such term is hereinafter defined) less the
amount of any Sales or Refinancing Proceeds received by ERP Operating
Partnership with respect to ERP Operating Partnership's interest in the
Palomino Park LLCs which is allocable to the Put/Call Stock. The Call Price
shall not be subject to dilution based upon any underlying dilution in the
Put/Call Stock.
(iii) The mechanics of the exercise of the put/call shall be
substantially as follows:
(a) At any time after the fifth (5th) anniversary of the date
hereof, provided that Newco shall not have previously furnished the
Call Notice (as hereinafter defined), ERP Operating Partnership shall
have the right to furnish a notice (a "Put Notice") to Newco informing
Newco that ERP Operating Partnership has elected to sell all (but not
less than all) of the Put/Call Stock to Newco for a price equal to the
Put Price, plus or minus the adjustments set forth below;
(b) At any time from and after the date hereof, provided that ERP
Operating Partnership shall not have previously furnished the Put
Notice, Newco shall have the right to furnish a notice (the "Call
Notice") to ERP Operating Partnership informing ERP Operating
Partnership that Newco has elected to purchase all (but not less than
all) of the Put/Call Stock for a price equal to the applicable Call
Price, plus or minus the adjustments set forth below;
(c) The closing of the transactions described in clause (a) or
clause (b) above, as the case may be, shall occur on a date (the
"Option Closing Date") and at a place and time mutually agreed to by
ERP Operating Partnership and Newco, which date shall be not more than
thirty (30) days after the furnishing of the Put Notice or the Call
Notice, as the case may be. The transaction shall be closed in the
following manner:
(1) ERP Operating Partnership shall deliver to Newco an
Assignment of Stock pursuant to which ERP Operating Partnership
shall assign the Put/Call Stock to Newco without recourse,
representation or warranty, other than representations relating to
authorization, execution and delivery of the instrument of
assignment and a representation that ERP Operating Partnership has
not created or suffered the creation of any liens, claims or
encumbrances on or prior assignments of the Put/Call Stock;
(2) The purchase price shall be increased by an amount equal
to the Put/Call Stock's ratable share of any undistributed cash
held by WPHC and/or the Palomino Park LLCs after the establishment
of a reasonable reserves for operating expenses and reasonably
projected capital replacements, subject to the provisions of
Section 10.1 of the Operating Agreements for the Park at Highlands
and Red Canyon and any comparable provision of the Operating
Agreement for future Palomino Park LLCs;
(3) Newco shall pay the applicable purchase price (i.e., the
Put Price or the Call Price, as the case may be) in cash in full
to ERP Operating Partnership at closing, subject to the
adjustments described in subsection (2) above.
(d) Notwithstanding anything to the contrary contained in this Section
1.8, in the event that ERP Operating Partnership and Newco have entered into
a Tag Along Transaction prior to either party's election to exercise its put
or call rights under this Section 1.8, then (a) the number of shares of
Put/Call Stock thereafter subject to the put/call shall be reduced by the
number of shares of P/C Tag Along Stock sold in connection with such Tag
Along Transaction and (b) the applicable Put Price or Call Price thereafter
payable pursuant to this Section 1.8 shall be reduced by the amount of the
P/C Tag Along Price received by ERP Operating Partnership in connection with
such Tag Along Transaction.
(e) Notwithstanding anything to the contrary contained in this Section
1.8, at such time, if any, as ERP Operating Partnership shall have received
an aggregate of $1,900,000 (if said threshold amount has not been received
by the fifth anniversary of the date hereof, then the balance remaining of
said threshold amount shall thereafter be expressed in terms of 2002
Equivalent Dollars) in Sales or Refinancing Proceeds to the extent allocable
to the Put/Call Stock, Newco shall have the right to acquire all (but not
less than all) of the Put/Call Stock for a purchase price equal to One
Dollar ($1.00).
(f) As employed herein, the term "2002 Equivalent Dollars" means the
equivalent purchasing power at any time of the value of One Dollar ($1.00)
as of the date hereof. The 2002 Equivalent Dollars of any amount shall be
determined by multiplying said amount by one (1) plus a fraction, the
numerator of which is the difference between (x) the Consumer Price Index
(as hereinafter defined) for the calendar month last published prior to the
date of such determination and (y) the Consumer Price Index for the calendar
month last published as of the fifth (5th) anniversary of the date of this
Agreement and the denominator of which is the Consumer Price Index for the
calendar month last published as of the fifth (5th) anniversary of the date
of this Agreement. As used herein, the term "Consumer Price Index" shall
mean the Consumer Price Index for Urban Wage Earners and Clerical Workers,
US Cities Average, all Items (Base Year 1982-1984=100) for the applicable
month published by the Bureau of Labor Statistics of the United States
Department of Labor or similar index agreed to by the parties if such index
is changed or is no longer available.
1.9 To the extent that WPHC receives any distributions of any nature from
any of the Palomino Park LLCs, WPHC shall promptly pass such distributions
through to the shareholders of WPHC in the form of dividends. WPHC shall
cause the Palomino Park LLCs to promptly distribute to WPHC all cash received
by said entity, after paying current expenses and establishing reasonable
reserves for operating expenses and reasonably projected capital replacements,
subject to the provisions of Section 10.1 of the Operating Agreements for the
Park at Highlands and Red Canyon and any comparable provision of the Operating
Agreement for future Palomino Park LLCs.
1.10 WPHC shall not authorize or effect any stock split or reverse stock
split which would have the effect of diluting or otherwise eliminating ERP
Operating Partnership's then-current ownership interest in WPHC.
1.11 Neither WPHC nor any of the Palomino Park LLCs shall engage in any
business other than that associated with the real estate development,
management, operation, leasing, financing, refinancing and disposition of the
Overall Property and the Project.
1.12 Neither WPHC nor any Subsidiary of WPHC shall engage any Affiliate of
WPHC or any Subsidiary of WPHC to provide any goods or perform any services on
other than an arm's-length basis or otherwise reasonably competitive basis.
1.13 All portions of the Remaining Overall Property that are acquired or
owned by WPHC or by any Subsidiary, shall be acquired or owned by WPHC or
Colorado limited liability companies formed and continued pursuant to
Operating Agreements in substantially the form of the Red Canyon Operating
Agreement (Park at Highlands, Red Canyon and any such entity that is so formed
in the future being referred to herein as a "Palomino Park LLC"). WPHC shall
not assign WPHC's rights to acquire all or any portion of the Remaining
Overall Property to any party that is not a Subsidiary of WPHC, without first
(i) affording ERP Operating Partnership a right of first offer with respect to
the sale or assignment of said rights, in accordance with procedures
substantially similar in nature to the procedures set forth in Section 2.3(a)
hereof and (ii) causing the acquiring party to subject the property in
question to all assessment liens arising from or in connection with the
Assessment Lien Revenue Bonds, Series 1995, issued by PPPIC in the aggregate
principal amount of $14,755,000.
1.14 Newco and WPHC shall take all actions necessary to ensure that each of
the Palomino Park LLC's will be classified for federal tax purposes as a
partnership and not as an association taxable as corporation.
1.15 WPHC may transfer, convey or assign, directly or indirectly, any of
WPHC's legal or beneficial ownership interest in Red Canyon or Park at
Highlands, provided that (i) such transfer, conveyance, or assignment is not
to an Affiliate of WPHC or Newco and (ii) WPHC at all times retains at least a
twenty-one percent (21%) ownership interest in the entity in question. There
are no restrictions on the transfer, conveyance or assignment of any of WPHC's
legal or beneficial ownership interest in the Recreation Center or any future
Palomino Park Phases, provided that such transfer, conveyance or assignment is
not to an Affiliate of WPHC or Newco.
ARTICLE 2
RIGHTS OF FIRST/LAST OFFER
2.1 Concurrently herewith, WPHC shall enter into an agreement with ERP
Operating Partnership, in which Newco shall join for the purpose of
guarantying WPHC's obligations, pursuant to which WPHC shall agree that:
(i) with the exception of the possible conversion of one or more of
Phase I and Phase II for condominium purposes (the term "condominium" shall
include townhome conversion) and the retail sale of condominium units by
WPHC or the applicable Palomino Park LLC, (A) WPHC shall not transfer,
convey or assign, directly or indirectly, any legal or beneficial ownership
interest in Phase I or Phase II and (B) WPHC shall cause each of Park at
Highlands and Red Canyon not to transfer, convey or assign, directly or
indirectly, any legal or beneficial ownership interest in either of such
Phases, until after such time (as to each such Phase) as the documents
described in clause (ii) below shall have been entered into; and
(ii) within six (6) months following the substantial completion of each
of Phase I and Phase II, respectively, WPHC shall cause Park at Highlands
and Red Canyon, as the case may be, to enter into the following documents
with ERP Operating Partnership and to record memoranda thereof against title
to the applicable portion of the Overall Property owned by said entity:
A. A Right of First/Last Offer Agreement, by and between ERP
Operating Partnership and Park at Highlands with respect to Phase I;
and
B. A Right of First/Last Offer Agreement, by and between ERP
Operating Partnership and Red Canyon with respect to Phase II.
2.2 Each of the documents described in Section 2.1 hereinabove shall be
prepared by counsel to ERP Operating Partnership and shall be in form and
substance satisfactory to ERP Operating Partnership in ERP Operating
Partnership's commercially reasonable judgment, and shall incorporate
substantially the terms set forth in subsections (a), (b), (c) and (d) of this
Section 2.2. For the purposes of this Section 2.2, the owner of the subject
portion of the Overall Property (i.e., Park at Highlands with respect to
Lot 1A and Red Canyon with respect to Lot 2A are referred to herein as the
"Owner," and the property owned by said Owner is referred to hereinbelow as
the "Subject Property" it being understood and agreed that the Subject
Property shall not consist of any property not owned directly or indirectly by
WPHC and shall not include any property other than portions or all of the
Overall Property and shall not be part of a transaction or series of
transactions involving any property other than the foregoing:
(a) Owner shall have the right to sell (or enter into an option or other
agreement for sale of) the Subject Property solely in accordance with the
terms set forth below in this Section 2.3. If Owner desires to sell or grant
an option to sell the Subject Property or any portion thereof or to cause the
Subject Property or any portion thereof to be marketed for sale, or to enter
into any contract, agreement or other arrangement for the future sale thereof,
Owner shall first furnish a written notice (a "Marketing Election Notice")
accompanied by a reasonably detailed term sheet (the "Term Sheet") identifying
all of the material economic terms of the proposed transaction. Regardless of
whether the transaction is structured as a purchase and sale agreement or an
option, the closing of the sale pursuant thereto shall be scheduled to occur
no later than nine (9) months after the date of the Marketing Election Notice.
ERP Operating Partnership shall have a period of thirty (30) days from the
date on which the Marketing Election Notice is furnished (the "Marketing
Election Response Period") in which to furnish a written notice (a "Marketing
Election Response Notice") to Owner, advising Owner of ERP Operating
Partnership's election to either:
(i) Consent to Owner's entering into the proposed transaction with a
third party upon economic terms not more favorable to the purchaser or
optionee than the terms set forth in the Term Sheet; or
(ii) Elect to enter into the proposed transaction as purchaser or
optionee, in accordance with the business and economic terms set forth in
the Term Sheet, subject to the negotiation of mutually agreeable
documentation (as provided in subsection (b) below) within a period of
thirty (30) days.
(b) If ERP Operating Partnership shall have made the election described in
clause (ii) of Section 2.3(a) above (an "Affirmative Election"), Owner shall
furnish ERP Operating Partnership with a draft of the proposed agreement
governing the proposed transaction (together with the principal ancillary
documents) within ten (10) days following the date on which the Affirmative
Election was furnished to Owner. If for any reason whatsoever Owner and ERP
Operating Partnership do not enter into a binding written contract governing
the transaction on or before the thirtieth (30th) day following the furnishing
of the Affirmative Election, then subsection (e) hereof shall apply.
(c) Owner and ERP Operating Partnership agree that each shall act in good
faith and shall be reasonable and cooperate with the other including, without
limitation, executing any documents that may reasonably be required in order
to consummate the transactions contemplated by the provisions set forth in
this Section 2.3.
(d) If, within the Marketing Election Response Period, ERP Operating
Partnership shall not have made the Affirmative Election, Owner shall have the
right to effectuate a sale or option of the Subject Property to a third party
purchaser that is not an Affiliate of Owner if such sale is made within a
period (the "Marketing Period") of nine (9) months following the expiration of
the Marketing Election Response Period, pursuant to business and economic
terms that are not more favorable to the purchaser or optionee than as set
forth in the Term Sheet.
(e) If ERP Operating Partnership made the Affirmative Election but a
binding written contract or option was not entered into during the period
contemplated in clause (ii) of subsection (a) above, then Owner shall have the
right to consummate the transaction in question during the Marketing Period,
provided that if during the Marketing Period, a bona fide offer is received
from a party that is not an Affiliate of Owner for the purchase of the Subject
Property upon economic terms that are more favorable to the purchaser or
optionee than as set forth on the Term Sheet, or if a bona fide offer is
received from a party that is not an Affiliate of Owner to purchase the
Subject Property pursuant to the terms of a proposed purchase and sale or
option documentation (the "Proposed Agreement") which imposes materially fewer
non-economic burdens or confers materially greater non-economic benefits upon
the purchaser or optionee than the final drafts (the "Final Drafts") of the
documentation submitted to ERP Operating Partnership by Owner pursuant to
subsection (b) above, then in either case, if Owner desires to accept such an
offer, Owner shall communicate said offer to ERP Operating Partnership and ERP
Operating Partnership shall have a period of ten (10) business days following
ERP Operating Partnership's receipt of such notice from the Owner to notify
Owner as to whether ERP Operating Partnership desires to purchase the Subject
Property on the same terms. If ERP Operating Partnership elects to purchase
the Subject Property on the same terms, the closing shall take place at a date
mutually agreed upon by ERP Operating Partnership and Owner, no later than the
later of (x) the scheduled closing date under the Proposed Agreement and (y)
sixty (60) days after ERP Operating Partnership's election to accept such
offer, the only variations in the Proposed Agreement being de minimis changes
made to reflect, for example, the date of said closing and the name of the
purchaser or optionee. The closing of said purchase will occur in accordance
with the terms of the offer and the modifications proposed by said non-
Affiliated party with respect to the Form Agreement.
(f) If Owner is authorized to proceed with the sale or option transaction
pursuant to this Section 2.3, then, at the closing of said transaction, ERP
Operating Partnership shall execute and deliver an instrument, in recordable
form, extinguishing all of ERP Operating Partnership's rights of first offer,
rights of first refusal and rights with respect to Subject Property,
sufficient to enable the purchaser's or optionee's title insurer to omit same
as an exception to this coverage.
(g) Owner shall deliver to ERP Operating Partnership a copy of all Proposed
Agreements prior to the execution and delivery thereof. Any such Proposed
Agreement shall be marked so as to identify all variations from the Final
Drafts. If required, the terms of such Proposed Agreements shall be held in
confidence by ERP Operating Partnership.
(h) Nothing herein shall prohibit Owner from mortgaging the Subject
Property as security for a loan made at arm's length to said Owner by a lender
that is not an Affiliate of Owner, even though said financing may confer upon
the lender a right to share in the cash flow or appreciation in the Subject
Property, provided however that said lender is not granted an option to
purchase the Subject Property, in connection with said loan.
(i) The rights conferred upon ERP Operating Partnership under this
Article 2 are subject and subordinate to any and all rights and interests
which may now or at any time hereafter be granted in the Subject Property
including, without limitation, the several assessment liens imposed in
connection with the PPPIC bonds, easements, rights of way, restrictions,
encumbrances, and mortgages (complying with subsection (h) above) and options
and contracts (if Owner shall have complied with the provisions of this
Article). ERP Operating Partnership shall execute any instrument reasonably
required by Owner or the holder of such interest or appropriate title insurer
to evidence such subordination.
(j) Time shall be deemed of the essence with respect to all of the time
periods with which ERP Operating Partnership is obligated to comply under this
Article.
(k) Owner reserves the right to withdraw from the market an offer at any
time for any or no reason. Owner may restart ERP Operating Partnership's
rights under this Article at any time by submitting the terms of any revised
offer to ERP Operating Partnership, whereupon the process shall repeat itself
ab initio.
ARTICLE W
TRI-PARTY AGREEMENTS AND STANDBY AGREEMENTS
3.1 (a) Reference is hereby made to a certain Tri-Party Agreement dated
December 29, 1995 (the "Phase I Tri-Party Agreement"), by and among
Nationsbank of Texas, N.A. ("Nationsbank"), Park at Highlands, WPHC, Wellsford
Parent, Al Feld and Feld Company. Newco acknowledges that, pursuant to the
Merger Agreement, the Surviving Trust has succeeded to Wellsford Parent's
rights, interests and obligations under the Tri-Party Agreement, and that the
Surviving Trust has caused said rights, interests and obligations to be
assigned to (and assumed by) ERP Operating Partnership. Newco, however,
covenants and agrees as follows with respect to the Phase I Tri-Party
Agreement:
(i) Provided that ERP Operating Partnership makes the Loan Payoff
payment therein required, Newco shall cause WPHC to assign to ERP Operating
Partnership (or, if not assignable, to enforce for the benefit of ERP
Operating Partnership) all certifications that are required by the terms of
the Phase I Tri-Party Agreement, to be certified to WPHC;
(ii) Newco shall cause WPHC not to exercise, waive or modify any
rights, or grant any approvals, under the Tri-Party Agreement without ERP
Operating Partnership's prior written consent, which shall not be
unreasonably withheld or delayed;
(iii) The "Final Project Budget" (as such term is referred to in
the Phase I Tri-Party Agreement) shall not be increased without ERP
Operating Partnership's prior written consent. The parties acknowledge that
the Final Project Budget under the Phase I Tri-Party Agreement constitutes a
limit on ERP Operating Partnership's financial obligations under the
Tri-Party Agreement and, in order to avoid any confusion with the
development budgets adopted by the Palomino Park LLC's, the term Final
Project Budget will not be employed hereinafter in this Agreement and the
term "Tri-Party Agreement Ceiling" will be employed in this Agreement in
lieu thereof.
(b) With respect to Phase II, ERP Operating Partnership understands that
(i) Red Canyon and/or WPHC are currently negotiating the terms of the proposed
construction loan (the "Phase II Loan"), and the related loan documentation
(the "Phase II Loan Documentation"), with Nationsbank or other prospective
lenders, and (ii) the plans and specifications for Phase II (the "Phase II
Plans") have not yet been finalized, and (iii) the exhibits to the operating
agreement for Red Canyon have not yet been finalized. Newco acknowledges that
ERP Operating Partnership shall have only the following rights of review and
approval in connection therewith:
(i) ERP Operating Partnership acknowledges having reviewed and
approved certain non-dimension elevations and floor plans for Phase II
(collectively, the "Preliminary Plans"), copies of which are attached hereto
as Schedule I. Newco shall cause WPHC to furnish the final proposed plans
and specifications to ERP Operating Partnership for ERP Operating
Partnership's review and approval, which shall not be withheld or delayed if
said plans and specifications constitute a logical progression from, and are
not inconsistent with, the Preliminary Plans;
(ii) ERP Operating Partnership has reviewed and approved a preliminary
total budget of $30,000,000 for Phase II, with an anticipated construction
loan in the face principal amount of $29,300,000 (collectively, the
"Preliminary Budget"). Newco shall cause WPHC to furnish to ERP Operating
Partnership the final proposed budget (the loan budget and the total budget)
for Phase II for ERP Operating Partnership's review and approval, which
shall not be withheld or delayed if the total budget for Phase II (including
land, valued at cost, and all other items) (the "Total Phase II Budget") is
not greater than $33,000,000 and ERP Operating Partnership does not have a
commercially reasonable basis to doubt the accuracy of the budget; and
(iii) The exhibits to the Operating Agreements shall be subject to
ERP Operating Partnership's review and approval not to be unreasonably
withheld.
ERP Operating Partnership further understands that Newco is attempting to
structure the Phase II Loan Documentation so that the forms of the documents
themselves will be essentially identical to the "Loan Documents" (as such term
is defined in the Tri-Party Agreement) for Phase I and such that the overall
structure of the Phase II Loan shall be not less favorable to Red Canyon and
WPHC than were the Loan Documents for Phase I as they related to Park at
Highlands and WPHC. In particular, ERP Operating Partnership understands that
Newco will request that ERP Operating Partnership enter into a Tri-Party
Agreement for Phase II (the "Phase II Tri-Party Agreement") that is structured
in the same manner as the Tri-Party Agreement for Phase I. ERP Operating
Partnership hereby agrees to do so, provided that (i) the Tri-Party Agreement
Ceiling (determined at the time the Phase II Tri-Party Agreement is entered
into and not subject to subsequent increase without ERP Operating
Partnership's prior written consent) applicable to the Phase II Tri-Party
Agreement shall be less than or equal to $29,300,000, adjusted downward on a
dollar for dollar basis to the extent that the Total Phase II Budget is less
than $30,000,000, and adjusted upward on a dollar for dollar basis to the
extent that the Total Phase II Budget is greater than $30,000,000 but less
than or equal to $31,500,000; (ii) the maturity date under the Phase II Loan
is no later than the third anniversary of the date hereof; (iii) ERP Operating
Partnership shall have no obligations to the lender with respect to the
Phase II Loan, other than as set forth in the Phase II Tri-Party Agreement;
and (iv) the form of the Phase II Tri-Party Agreement shall have been modified
from the form of the Phase I Tri-Party Agreement so as to be consistent with
clauses (i) through (iii) of Section 3.1(a) hereof and provided further that
ERP Operating Partnership shall not be required to make any representations or
warranties regarding Phase II. In no event shall the Tri-Party Agreement
Ceiling for the Phase II Tri-Party Agreement be greater than $30,800,000.
3.2 (a) Concurrently herewith, WPHC shall enter into a Standby Purchase
and Sale Agreement with ERP Operating Partnership (the "Standby Agreement")
pursuant to which WPHC shall agree to cause the applicable Palomino Park LLC
to grant ERP Operating Partnership an option to purchase only Phase I or Phase
II, as the case may be, upon and subject to the satisfaction of the conditions
set forth herein.
(b) ERP Operating Partnership shall have the right to exercise its option
to purchase Phase I from and after the date, if any, on which ERP Operating
Partnership shall make the "Loan Payoff" (as such term is employed in Section
1 of the Phase I Tri-Party Agreement) pursuant to Section 1 of the Phase I
Tri-Party Agreement. Said option must be exercised, if at all, within thirty
(30) days following the making of said Loan Payoff and ERP Operating
Partnership shall not have the right to exercise said option unless ERP
Operating Partnership has made the Loan Payoff.
(c) ERP Operating Partnership shall have the right to exercise its option
to purchase Phase II from and after the date, if any, on which ERP Operating
Partnership shall make the "Loan Payoff" (as such term shall be employed in
Section 1 of the Phase II Tri-Party Agreement) pursuant to Section 1 of the
Phase II Tri-Party Agreement. Said option must be exercised, if at all,
within thirty (30) days following the making of said Loan Payoff and ERP
Operating Partnership shall not have the right to exercise said option unless
ERP Operating Partnership has made the Loan Payoff.
(d) The Purchase Price for Phase I, pursuant to the Standby Agreement shall
be One Hundred Dollars ($100); the Purchase Price for Phase II, pursuant to
the Standby Agreement, shall be One Hundred Dollars ($100).
(e) No fee shall be payable to ERP Operating Partnership in connection with
the Phase I Tri-Party Agreement. In consideration of ERP Operating
Partnership's undertakings pursuant to the Phase II Tri-Party Agreement,
however, Newco shall pay to ERP Operating Partnership a fee (the "Tri-Party
Fee"), with respect to each of the first three (3) "Annual Periods" (as such
term is hereinafter defined) from and after the date hereof, in the respective
amount set forth below with respect to each such Annual Period;
(i) The fee for the first Annual Period shall be an amount equal to
one percent (1%) of the face principal amount of the construction loan for
Phase II;
(ii) The fee for the second Annual Period shall be an amount equal to
one percent (1%) of the face principal amount of the construction loan for
Phase II; and
(iii) The fee for the third Annual Period shall be one and one-half
percent (1 1/2%) of the face principal amount of the construction loan for
Phase II.
As employed herein, the term "Annual Period" shall mean a period commencing
on the date on which ERP Operating Partnership enters into the Phase II
Tri-Party Agreement or on any anniversary of said date and ending on the
immediately preceding day of the same month in the next calendar year. The
Tri-Party Fee for any given Annual Period shall be payable quarterly in
advance (in equal fourths of the Tri-Party Fee for the entire Annual Period in
which said quarter falls) on the first day of each quarter of said Annual
Period, shall be earned in full for said quarter as of the first day of said
quarter and shall not be refundable for any reason whatsoever, including
without limitation the termination of the Phase II Tri-Party Agreement prior
to the expiration of the quarter for which said Standby Fee has been paid.
With respect to each Annual Period, a "quarter" shall be any of the four
periods commencing on the first day of said Annual Period or on the dates that
are three, six or nine months thereafter, respectively, and ending on the day
prior to the commencement of the next quarter.
(f) ERP Operating Partnership shall not be responsible for the payment of
any transfer or transaction taxes, the purchase of documentary stamps or other
transaction costs of any kind whatsoever (other than the payment of ERP
Operating Partnership's own attorneys' fees) in connection with the closing.
All other costs and expenses (including title, escrow and survey costs and the
fees and expenses of any professionals providing inspections or certifications
as provided hereinbelow) shall be borne solely by Park at Highlands or Red
Canyon, as the case may be.
(g) ERP Operating Partnership's obligations under the Phase I Tri-Party
Agreement and the Phase II Tri-Party Agreement shall be unsecured.
3.3 In connection with ERP Operating Partnership's purchase of Phase I or
the Phase II, as the case may be, pursuant to the Standby Agreement, WPHC
shall cause the following conditions to be satisfied at closing:
(a) A title insurance company satisfactory to ERP Operating Partnership in
the exercise of ERP Operating Partnership's commercially reasonable judgment
shall have issued to ERP Operating Partnership an Owner's policy of title
insurance, in the amount of the purchase price, in such form and with such
endorsements as shall be reasonably requested by ERP Operating Partnership,
showing ERP Operating Partnership in title to the subject property subject to
no title exceptions other than matters not materially interfering with the
use, operation and maintenance of the property in question for its intended
purpose as a multifamily development within Highlands Ranch.
The title policy shall contain full extended coverage over mechanic's lien
claims or rights to liens in connection with all work performed before the
date of closing. The title policy shall reflect that all financing and liens
of a definite or ascertainable amount have been released from the subject
property, other than liens for taxes and assessments not yet due and payable,
and all assessment liens including, without limitation, the Indemnification
Assessment Lien and all other liens arising from or in connection with the
Assessment Lien Revenue Bonds, Series 1995, issued by PPPIC in the aggregate
principal amount of $14,755,000. At a minimum, the endorsements to be
contained in said title policy shall include the following;
(i) 103.1 and 103.2 (encroachments);
(ii) 103.7 (property abuts or has insurable access to open and
dedicated street);
(iii) 110.1 (deleting standard exceptions);
(iv) 110.2 (special exceptions) if any new exceptions appear that are
not listed as permitted exceptions identified above;
(v) 115.2 (PUD);
(vi) 116.1 (survey); and
(vii) 123.2 (zoning).
(b) ERP Operating Partnership shall have received reasonably satisfactory
evidence (which may be included in the title policy described in Subsection
(a) above) that all real property taxes and assessments for the Phase that are
due and payable through the date of closing have been timely and fully paid.
(c) If so requested by ERP Operating Partnership, Red Canyon or Park at
Highlands, as the case may be, shall have furnished ERP Operating Partnership
with evidence of the termination of all contracts and service agreements
between said Palomino Park LLC and any Affiliate controlled by WPHC thereof,
and the waiver of any and all claims against ERP Operating Partnership with
respect to said contracts or agreements.
(d) Red Canyon or Park at Highlands, as the case may be, shall represent
and warrant to ERP Operating Partnership that, to their best knowledge, no
hazardous substances or other materials regulated by environmental laws have
been introduced to the Subject Property from and after March 15, 1994 in
excess of amounts permitted by applicable environmental laws, and that, to the
best knowledge of Red Canyon or Park at Highlands, as the case may be, the
Phase has been completed in accordance with all applicable laws, codes and
ordinances.
3.4 WPHC's obligations under the Standby Agreement shall be guaranteed by
Newco. Nothing in this Agreement or in any other instrument, agreement or
document, however characterized, including without limitation the Operating
Agreements for Park at Highlands and Red Canyon (in particular, Section 4.1.2
thereof) shall obligate Newco to pay the construction loan for the Phase, and
ERP Operating Partnership shall have no recourse whatsoever to seek recourse
to any extent against Newco for the payment of any part of said loan,
irrespective of whether ERP Operating Partnership pays any sums under the
Tri-Party Agreement for the Phase. Consistent with the foregoing, ERP
Operating Partnership shall have no right of enforcement, whether by
subrogation or direct action, or otherwise, of the capital contribution
requirements of Newco set forth in the Operating Agreement.
\ED The Standby Agreement (and the guaranty referred to in Section 3.4
hereof) shall be prepared by counsel to ERP Operating Partnership, shall
incorporate the terms set forth above in this Article 3 and shall otherwise be
in form and substance satisfactory to ERP Operating Partnership in ERP
Operating Partnership's commercially reasonable judgment.
3.6 The rights of ERP Operating Partnership under the Standby Agreement are
and shall at all times be subject to any and all liens, restrictions,
covenants and encumbrances, now existing and hereafter arising, affecting the
Subject Property and ERP Operating Partnership shall furnish any instrument
reasonably required by Newco, Park at Highlands, Red Canyon or any title
insurer sufficient to enable the title insurer to omit same as an exception to
title insurance coverage.
ARTICLE 4
CONDITIONS PRECEDENT
4.1 The execution and delivery of all of the documents and instruments
described in Articles 1, 2 and 3 above shall be mutually necessary conditions
precedent. In addition, the satisfaction of the following shall constitute
additional conditions precedent to the consummation of the transactions
contemplated under this Agreement:
(i) the approval of all third parties whose consent or approvals may
be required for the consummation of said transactions;
(ii) an acknowledgment by Nationsbank, WPHC and Park at Highlands that
the Phase I Tri-Party Agreement is in full force and effect and has not been
modified, that no notice of default has been given thereunder by Nationsbank
with respect to Wellsford Parent that has not been cured, and that the
Tri-Party Agreement Ceiling as it relates to Phase I has not been modified,
and Wellsford Parent's obligations under the Phase I Tri-Party Agreement
have been assigned to ERP Operating Partnership by the Surviving Trust and
that said parties will look solely to ERP Operating Partnership for the
performance of said obligations; an acknowledgment by Nationsbank that ERP
Operating Partnership's obligations to Nationsbank with respect to Phase I
are as set forth in the Phase I Tri-Party Agreement;
(iii) a release executed by Al Feld, of any and all obligations of
Wellsford Parent in connection with the Palomino Park LLCs (other than the
Phase I Tri-Party Agreement), including, without limitation, the obligations
to make capital contributions to Park at Highlands and Red Canyon;
(iv) evidence, reasonably satisfactory to ERP Operating Partnership, of
the due and valid authorization, execution and delivery of the documents and
instruments contemplated to be entered into pursuant to this Agreement by
Newco, WPHC, Park at Highlands, Red Canyon, or any Affiliate of any of the
foregoing;
(v) the delivery to ERP Operating Partnership of copies of the
Operating Agreements, as amended pursuant hereto, certified as true, correct
and complete by WPHC;
(vi) the delivery to ERP Operating Partnership of copies of the
corporate organizational documents for WPHC, certified as true, correct and
complete by an officer of WPHC;
(vii) certificates, in form and substance and executed by such
parties as ERP Operating Partnership may reasonably require, evidencing that
all documents and materials submitted to ERP Operating Partnership prior to
the execution and delivery of the Merger Agreement and relating to the
Overall Property, the Project or any portion thereof, shall not have been
materially modified, supplemented or amended without ERP Operating
Partnership's prior written consent and, to the best knowledge of the
undersigned, are free from default;
(viii) the consummation of the transactions contemplated under the
Merger Agreement and the Contribution Agreement.
4.2 It shall be a condition precedent to ERP Operating Partnership's
obligations to enter into the Phase II Tri-Party Agreement that no Event of
Default beyond all applicable cure periods shall have occurred under this
Agreement.
4.3 Newco shall use its best efforts to ensure that all conditions
precedent to ERP Operating Partnership's obligations which are set forth in
clauses (i)-(viii) inclusive of Section 4.1 shall be satisfied as of the date
of the consummation of the transactions contemplated by the Merger Agreement.
In the event that Newco is unable to satisfy any condition precedent set forth
in clauses (i)-(viii) inclusive of Section 4.1 hereof by the date of the
consummation of the transactions contemplated by the Merger Agreement, after
the exercise of its best efforts to satisfy such condition, ERP Operating
Partnership shall have the right, in its sole and absolute discretion, (i) to
satisfy such condition precedent, at its cost and expense, or (ii) to waive
compliance with any such condition precedent.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Newco. Newco hereby represents and
warrants to ERP Operating Partnership as follows:
(a) Newco (i) is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its organization,
(ii) has all requisite corporate power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted by Newco, (iii) is qualified to do business in every jurisdiction
where such qualification is required, except where the failure so to qualify
would not result in a "Material Adverse Effect on Newco" (as such term is
hereinafter defined), and (iv) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement. As
employed herein, the term "Material Adverse Effect on Newco" shall mean
(i) a materially adverse effect on the financial condition of Newco, or
(ii) material impairment of the ability of Newco to pay any amount due, or
to perform any other material obligation, under any Letter of Credit
Document or Alternate Reimbursement Document, as those terms are defined in
that certain Credit Enhancement Agreement dated May 30, 1997 by and between
ERP Operating Partnership and Newco (the "Credit Enhancement Agreement").
(b) The execution, delivery and performance by Newco of this Agreement
and the transactions contemplated hereby (i) have been duly authorized by
all requisite corporate and, if required, stockholder action and (ii) will
not (A) violate (x) any provision of law, statute, rule or regulation to
which Newco or any of its "Affiliates" (as such term is defined in
Section 6.2) shall be subject, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of Newco, (y) any
order of any governmental authority or quasi-governmental authority, or
(z) any provision of any indenture or other material agreement or instrument
to which Newco is a party or by which it or any of its property is or may be
bound, (B) be in conflict with, result in a breach of or constitute (alone
or with notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or (C) result in the creation or imposition
of any lien upon or with respect to any property or assets now owned or
hereafter acquired by Newco, except for the lien, if any, created pursuant
to the terms of this Agreement.
(c) This Agreement has been duly executed and delivered by Newco and
constitutes a legal, valid and binding obligation of Newco enforceable
against Newco in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally, or by general equity principles,
including but not limited to principles governing the availability of the
remedies of specific performance and injunctive relief.
(d) Each of the Palomino Park LLCs is classified for federal tax
purposes as a partnership and not as an association taxable as a
corporation.
(e) There have been no modifications to the Final Project Budget
attached to the Phase I Tri-Party Agreement, other than change orders funded
by WPHC. The total value of all negative change orders in connection with
Phase I is less than $500,000.
5.2 Representations and Warranties of ERP Operating Partnership. ERP
Operating Partnership hereby represents and warrants to Newco as follows:
(a) ERP Operating Partnership (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its organization, (ii) has all requisite corporate power and authority to
own its property and assets and to carry on its business as now conducted
and as proposed to be conducted by ERP Operating Partnership, (iii) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a
"Material Adverse Effect on ERP Operating Partnership" (as such term is
hereinafter defined), and (iv) has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement. As
employed herein, the term "Material Adverse Effect on ERP Operating
Partnership" shall mean a materially adverse effect on the financial
condition of ERP Operating Partnership.
(b) The execution, delivery and performance by ERP Operating
Partnership of this Agreement and the transactions contemplated hereby
(i) have been duly authorized by all requisite corporate and, if required,
stockholder action, and (ii) will not (A) violate (x) any provision of law,
statute, rule or regulation to which ERP Operating Partnership or any of its
"Affiliates" (as such term is defined in Section 6.2) shall be subject, or
of the certificate or articles of incorporation or other constitutive
documents or by-laws of ERP Operating Partnership, (y) any order of any
governmental authority or quasi-governmental authority, or (z) any provision
of any indenture or other material agreement or instrument to which ERP
Operating Partnership is a party or by which it or any of its property is or
may be bound, (B) be in conflict with, result in a breach of or constitute
(alone or with notice or lapse of time or both) a default under any such
indenture, agreement or other instrument, or (C) result in the creation or
imposition of any lien upon or with respect to any property or assets now
owned or hereafter acquired by ERP Operating Partnership.
(c) This Agreement has been duly executed and delivered by ERP
Operating Partnership and constitutes a legal, valid and binding obligation
of ERP Operating Partnership enforceable against ERP Operating Partnership
in accordance with its terms, except as such enforceability may be limited
by bankruptcy, insolvency or other laws affecting the enforcement of
creditors' rights generally, or by general equity principles, including but
not limited to principles governing the availability of the remedies of
specific performance and injunctive relief.
ARTICLE 6
EVENTS OF DEFAULT
6.1 Events of Default. The happening of any of the following events shall
be an "Event of Default" hereunder:
(a) any representation or warranty made or deemed made in or in
connection with this Agreement by Newco shall prove to have been false or
misleading in any material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any amounts due under this
Agreement and such default is not cured within five (5) business days of
written notice from ERP Operating Partnership of such default;
(c) material default shall be made in the due observance or
performance by Newco of any covenant, condition or agreement contained in
(i) this Agreement and any documents or instruments entered into pursuant to
this Agreement, other than a default in the payment of any amount due under
this Agreement, and such material default shall not be cured within fifteen
(15) business days of written notice from ERP Operating Partnership of such
default;
(d) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of Newco or any Subsidiary (as hereinafter defined),
or of a substantial part of the property or assets of Newco or any
Subsidiary, under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Newco or any
Subsidiary or for a substantial part of the property or assets of Newco or
any Subsidiary or (iii) the winding-up or liquidation of Newco or any
Subsidiary; and such proceeding or petition shall continue undismissed for
90 days or an order or decree approving or ordering any of the foregoing
shall be entered;
(e) Newco or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal
or state bankruptcy, insolvency, receivership or similar law, (ii) consent
to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in (h) above,
(iii) apply for or consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for Newco or any
Subsidiary or for a substantial part of the property or assets of Newco or
any Subsidiary, (iv) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become due
or (vii) take any action for the purpose of effecting any of the foregoing;
(f) one or more judgments for the payment of money in an aggregate
amount in excess of $250,000 shall be rendered against Newco, and the same
shall remain undischarged or unbonded for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed, or
any judgment creditor shall levy upon assets or properties of Newco or any
Subsidiary to enforce any such judgment; or
(g) there shall have occurred a Change in Control with respect to
Newco.
6.2 Definitions. As employed herein, the following terms shall have the
following meanings:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.
A "Change in Control" shall be deemed to have occurred with respect
to Newco or PPPIC, as the case may be, if (a) any Person or group (within
the meaning of Rule 13d-5 of the Securities and Exchange Commission as in
effect on the date hereof) shall own, directly or indirectly, beneficially
or of record, shares representing more than 50% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of
Newco; or (b) a change shall occur during any period in the Board of
Directors of Newco in which the individuals who constituted the Board of
Directors of Newco at the beginning of such period (together with any
other director whose election by the Board of Directors of Newco or whose
nomination for election by the stockholders of Newco was approved by a
vote of at least two-thirds of the directors then in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason
to constitute a majority of the directors of Newco then in office.
"Control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, whether
through the ownership of voting securities, by contract or otherwise. The
term "controlled" has a meaning correlative to the foregoing.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Subsidiary" of Newco shall mean WPHC, Park at Highlands or Red Canyon.
6.3 Remedies.
(a) Upon the occurrence of an Event of Default described in
Section 6.1 hereof, ERP Operating Partnership shall have any and all
remedies available to it at law, in equity or pursuant to statute. Nothing
in this section shall entitle ERP Operating Partnership to disaffirm to any
extent and in any manner its obligations under the Phase I Tri-Party
Agreement or (if ERP Operating Partnership has previously executed and
delivered the Phase II Tri-Party Agreement) the Phase II Tri-Party
Agreement; provided, however, that ERP Operating Partnership shall have no
obligation to enter into the Phase II Tri-Party Agreement if an Event of
Default shall have occurred.
(b) Upon the failure of ERP Operating Partnership to perform any of
its obligations under this Agreement, Newco shall have any and all remedies
available to it at law, in equity or pursuant to statute.
ARTICLE 7
RELEASE OF ERP OPERATING PARTNERSHIP
Notwithstanding anything to the contrary contained in this Agreement, Newco
shall not cause or permit to occur any transactions or series of transactions
as a result of which Newco will cease to own a controlling interest in WPHC or
WPHC will cease to own a controlling interest in the Palomino Park LLCs
without first causing ERP Operating Partnership to be fully released from the
Credit Enhancement Agreement of even date herewith between ERP Operating
Partnership and Newco (the "Credit Enhancement Agreement"), the "Initial ERP
Operating Partnership Guaranty" (as such term is defined in the Credit
Enhancement Agreement) and any "Alternate ERP Operating Partnership
Guaranties" (as such term is defined in the Credit Enhancement Agreement).
ARTICLE 8
TAX SHARING AGREEMENT
Concurrently herewith, the parties hereto shall enter into a Tax Sharing
Agreement in the form attached hereto as Exhibit A.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
or sent by telecopy, as follows:
(a) if to Newco: Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Edward Lowenthal
Telecopy No.: (212) 333-2323
with a copy to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, New York 10104-0053
Attn: Alan S. Pearce, Esq.
Telecopy No.: (212) 541-1411
(b) if to the ERP Operating
Partnership: ERP Operating Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: President
Telecopy No.: (312) 207-5243
with a copy to: Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: Bruce C. Strohm, Esq.
Telecopy No.: (312) 454-0039
and: Rudnick & Wolfe
203 N. LaSalle St., Suite 1800
Chicago, Illinois 60601
Attn: Errol R. Halperin, Esq.
Telecopy No.: (312) 236-7516
9.2 Survival of Agreement. All covenants, agreements, representations and
warranties made by Newco herein and in the certificates or other instruments
prepared or delivered in connection with or pursuant to this Agreement shall
be considered to have been relied upon by ERP Operating Partnership and shall
survive the date of this Agreement, regardless of any investigation made by
ERP Operating Partnership or on its behalf, and shall continue in full force
and effect so long as ERP Operating Partnership retains any obligations or
liability under this Agreement, or any document or instrument entered into
pursuant hereto.
9.3 Binding Effect. This Agreement shall become effective when it shall
have been executed by Newco and ERP Operating Partnership, and thereafter
shall be binding upon and inure to the benefit of Newco, ERP Operating
Partnership and their respective successors and assigns, except that Newco
shall not have the right to assign its rights hereunder or any interest herein
without the prior consent of ERP Operating Partnership.
9.4 Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
9.5 Waivers; Amendment.
(a) No failure or delay of Newco or ERP Operating Partnership in
exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of each party hereunder are
cumulative and are not exclusive of any rights or remedies which they would
otherwise have. No waiver of any provision of this Agreement or consent to
any departure by either party therefrom shall in any event be effective
unless the same shall be permitted by paragraph (b) below, and then such
waiver or consent shall be effective only in the specific instance and for
the purpose for which given. No notice or demand on the other party in any
case shall entitle the other party to any other or further notice or demand
in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by Newco and ERP Operating Partnership.
9.6 Entire Agreement. This Agreement, including any exhibits and schedules
hereto, constitutes the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party other
than the parties hereto and thereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.7 Waiver of Jury Trial. Each party hereto hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury
in respect of any litigation directly or indirectly arising out of, under or
in connection with this Agreement.
9.8 Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
9.9 Headings. Article and Section headings used herein are for convenience
of reference only, are not part of this Agreement and are not to affect the
construction of, or to be taken into consideration in interpreting, this
Agreement.
9.10 Jurisdiction; Consent to Service of Process.
(a) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS STATE
COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN THE CITY
OF CHICAGO OR THE CITY OF NEW YORK, AND ANY APPELLATE COURT THEREFROM, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR
FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
ILLINOIS OR NEW YORK STATE COURT OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH
FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN
ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED
BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
IN THE COURTS OF ANY JURISDICTION.
(b) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY ILLINOIS OR
NEW YORK STATE OR FEDERAL COURT. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF
AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY
SUCH COURT.
IN WITNESS WHEREOF, ERP Operating Partnership and Newco have caused this
Agreement to be signed by their respective officers hereunto duly authorized
all as of the date first written above.
ERP OPERATING LIMITED PARTNERSHIP
By: EQUITY RESIDENTIAL PROPERTIES TRUST,
its general partner
By:/s/ Bruce C. Strohm
-----------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
and General Counsel
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Edward Lowenthal
---------------------------------
Name: Edward Lowenthal
Title: President
<PAGE>
EXHIBIT A
FORM OF TAX SHARING AGREEMENT
<PAGE>
SCHEDULE I
PRELIMINARY PLANS
ASSIGNMENT AND ASSUMPTION OF
TRI-PARTY AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF TRI-PARTY AGREEMENT (this
"Assignment"), is made and entered into as of the ______ day of May, 1997, by
and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate
investment trust (hereinafter called "Assignor"), ERP OPERATING LIMITED
PARTNERSHIP, an Illinois limited partnership (hereinafter called "Assignee"),
PARK AT HIGHLANDS LLC, a Colorado limited liability company ("Park at
Highlands"), WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"),
THE FELD COMPANY, a Colorado corporation ("Feld Company"), AL FELD, an
individual and NATIONSBANK OF TEXAS, N.A., a national banking association
("Nationsbank").
RECITALS
10 Reference is hereby made to that certain Tri-Party Agreement dated
December 29, 1995, by and among Nationsbank, Assignor, Park at Highlands,
WPHC, Al Feld, and Feld Company (the "Phase I Tri-Party Agreement"). The
Phase I Tri-Party Agreement was executed in connection with that certain
construction loan in the original principal amount of $36,757,533.00 from
Nationsbank to Park at Highlands for the development of a 456-unit apartment
complex and related facilities in Highlands Ranch, Douglas County, Colorado
(the "Project").
11 Subsequent to the execution of the Phase I Tri-Party Agreement,
Assignor entered into that certain Agreement and Plan of Merger (the "Merger
Agreement") dated as of January 16, 1997, by and between Equity Residential
Properties Trust, a Maryland real estate investment trust ("ERPT"), and
Assignor in connection with the merger of ERPT with and into Assignor.
12 ERPT is the general partner of Assignee.
13 Pursuant to the Merger Agreement, Assignor is obligated to assign to
Assignee, and Assignee has agreed to assume, all of Assignor's rights,
interests and obligations under the Phase I Tri-Party Agreement.
14 The parties hereto now desire to enter into this Assignment in order
to effectuate the above-referenced assignment and assumption of Assignor's
rights, interests and obligations under the Phase I Tri-Party Agreement and to
evidence the consent to such assignment and assumption by the parties hereto.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby covenant and agree as follows:
14.1 Assignment. Assignor does hereby transfer, assign, grant, delegate
and convey to Assignee, its successors and assigns, and Assignee, for itself
and its successors and assigns, does hereby assume, all of Assignor's rights,
interests and obligations in, to and under the Phase I Tri-Party Agreement
from and after the date hereof.
14.2 Consent To Assignment. Nationsbank and each other party hereto does
hereby consent to and acknowledge the above assignment and agrees to look
solely to Assignee from and after the date hereof for the performance of all
duties and obligations that were previously the responsibility of Assignor
under the Phase I Tri-Party Agreement. Any further assignment of the Phase I
Tri-Party Assignment shall require the prior written consent of Nationsbank.
14.3 Original Documents. Concurrently with the execution and delivery of
this Assignment, Assignor shall deliver to Assignee any original copies of the
Phase I Tri-Party Agreement, together with all exhibits, addenda and
amendments thereto, in Assignor's possession.
14.4 Notice to Assignee. The parties hereto agree that from and after
the date hereof, a copy of any notice or communication required or permitted
to be given to Assignor pursuant to the Phase I Tri-Party Agreement, shall now
be sent to ERP Operating Limited Partnership, 2 North Riverside Plaza, Suite
400, Chicago, Illinois 60606, attention: President, with a copy to (i) Equity
Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago,
Illinois 60606, Attention: President and Bruce C. Strohm, Esq. and (ii)
Rudnick & Wolfe, 203 N. LaSalle St., Suite 1800, Chicago, Illinois 60601,
Attention: Errol R. Halperin, Esq.
14.5 Governing Law. This Assignment shall be governed by and construed
in accordance with the laws of the State of Colorado.
14.6 Successors and Assigns. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
14.7 Headings. The headings of the paragraphs of this Assignment have
been included only for convenience, and shall not be deemed in any manner to
modify or limit any of the provisions of this Assignment or be used in any
manner in the interpretation of this Assignment.
14.8 Interpretation. Whenever the context so requires in this
Assignment, all words used in the singular shall be construed to have been
used in the plural (and vice versa), each gender shall be construed to include
any other genders, and the word "person" shall be construed to include a
natural person, a corporation, a firm, a partnership, a joint venture, a
trust, an estate or any other entity.
14.9 Partial Invalidity. Each provision of this Assignment shall be
valid and enforceable to the fullest extent permitted by law. If any
provision of this Assignment or the application of such provision to any
person or circumstance shall, to any extent, be invalid or unenforceable, then
the remainder of this Assignment, or the application of such provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected by such invalidity or unenforceability.
14.10 Further Agreements. Assignor agrees to execute and deliver to
Assignee such additional documents, instruments or agreements as may be
necessary or appropriate to effectuate the purposes of this Assignment.
14.11 Limitation of Liability. This Assignment and all documents,
agreements, understandings and arrangements
relating to this Assignment have been executed by the undersigned on behalf of
Assignor in his/her capacity as an officer or trustee of Assignor which has
been formed as a Maryland real estate investment trust pursuant to a
Declaration of Trust of Assignor dated as of July 10, 1992, and not
individually, and neither the trustees, officers or shareholders of Assignor
shall be bound by or have any personal liability hereunder or thereunder. The
beneficiary of this Assignment shall look solely to the assets of Assignor for
satisfaction of any liability of Assignor in respect of this Assignment and
all documents, agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action against any of
the trustees, officers or shareholders of Assignor or any of their personal
assets for the performance or payment of any obligation hereunder or
thereunder. The foregoing shall also apply to all and any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto with respect to the this Assignment or any matter related thereto.
14.12 Counterparts. This Assignment may be executed in one or more
counterparts, all of which when taken together shall constitute the entire
agreement of the parties.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as
of the date above first written.
WELLSFORD RESIDENTIAL PROPERTY TRUST,
a Maryland real estate investment
trust
By: /s/ David M. Strong
-------------------------------------
Name: David M. Strong
Title: Vice President
ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, its
general partner
By: /s/ Bruce C. Strohm
--------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
NATIONSBANK OF TEXAS, N.A., a national banking
association
By: /s/ Sondra E. Teilborg
-------------------------------------
Name: Sondra E. Teilborg
Title: Vice President
PARK AT HIGHLANDS LLC, a Colorado limited liability
company
By: /s/ Al Feld, Manager
--------------------------------------
Al Feld, Manager
WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By: /s/ David M. Strong
--------------------------------------
David M. Strong,
Vice President
THE FELD COMPANY, a Colorado corporation
By: /s/ Al Feld
--------------------------------------
Al Feld, President
--------------------------------------
Al Feld
AGREEMENT AND ACKNOWLEDGEMENT
REGARDING TRI-PARTY AGREEMENT
This Agreement (this "Agreement") is made and entered into as of this
30th day of May, 1997, by and between Nationsbank of Texas, N.A., a national
banking association ("Nationsbank"), Park at Highlands LLC, a Colorado limited
liability company ("Borrower"), Wellsford Park Highlands Corp., a Colorado
corporation ("WPHC"), and ERP Operating Limited Partnership, an Illinois
limited partnership ("ERP Operating Partnership").
RECITALS
15 Reference is hereby made to that certain Tri-Party Agreement dated
December 29, 1995, by and among Nationsbank, Borrower, Wellsford Park
Highlands Corp., a Colorado corporation, Wellsford Residential Property Trust,
a Maryland real estate investment trust ("WRPT"), Al Feld, an individual and
the Feld Company, a Colorado corporation (the "Phase I Tri-Party Agreement"),
executed in connection with that certain construction loan in the original
principal amount of $36,757,533.00 from Nationsbank to Borrower for the
development of a 456-unit apartment complex and related facilities in
Highlands Ranch, Douglas County, Colorado (the "Project").
16 Subsequent to the execution of the Phase I Tri-Party Agreement, WRPT
entered into that certain Agreement and Plan of Merger dated as of January 16,
1997, by and between Equity Residential Properties Trust, a Maryland real
estate investment trust ("ERPT"), and WRPT in connection with the merger of
ERPT with and into WRPT.
17 ERPT is the general partner of ERP Operating Partnership.
18 The obligations of WRPT pursuant to the Phase I Tri-Party Agreement
have been or will be assigned to and assumed by ERP Operating Partnership
pursuant to that certain Assignment and Assumption of Tri-Party Agreement (the
"Tri-Party Assignment").
19 The parties hereto now desire to enter into this Agreement in order
to confirm the status of certain items contained in the Phase I Tri-Party
Agreement.
NOW, THEREFORE, for and in consideration of the above recitals and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree to and confirm the following:
19.1 The Phase I Tri-Party Agreement (including all Exhibits thereto) is
in full force and effect and has not been assigned, modified, supplemented or
amended in any way, except as described in Paragraph 4 below.
19.2 Nationsbank has not delivered to WRPT any Default Notice (as defined
in the Phase I Tri-Party Agreement) pursuant to Paragraph 9(a) of the Phase I
Tri-Party Agreement with respect to WRPT that has not been cured.
19.3 Subject to Nationsbank's rights under Paragraph 3(b) of the Phase I
Tri-Party Agreement, the total amount of the Final Project Budget (as defined
in the Phase I Tri-Party Agreement) as it relates to the Project has not been
modified, supplemented or amended in any way.
19.4 Nationsbank acknowledges that obligations of WRPT pursuant to the
Phase I Tri-Party Agreement have been assigned to and assumed by ERP Operating
Partnership pursuant to the Tri-Party Assignment.
19.5 The parties hereto shall look solely to ERP Operating Partnership
for the performance of all obligations of WRPT pursuant to the Phase I Tri-
Party Agreement.
19.6 All obligations of ERP Operating Partnership, as assignee of WRPT,
to Nationsbank with respect to the Project are as set forth in the Phase I
Tri-Party Agreement and have not been amended or modified in any way.
19.7 From and after the date hereof, a copy of any notice or
communication required or permitted to be given to WRPT pursuant to the Phase
I Tri-Party Agreement, shall now be sent to ERP Operating Limited Partnership,
2 North Riverside Plaza, Suite 400, Chicago, Illinois 60606, attention:
President, with a copy to (i) Equity Residential Properties Trust, Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: President and
Bruce C. Strohm, Esq. and (ii) Rudnick & Wolfe, 203 N. LaSalle St., Suite
1800, Chicago, Illinois 60601, Attention: Errol R. Halperin, Esq.
19.8 This Agreement shall be governed by and construed in accordance with
the laws of the State of Colorado.
19.9 Except as set forth herein and in the Tri-Party Assignment, the
Phase I Tri-Party Agreement is hereby ratified and confirmed and shall not be
otherwise amended or modified by this or any other instrument.
19.10 This Agreement may be executed in one or more counterparts, all
of which when taken together shall constitute the entire Agreement of the
parties.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
as of the day and year first above written.
NATIONSBANK OF TEXAS, N.A., a
national banking association
By:/s/ Sondra E. Teilborg
----------------------------------
Name: Sondra E. Teilborg
Title: Vice President
PARK AT HIGHLANDS LLC,
a Colorado limited liability company
By:/s/ al Feld
----------------------------------
Al Feld, Manager
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation
By:/s/ David M. Strong
---------------------------------
David M. Strong
Vice President
ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, its
general partner
By:/s/ Bruce C. Strohm
-----------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
FIRST AMENDMENT TO OPERATING AGREEMENT
OF RED CANYON AT PALOMINO PARK LLC
THIS FIRST AMENDMENT TO OPERATING AGREEMENT OF RED CANYON AT PALOMINO
PARK LLC (this "First Amendment") is made as of the 19th day of May, 1997, by
and between AL FELD, an individual ("Feld") and WELLSFORD PARK HIGHLANDS
CORP., a Colorado corporation ("WPHC").
RECITALS
A. Feld and WPHC constitute all of the members (collectively, the
"Members") of Red Canyon at Palomino Park LLC, a Colorado limited liability
company (the "Company"), which is governed by that certain Operating Agreement
of Red Canyon at Palomino Park LLC (the "Operating Agreement") dated as of
April 17, 1996.
B. The Members now desire to amend the Operating Agreement as set forth
herein.
C. Capitalized terms not otherwise defined herein shall have the
definitions set forth in the Operating Agreement.
NOW, THEREFORE, for and in consideration of the above recitals and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Feld and WPHC hereby agree to amend the Operating
Agreement as follows:
15. Operating Deficit Guaranty.
a. Section 6.4 of the Operating Agreement, which provides for the
making of the Operating Deficit Guaranty by Feld, is hereby deleted in its
entirety.
b. The definition of Operating Deficit Payments which appears in
Section 1(bn) of the Operating Agreement is hereby deleted.
c. Section 4.4 of the Operating Agreement, which provides for
Operating Deficit Payments by Feld, is hereby deleted in its entirety.
d. The phrase "Feld shall make either a Development Deficit Payment
or an Operating Deficit Payment" which appears in the second sentence of
Section 6.16 of the Operating Agreement is hereby deleted and the following is
substituted therefor: "Feld shall make a Development Deficit Payment."
e. The phrase "and Operating Deficits" which appears in the fifth
sentence of Section 7.6 of the Operating Agreement is hereby deleted.
f. Section 12.12.1.5 of the Operating Agreement, which provides a
cause for removal of Feld as the manager, and as a member, of the Company, is
hereby deleted in its entirety and the following is substituted therefor:
"12.12.1.5 The Project having incurred any Operating
Deficits after the Conversion Date; provided, however,
that the Company will remain liable to Feld for payment of
certain fees to Feld pursuant to Article 7 of this
Agreement and WPHC will remain liable to continue making
Capital Contributions to fund Operating Deficits pursuant
to Section 4.1.2(b) of this Agreement; provided, further,
that all such obligations shall survive Feld's removal;"
g. The phrase "or the Operating Deficit Guaranty," which appears in
Section 18.9 of the Operating Agreement is hereby deleted in its entirety.
16. Operating Deficit Capital Contributions.
a. Section 4.1.2(b) of the Operating Agreement is hereby denoted as
Section 4.1.2(c) and the following Section 4.1.2(b) is hereby added to the
Operating Agreement:
"(b) WPHC shall have the right, but not the obligation,
to make Capital Contributions from time to time in its
sole and absolute discretion to fund Operating Deficits or
other expenses incurred by the Company. Notwithstanding
the foregoing, so long as: (i) Feld is not in material
default under this Agreement, and (ii) Feld has personally
guaranteed the Construction Loan pursuant to Section 5.2.4
and is not in material default under such guaranty, then
WPHC shall be obligated to make Capital Contributions to
fund: (y) prior to Final Completion, the amount (if any)
by which Operating Expenses exceed Gross Operating
Revenue, and (z) Operating Deficits which were incurred
during the period between Final Completion and payment in
full of the Construction Loan."
b. The phrase "to the Members in accordance with their respective
Percentage Interests", which describes the distribution of Cash Flow and
appears in Section 10.1 of the Operating Agreement, is hereby deleted in its
entirety and the following is substituted therefor:
"to the Members as follows: (i) first, to WPHC, until it
has received aggregate distributions equal to the amount
of Capital Contributions made by it pursuant to
Section 4.1.2(b), (ii) then, to the Members in accordance
with their respective Percentage Interests".
c. The phrase "all fees paid to Feld or its Affiliates (excluding
the property management fee paid to The Feld Company after the Conversion
Date)" which appears in the definition of Development Costs in
Section 1(ac)(v) of the Operating Agreement is hereby deleted in its entirety
and the following is substituted therefor:
"all fees paid to Feld or its Affiliates (excluding the
property management fee paid to The Feld Company)".
d. The phrase "all Operating Expenses incurred prior to the
Conversion Date" which appears in the definition of Development Costs in
Section 1(ac)(viii) of the Operating Agreement is hereby deleted in its
entirety and the following is substituted therefor:
"all Operating Expenses incurred prior to the Conversion
Date, excluding all Operating Expenses (except real estate
taxes, assessments, personal property taxes and insurance)
incurred in buildings which have achieved Substantial
Completion with respect to their units and have been made
available to the property management company for immediate
leasing and occupancy".
17. Construction Loan.
a. The phrase "the Construction Loan Closing must take place on or
before October 31, 1996, provided, however, such date shall be extended to a
date not later than December 31, 1996" which appears in Section 5.2.4 of the
Operating Agreement is hereby deleted in its entirety and the following is
substituted therefor:
"the Construction Loan Closing must take place on or
before May 31, 1997, provided, however, such date shall be
extended to a date not later than June 30, 1997".
b. The following definition is hereby added to Section 1 of the
Operating Agreement:
""Budgeted Construction Loan Interest" means that amount
which appears in the line item of the Final Project Budget
(attached hereto as Exhibit O) denoted as "CONSTR. LOAN
INTEREST"".
c. The following text is hereby appended to the end of
Section 5.2.7 of the Operating Agreement:
"Feld's obligation to the Company and to WPHC to guarantee
interest payments on the Construction Loan applies to
payments which are due and payable through Substantial
Completion; Feld shall not be responsible for guaranteeing
payments which come due after Substantial Completion.
Nothing in this Section 5.2.7 shall relieve Feld of those
obligations which accrue prior to Substantial Completion."
d. The following text is hereby appended to the end of Section 6.3
of the Operating Agreement:
"Notwithstanding anything to the contrary in this
Agreement, the Members agree that, prior to the
Substantial Completion, all debt service expenses shall be
paid only from the funds reserved for Budgeted
Construction Loan Interest and from Development Deficit
Payments, not from any other funds of the Company
(including, without limitation, Net Operating Income);
provided, however, that Net Operating Income shall be used
to pay debt service expenses if so requested by either the
Construction Lender or WPHC (such payments are herein
referred to as "NOI Construction Loan Interest Payments").
Without the prior written consent of WPHC, the funds
reserved as Budgeted Construction Loan Interest will be
used for the sole purpose of debt service expenses on the
Construction Loan and for no other purpose (including,
without limitation, the payment of Development Deficits).
Any funds remaining after the payment of debt service on
the Construction Loan will be treated as net Cash Flow."
e. The following definition is hereby added to Section 1 of the
Operating Agreement:
"NOI Construction Loan Interest Payments" has the
definition given it in Section 6.3 hereof."
f. The definition of "Development Deficits" which appears in
Section 1(ad) of the Operating Agreement is hereby deleted in its entirety and
the following is substituted therefor:
""Development Deficits" means the positive amount, if any,
by which Development Costs exceed the sum of: (a) the
Capital Contributions of the Members required to be made
at the Initial Closing, (b) the Final Closing Capital
Contribution, and (c) the aggregate NOI Construction Loan
Interest Payments, for the period prior to the Conversion
Date."
18. No Incentive Fee.
a. Section 7.5 of the Operating Agreement, which provides for the
Incentive Fee to Feld, is hereby deleted in its entirety. The definition of
Incentive Fee which appears in Section 1(as) of the Operating Agreement will
remain a part of the Operating Agreement, but solely for the purpose of
allocating Infrastructure Costs as described in Section 1(ai)(i) of the
Operating Agreement.
b. The phrase "and accrued but unpaid Incentive Fees" which appears
in Section 1(ai)(i)(B) of the Operating Agreement is hereby deleted.
c. The second sentence of Section 1(bk) is hereby deleted in its
entirety.
d. Exhibit P of the Operating Agreement shall remain a part of the
Operating Agreement, but solely for the purpose of calculating the allocation
of Infrastructure Costs.
e. The phrase "except the Incentive Fee" which appears in the third
and sixth sentences of Section 7.6 of the Operating Agreement is hereby
deleted from each such sentence.
f. The phrase ", excluding, however the Incentive Fee" which
appears in the first sentence of Section 8.3.3 of the Operating Agreement is
hereby deleted in its entirety.
19. Cost Savings.
a. The phrase "twenty-five percent (25%)" which appears in
Sections 7.4 and 4.1.2(c) of the Operating Agreement is hereby replaced with
the phrase "fifty percent (50%)" in each of said Sections of the Operating
Agreement.
b. The definition of "Cost Savings" which appears in Section 1(z)
of the Operating Agreement is hereby deleted in its entirety and the following
is substituted therefor:
""Cost Savings" means the positive amount, if any, equal
to: (i) Total Budgeted Development Costs, minus (ii) the
undisbursed amount of Budgeted Construction Loan Interest
through the Final Closing, adjusted by subtracting
therefrom the aggregate NOI Construction Loan Interest
Payments, minus (iii) the actual Development Costs
incurred on the Final Closing Date."
20. Feld Reimbursable Expenses. The Members hereby agree that Feld had
no Reimbursable Expenses and that Exhibit A (indicating no Reimbursable
Expenses), a copy of which is attached hereto, is hereby attached to and made
a part of the Operating Agreement as Exhibit A thereto, to the same effect as
if it had been fully set forth in the Operating Agreement at the date the
Operating Agreement was executed by the Members.
21. Initial Project Budget. The Members hereby agree that there was no
Initial Project Budget and that Exhibit I (indicating no Initial Project
Budget), a copy of which is attached hereto, is hereby attached to and made a
part of the Operating Agreement as Exhibit I thereto, to the same effect as if
it had been fully set forth in the Operating Agreement at the date the
Operating Agreement was executed by the Members.
22. Property Management Agreement. The Members hereby agree that the
Property Management Agreement, a copy of which is attached hereto, is hereby
attached to and made a part of the Operating Agreement as Exhibit J thereto,
to the same effect as if it had been fully set forth in the Operating
Agreement at the date the Operating Agreement was executed by the Members.
23. Description of Infrastructure. The Members hereby agree that the
Description of Infrastructure, a copy of which is attached hereto, is hereby
attached to and made a part of the Operating Agreement as Exhibit E thereto,
to the same effect as if it had been fully set forth in the Operating
Agreement at the date the Operating Agreement was executed by the Members.
24. Description of Infrastructure Land. The Members hereby agree that
the Description of Infrastructure Land, a copy of which is attached hereto, is
hereby attached to and made a part of the Operating Agreement as Exhibit F
thereto, to the same effect as if it had been fully set forth in the Operating
Agreement at the date the Operating Agreement was executed by the Members.
25. Pledge and Security Agreement by Feld. The Members hereby agree
that the Pledge and Security Agreement by Feld, a copy of which is attached
hereto, is hereby attached to and made a part of the Operating Agreement as
Exhibit L thereto, to the same effect as if it had been fully set forth in the
Operating Agreement at the date the Operating Agreement was executed by the
Members.
26. Pledge and Security Agreement by WPHC. The Members hereby agree
that the Pledge and Security Agreement by WPHC, a copy of which is attached
hereto, is hereby attached to and made a part of the Operating Agreement as
Exhibit M thereto, to the same effect as if it had been fully set forth in the
Operating Agreement at the date the Operating Agreement was executed by the
Members.
27. Plans and Specifications. The Members hereby agree that the Plans
and Specifications, a copy of which is attached hereto, is hereby attached to
and made a part of the Operating Agreement as Exhibit N thereto, to the same
effect as if it had been fully set forth in the Operating Agreement at the
date the Operating Agreement was executed by the Members.
28. Final Project Budget. The Members hereby agree that the Final
Project Budget, a copy of which is attached hereto, is hereby attached to and
made a part of the Operating Agreement as Exhibit O thereto, to the same
effect as if it had been fully set forth in the Operating Agreement at the
date the Operating Agreement was executed by the Members.
29. Infrastructure Budget. The Members hereby agree that the
Infrastructure Budget, a copy of which is attached hereto, is hereby attached
to and made a part of the Operating Agreement as Exhibit T thereto, to the
same effect as if it had been fully set forth in the Operating Agreement at
the date the Operating Agreement was executed by the Members.
30. Substitution Agreement. The Members hereby agree that the
Substitution Agreement, a copy of which is attached hereto, is hereby attached
to and made a part of the Operating Agreement as Exhibit U thereto, to the
same effect as if it had been fully set forth in the Operating Agreement at
the date the Operating Agreement was executed by the Members.
31. Headings and Captions. The headings and captions of this First
Amendment are inserted for convenience only and are in no way intended to
describe, interpret, define, or limit the scope, extent or intent of this
First Amendment, the Operating Agreement or any provisions thereof.
32. Full Force and Effect. The Operating Agreement, as specifically
amended herein, is hereby ratified by the Members and shall remain in full
force and effect.
33. Counterparts. This First Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which, when taken together, shall constitute one agreement binding on the
parties hereto, notwithstanding that all the parties may not have signed the
same counterpart. Signature pages from one counterpart may be removed and
attached to another counterpart to create one fully-executed document.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being all of the Members of the
Company, have executed this First Amendment as of the date first written
above.
/s/ Al Feld
_____________________________________
Al Feld
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation
By:/s/ David M. Strong
__________________________________
David M. Strong, Vice President
<PAGE>
EXHIBIT A
FELD REIMBURSABLE EXPENSES
None.
<PAGE>
EXHIBIT E
DESCRIPTION OF INFRASTRUCTURE
<PAGE>
EXHIBIT F
DESCRIPTION OF INFRASTRUCTURE LAND
<PAGE>
EXHIBIT I
INITIAL PROJECT BUDGET
None.
<PAGE>
EXHIBIT J
PROPERTY MANAGEMENT AGREEMENT
(See attached)
<PAGE>
RED CANYON AT PALOMINO PARK, LLC
PROPERTY MANAGEMENT AGREEMENT
This agreement (the "Agreement") is executed on the 6th day of May, 1997
by and between RED CANYON AT PALOMINO PARK, LLC ("Owner"), and THE FELD
COMPANY, a Colorado corporation ("Manager").
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and sufficiency of which
is hereby acknowledged, Owner and Manager mutually agree as follows:
1. APPOINTMENT OF MANAGER
On and subject to the terms and conditions of this Agreement, Owner
hereby retains Manager commencing on January 1, 1997 (the "Commencement
Date") to manage and lease on behalf of Owner the following properties
(individually or collectively the "Property"): Red Canyon at Palomino
Park, Highlands Ranch, Colorado.
2. TERM
This Agreement shall commence on the Commencement Date and, subject to
Section 8 below, shall expire on the "Termination Date" (as defined
below). "Termination Date" shall mean the earlier of Final Closing or
removal of Feld as defined in the Operating Agreement of Red Canyon at
Palomino Park, LLC dated as of April 17, 1996 ("Operating Agreement").
3. MANAGEMENT FEES
In consideration of the performance by the Manager of its duties and
obligations hereunder, the Owner shall pay to the Manager a management
fee equal to 2.5% of "Gross Operating Revenues" (as defined below)
payable the last day of each calendar month with respect to that calendar
month. Manager shall submit to Owner an invoice detailing the
calculation of the management fee each month. "Gross Operating Revenues"
means the actual monthly cash collections from the customary operations
of the Property consisting of rental and vending machine receipts,
forfeited deposits, late charges, rent claim settlements net of any
collection fees, lease termination or modification payments and other
operating receipts, excluding applicable sales tax and refundable
deposits); Gross Operating Revenues shall not include any revenues from
condemnation or casualty proceeds, from the sale of any personal or real
property of Owner or from any source other than the customary operations
of the Property. Manager shall submit to Owner's or Owner's accounting
agent an invoice detailing the calculation of the management fee each
month.
4. AUTHORITY AND RESPONSIBILITIES OF MANAGER
4.01 Independent Contractor. In the performance of its duties hereunder,
the Manager shall be and act as an independent contractor, with the sole
duty to supervise, manage, operate, control and direct performance of the
details of its duties incident to the specified duties and obligations
hereunder, subject to the rights of the Owner, as described herein.
Nothing contained in this Agreement shall be deemed or construed to
create a partnership, joint venture, employment relationship, or
otherwise to create any liability for one party with respect to
indebtedness, liabilities or obligations of the other party except as
otherwise may be expressly set forth herein.
4.02 Standard of Care. Manager shall perform its duties and obligations
in a professional, competent, businesslike and efficient Manager as would
a first class property manager of apartment projects similar to the
Property.
4.03 Depository Account. Manager shall open, for the benefit of Owner, a
special, separate, FDIC insured, interest bearing account in a savings
institution identified by Owner (the "Depository Account") upon which the
only persons with signatory authority shall be the following employees of
Owner: Jeffrey Lynford, Chairman; Ed Lowenthal, President; and Gregory
Hughes, Vice President. The Depository Account shall be the sole and
exclusive property of the Owner, and Manager shall have no interest
(legal or equitable) therein. Owner shall have the right to change the
signatories to the Depository Account in its sole discretion.
4.04 Business Plan.
(a) Manager shall prepare and present to Owner in the computer
model and word processing and spreadsheet software approved by Owner,
within thirty days of the Commencement Date and prior to November 15 of
each year thereafter during the term of this Agreement, an annual
business plan for the following calendar year, which once approved by
Owner shall be the business plan governing the management of the Property
(the "Business Plan").
(b) Manager shall include in the Business Plan the following:
(i) a twelve-month operating budget, using Owners' chart of
accounts (see Schedule B) for the following calendar year,
which once approved by Owner, shall be the budget
("Budget");
(ii) a 5-year budget for planned improvements based on a
detailed annual physical inspection of the Property
completed by Manager;
(iii) a preventative maintenance plan for the Property
outlining the management plan to minimize long term
operating costs and to avoid deferred maintenance;
(iv) a marketing plan for the Property, including print and
other forms of advertising, use of apartment locators and
promotional activities and apartment pricing;
(v) market surveys;
(vi) tenant selection criteria to be used in the selection of
prospective tenants, including appropriate references,
income and credit history;
(vii) a copy of Manager's current policies and procedures
which shall include the following:
(x) an environmental compliance plan outlining policies
and procedures for managing the disposal or storage of
hazardous materials and toxic substances (such plan shall
require that the Property shall not be the source of a
release or dispose of any hazardous materials or toxic
substances except as may be incidental to the operation of
an apartment project (e.g. cleaning supplies, fertilizers,
paint); and
(y) a legal compliance plan of actions necessary to
comply with all "Applicable Laws" (as defined below).
"Applicable laws shall mean any and all statutes,
ordinances, laws, rules, regulations, orders and
requirements of any federal, state or municipal
government, and appropriate departments, commissions,
boards and officers having jurisdiction over the use,
maintenance or operation of the Property, including
without limitation (A) laws prohibiting discrimination
based on race, religion, national origin, color, gender,
disability, age, sexual preference or any other
classification, (B) employment laws of any kind or
description, (C) laws regarding tenant security deposits,
(D) laws regarding the storage, release, and disposal of
hazardous materials, petroleum products, and toxic
substances, (E) laws and orders relating to the use of
minority business enterprises, to the extent any such laws
and orders are applicable in the performance of work or
furnishing of services, materials, equipment or supplies
hereunder, and (F) all orders and requirements of local
board of fire underwriters, or any other body which may
hereafter exercise similar functions including any and all
forms, reports and returns required by law to be filed
with any governmental authority in connection with the
use, maintenance or operation of the Property; and
(viii) any other information, plan, survey, policies or
procedures as Owner may request.
(c) The Business plan shall be approved by the Owner before
implementation. All actions outlined in the Business Plan shall be
implemented by Manager on behalf of and at the expense of Owner, subject
to the limitations on expenses enumerated in the Budget. The Budget
shall be Managers's guideline for Owner's expectations of rental rates;
however, Manager shall be expected to continually test new rental levels
and to make adjustments with prompt notification to Owner as the market
shall permit or require. The Business Plan in conjunction with the
Budget, shall constitute a major control under which Manager shall
operate, and Manager shall submit a report to Owner setting forth the
reasons for any variance therefrom as required under Owner's policies and
procedures attached hereto, and made a part hereof, as Schedule B
("Owners' Policies and Procedures").
4.05 Leasing, Collection of Rents, etc.
(a) Manager shall use its best efforts consistent with the standard
of care set forth herein to lease apartments units, retain residents and
maximize Gross Operating Revenues.
(b) Manager shall sign apartment leases on behalf of Owner in its
capacity as property manager hereunder. Manager shall only sign leases
in the form of lease approved by Owner and subject to Owner's Policies
and Procedures. Manager shall not enter into any lease which has a term
greater than 24 months. Manager shall attach as a rider to all leases
the text as presented in Schedule A. Manager shall investigate tenant
references and tenant credit histories and shall select tenants in
accordance with tenant selection criteria outlined in the Business Plan,
and shall apply resident selection criteria fairly to all prospective
tenants. Manager shall not discriminate against or segregate any person
or group of persons on account of race, color, religion, creed, sex,
national origin, age, or disability in leasing or managing the Property
nor shall Manager permit any such practice or practices of discrimination
or segregation with reference to the selection, location, number, use, or
occupancy of tenants. Manager shall assess the leasing practices on a
regular basis to assure that no such practices of discrimination are
occurring on the Property. Manager shall report any such incidents or
claims of discrimination to Owner immediately.
(c) Manager shall collect rents, security deposits and other
charges payable by tenants in accordance with the tenant leases, and
shall collect income due Owner with respect to the Property from all
other sources, and shall deposit all such income received immediately
upon receipt in the Depository Account for each Property
(d) Manager shall, at Owner's expense, subject to limits set forth
in the Budget and the Business Plan, terminate leases, evict tenants,
institute and settle suits for delinquent payments as Manager deems
advisable. In connection therewith, Manager may, at Owner's expense and
subject to the limitations on expenses enumerated in the Budget, consult
and retain legal counsel.
4.06 Repair, Maintenance and Service.
(a) Manager shall, at Owner's expense and subject to the
limitations set forth in the Budget and the Business Plan, maintain the
Property in good repair and condition.
(b) In name of Owner and subject to the other terms and conditions
of this Agreement, Manager in its capacity hereunder shall execute
contracts for water, electricity, gas, telephone, television, vermin or
pest extermination and any other services which are necessary to properly
maintain the Property. Manager shall include in any such contracts the
text in Schedule A. Manager shall, in Owner's name and at Owner's
expense, hire and discharge independent contractors for the repair and
maintenance of the Property and shall include in any such contract the
text as presented in Schedule A. Other than leases, Manager shall not,
without the prior written consent of the Owner, enter into any contract
in name of Owner which may not be terminated with 30 days notice.
Manager shall act at arms length with all contractors and shall employ no
affiliated entities without Owner's prior written consent.
Notwithstanding the foregoing, Owner shall have the right to require
Manager to use certain contractors and suppliers for any service, supply,
maintenance, repair or utility for the Property, including cable,
landscaping or security service.
4.07 Manager's Employees.
(a) Manager shall have in its employ at all times a sufficient
number of employees to enable it to professionally manage the Property in
accordance with the terms of this Agreement. Owner shall have the right
to require that Manager have a minimum or maximum number of employees at
the Property and to approve or require the removal or replacement of any
employee working at the Property. Manager shall prepare, execute and
file all forms, reports and returns required by Applicable Laws. All
payroll costs for on-site employees shall be at Owner's expense. All
matters pertaining to the employment and supervision of such employees
shall be the sole responsibility of the Manager, which in all respects
shall be the employer of such employees, and Owner shall have no
liability with respect to such matters. Notwithstanding the foregoing,
Manager shall not, without consent of Owner, transfer any employee from
the Property to a similar on-site position at a property in the area
managed by Manager on behalf of a third party.
(b) Manager shall employ at its sole expense a regional manager to
oversee the operations of the Property who shall frequently, but not less
than bi-weekly, visit the Property performing inspections and providing
guidance and training to the on-site staff. The assignment of this
regional manager to oversee the Property shall be approved by Owner. The
regional manager's supervision of more than seven (7) properties
including the Property or other considerations may be cause for Owner to
withhold or rescind said approval.
(c) Manager shall maintain, at Owner's expense, workers
compensation (or other private insurance acceptable to Owner) for all
on-site employees at limits not less than the statutory amount. Manager
shall prepare, execute and file all forms, reports and returns required
by Applicable Laws.
4.08 Insurance.
(a) Manager shall, at its sole cost and expense, procure and
maintain in full force and effect, throughout the existence of this
Agreement, policies of insurance as detailed below in subsection (b), on
which Owner shall be named insured. These policies shall be issued by an
insurance company licensed to do business in the state in which the
Property is located with an AM Best rating of A-, V or better. Manager
shall be covered under such policies for its indemnity obligations
hereunder subject to the limits set forth below. Manager shall promptly
furnish to Owner certificates of insurance acceptable to Owner as
evidence of the insurance coverage required hereunder. Manager shall
obtain a written obligation on the part of each insurance carrier to
notify Owner at least 30 days prior to any cancellation or material
change of any such policy.
(b) The following policies of insurance shall be procured and
maintained by Manager:
1. Employer's liability insurance in an amount not less than
$250,000 per occurrence.
2. Blanket crime coverage, including employee dishonesty and
depositor's forgery endorsements, protecting Manager against
fraudulent or dishonest acts of its employees, whether acting alone
or with others, with limits of liability of not less than $25,000
per Property, not to exceed $100,000 in aggregate if more than one
Property is managed, on which Owner shall be loss payee.
3. Professional liability insurance covering the activities of
Manager written on a "claims made" basis with limits of at least
$1,000,000 with a maximum deductible of $10,000. Any loss within
the deductible shall be borne by Manager. Coverage shall be
maintained in effect during the period of the Agreement and for not
less than two (2) years after termination of the Agreement.
4.09 Reports. Manager shall prepare and send to Owner reports in
accordance with Owner's Policies and Procedures, including, i) monthly
status report (Owner's form); ii) monthly statements approved by Manager
showing all receipts and disbursements; iii) an accompanying letter
explaining any significant events at the Property, as well as any
variances from budget in excess of +/- 10% on any operating statement
detailed item; iv) planned improvement logs (Owner's form); v) market
study; vi) copies of significant incident reports; and, vii) other
analyses as should from time to time be reasonably requested by Owner.
4.10 Operating Expenses.
(a) Manager shall cause the Property to incur proper operating
expenses in exercising its authority and performing all of its duties and
obligations hereunder. Manager shall use reasonable efforts to minimize
such expenses by obtaining competitive pricing on all services and
obtaining at least three bids on major expenditures. Manager shall use
reasonable efforts to comply with the limitations on expenditures set
forth in the Budget. Manager shall obtain Owner's prior written consent
before incurring on behalf of Owner any single expenditure in excess of
two thousand five hundred dollars ($2,500) excluding utility bills and
other normal and recurring expenses included in the Budget, except in an
emergency in which case Manager may incur expenses reasonably necessary
to protect life and property. Manager shall notify Owner of any such
emergency expenses as soon as practicable after they are incurred.
(b) Manager shall timely request payment by Owner of all proper
costs and expenses incurred by the operation of the Property as
contemplated herein. All costs for which payment is requested shall be
coded by the on-site manager in accordance with Owner's standard chart of
accounts, attached in Schedule B. Manager shall not request payment of
invoices to itself other than for the following items: i) the cost of
sending Property related material by overnight courier at Owner's request
ii) forms and other items ordered in bulk by Manager and used by the
Property, iii) third-party payroll processing, and iv) the Management
Fee. Manager shall not request payment of any invoices, whether to
itself or a third party, marked-up above cost. Manager is not required
to monitor or request payment for taxes, escrows or debt service, which
costs Owner will monitor and pay.
4.11 Legal Proceedings and Compliance with Applicable Laws.
(a) Manager shall promptly notify Owner in writing of the service
of any legal process upon Manager (although Manager is not authorized to
accept service of process on behalf of the Owner), or the occurrence of
any casualty loss, injury or damage on or about the Property;
(b) Manager shall fully comply with all Applicable Laws in
connection with this Agreement, the performance of its obligations
hereunder, its own operations and its hiring, discharge and retention of
employees. Manager shall perform, on behalf and upon approval of Owner
and at Owner's expense, all such acts in and about the Property which
shall be reasonably necessary to comply with Applicable Laws.
4.12 Policies and Procedures.
(a) Manager shall maintain files of all original documents relating
to leases, vendors and all other business of the Property in an orderly
fashion at the Property, which files shall be the property of Owner and
shall at all times be open to Owner's inspection.
(b) Manager shall comply with the policies and procedures attached
hereto as Schedule B. Owner may periodically make alterations to these
policies and procedures and will provide such updates to Manager.
5. RESPONSIBILITIES OF OWNER
5.01 Accounting. Owner shall provide accounting services for the
payment of all proper expenses of the property, and shall provide to
Manager all accounting reports necessary for Manager to discharge its
obligations hereunder by the 5th of each month or the next subsequent
business day.
5.02 Liability. Owner shall maintain sole and primary public
liability and property damage insurance with respect to occurrences on or
about the Property, with liability limits of not less than $1,000,000 per
person and per occurrence, and excess liability with limits of not less
than $10,000,000, and rental income insurance, and naming the Manager as
an additional insured. Owner shall maintain such fire, hazard and other
insurance in such amounts as are proper in judgment of Owner. The
maintenance of fire, hazard and other insurance shall be the sole
responsibility of Owner and not Manager.
6. INDEMNIFICATION
6.01 Indemnification of Owner. The Manager shall indemnify, defend
and hold harmless Owner against any and all liabilities, costs, expenses,
damages, penalties, interest, injuries and obligations, including
reasonable attorneys' fees ("Claims") incurred by Owner as a result of
(a) any act by Manager outside the scope of its authority hereunder, (b)
any act or failure to act constituting negligence, misconduct, fraud or
breach of this Agreement, (c) Claims made by current or former employees
or applicants for employment arising from hiring, supervising or firing
same, or (d) any act by Manager, its employees, agents or contractors in
violation of any Applicable Law.
6.02 Indemnification of Manager. Owner shall indemnify and hold harmless
Manager against any and all Claims incurred by Manager as a result of
acts of Manager made within the scope of its authorities, excluding,
however, (a) Claims which arise from the negligence, misconduct, fraud or
breach of this Agreement by Manager, (b) Claims made by current or former
employees or applicants for employment arising from hiring, supervising
or firing of same, or (c) any act by Manager, its employees, agents or
contractors in violation of any Applicable Law.
6.03 General Provisions. The provisions of this Section shall survive the
termination of this Agreement.
7. DEFAULTS
7.01 Manager's Event of Default. Manager shall be deemed to be in
default hereunder upon the happening of any of the following ("Manager's
Event of Default"):
(a) The failure by Manager to keep, observe or perform any
covenant, agreement, term or provision of this Agreement to be kept,
observed or performed by Manager relating to any of the Properties, and
such default shall continue, in full or in part, for a period of ten (10)
days after written notice thereof by Owner to Manager, including without
limitation, the following:
(i) failure to make any payment or perform any financial
obligation required hereby;
(ii) failure to prepare and present a complete Budget or
Business Plan as required hereby;
(iii) failure to collect Gross Operating Revenue as
required hereby;
(iv) failure to deposit Gross Operating Revenue due Owner as
required hereby;
(v) failure to maintain the Property as required hereby;
(vi) an act or omission of Manager in violation of any
Applicable Law; or
(vii) failure to comply with Owner's Policies and
Procedures.
(b) Notwithstanding paragraph (a), the occurrence of any of the
following shall be a Manager's Event of Default and Manager shall not
have the right to cure such action:
(i) The request by Manager of payment of any invoice, whether
to itself or a third party, marked-up above cost as
prohibited herein.
(ii) The aggregate operating expenses excluding real estate
taxes and improvements as reported for any Property on an
accrual basis shall:
(x) in any consecutive three month period exceed by 10%
or more the aggregate amount included in the Budget
for those same expenses for such three-month period;
or
(y) in any one-month period exceed by 20% or more the
amount included in the Budget for those same expenses
for such month.
(iii) The failure by Manager to meet the standard of care
set forth herein for the performance of its duties at
any of the Properties.
(c) The making of a general assignment by Manager for benefit of
its creditors, the filing by Manager with any bankruptcy court of
competent jurisdiction of a voluntary petition under Title 11 of U.S.
Code, as amended from time to time, the filing by Manager of any petition
or answer seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution, or similar relief under any
present or future federal or state act or law relating to bankruptcy,
insolvency, or other relief for debtors, Manager being the subject of any
order for relief issued under such Title 11 of the U.S. Code, as amended
from time to time, or the dissolution or liquidation of Manager; and
(d) The misapplication or misappropriation of funds held by Manager
in trust for Owner.
7.02 Remedies of Owner. Upon the occurrence of a Manager's Event of
Default, Owner shall be entitled (i) to terminate in writing this
Agreement effective as of the date designated by Owner (which may be the
date upon which notice is given), and/or (ii) to pursue any remedy at law
or in equity, including without limitation, specific performance. All of
Owner's rights and remedies shall be cumulative.
7.03 Owner's Event of Default. Owner shall be deemed to be in default
hereunder (an "Owner's Event of Default") if Owner shall fail to keep,
observe or perform any covenant, agreement, term or provision of this
Agreement to be kept, observed or performed by Owner, and such default
shall continue for a period of thirty (30) days after written notice
thereof by Manager to Owner, or if such default cannot be cured within
such thirty (30) day period, then such additional period as shall be
reasonable, provided Owner commences to cure such default within such
thirty (30) day period and proceeds diligently to prosecute such cure to
completion.
7.04 Remedies of Manager. Upon the occurrence of an Owner's Event of
Default or upon a termination of this Agreement by Owner without cause
pursuant to Section 8.04 hereof, Manager shall be entitled (i) to
terminate in writing this Agreement effective as of the date designated
by Owner which is at least 10 days after receipt of such notice of
termination by Owner, and/or (ii) to pursue an action for the actual
compensatory damages incurred by Manager. Manager expressly agrees that
termination and monetary damages are its sole rights and remedies with
respect to an Owner's Event of Default and Owner expressly waives and
releases the right to seek equitable relief, including specific
performance or injunctive relief, and to sue for any consequential or
punitive damages.
8. TERMINATION RIGHTS
8.01 Expiration of Term. If not sooner terminated, this Agreement shall
terminate on the expiration of its term set forth in Section 2 hereof.
8.02 Termination By Owner Upon Manager Event of Default. Upon a Manager
Event of Default, Owner may terminate this Agreement as specified in
Section 7.02 hereof.
8.03 Termination By Manager Upon Owner Event of Default. Upon an Owner
Event of Default, Manager may terminate this Agreement as specified in
Section 7.04 hereof.
8.04 Termination By Owner Without Cause. Even in the absence of an
express right to terminate this Agreement and after the "Conversion Date"
as defined in ___________, Owner may terminate this Agreement upon
written notice at any time delivered to Manager effective as of the date
designated by Owner (which may be the date upon which notice is given);
provided that in such event Manager shall be entitled to pursue its
remedy for compensatory damages for early termination pursuant to Section
7.04 hereof.
8.05 Termination Upon Sale of the Property. If the Property is sold,
conveyed or transferred during the term hereof, this Agreement shall
term.
8.06 Termination After Initial Term. If the parties hereto agree to
continue this Agreement after the initial term hereof, Owner shall then
be entitled to terminate this Agreement upon thirty (30) days written
notice.
8.07 Effect of Termination Upon Payment of Fees. Upon the termination of
this Agreement for any reason, Manager shall be entitled to its earned,
but unpaid fees, for the period prior to the termination. Manager shall
not be entitled to any fees relating to the period after the date of
termination of this Agreement; provided that in the case of termination
by Owner pursuant to Section 8.04, Manager shall be entitled to actual,
compensatory damages as specified in Section 7.04.
8.08 Delivery of Property Upon Termination. Immediately after
termination of this Agreement for any reason, Manager shall deliver to or
as directed by Owner all funds, checks, keys, lease files, books and
records and other Confidential Information to Owner. Immediately after
termination, Manager shall leave the Property and cause its employees to
leave the Property without causing any damage thereto. Under no
circumstances shall any default by Owner give rise to any lien on the
Property or give rise to a right of Manager to stay on the Property after
the date of termination without the express consent of Owner.
8.09 Effect of Termination on Village at the Bear LLC. The termination
of this Agreement shall not affect or impair the rights and remedies of
the parties to the Operating Agreement of Village at the Bear LLC under
such Operating Agreement, including any right of a party to receive fees,
compensation or distributions under such Operating Agreement.
9. CONFIDENTIALITY
9.01 Preservation of Confidentiality. In connection with the performance
of obligations hereunder, Manager acknowledges that it will have access
to "Confidential Information" (as defined below). Manager shall treat
such Confidential Information as proprietary to Owner and private, and
shall preserve the confidentiality thereof and not disclose, or cause or
permit its employees, agents or contractors to disclose, such
Confidential Information. Notwithstanding the foregoing, Manager shall
have the right to disclose Confidential Information if and to the extent
it is required by legal process or by operation of law to disclose any
Confidential Information. "Confidential Information" shall mean the
books, records, business practices, methods of operations, computer
software, financial models, financial information, policies and
procedures, and other information relating to Owner and the Property
(including any such information relating to the Property generated by the
Manager), which are not available to the public.
9.02 Property Right in Confidential Information. All Confidential
Information shall remain the property of Owner and Manager shall have no
ownership interest therein.
10. SURVIVAL OF AGREEMENT
All indemnity obligations set forth herein, all obligations to pay earned
and accrued fees and expenses, all confidentiality obligations, and all
obligations to perform and duties accrued prior to the date of
termination shall survive the termination of this Agreement.
11. ENFORCEMENT OF AGREEMENT
This Agreement, its interpretation, performance and enforcement, and the
rights and remedies of the parties hereto, shall be governed and
construed by and in accordance with the law of the State in which the
Property is located. If any action at law or in equity is brought to
enforce or interpret the provisions of this Agreement, the prevailing
party shall be entitled to recover reasonable costs, including attorney's
fees, incurred to maintain such action, from the prevailing party.
12. ASSIGNMENT
Manager shall not sell, assign or otherwise transfer by operation of law
or otherwise all or any part of its rights or obligations under this
Agreement. Owner may assign this Agreement to a successor owner of the
Property.
13. NOTICES
Any notice required by this Agreement shall be deemed to be delivered
when delivered, if delivered by overnight courier, personal delivery or
registered or certified mail, return receipt requested, addressed to the
parties at the following addresses or such changed address as such party
may fix by notice thereof:
If to Owner: Red Canyon at Palomino Park, LLC
c/o Wellsford Residential Property Trust
370 17th Street, Suite 3100
Denver, CO 80202
Attention: David M. Strong - Vice President
If to Manager: The Feld Company
4600 S. Ulster Street Parkway, Suite 350
Denver, CO 80237
Attention: Mr. Al Feld - President
14. MISCELLANEOUS
14.01 Captions. The captions of this Agreement are inserted only for
the purpose of convenient reference and do not define, limit or prescribe
the scope or intent of this Agreement or any part hereof.
14.02 Schedules. Each schedule attached hereto forms a material part
of this Agreement and is incorporated herein by reference.
14.03 Modifications and Changes. This Agreement cannot be changed or
modified except by another agreement in writing, signed by the parties
sought to be charged therewith.
14.04 Entire Agreement. This Agreement embodies the entire
understanding of the parties, and there are no further agreements or
understandings, written or oral, in effect between the parties relating
to the subject matter hereof.
EXECUTED as of the date set forth above.
OWNER: MANAGER:
RED CANYON AT PALOMINO PARK, LLC THE FELD COMPANY
a Colorado corporation
By:/s/ Al Feld By:/s/ Daniel B. Levin
---------------------- ------------------------------
Al Feld Name: Daniel B. Levin
Manager Title: VP
<PAGE>
INDEX TO SCHEDULES
Schedule A - Attachment to All Contracts Executed by Manager on Behalf of
Owner
Schedule B - Owner's Policies and Procedures to be Followed by Manager.
<PAGE>
SCHEDULE A
This Agreement and all documents, agreements, understandings and arrangements
have been executed or entered into by _____________________________ as agent
of Wellsford Residential Property Trust (the Company) which has been formed as
a Maryland real estate investment trust pursuant to a Declaration of Trust
dated as of July 10, 1992, as amended, and not individually, and neither the
trustees, officers or shareholders of the Company shall be bound or have any
personal liability hereunder or thereunder. All persons dealing with the
company shall look solely to the assets of this Agreement and all related
documents, agreements, understandings and arrangements and will not seek
recourse or commence any action against any of the trustees, officers or
shareholders of the Company or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder. The
foregoing shall also apply to any future documents, agreements,
understandings, arrangements and transactions between the parties hereto.
<PAGE>
SCHEDULE B
OWNER'S POLICIES AND PROCEDURES TO BE FOLLOWED BY MANAGER
<PAGE>
EXHIBIT L
PLEDGE AND SECURITY AGREEMENT BY FELD
(See attached)
<PAGE>
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of the
17th day of April, 1996, by AL FELD, an individual, having an address of 4600
South Ulster Street, Suite 350, Denver, Colorado 80237 ("Pledgor"), for the
benefit of WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation, having an
office at 370 Seventeenth Street, Suite 3100, Denver, Colorado 80202
("Pledgee").
RECITALS
A. Pledgor is the Manager and a Member of Red Canyon at Palomino Park
LLC, a Colorado limited liability company (the "Limited Liability Company"),
which Limited Liability Company is governed by its Operating Agreement dated
as of April 17, 1996 (the "Operating Agreement"), by and between Pledgee and
Pledgor.
B. Pledgee is also a Member in the Limited Liability Company.
C. In order to secure the full payment and performance by Pledgor of
all of Pledgor's obligations under the Operating Agreement, as such Operating
Agreement may be now or hereafter amended, modified or restated (said
obligations under the Operating Agreement are hereinafter referred to as the
"Obligations"), Pledgor is entering into this Agreement for the benefit of
Pledgee.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals, covenants and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. Definitions.
a. "Collateral" shall mean:
(i) All of Pledgor's right, title and interest in the
ownership interests of Pledgor in the Limited Liability Company,
whether now owned or hereafter acquired, including, without
limitation, its Interest (as defined in the Operating Agreement) in
the Limited Liability Company, the right of Pledgor, if any, to any
benefits to which Pledgor may be entitled pursuant to the Operating
Agreement or the Colorado Limited Liability Company Act, Colo. Rev.
Statutes Sections 7-80-101 to 7-80-913, as amended from time to time
(the "Act"), and Pledgor's right to receive payments, fees,
distributions and allocations under or in connection with the
Operating Agreement (whether as Member or as Manager), as such
Operating Agreement may be modified or extended from time to time
with the consent of the Pledgee; and
(ii) All proceeds, whether cash proceeds or noncash proceeds,
and products of any and all of the foregoing.
b. "Event of Default" shall mean an event of default described in
Section 8 herein.
2. Pledge of Collateral and Grant of Security Interest. Pledgor does
hereby unconditionally and irrevocably assign, pledge, convey, transfer,
deliver, set over and grant unto Pledgee, its successors and assigns, as
security for Pledgor's complete and timely payment and performance of the
Obligations, a continuing first lien security interest under the Uniform
Commercial Code of the State of Colorado in the Collateral. Pledgor hereby
further grants to Pledgee all rights in the Collateral as are available to a
secured party of such collateral under the Uniform Commercial Code of the
State of Colorado (being the principal place of business of Pledgor and the
location of Pledgor's residence) and, concurrently herewith, shall deliver to
Pledgee duly executed UCC-1 financing statements suitable for filing in the
State of Colorado with respect to the Collateral.
3. Delivery to Pledgee.
a. Pledgor agrees to execute and to use its best efforts to cause
all other necessary parties, and any successors and assigns thereof, to
execute and deliver to Pledgee such other agreements, instruments and
documentation as Pledgee may reasonably request from time to time to effect
the conveyance, transfer, and grant to Pledgee of Pledgor's right, title and
interest in and to the Collateral as security for the Obligations.
b. Concurrently with the execution of this Agreement, Pledgor has
caused each of the Members of the Limited Liability Company, other than
Pledgee, to execute the Consent to Security Interest and Agreement in the form
attached hereto as Schedule A (the "Consent") evidencing the consent of the
Members to the assignment of Pledgor's Limited Liability Company interests and
their agreement to be bound by Section 4 of this Agreement, and Pledgor
covenants to execute, if required by Pledgee, an amendment to the Operating
Agreement in such form as Pledgee may reasonably require to reflect the
substitution of Pledgee in place of Pledgor as Manager of the Limited
Liability Company upon the occurrence of an Event of Default. Pledgor further
agrees to execute and to cause the other Members of the Limited Liability
Company to execute and deliver to Pledgee such other agreements, instruments
and documentation as Pledgee may reasonably request from time to time to
effectuate the conveyance, transfer, assignment and grant to Pledgee of all of
Pledgor's right, title and interest in and to the Collateral and to evidence
the substitution of the Pledgee in place of Pledgor as Manager in the Limited
Liability Company.
4. Proceeds and Products of the Collateral.
a. Notwithstanding any of the foregoing, unless and until there
occurs an Event of Default, Pledgee agrees to forbear from exercising its
right to receive all benefits pertaining to the Collateral (except as
otherwise permitted under the Operating Agreement), and Pledgor shall be
permitted to exercise all rights and to receive all benefits of the
Collateral, including, without limitation, the right to exercise all voting,
approval, consent and similar rights of Pledgor pertaining to the Collateral,
payments due under, proceeds, whether cash proceeds or noncash proceeds, and
products of the Collateral and to retain and enjoy the same.
b. Pledgor acknowledges and agrees with Pledgee, that unless Pledgee
otherwise consents, in Pledgee's sole discretion, Pledgor shall not exercise
any voting, approval, consent or other rights with respect to the Collateral
at any time after (i) the occurrence of an Event of Default and (ii) receipt
of notice from Pledgee instructing Pledgor not to exercise any such voting,
approval, consent or other rights with respect to the Collateral, provided,
however, that Pledgor shall exercise any such right it may have under the
agreements comprising the Collateral with respect to the business affairs of
the Limited Liability Company as is reasonably necessary to protect and
preserve the Collateral.
c. Upon or at any time after the occurrence of an Event of Default,
Pledgee, at its option, to be exercised in its sole discretion by written
notice to Pledgor, may exercise all rights and remedies granted under this
Agreement, including, without limitation, the right to require the obligors
under the Collateral to make all payments due under and to pay all proceeds,
whether cash proceeds or noncash proceeds, and products of the Collateral to
Pledgee. Upon the giving of any such notice, the security constituted by this
Agreement shall become immediately enforceable by Pledgee, without any
presentment, further demand, protest or other notice of any kind, all of which
are hereby expressly and irrevocably waived by Pledgor. Pledgor hereby
authorizes and directs each respective obligor under the agreements
constituting the Collateral, that upon receipt of written notice from Pledgee
of an Event of Default by Pledgor hereunder, to assign, set over, transfer,
distribute, pay and deliver any and all Collateral or said payments, proceeds
or products of the Collateral to Pledgee, at such address as Pledgee may
direct, at such time and in such manner as the Collateral and such payments,
proceeds and products of the Collateral would otherwise be distributed,
transferred, paid or delivered to Pledgor. The respective obligors under the
agreements constituting the Collateral shall be entitled to conclusively rely
on such notice and make all such assignments and transfers of the Collateral
and all such payments with respect to the Collateral and pay all such proceeds
and products of the Collateral to Pledgee and shall have no liability to
Pledgor for any loss or damage Pledgor may incur by reason of said reliance.
5. No Assumption. Notwithstanding any of the foregoing, whether or not
an Event of Default shall have occurred, and whether or not Pledgee elects to
foreclose on its security interest in the Collateral as set forth herein,
neither the execution of this Agreement, receipt by Pledgee of any of
Pledgor's right, title and interest in and to the Collateral and the payments,
proceeds and products of the Collateral, now or hereafter due to Pledgor from
any obligor of the Collateral, nor Pledgee's foreclosure of its security
interest in the Collateral, shall in any way be deemed to obligate Pledgee to
assume any of Pledgor's obligations, duties or liabilities under the
Collateral or any agreements constituting the Collateral, as presently
existing or as hereafter amended, or under any and all other agreements now
existing or hereafter drafted or executed (collectively, the "Pledgor's
Liabilities"), unless Pledgee otherwise agrees to assume any or all of
Pledgor's Liabilities in writing. In the event of foreclosure by Pledgee of
its security interest in the Collateral, Pledgor shall remain bound and
obligated to perform the Pledgor's Liabilities to the extent required under
the Operating Agreement, and Pledgee shall not be deemed to have assumed any
of the Pledgor's Liabilities, except as provided in the preceding sentence.
In the event the entity or person acquiring the Collateral at a foreclosure
sale elects to assume the Pledgor's Liabilities, such assignee shall agree to
be bound by the terms and provisions of the applicable agreement.
6. Indemnification. Pledgor hereby agrees to indemnify, defend and
hold Pledgee, its successors and assigns harmless from and against any and all
damages, losses, claims, costs or expenses (including without limitation,
reasonable attorneys' fees) and any other liabilities whatsoever that Pledgee
or its successors or assigns may incur by reason of Pledgor's failure to
comply with the terms and conditions of this Agreement or by reason of any
unpermitted assignment of Pledgor's right, title and interest in and to any or
all of the Collateral.
7. Representations, Warranties and Covenants. In addition to the
representations made by Pledgor in the Operating Agreement, Pledgor makes the
following representations and warranties, and Pledgor covenants and agrees to
provide written notices to Pledgee within ten (10) days after Pledgor becomes
aware that any of the following is no longer true and correct and to perform
diligently all acts reasonably necessary to maintain or restore the truth and
correctness, in all material respects, of the following:
a. Pledgor acknowledges that the Operating Agreement and any other
agreements constituting the Collateral, currently are in full force and
effect and have not been amended or modified, except by Pledgor and
Pledgee in writing.
b. Pledgor has the full right and title to its interest in the
Collateral and has the full power, legal right and authority to pledge,
convey, transfer and assign such interest. None of the Collateral is
subject to any existing assignment, claim, lien, pledge, transfer or
other security interest of any character, or to any attachment, levy,
garnishment or other judicial process or to any claim for set-off,
counterclaim, deduction or discount. Pledgor shall not, without the
prior written consent of Pledgee, which consent may be granted or denied
in Pledgee's sole discretion, further convey, transfer, set over or
pledge to any party any of its interests in the Collateral. Pledgor
agrees to (i) warrant and defend its title to the Collateral and the
security interest created by this Agreement against all claims of all
persons, and (ii) maintain and preserve the Collateral and such security
interests.
c. The pledge of the Collateral pursuant to this Agreement creates
a valid first priority security interest in the Collateral, securing the
performance of the Obligations, which security interest shall be
perfected upon the filing of the UCC-1 Financing Statements referred to
in Paragraph 2 of this Agreement.
d. Pledgor's Social Security Number is: ###-##-####, and Pledgor's
principal residence is located at One Dexter Street, Denver, Colorado
80220.
e. Pledgor agrees that it shall not, without at least thirty (30)
days' prior written notification to Pledgee, move or otherwise change its
place of residence.
f. To the best knowledge of Pledgor, neither the execution and
delivery of this Agreement by Pledgor nor the consummation of the
transactions herein contemplated nor the fulfillment of the terms hereof
(i) violate the terms of any agreement, indenture, mortgage, deed of
trust, equipment lease, instrument or other document to which Pledgor is
a party, or (ii) conflict with any law, order, rule or regulation
applicable to Pledgor or any court or any government, regulatory body or
administrative agency or other governmental body having jurisdiction over
Pledgor or its properties, or (iii) result in or require the creation or
imposition of any lien (other than the first priority lien of Pledgee in
the Collateral contemplated hereby).
g. No consent or approval which has not been obtained prior to the
date hereof of any other person or entity and no authorization, approval
or other action by, and no notice to or filing with any governmental
body, regulatory authority or securities exchange, was or is necessary as
a condition to the validity of the pledge hereunder of the Collateral and
such pledge is effective to vest in the Pledgee the rights of Pledgee in
the Collateral as set forth herein.
h. Pledgor shall comply in all material respects with all
requirements of law applicable to the Collateral or any part thereof.
i. Pledgor shall pay and discharge all taxes, assessments and
governmental charges or levies against any Collateral prior to
delinquency thereof and shall keep all Collateral free of all unpaid
charges whatsoever.
8. Event of Default. Each of the following shall constitute an Event
of Default hereunder:
a. A breach of any representation, warranty, covenant or
obligation of Pledgor shall have occurred under the Operating Agreement
and such breach shall not have been cured within any applicable grace
period provided therein; or
b. Any warranty, representation or statement of the Pledgor in
this Agreement proves to have been false in any material respect when
made or furnished; or
c. There occurs the issuance of a writ, order of attachment or
garnishment with respect to any of the Collateral and such writ, order of
attachment or garnishment is not dismissed and removed within thirty (30)
days thereafter; or
d. A material breach or violation of any covenant or agreement
contained herein shall have occurred, which is not cured within thirty
(30) days after notice has been given to Pledgor by Pledgee.
Any Event of Default under this Agreement shall be an event of default by
Pledgor under the Operating Agreement.
9. Remedies.
a. Upon the occurrence of an Event of Default, Pledgee may by
giving notice of such Event of Default, at its option, do any one or more of
the following:
(i) Take control of the Collateral and thereafter exercise all
rights and powers of Pledgor with respect to the Collateral; and
(ii) Without notice to or demand upon Pledgor, make such payments
and do such acts as Pledgee may deem necessary to protect its
security interest in the Collateral, including, without limitation,
paying, purchasing, contesting or compromising any encumbrance,
charge or lien which is prior to or superior to the security
interest granted hereunder, and in exercising any such powers or
authority to pay all expenses incurred in connection therewith; and
(iii) Require Pledgor to take all actions necessary to deliver such
Collateral to Pledgee, or an agent or representative designated by
Pledgee; and
(iv) Foreclose upon this Agreement as herein provided or in any
commercially reasonable manner permitted by law, and exercise any
and all of the rights and remedies conferred upon Pledgee by the
Operating Agreement, or in any other document executed by Pledgor in
connection with the Obligations secured hereby; and sell or cause to
be sold the Collateral, without affecting in any way the rights or
remedies to which Pledgee may be entitled under the other such
instruments; and
(v) Sell or otherwise dispose of the Collateral at public sale,
without having the Collateral at the place of sale, and upon terms
and in such manner as is commercially reasonable; Pledgee may be a
purchaser at any sale; and
(vi) Exercise any remedies of a secured party under the Uniform
Commercial Code of the State of Colorado or any other applicable
law; and
(vii) Exercise any remedies available to Pledgee under the
Operating Agreement, including, but not limited to, the removal of
the Pledgor as the Manager and a Member of the Limited Liability
Company and exercise of any rights of offset in favor of Pledgee as
the Manager and a Member of the Limited Liability Company; and
(viii) Notwithstanding anything to the contrary contained in this
Agreement, at any time after an Event of Default Pledgee may, by
delivering written notice to the Limited Liability Company and to
Pledgor, succeed, or designate its nominee or designee to succeed,
to all right, title and interest of Pledgor (including, without
limitation, the right, if any, to vote on or take any action with
respect to the matters of the Limited Liability Company) as the
Manager and/or a Member of the Limited Liability Company in respect
of the Collateral. Pledgor hereby irrevocably authorizes and
directs the Limited Liability Company on receipt of any such notice
(a) to deem and treat Pledgee or such nominee or designee in all
respects as the Manager and/or a Member (and not merely an assignee
of the Manager and/or a Member) of such Limited Liability Company,
entitled to exercise all the rights, powers and privileges
(including the right to vote on or take any action with respect to
Limited Liability Company matters pursuant to the Operating
Agreement, to receive all distributions, to be credited with the
capital account and to have all other rights, powers and privileges
appertaining to the Collateral to which Pledgor would have been
entitled had the Collateral not been transferred to Pledgee or such
nominee or designee), and (b) to file amended Articles of
Organization for such Limited Liability Company, if required,
admitting Pledgee or such nominee or designee as the Manager and/or
a Member of the Limited Liability Company in place of Pledgor; and
(ix) The rights granted to Pledgee under this Agreement are of a
special, unique, unusual and extraordinary character. The loss of
any of such rights cannot be reasonably or adequately compensated by
way of damages in any action at law, and any material breach by
Pledgor of any of Pledgor's covenants, agreements, obligations
representations or warranties under this Agreement will cause
Pledgee irreparable injury and damage. In the event of any such
breach, Pledgee shall be entitled, as a matter of right, to
injunctive relief or other equitable relief in any court of
competent jurisdiction to prevent the violation or contravention of
any of the provisions of this Agreement or to compel compliance with
the terms of this Agreement by Pledgor. Pledgee is absolutely and
irrevocably authorized and empowered by Pledgor to demand specific
performance of each of the covenants, agreements, representations
and warranties of Pledgor in this Agreement. Pledgor hereby
irrevocably waives any defense based on the adequacy of any remedy
at law which might otherwise be asserted by Pledgor as a bar to the
remedy of specific performance in any action brought by Pledgee
against Pledgor to enforce any of the covenants or agreements of
Pledgor in this Agreement.
b. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Pledgee shall give Pledgor at least ten (10) days' prior written notice of the
time and place of any public sale of the Collateral subject to this Agreement
or other intended disposition thereof to be made. Such notice shall be
conclusively deemed to have been delivered to Pledgor at the address set forth
in subsection 7(d) of this Agreement, unless Pledgor shall notify Pledgee in
writing of any change of its place of residence and provide Pledgee with the
address of its new place of residence.
c. The proceeds of any sale under Subsections 9(a)(iv) and (v)
above shall be applied as follows:
(i) To the repayment of all reasonable costs and expenses of
retaking, holding and preparing for the sale and the selling of the
Collateral (including actual reasonable legal expenses and
attorneys' fees) and the discharge of all assessments, encumbrances,
charges or liens, if any, on the Collateral prior to the lien hereof
(except any taxes, assessments, encumbrances, charges or liens
subject to which such sale shall have been made);
(ii) To the payment of the whole amount, if any, of the
Obligations, as and when the same become due; and
(iii) The aggregate surplus, if any, shall be paid to Pledgor in a
lump sum, without recourse to Pledgee, or as a court of competent
jurisdiction may direct.
d. Pledgee shall have the right to enforce one or more remedies
under this Agreement and under the Operating Agreement, successively or
concurrently, and such action shall not operate to estop or prevent Pledgee
from pursuing any further remedy which it may have, and any repossession or
retaking or sale of the Collateral pursuant to the terms hereof shall not
operate to release Pledgor until full payment of any deficiency has been made
in cash.
e. PLEDGOR ACKNOWLEDGES THAT PLEDGEE MAY BE UNABLE TO EFFECT A
PUBLIC SALE OF ALL OR ANY PART OF THE COLLATERAL AND MAY BE COMPELLED TO
RESORT TO ONE OR MORE PRIVATE SALES TO A RESTRICTED GROUP OF PURCHASERS WHO
WILL BE OBLIGATED TO AGREE, AMONG OTHER THINGS, TO ACQUIRE THE COLLATERAL FOR
ITS OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR
RESALE THEREOF. PLEDGOR FURTHER ACKNOWLEDGES THAT ANY SUCH PRIVATE SALES MAY
BE AT PRICES AND ON TERMS LESS FAVORABLE THAN THOSE OF PUBLIC SALES, AND
AGREES THAT PROVIDED SUCH PRIVATE SALES ARE MADE IN A COMMERCIALLY REASONABLE
MANNER, PLEDGEE SHALL HAVE NO OBLIGATION TO DELAY SALE OF ANY COLLATERAL TO
PERMIT THE ISSUER THEREOF TO REGISTER IT FOR PUBLIC SALE UNDER THE SECURITIES
ACT OF 1933. PLEDGOR AGREES THAT PLEDGEE SHALL BE PERMITTED TO TAKE SUCH
ACTIONS AS PLEDGEE DEEMS REASONABLY NECESSARY IN DISPOSING OF THE COLLATERAL
TO AVOID CONDUCTING A PUBLIC DISTRIBUTION OF SECURITIES IN VIOLATION OF THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AS NOW ENACTED OR
AS THE SAME MAY IN THE FUTURE BE AMENDED, PROVIDED THAT ANY SUCH ACTIONS SHALL
BE COMMERCIALLY REASONABLE. IN ADDITION, PLEDGOR AGREES TO EXECUTE, FROM TIME
TO TIME, ANY AMENDMENT TO THIS AGREEMENT OR OTHER DOCUMENT AS PLEDGEE MAY
REASONABLY REQUIRE TO EVIDENCE THE ACKNOWLEDGEMENTS AND CONSENTS OF PLEDGOR
SET FORTH IN THIS SECTION.
10. Attorneys Fees. Pledgor agrees to pay to Pledgee, without demand,
reasonable attorneys' fees and all reasonable costs and other reasonable
expenses which Pledgee expends or incurs in collecting any amounts payable by
Pledgor with respect to an Event of Default, hereunder or in enforcing this
Agreement against Pledgor whether or not suit is filed.
11. Further Documentation. Pledgor hereby agrees to execute, from time
to time, one or more financing statements and such other instruments as may be
required to perfect the security interest created hereby, including any
continuation or amendments of such financing statements, and pay the cost of
filing or recording the same in the public records specified by Pledgee.
12. Waiver and Estoppel. Pledgor represents and acknowledges that it
knowingly waives each and every one of the following rights, and agrees that
it will be estopped from asserting any argument to the contrary: (a) any
promptness in making any claim or demand hereunder; (b) any defense that may
arise by reason of the incapacity, lack of authority, death or disability of
Pledgor; (c) any defense based upon an election of remedies by Pledgee which
destroys or otherwise impairs any or all of the Collateral; (d) the right of
Pledgor to proceed against Pledgee or any other person, for reimbursement; and
(e) all duty or obligation of the Pledgee to perfect, protect, retain or
enforce any security for the payment of amounts payable by Pledgor hereunder.
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO THIS AGREEMENT
SEVERALLY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM BROUGHT BY ANY
PARTY TO THIS AGREEMENT ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE
RELATING TO THIS AGREEMENT.
No delay or failure on the part of Pledgee in the exercise of any right
or remedy against Pledgor or any other party against whom Pledgee may have any
rights, shall operate as a waiver of any agreement or obligation contained
herein, and no single or partial exercise by Pledgee of any rights or remedies
hereunder shall preclude other or further exercise thereof or other exercise
of any other right or remedy whether contained in this Agreement or in any of
the other documents regarding the Obligations, including without limitation
the Operating Agreement. No waiver of the rights of Pledgee hereunder or in
connection herewith and no release of Pledgor shall be effective unless
executed in writing by Pledgee. No actions of Pledgee permitted under this
Agreement shall in any way impair or affect the enforceability of any
agreement or obligation contained herein.
13. Independent Obligations. The obligations of Pledgor are independent
of the obligations of any other party which may be initially or otherwise
responsible for performance or payment of the Obligations, and a separate
action or actions for payment, damages or performance may be brought and
prosecuted by Pledgee against Pledgor, individually, for the full amount of
the Obligations then due and payable, whether or not an action is brought
against any other party, whether or not Pledgee is involved in any proceedings
and whether or not Pledgee or Pledgor or any other person is joined in any
action or proceedings.
14. No Offset Rights of Pledgor. No lawful act of commission or
omission of any kind or at any time upon the part of Pledgee shall in any way
affect or impair the rights of Pledgee to enforce any right, power or benefit
under this Agreement, and no set-off, recoupment, reduction or diminution of
any obligation which Pledgor has or may have against Pledgee or against any
other party shall be available against Pledgee in any suit or action brought
by Pledgee to enforce any right, power or benefit under this Agreement.
15. Power of Attorney. Pledgor hereby appoints Pledgee as his attorney-
in-fact to execute and file, effective upon the occurrence of an Event of
Default, on his behalf any financing statements, continuation statements or
other documentation required to perfect or continue the security interest
created hereby. This power, being coupled with an interest, shall be
irrevocable until all amounts secured hereby have been paid, satisfied and
discharged in full. Pledgor acknowledges and agrees that the exercise by
Pledgee of its rights under this Section 15 will not be deemed a satisfaction
of the amounts owed Pledgee unless Pledgee so elects in writing.
16. GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SUCH PARTIES
FURTHER AGREE THAT IN THE EVENT OF DEFAULT, THIS AGREEMENT MAY BE ENFORCED IN
THE DISTRICT COURT IN AND FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO
AND THEY DO HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT REGARDLESS OF
THEIR RESIDENCE OR WHERE THIS AGREEMENT MAY BE EXECUTED.
17. Successors and Assigns. All agreements, covenants, conditions and
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective heirs, personal representatives, successors and assigns of the
parties hereto.
18. Notices. Whenever any party hereto shall desire to, or be required
to, give or serve any notice, demand, request or other communication with
respect to this Agreement, each such notice, demand, request or communication
shall be in writing and shall be effective only if the same is delivered by
personal service (including, without limitation, courier or express service)
or mailed certified or registered mail, postage prepaid, return receipt
requested, or sent by telegram to the parties at the addresses shown
throughout this Agreement or such other addresses which the parties may
provide to one another in accordance herewith. If notice is sent to Pledgee,
a copy of such notice shall also be given to Wayne H. Hykan, Esq., Brownstein
Hyatt Farber & Strickland, P.C., 410 17th Street, Suite 2222, Denver, Colorado
80202. If notice is sent to Pledgor, a copy of such notice shall also be
given to Alan B. Lottner, Esq., Haligman & Lottner, First Interstate Tower
North, 633 Seventeenth Street, Suite 2700, Denver, Colorado 80202-3635.
Notices delivered personally will be effective upon delivery to an authorized
representative of the party at the designated address; notices sent by mail in
accordance with the above paragraph will be effective upon execution of the
Return Receipt Requested.
19. Consent of Pledgor. Pledgor consents to the exercise by Pledgee of
any rights of Pledgor in accordance with the provisions of this Agreement.
20. Severability. Every provision of this Agreement is intended to be
severable. In the event any term or provision hereof is declared by a court
of competent jurisdiction to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the legality or validity of the
balance of the terms and provisions hereof, which terms and provisions shall
remain binding and enforceable.
21. Amendment. This Agreement may be modified or rescinded only by a
writing expressly relating to this Agreement and signed by all of the parties.
22. Termination. This Agreement shall terminate, and shall be of no
further force or effect, upon the earlier to occur of the following: (i) full
payment and performance of the Obligations of the Pledgor, (ii) acquisition by
Pledgor or an affiliate of Pledgor of 100% ownership interest in the Limited
Liability Company, or (iii) upon the mutual consent of Pledgor and Pledgee.
23. Certain Matters With Respect to Pledgee. This Agreement and all
documents, agreements, understandings and arrangements relating to this
transaction have been executed by the undersigned on behalf of Pledgee in
his/her capacity as an officer or director of Pledgee, and not individually,
and neither the directors, officers or shareholders of Pledgee shall be bound
by or have any personal liability hereunder or thereunder. The parties to
this Agreement shall look solely to the assets of Pledgee for satisfaction of
any liability of Pledgee in respect of this Agreement and all documents,
agreements, understandings and arrangements relating to this transaction and
will not seek recourse or commence any action against any of the directors,
officers or shareholders of Pledgee or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder. The
foregoing shall also apply to all and any future documents, agreements,
understandings, arrangements and transactions between the parties hereto with
respect to the Collateral or this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR: __________________________________________
Al Feld
PLEDGEE: WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By:_______________________________________
Name:________________________________
Title:_______________________________
STATE OF ____________ )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this __ day of
__________________, 1997, by Al Feld.
WITNESS my hand and official seal.
My commission expires: ______________________________________.
Address:
________________________________
(SEAL) Notary Public
STATE OF ____________ )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this _____ day of
__________, 1997, by _________________________ as _______________ of Wellsford
Park Highlands Corp., a Colorado corporation.
WITNESS my hand and official seal.
My commission expires: _____________________________________.
Address:
_____________________________________
(SEAL) Notary Public
<PAGE>
SCHEDULE A
CONSENT TO SECURITY INTEREST AND AGREEMENT
OF THE MEMBERS
OF RED CANYON AT PALOMINO PARK LLC,
a Colorado Limited Liability Company
The undersigned, being all the members of RED CANYON AT PALOMINO PARK
LLC, a Colorado limited liability company (the "Limited Liability Company")
hereby represent and certify to Wellsford Park Highlands Corp., a Colorado
corporation (the "Secured Party") as follows:
1. The Limited Liability Company has received notice from the Secured
Party that the Secured Party has a security interest in the following
collateral ("Collateral") registered to Al Feld (the "Debtor"):
(i) All of the right, title and interest of the Debtor in the
Limited Liability Company, whether now owned or hereafter acquired,
including, without limitation, the Debtor's Interest (as defined in
the Operating Agreement) in the Limited Liability Company and its
right to receive payments, fees, distributions and allocations under
or in connection with the Operating Agreement (whether as Member or
as Manager), as such Operating Agreement may be modified or extended
from time to time with the consent of the Secured Party; and
(ii) All proceeds, whether cash proceeds or noncash proceeds,
and products of any and all of the foregoing.
2. Other than the notice from the Secured Party referred to above, the
Limited Liability Company has not received any notice from any entity or
person claiming an adverse claim against, lien on or security interest in the
Collateral.
3. The security interest of the Secured Party referred to above was
duly registered in the books and records of the Limited Liability Company
effective April 17, 1996.
4. Interests in the Limited Liability Company, whether as Member or as
Manager, are not represented in any certificate, instrument or document, and
such interest may be assigned, transferred or pledged without the party
receiving such assignment, transfer or pledge taking physical possession of
any certificate, instrument or document.
The Members hereby consent to the execution and delivery of the Pledge
and Security Agreement by the Debtor and agree hereby to be bound by Section 4
thereof to assign, set over, transfer, distribute, pay and deliver the
Collateral and any and all payments, proceeds or products due to Debtor under
the Collateral to the Secured Party.
The Members hereby consent to the admission of the Secured Party (or its
nominee, designee or any person acquiring its interest under the Pledge and
Security Agreement), as a Manager of the Limited Liability Company upon
receipt of notice by the Secured Party of an Event of Default by the Debtor
thereunder, and (ii) that the Secured Party or such nominees, designees or
persons acquiring the Secured Party's interest thereunder shall not be deemed
to have assumed any of Debtor's liability by virtue of such admission as the
Manager of the Limited Liability Company.
This Agreement and all documents, agreements, understandings and
arrangements relating to this transaction have been executed by the
undersigned on behalf of the Secured Party in his/her capacity as an officer
or trustee of the Secured Party, and not individually, and neither the
directors, officers or shareholders of the Secured Party shall be bound by or
have any personal liability hereunder or thereunder. The parties to this
Agreement shall look solely to the assets of the Secured Party for
satisfaction of any liability of the Secured Party in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence any action
against any of the directors, officers or shareholders of the Secured Party or
any of their personal assets for the performance or payment of any obligation
hereunder or thereunder. The foregoing shall also apply to all and any future
documents, agreements, understandings, arrangements and transactions between
the parties hereto with respect to the Collateral or this Agreement.
EXECUTED as of the date set forth above.
MEMBERS: WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By:_______________________________________
Name:________________________________
Title:_______________________________
__________________________________________
AL FELD, an individual
AGREED TO AND CONCURRED:
SOLE MANAGER
_______________________________
AL FELD
<PAGE>
EXHIBIT M
PLEDGE AND SECURITY AGREEMENT BY WPHC
(See attached)
<PAGE>
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of
the 17th day of April, 1996, by WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation, having an office at 370 Seventeenth Street, Suite 3100, Denver,
Colorado 80202 ("Pledgor"), for the benefit of AL FELD, an individual, having
an address of 4600 South Ulster Street, Suite 350, Denver, Colorado 80237
("Pledgee").
RECITALS
A. Pledgor is a Member of Red Canyon at Palomino Park LLC, a Colorado
limited liability company (the "Limited Liability Company"), which Limited
Liability Company is governed by its Operating Agreement dated as of April 17,
1996 (the "Operating Agreement"), by and between Pledgor and Pledgee.
B. Pledgee also is a Member, as well as the Manager, in the Limited
Liability Company.
C. In order to secure the full payment and performance by Pledgor of
all of Pledgor's obligations under the Operating Agreement, as such Operating
Agreement may be now or hereafter amended, modified or restated (said
obligations under the Operating Agreement are hereinafter referred to as the
"Obligations"), Pledgor is entering into this Agreement for the benefit of
Pledgee.
AGREEMENT
NOW, THEREFORE, in consideration of the recitals, covenants and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. Definitions.
a. "Collateral" shall mean:
(i) All of Pledgor's right, title and interest in the
ownership interests of Pledgor in the Limited Liability Company,
whether now owned or hereafter acquired, including, without
limitation, its Interest (as defined in the Operating Agreement) in
the Limited Liability Company, the right of Pledgor, if any, to any
benefits to which Pledgor may be entitled pursuant to the Operating
Agreement or the Colorado Limited Liability Company Act, Colo. Rev.
Stat. Sections 7-80-101 to 7-80-913, as amended from time to time
(the "Act"), and Pledgor's right to receive payments, fees,
distributions and allocations under or in connection with the
Operating Agreement (whether as Member or as Manager), as such
Operating Agreement may be modified or extended from time to time
with the consent of Pledgee; and
(ii) All proceeds, whether cash proceeds or noncash proceeds,
and products of any and all of the foregoing.
b. "Event of Default" shall mean an event of default described in
Section 8 herein.
2. Pledge of Collateral and Grant of Security Interest. Pledgor does
hereby unconditionally and irrevocably assign, pledge, convey, transfer,
deliver, set over and grant unto Pledgee, its successors and assigns, as
security for Pledgor's complete and timely payment and performance of the
Obligations, a continuing first lien security interest under the Uniform
Commercial Code of the State of Colorado in the Collateral. Pledgor hereby
further grants to Pledgee all rights in the Collateral as are available to a
secured party of such Collateral under the Uniform Commercial Code of the
State of Colorado (being the principal place of business of Pledgor) and,
concurrently herewith, shall deliver to Pledgee duly executed UCC-1 financing
statements suitable for filing in the State of Colorado with respect to the
Collateral.
3. Delivery to Pledgee.
a. Pledgor agrees to execute and to use its best efforts to cause
all other necessary parties, and any successors and assigns thereof, to
execute and deliver to Pledgee such other agreements, instruments and
documentation as Pledgee may reasonably request from time to time to effect
the conveyance, transfer, and grant to Pledgee of Pledgor's right, title and
interest in and to the Collateral as security for the Obligations.
b. Concurrently with the execution of this Agreement, Pledgor has
caused each of the Members of the Limited Liability Company, other than
Pledgee, to execute the Consent to Security Interest and Agreement in the form
attached hereto as Schedule A (the "Consent") evidencing the consent of the
Members to the assignment of Pledgor's Limited Liability Company interests and
their agreement to be bound by Section 4 of this Agreement. Pledgor further
agrees to execute and to cause the other Members of the Limited Liability
Company to execute and deliver to Pledgee such other agreements, instruments
and documentation as Pledgee may reasonably request from time to time to
effectuate the conveyance, transfer, assignment and grant to Pledgee of all of
Pledgor's right, title and interest in and to the Collateral.
4. Proceeds and Products of the Collateral.
a. Notwithstanding any of the foregoing, unless and until there
occurs an Event of Default, Pledgee agrees to forbear from exercising his
right to receive all benefits pertaining to the Collateral (except as
otherwise permitted under the Operating Agreement), and Pledgor shall be
permitted to exercise all rights and to receive all benefits of the
Collateral, including, without limitation, the right to exercise all voting,
approval, consent and similar rights of Pledgor pertaining to the Collateral,
payments due under, proceeds, whether cash proceeds or noncash proceeds, and
products of the Collateral and to retain and enjoy the same.
b. Pledgor acknowledges and agrees with Pledgee, that unless
Pledgee otherwise consents, in Pledgee's sole discretion, Pledgor shall not
exercise any voting, approval, consent or other rights with respect to the
Collateral at any time after (i) the occurrence of an Event of Default and
(ii) receipt of notice from Pledgee instructing Pledgor not to exercise any
such voting, approval, consent or other rights with respect to the Collateral,
provided, however, that Pledgor shall exercise any such right it may have
under the agreements comprising the Collateral with respect to the business
affairs of the Limited Liability Company as is reasonably necessary to protect
and preserve the Collateral.
c. Upon or at any time after the occurrence of an Event of
Default, Pledgee, at his option to be exercised in his sole discretion by
written notice to Pledgor, may exercise all rights and remedies granted under
this Agreement, including, without limitation, the right to require the
obligors under the Collateral to make all payments due under and to pay all
proceeds, whether cash proceeds or noncash proceeds, and products of the
Collateral to Pledgee. Upon the giving of any such notice, the security
constituted by this Agreement shall become immediately enforceable by Pledgee,
without any presentment, further demand, protest or other notice of any kind,
all of which are hereby expressly and irrevocably waived by Pledgor. Pledgor
hereby authorizes and directs each respective obligor under the agreements
constituting the Collateral, that upon receipt of written notice from Pledgee
of an Event of Default by Pledgor hereunder, to assign, set over, transfer,
distribute, pay and deliver any and all Collateral or said payments, proceeds
or products of the Collateral to Pledgee, at such address as Pledgee may
direct, at such time and in such manner as the Collateral and such payments,
proceeds and products of the Collateral would otherwise be distributed,
transferred, paid or delivered to Pledgor. The respective obligors under the
agreements constituting the Collateral shall be entitled to conclusively rely
on such notice and make all such assignments and transfers of the Collateral
and all such payments with respect to the Collateral and pay all such proceeds
and products of the Collateral to Pledgee and shall have no liability to
Pledgor for any loss or damage Pledgor may incur by reason of said reliance.
5. No Assumption. Notwithstanding any of the foregoing, whether or not
an Event of Default shall have occurred, and whether or not Pledgee elects to
foreclose on his security interest in the Collateral as set forth herein,
neither the execution of this Agreement, receipt by Pledgee of any of
Pledgor's right, title and interest in and to the Collateral and the payments,
proceeds and products of the Collateral, now or hereafter due to Pledgor from
any obligor of the Collateral, nor Pledgee's foreclosure of his security
interest in the Collateral, shall in any way be deemed to obligate Pledgee to
assume any of Pledgor's obligations, duties or liabilities under the
Collateral or any agreements constituting the Collateral, as presently
existing or as hereafter amended, or under any and all other agreements now
existing or hereafter drafted or executed (collectively, the "Pledgor's
Liabilities"), unless Pledgee otherwise agrees to assume any or all of the
Pledgor's Liabilities in writing. In the event of foreclosure by Pledgee of
his security interest in the Collateral, Pledgor shall remain bound and
obligated to perform the Pledgor's Liabilities to the extent required under
the Operating Agreement and Pledgee shall not be deemed to have assumed any of
the Pledgor's Liabilities, except as provided in the preceding sentence. In
the event the entity or person acquiring the Collateral at a foreclosure sale
elects to assume the Pledgor's Liabilities, such assignee shall agree to be
bound by the terms and provisions of the applicable agreement.
6. Indemnification. Pledgor hereby agrees to indemnify, defend and
hold Pledgee, his successors and assigns harmless from and against any and all
damages, losses, claims, costs or expenses (including without limitation,
reasonable attorneys' fees) and any other liabilities whatsoever that Pledgee
or his successors or assigns may incur by reason of Pledgor's failure to
comply with the terms and conditions of this Agreement or by reason of any
unpermitted assignment of Pledgor's right, title and interest in and to any or
all of the Collateral.
7. Representations, Warranties and Covenants. In addition to the
representations made by Pledgor in the Operating Agreement, if any, Pledgor
makes the following representations and warranties, which shall be deemed to
be continuing representations and warranties, and Pledgor covenants and agrees
to provide written notice to Pledgee within ten (10) days after Pledgor
becomes aware that any of the following is no longer true and correct and to
perform diligently all acts reasonably necessary to maintain or restore the
truth and correctness, in all material respects, of the following:
a. Pledgor acknowledges that the Operating Agreement and any other
agreements constituting the Collateral, currently are in full force and effect
and have not been amended or modified, except by Pledgor and Pledgee in
writing.
b. Pledgor has the full right and title to its interest in the
Collateral and has the full power, legal right and authority to pledge,
convey, transfer and assign such interest. None of the Collateral is subject
to any existing assignment, claim, lien, pledge, transfer or other security
interest of any character, or to any attachment, levy, garnishment or other
judicial process or to any claim for set-off, counterclaim, deduction or
discount. Pledgor shall not, without the prior written consent of Pledgee,
which consent may be granted or denied in Pledgee's sole discretion, further
convey, transfer, set over or pledge to any party any of its interests in the
Collateral. Pledgor agrees to (i) warrant and defend its title to the
Collateral and the security interest created by this Agreement against all
claims of all persons, and (ii) maintain and preserve the Collateral and such
security interests.
c. The pledge of the Collateral pursuant to this Agreement creates
a valid first priority security interest in the Collateral, securing the
performance of the Obligations, which security interest shall be perfected
upon the filing of the UCC-1 Financing Statements referred to in Paragraph 2
of this Agreement.
d. Pledgor's Employer Identification number is: 84-1305872.
Pledgor's principal place of business is located at: 370 Seventeenth Street,
Suite 3100, Denver, Colorado 80202.
e. Pledgor agrees that it shall not, without at least thirty (30)
days' prior written notification to Pledgee, move or otherwise change its
principal place of business.
f. To the best knowledge of Pledgor, neither the execution and
delivery of this Agreement by Pledgor nor the consummation of the transactions
herein contemplated nor the fulfillment of the terms hereof (i) violate the
terms of any agreement, indenture, mortgage, deed of trust, equipment lease,
instrument or other document to which Pledgor is a party, or (ii) conflict
with any law, order, rule or regulation applicable to Pledgor or any court or
any government, regulatory body or administrative agency or other governmental
body having jurisdiction over Pledgor or its properties, or (iii) result in or
require the creation or imposition of any lien (other than the first priority
lien of Pledgee in the Collateral contemplated hereby).
g. No consent or approval which has not been obtained prior to the
date hereof of any other person or entity and no authorization, approval or
other action by, and no notice to or filing with any governmental body,
regulatory authority or securities exchange, was or is necessary as a
condition to the validity of the pledge hereunder of the Collateral and such
pledge is effective to vest in the Pledgee the rights of the Pledgee in the
Collateral as set forth herein.
h. Pledgor shall comply in all material respects with all
requirements of law applicable to the Collateral or any part thereof.
i. Pledgor shall pay and discharge all taxes, assessments and
governmental charges or levies against any Collateral prior to delinquency
thereof and shall keep all Collateral free of all unpaid charges whatsoever.
8. Event of Default. Each of the following shall constitute an Event
of Default hereunder:
a. A failure of Pledgor to make a Capital Contribution pursuant to
the Operating Agreement within thirty (30) days of receipt by Pledgor of
written demand from Pledgee, provided that the fact that such amount is due
and payable is not in dispute, or that any dispute has been finally determined
by a court having jurisdiction or through another means that is mutually
acceptable to Pledgor and Pledgee; or
b. Any warranty, representation or statement of Pledgor in this
Agreement proves to have been false in any material respect when made or
furnished; or
c. There occurs the issuance of a writ, order of attachment or
garnishment with respect to any of the Collateral and such writ, order of
attachment or garnishment is not dismissed and removed within thirty (30) days
thereafter.
d. A material breach or violation of any covenant or agreement
contained herein shall have occurred, which is not cured within thirty (30)
days after notice has been given to Pledgor by Pledgee.
Any Event of Default under this Agreement shall be an event of default by
Pledgor under the Operating Agreement.
9. Remedies.
a. Upon the occurrence of an Event of Default, Pledgee may, by
giving notice of such Event of Default, at his option, do any one or more of
the following:
(i) Take control of the Collateral, collect, and thereafter
exercise all rights and powers of Pledgor with respect to the
Collateral; and
(ii) Without notice to or demand upon Pledgor, make such
payments and do such acts as Pledgee may deem necessary to protect
his security interest in the Collateral, including, without
limitation, paying, purchasing, contesting or compromising any
encumbrance, charge or lien which is prior to or superior to the
security interest granted hereunder, and in exercising any such
powers or authority to pay all expenses incurred in connection
therewith; and
(iii) Require Pledgor to take all actions necessary to deliver
such Collateral to Pledgee, or an agent or representative designated
by Pledgee; and
(iv) Foreclose upon this Agreement as herein provided or in any
commercially reasonable manner permitted by law, and exercise any
and all of the rights and remedies conferred upon Pledgee by the
Operating Agreement, or in any other document executed by Pledgor in
connection with the Obligations secured hereby; and sell or cause to
be sold the Collateral, without affecting in any way the rights or
remedies to which Pledgee may be entitled under the other such
instruments; and
(v) Sell or otherwise dispose of the Collateral at public
sale, without having the Collateral at the place of sale, and upon
terms and in such manner as is commercially reasonable; Pledgee may
be a purchaser at any sale; and
(vi) Exercise any remedies of a secured party under the Uniform
Commercial Code of the State of Colorado or any other applicable
law; and
(vii) Exercise any remedies available to Pledgee under the
Operating Agreement; and
(viii) Notwithstanding anything to the contrary contained in this
Agreement, at any time after an Event of Default Pledgee may, by
delivering written notice to the Limited Liability Company and to
Pledgor, succeed, or designate its nominee or designee to succeed,
to all right, title and interest of Pledgor (including, without
limitation, the right, if any, to vote on or take any action with
respect to the matters of the Limited Liability Company) as a Member
of the Limited Liability Company in respect of the Collateral.
Pledgor hereby irrevocably authorizes and directs the Limited
Liability Company on receipt of any such notice (a) to deem and
treat Pledgee or such nominee or designee in all respects as a
Member (and not merely an assignee of a Member) of such Limited
Liability Company, entitled to exercise all the rights, powers and
privileges (including the right to vote on or take any action with
respect to Limited Liability Company matters pursuant to the
Operating Agreement, to receive all distributions, to be credited
with the capital account and to have all other rights, powers and
privileges appertaining to the Collateral to which Pledgor would
have been entitled had the Collateral not been transferred to
Pledgee or such nominee or designee), and (b) to file amended
Articles of Organization for such Limited Liability Company, if
required, admitting Pledgee or such nominee or designee as a Member
of the Limited Liability Company in place of Pledgor; and
(ix) The rights granted to Pledgee under this Agreement are of
a special, unique, unusual and extraordinary character. The loss of
any of such rights cannot be reasonably or adequately compensated by
way of damages in any action at law, and any material breach by
Pledgor of any of Pledgor's covenants, agreements, obligations,
representations or warranties under this Agreement will cause
Pledgee irreparable injury and damage. In the event of any such
breach, Pledgee shall be entitled, as a matter of right, to
injunctive relief or other equitable relief in any court of
competent jurisdiction to prevent the violation or contravention of
any of the provisions of this Agreement or to compel compliance with
the terms of this Agreement by Pledgor. Pledgee is absolutely and
irrevocably authorized and empowered by Pledgor to demand specific
performance of each of the covenants, agreements, representations
and warranties of Pledgor in this Agreement. Pledgor hereby
irrevocably waives any defense based on the adequacy of any remedy
at law which might otherwise be asserted by Pledgor as a bar to the
remedy of specific performance in any action brought by Pledgee
against Pledgor to enforce any of the covenants or agreements of
Pledgor in this Agreement.
b. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Pledgee shall give Pledgor at least ten (10) days' prior written notice of the
time and place of any public sale of the Collateral subject to this Agreement
or other intended disposition thereof to be made. Such notice shall be
conclusively deemed to have been delivered to Pledgor at the address set forth
in subsection 7(d) of this Agreement, unless Pledgor shall notify Pledgee in
writing of any change of its principal place of business and provide Pledgee
with the address of its new place of business.
c. The proceeds of any sale under subsections 9(a)(iv) and (v)
above shall be applied as follows:
(i) To the repayment of all reasonable costs and expenses of
retaking, holding and preparing for the sale and the selling of the
Collateral (including actual reasonable legal expenses and
attorneys' fees) and the discharge of all assessments, encumbrances,
charges or liens, if any, on the Collateral prior to the lien hereof
(except any taxes, assessments, encumbrances, charges or liens
subject to which such sale shall have been made);
(ii) To the payment of the whole amount, if any, of the
Obligations, as and when the same become due; and
(iii) The aggregate surplus, if any, shall be paid to Pledgor in
a lump sum, without recourse to Pledgee, or as a court of competent
jurisdiction may direct.
d. Pledgee shall have the right to enforce one or more remedies
under this Agreement and under the Operating Agreement, successively or
concurrently, and such action shall not operate to estop or prevent Pledgee
from pursuing any further remedy which he may have, and any repossession or
retaking or sale of the Collateral pursuant to the terms hereof shall not
operate to release Pledgor until full payment of any deficiency has been made
in cash.
e. PLEDGOR ACKNOWLEDGES THAT PLEDGEE MAY BE UNABLE TO EFFECT A
PUBLIC SALE OF ALL OR ANY PART OF THE COLLATERAL AND MAY BE COMPELLED TO
RESORT TO ONE OR MORE PRIVATE SALES TO A RESTRICTED GROUP OF PURCHASERS WHO
WILL BE OBLIGATED TO AGREE, AMONG OTHER THINGS, TO ACQUIRE THE COLLATERAL FOR
THEIR OWN ACCOUNT, FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR
RESALE THEREOF. PLEDGOR FURTHER ACKNOWLEDGES THAT ANY SUCH PRIVATE SALES MAY
BE AT PRICES AND ON TERMS LESS FAVORABLE THAN THOSE OF PUBLIC SALES, AND
AGREES THAT PROVIDED SUCH PRIVATE SALES ARE MADE IN A COMMERCIALLY REASONABLE
MANNER, PLEDGEE SHALL HAVE NO OBLIGATION TO DELAY SALE OF ANY COLLATERAL TO
PERMIT THE ISSUER THEREOF TO REGISTER IT FOR PUBLIC SALE UNDER THE SECURITIES
ACT OF 1933. PLEDGOR AGREES THAT PLEDGEE SHALL BE PERMITTED TO TAKE SUCH
ACTIONS AS PLEDGEE DEEMS REASONABLY NECESSARY IN DISPOSING OF THE COLLATERAL
TO AVOID CONDUCTING A PUBLIC DISTRIBUTION OF SECURITIES IN VIOLATION OF THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AS NOW ENACTED OR
AS THE SAME MAY IN THE FUTURE BE AMENDED, PROVIDED THAT ANY SUCH ACTIONS SHALL
BE COMMERCIALLY REASONABLE. IN ADDITION, PLEDGOR AGREES TO EXECUTE, FROM TIME
TO TIME, ANY AMENDMENT TO THIS AGREEMENT OR OTHER DOCUMENT AS PLEDGEE MAY
REASONABLY REQUIRE TO EVIDENCE THE ACKNOWLEDGEMENTS AND CONSENTS OF PLEDGOR
SET FORTH IN THIS SECTION.
10. Attorneys Fees. Pledgor agrees to pay to Pledgee, without demand,
reasonable attorneys' fees and all reasonable costs and other reasonable
expenses which Pledgee expends or incurs in collecting any amounts payable by
Pledgor with respect to an Event of Default hereunder or in enforcing this
Agreement against Pledgor, whether or not suit is filed.
11. Further Documentation. Pledgor hereby agrees to execute, from time
to time, one or more financing statements and such other instruments as may be
required to perfect the security interest created hereby, including any
continuation or amendments of such financing statements, and pay the cost of
filing or recording the same in the public records specified by Pledgee.
12. Waiver and Estoppel. Pledgor represents and acknowledges that it
knowingly waives each and every one of the following rights, and agrees that
it will be estopped from asserting any argument to the contrary: (a) any
promptness in making any claim or demand hereunder; (b) any defense that may
arise by reason of the incapacity or lack of authority of Pledgor; (c) any
defense based upon an election of remedies by Pledgee which destroys or
otherwise impairs any or all of the Collateral; (d) the right of Pledgor to
proceed against Pledgee or any other person for reimbursement; and (e) all
duty or obligation of Pledgee to perfect, protect, retain or enforce any
security for the payment of amounts payable by Pledgor hereunder.
TO THE FULLEST EXTENT PERMITTED BY LAW, EACH PARTY TO THIS AGREEMENT
SEVERALLY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY AND ALL
RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT OR COUNTERCLAIM BROUGHT BY ANY
PARTY TO THIS AGREEMENT ARISING IN CONNECTION WITH, OUT OF OR OTHERWISE
RELATING TO THIS AGREEMENT.
No delay or failure on the part of Pledgee in the exercise of any right
or remedy against Pledgor or any other party against whom Pledgee may have any
rights, shall operate as a waiver of any agreement or obligation contained
herein, and no single or partial exercise by Pledgee of any rights or remedies
hereunder shall preclude other or further exercise thereof or other exercise
of any other right or remedy whether contained in this Agreement or in any of
the other documents regarding the Obligations, including without limitation
the Operating Agreement. No waiver of the rights of Pledgee hereunder or in
connection herewith and no release of Pledgor shall be effective unless in
writing executed by Pledgee. No actions of Pledgee permitted under this
Agreement shall in any way impair or affect the enforceability of any
agreement or obligation contained herein.
13. Independent Obligations. The obligations of Pledgor are independent
of the obligations of any other party which may be initially or otherwise
responsible for performance or payment of the Obligations, and a separate
action or actions for payment, damages or performance may be brought and
prosecuted by Pledgee against Pledgor, individually, for the full amount of
the Obligations then due and payable, whether or not an action is brought
against any other party, whether or not Pledgee is involved in any proceedings
and whether or not Pledgee or Pledgor or any other person is joined in any
action or proceedings.
14. Lawful Acts of Pledgee. No lawful act of commission or omission of
any kind or at any time upon the part of Pledgee shall in any way affect or
impair the rights of Pledgee to enforce any right, power or benefit under this
Agreement.
15. Power of Attorney. Pledgor hereby appoints Pledgee as its attorney-
in-fact to execute and file, effective upon the occurrence of an Event of
Default, on its behalf any financing statements, continuation statements or
other documentation required to perfect or continue the security interest
created hereby. This power, being coupled with an interest, shall be
irrevocable until all amounts secured hereby have been paid, satisfied and
discharged in full. Pledgor acknowledges and agrees that the exercise by
Pledgee of his rights under this Section 15 will not be deemed a satisfaction
of the amounts owed Pledgee unless Pledgee so elects in writing.
16. GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SUCH PARTIES
FURTHER AGREE THAT IN THE EVENT OF DEFAULT, THIS AGREEMENT MAY BE ENFORCED IN
THE DISTRICT COURT IN AND FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO
AND THEY DO HEREBY SUBMIT TO THE JURISDICTION OF SUCH COURT REGARDLESS OF
THEIR RESIDENCE OR WHERE THIS AGREEMENT MAY BE EXECUTED.
17. Successors and Assigns. All agreements, covenants, conditions and
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective heirs, personal representatives, successors and assigns of the
parties hereto.
18. Notices. Whenever any party hereto shall desire to, or be required
to, give or serve any notice, demand, request or other communication with
respect to this Agreement, each such notice, demand, request or communication
shall be in writing and shall be effective only if the same is delivered by
personal service (including, without limitation, courier or express service)
or mailed certified or registered mail, postage prepaid, return receipt
requested, or sent by telegram to the parties at the addresses shown
throughout this Agreement or such other addresses which the parties may
provide to one another in accordance herewith. If notice is sent to Pledgor,
a copy of such notice shall also be given to Wayne H. Hykan, Esq., Brownstein
Hyatt Farber & Strickland, P.C., 410 17th Street, Suite 2222, Denver, Colorado
80202. If notice is sent to Pledgee, a copy of such notice shall also be
given to Alan B. Lottner, Esq., Haligman & Lottner, PC, 633 17th Street,
Suite 2700, Denver, Colorado 80202. Notices delivered personally will be
effective upon delivery to an authorized representative of the party at the
designated address; notices sent by mail in accordance with the above
paragraph will be effective upon execution of the Return Receipt Requested.
19. Consent of Pledgor. Pledgor consents to the exercise by Pledgee of
any rights of Pledgor in accordance with the provisions of this Agreement.
20. Severability. Every provision of this Agreement is intended to be
severable. In the event any term or provision hereof is declared by a court
of competent jurisdiction to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the legality or validity of the
balance of the terms and provisions hereof, which terms and provisions shall
remain binding and enforceable.
21. Amendment. This Agreement may be modified or rescinded only by a
writing expressly relating to this Agreement and signed by all of the parties.
22. Limitation of Liability. No officer, director or shareholder of
Pledgor shall be bound by or have any personal liability hereunder or under
any documents, agreements, understandings or arrangements relating to this
transaction. The parties to this Agreement shall look solely to the assets of
Pledgor for satisfaction of any liability of Pledgor in respect of this
Agreement and all documents, agreements, understandings and arrangements
relating to this transaction and will not seek recourse or commence action
against any of the directors, officers or shareholders of Pledgor or any of
their personal assets for the performance or payment of any obligation
hereunder or thereunder. The foregoing shall also apply to all and any future
documents, agreements, understandings, arrangements and transactions between
the parties hereto with respect to the Obligations, the Collateral or this
Agreement.
23. Termination. This Agreement shall terminate, and shall be of no
further force or effect, upon the earlier to occur of the following: (i) full
payment and performance of the Obligations of the Pledgor, (ii) acquisition by
Pledgor or an affiliate of Pledgor of 100% ownership interest in the Limited
Liability Company, or (iii) upon the mutual consent of Pledgor and Pledgee.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PLEDGOR: WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By:__________________________________
Name: ____________________________
Title: ___________________________
PLEDGEE: _____________________________________
Al Feld
STATE OF ____________ )
) ss.
COUNTY OF __________ )
The foregoing instrument was acknowledged before me this ____ day of
_______________, 1997, by _________________________ as _______________ of
Wellsford Park Highlands Corp., a Colorado corporation.
WITNESS my hand and official seal.
My commission expires: ___________________________________.
Address:
________________________________
(SEAL) Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF ________ )
The foregoing instrument was acknowledged before me this __ day of
__________, 1997, by Al Feld.
WITNESS my hand and official seal.
My commission expires: _____________________________________.
Address:
________________________________
(SEAL) Notary Public
<PAGE>
SCHEDULE A
CONSENT TO SECURITY INTEREST AND AGREEMENT
OF THE MEMBERS
OF RED CANYON AT PALOMINO PARK LLC,
a Colorado Limited Liability Company
The undersigned, being all the members of RED CANYON AT PALOMINO PARK
LLC, a Colorado limited liability company (the "Limited Liability Company")
hereby represent and certify to Al Feld, an individual having an address at
4600 South Ulster Street, Suite 350, Denver, Colorado 80237 (the "Secured
Party") as follows:
1. The Limited Liability Company has received notice from the Secured
Party that the Secured Party has a security interest in the following
collateral (the "Collateral") registered to Wellsford Park Highlands Corp., a
Colorado corporation (the "Debtor"):
GAR All of the right, title and interest of the Debtor in the
Limited Liability Company, whether now owned or hereafter acquired,
including, without limitation, the Debtor's Interest (as defined in
the Operating Agreement) in the Limited Liability Company and its
right to receive payments and distributions from the Limited
Liability Company and allocations under or in connection with the
Operating Agreement, as such Operating Agreement may be modified or
extended from time to time with the written consent of the Secured
Party; and
(ii) All proceeds, whether cash proceeds or noncash proceeds,
and products of any and all of the foregoing.
2. Other than the notice from the Secured Party referred to above, the
Limited Liability Company has not received any notice from any entity or
person claiming an adverse claim against, lien on or security interest in the
Collateral.
3. The security interest of the Secured Party referred to above was
duly registered in the books and records of the Limited Liability Company
effective April 17, 1996.
4. Interests in the Limited Liability Company are not represented in
any certificate, instrument or document, and such Interests may be assigned,
transferred or pledged without the party receiving such assignment, transfer
or pledge taking physical possession of any certificate, instrument or
document.
5. The Members hereby consent to the execution and delivery of that
certain the Pledge and Security Agreement by the Debtor and agree hereby to be
bound by Section 4 thereof to assign, set over, transfer, distribute, pay and
deliver the Collateral and any and all payments, proceeds or products due to
the Debtor under the Collateral to the Secured Party.
This agreement and all documents, agreements, understandings and
arrangements relating to this transaction have been executed by the
undersigned on behalf of Wellsford Park Highlands Corp., a Colorado
corporation ("WPHC") in his/her capacity as an officer or director of WPHC,
and not individually, and neither the directors, officers or shareholders of
WPHC shall be bound by or have any personal liability hereunder or thereunder.
The parties to this agreement shall look solely to the assets of WPHC for
satisfaction of any liability of WPHC in respect of this agreement and all
documents, agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action against any of
the directors, officers or shareholders of WPHC or any of their personal
assets for the performance or payment of any obligation hereunder or
thereunder. The foregoing shall also apply to all and any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto with respect to the Collateral or this Agreement.
EXECUTED as of the date set forth above.
MEMBERS: WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By:_______________________________________
Name: _________________________________
Title: ________________________________
__________________________________________
AL FELD, an individual
AGREED TO AND CONCURRED:
SOLE MANAGER
__________________________________________
Al Feld
<PAGE>
EXHIBIT N
PLANS AND SPECIFICATIONS
<PAGE>
EXHIBIT O
FINAL PROJECT BUDGET
<PAGE>
EXHIBIT T
INFRASTRUCTURE BUDGET
<PAGE>
EXHIBIT U
SUBSTITUTION AGREEMENT
(See attached)
<PAGE>
SUBSTITUTION AGREEMENT
THIS SUBSTITUTION AGREEMENT (this "Agreement") is made and entered into
as of the 17th day of April, 1996, by and among AL FELD, an individual
("Feld"), WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"), and
THE FELD COMPANY, a Colorado corporation (the "Company").
RECITALS
A. WPHC is a Member of Red Canyon at Palomino Park LLC, a Colorado
limited liability company (the "LLC"), which LLC is governed by its Operating
Agreement dated as of April 17, 1996 (the "Operating Agreement") by and
between WPHC and Feld.
B. Feld is also a Member, as well as the Manager, in the LLC and is the
principal officer and shareholder of the Company.
C. In order to facilitate WPHC's appointment of the Company as a
substitute Member and the Manager of the LLC upon the death or disability of
Feld in accordance with Section 12.13 of the Operating Agreement and to bind
the Company to the agreements set forth in said Section 12.13, the parties
hereto now desire to enter into this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the execution of the Operating
Agreement and of the recitals, covenants and agreements set forth herein, and
for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Request for Substitute Manager. In the event that Feld should die
or WPHC shall elect to remove Feld as manager due to disability (such an event
is hereinafter referred to as a "Triggering Event"), WPHC shall have the
right, at its sole option, to request in writing that: (a) the Company shall
acquire from Feld (or from his estate, if Feld is deceased) the entire
interest of Feld in the LLC; (b) the Company shall be admitted as a Member of
the LLC and substituted for Feld as Member and Manager under the Operating
Agreement; and (c) the Company shall assume, in writing, all of the
obligations of the Manager and of a Member under the Operating Agreement, as
the same may be amended from time to time. The foregoing actions under items
(a), (b) and (c) shall be effective upon the next business day after WPHC
delivers its written request to the Company and Feld. Notwithstanding
anything to the contrary contained herein or in the Operating Agreement, if
the Company is substituted for Feld as a Member and Manager, then Feld (or his
estate if Feld is deceased) shall remain liable for the performance of the
obligations of the Manager under the Operating Agreement, in accordance with
Section 12.12.3.2 thereof.
2. Failure to Request a Substitute Manager. If WPHC fails to exercise
its option under Section 12.13 of the Operating Agreement and this Agreement
to cause the Company to be substituted for Feld as the Manager within ninety
(90) days after the date of a Triggering Event, then such right shall
automatically terminate and Feld (and his estate) shall be released from all
responsibilities and obligations as Manager under the Operating Agreement
arising after the effective date of Feld's withdrawal or Removal (as said term
is defined in the Operating Agreement) from the LLC in connection with the
Triggering Event.
3. Attorneys Fees. In the event any litigation or other legal
proceedings or alternative dispute resolution proceedings are brought for the
enforcement of or arise out of this Agreement, the prevailing party shall be
entitled to recover from the non-prevailing party all reasonable attorneys'
fees and costs and all other reasonable expenses, in addition to any other
relief or damages obtained.
4. Further Documentation. The parties hereby agree to execute, from
time to time, such other documents as may be reasonably necessary to
effectuate the intent of this Agreement and Section 12.13 of the Operating
Agreement.
5. GOVERNING LAW. THE PARTIES HERETO AGREE THAT THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
COLORADO WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. SUCH PARTIES
FURTHER AGREE THAT THIS AGREEMENT MAY BE ENFORCED IN THE DISTRICT COURT IN AND
FOR THE CITY AND COUNTY OF DENVER, STATE OF COLORADO AND THEY DO HEREBY SUBMIT
TO THE JURISDICTION OF SUCH COURT REGARDLESS OF THEIR RESIDENCE OR WHERE THIS
AGREEMENT MAY BE EXECUTED.
6. Successors and Assigns. All agreements, covenants, conditions and
provisions of this Agreement shall inure to the benefit of and be binding upon
the respective heirs, personal representatives, successors and assigns of the
parties hereto.
7. Notices. Whenever any party hereto shall desire to, or be required
to, give or serve any notice, demand, request or other communication with
respect to this Agreement, each such notice, demand, request or communication
shall be in writing and shall be effective only if the same is delivered by
personal service (including, without limitation, courier or express service)
or mailed certified or registered mail, postage prepaid, return receipt
requested, or sent by telegram to the parties at the addresses shown in the
Operating Agreement or such other addresses which the parties may provide to
one another in accordance therewith. The notice address for the Company shall
be the same as the notice address for Feld. If notice is sent to WPHC, a copy
of such notice shall also be given to Wayne H. Hykan, Esq., Brownstein Hyatt
Farber & Strickland, P.C., 410 17th Street, Suite 2222, Denver, Colorado
80202. If notice is sent to Feld or the Company, a copy of such notice shall
also be given to Alan Lottner, Esq., Haligman and Lottner, First Interstate
Tower North, 633 Seventeenth Street, Suite 2700, Denver, Colorado 80202-3635.
Notices delivered personally will be effective upon delivery to an authorized
representative of the party at the designated address; notices sent by mail in
accordance with the above paragraph will be effective upon execution of the
Return Receipt Requested.
8. Severability. Every provision of this Agreement is intended to be
severable. In the event any term or provision hereof is declared by a court
of competent jurisdiction to be illegal or invalid for any reason whatsoever,
such illegality or invalidity shall not affect the legality or validity of the
balance of the terms and provisions hereof, which terms and provisions shall
remain binding and enforceable.
9. Capitalized Terms. All capitalized terms not otherwise defined
herein shall have the meanings set forth in the Operating Agreement.
10. Amendment. This Agreement may be modified or rescinded only by a
writing expressly relating to this Agreement and signed by all of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
________________________________________
AL FELD, individually
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation
By:_____________________________________
Its:____________________________________
THE FELD COMPANY, a Colorado corporation
By:_____________________________________
Its:____________________________________
TRI-PARTY AGREEMENT
THIS TRI-PARTY AGREEMENT ("Agreement") is executed this 29th day of May,
1997, by and among NATIONSBANK OF TEXAS, N.A., a national banking association
("Construction Lender" or "NationsBank"), RED CANYON AT PALOMINO PARK LLC, a
Colorado limited liability company ("Borrower"), WELLSFORD PARK HIGHLANDS
CORP., a Colorado corporation ("WPHC"), WELLSFORD RESIDENTIAL PROPERTY TRUST, a
Maryland real estate investment trust ("WRPT"), AL FELD, an individual resident
of Denver, Colorado ("Feld"), and THE FELD COMPANY, a Colorado corporation.
R E C I T A L S:
A. Feld and WPHC, as members, are parties to that certain Operating
Agreement of Red Canyon at Palomino Park LLC, a Colorado limited liability
company, dated as of April 17, 1996, as amended by First Amendment to Operating
Agreement of Red Canyon at Palomino Park LLC dated as of May 19, 1997 (the
"Operating Agreement") evidencing the organization and formation of Borrower.
The Operating Agreement contemplates the development of a 304-unit apartment
complex and related facilities and amenities (the "Improvements") by Borrower
on certain real property located in Highlands Ranch, Douglas County, Colorado,
as more particularly described on Exhibit A attached hereto and made a part
hereof (the "Land") (the Land and the Improvements being referred to herein
collectively as the "Property"). All terms used herein with their initial
letters capitalized, unless otherwise defined herein, shall have the same
meaning as ascribed thereto in the Operating Agreement.
B. NationsBank has agreed, subject to compliance by Borrower with all of
the terms and conditions of the Construction Loan Agreement of even date
herewith (the "Loan Agreement") between NationsBank and Borrower, to make a
construction loan to Borrower (the "Loan") to provide funds for the acquisition
of the Land and the construction of the Improvements on the Land. In
connection with the Loan, Borrower has executed, among other instruments, a
Promissory Note of even date herewith (the "Note"), payable to the order of
NationsBank in the stated principal amount of $29,379,819.00 and a first lien
Construction Loan Deed of Trust, Assignment, Security Agreement and Financing
Statement of even date herewith (the "Mortgage"), encumbering the Property.
The Loan has been guaranteed by Feld and The Feld Company (collectively, the
"Guarantors") by separate Guaranty Agreements of even date herewith
(collectively, the "Guaranty Agreements") in favor of NationsBank. The Loan
Agreement, the Note, the Mortgage, and all other documents evidencing, securing
or otherwise pertaining to the Loan are referred to herein collectively as the
"Loan Documents."
C. The Operating Agreement contains a requirement that at the
Construction Loan Closing, Borrower, the Construction Lender and WRPT will
enter into an agreement providing, among other things, if the Loan has not been
paid in full by its maturity date, the Construction Lender shall have the right
to require that WRPT either purchase the Loan from the Construction Lender, or
at WRPT's option, cause the Loan to be repaid. The Loan Agreement also
contains a requirement that NationsBank, Borrower, WPHC and WRPT enter into an
agreement coordinating the payoff of the Loan by WRPT. This Agreement is being
entered into in compliance with the aforesaid requirements in the Operating
Agreement and the Loan Agreement.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. Subject to the satisfaction or waiver (by WRPT) of the conditions and
requirements listed in Exhibit B attached hereto and made a part hereof, WRPT
agrees to pay to NationsBank, on or before the maturity date of the Note, the
lesser of (i) the outstanding balance of all principal, interest and other
amounts owing to NationsBank in connection with the Loan (the "Outstanding Loan
Balance"), or (ii) the total of the Final Project Budget (the lesser of the
Outstanding Loan Balance and the total of the Final Project Budget is referred
to herein as the "Loan Payoff"). The Final Project Budget is defined in
paragraph 3 below and is subject to possible adjustment as provided in
paragraph 3. Upon its receipt of the Loan Payoff, NationsBank shall, at the
option of WRPT, either (a) assign to WRPT the Note, the Mortgage and all other
Loan Documents, without recourse or representation, except as to
title/ownership of the Loan Documents being transferred, or (b) cause the
Mortgage and all other liens and security interests on and against the Property
and securing the Loan to be released; provided, however, in connection with its
receipt of the Loan Payoff and such assignment of the Loan Documents or release
of the Mortgage, NationsBank shall retain its right to recover the difference,
if any, between the Outstanding Loan Balance and the Loan Payoff from
Guarantors under the Guaranty Agreements and shall also retain all of it rights
and remedies against Guarantors under the Environmental Indemnity Agreement and
all other indemnifications contained in the Loan Documents. When the Loan
Payoff is made, Borrower and WPHC shall execute and deliver such documents and
instruments as may be necessary to conform to the terms of the Operating
Agreement, and shall perform and observe all of the requirements of the
Operating Agreement to be performed and observed by Borrower and WPHC,
respectively, in connection with the Final Closing. Notwithstanding anything
contained in the Operating Agreement to the contrary, but subject to the
satisfaction or waiver (by WRPT) of the conditions and requirements listed in
Exhibit B hereto, WRPT shall be obligated to make the Loan Payoff to
NationsBank regardless of whether or not there is any uncured default on the
part of Feld, any Affiliate of Feld, or Borrower under the Operating Agreement
or under any other contracts or agreements relating to the Project.
2. WPHC and WRPT advise NationsBank that they have approved and
accepted, or have waived, the following items and conditions:
(a) The Initial Closing was completed in a timely manner, all of the
requirements and conditions set forth in Section 5.1 of the Operating Agreement
have been satisfied or waived, and WPHC has no right to remove Feld as a Member
or Manager of Borrower for any reason related to the Initial Closing.
(b) The Construction Loan Closing has been completed in a timely
manner, all of the requirements and conditions listed in Section 5.2 of the
Operating Agreement have been satisfied or waived, WPHC has approved all of the
documents and other items it is required to approve under Section 5.2 of the
Operating Agreement, and WPHC has no right to remove Feld as a Member or
Manager of Borrower for any reason related to the Construction Loan Closing.
Without limiting the foregoing, it is specifically acknowledged and agreed that
WPHC has approved all terms and conditions applicable to the Loan and all of
the Loan Documents as listed in Exhibit D attached hereto and made a part
hereof.
(c) The Infrastructure Land Closing was completed in a timely manner
and all of the requirements and conditions set forth in Section 5.3.1 of the
Operating Agreement have been satisfied. WPHC has also approved the
Infrastructure Improvements Agreement as described in Section 5.3.3 of the
Operating Agreement.
3. It is understood and agreed that WRPT has approved the budget for the
Loan, a copy of which is attached hereto and made a part hereof as Exhibit C,
and that said budget constitutes the Final Project Budget for purposes of the
Operating Agreement and this Agreement. The Final Project Budget is subject to
possible adjustment in accordance with the following provisions:
(a) In the event WPHC determines at any time that it is necessary or
appropriate to make any cash contribution ("Cash Contribution") to Borrower,
WPHC shall deliver written notice thereof to NationsBank prior to making the
Cash Contribution. As used herein, the term "Cash Contribution" also includes
amounts funded to Borrower from the proceeds of the "Bonds" (as defined in the
Loan Agreement) and used for the construction of the Improvements. To the
extent any such Cash Contribution (including Bond proceeds) is approved in
writing by NationsBank, in its sole and absolute discretion, and is actually
made to Borrower, the amount thereof shall be deducted from the total of the
Final Project Budget for purposes of calculating the Loan Payoff. In no event
shall any Cash Contribution (including Bond proceeds) made to Borrower which is
not approved in advance in writing by NationsBank be deducted from the Final
Project Budget.
(b) NationsBank shall have the right to make reallocations and other
adjustments to the line items in the Final Project Budget from time to time
without the necessity of obtaining any consent or approval from WRPT, provided
that WRPT's prior written approval shall be required for (i) any increases to
the total amount of the Final Project Budget and (ii) any decreases to the
interest reserve line item in the Final Project Budget. As between NationsBank
and Borrower, any such reallocations or adjustments shall be subject to the
terms and conditions of the Loan Agreement.
4. NationsBank shall not have the right to seek recovery against WRPT or
WPHC for any amount in excess of the Loan Payoff and, after its receipt of the
Loan Payoff, NationsBank shall not have the right to seek recovery against
Borrower if the Loan Payoff is less than the Outstanding Loan Balance; provided
that the foregoing shall not (i) limit the rights of NationsBank (as described
in paragraph 1 hereof) against Guarantors under the Guaranty Agreements, the
other Loan Documents, or otherwise or (ii) preclude NationsBank from naming
Borrower as a party in any suit against Guarantors (although NationsBank may
not obtain any recovery from Borrower after its receipt of the Loan Payoff).
The provisions of this paragraph 4 shall survive the delivery of the Loan
Payoff to NationsBank and the closing of the transaction described in
paragraph 1.
5. WPHC and WRPT are aware that (i) the Property is subject to, among
other assessment agreements and liens related thereto, an Indemnification
Assessment and Lien (the "Indemnification Assessment Lien"), dated as of May 2,
1996, recorded in Book 1338 at Page 2006 in the Office of the Clerk and
Recorder of Douglas County, Colorado and relating to certain indemnification
obligations of Palomino Park Public Improvements Corporation (the
"Corporation") in favor of Highlands Ranch Metropolitan District No. 2 in
connection with the Bonds; and (ii) the Indemnification Assessment Lien is
prior to the lien of the Mortgage. Notwithstanding anything contained herein
to the contrary, it is agreed that upon the occurrence of any default under the
Indemnification Assessment Lien WRPT shall be obligated to either, at its
option, (i) pay all amounts necessary to cure the default under the
Indemnification Assessment Lien to the Corporation or to NationsBank (if
NationsBank has made the payment necessary to cure such default, although
NationsBank shall not be required to do so), or (ii) pay the Loan Payoff to
NationsBank in accordance with the provisions of paragraph 1 hereof, even if
not all of the conditions and requirements listed in Exhibit B hereto are
satisfied at such time (and if WRPT exercises the option under this clause (ii)
the Loan Payoff shall include all amounts paid by NationsBank, if any, to cure
such default). WRPT shall make its election under either clause (i) or clause
(ii) of the preceding sentence, and shall make the appropriate payment to the
Corporation or to NationsBank, no later than ten (10) days after the
commencement of any foreclosure or other enforcement proceeding by the
Corporation with respect to the Indemnification Assessment Lien.
6. Borrower, WPHC and WRPT agree that the Operating Agreement will not
be modified or amended in any manner which could affect the security or
interests of NationsBank without the prior written consent of NationsBank. The
provisions of this paragraph 6 shall no longer apply after the Loan Payoff has
been made to NationsBank.
7. WPHC represents and warrants to NationsBank that, as of the date
hereof, to the best of WPHC's knowledge, there is no uncured default by Feld or
any Affiliate of Feld under the Operating Agreement or any of the Approved
Affiliate Agreements, and WPHC is not aware of any occurrence or condition
which, with the giving of notice or passage of time, or both, could constitute
a default by Feld or any Affiliate of Feld under the Operating Agreement or any
of the Approved Affiliate Agreements. As used herein, the phrase "to the best
of WPHC's knowledge" shall mean the current actual knowledge of WPHC and shall
not imply any inquiry or investigation other than a review of all relevant
files in the possession of WPHC.
8. All of the parties hereto acknowledge and agree that this Agreement
satisfies the requirements and conditions for a tri-party agreement under both
the Operating Agreement and the Loan Agreement.
9. In the event any default occurs under the Loan Documents, NationsBank
agrees to deliver to WRPT a copy of any notice of default sent by NationsBank
to Borrower (the "Default Notice") and further agrees not to accelerate the
maturity of the Note if WRPT, within thirty (30) days after the date of the
Default Notice (the "Cure Period"), either (a) cures or causes to be cured such
default (it being agreed that WRPT shall have no obligation to cure any such
default), or (b) notifies NationsBank of its willingness to pay and satisfy or
purchase the Loan from NationsBank by payment of the outstanding balance of
principal and interest owing thereon (but not in excess of the amount of the
Loan Payoff), as well as any costs that have been incurred by NationsBank as a
result of such default, within ten (10) days after expiration of the Cure
Period and WRPT does so pay and satisfy or purchase the Loan within ten (10)
days after expiration of the Cure Period. Any Default Notice delivered by
NationsBank to WRPT pursuant to this paragraph 9 shall include a written
statement of the amount necessary to pay and satisfy or purchase the Loan from
NationsBank. Since the final amount of accrued interest and actual costs
incurred by NationsBank as a result of the default may not be known at the time
NationsBank delivers the Default Notice, it is agreed that such payoff
statement may include a per diem amount for accrued interest and may include an
estimate of costs, with NationsBank reserving the right to collect all costs
actually incurred by NationsBank in connection with the default (if the actual
costs exceed the estimated costs). If WRPT elects to purchase the Loan from
NationsBank as aforesaid, then the closing shall be held through the office of
the same title company in Denver, Colorado which handled the closing of the
Loan on the date specified by WRPT in its notice of election to purchase, which
date shall not be later than ten (10) days after expiration of the Cure Period.
Notwithstanding anything contained herein to the contrary, in no event shall
NationsBank be obligated to give a Default Notice to WRPT with respect to any
default that NationsBank is not required to give notice of to Borrower under
the Loan Documents.
10. Any notice or communication required or permitted to be given
hereunder shall be in writing and shall be deemed to be delivered when actually
received or, regardless of whether actually received or not, (a) one (1)
business day after deposited with Federal Express, Emery, DHL, UPS, or other
overnight air courier service, (b) twenty-four (24) hours after transmitted by
facsimile, with evidence of transmission attached and hard copy sent by United
States mail, or (c) three (3) days after deposited in the United States mail,
postage prepaid, registered or certified mail, return receipt requested,
addressed to the addressee as follows or to such other address or facsimile
number as shall hereafter be designated by written notice from the addressee
actually received by the other parties at least twenty (20) days prior to the
effective date of the change:
NationsBank: NationsBank of Texas, N.A.
Real Estate Banking Group
901 Main Street, 51st Floor
Dallas, Texas 75202
Attn: Real Estate Loan Administration
Facsimile No. 214/508-1571
with copy to: Michael A. Deahl
Powell & Coleman, L.L.P.
One NorthPark East, Suite 130
8950 North Central Expressway
Dallas, Texas 75231
Facsimile No. 214/373-8768
Borrower: c/o Mr. Al Feld
The Feld Company
4600 South Ulster Street, Suite 350
Denver, Colorado 80237
Facsimile No. 303/721-9418
with copy to: Alan B. Lottner
Haligman & Lottner, P.C.
633 17th Street, Suite 2700, North Tower
Denver, Colorado 80202
Facsimile No. 303/292-1300
WPHC and WPRT: c/o Wellsford Residential Property Trust
370 Seventeenth Street, Suite 3100
Denver, Colorado 80202
Attn: David M. Strong
Facsimile No. 303/595-7799
with copies to: Wellsford Residential Property Trust
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Jeffrey Lynford
Facsimile No. 212/333-2323
and to: Wayne H. Hykan
Brownstein Hyatt Farber & Strickland, P.C.
410 Seventeenth Street, 22nd Floor
Denver, Colorado 80202
Facsimile No. 303/623-1956
11. With respect to the relationship among NationsBank, Borrower,
Guarantors, WPHC and WRPT, in the event of any conflict or inconsistency
between the terms, provisions or conditions of this Agreement, on the one hand,
and the terms, provisions or conditions of the Operating Agreement or the Loan
Agreement, on the other hand, this Agreement will govern. However, the terms
of the Operating Agreement will govern the relationship among the members of
Borrower and the relationship between Borrower and WRPT.
12. If any party shall be required to employ an attorney to enforce or
defend the rights of such party hereunder, the prevailing party or parties
shall be entitled to recover reasonable attorneys fees and costs.
13. This Agreement may be executed in any number of counterparts, each of
which shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument.
14. This Agreement may be changed, terminated or modified only by
agreement in writing signed by all of the parties hereto.
15. The covenants, agreements and rights contained in this Agreement
shall be binding upon and shall inure to the benefit of the respective
successors and assigns of the parties hereto and all persons claiming by,
through or under any of them. Without limiting the foregoing, it is agreed
that any transfer or assignment of the Loan by NationsBank shall be expressly
made subject to this Agreement and that the transferee or assignee will also be
entitled to the rights and benefits of NationsBank under this Agreement. In
addition, NationsBank agrees to deliver written notice to WRPT within a
reasonable period of time after any such transfer or assignment of the Loan.
16. This Agreement has been executed by the undersigned signatory on
behalf of WRPT in his/her capacity as an officer or trustee of WRPT which has
been formed as a Maryland real estate investment trust pursuant to a
Declaration of Trust of WRPT dated as of July 10, 1992, and not individually,
and neither the trustees, officers or shareholders of WRPT shall be bound by or
have any personal liability hereunder or thereunder. The other parties hereto
shall look solely to the assets of WRPT for satisfaction of any liability of
WRPT in respect of this Agreement and will not seek recourse or commence any
action against any of the trustees, officers or shareholders of WRPT
individually or against any of their personal assets for the performance or
payment of any obligation hereunder or thereunder. The foregoing shall also
apply to any and all future documents, agreements, understandings, arrangements
and transactions between the parties hereto with respect to the subject matter
of this Agreement.
17. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND SHALL BE PERFORMABLE IN DALLAS COUNTY, TEXAS.
18. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
REGARDING THE SUBJECT HEREOF AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature pages follow]
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
CONSTRUCTION LENDER:
NATIONSBANK OF TEXAS, N.A., a national
banking association
By: /s/ Sondra E. Teilborg
----------------------------
Name: Sondra E. Teilborg
---------------------
Title: Vice President
---------------------
BORROWER:
RED CANYON AT PALOMINO PARK LLC, a
Colorado limited liability company
By: /s/ Al Feld
----------------------------
Al Feld, Manager
WPHC:
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By: /s/ David M. Strong
----------------------------
David M. Strong
Vice President
WRPT:
WELLSFORD RESIDENTIAL PROPERTY TRUST,
a Maryland real estate investment trust
By: /s/ David M. Strong
----------------------------
David M. Strong
Vice President
GUARANTORS:
/s/ Al Feld
---------------------------------
Al Feld
THE FELD COMPANY, a Colorado corporation
By: /s/ Al Feld
----------------------------
Al Feld
President
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
1. Delivery to WPHC of a payoff letter from NationsBank setting forth the
total of all principal, interest and other amounts owing to NationsBank in
connection with the Loan.
2. The Title Insurance Company shall be irrevocably committed to issue the
following endorsements to the Owner's Title Policy issued to Borrower in
connection with the Construction Loan Closing (said endorsements to be
issued at the time of the Loan Payoff):
(a) A "date down" endorsement to the Title Policy extending the effective
date of the Title Policy to the date of funding and showing no
exceptions to title other than the exceptions reflected on the
existing Title Policy and any other exceptions which are reasonably
acceptable to or have been previously approved in writing by WPHC.
(b) An endorsement increasing the amount of insurance by an amount equal
to the Final Closing Capital Contribution.
(c) Such other endorsements as WPHC may reasonably require and the Title
Insurance Company is willing to issue. Such additional endorsements
shall be at WPHC's sole cost and expense.
3. Delivery to WPHC of unconditional lien releases from all subcontractors,
materialmen and providers of labor, equipment, material and/or services to
the Property, as to all work performed and materials purchased in
connection with the construction of the Project (which by definition, does
not include the Infrastructure), in form reasonably satisfactory to WPHC
or, with respect to any liens not so released, Feld shall have provided
surety bonds to which any contested liens are transferred (and released
from the Property) and title insurance over any such liens.
4. Delivery to WPHC of a physical inspection report prepared by the
Construction Consultant under the Operating Agreement or, alternatively, a
copy of a physical inspection report prepared by the construction
inspector under the Loan Agreement and addressed to WPHC.
5. Delivery to WPHC of an as-built survey reasonably satisfactory to WPHC
dated no more than thirty (30) days prior to the date of funding, showing
no encroachments or other adverse matters affecting title to the Property,
except as shall be reasonably acceptable to or have been previously
approved in writing by WPHC. WPHC acknowledges that it has approved the
ALTA/ACSM Land Survey of the Property prepared by P. R. Fletcher &
Associates, Inc. dated May 23, 1997, Job No. 788.01.
6. Delivery to WPHC of a written document executed by Feld, the architect and
the general contractor certifying no material change to the approved "for-
construction" plans and specifications for the Project except any changes
stated therein that have previously been approved by WPHC.
7. Delivery to WPHC of a copy of the final and unconditional certificate or
certificates of occupancy issued by the appropriate governmental
authorities for the Project in its entirety and a copy of any permits and
licenses which are required for the operation and use of the Project.
ED Delivery to WPHC of an Architect's Certificate substantially in the form
attached hereto as Exhibit B-1. [Note: This will be the same form as
attached to the Operating Agreement as Exhibit S-1.]
9. Delivery to WPHC of an Engineer's Certificate substantially in the form
attached hereto as Exhibit B-2. [Note: This will be the same form as
attached to the Operating Agreement as Exhibit S-2.]
10. Delivery to WPHC of satisfactory evidence (which may be in the form of an
endorsement to the Title Policy described in item 2 above) that all real
property taxes and assessments for the Property which are due and payable
through the date of funding have been fully paid.
11. Delivery to WPHC of a Release and Waiver, substantially in the form
attached hereto as Exhibit B-3, from Feld and each Affiliate of Feld that
is a party to an Approved Affiliate Agreement [Note: This will be the
same form as attached to the Operating Agreement as Exhibit B-3].
<PAGE>
EXHIBIT B-1
------------------
Form of Architect's Certificate
(Letterhead of Architect)
CERTIFICATE OF ARCHITECT
______________, 1997
Red Canyon at Palomino Park LLC
Wellsford Residential Property Trust
370 17th Street, Suite 3100
Denver, CO 80202
Reference: ___________________________
_________________, Colorado
Ladies and Gentlemen:
Please refer to the final architectural plans and specifications reflecting all
field notes and field changes as built described in the attached Exhibit A (the
"Plans"). The undersigned understands that ___________________________ or its
designee ("Wellsford") is acquiring an interest in or is causing the repayment
of the construction loan for a residential complex owned by Red Canyon at
Palomino Park LLC, a Colorado limited liability company ("Owner"), located on
that certain parcel of real property having an address of ___________________
in the City of ___________________________, County of _________________, State
of Colorado and described on Exhibit B attached hereto (the "Site"), on which
Owner has constructed a complex of apartment units known as ___________________
(the "Project"). This Certificate is a condition precedent to Wellsford's
acquiring the Project or repaying such loan, and the undersigned acknowledges
that Wellsford will be relying upon this Certificate in consummating such
transaction.
With such understanding, the undersigned has reviewed the Plans, the
construction of the Project in relationship to the Plans, and its conformity
and compliance with applicable laws and regulations (i.e., applicable federal,
state, county and municipal laws and regulations and ordinances, including
without limitation, governing building and fire codes, zoning, subdivision and
land use laws and regulations, environmental and safety statutes and
regulations, and the rules and regulations of other governmental agencies
having jurisdiction over the Site or the Project ("Applicable Laws"). Based
upon these reviews and upon due professional investigation, the undersigned
declares and certifies to and for the benefit of Owner and Wellsford that:
1. The undersigned is the architect who prepared the Plans and coordinated
and supervised the construction of the Project.
2. The Project commonly known as ___________________________ contains 456
apartment units in ______ buildings, and _____________ parking spaces,
with related amenities and facilities. The Site is zoned
___________________________ under the applicable ordinances of the City of
___________________________, Colorado.
3. We have examined all applicable materials relative to those types of
restrictions and requirements sometimes referred to as use, dimensional,
bulk and parking restrictions, jurisdictional wetlands requirements,
setback and buffering requirements, density restraints, landscaping and
vegetation preservation ordinances, laws, rules and regulations and
environmental restraints, which relate to the Site (hereinafter referred
to as "Development Constraints") and have determined that the Project is
permitted as a matter of right except for the following variances:
___________________________, and that the following restrictions and
requirements (the "Restrictions and Requirements") are applicable to the
Project:
Minimum Lot Area:
Height Limitation:
Maximum Floor Area Ratio
(or other type of bulk
-bulk restriction):
Limitation on Number of
Dwelling Units (if any):
Front Yard Requirements:
Side and Rear Yard
Requirements:
Parking Requirements:
4. The Project and the Site are in compliance with the Development
Constraints and the Restrictions and Requirements.
5. The improvements contemplated by the Plans have been completed in
substantial compliance with the Plans, except for the items in the
attached Exhibit C which are incomplete to the extent indicated and for
which the estimated cost to complete is indicated on said Exhibit C.
6. We are of the opinion that the Project has been designed in accordance
with the applicable provisions of Colorado law, the Americans with
Disabilities Act of 1990, 42 U.S.C. Section 12101, et seq., as amended,
and any other applicable law, rule or regulation of any kind or
description relating to the elimination of architectural barriers for the
handicapped.
7. We certify that any and all amounts due and payable to us under or in
connection with the Standard Form of Agreement between Owner and Architect
for Housing Services (AIA-Document B181) dated ___________________________
with regard to the Project have been paid in full.
8. The Project, the Plans and all improvements comply with Applicable Laws,
including without limitation, the applicable PUD, and with all necessary
and required notices, permits or license agreements in connection with the
Plans, and all permits, licenses and approvals required for the
construction of the improvements contemplated by the Plans and for the use
and occupancy of the Project (including, without limitation, all final
certificates of occupancy) have been obtained from the applicable
governmental or quasi-governmental agency having jurisdiction or any
private party from whom any license is required.
9. The improvements are ready for occupancy.
10. The improvements on the Property, contain a minimum of ________________
square feet of net rentable living area (as measured from inside face of
exterior wall to apartment side of corridor wall to centerline of tenant
separation wall) for the apartments.
11. The undersigned is a licensed architect and has the power and authority to
render this Certificate and to execute and deliver it on behalf of Feld
Design, Inc.
This Certificate may be relied upon only by Wellsford and the Owner.
Very truly yours,
By: Pamela J.L. English
Supervising Architect
Dated:____________________________
<PAGE>
EXHIBIT B-2
------------------
Form of Engineer's Certificate
(Letterhead of Project Engineer)
ENGINEER'S CERTIFICATE
_________________, 1997
Red Canyon at Palomino Park LLC
Wellsford Residential Property Trust
370 17th Street, Suite 3100
Denver, Colorado 80202
Reference: ___________________
_______________, Colorado
Ladies and Gentlemen:
The undersigned understands that ___________________________ or its designee
("Wellsford") is acquiring an interest in or is causing the repayment of the
construction loan for a residential complex owned by Red Canyon at Palomino
Park LLC, a Colorado limited liability company ("Owner"), located on that
certain parcel of real property having an address of ________________ in the
City of __________________________, County of __________________, State of
Colorado and described on Exhibit A attached hereto (then "Site"), on which
Owner has constructed a complex of ________ apartment units known as (the
"Project"). This Certificate is a condition precedent to Wellsford's acquiring
the Project or repaying such loan, and the undersigned acknowledges that
Wellsford will be relying upon this Certificate in consummating such
transaction.
With such understanding, the undersigned has reviewed those portions of the
plans and specifications for the Project that are listed on Exhibit B attached
hereto (the "Engineering Plans"), the construction of the Project in
relationship to the Engineering Plans, and its conformity and compliance with
certain applicable laws and regulations. Based upon these reviews and upon due
professional investigation, the undersigned declares and certifies to and for
the benefit of Owner and Wellsford that:
1. Satisfactory methods of access to and egress from the Site and the Project
and adjoining or nearby public ways are available and are sufficient to
meet the reasonable needs of the Project and all applicable requirements
of public authorities. Sanitary water supply and storm sewer and sanitary
sewer facilities and other required utilities (gas, electricity,
telephone, etc.) are likewise available and are sufficient to meet the
reasonable needs of the Project and all applicable requirements of public
authorities.
2. We are of the opinion that the Property is not located in a 100-Year Floor
plain or in an identified "flood prone area," as descried by the U.S.
Department of Housing and Urban Development, pursuant to the Flood
Disaster Protection Act of 1973, as amended, and is not subject to any
federal, state or local "wetlands" rules, regulations, ordinances or
requirements.
3. We have reviewed and are familiar with all tests and analyses performed
and professional recommendations made by soil engineers and other
consultants regarding the condition of the soil of the Site. In our
professional opinion, the condition of the soil of the Site is adequate to
support the Project as completed.
4. We have reviewed the locations of all easements, rights-of-way, subsurface
rights of jurisdictional wetlands, and all rules and regulations
pertaining to the same in force relating to the Site, and the Plans are
prepared so that the Project does not encroach over, across or upon any
such easements, rights-of-way, subsurface rights or jurisdictional
wetlands and the like, and all necessary permits and approvals required
for the Project have been obtained.
5. We have reviewed all deeds, easements, covenants, restrictions and other
matters set forth in Schedule B of Title Commitment No. __________ issued
by Land Title Guaranty Company, and the Project satisfies and/or does not
violate any provisions concerning construction of improvements on the Site
set forth in such deeds, easements, covenants, restrictions and other
matters.
This Certificate may be relied upon only by Owner and Wellsford.
Very Truly yours,
[ENGINEER]
By:__________________________
Title:______________________
Dated:_____________________
<PAGE>
EXHIBIT C
APPROVED BUDGET
Land Costs
- ----------
Land $2,123,119
Site Improvements 5,127,247
Hard Costs
- ----------
Construction Contract 16,518,058
Amenities 845,782
General Conditions/Permits 1,133,204
Soft Costs
- ----------
Architectural 148,000
Engineering 317,800
Title Insurance 21,280
Legal 40,000
Appraisal and Environmental Audit 7,500
Construction Management Fee 608,000
Reproduction Costs 16,000
Landscape Architect 42,000
Interior Design 20,000
Accounting/Tax Returns 10,000
Developer's Fee 304,000
Real Estate Taxes 30,000
Systems Development Fee 505,500
Lender/Owner Inspections 15,200
NationsBank Loan Fee 146,899
Guaranty Fee 293,748
NationsBank Loan Interest 1,634,789
Contingency 674,643
___________
TOTAL $30,579,819
Less Borrower's
Upfront Equity 1,200,000
___________
TOTAL LOAN AMOUNT $29,379,819
<PAGE>
EXHIBIT D
SCHEDULE OF LOAN DOCUMENTS
[Unless indicated otherwise, all of the following Loan Documents are dated as
of May 29, 1997.]
1. Construction Loan Agreement.
2. Promissory Note.
3. Guaranty Agreement of Al Feld.
4. Guaranty Agreement of The Feld Company.
5. Construction Loan Deed of Trust, Assignment, Security Agreement and
Financing Statement.
6. UCC-1 Financing Statements.
7. Assignment of Rents and Leases.
8. Environmental Indemnity Agreement.
9. Collateral Assignment of Management Agreement.
10. Manager's Agreement, Subordination and Consent to Assignment.
11. Assignment of Construction Contract.
12. Contractor's Subordination, Agreement and Consent to Assignment of
Construction Contract.
13. Assignment of Construction Documents.
14. Architect's Consent to Assignment, Agreement and Subordination of Lien.
15. Certification of Non-Foreign Status.
16. Notice by Disburser.
ASSIGNMENT AND ASSUMPTION OF
TRI-PARTY AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF TRI-PARTY AGREEMENT (this "Assignment"),
is made and entered into as of the _____ day of May, 1997, by and between
WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust
(hereinafter called "Assignor"), ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership (hereinafter called "Assignee"), RED CANYON AT PALOMINO
PARK LLC, a Colorado limited liability company2 ("Red Canyon"), WELLSFORD PARK
HIGHLANDS CORP., a Colorado corporation ("WPHC"), THE FELD COMPANY, a Colorado
corporation ("Feld Company"), AL FELD, an individual and NATIONSBANK OF TEXAS,
N.A., a national banking association ("Nationsbank").
RECITALS
(a) Reference is hereby made to that certain Tri-Party Agreement dated
_______________ ____, 1997, by and among Nationsbank, Assignor, Red Canyon,
WPHC, Al Feld, and Feld Company (the "Phase II Tri-Party Agreement"). The
Phase II Tri-Party Agreement was executed in connection with that certain
construction loan in the original principal amount of $29,502,119.00 from
Nationsbank to Red Canyon for the development of a 304-unit apartment complex
and related facilities in Highlands Ranch, Douglas County, Colorado (the
"Project").
(b) Assignor has entered into that certain Agreement and Plan of Merger
(the "Merger Agreement") dated as of January 16, 1997, by and between Equity
Residential Properties Trust, a Maryland real estate investment trust ("ERPT"),
and Assignor in connection with the merger of ERPT with and into Assignor.
(c) ERPT is the general partner of Assignee.
(d) Pursuant to the Merger Agreement, Assignor is obligated to assign to
Assignee, and Assignee has agreed to assume, all of Assignor's rights,
interests and obligations under the Phase II Tri-Party Agreement.
(e) The parties hereto now desire to enter into this Assignment in order
to effectuate the above-referenced assignment and assumption of Assignor's
rights, interests and obligations under the Phase II Tri-Party Agreement and to
evidence the consent to such assignment and assumption by the parties hereto.
NOW, THEREFORE, in consideration of the above recitals and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby covenant and agree as follows:
LLS Assignment. Assignor does hereby transfer, assign, grant, delegate
and convey to Assignee, its successors and assigns, and Assignee, for itself
and its successors and assigns, does hereby assume, all of Assignor's rights,
interests and obligations in, to and under the Phase II Tri-Party Agreement
from and after the date hereof.
(ii) Consent To Assignment. Nationsbank and each other party hereto does
hereby consent to and acknowledge the above assignment and agrees to look
solely to Assignee from and after the date hereof for the performance of all
duties and obligations that were previously the responsibility of Assignor
under the Phase II Tri-Party Agreement. Any further assignment of the Phase II
Tri-Party Assignment shall require the prior written consent of Nationsbank.
(iii) Original Documents. Concurrently with the execution and
delivery of this Assignment, Assignor shall deliver to Assignee any original
copies of the Phase II Tri-Party Agreement, together with all exhibits, addenda
and amendments thereto, in Assignor's possession.
(iv) Notice to Assignee. The parties hereto agree that from and after the
date hereof, a copy of any notice or communication required or permitted to be
given to Assignor pursuant to the Phase II Tri-Party Agreement, shall now be
sent to ERP Operating Limited Partnership, 2 North Riverside Plaza, Suite 400,
Chicago, Illinois 60606, attention: President, with a copy to (i) Equity
Residential Properties Trust, Two North Riverside Plaza, Suite 400, Chicago,
Illinois 60606, Attention: President and Bruce C. Strohm, Esq. and (ii) Rudnick
& Wolfe, 203 N. LaSalle St., Suite 1800, Chicago, Illinois 60601, Attention:
Errol R. Halperin, Esq.
(v) Governing Law. This Assignment shall be governed by and construed in
accordance with the laws of the State of Colorado.
(vi) Successors and Assigns. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(vii) Headings. The headings of the paragraphs of this Assignment
have been included only for convenience, and shall not be deemed in any manner
to modify or limit any of the provisions of this Assignment or be used in any
manner in the interpretation of this Assignment.
(viii) Interpretation. Whenever the context so requires in this
Assignment, all words used in the singular shall be construed to have been used
in the plural (and vice versa), each gender shall be construed to include any
other genders, and the word "person" shall be construed to include a natural
person, a corporation, a firm, a partnership, a joint venture, a trust, an
estate or any other entity.
(ix) Partial Invalidity. Each provision of this Assignment shall be valid
and enforceable to the fullest extent permitted by law. If any provision of
this Assignment or the application of such provision to any person or
circumstance shall, to any extent, be invalid or unenforceable, then the
remainder of this Assignment, or the application of such provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected by such invalidity or unenforceability.
(x) Further Agreements. Assignor agrees to execute and deliver to
Assignee such additional documents, instruments or agreements as may be
necessary or appropriate to effectuate the purposes of this Assignment.
(xi) Limitation of Liability. This Assignment and all documents,
agreements, understandings and arrangements
relating to this Assignment have been executed by the undersigned on behalf of
Assignor in his/her capacity as an officer or trustee of Assignor which has
been formed as a Maryland real estate investment trust pursuant to a
Declaration of Trust of Assignor dated as of July 10, 1992, and not
individually, and neither the trustees, officers or shareholders of Assignor
shall be bound by or have any personal liability hereunder or thereunder. The
beneficiary of this Assignment shall look solely to the assets of Assignor for
satisfaction of any liability of Assignor in respect of this Assignment and all
documents, agreements, understandings and arrangements relating to this
transaction and will not seek recourse or commence any action against any of
the trustees, officers or shareholders of Assignor or any of their personal
assets for the performance or payment of any obligation hereunder or
thereunder. The foregoing shall also apply to all and any future documents,
agreements, understandings, arrangements and transactions between the parties
hereto with respect to the this Assignment or any matter related thereto.
(xii) Counterparts. This Assignment may be executed in one or more
counterparts, all of which when taken together shall constitute the entire
agreement of the parties.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the date above first written.
WELLSFORD RESIDENTIAL PROPERTY TRUST,
a Maryland real estate investment trust
By:/s/ David M. Strong
---------------------------------------
Name: David M. Strong
Title: Vice President
<PAGE>
ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, its
general partner
By:/s/ Bruce C. Strohm
-------------------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
NATIONSBANK OF TEXAS, N.A., a national banking
association
By:/s/ Sondra E. Teilborg
----------------------------------------------
Name: Sondra E. Teilborg
Title: Vice President
RED CANYON LLC, a Colorado limited liability company
By:/s/ Al Feld
----------------------------------------------
Al Feld, Manager
WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation
By:/s/ David M. Strong
---------------------------------------------
David M. Strong,
Vice President
THE FELD COMPANY, a Colorado corporation
By:/s/ Al Feld
--------------------------------------------
Al Feld, President
--------------------------------------------
Al Feld
AGREEMENT AND ACKNOWLEDGEMENT
REGARDING TRI-PARTY AGREEMENT
This Agreement (this "Agreement") is made and entered into as of this 30th
day of May, 1997, by and between Nationsbank of Texas, N.A., a national banking
association ("Nationsbank"), Red Canyon at Palomino Park LLC, a Colorado
limited liability company ("Borrower"), Wellsford Park Highlands Corp., a
Colorado corporation ("WPHC"), and ERP Operating Limited Partnership, an
Illinois limited partnership ("ERP Operating Partnership").
RECITALS
(f) Reference is hereby made to that certain Tri-Party Agreement dated
May 30, 1997, by and among Nationsbank, Borrower, Wellsford Park Highlands
Corp., a Colorado corporation, Wellsford Residential Property Trust, a Maryland
real estate investment trust ("WRPT"), Al Feld, an individual and the Feld
Company, a Colorado corporation (the "Phase II Tri-Party Agreement"), executed
in connection with that certain construction loan in the original principal
amount of $29,379,819.00 from Nationsbank to Borrower for the development of a
304-unit apartment complex and related facilities in Highlands Ranch, Douglas
County, Colorado (the "Project").
(g) WRPT has entered into that certain Agreement and Plan of Merger dated
as of January 16, 1997, by and between Equity Residential Properties Trust, a
Maryland real estate investment trust ("ERPT"), and WRPT in connection with the
merger of ERPT with and into WRPT.
(h) ERPT is the general partner of ERP Operating Partnership.
(i) The obligations of WRPT pursuant to the Phase II Tri-Party Agreement
have been or will be assigned to and assumed by ERP Operating Partnership
pursuant to that certain Assignment and Assumption of Tri-Party Agreement (the
"Tri-Party Assignment").
(j) The parties hereto now desire to enter into this Agreement in order
to confirm the status of certain items contained in the Phase II Tri-Party
Agreement.
NOW, THEREFORE, for and in consideration of the above recitals and other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree to and confirm the following:
(i) The Phase II Tri-Party Agreement (including all Exhibits thereto) is
in full force and effect and has not been assigned, modified, supplemented or
amended in any way, except as described in Paragraph 4 below.
(ii) Nationsbank has not delivered to WRPT any Default Notice (as defined
in the Phase II Tri-Party Agreement) pursuant to Paragraph 9(a) of the Phase II
Tri-Party Agreement with respect to WRPT that has not been cured.
(iii) Subject to Nationsbank's rights under Paragraph 3(b) of the
Phase II Tri-Party Agreement, the total amount of the Final Project Budget (as
defined in the Phase II Tri-Party Agreement) as it relates to the Project has
not been modified, supplemented or amended in any way.
(iv) Nationsbank acknowledges that obligations of WRPT pursuant to the
Phase II Tri-Party Agreement have been assigned to and assumed by ERP Operating
Partnership pursuant to the Tri-Party Assignment.
(v) The parties hereto shall look solely to ERP Operating Partnership for
the performance of all obligations of WRPT pursuant to the Phase II Tri-Party
Agreement.
(vi) All obligations of ERP Operating Partnership, as assignee of WRPT, to
Nationsbank with respect to the Project are as set forth in the Phase II Tri-
Party Agreement and have not been amended or modified in any way.
(vii) From and after the date hereof, a copy of any notice or
communication required or permitted to be given to WRPT pursuant to the Phase
II Tri-Party Agreement, shall now be sent to ERP Operating Limited Partnership,
2 North Riverside Plaza, Suite 400, Chicago, Illinois 60606, attention:
President, with a copy to (i) Equity Residential Properties Trust, Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, Attention: President and
Bruce C. Strohm, Esq. and (ii) Rudnick & Wolfe, 203 N. LaSalle St., Suite 1800,
Chicago, Illinois 60601, Attention: Errol R. Halperin, Esq.
(viii) This Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
(ix) Except as set forth herein and in the Tri-Party Assignment, the Phase
II Tri-Party Agreement is hereby ratified and confirmed and shall not be
otherwise amended or modified by this or any other instrument.
(x) This Agreement may be executed in one or more counterparts, all of
which when taken together shall constitute the entire Agreement of the parties.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this agreement
as of the day and year first above written.
NATIONSBANK OF TEXAS, N.A., a national
banking association
By:/s/ Sondra E. Teilborg
--------------------------------
Name: Sondra E. Teilborg
Title: Vice President
RED CANYON AT PALOMINO PARK LLC,
a Colorado limited liability company
By:/s/ Al Feld
---------------------------------
Al Feld, Manager
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation
By:/s/ David M. Strong
----------------------------------
David M. Strong
Vice President
ERP OPERATING LIMITED PARTNERSHIP, an Illinois
limited partnership
By: EQUITY RESIDENTIAL PROPERTIES TRUST, its
general partner
By:/s/ Bruce C. Strohm
-------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
FIRST AMENDMENT TO
LETTER OF CREDIT REIMBURSEMENT AGREEMENT
This First Amendment to Letter of Credit Reimbursement Agreement (the
"First Amendment"), dated as of May 30, 1997, among PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION, a Colorado nonprofit corporation (the "Bond Issuer");
WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust
("Wellsford REIT") (immediately upon consummation of the Merger described
herein, Wellsford REIT's name shall be changed to Equity Residential Properties
Trust); DRESDNER BANK AG, a banking corporation organized and existing under
the laws of The Federal Republic of Germany, acting by and through its New York
Branch (the "Bank"); and WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation ("WRP"), relates to that certain Letter of Credit Reimbursement
Agreement, dated as of December 1, 1995, by and among the Bond Issuer,
Wellsford REIT and the Bank (the "Reimbursement Agreement"). Except as
otherwise provided herein, capitalized terms used in this First Amendment shall
have the meanings set forth in the Reimbursement Agreement, as amended by this
First Amendment (the "Amended Reimbursement Agreement"), and the rules of
interpretation contained in Sections 1.2 and 1.3 of the Reimbursement Agreement
shall apply equally to this First Amendment.
WHEREAS, the Bond Issuer has issued its Assessment Lien Revenue
Bonds, Series 1995 (the "Bonds") pursuant to the terms of a Trust Indenture,
dated as of September 1, 1995 (the "Bond Indenture"), between the Bond Issuer
and United States Trust Company of New York, as Trustee (the "Bond Trustee");
and
WHEREAS, in order to secure the payment of principal of and interest
on the Bonds, the Bank has issued an irrevocable Letter of Credit (together
with any extensions, renewals or replacements thereof, the "Letter of Credit"),
in accordance with the terms of the Reimbursement Agreement; and
WHEREAS, Wellsford REIT intends to spin-off WRP and merge with Equity
Residential Properties Trust, a Maryland real estate investment trust ("ERP
REIT"), with Wellsford REIT being the surviving entity and being renamed Equity
Residential Properties Trust; and
WHEREAS, Wellsford REIT and WRP intend to enter into that certain
Assignment Agreement dated as of May 30, 1997 (the "Assignment Agreement")
pursuant to which Wellsford REIT assigns all of its right, title and interest
in the Reimbursement Agreement to WRP and WRP assumes all obligations of
Wellsford REIT arising out of or in connection with the Reimbursement Agreement
and covenants and agrees that it shall perform the obligations of Wellsford
REIT thereunder; and
WHEREAS, the Bank and the Bond Issuer have been asked to consent to
the Assignment Agreement and to the Merger; and
WHEREAS, the Bank and the Bond Issuer have been asked to consent to
the replacement of Wellsford REIT with WRP as an Account Party to the
Reimbursement Agreement; and
WHEREAS, in order to induce the Bank to consent to the Assignment
Agreement and to enter into this First Amendment, ERP Operating Limited
Partnership, an Illinois limited partnership (the "Guarantor"), which is a
majority owned subsidiary of ERP REIT and after the Merger will be a majority
owned subsidiary of Wellsford REIT (with Wellsford REIT being renamed "Equity
Residential Properties Trust"), intends to enter into that certain Guaranty
dated as of May 30, 1997 (the "Guaranty;") on behalf of the Bank; and
WHEREAS, the parties desire to amend the Reimbursement Agreement as
hereinafter provided.
NOW THEREFORE for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
11. From and after the effectiveness of this First Amendment, the
Bank hereby consents to the Spin Off, the Merger and the Assignment Agreement.
From and after the effectiveness of this First Amendment, WRP is hereby
constituted as successor account party to Wellsford REIT under the
Reimbursement Agreement, and Wellsford REIT is released from all future
liability to the Bank and the Bond Issuer under the Reimbursement Agreement,
the Letter of Credit, the Bond Indenture, the Remarketing Agreement, the
Promissory Notes, the Pledge Agreement and the Bonds except as set forth below.
From and after the effectiveness of this First Amendment, all references in the
Reimbursement Agreement to Wellsford REIT shall be deemed references to WRP
(except for the references contained in Article 3, to the extent such
references relate to conditions precedent satisfied prior to the effectiveness
of this First Amendment.)
12. Section 1.1 of the Reimbursement Agreement shall be amended as
follows:
a. The following definitions contained in Section 1.1 shall be
deleted in their entirety: "Agent," "Base Rate Loans," "Lenders,"
"Loans," "Net Capital Expenditures," "Pro Forma Debt Service Charges,"
"REIT Status," "Unencumbered Operating Properties," and "Wellsford REIT
Loan Obligations";
b. The definition of "Balance Sheet Date" shall be amended by
deleting the words "September 30, 1995" and inserting the words "May 30,
1997 (after the consummation of the Spin Off and the Merger)" in lieu
thereof;
c. The definition of "Base Rate" shall be amended by deleting the
words "Bank of Boston at its head office in Boston, Massachusetts" and
inserting the words "Dresdner Bank AG, New York Branch at its office in
New York, New York";
d. The definition of "Consolidated Operating Cash Flow" shall be
amended and restated in its entirety as follows:
(a) "Consolidated Operating Cash Flow" means, with respect to
any period, an amount equal to the Operating Cash Flow of the
Borrower and its Subsidiaries for such period consolidated in
accordance with generally accepted accounting principles.
e. The definition of "Debt Service" shall be amended and restated
in its entirety as follows:
(a) "Debt Service" means, for any period, the sum of actual
interest expense and mandatory or scheduled principal payments due
and payable during such period with respect to all Indebtedness,
excluding any balloon payments due upon maturity of any Indebtedness,
amortized loan fees and the capitalized interest expense and
principal payments due with respect to the construction loans on the
Development permitted by Section 6.3(a) hereof.
f. The definition of "Deed of Trust" shall be amended by adding the
words "including such amendments, modifications or supplements permitted
pursuant to its terms and Section 6.1" after the words "dated December 1,
1995".
g. The definition of "Development" shall be amended by adding the
words "comprising approximately 182 acres planned for development in five
phases" before the period at the end thereof.
h. The definition of "Distribution" shall be amended by (i)
deleting the words "beneficial interest" and adding the words "common
stock or other equity interests" in lieu thereof each time such words
appear therein and (ii) deleting the words "or partners as such."
i. The definition of "Expiration Date" shall be amended by
replacing the words ""the Maturity Date of the Wellsford REIT Loan
Agreement" with the words "May 30, 2005."
AR The definition of "Federal Funds Effective Rate" shall be
amended by (i) replacing the word "Agent" with the words "the Bank" each
time such word appears therein and (ii) deleting the words "as provided
for in the Wellsford REIT Loan Agreements";
k. The definition of "Operating Cash Flow" shall be amended and
restated in its entirety as follows:
(a) "Operating Cash Flow" means, with respect to any Person (or
any asset of any Person) for any period, an amount equal to the sum
of (a) the Net Income (or Deficit) of such Person (or attributable to
such asset) for such period plus (b) depreciation and amortization,
interest expense, and any extraordinary or non-recurring losses
deducted in calculating such Net Income (or Deficit) minus (c) any
extraordinary or non-recurring gains included in calculating such Net
Income (or Deficit).
l. The definition of "Participant(s)" shall be amended by deleting
the parenthetical "(including without limitation the Intercreditor
Agreement)";
m. The definition of "Pledge Agreement" shall be amended by adding
the words "including, without limitation, the Bond Pledge Amendment"
before the period at the end thereof.
n. The definition of "Promissory Note" shall be amended by adding
the words ", including, without limitation, the Note Amendments" before
the period at the end thereof.
o. The definition of "Reimbursement Agreement" shall be amended by
adding the words ", including, without limitation, the First Amendment"
before the period at the end thereof.
p. The definition of "Related Documents" shall be amended by
deleting the words "the Wellsford REIT Loan Agreement, the Intercreditor
Agreement and the Loan Documents" and inserting the words "the First
Amendment, the Assignment Agreement, the Note Amendments, the Guaranty,
the Bond Pledge Amendment, the Indenture Supplement, the Assessment
Agreement Amendment, the Assessment and Lien Amendment and the Deed of
Trust Amendment";
q. The definition of "Wellsford Reimbursement Agreement" shall be
amended by adding the words "and all exhibits, instruments or agreements
relating thereto or contemplated thereby, including without limitation
that certain Wellsford Bond Pledge and Security Agreement dated as of
December 20, 1995, that certain First Amendment to Wellsford Bond Pledge
and Security Agreement dated as of May 30, 1997, that certain Palomino
Park Promissory Note from the Bond Issuer to Wellsford REIT dated as of
December 20, 1995, and that certain Endorsement of Palomino Park
Promissory Note by Wellsford REIT to WRP dated May 30, 1997, in each case
including such amendments, modifications or supplements permitted pursuant
to this respective terms and Section 6.1.
r. The following definitions shall be added to Section 1.1 in the
proper alphabetical order:
(a) "Adjustment Date" means the earlier to occur of (i) May 30,
1998, (ii) the date on which an Equity Offering is completed having
raised an amount of not less than $50,000,000; and (iii) the date on
which the Point View Office Complex is 90% leased pursuant to
bona-fide arms-length leases requiring the payment of current rent
with tenants in actual occupancy.
(b) "Assessment and Lien Amendment" means that certain First
Amendment to Public Improvements Assessment and Lien, dated as of May
[30], 1997, by and between the Bond Issuer and Highlands.
(c) "Assessment Agreement Amendment" means that certain First
Amendment to Assessment Agreement, dated as of May [30], 1997, by and
between the Bond Issuer and Highlands.
(d) "Assignment Agreement" means that certain Assignment and
Assumption Agreement, dated as of May [30], 1997, by and between
Wellsford REIT and WRP.
(e) "Bond Pledge Amendment" means that certain First Amendment
to Bond Pledge and Security Agreement, dated as of May [30], 1997,
among WRP, Wellsford REIT, the Bond Issuer, the Bank and the Bond
Trustee.
(f) "Capital Improvement Reserve" means, for any period, an
amount equal to thirty cents ($0.30) multiplied by the weighted
average of rentable square footage of Real Estate owned by the
Borrower and its Subsidiaries during such period.
(g) "Deed of Trust Amendment" means that certain First
Amendment to Deed of Trust, Security Agreement, Financing Statement
and Assignment of Rents and Leases dated as of May [30], 1997, by and
among the Bond Issuer, the Bond Trustee and the Bank.
(h) "Drawing Date" has the meaning set forth in Section 2.1(1).
(i) "Equity Offering" means the issuance and sale by WRP of any
of its equity securities.
(j) "Final LC Loan Payment Date" has the meaning set forth in
Section 2.2(1).
(k) "First Amendment" means that certain First Amendment to
Letter of Credit Reimbursement Agreement, dated as of May [30], 1997,
among the Bond Issuer, Wellsford REIT, the Bank and WRP.
(l) "First Amendment Effective Date" means that date when all
of the conditions to the effectiveness of the First Amendment have
been satisfied or waived by the Bank and the First Amendment has
become effective. The First Amendment Effective Date is May 30,
1997.
(m) "Guarantor" means ERP Operating Limited Partnership, an
Illinois limited partnership.
(n) "Guarantor's Loan Agreement" means that certain Amended and
Restated Revolving Credit Agreement dated as of December 9, 1996
among Guarantor, the banks listed therein, Morgan Guaranty Trust
Company of New York, as Lead Agent, Bank of America Illinois, as Co-
Lead Agent, The First National Bank of Chicago, as Co-Lead Agent,
First Bank National Association, as Co-Lead Agent, and Nationsbank of
Texas, N.A., as Co-Agent.
(o) "Guaranty" means that certain Guaranty dated as of May 30,
1997 made by the Guarantor on behalf of the Bank.
(p) "Interest Payment Date" means the 1st day of every month.
(q) "Indenture Supplement" means that certain First Amendment
to Trust Indenture, dated as of May 30, 1997, between the Bond Issuer
and the Bond Trustee.
(r) "Merger" means the transactions contemplated by that
certain Agreement and Plan of Merger dated as of January 16, 1997,
pursuant to which Wellsford REIT and Equity Residential Properties
Trust will merge, with Wellsford REIT being the surviving entity and
being renamed "Equity Residential Properties Trust."
(s) "Net Cash Proceeds" means, with respect to the sale or
issuance of any capital stock or other equity securities, notes,
bonds, debentures, debt securities or other similar instruments, any
securities convertible into or exchangeable for capital stock or any
warrants, rights or options to acquire capital stock by any Person,
the aggregate amount of cash in connection with such transaction
after deducting therefrom only (a) actual costs of such sale or
issuance, including brokerage commissions, underwriting fees and
discounts, legal fees, finder's fees and other similar fees and
commissions and (b) the amount of taxes payable in connection with or
as a result of such transaction, in each case to the extent, but only
to the extent, that the amounts so deducted are, at the time of
receipt of such cash, actually paid or earmarked for payment to a
Person that is not an Affiliate and are properly attributable to such
transaction or to the asset that is the subject hereof in accordance
with generally accepted accounting principles consistently applied."
(t) "Note Amendments" means that certain Amended and Restated
Promissory Note dated as of May 30, 1997 made by WRP and that certain
Allonge to Promissory Note dated as of May 30, 1997 made by the Bond
Issuer.
(u) "Point View Office Complex" means certain real property and
improvements located in Wayne, New Jersey consisting of the
following: (i) a main campus of two office buildings and (ii) two
smaller office buildings located at 1700 and 1800 Valley Road.
(v) "Proxy Statement" means that certain Equity Residential
Properties Trust and Wellsford Residential Property Trust Joint Proxy
Statement, Equity Residential Properties Trust Prospectus and
Wellsford Real Properties, Inc. Information Statement dated April 25,
1997.
:\E "Red Canyon" means Red Canyon at Palomino Park LLC, a
Colorado limited liability company, the members of which are
Wellsford Park Highlands Corp. (99%) and Al Feld (1%).
(x) "Shareholder's Equity" means, at any date, the total
consolidated shareholder's equity of WRP and its Subsidiaries,
determined in conformity with generally accepted accounting
principles consistently applied.
(y) "Spin Off" means the transactions contemplated by that
certain Contribution and Distribution Agreement dated as of May 30,
1997 by and between Wellsford REIT and WRP, pursuant to which, among
other things, certain assets are contributed and certain obligations
are assumed by WRP, including, among others, 80% of the shares of
WPHC (which represents an approximately 80% interest in the
Development) and WRP's common stock is distributed to Wellsford
REIT's shareholders.
(z) "Spin Off Agreements" means the Contribution and
Distribution Agreement dated as of May 30, 1997 by and between
Wellsford REIT and WRP, the Credit Enhancement Agreement dated as of
May 30, 1997 by and between Guarantor and WRP, the Agreement
Regarding Palomino Park by and between Guarantor and WRP, those
certain Right of First/Last Offer Agreements contemplated by the
Agreement Regarding Palomino Park, those certain Restrictive Covenant
Agreements contemplated by the Agreement Regarding Palomino Park, the
Tri-Party Agreement (the "Highlands Tri-Party Agreement"), dated as
of December 29, 1995 by and among Nationsbank of Texas, N.A.,
Highlands, WPHC, Wellsford REIT, Al Feld and the Feld Company, the
Assignment and Assumption of Tri-Party Agreement dated as of May 30,
1997 by and among Wellsford REIT, Guarantor, and the other Persons
party to the Highlands Tri-Party Agreement, the Tri-Party Agreement
(the "Red Canyon Tri-Party Agreement") dated as of May 29, 1997 by
and among Nationsbank of Texas, N.A., Red Canyon, WPHC, Wellsford
REIT, Al Feld and the Feld Company, the Assignment and Assumption of
Tri-Party Agreement dated as of May 30, 1997, by and among Wellsford
REIT, Guarantor and the other Persons party to the Red Canyon Tri-
Party Agreement, the Standby Option Agreement dated as of May 30,
1997 by and between WPHC and Guarantor, the Reimbursement and
Indemnification Agreement dated as of May 30, 1997 by and between WRP
and Guarantor, the Pledge of Promissory Note and Collateral
Assignment of Reimbursement Agreement dated as of May 30, 1997 by WRP
in favor of Guarantor, the Shareholder's Agreement dated as of May
30, 1997 by and between WRP, Guarantor, and WPHC, the Affirmative
Covenant Agreement dated as of May 30, 1997 by the Bond Issuer in
favor of Guarantor and, in each case, all exhibits, instruments or
agreements relating to each.
(aa) "Tangible Net Worth" means the excess of total assets over
total liabilities, total assets and total liabilities to be
determined in accordance with generally accepted accounting
principles consistently applied, minus intangible assets (including,
without limitation, franchises, patents, patent applications,
trademarks, brand names, goodwill and capitalized research and
development cost), determined in conformity with generally accepted
accounting principles consistently applied.
(ab) "WPHC" means Wellsford Park Highlands Corp., a Colorado
corporation.
(ac) "WRP" means Wellsford Real Properties, Inc., a Maryland
corporation.
(ad) "WRP Loan Agreement" means that certain Revolving Credit
Agreement dated as of May 30, 1997 among WRP and Bank Boston and
Morgan Guaranty Trust Company of New York pursuant to which a
revolving line of credit in the amount of up to $50 million will be
made available to WRP, as described in the Proxy Statement.
13. Section 2.1 of the Reimbursement Agreement shall be amended as
follows:
a. Subsection (2) shall be deleted in its entirety and the
following subsection (2) shall be inserted in lieu thereof:
(a) "(2) To the extent permitted by law all amounts required
to be reimbursed to the Bank pursuant to the foregoing clause (1) of
this Section 2.1 shall bear interest at the Base Rate for three days
from the date such amounts are required to be reimbursed, and
thereafter at the Default Rate until paid in full. Such amounts
shall be due and payable on demand."
b. The last sentence of Section 2.1 shall be deleted in its
entirety.
14. Section 2.2 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 2.2 shall be inserted in lieu thereof:
(a) "Section 2.2 Reimbursement of Liquidity Drawing Amounts and LC
Loans. The Account Parties agree that they shall reimburse the Bank for
amounts drawn under Liquidity Drawings (the "Liquidity Drawing Amounts")
in accordance with the following provision of this Section 2.2:
(b) (1) At the written request of both Account Parties received by
the Bank no later than 8:00 a.m. New York time on the Business Day next
succeeding the Drawing Date (the "LC Loan Eligibility Date") stating that
no Default exists and is continuing or would result from the conversion of
a Liquidity Drawing into an LC Loan as set forth herein and that the
representations and warranties contained in Article IV of this
Reimbursement Agreement are true and correct on and as of the date of such
conversion as if made on and as of such date, and requesting a conversion
to an LC Loan as set forth herein, to the extent not repaid in full,
including interest thereon in accordance with clause (2) of Section 2.1,
Liquidity Drawings may be converted into a short-term loan under this
Reimbursement Agreement (an "LC Loan"). From and after the LC Loan
Eligibility Date and until the LC Loans have been repaid in full, the LC
Loans shall bear interest at the Base Rate plus one and three-quarters
percent (1.75%) for the period commencing on the LC Loan Eligibility Date
and ended fourteen days following the Drawing Date for the Liquidity
Drawing that became such LC Loan, at the Base Rate plus two and one-half
percent (2.5%) for the next fourteen days thereafter, and at the Base Rate
plus three and one-half percent (3.5%) for the next fourteen days
thereafter (the "Final LC Loan Payment Date"). Interest on such LC Loans
shall be payable in arrears on the earlier of each Interest Payment Date
or the applicable Final LC Loan Payment Date. On the Final LC Loan
Payment Date for any LC Loan, such LC Loan shall be immediately due and
payable in full, including all accrued and unpaid interest. LC Loans may
be prepaid in accordance with Section 2.4. Any Liquidity Drawing that is
not converted into a LC Loan in accordance with this Section 2.2(1) shall
be due and payable at the time, and bear interest at the rates set forth
in Section 2.1.
(c) (2) Notwithstanding the foregoing, all unreimbursed Liquidity
Drawings and LC Loans shall be accelerated and become immediately due and
payable on the first to occur of the end of the Final LC Loan Interest
Period (for LC Loans only) and the Expiration Date. To the extent
permitted by law, any unreimbursed Liquidity Drawings or LC Loan, and any
interest accruing thereon, that are not paid when due thereafter shall
bear interest at the Default Rate. While held by or for the benefit of
the Bank, the Pledged Bonds shall bear interest at the Base Rate plus one
and three-quarters percent (1.75%)."
15. Section 2.4 of the Reimbursement Agreement shall be amended as
follows:
a. The first sentence thereof shall be amended by deleting the
words "and the Lenders";
b. The third sentence thereof shall be amended by deleting the
parenthetical;
c. Subsection (2) shall be amended by deleting the parenthetical
which immediately follows the words "the Bank shall receive a payment."
16. Section 2.8 of the Reimbursement Agreement shall be amended by
(i) replacing the word "arrears" with the word "advance" each time such word
appears therein, (ii) replacing the phrase "each Wellsford REIT Loan Agreement
Interest Payment Date" with the phrase "January 1, April 1, July 1 and October
1 of each year until the Expiration Date" each time such phrase appears
therein, and (iii) replacing the percentage "0.50%" with the percentage "0.95%"
each time such percentage appears therein.
17. Section 2.10 of the Reimbursement Agreement shall be amended by
deleting the parenthetical contained in the first sentence thereof.
18. Section 2.15 shall be deleted in its entirety.
19. Section 4.1 of the Reimbursement Agreement shall be amended by
amending subsection (1) by deleting subsection (a) in its entirety and
inserting the following subsection (a) in lieu thereof:
(1) "(a) WRP: (i) is a Maryland corporation duly organized,
incorporated, validly existing and in good standing under the laws of
Maryland, (ii) has all requisite power to own its property, to
conduct its business as now conducted and as presently contemplated
and to enter into and satisfy its obligations under this
Reimbursement Agreement and the other Related Documents to which it
is a party, and (iii) is in good standing as a foreign entity and is
duly authorized to do business in Denver, Colorado and in each other
jurisdiction where failure to be so qualified in such other
jurisdiction could have a materially adverse effect on the business,
assets or financial condition of WRP.".
20. Section 4.4 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 4.4 shall be inserted in lieu thereof:
(a) "Section 4.4 Financial Statements. WRP and Highlands have
furnished to the Bank: pro forma income projections and pro forma summary
balance sheets of WRP as of the Balance Sheet Date satisfactory in form
and substance to the Bank and certified by WRP's chief financial officer
as fairly presenting reasonable estimates of the matters set forth
therein. Such balance sheet and statements of income and stockholder's
equity and all other financial statements delivered to the Bank by WRP or
Wellsford REIT in connection with the Spin Off, the Merger and the First
Amendment, and all other financial statements delivered to the Bank by WRP
on or after the Balance Sheet Date pursuant to Section 5.4 hereof, have
been prepared in accordance with generally accepted accounting principles,
are complete, true and correct and fairly present the financial condition
of WRP and its Subsidiaries and Highlands and its Subsidiaries,
respectively, as of such dates and the results of the operations of each
of them. There are no liabilities, contingent or otherwise, of WRP or
Highlands or any of their respective Subsidiaries involving material
amounts not disclosed in said financial statements and the related notes
thereto, or financial statements and the related notes thereto delivered
to the Bank in accordance with Section 5.4 hereof."
21. Section 4.7 of the Reimbursement Agreement shall be amended by
deleting the phrase ", or of Wellsford REIT to pay and perform the Wellsford
REIT Loan Obligations in the manner contemplated by the Wellsford REIT Loan
Agreement and the Loan Documents" in its entirety.
22. Section 4.14 of the Reimbursement Agreement shall be amended by
(i) adding the words ", or assumption, as the case may be," after the words
"execution and delivery" and (ii) adding the words ", limited liability
operating agreements or" after the words "articles of incorporation."
23. Section 4.15 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 4.15 shall be inserted in lieu thereof:
(a) "Section 4.15. [Reserved]"
24. Section 4.17 of the Reimbursement Agreement shall be amended by
(i) adding the word "or" immediately after the words "Liquidity Drawing Amount"
and immediately after the words "this Reimbursement Agreement," (ii) deleting
the phrase "or any Loan (as that term is defined in the Wellsford REIT Loan
Agreement)" and (iii) deleting the phrase "or the Wellsford REIT Loan
Agreement."
25. Section 4.23 of the Reimbursement Agreement shall be amended by
deleting the words "of the Wellsford REIT Loan Obligations."
26. Section 4.25 of the Reimbursement Agreement shall be amended by
(i) adding the word "or" immediately before the words "any other Related
Document" and (ii) deleting the words "the Wellsford REIT Loan Agreement or the
Loan Documents related thereto."
27. Section 5.4 of the Reimbursement Agreement shall be amended by
deleting subsection (h) thereof and replacing it with the following:
(a) "(i) concurrently with the delivery thereof pursuant to the WRP
Loan Agreement, copies of all certificates, reports, financials and other
documents delivered to the Lenders pursuant to the WRP Loan Agreement;
and"
28. Section 5.5 of the Reimbursement Agreement shall be amended by
deleting subsection (4) in its entirety and replacing it with the following
subsection (4):
(a) "(4) [Reserved.]".
29. Section 5.6 of the Reimbursement Agreement shall be amended by
replacing the words "real estate investment trust" with the word "corporation"
in the first sentence thereof.
30. Section 5.8 of the Reimbursement Agreement shall be amended by
deleting the last sentence thereof in its entirety.
31. Sections 5.12, 5.13 and 5.14 shall be deleted in their entirety.
32. Section 6.1 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 6.1 shall be inserted in lieu thereof:
(a) "Section 6.1 Amendments. Each Account Party shall not, and
WRP shall not permit Highlands, Red Canyon, or any other Subsidiary of WRP
to, amend, modify, or supplement, or agree to any amendment or
modification of, or supplement to, any of the Related Documents or the
Wellsford Reimbursement Agreement to which it is a party. Each Account
Party shall not, and WRP shall not permit Highlands, Red Canyon, or any
other Subsidiary of WRP, to amend, modify or supplement, or agree to any
amendment or modification of, or supplement to, that certain Operating
Agreement of Red Canyon, dated as of April 17, 1996, that certain
Operating Agreement of Highlands, dated as of April 27, 1995 (as amended
by that certain First Amendment to Operating Agreement of Highlands, dated
December 29, 1995), and that certain Deposit and Contract Administration
Agreement, made as of May 2, 1995, by and between the Feld Company and
Wellsford Park Highlands Corp. if such amendment, modification or
supplement would have an adverse effect on the Bank or on any Account
Party's ability to satisfy its obligations under this Reimbursement
Agreement or any Related Document or on Guarantor's ability to satisfy its
obligations under the Guaranty. The Account Parties shall not amend, and
shall not permit WPHC, Highlands, Red Canyon or any of their other
respective Subsidiaries to amend, modify or supplement any Spin Off
Agreement if such amendment, modification or supplement would have an
adverse effect on the Bank or on any Account Party's ability to satisfy
its obligations under this Reimbursement Agreement or any Related Document
or on Guarantor's ability to satisfy its obligations under the Guaranty."
33. Section 6.3 of the Reimbursement Agreement shall be amended as
follows:
a. Subsection (a) shall be amended by deleting the words
"Indebtedness to the bank group under the Wellsford REIT Loan Agreement
and the Loan Documents related thereto" and adding the words "Indebtedness
under the WRP Loan Agreement and the documents related thereto,
Indebtedness of Red Canyon in a principal amount not to exceed
$29,500,000, on terms similar to those applicable to the construction
financing for Phase I of the Development provided by Nationsbank, the
proceeds of which will be used to construct Phase II of the Development,"
in lieu thereof;
b. Subsection (f) shall be deleted in its entirety and the
following subsection (f) shall be inserted in lieu thereof:
(a) "(f) [reserved]"
c. Subsection (g) shall be deleted in its entirety and the
following subsection (g) shall be inserted in lieu thereof:
(a) "(g) [reserved]"
d. Subsection (h) shall be deleted in its entirety and the
following Subsection (h) shall be inserted in lieu thereof:
(a) "(h) [reserved]"
e. Subsection (i) shall be deleted in its entirety and the
following subsection (i) shall be inserted in lieu thereof:
(a) "(i) [reserved]"
f. Subsection (j) shall be deleted in its entirety and the
following subsection (j) shall be inserted in lieu thereof:
(a) "(j) [reserved]"
34. Section 6.4, subsection (f) shall be amended by deleting the
words ",liens in favor of the Lenders under the Wellsford REIT Loan Agreement
and Loan Documents."
35. Section 6.5 shall be amended by (i) adding the word "and" after
the semi-colon in Subsection (i); and (ii) deleting Subsections (j) and (k) in
their entirety and inserting the following Subsection (j) in lieu thereof:
(a) "(j) with respect to WRP and its Subsidiaries, investments
consistent with the certain Section entitled "Lines of Business" in the
Form S-11 Registration Statement for WRP delivered to the Bank in
connection with the First Amendment."
36. Section 6.9 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 6.9 shall be inserted in lieu thereof:
(a) "Section 6.9 Distributions. WRP will not make any
Distributions which would cause it to violate the provisions of Section
6.17."
37. Section 6.10 of the Reimbursement Agreement shall be amended as
follows:
a. Subsection (1) shall be deleted in its entirety and the
following subsection (1) shall be inserted in lieu thereof:
(a) "(1) WRP shall not sell, transfer or otherwise dispose of
any interest in WPHC unless after giving effect to such disposition,
WRP shall hold at least fifty-one percent (51%) of the Voting
Interests of WPHC, and WPHC shall not sell, transfer, or otherwise
dispose of any interest in Highlands, Red Canyon or any other limited
liability company formed to develop any phase of the Development that
is or will be subject to the Assessment and Lien, unless, after
giving effect to such disposition, WPHC shall hold at least fifty-one
percent (51%) of the Voting Interests of Highlands, Red Canyon and
such other limited liability company (as applicable), in any case,
unless consented to in writing by the Bank.";
b. Subsection (2) shall be amended by (i) adding the words ",
whether direct or indirect," immediately before the words "in Highlands,"
and (ii) adding the words ", WPHC and/or Red Canyon" after the words "in
Highlands".
38. Section 6.11 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 6.11 shall be inserted in lieu thereof:
(a) "Section 6.11. [Reserved]"
39. Section 6.12 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 6.12 shall be inserted in lieu thereof:
(a) "Section 6.12. [Reserved]"
40. Section 6.13 of the Reimbursement Agreement shall be amended by
(i) deleting the "(i)" immediately following the words "of any Indebtedness
other than the obligations" and (ii) deleting the words "and (ii) to the Agent
and the Lenders under the Wellsford REIT Loan Agreement and the other Loan
Documents."
41. Section 6.14 of the Reimbursement Agreement shall be deleted in
its entirety and the following Section 6.14 shall be inserted in lieu thereof:
(a) "Section 6.14. [Reserved]"
42. Section 6.17 of the Reimbursement Agreement shall be amended as
follows:
a. Subsection (1) shall be deleted in its entirety and the
following subsection (1) shall be inserted in lieu thereof:
(a) "(1) Minimum Shareholder's Equity. (a) From May 30, 1997
through June 4, 1997, WRP will not permit its Shareholder's Equity to
be less than $45,000,000; and (b) from and after June 4, 1997, WRP
will not, at the end of any fiscal quarter, permit its Shareholder's
Equity to be less than the sum of (x) $35,000,000 plus (y) eight
percent (80%) of the Net Cash Proceeds of all Equity Offerings
funding on or after May 30, 1997.
b. Subsection (2) shall be deleted in its entirety and the
following subsection (2) shall be inserted in lieu thereof:
(a) "(2) Consolidated Operating Cash Flow Coverage. WRP will
not, at the end of any fiscal quarter, (a) until the occurrence of
the Adjustment Date, permit its Consolidated Operating Cash Flow for
any period of four consecutive fiscal quarters (treated as a single
accounting period) (the "Test Period"), minus the Capital Improvement
Reserve for the Test Period to be less than 1.3 times the Debt
Service for the Test Period; and (b) after the occurrence of the
Adjustment Date, permit Consolidated Operating Cash Flow for the Test
Period minus the Capital Improvement Reserve for the Test Period to
be less than 1.5 times the Debt Service for the Test Period. Until
four consecutive fiscal quarters have been completed after July 1,
1997, the Consolidated Operating Cash Flow Coverage calculation shall
be based on those consecutive fiscal quarters ending after July 1,
1997, even if there are less than four such quarters.
43. Section 7.1 of the Reimbursement Agreement shall be amended as
follows:
a. Subsection (c) shall be amended by deleting the references to
Sections 5.13 and 5.14, by replacing the words "45 days" with the words
"15 Business Days," and by deleting the words "provided that such cure
period shall apply only if not more than two such cure periods, or
portions thereof, have occurred in the prior 12 months."
b. Subsection (d) shall be amended by replacing the words "45 days"
with the words "15 Business Days."
c. Subsection (f) shall be amended by replacing the words "(except
the Loan Documents); or the occurrence and continuation of an event of
default under any of the Loan Document" with "or the occurrence and
continuation of any default under, or the failure to observe or perform
any term, covenant or agreement contained in any of the Spin Off
Agreements if such default or failure could have an adverse effect on the
Bank or on any Account Party's ability to satisfy its obligations under
this Reimbursement Agreement or any Related Document or on Guarantor's
ability to satisfy its obligations under the Guaranty, and the passage of
the applicable cure period, if any, set forth therein."
d. Subsection (h) shall be amended by replacing the words "(i) the
amount available to the Account Parties in connection with such litigation
under any insurance policies held by the Account Parties or their
Subsidiaries plus (ii) in the case of Wellsford REIT and its Subsidiaries"
with the words "$250,000" and by adding the words "or any judgment
creditor shall levy upon assets or properties of either Account Party or
any of their respective Subsidiaries" immediately before the semi-colon.
e. Subsection (m) shall be amended by replacing the word "60" with
the word "30" and by replacing the word "$1,000,000" with the word
"$250,000."
f. Subsection (t) shall be amended by deleting the "and"
immediately after the semi-colon.
g. Subsection (u) shall be deleted in its entirety and the
following subsection (u) shall be inserted in lieu thereof:
(a) "(u) default under the Guaranty by the Guarantor; and"
h. The following Subsection (v) shall be added immediately after
subsection (u):
(a) "(v) default by WRP in the payment of the principal of or
interest on any obligation or Indebtedness under the WRP Loan
Agreement; or the occurrence and continuation of a default under, or
the failure to observe or perform any material term, covenant or
agreement contained in, the WRP Loan Agreement, and the passage of
the applicable cure period, if any, set forth therein."
44. Section 8.1 of the Reimbursement Agreement shall be amended by
(i) deleting the words ", any Lender" in the first sentence thereof and
(ii) adding the words "the Guarantor," after the words "the Remarketing
Agent," in clause (d) thereof.
45. Section 9.3 shall be deleted in its entirety and the following
Section 9.3 shall be inserted in lieu thereof:
(a) "Section 9.3 Extension. On or after June 20, 1999 (and annually
thereafter through June 20, 2004), WRP may request that the then-existing
Expiration Date of the Letter of Credit be extended for a period of one-
year, provided however that in no event shall the date stated in paragraph
1(a) of the Letter of Credit be extended beyond May 30, 2005. Such
request shall be made in writing at least 120 days prior to then-existing
Expiration Date. Within sixty (60) days of receipt of a request for
extension, the Bank shall, at its sole option, either notify WRP, the Bond
Issuer and the Bond Trustee that it will consent to such extension or
notify WRP, the Bond Issuer and the Bond Trustee that the Letter of Credit
will not be so extended. Failure of the Bank to respond to any requested
extension shall constitute the Bank's denial of such request. If the Bank
consents to an extension request, such extension will become effective
only upon payment by the Account Parties of an extension fee in the amount
of $16,667. Failure to pay the extension fee within thirty (30) days
after the Bank has provided its consent to an extension shall nullify such
consent and the Expiration Date of the Letter of Credit will not be so
extended."
RDO Section 10.7 shall be deleted in its entirety and the following
Section 10.7 shall be inserted in lieu thereof:
(a) "Section 10.7 Consent to Jurisdiction and Venue, Etc. Each of the
Bond Issuer and WRP irrevocably (a) agrees that any suit, action or other
legal proceeding arising out of or relating to this Reimbursement
Agreement or any of the other Related Documents may be brought in a court
of record in the State of New York or in the Courts of the United States
located in such state, (b) consents to the jurisdiction of each such court
in any such suit, action or proceeding and (c) waives any objection which
it may have to the laying of venue of any such suit, action or proceedings
in any of such courts and any claim that any such suit, action or
proceeding has been bought in an inconvenient forum. Each of the Bond
Issuer and WRP agrees that a final judgment in any such suit, action or
proceeding shall be conclusive and may be enforced in other jurisdictions
by suit on the judgment or in any other manner provided by law. All
mailings under this Section 10.7 shall be by certified mail, return
receipt requested.
(b) Nothing in this Section 10.7 shall affect the right of the Bank
to serve legal process in any other manner permitted by law or affect that
right of the Bank to bring any suit, action or proceeding against either
the Bond Issuer or WRP or their respective property or any property
encumbered by the Assignment and Lien in the courts of any other
jurisdiction."
47. Section 10.13 shall be deleted in its entirety and the following
Section 10.13 shall be inserted in lieu thereof:
(a) "Section 10.13 WAIVER OF JURY TRIAL. WRP AND THE BOND ISSUER
EACH HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO
TRIAL BY JURY FOR ANY TRIAL RESULTING EITHER DIRECTLY OR INDIRECTLY OUT
OF, UNDER OR IN CONNECTION WITH THIS REIMBURSEMENT AGREEMENT OR ANY OF THE
OTHER RELATED DOCUMENTS. WRP AND THE BOND ISSUER EACH FURTHER AGREES
THAT, IN THE EVENT OF LITIGATION, IT WILL NOT PERSONALLY OR THROUGH ITS
AGENTS OR ATTORNEYS SEEK TO REPUDIATE THE VALIDITY OF THIS SECTION 10.13,
AND IT ACKNOWLEDGES THAT IT FREELY AND VOLUNTARILY ENTERED INTO THIS
AGREEMENT TO WAIVE TRIAL BY JURY IN ORDER TO INDUCE THE BANK TO ISSUE THE
LETTER OF CREDIT, AND TO ENTER INTO THE FIRST AMENDMENT."
48. The following Section 10.15 is hereby added to the Reimbursement
Agreement:
(a) "Section 10.15. Subrogation and Subordination. Notwithstanding
anything to the contrary set forth in this Reimbursement Agreement, the
Related Documents, the Wellsford Reimbursement Agreement or the Spin Off
Agreements:
(b) (1) Subrogation. Except as set forth in Subsection 10.15(2)
below with respect to the Wellsford Reimbursement Agreement, until all
obligations to the Bank under this Reimbursement Agreement and the Related
Documents shall have been paid in full and the Letter of Credit shall have
expired or been canceled, each Account Party shall withhold exercise of
(a) any claim, right or remedy, direct or indirect, that such Account
Party now has or may hereafter have against the other Account Party or any
of its assets in connection with this Reimbursement Agreement or the
Related Documents or the performance by any Account Party of its
obligations thereunder, in each case, whether such claim, right or remedy
arises in equity, under contract, by statute, under common law or
otherwise and including without limitation (i) any right of subrogation,
reimbursement or indemnification that any Account Party now has or may
hereafter have against the other Account Party, (ii) any right to enforce,
or to participate in, any claim, right or remedy that the Bank now or may
hereafter have against any Account Party, and (iii) any benefit of, and
any right to participate in, any collateral or security now or hereafter
held by the Bond Trustee or the Bank, and (b) any right of contribution
any Account Party may have against any other Person regarding any of the
obligations under this Reimbursement Agreement and the Related Documents.
Each Account Party agrees that, to the extent the agreement to withhold
the exercise of its rights of subrogation, reimbursement, indemnification
and contribution as set forth herein is found by a court of competent
jurisdiction to be void or voidable for any reason, any rights of
contribution such Account Party may have against the other Account Party
or any such other Person shall be junior to and subordinate to any rights
the Bank or the Bond Trustee may have in any such collateral or security,
and to any right the Bank may have against such other Account Party or
such other Person. The Bank may use, sell or dispose of any item of
collateral or security as it sees fit without regard to any subrogation
rights any Account Party may have, and upon any such disposition or sale
any rights of subrogation any Account Party may have shall terminate. If
any amounts shall be paid to any Account Party on account of such
subrogation, reimbursement or indemnification rights at any time when all
obligations to the Bank then due and owing under this Reimbursement
Agreement and the Related Documents shall not have been paid in full, such
amount shall be held in trust for the Bank and shall forthwith be paid
over to the Bank to be credited and applied against the obligations to the
Bank under this Reimbursement Agreement and the Related Documents whether
matured or unmatured, in accordance with the terms hereof and thereof.
(c) (2) Subordination. Any Indebtedness of an Account Party now or
hereafter held by any other Account Party, including without limitation
all obligations under the Wellsford Reimbursement Agreement, is hereby
subordinated in right of payment to the prior payment in full of all
obligations of such Person to the Bank now or hereafter existing under
this Reimbursement Agreement and the other Related Documents (all such
obligations by any Account Party to the other Account Party being the
"Subordinated Obligations"). Each Account Party agrees not to ask,
demand, sue for, take or receive from the other Account Party, directly or
indirectly, in cash or other property or by set-off or in any other manner
(including without limitation from or by way of collateral), payment of
all or any of the Subordinated Obligations of such other Account Party
unless and until all obligations then due and owing under this
Reimbursement Agreement and the other Related Documents shall have been
paid and satisfied in full. Any payment on any Subordinated Obligation
collected or received by any Account Party after an Event of Default has
occurred and is continuing shall be held in trust for the Bank and shall
forthwith be paid over to the Bank to be credited and applied against the
obligations to the Bank under this Reimbursement Agreement and the Related
Documents, but without affecting, impairing or limiting in any manner the
liability of any Account Party under any other provision of this
Reimbursement Agreement and the other Related Documents."
49. Exhibit D to the Reimbursement Agreement is replaced with
Attachment A (Compliance Certificate of WRP) attached hereto.
50. In connection with this First Amendment and the transactions
contemplated hereby, Account Parties agree to pay the Bank, pursuant to Section
2.5 of the Reimbursement Agreement, the sum of $50,000 as an amendment fee,
plus the Bank's actual costs and expenses (including, without limitation,
attorneys fees) associated with this First Amendment and the Related Documents.
All such amounts shall be payable on the Effective Date.
51. This First Amendment shall be effective upon the date (the
"Effective Date") that each of the following conditions is, except as
specifically provided below, (x) satisfied or (y) waived by the Bank:
a. The Account Parties shall deliver or cause to be delivered to
the Bank a fully executed copy of this First Amendment, the Assignment
Agreement, the Guaranty, the Note Amendments, and the Bond Pledge
Amendment;
b. The Account Parties shall deliver or cause to be delivered to
the Bank a fully executed copy of the Indenture Supplement, the Assessment
Agreement Amendment, the Assessment and Lien Amendment, the Deed of Trust
Amendment and all documents amending, modifying or supplementing the
Wellsford Reimbursement Agreement entered into prior to, concurrently
with, or immediately after the Spin Off and the Merger;
c. The Account Parties shall deliver or cause to be delivered to
the Bank the following for each of WRP, the Guarantor and the Bond Issuer,
unless otherwise noted, dated the Effective Date:
(1) Certified copies of the Articles of Incorporation or
Limited Partnership Agreement, as the case may be, of each of WRP,
the Guarantor and the Bond Issuer, together with a good standing
certificate from the Secretary of State (or comparable official) of
their respective jurisdictions of incorporation or organization, each
dated a recent date prior to the Effective Date;
(2) Good standing certificates regarding each of WRP, the
Guarantor and the Bond Issuer from the Secretary of State of
Colorado;
(3) Copies of the Bylaws, if applicable, for each of WRP, the
Guarantor and the Bond Issuer certified as of the Effective Date by
their respective corporate secretary or an assistance secretary;
(4) Resolutions of the Boards of Directors of each of WRP, the
Guarantor and the Bond Issuer or a written consent of its general
partner or partners, as applicable, approving and authorizing the
execution, delivery and performance of this First Amendment and the
other Related Documents to be entered into concurrently with the
First Amendment to which it is a party and the other matters
contemplated hereby and copies of all other documents evidencing any
other necessary organizational action, certified as of the Effective
Date by their respective secretary or assistant secretary as being in
full force and effect without modification or amendment;
(5) Signature and incumbency certificates of the officers of
each of WRP, the Guarantor and the Bond Issuer executing this First
Amendment and the other Related Documents to be entered into
concurrently with the First Amendment to which it is a party;
d. The Account Parties shall deliver or cause to be delivered to
the Bank originally executed copies of favorable opinions of (i) Ballard,
Spahr, Andrews & Ingersoll, Bond Counsel, (ii) Brownstein Hyatt Farber &
Strickland, Colorado counsel to the Bond Issuer, (iii) Robinson Silverman
Pearce Aronsohn & Berman LLP, New York counsel to the Bond Issuer, (iv)
Ballard Spahr Andrews & Ingersoll, Maryland counsel to WRP, (v) Robinson
Silverman Pearce Aronsohn & Berman, New York counsel to WRP, (vi) Rudnick
& Wolfe, counsel to the Guarantor, (vii) Robinson Silverman Pearce
Aronsohn & Berman, New York special counsel to the Guarantor, (viii)
Ballard Spahr Andrews & Ingersoll, Maryland counsel to Wellsford REIT, and
(ix) Robinson Silverman Pearce Aronsohn & Berman, LLP, New York counsel to
Wellsford REIT, each in form and substance satisfactory to the Bank and
its counsel, dated as of the Effective Date;
e. The Account Parties shall deliver or cause to be delivered to
the Bank certified copies of all approvals or authorizations by, or
consents of, or notices to or registrations with, any governmental body or
agency required for the Bond Issuer, WRP or the Guarantor, as the case may
be, to enter into this First Amendment and the other Related Documents to
be entered into concurrently with the First Amendment to which each of
them is a party or to have WRP assume Wellsford REIT's position with
respect to the Development or the Bonds, and copies of all such approvals,
authorizations, consents, notices or registrations required to be obtained
or made prior to the Effective Date in connection with the transactions
contemplated by the Related Documents;
f. WRP shall deliver or cause to be delivered (i) a completed,
executed Compliance Certificate in the form of Attachment A hereto dated
as of the Effective Date demonstrating compliance with each of the
covenants calculated therein after consummation of the Merger and (ii) a
completed, executed Compliance Certificate for the Guarantor in the form
of Attachment B hereto dated as of the Effective Date demonstrating
compliance with each of the covenants calculated therein as of the most
recent fiscal quarter end of the Guarantor and after the consummation of
the Spin Off and the Merger;
g. WRP shall deliver or cause to be delivered (i) a Solvency
Certificate of WRP in the form of Attachment C hereto dated as of the
Effective Date demonstrating WRP's solvency after the consummation of the
Spin Off, the Merger and the related transactions described in the Proxy
Statement, including without limitation, the transactions contemplated by
this First Amendment and the Related Documents, and (ii) a Solvency
Certificate of the Guarantor in the form of Exhibit D hereto dated as of
the Effective Date demonstrating the Guarantor's solvency after the
consummation of the Spin Off, the Merger and the related transactions
described in the Proxy Statement, including without limitation, the
transactions contemplated by this First Amendment, the Guaranty and the
Related Documents,
h. Each Account Party and the Guarantor shall deliver a certificate
executed by one of its officers and dated as of the Effective Date stating
that: (i) its representations and warranties, contained in Article 4 of
the Reimbursement Agreement, as amended by this First Amendment, and the
Related Documents or Article III of the Guaranty, as applicable, are true
and correct on and as of the Effective Date as though made on and as of
such date; (ii) it is in compliance with all of the covenants set forth in
Articles 5 and 6 of the Reimbursement Agreement as amended by this First
Amendment or Article IV and V of the Guaranty, as applicable, (iii) no
petition by or against it has at any time been filed under the United
States Bankruptcy Code or under any similar act; (iv) no Event of Default
or Default has occurred and is continuing, or would result from the
execution, delivery or performance of this First Amendment, the Guaranty,
or the Related Documents; and (v) such other matters as the Bank or its
counsel may request;
i. WRP shall pay or caused to be paid all of the amounts
(including attorney's fees and expenses) payable at the Effective
Date pursuant to Section 2.5 of the Reimbursement Agreement and
paragraph 40 hereof;
j. WRP shall deliver or cause to be delivered for each of WRP and
the Guarantor its most recent annual audited financial statements and its
unaudited financial statements as of March 31, 1997. All of such
statements shall be accompanied with a certificate from an officer of WRP
or the Guarantor, as applicable, stating that no material adverse change
in the consolidated assets, liabilities, operations or financial condition
of WRP or the Guarantor, as applicable, has occurred since the date of the
most recent financial statements;
k. The Account Parties shall deliver or cause to be delivered to
the Bank evidence that any amendments to the Related Documents necessary
or desirable to perfect the security interests granted in the
Reimbursement Agreement, as amended, and the Related Agreements have been
executed and delivered and, if necessary, recorded or filed in the
appropriate county recorder's office; that any other appropriate financing
statements, including any amendments to the UCC-1 financing statement
previously filed, have been filed in the appropriate filing office(s); and
that commitments for endorsements to the Loan Policies regarding the Deed
of Trust and the Assessment and Lien have been issued by a title company
acceptable to the Bank in form and substance acceptable to the Bank;
l. Wellsford REIT shall deliver or cause to be delivered to the
Bank fully executed or conformed copies of any agreements or documents
relating to the Spin Off or the Merger, including without limitation the
Spin Off Agreements, that the Bank or its counsel may request, accompanied
by certificates of officers of the parties to such agreements or
documents, in form and substance satisfactory to the Bank and dated as of
the Effective Date, certifying that the Spin Off has been consummated
prior to the effectiveness of this First Amendment in accordance with the
Spin Off Documents and the Merger will be consummated on the Effective
Date immediately following the effectiveness of the First Amendment in
accordance with the Agreement and Plan of Merger dated as of January 16,
1997 and the documents contemplated thereby.
m. The Account Parties shall deliver such other documents,
instruments, approvals and, if requested by the Bank, certified duplicates
of executed copies thereof, and opinions as the Bank may reasonably
request;
n. The Bank shall give notice, as provided in Paragraph 1(a) of the
Letter of Credit, extending the Letter of Credit to June 20, 2000, and the
Bank shall give notice in accordance with Section 2.10 of the
Reimbursement Agreement providing new wire transfer instructions for
payment to the Bank.
52. Nothing in this Agreement shall be construed to modify the
obligations of the Bank to the Bond Trustee arising under or in connection with
the Letter of Credit.
53. On and after the Effective Date, each reference in the
Reimbursement Agreement and the Related Documents to the Reimbursement
Agreement or any schedule or exhibit thereto shall mean the Amended
Reimbursement Agreement or such schedule or exhibit thereto as amended by this
First Amendment. Except as specifically amended or modified hereby, the
Reimbursement Agreement shall remain in full force and effect and is hereby
ratified and confirmed. The execution, delivery and effectiveness of this
First Amendment shall not, except as expressly provided herein, operate as a
waiver of any right, power or remedy of the Bank nor constitute a waiver of any
provision of the Amended Reimbursement Agreement.
54. This First Amendment shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of laws.
55. This First Amendment may be executed in any number of
counterparts, any set of which signed by the parties hereto shall be deemed to
be and shall constitute a completed executed original for all purposes. The
parties agree that this First Amendment, agreements ancillary to this First
Amendment, and Related Documents to be entered into in connection with this
First Amendment will be considered executed and delivered by a party upon
delivery of such party's signature to the other parties by facsimile
transmission. Such facsimile signature shall be treated in all respects as
having the same effect as an original signature.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this First
Amendment to Letter of Credit Reimbursement Agreement as of the day and year
first above written.
PALOMINO PARK PUBLIC IMPROVEMENTS
CORPORATION
By: /s/ Edward Lowenthal
--------------------------
Title:
--------------------------
WELLSFORD RESIDENTIAL PROPERTY
TRUST
By: /s/ Edward Lowenthal
--------------------------
Title:
--------------------------
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
--------------------------
Title:
--------------------------
DRESDNER BANK AG, NEW YORK BRANCH
By: /s/ Johannes Boeckman
--------------------------
Title: Vice President
--------------------------
By: /s/ Michael A. Seton
--------------------------
Title: Assistant Vice President
--------------------------
<PAGE>
List of Attachment
Attachment A - Form of Compliance Certificate for WRP.
Attachment B - Form of Compliance Certificate for the Guarantor.
Attachment C - Form of Solvency Certificate for WRP.
Attachment D - Form of Solvency Certificate for the Guarantor.
AMENDMENT TO WELLSFORD REIMBURSEMENT AGREEMENT
This Amendment to Wellsford Reimbursement Agreement (the "Amendment"), is
made as of the 30th day of May, 1997, by and between PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION, a Colorado nonprofit corporation (the "Company");
WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate investment trust
("Wellsford REIT"); and WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation ("WRP").
WHEREAS, the Company has issued its Assessment Lien Revenue Bonds, Series
1995 (the "Bonds") pursuant to the terms of an Indenture of Trust, dated as of
December 1, 1995, as amended and supplemented (the "Indenture"), between the
Company and United States Trust Company of New York, as Trustee (the
"Trustee"); and
WHEREAS, in order to further secure the payment of principal of and
interest on the Bonds, Dresdner Bank AG, New York, a banking corporation
organized and existing under the laws of The Federal Republic of Germany,
acting by and through its New York Branch (the "Bank"), has issued an
irrevocable Letter of Credit (together with any extensions, renewals or
replacements thereof, the "Letter of Credit"), in accordance with the terms of
a Letter of Credit Reimbursement Agreement, dated as of December 1, 1995 (the
"Bank Reimbursement Agreement"), between the Bank, and the Company and
Wellsford REIT, as account parties; and
WHEREAS, WRP shall succeed to the interest of Wellsford REIT pursuant to
the terms of a First Amendment to the Bank Reimbursement Agreement, by and
between the Bank, the Company, Wellsford REIT and WRP, in accordance with the
provisions of an Assignment and Assumption Agreement between WRP and Wellsford
REIT; and
WHEREAS, the Company and Wellsford REIT executed and delivered a
Reimbursement Agreement, dated as of the 1st day of December, 1995 (the
"Reimbursement Agreement"), pursuant to which the Company agreed, among other
things, to pay, indemnify, reimburse, exonerate and hold Wellsford REIT
harmless against any loss, liability, demand or cost incurred by Wellsford
REIT in connection with the Bank Reimbursement Agreement; and
WHEREAS, the parties desire to amend the Reimbursement Agreement as
hereinafter provided.
NOW THEREFORE for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
a. Wellsford REIT hereby assigns all its right, titles and interest in
the Reimbursement Agreement to WRP. WRP hereby assumes all obligations of
Wellsford REIT arising out of or in connection with the Reimbursement
Agreement, and covenants and agrees that it shall perform the obligations of
Wellsford REIT thereunder. WRP is hereby constituted as successor to
Wellsford REIT, and Wellsford REIT is released from all liability under the
Reimbursement Agreement and documents executed in connection therewith. The
Company hereby consent to such assignment and assumption, and to the merger of
Wellsford REIT and Equity Residential Properties Trust, a Maryland real estate
investment trust. The Company hereby covenants and agrees that it shall be
obligated to WRP in like manner and to the same extend as provided in the
Reimbursement Agreement with respect to the obligations of the Company to
Wellsford REIT. Unless the context clearly requires, all references in the
Reimbursement Agreement to Wellsford Residential Property Trust shall be
deemed references to Wellsford Real Properties, Inc.
b. The Company represents and warrants to WRP as follows:
(a) The Company has all requisite power to enter into and satisfy
its obligations under this Amendment.
(b) The execution, delivery and performance of this Amendment and
the transactions contemplated hereby are (i) within the authority of the
Company, (ii) have been duly authorized by all necessary proceedings on
the part of the Company, (iii) do not and will not conflict with a result
and a breach or contravention of any provision of law, statute, rule or
regulation to which the Company is subject to any judgment, order, writ,
injunction, license or permit applicable to the Company, or its
properties, (iv) do not and will not conflict with or constitute a
default (whether with a passage of time or the giving of notice or both)
under any provision of the charter documents, partnership agreement,
declaration of trust, articles of Incorporation or other documents or
bylaws of or any other agreement or other instrument binding upon, the
Company or any of its properties, and (v) do not and will not result in
or require the imposition of any lien or encumbrances on any of the
properties, assets or rights of the Company or any of its properties.
(c) This Amendment is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms and
provisions hereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to
the extent the availability of the remedies of specific performance or
injunctive relief is subject to the discretion of the court before which
any proceedings thereof may be brought.
(d) There are no actions, suits, proceedings or investigations of
any kind pending or threatening against the Company, or any of the
subsidiaries of the Company before any court, tribunal or administrative
agency or board that, if adversely determined, might either in any case
or in the aggregate, materially adversely effect the properties, assets,
financial conditions, or business of such person or materially impair the
right of such person to carry on business substantially as now conducted
by it, or result in any liability not adequately covered by insurance, or
for which adequate reserves are not maintained on the balance sheets of
such person.
c. The Company hereby agrees to pay to WRP, upon demand, any and all
reasonable expenses of the WRP, including reasonable attorney fees and
expenses, incurred or paid by WRP, in connection with the preparation and
negotiation of this Amendment, the request for release and other documents and
agreements referred to herein or contemplated hereby.
d. Except as modified herein, the Reimbursement Agreement is hereby
ratified and confirmed in its original form.
IN WITNESS WHEREOF, the undersigned have executed this Amendment to
Letter of Credit Reimbursement Agreement as of the day and year first above
written.
PALOMINO PARK PUBLIC IMPROVEMENTS CORPORATION
By:/s/ David M. Strong
--------------------------------
Title: Vice President
WELLSFORD RESIDENTIAL PROPERTY TRUST
By:/s/ David M. Strong
--------------------------------
Title: Vice President
WELLSFORD REAL PROPERTY, INC.
By:/s/ David M. Strong
--------------------------------
Title: Vice President
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Assignment") is made as
of May 30, 1997, by and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a
Maryland real estate investment trust ("Assignor"), and WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation ("Assignee").
W I T N E S S E T H:
For valuable consideration, the receipt of which is hereby acknowledged,
Assignor and Assignee agree as follows:
1. Assignment and Assumption.
a. Assignor hereby assigns and transfers to Assignee all right,
title and interest of Assignor in, to and under (i) that certain Bond
Pledge and Security Agreement, dated as of December 1, 1995, by and
between Assignor, Palomino Park Public Improvements Corporation, a
Colorado nonprofit corporation (the "Bond Issuer"), Dresdner Bank AG, New
York Branch, a banking corporation organized under the laws of The
Federal Republic of German, operating through its New York Branch (the
"Bank"), and United States Trust Company of New York, a trust company
organized under the laws of the State of New York, as Trustee (the
"Trustee") (the "Pledge Agreement"), (ii) that certain Letter of Credit
Reimbursement Agreement, dated as of December 1, 1995, between Assignor,
the Bank and the Bond Issuer, together with all amendments, modifications
and supplements thereto (the Reimbursement Agreement"), (iii) that
certain Promissory Note, dated as of December 1, 1995, from the Assignor
to the Bank (the "Wellsford Note") (iv) that certain Promissory Note,
dated as of December 1, 1995, from the Bond Issuer to the Assignor (the
"Issuer Note"), (v) that certain Wellsford Bond Pledge and Security
Agreement, dated as of December 1, 1995, by and between Assignor, the
Bond Issuer and the Trustee (the "Wellsford Pledge Agreement"), (vi) that
certain Reimbursement Agreement, dated as of December 1, 1995, between
Assignor and the Bond Issuer, together with all amendments, modifications
and supplements thereto (the "Wellsford Reimbursement Agreement"), (vii)
that certain Public Improvements Assessment and Lien, dated as of
December 1, 1995, including all amendments and modifications thereto (the
"Assessment and Lien"), by and between the Bond Issuer and Park at
Highlands LLC, a limited liability company organized under the laws of
the State of Colorado (the "Developer"), (viii) the Assessment Agreement,
dated as of December 1, 1995, together with all amendments, modifications
and supplements thereto (the "Assessment Agreement"), by and between the
Developer and the Bond Issuer, and (ix) that certain Trust Indenture,
dated as of December 1, 1995, by and between the Bond Issuer and United
States Trust Company of New York, as Trustee, ((i), (ii), (iii), (iv),
(v), (vi), (vii), (viii) and (ix), collectively, the "Conveyed
Property").
b. Assignee hereby accepts the foregoing assignment, and (i)
confirms that it shall be deemed to be a party to the Reimbursement
Agreement, the Pledge Agreement, the Wellsford Pledge Agreement, the
Wellsford Reimbursement Agreement and the Wellsford Note, and (ii) agrees
to be bound by all of the terms of, and to undertake all of the
obligations of the Assignor contained in the Reimbursement Agreement, the
Pledge Agreement, the Wellsford Note, the Wellsford Reimbursement
Agreement and the Wellsford Pledge Agreement.
The execution and delivery of this Assignment shall constitute an
acknowledgment and agreement by each of the parties hereto (i) that each
intends that the transfer, assignment and conveyance herein contemplated
constitute an absolute assignment by the Assignor of its interest in the
Conveyed Property, conveying good title in such Conveyed Property free and
clear of any liens, and that such interest shall not be a part of the
Assignor's estate in the event of the bankruptcy or the occurrence of another
similar event of, or with respect to, the Assignor, (ii) that each consents to
such assignment by the Assignor of its rights under the Conveyed Property and
the assumption by the Assignee of the obligations of Assignor thereunder, and
(iii) that Assignor is and shall be relieved of all liabilities arising
pursuant to and in accordance with the Reimbursement Agreement, the Pledge
Agreement, the Wellsford Note, the Wellsford Reimbursement Agreement and the
Wellsford Pledge Agreement.
2. Further Assurances. The parties shall promptly execute and deliver
any additional instruments or documents which may be reasonably necessary to
evidence or better effect the assignment contemplated hereby. Notwithstanding
the foregoing, nothing in this Assignment shall be construed as requiring any
party to the Assignment to incur liabilities or obligations other than with
respect to liabilities and obligations arising specifically described in the
Conveyed Property.
3. Counterparts. This Assignment may be executed in any number of
counterparts and by each party on a separate counterpart or counterparts, each
of which when so executed and delivered shall be deemed an original and all of
which taken together shall constitute but one and the same instrument.
4. Governing Law. This Assignment shall be deemed to be an agreement
made under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with such laws.
5. Binding Effect. This Assignment shall be binding upon and inure to
the benefit of each of the parties and its successors and assigns.
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment
as of the date first hereinabove written.
ASSIGNOR:
WELLSFORD REAL ESTATE
INVESTMENT TRUST
By:/s/ David M. Strong
-----------------------------
Name: David M. Strong
Title: Vice President
ASSIGNEE:
WELLSFORD REAL PROPERTY, INC.
By: /s/ David M. Strong
------------------------------
Name: David M. Strong
Title: Vice President
==============================================================================
Credit Enhancement Agreement
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of May 30, 1997
==============================================================================
<PAGE>
CREDIT ENHANCEMENT AGREEMENT
THIS CREDIT ENHANCEMENT AGREEMENT (this "Agreement") is made and entered
into as of May 30, 1997 by and between ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership ("ERP Operating Partnership"), and WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation ("Newco").
A. Pursuant to a certain Trust Indenture dated as of December 1, 1995
(the "Indenture"), between Palomino Park Public Improvements Corporation, a
Colorado nonprofit corporation ("PPPIC"), and United States Trust Company of
New York, as trustee (the "Trustee"), PPPIC has issued, sold and delivered its
Assessment Lien Revenue Bonds, Series 1995 (the "Bonds"), in the aggregate
principal amount of Fourteen Million Seven Hundred Fifty-Five Thousand and
00/100 Dollars ($14,755,000.00). The Bonds are payable as to principal and
interest in the manner provided in the Indenture. Proceeds of the Bonds are
intended to be applied for the purpose of financing certain public facilities
located within Highlands Ranch Metropolitan District No. 2, Douglas County,
Colorado, a quasi-municipal corporation organized under the laws of the State
of Colorado. The Indenture, and the other documents and instruments to which
PPPIC is a party, evidencing or securing PPPIC's obligations in connection
with the Bonds (with the exception of the "Letter of Credit Documents"
described below) are referred to herein collectively as the "Bond Documents."
All capitalized terms not otherwise defined herein shall have the meanings set
forth in the Indenture.
B. Pursuant to the Indenture, PPPIC is required to furnish a Letter of
Credit or Alternate Credit Facility satisfying the conditions set forth in the
Indenture, to secure the payment of Bonds that are in the Weekly Mode or the
Term Mode, but not Bonds that are in the Fixed Mode. Pursuant to the terms of
a Letter of Credit Reimbursement Agreement dated as of December 1, 1995 (said
agreement, as the same may be modified pursuant to Section 3.1(h) hereof, the
"Bank Reimbursement Agreement") by and among PPPIC, Wellsford Residential
Property Trust, a Maryland real estate investment trust ("Wellsford Parent"),
and Dresdner Bank, AG, New York Branch (the "Bank"), the Bank has issued to
the Trustee, acting on behalf of the holders of the Bonds, a certain letter of
credit (the "Dresdner L.C.") in the face principal amount of $15,773,702, for
the purpose of securing the payment of the Bonds. All documents entered into
by PPPIC or Wellsford Parent pursuant to the Bank Reimbursement Agreement are
referred to herein collectively as the "Letter of Credit Documents."
C. PPPIC and Wellsford Parent have entered into a Reimbursement
Agreement dated as of December 1, 1995 (the "Wellsford Parent Reimbursement
Agreement") pursuant to which PPPIC has undertaken certain obligations and
provided certain security for the benefit of Wellsford Parent in consideration
of Wellsford Parent's obligations under the Bank Reimbursement Agreement.
Among other things, pursuant to the Wellsford Parent Reimbursement Agreement,
PPPIC agreed that PPPIC would not convert the Rate Mode of the Bonds without
the express written consent of Wellsford Parent and would, at the request of
Wellsford Parent, convert the Rate Mode of the Bonds. PPPIC has executed and
delivered to Wellsford Parent a certain Palomino Park Promissory Note dated
December 20, 1995 (the "PPPIC Note to Wellsford Parent"), evidencing PPPIC's
payment obligations to Wellsford Parent pursuant to the Wellsford Parent
Reimbursement Agreement.
D. Newco has been formed as a wholly-owned subsidiary of Wellsford
Parent pursuant to the Contribution Agreement ("Contribution Agreement")
referred to in that certain Agreement and Plan of Merger dated as of
January 16, 1997 (the "Merger Agreement") by and between Equity Residential
Properties Trust, a Maryland real estate investment trust that is the general
partner of ERP Operating Partnership ("EQR"), and Wellsford Parent. Pursuant
to the Contribution Agreement, Wellsford Parent has assigned to Newco and
Newco has assumed, or is assuming concurrently herewith, Wellsford Parent's
rights and obligations under the Bank Reimbursement Agreement, the Letter of
Credit Documents, the Wellsford Parent Reimbursement Agreement and the PPPIC
Note to Wellsford Parent.
E. ERP Operating Partnership and Newco are entering into this Agreement
pursuant to the Merger Agreement.
NOW, THEREFORE, in consideration of the premises, and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
CREDIT ENHANCEMENT
1.1 (a) Upon and subject to the satisfaction of the conditions
precedent set forth in Article 3 hereof, ERP Operating Partnership shall
execute and deliver to the Bank a guaranty (the "Initial ERP Operating
Partnership Guaranty") pursuant to which ERP Operating Partnership shall
guarantee to the Bank the payment by Newco of any and all "Overdue
Reimbursement Amounts" (as such term is hereinafter defined). As
employed herein, the term "Overdue Reimbursement Amounts" shall mean any
and all sums due and owing from time to time by Newco to the Bank
pursuant to the Bank Reimbursement Agreement that are not paid to the
Bank by Newco when due (after the expiration of any cure periods under
the Bank Reimbursement Agreement) pursuant to the Bank Reimbursement
Agreement. The Initial ERP Operating Partnership Guaranty:
(i) shall not require security for ERP Operating Partnership's
obligations pursuant to the Initial ERP Operating
Partnership Guaranty;
(ii) shall obligate ERP Operating Partnership to pay all
Overdue Reimbursement Amounts to the Bank upon demand or,
if the Bank shall agree, in its sole and absolute
discretion, then within a period of up to three (3)
business days following the making of a written demand
upon ERP Operating Partnership by the Bank and shall
provide that the payment by ERP Operating Partnership to
the Bank within said period of time shall, at ERP
Operating Partnership's election, constitute a cure with
respect to Newco's obligations to the Bank under the Bank
Reimbursement Agreement;
(iii) shall not impose upon ERP Operating Partnership any
financial covenants (collectively, "financial covenants")
consisting of net worth requirements, financial tests,
financial reporting requirements (other than customary
quarterly and annual statements) or covenants generally
recognized as financial covenants with respect to ERP
Operating Partnership, or any other covenants regarding
the nature or manner of operation of ERP Operating
Partnership's businesses; provided, however, that the
Initial ERP Operating Partnership Guaranty may be cross-
defaulted to such corporate-level financial covenants, if
any, as ERP Operating Partnership may be subject to from
time to time under any of ERP Operating Partnership's
corporate-level unsecured debt instruments, to the extent
that the enforcement of said covenants is not waived or
released by the financial institutions in whose favor said
covenants primarily run (upon request from the Bank, ERP
Operating Partnership shall furnish the Bank with evidence
satisfactory to the Bank of such financial covenants to
which ERP Operating Partnership may from time to time be
subject);
(iv) shall not contain a waiver of any rights of subrogation
that ERP Operating Partnership may otherwise have by
reason of making payment to the Bank under the Initial ERP
Operating Partnership Guaranty, shall grant ERP Operating
Partnership full rights of subrogation with respect
thereto upon the payment in full to the Bank by ERP
Operating Partnership of Newco's obligations under the
Letter of Credit Documents, and shall contain the Bank's
agreement to assign to ERP Operating Partnership (without
warranty, representation or recourse, and without
releasing Newco from any obligations or defaults
thereunder) the Bank's rights and remedies under the
Letter of Credit Documents following the payment in full
by ERP Operating Partnership of Newco's obligations under
the Letter of Credit Documents;
(v) shall provide for an absolute and unconditional guaranty
of payment by ERP Operating Partnership containing such
terms and conditions as are usual and customary for the
Bank to impose in transactions of the type herein
contemplated with third party guarantors of comparable net
worth which are unaffiliated with the party whose
obligations they are guaranteeing, which guaranty may
include an express statement to the effect of any one or
more of the following: ERP Operating Partnership shall
not be released by any bankruptcy (voluntary or
involuntary) of any obligor with respect to the Letter of
Credit Documents, any fact, matter or circumstance,
whether or not denominated in the Letter of Credit
Documents; and that ERP Operating Partnership shall
expressly waive or be deemed to have waived any suretyship
defenses; and may permit the Bank to seek sole and
immediate enforcement of the Initial ERP Operating
Partnership Guaranty without first proceeding against
Newco, PPPIC or any obligor or collateral; provided,
however, that the Initial ERP Operating Partnership
Guaranty shall provide that ERP Operating Partnership
shall be released fully and absolutely from liability
under the Initial ERP Operating Partnership Guaranty in
the event that the Bank Reimbursement Agreement or the
other Letter of Credit Documents or any of Newco's
obligations in connection therewith shall be modified
without the prior written consent of ERP Operating
Partnership, which shall not be unreasonably withheld,
provided that such modification shall not increase the
amount of the Letter of Credit or otherwise increase ERP
Operating Partnership's obligations under the Initial ERP
Operating Partnership Guaranty, increase the likelihood
that ERP Operating Partnership will be required to make a
payment pursuant to the Initial ERP Operating Partnership
Guaranty, or diminish the remedies or collateral to which
ERP Operating Partnership will become subrogated upon
payment as contemplated under Section 1.1(a)(iv)
hereinabove; and
(vi) shall provide that the term of the Initial ERP Operating
Partnership Guaranty or any Alternate Credit Facility
shall not extend beyond the eighth (8th) anniversary of
the date of this Agreement (the "Expiration Date") or, if
the term of the Initial ERP Operating Partnership Guaranty
or any Alternate Credit Facility shall extend beyond the
Expiration Date, then such guaranty document shall make it
clear that the guaranty afforded under this Agreement
shall expire on the Expiration Date.
(b) The form of the Initial ERP Operating Partnership Guaranty
shall be subject to ERP Operating Partnership's review and approval,
which shall not be unreasonably withheld or delayed if the terms and
conditions thereof conform to the parameters set forth in Section 1.1(a)
hereof.
1.2 For so long as a Letter of Credit or Alternate Credit Facility is
required to be furnished to the Trustee pursuant to the terms of the
Indenture, Newco shall cause PPPIC to do so and, in particular, shall cause
PPPIC to furnish to the Trustee a Letter of Credit or Alternate Credit
Facility in accordance with Section 5.15(b) of the Indenture prior to the
expiration of any then-existing Letter of Credit so as to cause the Trustee to
surrender for cancellation the previously held Letter of Credit to the issuer
thereof, not less than thirty (30) days prior to the expiry of said existing
Letter of Credit.
1.3 In connection with any Alternate Letter of Credit or Alternate
Credit Facility that may be furnished to the Trustee from time to time
pursuant to the Indenture, ERP Operating Partnership acknowledges that PPPIC
or Newco may desire or be required to undertake certain obligations or provide
certain financial accommodations (collectively the "Alternate Reimbursement
Obligations") to the issuer of said Alternate Letter of Credit or Alternate
Credit Facility. The documents evidencing or securing Newco's Alternate
Reimbursement Obligations are referred to herein collectively as the
"Alternate Reimbursement Documents". The parties acknowledge that the issuer
of the Alternate Letter of Credit or the Alternate Credit Facility may be one
or more institutions, selected by Newco, meeting the requirements of the
Indenture. If Newco undertakes any Alternate Reimbursement Obligations, then
ERP Operating Partnership shall enter into a guaranty of the payment of
Newco's Alternate Reimbursement Obligations by executing and delivering to the
issuer of said Alternate Letter of Credit or Alternate Credit Facility a
guaranty in favor of said issuer (the "Alternate ERP Operating Partnership
Guaranty"), upon and subject to the satisfaction of the conditions precedent
set forth in Sections 3.1(d), 3.1(f), 3.1(i), 3.1(k) and 3.2 hereof, and
subject also to the satisfaction of the following additional conditions
precedent:
(a) The terms and conditions of said Alternate Letter of Credit or
Alternate Credit Facility shall be subject to ERP Operating Partnership's
review and approval in ERP Operating Partnership's sole and absolute
discretion; provided, however, that ERP Operating Partnership shall not
unreasonably withhold or delay its approval with respect thereto if the
terms and conditions thereof shall not be materially less favorable to
Newco than the terms and conditions of the Letter of Credit Documents, as
the same have been modified pursuant to this Agreement, and are otherwise
commercially reasonable in the circumstances;
(b) The terms and conditions of the Alternate ERP Operating
Partnership Guaranty shall be subject to ERP Operating Partnership's
review and approval in ERP Operating Partnership's sole and absolute
discretion; provided, however, that ERP Operating Partnership shall not
unreasonably withhold or delay its approval with respect thereto if the
scope and nature thereof is limited in substantially the same manner as
the Initial ERP Operating Partnership Guaranty and if the Alternate ERP
Operating Partnership Guaranty is not otherwise on terms materially less
favorable than the Initial ERP Operating Partnership Guaranty;
(c) The Initial ERP Operating Partnership Guaranty (or, as the case
may be, any pre-existing Alternate ERP Operating Partnership Guaranty)
shall be returned to ERP Operating Partnership, and ERP Operating
Partnership shall be released fully and absolutely from all liability
thereunder, prior to or concurrently with the execution and delivery of
the Alternate ERP Operating Partnership Guaranty;
(d) The Alternate Letter of Credit or Alternate Credit Facility
shall satisfy the requirements of the Indenture; and
(e) Newco and PPPIC shall have executed and delivered documents
relating to the Alternate Credit Facility or Alternate Letter of Credit,
as the case may be, which are in substantially the same form as the
Wellsford Parent Reimbursement Agreement and the PPPIC Note to Wellsford
Parent, respectively, and PPPIC and Newco shall have executed and
delivered to ERP Operating Partnership an instrument or agreement with
respect thereto in substantially the same form as the Collateral
Assignment and Consent described in Section 4.6 hereof.
1.4 Newco shall furnish drafts of all Alternate Reimbursement Documents
to ERP Operating Partnership not less than sixty (60) days prior to the date
on which any Alternate Letter of Credit or Alternate Credit Facility is
required or proposed to be furnished to the Trustee. If ERP Operating
Partnership is not satisfied with the terms of the proposed Alternate
Reimbursement Documents for any reason whatsoever, or if ERP Operating
Partnership, in its sole discretion, shall otherwise prefer to do so, ERP
Operating Partnership may itself arrange for an Alternate Letter of Credit or
Alternate Credit Facility in lieu of the one proposed by Newco or PPPIC;
provided, however, that if the terms of the proposed documents are such that
ERP Operating Partnership would otherwise be obligated to execute and deliver
an Alternate ERP Operating Partnership Guaranty pursuant to Section 1.3 of
this Agreement in connection with an Alternate Letter of Credit or Alternate
Credit Facility proposed by Newco or PPPIC, and ERP Operating Partnership
nevertheless desires not to do so, then (i) ERP Operating Partnership shall be
obligated to arrange for an Alternate Letter of Credit or Alternate Credit
Facility in lieu of the one proposed by Newco or PPPIC, and (ii) under such
circumstances, ERP Operating Partnership shall bear all costs and expenses
arising in connection with such Alternate Letter of Credit or Alternate Credit
Facility including, without limitation, any fees, costs, attorneys' fees or
charges imposed or incurred by the Bank, the Trustee, or the rating service
rating the Bonds. If ERP Operating Partnership arranges for such an Alternate
Letter of Credit or Alternate Credit Facility, then Newco covenants and agrees
that PPPIC and Newco shall be the parties primarily liable on a joint and
several basis with respect to the Alternate Reimbursement Documents arranged
by ERP Operating Partnership, and ERP Operating Partnership agrees, subject to
the satisfaction of the conditions set forth in this Agreement, to execute and
deliver an Alternate ERP Operating Partnership Guaranty with respect to
Newco's payment obligations under said Alternate Reimbursement Documents. Any
Alternate Reimbursement Documents proposed by ERP Operating Partnership shall
be on terms that are not materially less favorable to Newco or PPPIC than the
Alternate Reimbursement Documents proposed by Newco or PPPIC.
1.5 ERP Operating Partnership shall have no liability to Newco or any
other party to maintain any given rating with respect to the Bonds, it being
acknowledged and agreed that (i) ERP Operating Partnership has no obligation
whatsoever to PPPIC, the Trustee, the holders of the Bonds or any party paying
assessments to PPPIC, and (ii) ERP Operating Partnership's sole obligation in
connection with the Bonds is to provide certain financial accommodations to
the issuer of a Letter of Credit or Alternate Credit Facility, as the case may
be, solely in accordance with the terms of this Agreement.
1.6 For informational purposes, from time to time upon reasonable prior
notice, ERP Operating Partnership shall cooperate reasonably in furnishing
information concerning itself to the Bank or the issuer of any Alternate
Letter of Credit or Alternate Credit Facility whether prior or subsequent to
entering into the Initial ERP Operating Partnership Guaranty or any Alternate
ERP Operating Partnership Guaranty, as the case may be.
1.7 Newco shall have the right at any time prior to the Expiration Date
to obtain a full release of the Initial ERP Operating Partnership Guaranty or
the Alternate ERP Operating Partnership Guaranty, as the case may be, and
terminate this Agreement.
ARTICLE 2
FEES AND EXPENSES
2.1 With respect to each period (each, an "Annual Period") commencing on
the date hereof or on any anniversary of the date hereof and ending on the
immediately preceding day of the same month in the next calendar year, Newco
shall pay to ERP Operating Partnership a fee (the "Credit Enhancement Fee"),
in an amount equal to one-half of one percent (0.5%) of the face amount of any
Letter of Credit (or the maximum principal amount of any Alternate Credit
Facility) in existence on the first day of said Annual Period. The Credit
Enhancement Fee for any given Annual Period shall be payable quarterly in
advance (in equal fourths of the Credit Enhancement Fee for the entire Annual
Period in which said quarter falls) on the first day of each quarter of said
Annual Period, shall be earned in full for said quarter as of the first day of
said quarter and shall not be refundable for any reason whatsoever, including,
without limitation, the occurrence of any of the following prior to the end of
the said quarter: (i) the repayment in full of the Bonds; (ii) the termination
or expiration of this Agreement; (iii) the release of the Initial ERP
Operating Partnership Guaranty or any Alternate ERP Operating Partnership
Guaranty; or (iv) the conversion of the Bonds to the Fixed Mode. With respect
to each Annual Period, a "quarter" shall be any of the four periods commencing
on the first day of said Annual Period or on the dates that are three, six or
nine months thereafter, respectively, and ending on the day prior to the
commencement of the next quarter.
2.2 Newco shall be solely responsible for paying (i) all costs, fees,
charges, penalties and other expenses charged by the Bank or the issuer of any
Alternate Letter of Credit or Alternate Credit Facility, and (ii) to the
extent the same are reasonable in the circumstances, all costs, fees and
expenses, including without limitation attorneys' fees and expenses, incurred
by ERP Operating Partnership in connection with the Letter of Credit, any
Alternate Letter of Credit or Alternate Credit Facility, the Initial ERP
Operating Partnership Guaranty or any Alternate ERP Operating Partnership
Guaranty.
ARTICLE 3
CONDITIONS PRECEDENT
3.1 As conditions precedent to ERP Operating Partnership's obligations
pursuant to Article 1 of this Agreement, Newco shall furnish to ERP Operating
Partnership:
(a) evidence, satisfactory to ERP Operating Partnership in the
exercise of ERP Operating Partnership's commercially reasonable judgment,
of the consent of PPPIC, the Bank, the Trustee and all other parties
having a right of consent in connection with the Bonds or the Letter of
Credit with respect to the assumption by Newco of Wellsford Parent's
obligations pursuant to the Bank Reimbursement Agreement and the Letter
of Credit Documents, and the release of Wellsford Parent therefrom.
(b) an instrument in form and substance satisfactory to ERP
Operating Partnership in the exercise of ERP Operating Partnership's
commercially reasonable judgment, executed by the Bank, releasing ERP
Operating Partnership and Wellsford Parent from any and all obligations
in connection with the Bank Reimbursement Agreement and the Letter of
Credit Documents, other than those obligations expressly undertaken by
ERP Operating Partnership pursuant to the Initial ERP Operating
Partnership Guaranty.
(c) an instrument, in form and substance satisfactory to ERP
Operating Partnership in the exercise of ERP Operating Partnership's
commercially reasonable judgment, releasing ERP Operating Partnership and
Wellsford Parent from any and all obligations under (i) that certain
Second Amended and Restated Revolving Credit Agreement date as of
June 30, 1995, as amended, with the First National Bank of Boston and the
other parties listed therein, and (ii) that certain Intercreditor
Agreement dated as of June 30, 1995, as amended, by and among said
parties (collectively, the documents described in this Section 3.1(c) are
referred to herein as the "Bank of Boston Documents");
(d) a current certificate from the Trustee that, to the knowledge
of Trustee, there has not occurred and shall not be continuing any
default or event of default beyond any applicable grace period under the
Indenture or the Bond Documents;
(e) a current certificate, in form and substance satisfactory to
ERP Operating Partnership in the exercise of ERP Operating Partnership's
commercially reasonable judgment, executed by an officer of the Bank, to
the effect that, to the knowledge of the Bank, there is no continuing
default or event of default beyond any applicable grace period under the
Bank Reimbursement Agreement or the Letter of Credit Documents;
(f) a certificate, in form and substance satisfactory to ERP
Operating Partnership, executed by an officer or director of PPPIC, to
the effect that the Bond Documents shall not have been modified in any
respect, from the forms submitted to ERP Operating Partnership prior to
the execution of the Merger Agreement, without ERP Operating
Partnership's written consent, which shall not be unreasonably withheld;
(g) a certificate, in form and substance satisfactory to ERP
Operating Partnership, executed by an officer or director of PPPIC, to
the effect that the Letter of Credit Documents have not been modified in
any respect from the forms submitted to ERP Operating Partnership prior
to the execution of the Merger Agreement, without ERP Operating
Partnership's written consent (which shall not be unreasonably withheld),
except as provided in Section 3.1(h) hereinbelow;
(h) the Bank Reimbursement Agreement and the Letter of Credit
Documents shall have been amended so that (x) all covenants relating to
the financial status and operations and personnel of Wellsford Parent
have either been deleted or have been modified so as to reflect the
status and business operations of Newco, as Wellsford Parent's assignee
thereunder, (y) all references to the Bank of Boston Documents (including
cross-defaults thereto and all references to any line or lines of credit
available to Wellsford Parent pursuant thereto) shall have been deleted,
and (z) such other provisions as Newco and the Bank may agree upon shall
have been modified without the prior written consent of ERP Operating
Partnership, which shall not be unreasonably withheld; provided that no
such modification shall alter the basic business terms and procedures set
forth in Articles 1, 2, 6.15, 6.19, 6.20, 6.21, 7.2, 8 and 9 of the Bank
Reimbursement Agreement, relieve Newco and PPPIC of their obligations as
the sole "Account Parties" (as such term is defined in the Bank
Reimbursement Agreement) or increase the amount of the Letter of Credit
or otherwise increase ERP Operating Partnership's obligations under the
Initial ERP Operating Partnership Guaranty, increase the likelihood that
ERP Operating Partnership will be required to make a payment pursuant to
the Initial ERP Operating Partnership Guaranty, or diminish the remedies
or collateral to which ERP Operating Partnership will become subrogated
upon payment as contemplated under Section 1.1(a)(iv) hereinabove;
(i) a Reimbursement and Indemnification Agreement, executed by
Newco, described in Section 4.3 hereof;
(j) the acknowledgement and agreement of PPPIC described in
Section 5.1(b) hereof, the irrevocable power of attorney from PPPIC
described in Section 5.1(c) hereof, and the Trustee's consent and
acknowledgement described in Section 5.1(c) hereof;
(k) the covenant and agreement of PPPIC described in Section 4.5
hereof;
(l) evidence, satisfactory to ERP Operating Partnership in the
exercise of ERP Operating Partnership's commercially reasonable judgment,
of the consent of PPPIC with respect to the assumption by Newco of
Wellsford Parent's rights and obligations under the Wellsford Parent
Reimbursement Agreement and the release of Wellsford Parent therefrom and
the assignment to Newco of the PPPIC Note to Wellsford Parent;
(m) the Collateral Assignment and Consent described in Section 4.6
hereof; and
(n) evidence, satisfactory to ERP Operating Partnership in the
exercise of ERP Operating Partnership's commercially reasonable judgment,
that Newco was formed, established and capitalized in accordance with the
terms of the Contribution Agreement.
3.2 It shall be a condition precedent to ERP Operating Partnership's
obligations pursuant to Article 1 of this Agreement that no Event of Default
beyond all applicable cure periods shall have occurred under this Agreement.
3.3 The consummation of the transactions contemplated under the Merger
Agreement shall be a condition precedent to ERP Operating Partnership's
obligations pursuant to Article 1 of this Agreement.
3.4 Newco shall use its best efforts to ensure that all conditions
precedent to ERP Operating Partnership's obligations pursuant to Article 1 of
this Agreement shall be satisfied as of the date of the consummation of the
transactions contemplated by the Merger Agreement. In the event that Newco is
unable to satisfy any condition precedent to ERP Operating Partnership's
obligations pursuant to Article 1 of this Agreement by the date of the
consummation of the transactions contemplated by the Merger Agreement, after
the exercise of its best efforts to satisfy such condition, ERP Operating
Partnership shall have the right, in its sole and absolute discretion, (i) to
satisfy such condition precedent, at its cost and expense, or (ii) to waive
compliance with any such condition precedent.
ARTICLE 4
OTHER OBLIGATIONS OF NEWCO
4.1 On the same day, if any, as ERP Operating Partnership is required to
make any payment from time to time under the Initial ERP Operating Partnership
Guaranty or any Alternate ERP Operating Partnership Guaranty, Newco shall
repay said amounts to ERP Operating Partnership in full. All amounts required
to be reimbursed to ERP Operating Partnership pursuant to the foregoing
sentence shall be interest at the rate of the "Prime Rate" (as such term is
hereinafter defined) plus three percent (3%) per annum until paid in full,
which interest shall be due and payable to ERP Operating Partnership on
demand. Said interest shall be in the nature of default rate interest and the
payment of said interest shall not excuse Newco from the obligation of
repaying the amounts due and payable to ERP Operating Partnership pursuant to
the first sentence of this Section 4.1 when said amounts are due pursuant to
said sentence. As employed herein, the term "Prime Rate" shall mean, from
time to time, the rate of interest per annum then most recently announced by
The First National Bank of Chicago in Chicago, Illinois as its corporate base
rate. If The First National Bank of Chicago shall not announce such a rate,
then the term "Prime Rate" shall mean the prime rate or base rate from time to
time announced by an American money center bank designated by ERP Operating
Partnership.
4.2 (a) Newco shall indemnify and hold harmless ERP Operating
Partnership, its general and limited partners, and the officers,
directors, trustees, agents and employees of any of the foregoing (each,
a "ERP Operating Partnership Indemnified Party") from and against any and
all claims, demands, damages, losses, liabilities, and costs or expenses
whatsoever (including reasonable attorneys' fees) which the ERP Operating
Partnership Indemnified Party may incur (or which may be claimed against
the ERP Operating Partnership Indemnified Party by any person or entity
whatsoever) by reason of or in connection with the execution, delivery
and performance of this Agreement, the Initial ERP Operating Partnership
Guaranty or any Alternate ERP Operating Partnership Guaranty, except to
the extent of claims, demands, damages, losses, liabilities and costs and
expenses arising by reason of ERP Operating Partnership's breach of its
obligations under this Agreement or by reason of the gross negligence or
willful misconduct of the Indemnified Party.
(b) ERP Operating Partnership shall indemnify and hold harmless
Newco and its officers, directors, agents and employees (each, a "Newco
Indemnified Party") from and against any and all claims, demands,
damages, losses, liabilities, and costs or expenses whatsoever (including
reasonable attorneys' fees) to the extent they arise from ERP Operating
Partnership's breach of its obligations under this Agreement or by reason
of the gross negligence or willful misconduct of ERP Operating
Partnership.
4.3 The rights and obligations of ERP Operating Partnership and Newco
with respect to the matters set forth in Sections 4.1 and 4.2 shall be set
forth in a Reimbursement and Indemnification Agreement to be prepared by ERP
Operating Partnership and to be entered into concurrently with the execution
and delivery of the Initial ERP Operating Partnership Guaranty and any
Alternate ERP Operating Partnership Guaranty, which shall be in form and
substance satisfactory to ERP Operating Partnership in the exercise of its
commercially reasonable judgment.
4.4 Newco covenants and agrees to comply in all material respects, and
to cause PPPIC to comply in all material respects, with all terms and
conditions of (i) the Indenture and the other Bond Documents, (ii) the Bank
Reimbursement Agreement and the other Letter of Credit Documents, and
(iii) any Alternate Reimbursement Documents.
4.5 Newco shall cause PPPIC to covenant and agree (i) to furnish ERP
Operating Partnership concurrently with copies of all documentation furnished
to the Trustee or its agents by PPPIC in connection with the draw-down of any
Bond proceeds to fund the construction of the Public Improvements or other
expenses and (ii) except as may be required by or in order to comply with
existing law, that the Public Improvements that are constructed from time to
time shall be only those Public Improvements reasonably required from time to
time to service the improvements existing or under development on the
Property.
4.6 As security for Newco's obligations under this Agreement, Newco
shall collaterally assign to ERP Operating Partnership all of Newco's rights,
title and interest under the Wellsford Parent Reimbursement Agreement, and
shall pledge to ERP Operating Partnership the PPPIC Note to Wellsford Parent.
Said collateral assignment and pledge shall be evidenced by an instrument (the
"Collateral Assignment") in form and substance satisfactory to ERP Operating
Partnership in the exercise of its commercially reasonable judgment. The
Collateral Assignment shall include a provision pursuant to which Newco
agrees: (i) not to consent to any modification of the Bank Reimbursement
Agreement, the Indenture, or any documents executed by PPPIC in connection
therewith which would have the effect of increasing the amount of the Letter
of Credit or otherwise increasing ERP Operating Partnership's obligations
under the Initial ERP Operating Partnership Guaranty, increasing the
likelihood that ERP Operating Partnership will be required to make a payment
pursuant to the Initial ERP Operating Partnership Guaranty, or diminishing the
remedies or collateral to which ERP Operating Partnership will become
subrogated upon payment as contemplated under Section 1.1(a)(iv) hereinabove;
(ii) not to consent to the exercise by PPPIC of any rights of optional
redemption under the Indenture without the prior written consent of ERP
Operating Partnership, which consent shall not be unreasonably withheld;
(iii) not to direct or consent to any conversion of the Rate Mode of the Bonds
that is inconsistent with ERP Operating Partnership's rights under Section 5.1
of this Agreement; and (iv) that all rights of consent, and all rights to
direct the actions of PPPIC which Newco has pursuant to the Wellsford Parent
Reimbursement Agreement, shall be exercisable solely by ERP Operating
Partnership solely upon the occurrence of an Event of Default described in
Section 7.1. Newco shall cause PPPIC to execute a consent and acknowledgment
(the "Consent"), pursuant to which PPPIC consents to the Collateral Assignment
and agrees that all rights of consent, and all rights to direct the actions of
PPPIC, which Newco has pursuant to the Wellsford Parent Reimbursement
Agreement, shall be exercisable solely by ERP Operating Partnership solely
upon the occurrence of an Event of Default described in Section 7.1 unless and
until written notice of the release of said right is received from ERP
Operating Partnership.
ARTICLE 5
RATE MODE OF BONDS;
EXPIRATION OF ERP OPERATING PARTNERSHIP'S OBLIGATIONS
5.1 Newco acknowledges that, pursuant to the Collateral Assignment and
the Consent, ERP Operating Partnership shall have the exclusive right, subject
to the rights of the Bank under the Bank Reimbursement Agreement, upon and
following the occurrence of an Event of Default beyond all applicable cure
periods or at any time after the Expiration Date (provided that ERP Operating
Partnership shall not have previously been released from all of its
obligations under the Initial ERP Operating Partnership Guaranty by the
Alternate ERP Operating Partnership Guaranty, as the case may be), to direct
PPPIC with respect to establishing the Rate Modes from time to time of the
Bonds. ERP Operating Partnership hereby agrees to permit the Bonds to remain
in the Weekly Mode; provided that, at any time on or after the Expiration Date
(provided that ERP Operating Partnership shall not have previously been
released from all of its obligations under the Initial ERP Operating
Partnership Guaranty or the Alternate ERP Operating Partnership Guaranty, as
the case may be) or at any time after the occurrence of an Event of Default
under this Agreement beyond all applicable cure periods, ERP Operating
Partnership shall have the right to direct PPPIC to exercise its option (the
"Rate Conversion Option"), at the earliest possible time thereafter pursuant
to the Indenture, to convert all the Bonds to the Fixed Mode. ERP Operating
Partnership shall not cause the Bonds to be converted to the Term Mode without
the approval of Newco and ERP Operating Partnership shall have no obligation
at any time to cause or permit a conversion of the Bonds to a Term Mode with a
duration of longer than two hundred and ten (210) days or which ends after the
Expiration Date or the expiration date or maturity date of the Letter of
Credit, any Alternate Letter of Credit or any Alternate Credit Facility.
5.2 On and as of the Expiration Date, Newco shall cause ERP Operating
Partnership to be released from the Initial ERP Operating Partnership Guaranty
and any Alternate ERP Operating Partnership Guaranty then in effect as of the
Expiration Date, and ERP Operating Partnership shall have no further
obligations pursuant to this Agreement from and after the Expiration Date.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1 Representations and Warranties of Newco. Newco hereby represents
and warrants to ERP Operating Partnership as follows:
(a) Newco (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its organization,
(ii) has all requisite corporate power and authority to own its property
and assets and to carry on its business as now conducted and as proposed
to be conducted by Newco, (iii) is qualified to do business in every
jurisdiction where such qualification is required, except where the
failure so to qualify would not result in a "Material Adverse Effect on
Newco" (as such term is hereinafter defined), and (iv) has the corporate
power and authority to execute, deliver and perform its obligations under
this Agreement. As employed herein, the term "Material Adverse Effect on
Newco" shall mean (i) a materially adverse effect on the financial
condition of Newco, or (ii) material impairment of the ability of Newco
to pay any amount due, or to perform any other material obligation, under
any Letter of Credit Document or Alternate Reimbursement Document.
(b) The execution, delivery and performance by Newco of this
Agreement and the transactions contemplated hereby (i) have been duly
authorized by all requisite corporate and, if required, stockholder
action and (ii) will not (A) violate (x) any provision of law, statute,
rule or regulation to which Newco or any of its "Affiliates" (as such
term is defined in Section 7.2) shall be subject, or of the certificate
or articles of incorporation or other constitutive documents or by-laws
of Newco, (y) any order of any governmental authority or quasi-
governmental authority, or (z) any provision of any indenture or other
material agreement or instrument to which Newco is a party or by which it
or any of its property is or may be bound, (B) be in conflict with,
result in a breach of or constitute (alone or with notice or lapse of
time or both) a default under any such indenture, agreement or other
instrument, or (C) result in the creation or imposition of any lien upon
or with respect to any property or assets now owned or hereafter acquired
by Newco, except for the lien, if any, created pursuant to the terms of
this Agreement.
(c) This Agreement has been duly executed and delivered by Newco
and constitutes a legal, valid and binding obligation of Newco
enforceable against Newco in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally, or by general
equity principles, including but not limited to principles governing the
availability of the remedies of specific performance and injunctive
relief.
(d) All of the Bonds are in the Weekly Mode.
6.2 Representations and Warranties of ERP Operating Partnership. ERP
Operating Partnership hereby represents and warrants to Newco as follows:
(a) ERP Operating Partnership (i) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its organization, (ii) has all requisite corporate power and authority
to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted by ERP Operating Partnership,
(iii) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify would
not result in a "Material Adverse Effect on ERP Operating Partnership"
(as such term is hereinafter defined), and (iv) has the corporate power
and authority to execute, deliver and perform its obligations under this
Agreement. As employed herein, the term "Material Adverse Effect on ERP
Operating Partnership" shall mean a materially adverse effect on the
financial condition of ERP Operating Partnership.
(b) The execution, delivery and performance by ERP Operating
Partnership of this Agreement and the transactions contemplated hereby
(i) have been duly authorized by all requisite corporate and, if
required, stockholder action, and (ii) will not (A) violate (x) any
provision of law, statute, rule or regulation to which ERP Operating
Partnership or any of its "Affiliates" (as such term is defined in
Section 7.2) shall be subject, or of the certificate or articles of
incorporation or other constitutive documents or by-laws of ERP Operating
Partnership, (y) any order of any governmental authority or quasi-
governmental authority, or (z) any provision of any indenture or other
material agreement or instrument to which ERP Operating Partnership is a
party or by which it or any of its property is or may be bound, (B) be in
conflict with, result in a breach of or constitute (alone or with notice
or lapse of time or both) a default under any such indenture, agreement
or other instrument, or (C) result in the creation or imposition of any
lien upon or with respect to any property or assets now owned or
hereafter acquired by ERP Operating Partnership.
(c) This Agreement has been duly executed and delivered by ERP
Operating Partnership and constitutes a legal, valid and binding
obligation of ERP Operating Partnership enforceable against ERP Operating
Partnership in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally, or by general equity
principles, including but not limited to principles governing the
availability of the remedies of specific performance and injunctive
relief.
ARTICLE 7
EVENTS OF DEFAULT
7.1 Events of Default. The happening of any of the following events
shall be an "Event of Default" hereunder:
(a) any representation or warranty made or deemed made in this
Agreement by Newco shall prove to have been false or misleading in any
material respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any amounts due under
this Agreement and such default is not cured within five (5) business
days of written notice from ERP Operating Partnership of such default;
(c) material default shall be made in the due observance or
performance by Newco or PPPIC of any covenant, condition or agreement
contained in this Agreement, the Bond Documents, the Letter of Credit
Documents, any Alternate Reimbursement Documents and any Reimbursement
and Indemnification Agreement entered into pursuant to Section 4.3
hereof, other than a default in the payment of any amount due under this
Agreement, and such material default shall not be cured within fifteen
(15) business days of written notice from ERP Operating Partnership of
such default;
(d) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of Newco or PPPIC, or of a substantial part of the
property or assets of Newco or PPPIC under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law, (ii) the
appointment of a receiver, trustee, custodian, sequestrator, conservator
or similar official for Newco or PPPIC or for a substantial part of the
property or assets of Newco or PPPIC, or (iii) the winding-up or
liquidation of Newco or PPPIC; and such proceeding or petition shall
continue undismissed for 90 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(e) Newco or PPPIC shall (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal or
state bankruptcy, insolvency, receivership or similar law, (ii) consent
to the institution of, or fail to contest in a timely and appropriate
manner, any proceeding or the filing of any petition described in (d)
above, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
Newco or PPPIC or for a substantial part of the property or assets of
Newco or PPPIC, (iv) file an answer admitting the material allegations of
a petition filed against it in any such proceeding, (v) make a general
assignment for the benefit of creditors, or (vi) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due;
(f) one or more judgments for the payment of money in an aggregate
amount in excess of $250,000 shall be rendered against Newco or PPPIC and
the same shall remain unbonded or undischarged for a period of 30
consecutive days during which execution shall not be effectively stayed,
or any judgment creditor shall levy upon assets or properties of Newco or
PPPIC to enforce any such judgment; or
(g) there shall have occurred a Change in Control with respect to
Newco or PPPIC.
7.2 Definitions. As employed herein, the following terms shall have the
following meanings:
"Affiliate" shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or
more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.
A "Change in Control" shall be deemed to have occurred with
respect to Newco, as the case may be, if (a) any Person or group
(within the meaning of Rule 13d-5 of the Securities and Exchange
Commission as in effect on the date hereof other than ERP Operating
Partnership or ERP Operating Partnership's Affiliate) shall own,
directly or indirectly, beneficially or of record, shares
representing more than 50% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Newco; or
(b) a change shall occur during any period in the Board of Directors
of Newco in which the individuals who constituted the Board of
Directors of Newco at the beginning of such period (together with
any other director whose election by the Board of Directors of Newco
or whose nomination for election by the stockholders of Newco was
approved by a vote of at least two-thirds of the directors then in
office who either were directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the
directors of Newco then in office. With respect to PPPIC, a "Change
in Control" shall mean that the members of the Board of Directors of
PPPIC are no longer the nominees of Newco.
"Control", when used with respect to any specified Person,
means the power to direct the management and policies of such
Person, whether through the ownership of voting securities, by
contract or otherwise. The term "controlled" has a meaning
correlative to the foregoing.
"Person" shall mean any natural person, corporation, business
trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
7.3 Remedies. Upon the occurrence of an Event of Default described in
Section 7.1 hereof, ERP Operating Partnership shall have any and all remedies
available to it at law, in equity or pursuant to statute. Without limitation
of the foregoing,the occurrence of an Event of Default shall have the
consequences set forth in Sections 3.2 and 5.1 of this Agreement.
ARTICLE 8
AGREEMENT REGARDING PALOMINO PARK
Notwithstanding anything to the contrary contained herein, if at any time
Newco shall breach the terms of Article 7 of that certain Agreement Regarding
Palomino Park of even date herewith by and between ERP Operating Partnership
and Newco, then ERP Operating Partnership shall have no further obligations
under this Agreement.
ARTICLE 9
MISCELLANEOUS
9.1 Notices. Notices and other communications provided for herein shall
be in writing and shall be delivered by hand or overnight courier service,
mailed or sent by telecopy, as follows:
(a) if to Newco: Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Edward Lowenthal
Telecopy No.: (212) 333-2323
with a copy to: Brownstein, Hyatt, Farber & Strichland P.C.
410 Seventeenth St., Suite 2200
Denver, Colorado 80202
Attn: Wayne Hykan, Esq.
Telecopy No.: (303) 623-1956
(b) if to ERP Operating
Partnership: ERP Operating Limited Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: President
Telecopy No.: (312) 207-5243
with a copy to: Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: Bruce C. Strohm, Esq., General Counsel
Telecopy No.: (312) 454-0039
and: Rudnick & Wolfe
203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601
Attn: Errol R. Halperin, Esq.
Telecopy No.: (312) 236-7516
Such notice will be deemed given when received.
9.2 Survival of Agreement. All covenants, agreements, representations
and warranties made by Newco herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by ERP Operating
Partnership and shall survive the date of this Agreement, regardless of any
investigation made by ERP Operating Partnership or on its behalf, and shall
continue in full force and effect so long as ERP Operating Partnership retains
any obligations or liability under this Agreement, the Initial ERP Operating
Partnership Guaranty or any Alternate ERP Operating Partnership Guaranty.
9.3 Binding Effect. This Agreement shall become effective when it shall
have been executed by Newco and ERP Operating Partnership, and thereafter
shall be binding upon and inure to the benefit of Newco, ERP Operating
Partnership and their respective successors and assigns, except that neither
Newco nor ERP Operating Partnership shall have the right to assign its rights
hereunder or any interest herein without the prior consent of the other.
9.4 Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
9.5 Waivers; Amendment.
(a) No failure or delay of ERP Operating Partnership or Newco in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. The rights and remedies of ERP
Operating Partnership and Newco hereunder are cumulative and are not
exclusive of any rights or remedies which they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by
either party therefrom shall in any event be effective unless the same
shall be permitted by paragraph (b) below, and then such waiver or
consent shall be effective only in the specific instance and for the
purpose for which given. No notice or demand on either party in any case
shall entitle such party to any other or further notice or demand in
similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in
writing entered into by Newco and ERP Operating Partnership.
9.6 Entire Agreement. This Agreement, including any exhibits and
schedules hereto, constitutes the entire contract between the parties relative
to the subject matter hereof. Any previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement. Nothing
in this Agreement, expressed or implied, is intended to confer upon any party
other than the parties hereto and thereto any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.7 Waiver of Jury Trial. Each party hereto hereby waives, to the
fullest extent permitted by applicable law, any right it may have to a trial
by jury in respect of any litigation directly or indirectly arising out of,
under or in connection with this Agreement.
9.8 Severability. In the event any one or more of the provisions
contained in this Agreement should be held invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be affected or
impaired thereby. The parties shall endeavor in good-faith negotiations to
replace the invalid, illegal or unenforceable provisions with valid provisions
the economic effect of which comes as close as possible to that of the
invalid, illegal or unenforceable provisions.
9.9 Headings. Article and Section headings used herein are for
convenience of reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in interpreting,
this Agreement.
9.10 Jurisdiction; Consent to Service of Process.
(a) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR
ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS
OR NEW YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA
SITTING IN THE CITY OF CHICAGO OR THE CITY OF NEW YORK, AND ANY APPELLATE
COURT THEREFROM, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND
EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES
THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD
AND DETERMINED IN SUCH ILLINOIS OR NEW YORK STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE
JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO
BRING ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT IN THE COURTS
OF ANY JURISDICTION.
(b) NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY
ILLINOIS OR NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE CITY OF
NEW YORK. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO
THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
IN WITNESS WHEREOF, ERP Operating Partnership and Newco have caused this
Agreement to be signed by their respective officers hereunto duly authorized
all as of the date first written above.
ERP OPERATING LIMITED PARTNERSHIP
BY: EQUITY RESIDENTIAL PROPERTIES TRUST,
its general partner
By:/s/ Bruce C. Strohm
--------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
and General Counsel
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Edward Lowenthal
------------------------------
Name: Edward Lowenthal
Title: President
REIMBURSEMENT AND INDEMNIFICATION AGREEMENT
THIS REIMBURSEMENT AND INDEMNIFICATION
AGREEMENT (this "Agreement") made as of the 30th day of May, 1997 by and
between WELLSFORD REAL PROPERTIES, INC., a Maryland corporation ("Newco") and
ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership ("ERP").
R E C I T A L S:
A. Reference is hereby made to that
certain Letter of Credit in the face principal amount of $15,773,702.00 issued
by Dresdner Bank, AG, New York Branch (the "Bank") for the purpose of securing
the payment of certain bonds which were issued by the Palomino Park Public
Improvements Corporation, a Colorado nonprofit corporation ("PPPIC") for the
purpose of financing certain public facilities located within Highlands Ranch
Metropolitan District No. 2, Douglas County, Colorado, a quasi-municipal
corporation organized pursuant to the laws of the State of Colorado (the
"Dresdner L.C."). In connection with the Dresdner L.C., the Bank, PPPIC and
Wellsford Residential Properties Trust, a Maryland real estate investment
trust ("Wellsford Parent") entered into that certain Letter of Credit
Reimbursement Agreement dated as of December 1, 1995 (the "Bank Reimbursement
Agreement").
B. All of Wellsford Parent's rights and
obligations under the Bank Reimbursement Agreement have been assigned to and
assumed by Newco, a wholly-owned subsidiary of Wellsford Parent, pursuant to
that certain Contribution Agreement dated as of May 30, 1997 by and between
Wellsford Parent and Newco (the "Contribution Agreement").
C. ERP and Newco have entered into that
certain Credit Enhancement Agreement dated as of May 30, 1997 (the "Credit
Enhancement Agreement") whereby, among other things, ERP has agreed to
guarantee certain obligations of Newco (as the assignee of Wellsford Parent
pursuant to the Contribution Agreement) under the Bank Reimbursement
Agreement. All capitalized terms not otherwise defined herein shall have the
meanings ascribed thereto in the Credit Enhancement Agreement. Concurrently
herewith and pursuant to the terms of the Credit Enhancement Agreement, ERP
has agreed to execute and deliver to the Bank the Initial ERP Operating
Partnership Guaranty and, if required pursuant to Article 1.3 of the Credit
Enhancement Agreement, an Alternate ERP Operating Partnership Guaranty.
D. In consideration of ERP's
obligations under the Initial ERP Operating Partnership Guaranty, and if
required, the Alternate ERP Operating Partnership Guaranty, Newco has agreed
to enter into this Agreement under the terms and conditions as set forth
herein.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the
recitals, and the mutual representations, warranties, covenants and agreements
contained herein, Newco and ERP hereby agree as follows:
1. Reimbursement. Newco hereby
promises, without notice or demand, to pay to ERP in full the amount of any
payment ERP is required to make under the Initial ERP Operating Partnership
Guaranty or any Alternate ERP Operating Partnership Guaranty. All such
amounts shall be due and payable in full by Newco to ERP on the day on which
payment is made by ERP under the Initial ERP Operating Partnership Guaranty or
any Alternate ERP Operating Partnership Guaranty.
Newco shall pay ERP interest at the rate
of the "Prime Rate" (as such term is hereinafter defined) plus three percent
(3%) on all amounts due and owing from Newco to ERP under this Agreement, from
the date said amounts are due until said amounts are actually paid in full by
Newco to ERP. The payment of said interest by Newco shall not, however,
authorize Newco to defer payment when due of any amounts required to be paid
by Newco pursuant to this Agreement. As employed herein, the term "Prime
Rate" shall mean, from time to time, the rate of interest per annum then most
recently announced by The First National Bank of Chicago in Chicago, Illinois
as its corporate base rate. If The First National Bank of Chicago shall not
announce such a rate, then the term "Prime Rate" shall mean the prime rate or
base rate from time to time announced by an American money center bank
designated by ERP.
2. Indemnification of ERP. Newco shall
indemnify, exonerate and hold harmless ERP and any "ERP Indemnified Party" (as
such term is hereinafter defined) against any and all claims, demands,
damages, losses, liabilities and any costs and expenses whatsoever, including
without limitation reasonable attorneys' fees, which ERP or any ERP
Indemnified Party may incur (or which may be claimed against ERP or any ERP
Indemnified Party by any person or entity whatsoever) in connection with the
following:
a. The execution and delivery of,
or the performance of any obligations
under the Credit Enhancement Agreement.
b. The execution and delivery of,
or the performance of any obligations
under the Initial ERP Operating
Partnership Guaranty.
c. The execution and delivery of,
or the performance of any obligations
under any Alternate ERP Operating
Partnership Guaranty.
Notwithstanding the foregoing, Newco shall not indemnify or hold harmless ERP
to the extent that claims, demands, damages, losses, liabilities, costs and
expenses have arisen by reason of ERP's breach of its obligations under the
Credit Enhancement Agreement or the negligence or willful misconduct of ERP or
any ERP Indemnified Party in connection with the Credit Enhancement Agreement,
the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating
Partnership Guaranty.
As employed herein, the term "ERP
Indemnified Party" shall mean any and all general and limited partners,
officers, directors, trustees and agents of ERP and any and all employees of
the foregoing.
DG Indemnification of Newco. ERP shall
indemnify, exonerate and hold harmless Newco and any "Newco Indemnified Party"
(as such term is hereinafter defined) against any and all claims, demands,
damages, losses, liabilities and any costs and expenses whatsoever, including
without limitation, reasonable attorneys' fees which Newco or any Newco
Indemnified Party may incur (or which may be claimed against Newco or any
Newco Indemnified Party) in connection with ERP's breach of its obligations
under the Credit Enhancement Agreement or by reason of the negligence or
willful misconduct of ERP in connection with the Credit Enhancement Agreement,
the Initial ERP Operating Partnership Guaranty or any Alternate ERP Operating
Partnership Guaranty.
As employed herein, the term "Newco
Indemnified Party" shall mean any and all officers, directors and agents of
Newco and any and all employees of the foregoing.
4. Covenant of Newco. If Newco
receives any notices with respect to a default under the Bank Reimbursement
Agreement or if Newco receives notice that Newco has taken action that with
the passage of time would constitute an event of default under the Bank
Reimbursement Agreement, then Newco shall immediately deliver copies of all
such notices to ERP.
5. Waiver and Estoppel. Newco
knowingly waives and agrees that it will be estopped from asserting any
argument to the contrary: (a) any and all notice of acceptance of this
Agreement or of the creation, renewal or accrual of any of the obligations or
liabilities hereunder indemnified against, either now or in the future;
(b) protest, presentment, demand for payment, notice of default or nonpayment,
notice of protest or default; (c) any and all notices or formalities to which
Newco may otherwise be entitled, including without limitation notice of the
granting of any indulgences or extensions of time of payment of any of the
liabilities and obligations hereunder and hereby indemnified against; (d) any
promptness in making any claim or demand hereunder; (e) the defense of the
statute of limitations in any action hereunder or in any action for the
collection of amounts payable hereunder; (f) any defense that may arise by
reason of the incapacity, lack of authority, death or disability of any other
person or persons or the failure to file or enforce a claim against the estate
(in administration, bankruptcy or any other proceeding) of any other person or
persons; (g) any defense based upon an election of remedies which destroys or
otherwise impairs any or all of the subrogation rights of Newco or the right
of Newco to proceed against any other person for reimbursement, or both;
(h) all duty or obligation of ERP to proceed against any one or more person as
a condition to proceeding against Newco; (i) any principle or provision of
law, statutory or otherwise, which is or might be in conflict with the terms
and provisions of this Agreement. No delay or failure on the part of ERP in
the exercise of any right or remedy against Newco or any other party against
whom ERP may have any rights, shall operate as a waiver of any agreement or
obligation contained herein, and no single or partial exercise by ERP of any
rights or remedies as hereunder shall preclude other or further exercise
thereof or other exercise of any other right or remedy. No waiver of the
rights of ERP or in connection herewith and no release of Newco shall be
effective unless in writing executed by a duly authorized officer of ERP.
6. Restriction on Modification of
Guaranties. ERP agrees that following the execution of the Initial ERP
Operating Partnership Guaranty and the Alternate ERP Operating Partnership
Guaranty, ERP will not consent to a modification of the terms and conditions
of the Initial ERP Operating Partnership Guaranty or the terms and conditions
of the Alternate ERP Operating Partnership Guaranty which would increase
Newco's obligations under this Agreement, without Newco's prior written
consent, unless (in the case of the Alternate ERP Operating Partnership
Guaranty) ERP is required to enter into an Alternate ERP Operating Partnership
Guaranty in such form pursuant to the Credit Enhancement Agreement.
7. Remedies; Attorneys' Fees and
Enforcement Costs. If either party shall fail to perform its obligations
under this Agreement, the other party shall be entitled to pursue any and all
remedies, singly, successively or in combination (including, without
limitation, direct and consequential damages, the remedy of specific
performance and injunctive relief) available to it at law, in equity or
pursuant to statute. In the event of any action or proceeding at law or in
equity between ERP and Newco to enforce any provision of this Agreement or to
protect or establish any right or remedy of either party hereunder, the
unsuccessful party to such litigation (after exhaustion of all appeals) shall
pay to the prevailing party all costs and expenses, including reasonable
attorneys' fees incurred therein by such prevailing party, and if such
prevailing party shall recover judgment in any such action or proceeding, such
costs and expenses (including such attorneys' fees) as are related to said
action or proceeding, or as were incurred by the prevailing party in any lower
court proceedings which have been overturned, shall be included in and as a
part of such judgment.
8. Notices. All notices herein
required shall be in writing and shall be served on the parties at the
addresses or telecopy numbers as set forth herein. The mailing of a notice by
registered or certified mail, return receipt requested, the "faxing" of a
notice by telecopy or notice sent by overnight courier or messenger shall be
deemed sufficient service hereunder. Notices shall be deemed given as of
(i) the second (2nd) business day after the date of mailing if mailed by
registered or certified mail as aforesaid, (ii) the new business day after the
date of sending, if sent by overnight courier, (iii) the time received if
delivered by messenger, or (iv) the date received if given by telecopy as
aforesaid, if received during normal business hours, otherwise, on the next
business day. Notices shall be sent as follows:
If to ERP: ERP Operating Limited Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: President
Fax No. (312) 207-5243
with a copy to: Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attention: Bruce C. Strohm, Esq.
Fax No. (312) 454-0039
and to: Rudnick & Wolfe
203 N. LaSalle Street, Suite 1800
Chicago, Illinois 60601
Attention: Errol R. Halperin, Esq.
Fax No. (312) 236-7516
If to Newco: Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attention: Edward Lowenthal
Fax No. (212) 333-2323
with a copy to: Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attention: Wayne H. Hykan, Esq.
Fax No. (303) 623-1956
9. State Law. This Agreement shall be construed and interpreted in
accordance with the substantive laws of the State of Illinois without regard
to principles of conflicts of laws.
10. Jurisdiction; Consent to Service of Process.
a. NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF
AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY ILLINOIS OR NEW
YORK STATE COURT OR FEDERAL COURT OF THE UNITED STATES OF AMERICA SITTING IN
THE CITY OF CHICAGO OR THE CITY OF NEW YORK, AND ANY APPELLATE COURT
THEREFROM, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH OF
THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN SUCH ILLINOIS OR NEW YORK STATE COURT OR, TO THE EXTENT
PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE PARTIES HERETO AGREES
THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE
AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY
OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS AGREEMENT SHALL AFFECT ANY
RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT IN THE COURTS OF ANY JURISDICTION.
b. NEWCO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE
FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO, ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT IN ANY ILLINOIS OR
NEW YORK STATE COURT OR FEDERAL COURT SITTING IN THE CITY OF NEW YORK. EACH
OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF
SUCH ACTION OR PROCEEDING IN ANY SUCH COURT.
11. Headings. The headings used herein are for convenience only and do not
limit or alter the terms of this Agreement or in any way affect the meaning or
interpretation of this Agreement.
12. Successors and Assigns. All rights of ERP and Newco shall inure to the
benefit of their successors and assigns, and all obligations, liabilities, and
duties of Newco hereunder shall bind their successors and assigns, provided
that Newco shall not be permitted to assign its rights and obligations under
this Agreement without the prior written consent of ERP, which may be withheld
in ERP's sole and absolute discretion.
13. Entire Agreement; Amendment and Modification. This Agreement
constitutes the entire agreement and understanding of the parties hereto in
respect of the subject matter contained herein, supersedes all prior
agreements and understandings, both written and oral, between the parties in
respect of the subject matter hereof or thereof and no changes, amendments, or
alterations hereto shall be effective unless pursuant to written instrument
executed by Newco and ERP.
14. Waiver of Strict Compliance. No waiver or failure of ERP to exercise
any right, power or remedy or to insist upon strict compliance with any
obligation, covenant, agreement, representation, warranty, or condition shall
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure to comply with such obligation, covenant, agreement, representation,
warranty, or condition.
15. Severability. In the event that any provision of this Agreement, or
the application thereof to any particular party or circumstance, is found by a
court of competent jurisdiction to be invalid or unenforceable (in whole or in
its application to a particular party or circumstance), the remaining
provisions of this Agreement or the application thereof to different parties
or circumstances, as the case may be, shall not be affected thereby and this
Agreement shall remain in full force and effect in all other respects.
16. Time of the Essence. The parties hereby acknowledge and agree that
time is and shall be of the essence hereof.
[Signature page follows]
<PAGE>
SIGNATURE PAGE TO
REIMBURSEMENT AND INDEMNIFICATION AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
WELLSFORD REAL PROPERTIES, INC., a
Maryland corporation
By:/s/Edward Lowenthal
-------------------------------
Name: Edward Lowenthal
Title: President
ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership
By: Equity Residential Properties
Trust, a Maryland real estate
investment trust, its general
partner
By:/s/ Bruce C. Strohm
---------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
GUARANTY
This GUARANTY ("Guaranty") is executed as of May 30, 1997, by ERP
Operating Limited Partnership, an Illinois limited partnership ("Guarantor"),
in favor of and for the benefit of Dresdner Bank AG, New York Branch, a
banking corporation organized and existing under the laws of The Federal
Republic of Germany, acting by and through its New York Branch (the "Bank").
W I T N E S S E T H:
WHEREAS, Palomino Park Public Improvements Corporation, a Colorado
nonprofit corporation (the "Bond Issuer"), has issued its Assessment Lien
Revenue Bonds, Series 1995 (the "Bonds") pursuant to the terms of a Trust
Indenture, dated as of September 1, 1995 (the "Bond Indenture"), between the
Bond Issuer and United States Trust Company of New York, as Trustee (the "Bond
Trustee"), the proceeds of which have been or will be used primarily to
finance certain water, sewer, street and park facilities for The Park at
Highlands Ranch, a master-planned community in Douglas, Colorado, comprising
approximately 182 acres planned for development in five phases (the
"Development"); and
WHEREAS, in order to secure the payment of principal of and interest
on the Bonds, the Bank has issued an irrevocable Letter of Credit (together
with any extensions, renewals or replacements thereof, the "Letter of
Credit"), in accordance with the terms of a Letter of Credit Reimbursement
Agreement, dated as of December 1, 1995 (the "Original Reimbursement
Agreement"), between the Bank, and the Bond Issuer and Wellsford Real Estate
Investment Trust ("Wellsford REIT"), as account parties; and
WHEREAS, Wellsford REIT intends to spin-off Wellsford Real
Properties, Inc. ("WRP," and together with the Bond Issuer, the "Account
Parties") and merge with Equity Residential Properties Trust, a Maryland real
estate investment trust ("ERP REIT"), with Wellsford REIT being the surviving
entity and being renamed Equity Residential Properties Trust; and
WHEREAS, Wellsford REIT has requested that WRP succeed to the
interest of Wellsford REIT under the Reimbursement Agreement, in accordance
with the provisions of that certain First Amendment to Letter of Credit
Reimbursement Agreement, dated as of the date hereof, between the Bank, the
Bond Issuer, Wellsford REIT and WRP (the "First Amendment" and together with
the Original Reimbursement Agreement, the "Reimbursement Agreement"), and that
certain Assignment and Assumption Agreement, dated as of the date hereof, by
and between Wellsford REIT and WRP (the "Assignment Agreement") (capitalized
terms used herein without definition have the meanings given such terms in the
Reimbursement Agreement unless otherwise expressly indicated, provided,
however, that capitalized terms used in section 4.4 and not otherwise defined
in this Guaranty have the meanings given such terms in Annex A attached
hereto); and
WHEREAS, the Bank and the Bond Issuer have been asked to consent to
the Spin Off and the Merger; and
WHEREAS, in order to induce the Bank to consent to the Assignment
Agreement, the Spin Off and the Merger and to enter into the First Amendment,
Guarantor, which is a majority-owned subsidiary of ERP REIT and after the
Merger will be a majority-owned subsidiary of Wellsford REIT (with Wellsford
REIT being renamed "Equity Residential Properties Trust"), has offered to
enter into this Guaranty for the benefit and in favor of the Bank; and
WHEREAS, both through the Merger and accompanying transactions and
through its direct and indirect ownership interests in both WRP and the
Development pursuant to the Spin Off and the Merger, Guarantor will directly
benefit from the transactions contemplated hereby.
NOW, THEREFORE, as an inducement to the Bank to execute the First
Amendment and the Assignment Agreement and for other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
ARTICLE V
NATURE AND SCOPE OF GUARANTY
5.1 Guaranty of Obligation. Guarantor hereby irrevocably and
unconditionally guarantees to the Bank and its successors and assigns the due
and punctual payment and performance in full of all Guaranteed Obligations (as
herein defined) as and when the same shall become due and payable, whether by
lapse of time, by acceleration of maturity or otherwise (including amounts
that would become due but for the operation of the automatic stay under
Section 362(a) of the Bankruptcy Code, 11 U.S.C. Section 362(a)).
5.2 Definition of Guaranteed Obligations. The term "Guaranteed
Obligations" is used herein to mean the punctual payment when due, whether at
stated maturity, by acceleration or otherwise, of all obligations of each
Account Party, and both of them, now or hereinafter existing under the
Reimbursement Agreement and the Related Documents, including, subject to the
provisions of Section 2.1, (if applicable), any extensions, modifications,
amendments, substitutions and renewals thereof, whether for principal
(including reimbursement of amounts drawn under the Letter of Credit),
interest, fees, expenses, indemnification, or otherwise.
Notwithstanding anything to the contrary in the Reimbursement
Agreement or the Related Documents, (i) the Bank shall not be deemed to have
waived any right which the Bank may have under Section 506(a), 506(b), 1111(b)
or any other provisions of the U.S. Bankruptcy Code to file a claim for the
full amount of the debt secured by the Deed of Trust or to require that all
collateral shall continue to secure all of the debt owing to the Bank in
accordance with the Reimbursement Agreement and the Related Documents,
provided, however, that the exercise of such rights shall not be a condition
to or a prerequisite for the exercise of any rights or remedies of the Bank
hereunder or under the Reimbursement Agreement or any other Related Document,
and (ii) Guarantor shall be liable for the full amount of the Guaranteed
Obligations as and when due hereunder.
5.3 Nature of Guaranty. This Guaranty is an irrevocable, absolute,
continuing guaranty of payment and not a guaranty of collection. This
Guaranty may not be revoked by Guarantor and shall continue to be effective
with respect to any Guaranteed Obligations arising or created after any
attempted revocation by Guarantor. Subject to the provisions of Section 2.1
hereof, the fact that at any time or from time to time the Guaranteed
Obligations may be increased or reduced shall not release or discharge the
obligation of Guarantor to the Bank with respect to the Guaranteed
Obligations. This Guaranty may be enforced by the Bank and any subsequent
holder of the Promissory Notes and shall not be discharged by the assignment
or negotiation of all or part of any of the Promissory Notes.
5.4 Guaranteed Obligations Not Reduced by Offset. The Guaranteed
Obligations and the liabilities and obligations of Guarantor to the Bank
hereunder, shall not be reduced, discharged or released because or by reason
of any existing or future offset, claim or defense of any Account Party, or
any other party, against the Bank or against payment of the Guaranteed
Obligations, whether such offset, claim or defense arises in connection with
the Guaranteed Obligations (or the transactions creating the Guaranteed
Obligations) or otherwise.
5.5 Payment By Guarantor. Guarantor hereby agrees, in furtherance
of the foregoing and not in limitation of any other right which the Bank or
any other Person may have at law or in equity against Guarantor by virtue
hereof, that upon the failure of any Account Party to pay any of the
Guaranteed Obligations when and as the same shall become due, whether at
stated maturity, by required prepayment, declaration, acceleration, demand or
otherwise, Guarantor will upon demand, without presentment, protest, notice of
protest, notice of non-payment, notice of intention to accelerate the
maturity, notice of acceleration of the maturity, or any other notice
whatsoever, pay, or cause to be paid, in cash, to the Bank, an amount equal to
the sum of the unpaid principal amount of all Guaranteed Obligations then due
as aforesaid, accrued and unpaid interest on such Guaranteed Obligations at
the relevant rate set forth in the Reimbursement Agreement and the Related
Documents (including, without limitation, interest which, but for the filing
of a petition in bankruptcy with respect to WRP or the Bond Issuer, would have
accrued on such Guaranteed Obligations, whether or not a claim is allowed
against WRP or the Bond Issuer for such interest in any such bankruptcy
proceeding) and all other Guaranteed Obligations then owed to the Bank.
5.6 Payment of Expenses. Guarantor agrees to pay, or cause to be
paid, on demand, and to save the Bank harmless against liability for, any and
all costs and expenses (including fees and disbursements of counsel and
reasonable allocated costs of internal counsel) incurred or expended by the
Bank in connection with the enforcement of or preservation of any rights under
this Guaranty. The covenant contained in this Section shall survive the
payment and performance of the Guaranteed Obligations and the termination of
this Guaranty.
5.7 Effect of Bankruptcy. (a) So long as any Guaranteed
Obligations remain outstanding, Guarantor shall not, without the prior written
consent of the Bank, commence or join with any other Person in commencing any
bankruptcy, reorganization or insolvency proceedings of or against either or
both of the Account Parties. The obligations of Guarantor under this Guaranty
shall not be reduced, limited, impaired, discharge, deferred, suspended or
terminated by any proceeding, voluntary or involuntary, involving the
bankruptcy, insolvency, receivership, reorganization, liquidation, or
arrangement of either or both of the Account Parties or by any defense which
either or both of the Account Parties may have by reason of the order, decree
or decision of any court or administrative body resulting from any such
proceeding.
(b) Guarantor acknowledges and agrees that any interest on any
portion of the Guaranteed Obligations which accrues after the commencement of
any proceeding referred to in clause (a) above (or, if interest on any portion
of the Guaranteed Obligations ceases to accrue by operation of law by reason
of the commencement of said proceedings, such interest as would have accrued
on such portion of the Guaranteed Obligations if said proceedings had not been
commenced) shall be included in the Guaranteed Obligations, whether or not a
claim is allowed for such interest in any such bankruptcy proceeding, because
it is the intention of Guarantor and the Bank that the Guaranteed Obligations
which are guaranteed by Guarantor pursuant to this Guaranty should be
determined without regard to any rule of law or order which may relieve either
or both of the Account Parties of any portion of such Guaranteed Obligations.
Guarantor will permit any trustee in bankruptcy, receiver, debtor in
possession, assignee for the benefit of creditors or similar person to pay the
Bank, or allow the claim of the Bank in respect of, any such interest accruing
after the date on which such proceeding is commenced.
(c) In the event that all or any portion of the Guaranteed
Obligations are paid by either or both of the Account Parties, the obligation
of Guarantor hereunder shall continue and remain in full force and effect or
be reinstated, as the case may be, in the event that all or any part of such
payment(s) are rescinded or recovered directly or indirectly from the Bank as
a preference, fraudulent transfer or otherwise, and any such payments which
are so rescinded or recovered shall constitute Guaranteed Obligations for all
purposes under this Guaranty. It is the intention of Guarantor that
Guarantor's obligations hereunder shall not be discharged except by
Guarantor's performance of such obligations and then only to the extent of
such performance.
5.8 Rights Cumulative. The rights, powers and remedies given to
the Bank by this Guaranty are cumulative and shall be in addition to and
independent of all rights, powers and remedies given to the Bank by virtue of
any statue or rule of law or in any of the Reimbursement Agreement, the
Related Documents or any agreement between Guarantor and the Bank or between
an Account Party and the Bank. Any forbearance or failure to exercise, and
any delay by the Bank in exercising, any right, power or remedy hereunder
shall not impair any such right, power or remedy or be construed to be a
waiver thereof, nor shall it preclude the further exercise of any such right,
power or remedy.
5.9 Notice of Events. As soon as Guarantor obtains knowledge
thereof, Guarantor shall give the Bank written notice of any condition or
event which has resulted in (a) a material adverse change in the financial
condition of Guarantor, or (b) a breach of or noncompliance with any term,
condition or covenant contained herein or in any other documents delivered
pursuant hereto.
5.10 Successor. The term "WRP" or "Bond Issuer," as applicable, as
used herein shall include any new or successor corporation, association,
partnership (general or limited), joint venture, trust or other individual or
organization formed as a result of any merger, reorganization, sale, transfer,
devise, gift or bequest of WRP or Bond Issuer, as applicable, or any interest
in WRP or Bond Issuer, as applicable.
ARTICLE VI
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Except as otherwise expressly set forth herein, Guarantor agrees
that its obligations hereunder are irrevocable, absolute, independent and
unconditional and shall not be affected by any circumstance which releases,
diminishes, impairs, reduces or adversely affects its obligations hereunder or
constitutes a legal or equitable discharge of a guarantor or surety other than
payment in full of the Guaranteed Obligations. In furtherance of the
foregoing and without limiting the generality thereof, Guarantor agrees as
follows:
6.1 Modification. Bank, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or enforceability
of this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of Guarantor's liability hereunder, from time to time
may (i) renew, extend, increase, modify, alter, rearrange, accelerate, or
otherwise change the time, place, manner or terms of payment (including
without limitation the rate of interest) of the Guaranteed Obligations and
(ii) renew, extend, amend, modify, rescind, waive, increase, alter,
supplement, rearrange or otherwise change the Reimbursement Agreement, any
Related Document or any other document, instrument, contract or understanding
between WRP, the Bond Issuer and the Bank, or any other parties, pertaining to
the Guaranteed Obligations, whether or not in accordance with the
Reimbursement Agreement, such Related Document or such other document;
provided, however, that, notwithstanding the foregoing and anything to the
contrary contained in this Section 2.1, so long as no Event of Default has
occurred and is continuing under this Guaranty, if at any time the Bank and
the Account Parties desire to amend, modify, alter or supplement the
Reimbursement Agreement or any Related Document (by a written instrument or
otherwise) in any way, other than extensions of the Letter of Credit through
May 30, 2005 in accordance with Section 9.3 of the Reimbursement Agreement and
Exhibit H of the Letter of Credit, the Bank shall first obtain Guarantor's
consent to the amendment, modification, alteration, or supplement if the
effect thereof is to increase the obligations or impose new obligations upon
Guarantor under this Guaranty. If Guarantor's consent was required by the
preceding sentence and the Bank fails to obtain Guarantor's consent to such
amendment, modification, alteration or supplement, the Bank shall have no
obligation or liability to Guarantor and the only consequence of the Bank's
failure to obtain Guarantor's consent to such amendment, modification,
alteration or supplement shall be that Guarantor shall have no obligation
hereunder with respect to the new, additional or increased obligation, as
applicable.
6.2 Adjustments. The Bank may enforce this Guaranty
notwithstanding any adjustment, indulgence, forbearance or compromise that
might be granted or given by the Bank to any Account Party or the Guarantor.
6.3 Disputes with Account Party. Bank may enforce this Guaranty
upon the occurrence of an Event of Default under the Reimbursement Agreement
or any Related Document notwithstanding the existence of any dispute between
the Bank and an Account Party with respect to the existence of such Event of
Default.
6.4 Independence of Obligations. The obligations of Guarantor
hereunder are independent of the obligations of each of the Account Parties
under the Reimbursement Agreement and the Related Documents and the
obligations of any other guarantor of the obligations of an Account Party
under the Reimbursement Agreement and the Related Documents, and a separate
action or actions may be brought and prosecuted against Guarantor whether or
not any action is brought against an Account Party or any of such other
guarantors and whether or not an Account Party is joined in any such action or
actions. The obligations of Guarantor hereunder are independent of any full
or partial release of the liability of any Account Party on the Guaranteed
Obligations, or any part thereof, or of any co-guarantors, or any other person
or entity now or hereafter liable, whether directly or indirectly, jointly,
severally, or jointly and severally, to pay, perform, guarantee or assure the
payment of the Guaranteed Obligations, or any part thereof, it being
recognized, acknowledged and agreed by Guarantor that Guarantor may be
required to pay the Guaranteed Obligations in full without assistance or
support of any other party, and Guarantor has not been induced to enter into
this Guaranty on the basis of a contemplation, belief, understanding or
agreement that other parties will be liable to pay or perform the Guaranteed
Obligations, or that the Bank will look to other parties to pay or perform the
Guaranteed Obligations. Accordingly, it shall not be necessary for the Bank
(and Guarantor hereby waives any rights which Guarantor may have to require
the Bank), in order to enforce the obligations of Guarantor hereunder, first
to (i) institute suit or exhaust its remedies against any Account Party or
others liable on any Guaranteed Obligations or any other person, (ii) enforce
the Bank's rights against any collateral which shall ever have been given to
secure any indebtedness under the Reimbursement Agreement or the Related
Documents, (iii) enforce the Bank's rights against any other guarantors of the
Guaranteed Obligations, (iv) join any Account Party or any others liable on
the Guaranteed Obligations in any action seeking to enforce this Guaranty,
(v) exhaust any remedies available to the Bank against any collateral which
shall ever have been given to secure any indebtedness under the Reimbursement
Agreement or the Related Documents, or (vi) resort to any other means of
obtaining payment of the Guaranteed Obligations. The Bank shall not be
required to mitigate damages or take any other action to reduce, collect or
enforce the Guaranteed Obligations.
6.5 Partial Payment. Guarantor's payment of a portion, but not
all, of the Guaranteed Obligations shall in no way limit, affect, modify or
abridge Guarantor's liability for any portion of the Guaranteed Obligations
which has not been paid. Without limiting the generality of the foregoing, if
the Bank is awarded a judgement in any suit brought to enforce Guarantor's
covenant to pay a portion of the Guaranteed Obligations, such judgment shall
not be deemed to release Guarantor from its covenant to pay the portion of the
Guaranteed Obligations that is not the subject of such suit.
6.6 Collateral. Bank, upon such terms as it deems appropriate,
without notice or demand and without affecting the validity or enforceability
of this Guaranty or giving rise to any reduction, limitation, impairment,
discharge or termination of Guarantor's liability hereunder, from time to time
may (i) request and accept other guaranties of the Guaranteed Obligations and
take, hold and accept security, collateral or guaranty, or other assurances of
payment, for the payment of all or any part of this Guaranty or the Guaranteed
Obligations; (ii) release, surrender, exchange, substitute, compromise,
settle, rescind, waive, alter, subordinate or modify, with or without
consideration, any security, property or collateral at any time existing in
connection with, or assuring or securing the payment of, all or any part of
the Guaranteed Obligations, any other guaranties of the Guaranteed
Obligations, or any other obligation of any Person with respect to the
Guaranteed Obligations; (iii) allow the waste, deterioration, waste, loss or
impairment (including without limitation negligent, willful, unreasonable or
unjustifiable impairment) of any collateral, property or security at any time
existing in connection with, or assuring or securing payment of, all or any
part of the Guaranteed Obligations; or (iv) enforce and apply any security,
collateral or property now or hereafter held by or for the benefit of the Bank
in respect of this Guaranty or the Guaranteed Obligations and direct the order
or manner of sale thereof, or exercise any other right or remedy that the Bank
may have against any such security, collateral or property, as the Bank in its
discretion may determine consistent with the Reimbursement Agreement and the
Related Documents, including foreclosure on any such security, collateral or
property pursuant to one or more judicial or nonjudicial sales, whether or not
every aspect of any such sale is commercially reasonable, and even though such
action operates to impair or extinguish any right to reimbursement or
subrogation or other right or remedy of Guarantor against either or both of
the Account Parties or any security, collateral or property for the Guaranteed
Obligations.
6.7 Invalidity of Guaranteed Obligations. This Guaranty and the
obligations of Guarantor hereunder shall be valid and enforceable and shall
not be subject to any reduction, limitation, impairment, discharge or
termination as a result of the invalidity, illegality or unenforceability of
all or any part of the Guaranteed Obligations, or any document or agreement
executed in connection with the Guaranteed Obligations, for any reason
whatsoever, including without limitation the fact that (i) the Guaranteed
Obligations, or any part thereof, exceeds the amount permitted by law, (ii)
the obligations of the Guarantor hereunder are, in any respect, more
burdensome than permitted by law, (iii) the act of creating the Guaranteed
Obligations or any part thereof is ultra vires, (iv) the officers or
representatives executing the Promissory Notes, the Reimbursement Agreement or
the other Related Documents or otherwise creating the Guaranteed Obligations
acted in excess of their authority, (v) the Guaranteed Obligations violate
applicable usury laws, (vi) WRP or the Bond Issuer has valid defenses, claims
or offsets (whether at law, in equity or by agreement) which render the
Guaranteed Obligations wholly or partially uncollectible from any Account
Party, including, without limitation, any defense arising by reason of the
incapacity or any disability of an Account Party, (vii) the creation,
performance or repayment of the Guaranteed Obligations (or the execution,
delivery and performance of any document or instrument representing part of
the Guaranteed Obligations or executed in connection with the Guaranteed
Obligations, or given to secure the repayment of the Guaranteed Obligations)
is illegal, uncollectible or unenforceable, (viii) any term of this Guaranty
which is or may be in conflict with any principles or provisions of law,
statutory or otherwise, (ix) the Guarantor's obligations hereunder qualify or
may qualify, for any reason, for any legal or equitable discharge, or (ix) the
Promissory Notes, the Reimbursement Agreement or any of the other Related
Documents have been forged or otherwise are irregular or not genuine or
authentic, it being agreed that Guarantor shall remain liable hereon
regardless of whether any Account Party or any other person be found not
liable on the Guaranteed Obligations or any part thereof for any reason,
whether or not Guarantor shall have had notice of any of the foregoing.
6.8 Notice. Guarantor waives any and all right to notice, demand,
presentment, protest, notice of protest, notice of dishonor or notice of
action or inaction in connection with this Guaranty, the Reimbursement
Agreement, the Related Documents, and any documents or agreements evidencing,
securing or relating to any of the Guaranteed Obligations and the obligations
hereby guaranteed.
6.9 Other Actions Taken or Omitted. Except as expressly provided
in Section 2.1 hereof, this Guaranty and the obligations of Guarantor
hereunder shall be valid and enforceable and shall not be subject to any
reduction, limitation, impairment, discharge or termination for any other
action taken or omitted to be taken with respect to the Reimbursement
Agreement and the Related Documents, the Guaranteed Obligations, or the
security and collateral therefor, whether or not such action or omission
prejudices Guarantor or increases the likelihood that Guarantor will be
required to pay the Guaranteed Obligations pursuant to the terms hereof, it is
the unambiguous and unequivocal intention of Guarantor that Guarantor shall be
obligated to pay the Guaranteed Obligations when due, notwithstanding any
occurrence, circumstance, event, action, or omission whatsoever, whether
contemplated or uncontemplated, and whether or not otherwise or particularly
described herein, which obligation shall be deemed satisfied only upon the
full and final payment and satisfaction of the Guaranteed Obligations.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Bank to consent to the Spin Off, the Merger
and the accompanying transactions, to accept this Guaranty and to enter into
the First Amendment and to extend credit thereunder, Guarantor represents and
warrants to the Bank that the following statements are true and correct:
7.1 Existence and Power. Guarantor is a limited partnership, duly
formed and validly existing as a limited partnership under the laws of the
State of Illinois and has all powers and all material governmental licenses,
authorizations, consents and approvals required to own its property and assets
and carry on its business as now conducted or as it presently proposes to
conduct and has been duly qualified and is in good standing in every
jurisdiction in which the failure to be so qualified or in good standing is
likely to have a material adverse effect on this Guaranty.
DGA Power and Authority. Guarantor has the partnership power and
authority to execute, deliver and carry out the terms and provisions of this
Guaranty to which it is a party, and has taken all necessary partnership
action, if any, to authorize the execution and delivery on behalf of Guarantor
and the performance by Guarantor of this Guaranty. Guarantor has executed
this Guaranty and each of the documents related thereto to which it is a party
in accordance with the terms of this Guaranty, and this Guaranty and each such
related document constitutes the legal, valid and binding obligation of
Guarantor, enforceable in accordance with its terms, except as enforceability
may be limited by applicable insolvency, bankruptcy or other laws affecting
creditors rights generally, or general principles of equity, whether such
enforceability is considered in a proceeding in equity or at law.
7.3 No Violation. Neither the execution, delivery or performance
by or on behalf of Guarantor of this Guaranty, nor compliance by Guarantor
with the terms and provisions hereof nor the consummation of the transactions
contemplated by this Guaranty, (i) will materially contravene any applicable
provision of any law, statute, rule, regulation, order, writ, injunction or
decree of any court or governmental instrumentality, (ii) will materially
conflict with or result in any breach of, any of the terms, covenants,
conditions or provisions of, or constitute a default under, or result in the
creation or imposition of (or the obligation to create or impose) any lien
upon any of the property or assets of Guarantor or any of its Subsidiaries
pursuant to the terms of any indenture, mortgage, deed of trust, or other
agreement or other instrument to which Guarantor (or of any partnership of
which Guarantor is a partner) or any of its Subsidiaries is a party or by
which it or any of its property or assets is bound or to which it is subject,
or (iii) will cause a material default by Guarantor under any organization
document of any Person in which Guarantor has an interest, or cause a material
default under Guarantor's agreement or certificate of limited partnership, the
consequences of which conflict, breach or default would have a material
adverse effect on this Guaranty or Guarantor's ability to perform its
obligations hereunder or result in or require the creation or imposition of
any lien whatsoever upon any property of the Guaranty or any of its
Affiliates.
7.4 Financial Information. The consolidated balance sheet of
Guarantor and its Subsidiaries, dated as of December 31, 1996, the related
consolidated statements of Guarantor's financial position for the fiscal year
then ended, reported on by Ernst & Young LLP, the consolidated balance sheet
of Guarantor and its Subsidiaries, dated as of March 31, 1997, and the related
consolidated statements of Guarantor's financial position for the fiscal
quarter then ended, copies of which have been delivered to the Bank, fairly
present, in conformity with generally accepted accounting principles, the
consolidated financial position of Guarantor and its Subsidiaries as of such
dates and their consolidated results of operations and cash flows for such
fiscal year and fiscal quarter, respectively.
7.5 Solvency. As of the date hereof, and after giving effect to
the Merger and the transactions related thereto and to this Guaranty and the
contingent obligations evidenced hereby, Guarantor is, and will be, solvent,
and has and will have assets which, fairly valued, exceed its obligations,
liabilities (including contingent liabilities) and debts, and has and will
have property and assets sufficient to satisfy and repay its obligations and
liabilities.
7.6 Governmental Approvals. No order, consent, approval, license,
authorization, or validation of, or filing, recording or registration with, or
exemption by, any governmental or public body or authority, or any subdivision
thereof, is required to authorize, or is required in connection with the
execution, delivery and performance of this Guaranty or the consummation of
any of the transactions contemplated hereby other than those that have already
been duly made or obtained and remain in full force and effect or those which,
if not made or obtained, would not have a material adverse effect on this
Guaranty or Guarantor's ability to perform its obligations hereunder.
7.7 Benefit. As of the date hereof, (a) Guarantor owns shares of
stock in WRP for which Guarantor has paid consideration in the amount of
$3,500,000 and (b) Guarantor owns a twenty percent (20%) interest in Wellsford
Park Highlands Corp., which holds a ninety-nine percent (99%) interest in the
entities owning the real property in the Development. Moreover, Guarantor
will benefit from the Spin Off and the Merger, the consummation of which
requires the Bank's consent under the Reimbursement Agreement. Accordingly,
Guarantor has received direct benefit from the making of this Guaranty with
respect to the Guaranteed Obligations.
7.8 Familiarity and Reliance. Guarantor is familiar with, and has
independently reviewed books and records regarding, the financial condition of
each of the Account Parties and is familiar with the value of any and all
collateral intended to be created as security for the payment of the Bonds,
the Promissory Notes and the other Guaranteed Obligations; however, Guarantor
is not relying on such financial condition or the collateral as an inducement
to enter into this Guaranty.
7.9 No Representation By the Bank. Neither the Bank nor any other
party has made any representation, warranty or statement to Guarantor in order
to induce Guarantor to execute this Guaranty.
7.10 Legality. The execution, delivery and performance by Guarantor
of this Guaranty and the consummation of the transactions contemplated
hereunder do not, and will not, contravene or conflict with any law, statute
or regulation whatsoever to which Guarantor is subject or constitute a default
(or an event which with notice or lapse of time or both would constitute a
default) under, or result in the breach of, any indenture, mortgage, deed of
trust, charge, lien, or any contract, agreement or other instrument to which
Guarantor is a party or which may be applicable to Guarantor. This Guaranty
is a legal and binding obligation of Guarantor and is enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency or
other laws of general application relating to the enforcement of creditors'
rights.
7.11 Survival. All representations and warranties made by Guarantor
herein shall survive the execution hereof.
ARTICLE IV
AFFIRMATIVE AND NEGATIVE COVENANTS
Guarantor covenants and agrees that, until this Guaranty terminates
pursuant to Section 7.1 below:
4.1 Information. Guarantor will deliver to the Bank copies of all
certificates, reports, financials and other documents to be delivered to the
lenders pursuant to Section 5.1 of that certain Amended and Restated Revolving
Credit Agreement, dated as of December 9, 1996, among Guarantor, the banks
listed therein, Morgan Guaranty Trust Company of New York, as Lead Manager,
Bank of America Illinois, as Co-Lead Manager, The First National Bank of
Chicago, as Co-Agent, First Bank National Association, as Co-Agent, and
Nationsbank of Texas, N.A., as Co-Agent (the "Guarantor Credit Agreement")
within 85 days of the close of the Fiscal Quarter (as defined in Annex A) of
Guarantor for each of the first three Fiscal Quarters of the Fiscal Year (as
defined in Annex A) and within 125 days of the close of the final Fiscal
Quarter of the Fiscal Year. Within 85 days of the close of the Fiscal Quarter
of Guarantor for each of the first three Fiscal Quarters of the Fiscal Year
and within 125 days of the close of the final Fiscal Quarter of the Fiscal
Year, Guarantor shall deliver to the Bank a statement (a "Compliance
Certificate") certified by the principal financial officer of Guarantor in the
form of Exhibit A hereto setting forth in reasonable detail computations
evidencing compliance with the covenants contained in this Article IV.
4.2 Conduct of Business and Maintenance of Existence. Guarantor will
continue to engage in business of the same general type as now conducted, and
will preserve, renew and keep in full force and effect, its partnership
existence and its rights, privileges and franchises necessary for the normal
conduct of business unless the failure to maintain such rights and franchises
does not have a material adverse effect on this Guaranty or Guarantor's
ability to perform its obligations hereunder.
4.3 Existence. Guarantor shall do or cause to be done, all things
necessary to preserve and keep in full force and effect its existence and its
patents, trademarks, servicemarks, tradenames, copyrights, franchises,
licenses, permits, certificates, authorizations, qualifications,
accreditation, easements, rights of way and other rights, consents and
approvals the nonexistence of which is likely to have a material adverse
effect on this Guaranty or Guarantor's ability to perform its obligations
hereunder.
4.4 Financial Covenants.
(a) Definitions. All capitalized terms contained in this
Section 4.4 not otherwise defined in this Guaranty shall have the definitions
assigned to such terms in Annex A hereto.
(b) Total Liabilities to Gross Asset Value. Guarantor shall
not permit the ratio of Total Liabilities to Gross Asset Value of Guarantor
and its Subsidiaries to exceed 0.50:1 at any time.
(c) Unencumbered Pool. Guarantor shall not permit the ratio of
the Unencumbered Asset Value to outstanding Unsecured Debt to be less than
2.5:1 at any time.
(d) EBITDA to Fixed Charges Ratio. Guarantor shall not permit
the ratio of EBITDA for the then most recently completed Fiscal Quarter to
Fixed Charges for the then most recently completed Fiscal Quarter to be less
than 1.8:1.
(e) Unencumbered Net Operating Income to Unsecured Interest
Expense. Guarantor shall not permit the ratio of Unencumbered Net Operating
Income for the then most recently completed Fiscal Quarter to Unsecured
Interest Expense for the then most recently completed Fiscal Quarter to be
less than 2.25:1.
(f) Minimum Consolidated Tangible Net Worth. The Consolidated
Tangible Net Worth of the Guarantor and its Consolidated Subsidiaries will at
no time be less than $1,000,000,000 plus ninety percent (90%) of all Net
Offering Proceeds received by ERP REIT, the surviving trust under the Merger
(i.e., Wellsford REIT as the surviving entity in the Merger, which will be
renamed Equity Residential Properties Trust), or Guarantor on or after
December 9, 1996.
(g) Calculation. Each of the foregoing ratios and financial
requirements shall be calculated as of the last day of each Fiscal Quarter.
(h) Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with GAAP applied on a basis consistent (except for changes concurred in by
Guarantor's independent public accountants) with the most recent audited
consolidated financial statements of Guarantor and its Consolidated
Subsidiaries delivered to the Bank; provided that for purposes of references
to the financial results and information of "ERP REIT, on a consolidated
basis," ERP REIT shall mean the surviving entity from the Merger and shall be
deemed to own one hundred percent (100%) of the partnership interests in
Guarantor; and provided further that, if Guarantor notifies the Bank that
Guarantor wishes to amend any covenant in this Article IV to eliminate the
effect of any change in GAAP on the operation of such covenant (or if the Bank
notifies Guarantor that it wishes to amend this Article IV for such purpose),
then Guarantor's compliance with such covenant shall be determined on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant is amended
in a manner reasonably satisfactory to Guarantor and the Bank.
4.5 Restriction on Fundamental Changes. (a) Guarantor shall not
enter into any merger or consolidation, unless (i) Guarantor is the surviving
entity, (ii) the entity which is merged into Guarantor is predominantly in the
commercial real estate business, (iii) the credit ratings assigned by Standard
& Poor's Ratings Services and Moody's Investors Services Inc. (the "Rating
Agencies") to the surviving entity's long term unsecured debt or implied
senior debt, as applicable, are not lower than the credit ratings assigned by
the Rating Agencies to Guarantor's long term unsecured debtor or implied
senior debt, as applicable, two months immediately preceding such merger, and
(iv) in the case of any merger where the then fair market value of the assets
of the entity which is merged into Guarantor is twenty-five percent (25%) or
more of the Gross Asset Value (as defined in Annex A) of the surviving entity
of such Merger and its Consolidated Subsidiaries (as defined in Annex A), the
Bank shall consent thereto in writing, which consent shall not be unreasonably
withheld, conditioned or delayed. Guarantor shall not liquidate, wind-up or
dissolve (or suffer any liquidation or dissolution), discontinue its business
or convey, lease, sell, transfer or otherwise dispose of, in one transaction
or series of transactions, all or substantially all of its business or
property, whether now or hereafter acquired. Nothing in this Section shall be
deemed to prohibit the sale or leasing of portions of the Guarantor's real
property assets in the ordinary course of business.
(b) Guarantor shall not amend its agreement of limited
partnership or other organizational documents in any manner that would have a
material adverse effect on this Guaranty or Guarantor's ability to perform its
obligations hereunder without the Bank's consent, which shall not be
unreasonably withheld.
4.6 Amendments. Guarantor shall not amend, modify, or supplement,
or agree to any amendment or modification of, or supplement to, any of the
Related Documents to which it is a party. Guarantor shall not amend, modify,
or supplement, or agree to any amendment or modification of, or supplement to
any of the Spin Off Agreements which would adversely affect any Account
Party's ability to satisfy its obligations under the Reimbursement Agreement
or any Related Documents, or which would adversely affect Guarantor's ability
to satisfy its obligations under this Guaranty, or which would detract from
Guarantor's obligations hereunder.
ARTICLE V
SUBORDINATION OF CERTAIN INDEBTEDNESS
5.1 Guarantor's Rights of Subrogation, Contribution, Etc. Until
the Guaranteed Obligations shall have been paid in full and the Letter of
Credit shall have expired or been cancelled, Guarantor shall withhold exercise
of (a) any claim, right or remedy, direct or indirect, that Guarantor now has
or may hereafter have against any Account Party or any of its assets in
connection with this Guaranty or the performance by Guarantor of its
obligations hereunder, in each case, whether such claim, right or remedy
arises in equity, under contract, by statute, under common law or otherwise
and including without limitation (i) any right of subrogation, reimbursement
or indemnification that Guarantor now has or may hereafter have against an
Account Party, (ii) any right to enforce, or to participate in, any claim,
right or remedy that the Bank now or may hereafter have against any Account
Party, and (iii) any benefit of, and any right to participate in, any
collateral or security now or hereafter held by the Bank, and (b) any right of
contribution Guarantor may have against any other guarantor of any of the
Guaranteed Obligations. Guarantor further agrees that, to the extent the
agreement to withhold the exercise of its rights of subrogation,
reimbursement, indemnification and contribution as set forth herein is found
by a court of competent jurisdiction to be void or voidable for any reason,
any rights of contribution Guarantor may have against any such other
guarantor, shall be junior to and subordinate to any rights the Bank may have
in any such collateral or security, and to any right the Bank may have against
such other guarantor. The Bank may use, sell or dispose of any item of
collateral or security as it sees fit without regard to any subrogation rights
Guarantor may have, and upon any such disposition or sale any rights of
subrogation Guarantor may have shall terminate. If any amounts shall be paid
to Guarantor on account of any such subrogation, reimbursement or
indemnification rights at any time when all Guaranteed Obligations shall not
have been paid in full, such amount shall be held in trust for the Bank and
shall forthwith be paid over to the Bank to be credited and applied against
the Guaranteed Obligations, whether matured or unmatured, in accordance with
the terms hereof.
5.2 Subordination of Other Obligations.
(a) Any Indebtedness (as defined in Annex A) of an Account
Party or any other Palomino Party (as defined in Annex A) now or hereafter
held by Guarantor is hereby subordinated in right of payment to the prior
payment in full of all obligations then due and owing of such Person now or
hereafter existing under the Reimbursement Agreement and the other Related
Documents, including, subject to the provisions of Section 2.1 hereof (if
applicable), any extensions, modifications, substitutions, amendments and
renewals thereof, whether for principal (including reimbursement of amounts
drawn under any letter of credit), interest, fees, expenses, indemnification
or otherwise (all such obligations by any Palomino Party to the Guarantor
being the "Subordinated Obligations"). Guarantor agrees not to ask, demand,
sue for, take or receive from any Palomino Party, directly or indirectly, in
cash or other property or by set-off or in any other manner (including without
limitation from or by way of collateral), payment of all or any of the
Subordinated Obligations of such Palomino Party unless and until all
obligations of such Palomino Party then due and owing under the Reimbursement
Agreement and the other Related Documents have been paid and satisfied in
full. Any payment on any Subordinated Obligation collected or received by
Guarantor after an Event of Default has occurred and is continuing shall be
held in trust for the Bank and shall forthwith be paid over to the Bank to be
credited and applied against the Guaranteed Obligations but without affecting,
impairing or limiting in any manner the liability of Guarantor under any other
provision of this Guaranty.
(b) In furtherance and not in limitation of Section 5.2(a):
(i) until the Guaranteed Obligations have been paid in
full, the Letter of Credit has expired, and this Guaranty has terminated in
accordance with Section 7.1, upon any distribution of all or any of the assets
of any Palomino Party indebted to Guarantor to creditors of such Palomino
Party upon the dissolution, winding up, liquidation, arrangement,
reorganization, adjustment, protection, relief, or composition of such
Palomino Party or its debts, whether in any bankruptcy, insolvency,
arrangement, reorganization, receivership, relief or similar proceedings or
upon an assignment for the benefit of creditors or any other marshalling of
the assets and liabilities of such Palomino Party or otherwise, any payment or
distribution of any kind (whether in cash, property or securities) which
otherwise would be payable or deliverable upon or with respect to the
Subordinated Obligations of such Palomino Party to Guarantor, shall be paid or
delivered directly to the Bank to be credited and applied against the
Guaranteed Obligations; and
(ii) Guarantor agrees that, until the Guaranteed
Obligations have been paid in full, the Letter of Credit has expired, and this
Guaranty has terminated in accordance with Section 7.1, it shall not commence,
or join with any creditor other than the Bank in commencing, any proceeding
against any Palomino Party referred to in Section 5.2(b)(i).
5.3 Claims in Bankruptcy. In the event of receivership,
bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency
proceedings involving Guarantor as debtor, the Bank shall have the right to
prove its claim in any such proceeding so as to establish its rights hereunder
and receive directly from the receiver, trustee or other court custodian
dividends and payments which would otherwise be payable on account of any debt
or liability of an Account Party or any other Palomino Party to Guarantor.
Guarantor hereby assigns such dividends and payments to the Bank. Should the
Bank receive, for application upon the Guaranteed Obligations, any such
dividend or payment which is otherwise payable to Guarantor, and which, as
between an Account Party or any other Palomino Party and Guarantor, shall
constitute a credit on account of a claim or liability of such Account Party
or such other Palomino Party to Guarantor, then upon payment to the Bank in
full of all Guaranteed Obligations and the termination of this Guaranty
pursuant to Section 7.1 hereof, Guarantor shall become subrogated to the
rights of the Bank to the extent that such payments to the Bank on account of
such claim or liability have contributed toward the liquidation of the
Guaranteed Obligations, and such subrogation shall be with respect to that
proportion of the Guaranteed Obligations which would have been unpaid if the
Bank had not received dividends or payments on account of such claim or
liability.
ARTICLE VI
EVENTS OF DEFAULT
6.1 Events of Default. The occurrence of any of the following
events (including expiration of any specified time) shall constitute an "Event
of Default," unless waived by the Bank in writing:
(a) failure of Guarantor to pay when due any amount due under
this Guaranty within 3 business days following the making of a demand upon
Guarantor by the Bank pursuant to Section 1.5 hereof;
(b) failure of Guarantor to observe of perform any of the
covenants, conditions or provisions of this Guaranty (other than as specified
in Sections 6.1(a), 6.1(c), 6.1(d), 6.1(e), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof) and to remedy such failure within 45 days of such failure;
(c) any representation or warranty made by Guarantor herein or
in any certificate, financial or other statement furnished in connection with
this Guaranty or the Amendment shall prove to have been untrue or incomplete
in any material respect when made;
(d) admission by Guarantor of insolvency or bankruptcy or its
inability or failure generally to pay its debts as they become due, or
Guarantor makes an assignment for the benefit of creditors or applies for or
consents to the appointment of a trustee, custodian or receiver for such
Person, or for a major part of its property;
(e) filing of a petition or application for the appointment of
a trustee or other custodian, liquidator or receiver in bankruptcy, custodian
or receiver for Guarantor or all or part of its assets and property or any
thereof or a case or other proceeding shall be commenced against Guarantor
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution of liquidation or similar law of any jurisdiction, now or
hereafter in effect, and Guarantor shall indicate its approval thereof,
consent thereto or acquiescence therein or such petition, application, case or
proceeding shall not have been dismissed within 60 days following the
commencement thereof;
(f) institution of bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings, or other proceedings for relief under
any bankruptcy law or similar law for the relief of debtors, by or against
Guarantor (other than bankruptcy proceedings instituted by Guarantor against
third parties), and, if instituted against Guarantor, allowance or consent by
Guarantor to such proceedings or failure to obtain dismissal, stay or other
nullification within thirty (30) days after such institution;
(g) entrance of a decree or order appointing any such trustee,
custodian, liquidator or receiver or adjudicating Guarantor bankrupt or
insolvent, or approving a petition in any such case or other proceeding, or a
decree or order for relief is entered in respect of Guarantor, in each case of
the foregoing in an involuntary case under federal bankruptcy laws as now or
hereafter constituted;
(h) cancellation, termination, revocation or rescission of
this Guaranty otherwise than in accordance with the terms thereof or with the
express prior written agreement, consent or approval of the Bank, or any
action at law, suit in equity or other legal proceeding to cancel, revoke or
rescind this Guaranty shall be commenced by or on behalf of Guarantor or any
court or any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, this Guaranty is illegal, invalid or
unenforceable in accordance with the terms thereof in any material respect as
determined by the Bank; and
(i) (a) default by Guarantor in the payment of the principal
or the interest on any obligation or Indebtedness under the Guarantor Credit
Agreement (as defined in Section 4.1) or any other Recourse Debt (as defined
in Annex A) of Guarantor in excess of $10 million; or (b) the occurrence or
continuation of any event of default (as defined in the Guarantor Credit
Agreement) under the Guarantor Credit Agreement; or (c) any default under any
document governing any of Guarantor's other Recourse Debt in excess of $10
million which, in the case of this subsection (c) only, is not cured within
the time periods set forth therein.
6.2 Rights and Remedies. Upon the occurrence and continuation of an
Event of Default, the Bank, in its sole discretion, (a) may, by notice to
Guarantor, declare the obligations of Guarantor hereunder to be immediately
due and payable, and the same shall thereupon become immediately due and
payable, (b) may deliver concurrently to the Account Parties and the Bond
Trustee written notice that an Event of Default has been declared under this
Guaranty (and accordingly under the Reimbursement Agreement) and that the
Letter of Credit will terminate ten (10) days after receipt of such notice
together with a written request that the Bonds be accelerated, (c) may cure
any default, event of default or event of nonperformance under this Guaranty
or (d) may exercise any other rights or remedies available under this
Guaranty, any Related Document, any other agreement or at law or in equity.
The rights and remedies of the Bank specified herein are for the sole and
exclusive benefit, use and protection of the Bank, and the Bank is entitled,
but shall have no duty or obligation to Guarantor, either Account Party, the
Bond Trustee, the Bondholders or otherwise, (i) to exercise or refrain from
exercising any right or remedy reserved to the Bank hereunder, or (ii) to
cause the Account Parties or any other party to exercise or to refrain from
exercising any rights or remedy available to it under any of the Related
Documents.
ARTICLE VII
MISCELLANEOUS
7.1 Term. Except for those provisions which by their terms survive
the termination of this Guaranty, this Guaranty shall terminate after the
occurrence of both (i) the expiration of the Letter of Credit (which under the
terms of the Reimbursement Agreement shall not extend beyond May 30, 2005) and
(ii) payment in full of all obligations owed to the Bank under this Guaranty,
the Reimbursement Agreement and all Related Documents.
7.2 Waiver. No failure to exercise, and no delay in exercising, on
the part of Bank, any right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right. The rights of the Bank
hereunder shall be in addition to all other rights provided by law. No
modification or waiver of any provision of this Guaranty, nor consent to
departure therefrom, shall be effective unless in writing and no such consent
or waiver shall extend beyond the particular case and purpose involved. No
notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar or other instances without such notice
or demand.
7.3 Notices. Any notice, demand, statement, request or consent
made hereunder shall be in writing and shall be deemed to be received by the
addressee on the third day following the day such notice is deposited with the
United States Postal Service first class certified mail, return receipt
requested, addressed to the address, as set forth below, of the party to whom
such notice is to be given, or to such other address as either party shall in
like manner designate in writing. The addresses of the parties hereto are as
follows:
Guarantor: ERP Operating Limited Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza
Chicago, Illinois 60606-2639
Attn: Chief Financial Officer
with a copy to Attn: General Counsel
Telephone: (312) 474-1300
Facsimile: (312) 454-0434
Bank: Dresdner Bank AG
New York Branch
75 Wall Street
New York, NY 10005-2889
Attn:Johannes Boeckmann
Telephone: (212) 429-2000
Facsimile: (212) 429-2127
7.4 Governing Law. This Guaranty shall be governed by and
construed in accordance with the laws of the State of New York and the
applicable laws of the United States of America.
7.5 Invalid Provisions. If any provision of this Guaranty is held
to be illegal, invalid, or unenforceable under present or future laws
effective during the term of this Guaranty, such provision shall be fully
severable and this Guaranty shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Guaranty, and the remaining provisions of this Guaranty shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Guaranty' unless such
continued effectiveness of this Guaranty, as modified, would be contrary to
the basic understandings and intentions of the parties as expressed herein.
7.6 Amendments. This Guaranty may be amended only by an instrument
in writing executed by Guarantor and the Bank.
7.7 Parties Bound; Assignment. This Guaranty shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors, assigns and legal representatives; provided, however, that
Guarantor may not, without the prior written consent of the Bank, assign any
of its rights, powers, duties or obligations hereunder.
7.8 Headings. Section headings are for convenience of reference
only and shall in no way affect the interpretation of this Guaranty.
7.9 Recitals. The recital and introductory paragraphs hereof are a
part hereof, form a basis for this Guaranty and shall be considered prima
facie evidence of the facts and documents referred to therein.
7.10 Rights and Remedies. If Guarantor becomes liable for any
indebtedness owing by an Account Party to the Bank, by endorsement or
otherwise, other than under this Guaranty, such liability to the Bank shall
not be in any manner impaired or affected hereby and the rights of the Bank
hereunder shall be cumulative of any and all other rights that the Bank may
ever have against Guarantor. The exercise by the Bank of any right or remedy
hereunder or under any other instrument or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
7.11 Entirety. THIS GUARANTY EMBODIES THE FINAL, ENTIRE AGREEMENT
OF GUARANTOR AND THE BANK WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR
AND THE BANK AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY,
AND NO COURSE OF DEALING BETWEEN GUARANTOR AND THE BANK, NO COURSE OF
PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY
NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF
THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND
THE BANK.
7.12 Waiver of Right To Trial By Jury. GUARANTOR HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY FOR ANY TRIAL
RESULTING EITHER DIRECTLY OR INDIRECTLY OUT OF, UNDER OR IN CONNECTION WITH
THIS GUARANTY. GUARANTOR FURTHER AGREES THAT, IN THE EVENT OF LITIGATION, IT
WILL NOT PERSONALLY OR THROUGH ITS AGENTS OR ATTORNEYS SEEKS TO REPUDIATE THE
VALIDITY OF THIS SECTION 7.12, AND IT ACKNOWLEDGES THAT IT FREELY AND
VOLUNTARILY ENTERED INTO THIS AGREEMENT TO WAIVE TRIAL BY JURY IN ORDER TO
INDUCE THE BANK TO CONSENT TO THE MERGER AND THE ASSIGNMENT AGREEMENT AND TO
ENTER INTO THE FIRST AMENDMENT.
7.13 Consent to Jurisdiction and Venue, Etc. Guarantor irrevocably
(a) agrees that any suit, action or other legal proceeding arising out of or
relating to this Guaranty may be brought in a court of record in the State of
New York or in the Courts of the United States located in such state, (b)
consents to the jurisdiction of each such court in any such suit, action or
proceeding and (c) waives any objection which it may have to the laying of
venue of any such suit, action or proceeding in any of such courts and any
claim that any such suit, action or proceeding has been brought in an
inconvenient forum. Guarantor agrees that a final judgment in any such suit,
action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
All mailings under this Section 7.13 shall be by certified mail, return
receipt requested.
Nothing in this section 7.13 shall affect the right of the Bank to
serve legal process in any other manner permitted by law or affect that right
of the Bank to bring any suit, actions or proceeding against Guarantor or its
property in the courts of any other jurisdiction.
7.14 Cooperation. Guarantor acknowledges that the Bank and its
successors and assigns may (i) sell this Guaranty, the Promissory Notes, the
Reimbursement Agreement and the Related Documents to one or more investors as
a whole loan, (ii) participate the indebtedness under the Reimbursement
Agreement or Related Documents secured by this Guaranty to one or more
investors, (iii) deposit this Guaranty, the Promissory Notes, the
Reimbursement Agreement and the Related Documents with a trust, which trust
may sell certificates to investors evidencing an ownership interest in the
trust assets, or (iv) otherwise sell any indebtedness under the Reimbursement
Agreement or the Related Documents or interest therein to investors (the
transactions referred to in clauses (i) through (iv) are hereinafter each
referred to as "Secondary Market Transaction"). Guarantor shall cooperate
with the Bank in effecting any such Secondary Market Transaction and shall
cooperate to implement all requirements imposed by any rating agency involved
in any Secondary Market Transaction. Guarantor shall provide such information
and documents relating to Guarantor, any Account Party or the Trust Property
as the Bank may reasonably request in connection with such Secondary Market
Transaction. In addition, Guarantor shall make available to the Bank all
information concerning its business and operations that the Bank may
reasonably request. The Bank shall be permitted to share all such information
with the investment banking firms, rating agencies, accounting firms, law
firms and other third-party advisory firms involved with any indebtedness
incurred under the Reimbursement Agreement or the Related Documents or the
applicable Secondary Market Transaction. It is understood that the
information provided by Guarantor to the Bank may ultimately be incorporated
into the offering documents for the Secondary Market Transaction and thus
various investors may also see some or all of the information. The Bank and
all of the aforesaid third-party advisors and professional firms shall be
entitled to rely on the information supplied by, or on behalf of, Guarantor in
the form as provided by Guarantor. The Bank may publicize the existence of
indebtedness incurred under the Reimbursement Agreement and the Related
Documents in connection with its marketing for a Secondary Market Transaction
or otherwise as part of its business development.
7.15 Assignability to Federal Reserve. The Bank may assign and
pledge all or any portion of the obligations owing to it hereunder to any
Federal Reserve Bank or the United States Treasury as collateral security
pursuant to Regulation A of the Board of Governors of the Federal Reserve
System and any Operating Circular issued by such Federal Reserve Bank,
provided that any payment in respect of such assigned obligations made by
Guarantor to the Bank in accordance with the terms of this Guaranty shall
satisfy Guarantor's obligations hereunder in respect of such assigned
obligation to the extent of such payment. No such assignment shall release
the Bank from its obligations under the Reimbursement Agreement or any other
Related Document.
7.16 Facsimile Execution. This Guaranty shall be considered
executed and delivered by the Guarantor upon delivery of Guarantor's signature
to the Bank by facsimile transmission. Such facsimile signature shall be
treated in all respects as having the same effect as an original signature.
7.17 Reinstatement in Certain Circumstances. If at any time any
payment of the principal of or interest under the Promissory Notes or any
other amount payable by the any Account Party under the Reimbursement
Agreement or the Related Documents is rescinded or must be otherwise restored
or returned upon the insolvency, bankruptcy or reorganization of any Account
Party or otherwise, Guarantor's obligations hereunder with respect to such
payment shall be reinstated as though such payment has been due but not made
at such time.
<PAGE>
EXECUTED as of the day and year first above written.
GUARANTOR:
ERP OPERATING LIMITED PARTNERSHIP
By: EQUITY RESIDENTIAL PROPERTIES TRUST, its
general partner
By: /s/ Bruce C. Strohm
-----------------------------------
Print Name: Bruce C. Strohm
Print Title: Executive Vice President
and General Counsel
<PAGE>
ANNEX A
FINANCIAL COVENANTS DEFINITIONS
The following terms, as used in Section 4.4 of the Guaranty and
elsewhere in the Guaranty as expressly provided therein, have the following
meanings:
"Adjusted Asset Value" means, with respect to any Person or
Property, (i) for any Property for which an acquisition or disposition has not
occurred in the Fiscal Quarter most recently ended by Guarantor or a Financing
Partnership, the product of four (4) and a fraction, the numerator of which is
EBITDA for such Fiscal Quarter attributable to such Property in a manner
reasonably acceptable to the Bank for the Fiscal Quarter most recently ended,
and the denominator of which is the FMV Cap Rate, plus (ii) for any Property
which has been acquired by Guarantor or a Financing Partnership in the Fiscal
Quarter most recently ended, the Net Price of the Property paid by Guarantor
or a Financing Partnership for such Property.
"Applicable Interest Rate" means (i) with respect to any Fixed Rate
Indebtedness, the fixed interest rate applicable to such Fixed Rate
Indebtedness at the time in question, and (ii) with respect to any Floating
Rate Indebtedness, either (x) the rate at which the interest rate applicable
to such Floating Rate Indebtedness is actually capped (or fixed pursuant to an
interest rate hedging device), at the time of calculation, if Guarantor has
entered into an interest rate cap agreement or other interest rate hedging
device with respect thereto or (y) if Guarantor has not entered into an
interest rate cap agreement or other interest rate hedging device with respect
to such Floating Rate Indebtedness, the greater of (A) the rate at which the
interest rate applicable to such Floating Rate Indebtedness could be fixed for
the remaining term of such Floating Rate Indebtedness, at the time of
calculation, by Guarantor's entering into any unsecured interest rate hedging
device either not requiring an upfront payment or if requiring an upfront
payment, such upfront payment shall be amortized over the term of such device
and included in the calculation of the interest rate (or, if such rate is
incapable of being fixed by entering into an unsecured interest rate hedging
device at the time of calculation, a fixed rate equivalent reasonably
determined by the Bank) or (B) the floating rate applicable to such Floating
Rate Indebtedness at the time in question.
"Approved Bank" shall mean banks which have (i)(a) a minimum net
worth of $500,000,000 and/or (b) total assets of $10,000,000,000, and (ii) a
minimum long term debt rating of (a) BBB+ or higher by S&P, and (b) Baa1 or
higher by Moody's.
"Capital Leases" as applied to any Person, means any lease of any
property (whether real, personal or mixed) by that Person as lessee which, in
conformity with GAAP, is or should be accounted for as a capital lease on the
balance sheet of that Person.
"Capital Reserve" shall mean, for any period, $62.50 for each Fiscal
Quarter to occur during such period.
"Cash and Cash Equivalents" shall mean (i) cash, (ii) direct
obligations of the United States Government, including without limitation,
treasury bills, notes and bonds, (iii) interest bearing or discounted
obligations of Federal agencies and Government sponsored entities or pools of
such instruments offered by Approved Banks and dealers, including without
limitation, Federal Home Loan Mortgage Corporation participation sale
certificates, Government National Mortgage Association modified pass through
certificates, Federal National Mortgage Association bonds and notes, and
Federal Farm Credit System securities, (iv) time deposits, Domestic and
Eurodollar certificates of deposit, bankers acceptances, commercial paper
rated at least A-1 by S&P and P-1 by Moody's and/or guaranteed by an Aa rating
by Moody's, a AA rating by S&P or better rated credit, floating rate notes,
other money market instruments and letters of credit each issued by Approved
Banks (provided that the same shall cease to be a "Cash or Cash Equivalent" if
at any time any such bank shall cease to be an Approved Bank), (v) obligations
of domestic corporations, including, without limitation, commercial paper,
bonds, debentures and loan participations, each of which is rated at least AA
by S&P and/or Aa2 by Moody's and/or guaranteed by an Aa rating by Moody's, a
AA rating by S&P or better rated credit, (vi) obligations issued by states and
local governments or their agencies, rated at least MIG-1 by Moody's and/or
SP-1 by S&P and/or guaranteed by an irrevocable letter of credit of an
Approved Bank (provided that the same shall cease to be a "Cash or Cash
Equivalent" if at any time any such bank shall cease to be an Approved Bank),
(vii) repurchase agreements with major banks and primary government security
dealers fully secured by the U.S. Government or agency collateral equal to or
exceeding the principal amount on a daily basis and held in safekeeping, and
(viii) real estate loan pool participations, guaranteed by an AA rating given
by S&P or Aa2 rating given by Moody's or better rated credit.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity which is consolidated with Guarantor in accordance with GAAP.
"Consolidated Tangible Net Worth" means at any date the consolidated
partner's capital plus the value of preference units of Guarantor and its
Consolidated Subsidiaries (determined on a book basis), less their
consolidated Intangible Assets, all determined as of such date. For purposes
of this definition "Intangible Assets" means with respect to any such
intangible assets, the amount (to the extent reflected in determining such
consolidated stockholders" equity) of (i) all write-ups (other than write-ups
resulting from foreign currency translations and write-ups of assets of a
going concern business made within twelve months after the acquisition of such
business) subsequent to June 30, 1996 in the book value of any asset (other
than Real Property Assets) owned by Guarantor or a Consolidated Subsidiary and
(ii) goodwill, patents, trademarks, service marks, trade names, anticipated
future benefit of tax loss carry forwards, copyrights, organization or
developmental expenses and other intangible assets.
"Contingent Obligation" as to any Person means, without duplication,
(i) any contingent obligation of such Person required to be shown on such
Person's balance sheet in accordance with GAAP, and (ii) any obligation
required to be disclosed in the footnotes to such Person's financial
statements, guaranteeing partially or in whole any Non-Recourse Indebtedness,
lease, dividend or other obligation, exclusive of contractual indemnities
(including, without limitation, any indemnity or price-adjustment provision
relating to the purchase or sale of securities or other assets) and guarantees
of non-monetary obligations (other than guarantees of completion) which have
not yet been called on or quantified, of such Person or of any other Person.
The amount of any Contingent Obligation described in clause (ii) shall be
deemed to be (a) with respect to a guaranty of interest or interest and
principal, or operating income guaranty, the Net Present Value of the sum of
all payments required to be made thereunder (which in the case of an operating
income guaranty shall be deemed to be equal to the debt service for the note
secured thereby), calculated at the Applicable Interest Rate, through (i) in
the case of an interest or interest and principal guaranty, the stated date of
maturity of the obligation (and commencing on the date interest could first be
payable thereunder), or (ii) in the case of an operating income guaranty, the
date through which such guaranty will remain in effect, and (b) with respect
to all guarantees not covered by the preceding clause (a), an amount equal to
the stated or determinable amount of the primary obligation in respect of
which such guaranty is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as recorded on the balance sheet and on the
footnotes to the most recent financial statements of Guarantor required to be
delivered pursuant to Section 4.4 of the Guaranty. Notwithstanding anything
contained herein to the contrary, guarantees of completion shall not be deemed
to be Contingent Obligations unless and until a claim for payment or
performance has been made thereunder, at which time any such guaranty of
completion shall be deemed to be a Contingent Obligation in an amount equal to
any such claim. Subject to the preceding sentence, (i) in the case of a joint
and several guaranty given by such Person and another Person (but only to the
extent such guaranty is recourse, directly or indirectly to Guarantor), the
amount of the guaranty shall be deemed to be 100% thereof unless and only to
the extent that such other Person has delivered Cash or Cash Equivalents to
secure all or any part of such Person's guaranteed obligations and (ii) in the
case of a guaranty (whether or not joint and several) of an obligation
otherwise constituting Indebtedness of such Person, the amount of such
guaranty shall be deemed to be only that amount in excess of the amount of the
obligation constituting Indebtedness of such Person. Notwithstanding anything
contained herein to the contrary, "Contingent Obligations" shall be deemed not
to include guarantees of Unused Commitments or of construction loans to the
extent the same have not been drawn. All matters constituting "Contingent
Obligations" shall be calculated without duplication.
"Convertible Securities" means evidences of shares of stock, limited
or general partnership interests or other ownership interests, warrants,
options, or other rights or securities which are convertible into or
exchangeable for, with or without payment of additional consideration, shares
of common stock of ERP REIT or partnership interests of Guarantor, as the case
may be, either immediately or upon the arrival of a specified date or the
happening of a specified event.
"Debt Service" means, for any period, Interest Expense for such
period plus scheduled principal amortization (excluding any individual
scheduled principal payment which exceeds 25% of the original principal amount
of an issuance of Indebtedness) for such period on all Indebtedness of ERP
REIT (calculated as provided in Section 4.4(g) of the Guaranty), on a
consolidated basis, plus Guarantor's Share of scheduled principal amortization
for such period on all Indebtedness of Investment Affiliates for which there
is no recourse to ERP REIT or Guarantor (or any Property thereof), plus,
without duplication, ERP REIT's and Guarantor's actual or potential liability
for principal amortization for such period on all Indebtedness of Investment
Affiliates that is recourse to ERP REIT or Guarantor (or any Property
thereof).
"EBITDA" means, for any period (i) Net Income for such period, plus
(ii) depreciation and amortization expense and other non-cash items deducted
in the calculation of Net Income for such period, plus (iii) Interest Expense
deducted in the calculation of Net Income for such period, plus, (iv) Taxes
deducted in the calculation of Net Income for such period, plus (v)
Guarantor's Share of distributed earnings of Investment Affiliates for such
period, minus (vi) the gains (and plus the losses) from extraordinary items or
asset sales or write-ups or forgiveness of indebtedness included in the
calculation of Net Income, for such period, minus (vii) Guarantor's Share of
accrued income and losses of Investment Affiliates for such period minus
(viii) earnings of Subsidiaries for such period distributed to third parties,
all of the foregoing without duplication.
"ERP REIT" means the surviving trust under the Merger (as defined in
the Reimbursement Agreement) (i.e., Wellsford REIT as the surviving entity in
the Merger, which will be renamed Equity Residential Properties Trust).
"Financing Partnerships" means (i) those subsidiary limited
partnerships for which Guarantor is a limited partner with a 1% limited
partnership interest, Guarantor is a general partner with a 98% general
partner interest and a QRS Corporation is a general partner with a 1% general
partner interest, (ii) those limited liability companies for which Guarantor
is a member with a 99% member interest and a QRS Corporation is a member with
a 1% member interest, (iii) those general partnerships in which Guarantor is a
general partner with a 99% partnership interest and a QRS Corporation is a
general partner with a 1% partnership interest, and (iv) those corporations
which are wholly-owned and controlled by Guarantor or an entity described in
clause (i), (ii) or (iii) of this definition.
"Fiscal Quarter" means a fiscal quarter of a Fiscal Year.
"Fiscal Year" means the fiscal year of Guarantor and ERP REIT which
shall be the twelve (12) month period ending on the last day of December in
each year.
"Fixed Charges" for any Fiscal Quarter period means the sum of (i)
Debt Service for such period, (ii) the product of the average number of
apartment units owned (directly or beneficially) by Guarantor or a Financing
Partnership during such period and the Capital Reserve for such period, (iii)
Guarantor's Share of the aggregate sum of the product of the average number of
apartment units owned (directly or beneficially) by each Investment Affiliate
during such period and the Capital Reserve for such period, and (iv) dividends
on preferred units payable by Guarantor for such period.
"Fixed Rate Indebtedness" means all Indebtedness which accrues
interest at a fixed rate.
"Floating Rate Indebtedness" means all Indebtedness which is not
Fixed Rate Indebtedness and which is not a Contingent Obligation or an Unused
Commitment.
"FMV Cap Rate" means 9%.
"GAAP" means generally accepted accounting principles recognized as
such in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and the Financial
Accounting Standards Board or in such other statements by such other entity as
may be approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of determination.
"Gross Asset Value" means, with respect to any Person or Property,
Adjusted Asset Value plus, in the case of any Person, the value of any Cash or
Cash Equivalent owned by such Person and not subject to any Lien.
"Guarantor Credit Agreement" means that certain Amended and Restated
Revolving Credit Agreement, dated as of December 9, 1996, among Guarantor, the
Lenders, Morgan Guaranty Trust Company of New York, as lead agent, Bank of
America Illinois, as co-lead agent, and The First National Bank of Chicago,
First Bank National Association and Nationsbank of Texas, N.A., as co-agents,
or any credit or loan agreement replacing or superseding the same.
"Guarantor's Share" means Guarantor's or ERP REIT's share of the
liabilities of an Investment Affiliate based upon Guarantor's or ERP REIT's
percentage ownership of such Investment Affiliate, as the case may be.
"Indebtedness" as applied to any Person (and with out duplication),
means (a) all indebtedness, obligations or other liabilities of such Person
for borrowed money, (b) all indebtedness, obligations or other liabilities of
such Person evidenced by Securities or other similar instruments, (c) all
Contingent Obligations of such Person, (d) all reimbursement obligations and
other liabilities of such Person with respect to letters of credit or banker's
acceptances issued for such Person's account or other similar instruments for
which a contingent liability exists, (e) all obligations of such Person to pay
the deferred purchase price of Property or services, (f) all obligations in
respect of Capital Leases (including ground leases) of such Person, (g) all
indebtedness obligations or other liabilities of such Person or others secured
by a Lien on any asset of such Person, whether or not such indebtedness,
obligations or liabilities are assumed by, or are a personal liability of such
Person, (h) all indebtedness, obligations or other liabilities (other than
interest expense liability) in respect of Interest Rate Contracts and foreign
currency exchange agreements (other than Interest Rate Contracts purchased to
hedge Indebtedness), (i) ERISA obligations currently due and payable and (j)
all other items which, in accordance with GAAP, would be included as
liabilities on the liability side of the balance sheet of such Person.
"Interest Expense" means, for any period and without duplication,
total interest expense, whether paid, accrued or capitalized (including the
interest component of Capital Leases but excluding interest expense covered by
an interest reserve established under a loan facility) of ERP REIT, on a
consolidated basis, including without limitation all commissions, discounts
and other fees and charges owed with respect to drawn letters of credit,
amortized costs of Interest Rate Contracts incurred on or after December 9,
1996 and the facility fees payable to the lenders under the Guarantor Credit
Agreement in accordance with the Guarantor Credit Agreement, Plus Guarantor's
Share of accrued, paid or capitalized interest with respect to any
Indebtedness of Investment Affiliates for which there is no recourse to ERP
REIT or Guarantor, plus, without duplication, ERP REIT's and Guarantor's
actual or potential liability for accrued, paid or capitalized interest with
respect to Indebtedness of Investment Affiliates that is recourse to ERP REIT
or Guarantor calculated for all Fixed Rate Indebtedness, at the actual
interest rate in effect with respect to all Indebtedness outstanding as of the
last day of such Fiscal Quarter and in the case of all Floating Rate
Indebtedness, the greater of (i) (A) the Treasury Rate plus 1.75% for taxable
Indebtedness and (B) 7.0% for tax-exempt Indebtedness, (ii) the actual rate of
interest in effect with respect to such Floating Rate Indebtedness outstanding
for which no Interest Rate Contract is in effect as of the last day of such
quarter and (iii) if an Interest Rate Contract is in effect with respect to
such Floating Rate Indebtedness, the strike rate payable under such Interest
Rate Contract, all determined on an annualized basis.
"Interest Rate Contracts" means, collectively, interest rate swap,
collar, cap or similar agreements providing interest rate protection.
"Investment Affiliate" means any Person in whom ERP REIT or
Guarantor holds an equity interest, directly or indirectly, whose financial
results are not consolidated under GAAP with the financial results of ERP REIT
or Guarantor on the consolidated financial statements of ERP REIT and
Guarantor.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement, in each case that has the effect of creating a
security interest, in respect of such asset. For the purposes of these
definitions, Guarantor or any Consolidated Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Moody's" means Moody's Investors Services, Inc. or any successor
thereto.
"Net Income" means, for any period, the net earnings (or loss) after
Taxes of Guarantor, on a consolidated basis, for such period calculated in
conformity with GAAP.
"Net Offering Proceeds" means all cash or other assets received by
ERP REIT or Guarantor as a result of the sale of common shares of beneficial
interest, preferred shares of beneficial interest, partnership interests,
limited liability company interests, Convertible Securities or other ownership
or equity interests in ERP REIT or Guarantor less customary costs and
discounts of issuance paid by ERP REIT or Guarantor, as the case may be.
"Net Operating Income" means, for any period with respect to any
Property owned (directly or beneficially) by Guarantor or a Financing
Partnership, the net operating income of such Property (attributed to such
Property in a manner reasonably acceptable to the Bank) for such period (i)
determined in accordance with GAAP, (ii) determined in a manner which is
consistent with the past practices of ERP REIT and Guarantor, and (iii)
inclusive of an allocation of reasonable management fees and administrative
costs to each Property consistent with the past practices of ERP REIT and
Guarantor, except that, for purposes of determining Net Operating Income,
income shall not (a) include security or other deposits, lease termination or
other similar charges, delinquent rent recoveries, unless previously reflected
in reserves, or any other items deemed by the Bank to be of a non-recurring
nature or (b) be reduced by depreciation or amortization.
"Net Price" means, with respect to the purchase and sale of any
Property, without duplication, (i) Cash and Cash Equivalents paid as
consideration for such purchase or sale, plus (ii) the principal amount of any
note received or other deferred payment to be made in connection with such
purchase or sale (except as described in clause (iv) below), plus (iii) the
value of any other considerations delivered in connection with such purchase
or sale (including, without limitation, shares of beneficial interest in ERP
REIT and OP Units or Preferred OP Units (as defined in Guarantor's partnership
agreement)) (as reasonably determined by the Bank), minus (only in the case of
a sale) (iv) the value of any consideration deposited into escrow or subject
to disbursement or claim upon the occurrence of any event, minus (only in the
case of a sale) (v) the value of any consideration required to be paid to any
Person other than Guarantor and its Subsidiaries owning a beneficial interest
in such Property, minus (vi) reasonable costs of sale and taxes paid or
payable in connection with such purchase or sale.
"Net Present Value" shall mean, as to a specified or ascertainable
dollar amount, the present value, as of the date of calculation of any such
amount using a discount rate equal to the base interest rate in effect under
the Guarantor Credit Agreement as of the date of such calculation.
"Non-Recourse Indebtedness" means Indebtedness with respect to which
recourse for payment is limited to (i) specific assets related to a particular
Property or group of Properties encumbered by a Lien securing such
Indebtedness or (ii) any Subsidiary (provided that if a Subsidiary is a
partnership, there is no recourse of Guarantor or ERP REIT as a general
partner of such partnership); provided, however, that personal recourse of
Guarantor or ERP REIT for any such Indebtedness for fraud, misrepresentation,
misapplication of cash, waste, environmental claims and liabilities and other
circumstances customarily excluded by institutional lenders from exculpation
provisions and/or included in separate indemnification agreements in
non-recourse financing of real estate shall not, by itself, prevent such
Indebtedness from being characterized as Non-Recourse Indebtedness.
"Palomino Company" means any limited liability company formed by, or
with the consent of, WRP, Guarantor, WPHC, Highlands and/or Red Canyon (as
such terms are defined in the Reimbursement Agreement) to develop any phase of
the Development that is or will be encumbered by the Assessment and Lien (as
such term is defined in the Reimbursement Agreement).
"Palomino Parties" means, collectively, the Bond Issuer, WRP, WPHC,
Highlands, Red Canyon (as defined in the Reimbursement Agreement), and each
Palomino Company.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Property" means, with respect to any Person, any real or personal
property, building, facility, structure, equipment or unit, or other asset
owned by such Person.
"Qualifying Unencumbered Property" means any Property from time to
time which (i) is an operating multifamily residential property wholly-owned
(directly or beneficially) by Guarantor or a Financing Partnership, (ii) is
not subject (nor are any equity interests in such Property subject) to a Lien
which secures Indebtedness of any Person other than Liens permitted under the
Guarantor Credit Agreement, (iii) is not subject (nor are any equity interests
in such Property subject) to any covenant, condition, or other restriction
which prohibits or limits the creation or assumption of any Lien upon such
Property.
"QRS Corporation" means those qualified ERP REIT subsidiaries wholly
owned by ERP REIT.
"Real Property Assets" means as of any time, the real property
assets (including interests in participating mortgages in which Guarantor's
interest therein is characterized as equity according to GAAP) owned directly
or indirectly by Guarantor and the Consolidated Subsidiaries at such time.
"Recourse Debt" means Indebtedness that is not Non-Recourse
Indebtedness.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc., or any successor thereto.
"Secured Debt" means Indebtedness, the payment of which is secured
by a Lien on any Property owned or leased by ERP REIT, Guarantor, or any
Subsidiary.
"Securities" means any stock, partnership interests, shares, shares
of beneficial interest, voting trust certificates, bonds, debentures, notes or
other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly known as
"securities," or any certificates of interest, shares, or participations in
temporary or interim certificates for the purchase or acquisition of, or any
right to subscribe to, purchase or acquire any of the foregoing, but shall not
include any evidence of the obligations.
"Subsidiary" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by Guarantor.
"Taxes" means all federal, state, local and foreign income and gross
receipts taxes.
"Total Liabilities" means, as of the date of determination and
without duplication, all Indebtedness of ERP REIT (calculated as provided in
Section 4.4(g) of the Guaranty), on a consolidated basis, Plus Guarantor's
Share of all Indebtedness of Investment Affiliates for which there is no
recourse to ERP REIT or Guarantor (or any Property thereof) plus the actual or
potential liability of ERP REIT, Guarantor or any Subsidiary for any
Indebtedness of Investment Affiliates that is recourse to ERP REIT or
Guarantor (or Property thereof) plus accounts payable incurred in the ordinary
course of business.
"Treasury Rate" means, as of any date, a rate equal to the annual
yield to maturity on the U.S. Treasury Constant Maturity Series with a ten
year maturity, as such yield is reported in Federal Reserve Statistical
Release H.15 -- Selected Interest Rates, published most recently prior to the
date the applicable Treasury Rate is being determined. Such yield shall be
determined by straight line linear interpolation between the yields reported
in Release H.15, if necessary. In the event Release H.15 is no longer
published, the Bank shall select, in its reasonable discretion, an alternate
basis for the determination of Treasury yield for U.S. Treasury Constant
Maturity Series with ten year maturities.
"Unencumbered Asset Value" means (i) a fraction, the numerator of
which is the product of four (4) and the aggregate Unencumbered Net Operating
Income for the most recently ended Fiscal Quarter which is attributable (in a
manner reasonably acceptable to the Bank) to Qualifying Unencumbered
Properties owned (directly or beneficially) by Guarantor or any Financing
Partnership (exclusive of Unimproved Assets) for the entire Fiscal Quarter and
the denominator of which is the FMV Cap Rate Plus (ii) for all Qualifying
Unencumbered Properties wholly-owned (directly or beneficially) by Guarantor
or any Financing Partnership which have been acquired (directly or indirectly)
by Guarantor or any Financing Partnership in the Fiscal Quarter most recently
ended, the aggregate Net Price of the Qualifying Unencumbered Properties paid
by Guarantor or its Affiliates for such Qualifying Unencumbered Properties.
"Unencumbered Net Operating Income" means for any period for all
Qualifying Unencumbered Properties owned (directly or beneficially) by
Guarantor or any Financing Partnership during the applicable period, Net
Operating Income from each such Qualifying Unencumbered Property minus an
amount equal to the product of the average number of apartment units in such
Qualifying Unencumbered Property during such period and the Capital Reserve
for such period.
"Unimproved Assets" means Real Property Assets upon which no
material improvements have been completed which completion is evidenced by a
certificate of occupancy or its equivalent.
"Unsecured Debt" means Indebtedness of Guarantor and any Financing
Partnership which is not Secured Debt.
"Unsecured Interest Expense" means Interest Expense other than
Interest Expense payable in respect of Secured Debt.
"Unused Commitments" shall mean an amount equal to all unadvanced
funds (other than unadvanced funds in connection with any construction loan)
which any third party is obligated to advance to Guarantor or another Person
or otherwise pursuant to any loan document, written instrument or otherwise.
<PAGE>
EXHIBIT A
FORM OF GUARANTOR COMPLIANCE CERTIFICATE
AMENDED AND RESTATED PROMISSORY NOTE
Dated: May 30, 1997
FOR VALUE RECEIVED, the undersigned, Wellsford Real Properties,
Inc., a Maryland corporation ("WRP"), HEREBY PROMISES TO PAY on the Expiration
Date to the order of Dresdner Bank AG, New York Branch, a banking corporation
organized and existing under the laws of The Federal Republic of Germany
acting through its New York Branch (the "Bank"), the unpaid amount of all
obligations of WRP to the Bank pursuant to that certain Letter of Credit
Reimbursement Agreement among WRP, Palomino Park Public Improvements
Corporation and the Bank dated as of December 1, 1995 (as amended by that
certain First Amendment to Letter of Credit Reimbursement Agreement dated as
of May 30, 1997, and as further amended from time to time in accordance with
its terms, the "Reimbursement Agreement") and the other Related Documents.
WRP promises to pay interest on the unpaid principal amount of this Promissory
Note from the date hereof until such principal amount is paid in full, at such
interest rates, and payable at such times, as are specified in the
Reimbursement Agreement. (Capitalized terms used in this Promissory Note
which are not otherwise defined herein have the same meaning as provided in
the Reimbursement Agreement.)
Both principal and interest are payable in lawful money of the
United States of America in immediately available funds at the office of the
Bank set forth in the Reimbursement Agreement.
This Promissory Note is one the Promissory Notes referred to in, and
is entitled to the benefits of, the Reimbursement Agreement and the other
Related Documents. The Reimbursement Agreement, among other things, contains
provisions for acceleration of the maturity hereof upon the happening of
certain stated events and also for optional and mandatory prepayments on
account of principal hereof prior to the maturity hereof upon the terms and
conditions therein specified.
WRP waives presentment, demand, protest or notice of any kind in
connection with this Promissory Note. WRP agrees to pay to the holder hereof,
on demand, all costs and expenses (including legal fees and disbursements)
incurred in connection with the enforcement and collection of this Promissory
Note.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ David M. Strong
-------------------------------------
Name: David M. Strong
Title: Vice President
CONTRIBUTION AND DISTRIBUTION AGREEMENT
CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of May 30, 1997, by and
between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate
investment trust ("Wellsford Parent"), and WELLSFORD REAL PROPERTIES, INC., a
Maryland corporation ("Newco").
RECITALS:
WHEREAS, Wellsford Parent and Equity Residential Properties Trust, a
Maryland real estate investment trust ("EQR"), have entered into an Agreement
and Plan of Merger dated as of January 16, 1997 (the "Merger Agreement"),
providing for the merger of EQR with Wellsford Parent (the "Merger"), with
Wellsford Parent continuing as the surviving entity of the Merger, upon the
terms and subject to the conditions set forth in the Merger Agreement;
WHEREAS, the Board of Trustees of Wellsford Parent has determined that
Wellsford Parent can maximize the value of certain of its assets by not
conveying them in the Merger, and EQR has indicated that it has no interest in
acquiring such assets;
WHEREAS, the Board of Trustees of Wellsford Parent has deemed it
appropriate and advisable, in order to enhance value for the shareholders of
Wellsford Parent, prior to the Merger and as contemplated by the Merger
Agreement, to (i) contribute to Newco certain of the assets and liabilities of
Wellsford Parent and (ii) distribute, immediately prior to the Merger, as a
taxable distribution to the holders of Common Shares of Beneficial Interest,
$.01 par value of Wellsford Parent (the "Wellsford Parent Common Shares"), all
of the outstanding shares of common stock, $.01 par value, of Newco owned by
Wellsford Parent (the "Newco Common Stock");
WHEREAS, following such contribution and distribution, EQR shall acquire
the remaining businesses, operations, assets and liabilities of Wellsford
Parent and its remaining direct and indirect subsidiaries pursuant to the
Merger; and
WHEREAS, Wellsford Parent and Newco have determined that it is necessary
and desirable to set forth the transactions required to effect such
contribution and distribution and to set forth other agreements that will
govern certain other matters following such distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS
As used in this Agreement, the following terms have the following
meanings (such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
"Action" means any action, suit, arbitration, inquiry, proceeding or
investigation by or before any court, any governmental or other regulatory or
administrative agency or commission or any arbitration tribunal.
"Affiliate" means, when used with respect to a specified person, another
person that, directly or indirectly, controls, is controlled by, or is under
common control with, the person specified.
"Agent" means the distribution agent to be appointed by Wellsford Parent
to distribute to the Holders the shares of Newco Common Stock pursuant to the
Distribution.
"Assumed Liabilities" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, including any successor
legislation.
"Commission" means the Securities and Exchange Commission.
"Confidential Information" has the meaning set forth in Section 4.3.
"Contributed Asset" and "Contributed Assets" have the meaning set forth
in Section 2.1.
"Contribution" has the meaning set forth in Section 2.4.
"Credit Enhancement Agreement" means the Credit Enhancement Agreement of
even date herewith between ERP Operating Partnership and Newco.
"Distribution" means the distribution prior to the effective time of the
Merger by Wellsford Parent to the Holders of all the outstanding shares of
Newco Common Stock owned by Wellsford Parent on the Distribution Date on the
basis of 0.25 of a share of Newco Common Stock for each outstanding Wellsford
Parent Common Share.
"Distribution Date" means the date determined pursuant to Section 3.1 on
which the Distribution will be effected.
"Distribution Record Date" means the close of business on the date to be
determined by the Board of Trustees of Wellsford Parent as the record date for
determining the shareholders of Wellsford Parent entitled to receive Newco
Common Stock in the Distribution, which will be the date on which the Merger
is effected.
"Effective Time" means the time on the Distribution Date when Wellsford
Parent delivers to the Agent instructions directing the Agent to effect the
Distribution.
"ERP Operating Partnership" means ERP Operating Limited Partnership, an
Illinois limited partnership, of which EQR is the general partner.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Governmental Authority" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"Holder" means a holder of record of Wellsford Parent Common Shares on
the Distribution Record Date.
"Indemnifying Party" has the meaning set forth in Section 5.3.
"Indemnitee" has the meaning set forth in Section 5.3.
"Indemnitee Notice" has the meaning set forth in Section 5.4.
"Intellectual Property Rights" has the meaning set forth in Section 2.1.
"IRS" means the Internal Revenue Service.
"Liabilities" means any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including, without
limitation, Taxes and those debts, liabilities and obligations arising under
any law, rule, regulation, Action, threatened Action, order or consent decree
of any court, any governmental or other regulatory or administrative agency or
commission or any award of any arbitration tribunal, and those arising under
any contract, commitment or undertaking.
"Losses" and "Loss" mean any and all losses, charges, Liabilities,
claims, damages, penalties and costs or expenses (including, without
limitation, reasonable attorney's fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any
Actions or threatened Actions).
"Merger" has the meaning set forth in the recitals.
"Newco Common Stock" has the meaning set forth in the recitals.
"Newco Indemnitees" has the meaning set forth in Section 5.1.
"Newco Liabilities" means, collectively, (i) all the Liabilities of Newco
under this Agreement, (ii) all the Liabilities arising out of or in connection
with or otherwise relating to (A) the Assumed Liabilities, (B) the Liabilities
of Newco and the Newco Subsidiaries, whether incurred before or after the
Effective Time, and (C) the assets and conduct of the business of Newco and
the Newco Subsidiaries, whether incurred before or after the Effective Time,
but shall exclude the liabilities and benefits of Wellsford Parent under the
Tri-Party Agreement.
"Newco Subsidiaries" mean all Subsidiaries of Newco after giving effect
to the transactions contemplated hereby.
"Note" means the Promissory Note dated June 28, 1996 by Specified
Properties VIII, L.P., a Texas limited partnership.
"Palomino Agreement" means the Agreement regarding Palomino Park of even
date herewith between Newco and ERP Operating Partnership.
"Palomino Bonds" mean the Assessment Lien Revenue Bonds, Series 1995,
issued by PPPIC in the original aggregate principal amount of $14,755,000,
pursuant to a Trust Indenture dated as of December 1, 1995.
"Palomino Park" means the Overall Property, as defined in the Palomino
Agreement.
"PPPIC" means Palomino Park Public Improvement Corporation, a Colorado
nonprofit corporation.
"Registration Statement" means the registration statement on Form 10 (or
other applicable form) filed with the Commission by Newco pursuant to the
requirements of Section 12 of the Exchange Act, and the rules and regulations
thereunder, in order to register the Newco Common Stock under Section 12(b) of
the Exchange Act.
"Representatives" has the meaning set forth in Section 4.3.
"Retained Subsidiaries" means all Subsidiaries of Wellsford Parent other
than the Newco Subsidiaries.
"S-4" means the registration statement on Form S-4 filed with the
Commission relating to shares issued in connection with the Merger.
"Securities Act" means the Securities Act of 1933, as amended.
"Sonterra Documents" has the meaning set forth in Section 2.1.
"Subsidiary" means any entity at least 51% of the total outstanding
voting interests of which are owned, directly or indirectly, by another
entity.
"Taxes" means all taxes, charges and fees imposed by the United States or
any state, county, local or foreign government or subdivision or agency
thereof.
"Third-Party Claim" has the meaning set forth in Section 5.4.
"Transaction Costs Agreement" means the Transaction and Termination Costs
Agreement of even date herewith among Wellsford Parent, EQR and Newco.
"Transition Period" means the period from the Effective Time until three
months following the Effective Time.
"Tri-Party Agreement" means, collectively, the Tri-Party Agreements
executed by Wellsford Parent in favor of NationsBank, N.A., as lender under
the construction loan financing for Phase I and Phase II of Palomino Park.
"Wellsford Parent Common Shares" has the meaning set forth in the
recitals.
"Wellsford Parent Indemnitees" has the meaning set forth in Section 5.2.
"Wellsford Parent Liabilities" means, collectively, (i) all the
Liabilities of Wellsford Parent under this Agreement, (ii) all the Liabilities
of Wellsford Parent and the Retained Subsidiaries (other than the Newco
Liabilities), whether arising before or after the Effective Time, and
(iii) the liabilities and benefits of Wellsford Parent under the Tri-Party
Agreement.
"WPHC" means Wellsford Park Highlands Corp., a Colorado corporation.
References to a "Schedule" are, unless otherwise specified, to one of the
Schedules attached to this Agreement, and references to a "Section" are,
unless otherwise specified, to one of the Sections of this Agreement.
ARTICLE 2
CONTRIBUTION OF PROPERTIES
AND ASSETS TO NEWCO
2.1 Contribution. Subject to the terms and conditions of this
Agreement, immediately prior to the Distribution Date, Wellsford Parent shall,
without any representations or warranties, express or implied, assign,
transfer, convey and deliver to Newco all of Wellsford Parent's right, title
and interest in and to the following properties and assets (each a
"Contributed Asset", and collectively, the "Contributed Assets"):
(a) all agreements and other documents in connection with a 344-unit
apartment project located in Tucson, Arizona, and commonly known as Sonterra
at Williams Centre, including, without limitation, those agreements and
documents (the "Sonterra Documents") which are listed on Schedule 2.1(a)
attached hereto;
(b) any and all funds (other than payments of principal and interest
under the Note received prior to the Distribution Date), held by Wellsford
Parent or its designees under the Sonterra Documents, including, without
limitation, any and all tax deposits held pursuant to the Deed of Trust;
(c) eighty (80) shares of Class A Common Stock of WPHC, constituting 80%
of the outstanding shares of WPHC and 100% of the outstanding voting shares of
WPHC;
(d) cash in the amount (determined pursuant to Section 1.10 of the
Merger Agreement (the "Contribution Funds")) of $12,965,995;
(e) the split dollar life insurance agreements listed on Schedule 2.1(e)
hereto;
(f) the Merrill Lynch Non-Qualified Deferred Compensation Plan Trust
Agreement, dated June 20, 1994, by and between Wellsford Parent and Merrill
Lynch Trust Company;
(g) the Merrill Lynch Non-Qualified Deferred Compensation Plan Revocable
Trust Agreement dated May 28, 1997 by and between Wellsford Parent and Merrill
Lynch Trust Company;
(h) the Merrill Lynch Special Non-Qualified Deferred Compensation Plan
adopted by Wellsford Parent;
(i) any rights of Wellsford Parent under the Operating Agreement of Park
at Highlands LLC dated as of April 27, 1995, as amended, and the Operating
Agreement of Red Canyon at Palomino Park LLC, as amended;
(j) any rights of Wellsford Parent under the Reimbursement Agreement
dated December 1, 1995 between PPPIC and Wellsford Parent;
(k) Wellsford Bond Pledge and Security Agreement, dated December 1,
1995, among PPPIC, Wellsford Parent and United States Trust Company of New
York (the "Bond Trustee");
(l) the Palomino Park Promissory Note dated December 20, 1995 from PPPIC
to Wellsford Parent, delivered pursuant to the Reimbursement Agreement
described in clause (i) of this definition;
(m) the opinion of Ballard Spahr Andrews & Ingersoll dated December 20,
1995, addressed, inter alia, to Wellsford Parent, with respect to the Bonds;
(n) any other agreements between PPPIC and Wellsford Parent, and any
other agreements of third parties which run to the benefit of Wellsford Parent
with respect to the Palomino Bonds;
(o) the Letter of Credit Reimbursement Agreement dated December 1, 1995
among PPPIC, Wellsford Parent and Dresdner Bank AG, New York Branch;
(p) any agreements executed by Dresdner Bank AG, New York Branch in
favor of Wellsford Parent;
(q) any rights of Wellsford Parent under the Bond Pledge and Security
Agreement dated December 1, 1995 among PPPIC, Wellsford Parent, Dresdner Bank
AG, New York Branch and the Bond Trustee;
(r) any other rights or interest of Wellsford Parent and any of the
Retained Subsidiaries in any of the documents and agreements regarding
Palomino Park (other than the rights of ERP Operating Partnership under the
Credit Enhancement Agreement and the Palomino Agreement);
(s) furniture, fixtures, equipment and personalty located in the office
premises demised pursuant to the Headquarter Lease; and
(t) the name "Wellsford", the ticker symbol "WRP", and the plate used in
connection with the engraving and printing of the Wellsford Parent share
certificates (the "Intellectual Property Rights").
Such contribution shall be effected in such a manner so that Wellsford
Parent and the Retained Subsidiaries have no continuing obligation with
respect to the Contributed Assets after the Effective Time, except as
otherwise provided in the Credit Enhancement Agreement and the Palomino
Agreement.
2.2 Assumption.
(a) Subject to the terms and conditions of this Agreement,
simultaneously with the contribution contemplated by Section 2.1, Newco shall
assume and undertake to pay and discharge the following (the "Assumed
Liabilities"):
(i) All Liabilities of Wellsford Parent with respect to the
Contributed Assets, including, without limitation, all liabilities and
obligations of Wellsford Parent under each of the agreements giving rise
to any of the Contributed Assets;
(ii) the obligations arising under the option certificates listed on
Schedule 2.2(a) attached hereto (the "Option Agreements"), which will be
satisfied by (A) issuing Newco Common Stock pursuant to the Amended Newco
Options (defined below) and (B) amending the Option Agreements, as
described in Schedule 2.2(a) (as amended, the "Amended Newco Options");
(iii) the obligation to pay William Cockrum a consulting fee of
$500,000, payable $250,000 in cash and $250,000 by the issuance of Newco
Common Stock; and
(iv) the Promissory Note dated December 20, 1995 issued by Wellsford
Parent in favor of Dresdner Bank AG;
(v) the Indemnification Agreement dated November 12, 1996 given by
Wellsford Parent and WPHC to Donald D. MacKenzie; and
(vi) any other obligation of Wellsford Parent and the Retained
Subsidiaries under any other agreement relating to the Sonterra
Documents, the Palomino Bonds, PPPIC or Palomino Park, except the
obligations of ERP Operating Partnership under the Credit Enhancement
Agreement and the Palomino Agreement.
(b) Notwithstanding anything contained in Section 2.2(a), Wellsford
Parent hereby retains, and Newco does not assume and will have no liability
with respect to, Wellsford Parent Liabilities, except as otherwise provided in
the Transaction Costs Agreement.
2.3 Agreements and Documents to be Delivered in Connection with
Contribution. Wellsford Parent and Newco shall execute and deliver, or cause
to be executed and delivered, all agreements, documents and instruments
necessary or appropriate to effect the contribution contemplated by Section
2.1 and the assumption contemplated by Section 2.2, including, without
limitation, those agreements, documents and instruments described in this
Section 2.3:
(a) Wellsford Parent and Newco shall execute and deliver, or cause to be
executed and delivered, an Assignment and Assumption Agreement for the
Contributed Assets and the Assumed Liabilities.
(b) Wellsford Parent shall execute and deliver or cause to be executed
and delivered the following documents:
RDO Assignment of Note and Security Agreements, including an
assignment of (a) the Note without recourse, (b) the Deed of Trust (as
defined on Schedule 2.1(a) hereto), (c) the Loan Agreement (as defined on
Schedule 2.1(a) hereto), (d) the Assignment of Leases and Rents (as
defined on Schedule 2.1(a) hereto), (e) the Security Agreement (as
defined on Schedule 2.1(a) hereto), and (f) those certain financing
statements perfecting Wellsford Parent's security interests granted by
the Deed of Trust and the Security Agreement (collectively, the
"Security Documents");
(ii) Assignment of Deed of Trust and Security Documents, in form
suitable for recording;
(iii) Assignment of Option Agreement (as defined on Schedule
2.1(a) hereto), in form suitable for recording;
(iv) UCC-2 Assignments, in form suitable for filing or recording, as
the case may be;
(v) Omnibus Assignment of Mortgage Documents relating to the
Sonterra Documents not otherwise covered by the documents listed in this
Section 2.3(b);
(vi) Assignment of Seller's Waiver (as defined in Schedule 2.1(a)
hereto);
(vii) Certificate(s) representing eighty (80) shares of Class A
Common Stock of WPHC, with valid stock powers attached; and
(xii) Bill of Sale granting to Newco all right, title and
interest of Wellsford Parent to the Intellectual Property Rights.
2.4 Contributions Not Effected Prior to the Distribution; Transfer
Deemed Effective as of the Distribution Date. To the extent that any
assignment, transfer, conveyance or delivery (each, a "Contribution") of any
Contributed Asset contemplated by this Article II shall not have been
consummated on or prior to the Distribution Date, the parties shall cooperate
to effect such Contribution as promptly following the Distribution Date as
shall be practicable. Nothing herein shall be deemed to require the
Contribution of any Contributed Assets which by their terms or operation of
law cannot be assigned, transferred, conveyed or delivered; provided, however,
that Wellsford Parent and Newco shall use their reasonable best efforts to
seek to obtain any necessary consents or approvals for the Contribution of all
Contributed Asset contemplated to be contributed pursuant to this Article II.
In the event that any Contribution of a Contributed Asset has not been
consummated, from and after the Distribution Date Wellsford Parent shall hold
such Contributed Asset in trust for the use and benefit of Newco, and shall
take such other action as may be reasonably requested by Newco in order to
place Newco, insofar as is reasonably possible, in the same position as would
have existed had such Contributed Asset been contributed as contemplated by
this Article II. As and when any such Contributed Asset is able to be
assigned, transferred, conveyed or delivered, as the case may be, such
Contribution shall be effected forthwith. The parties agree that, as of the
Distribution Date, Newco shall be deemed to have acquired complete and sole
beneficial ownership over all of the Contributed Assets, together with all
rights, powers and privileges incident thereto and all duties, obligations and
responsibilities incident thereto including, without limitation, to the
Assumed Liabilities.
2.5 In contemplation of the Contribution and Distribution, Wellsford
Parent and Newco have entered into a Sublease whereby Wellsford Parent has
subleased to Newco the premises covered by the Lease between Rockefeller
Center Properties ("Prime Landlord") and Wellsford Parent, dated June 29,
1994. Newco has agreed to indemnify Wellsford Parent against certain claims
of the Prime Landlord pursuant to an Indemnity Agreement executed and
delivered by Newco.
ARTICLE 3
DISTRIBUTION AND RELATED TRANSACTIONS
3.1 Actions Prior to Distribution.
(a) The Board of Trustees of Wellsford Parent (or a duly authorized
committee thereof) shall, in its discretion, establish the Distribution Record
Date and the Distribution Date and any procedures necessary or appropriate in
connection with the Distribution, but in no event shall the Distribution occur
prior to such time as the conditions set forth in this Agreement have been
satisfied or waived. Such action shall not create any obligation on the part
of Wellsford Parent to effect the Distribution or in any way limit Wellsford
Parent's power of termination set forth in Section 6.1 of this Agreement.
(b) Wellsford Parent and Newco shall prepare and mail, prior to the
Distribution Date, to the holders of Wellsford Parent Common Shares, such
information concerning Newco, its business, operations and management, the
Distribution and such other matters as Wellsford Parent shall reasonably
determine to be necessary and as may be required by law. Wellsford Parent and
Newco will prepare, and Newco will, to the extent required under applicable
law, file with the Commission any such documentation which Wellsford Parent
determines are necessary or desirable to effectuate the Distribution, and
Wellsford Parent and Newco shall each use its reasonable best efforts to
obtain all necessary approvals from the Commission with respect thereto as
soon as practicable.
(c) Wellsford Parent and Newco shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(d) Wellsford Parent and Newco shall take all reasonable steps necessary
and appropriate to cause the conditions set forth in Section 6.1 to be
satisfied and to effect the Distribution on the Distribution Date.
(e) Newco shall prepare and file, and shall use its reasonable best
efforts to have approved on or prior to the Distribution Date, an application
for the listing of the Newco Common Stock to be distributed in the
Distribution on the New York Stock Exchange, the American Stock Exchange or
NASDAQ National Market System, subject to official notice of issuance.
3.2 Distribution. On or prior to the Distribution Date, subject to the
conditions and rights of termination set forth in this Agreement, Wellsford
Parent shall (i) deliver to the Agent for the benefit of the Holders a single
stock certificate representing all the Newco Common Stock owned by Wellsford
Parent, endorsed by Wellsford Parent in blank, and (ii) deliver to the Agent
written instructions to distribute on the Distribution Date to each Holder or
designated transferee or transferees of such Holder 0.25 of a share of Newco
Common Stock for each Wellsford Parent Common Share held by such Holder (and,
if applicable, cash in lieu of fractional shares).
3.3 Fractional Shares.
(a) No Fractional Shares. Notwithstanding anything herein to the
contrary, no certificate or scrip evidencing a fractional share of Newco
Common Stock shall be issued in connection with the Distribution, and any such
fractional share interests to which a Holder would otherwise be entitled will
not entitle such Holder to vote or to any rights of a stockholder of Newco.
In lieu of any such fractional shares, each Holder who, but for the provisions
of this Section 3.3(a), would be entitled to receive a fractional share
interest of Newco Common Stock pursuant to the Distribution shall be paid
cash, without any interest thereon, as hereinafter provided. Wellsford Parent
shall instruct the Agent to determine the number of whole shares and
fractional shares of Newco Common Stock allocable to each Holder, to aggregate
all such fractional shares into whole shares, to sell the whole shares
obtained thereby in the open market at the then prevailing prices on behalf of
Holders who otherwise would be entitled to receive fractional share interests
and to distribute to each such Holder his, her or its ratable share of the
total proceeds of such sale, after making appropriate deductions of the amount
required to be withheld for federal income tax purposes and after deducting
any applicable transfer taxes. All brokers' fees and commissions incurred in
connection with such sales shall be paid by Newco.
(b) Unclaimed Stock or Cash. Any Newco Common Stock or cash in lieu of
fractional shares and dividends or distributions with respect to Newco Common
Stock that remain unclaimed by any Holder 180 days after the Distribution Date
shall be returned to Wellsford Parent, and any such Holder shall look only to
Wellsford Parent for the Newco Common Stock, cash, if any, in lieu of
fractional share interests and any such dividends or distributions to which
they are entitled, subject in each case to applicable escheat or other
abandoned property laws.
3.4 No Representations or Warranties. Each of the parties hereto
understands and agrees that no party hereto is, in this Agreement or in any
other agreement or document contemplated by this Agreement or otherwise,
making any representation or warranty whatsoever, including, without
limitation, as to title, value or legal sufficiency.
ARTICLE 4
COVENANTS
4.1 Undertaking by Wellsford Parent. Wellsford Parent hereby undertakes
to change its name from "Wellsford Residential Property Trust" to a new name
bearing no resemblance to its present name, immediately upon consummation of
the Merger. Promptly, and in any event prior to the completion of the
Transition Period, Wellsford Parent shall remove all references to the name
"Wellsford" from the names of the Retained Subsidiaries and all of its
stationery.
4.2 Corporate Records. Wellsford Parent shall use its best efforts to
arrange, as soon as practicable following the Distribution Date, for the
transportation and delivery to Newco of all original agreements, documents,
books, records and files relating to or affecting Newco, the Contributed
Assets or the Assumed Liabilities, to the extent such items are not already in
the possession of Newco, provided that Wellsford Parent may retain any tax
returns, reports, forms or work papers, and Newco will be provided with copies
of such returns, reports, forms or work papers.
4.3 Confidentiality. Each of Wellsford Parent and Newco shall hold, and
shall cause its respective trustees, directors, officers, Affiliates,
employees, agents, accountants, consultants and advisors (collectively,
"Representatives") to hold, in strict confidence all information concerning
the other relating to the Contributed Assets and the Assumed Liabilities in
its possession (except to the extent that such information has been (a) in the
public domain through no fault of such party or any of its Representatives,
including information contained in the Registration Statement and the S-4 and
other statements and reports filed with the Commission, or (b) later lawfully
acquired from other sources by such party) to the extent such information (i)
relates to the period up to the Effective Time, (ii) relates to this Agreement
or (iii) is obtained from the other party pursuant to this Agreement
("Confidential Information"). Each party shall not release or disclose, or
permit to be released or disclosed by any of its Representatives or otherwise,
any Confidential Information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
need to know such information, unless compelled to disclose by judicial or
administrative process or, as advised by its counsel, by other requirements of
law. In the event that either party or its Representatives (a "Disclosing
Party") is compelled to release or disclose, or permit to be released or
disclosed, any Confidential Information as provided in the immediately
preceding sentence, such Disclosing Party shall (i) immediately notify the
other party (the "Providing Party") of the existence, terms and circumstances
surrounding such a requirement, (ii) consult with the Providing Party on the
advisability of taking legally available steps to resist or narrow such
requirement and (iii) if disclosure of such information is nevertheless
required, furnish only that portion of the Confidential Information which, in
the opinion of such Disclosing Party's counsel, such Disclosing Party is
legally compelled to disclose and to cooperate with any action by the
Providing Party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information (it being agreed that the Providing Party shall reimburse the
Disclosing Party for all reasonable out-of-pocket expenses incurred by the
Disclosing Party in connection with such cooperation).
4.4 Further Assurances. Each of the parties hereto shall use their
reasonable best efforts, prior to, on and after the Distribution Date, to take
or cause to be taken, all actions, and to do, or cause to be done, all things,
necessary, proper or desirable under applicable laws and regulations to carry
out the purposes of this Agreement and to vest Newco with full title to all
Contributed Assets. Without limiting the foregoing, Wellsford Parent and
Newco shall use their best efforts to obtain all consents and approvals, to
enter into all amendatory agreements and to make all filings and applications
and take all other actions which may be required for the consummation of the
transactions contemplated by this Agreement, including, without limitation,
all applicable regulatory filings.
ARTICLE 5
INDEMNIFICATION
5.1 Indemnification by Wellsford Parent. Except as otherwise set forth
herein, Wellsford Parent, for itself and its Affiliates, and their respective
successors and assigns, shall indemnify, defend and hold harmless Newco, each
of its directors, officers, employees and agents, and each Affiliate of Newco,
and each of the heirs, executors, successors and assigns of any of the
foregoing (the "Newco Indemnitees") from and against any and all Losses of the
Newco Indemnitees arising out of, by reason of or otherwise in connection with
the Wellsford Parent Liabilities, except as otherwise provided in the
Transaction Costs Agreement.
5.2 Indemnification by Newco. Except as otherwise set forth herein,
Newco, for itself and its Affiliates and their respective successors and
assigns, shall indemnify, defend and hold harmless Wellsford Parent, each of
its trustees, officers, employees and agents, and each Affiliate of Wellsford
Parent, and each of the heirs, executors, successors and assigns of any of the
foregoing (the "Wellsford Parent Indemnitees") from and against any and all
Losses of the Wellsford Parent Indemnitees arising out of, by reason of or
otherwise in connection with the Newco Liabilities, except as otherwise
provided in the Credit Enhancement Agreement and the Palomino Agreement.
5.3 Limitations on Indemnification Obligations. The amount which any
party (an "Indemnifying Party") is or may be required to pay to any other
party (an "Indemnitee") pursuant to Section 5.1 or Section 5.2 shall be
reduced (retroactively or prospectively) by any insurance proceeds or other
amounts actually recovered by or on behalf of such Indemnitee, in reduction of
the related Loss. If an Indemnitee shall have received the payment required
by this Agreement from an Indemnifying Party in respect of a Loss and shall
subsequently actually receive insurance proceeds or other amounts in respect
of such Loss, then such Indemnitee shall pay to such Indemnifying Party a sum
equal to the amount of such insurance proceeds or other amounts actually
received, up to the aggregate amount of any payments received from such
Indemnifying Party pursuant to this Agreement in respect of such Loss.
5.4 Procedure for Indemnification.
(a) If an Indemnitee shall receive notice or otherwise learn of the
assertion by a person (including, without limitation, any Governmental
Authority) who is not a party to this Agreement or the Merger Agreement of any
claim or of the commencement by any such person of any Action (a "Third-Party
Claim") with respect to which an Indemnifying Party may be obligated to
provide indemnification pursuant to this Agreement, such Indemnitee shall give
such Indemnifying Party written notice (the "Indemnitee Notice") thereof
promptly after becoming aware of such Third-Party Claim; provided, however,
that the failure of any Indemnitee to give notice as provided in this Section
5.4 shall not relieve the applicable Indemnifying Party of its obligations
under this Article V, except to the extent that such Indemnifying Party is
prejudiced by such failure to give notice. Such Indemnitee Notice shall
describe the Third-Party Claim in reasonable detail and shall indicate the
amount (estimated if necessary) of the Loss that has been or may be sustained
by such Indemnitee.
(b) The Indemnitee shall provide to the Indemnifying Party on request
all information and documentation reasonably necessary to support and verify
any Losses which the Indemnitee believes give rise to a claim for
indemnification hereunder and shall give the Indemnifying Party reasonable
access to all books, records and personnel in the possession or under the
control of the Indemnitee which would have bearing on such claim.
(c) Upon receipt of the Indemnitee Notice required by Section 5.4(a),
the Indemnifying Party shall be entitled, if it so elects, to take control of
the defense and investigation with respect to such claim and to employ and
engage attorneys of its own choice to handle and defend the same, at the
Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnitee of such election within 30 days of receipt of Indemnitee's notice.
The Indemnifying Party shall not settle any third-party claim that is the
subject of indemnification without the written consent of the Indemnitee,
which consent shall not be unreasonably withheld; provided, however, that the
Indemnifying Party may settle a claim without the Indemnitee's consent if such
settlement (i) includes a complete release of the Indemnitee and (ii) does not
require the Indemnitee to make any payment or take any action or otherwise
materially adversely affect the Indemnitee. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third-Party
Claim, such Indemnifying Party will not be liable to such Indemnitee under
this Article V for any legal or other expenses subsequently incurred by such
Indemnitee in connection with the defense thereof; provided, that, if the
defendants in any such claim include both the Indemnifying Party and one or
more Indemnitees and a conflict of interest between such Indemnitees and such
Indemnifying Party exists in respect of such claim, such Indemnitees will have
the right to employ separate counsel reasonably satisfactory to the
Indemnifying Party to represent such Indemnitees, and in that event the
reasonable fees and expenses of such separate counsel (but not more than one
separate counsel) will be paid by such Indemnifying Party.
(d) If an Indemnifying Party elects to defend or to seek to compromise
any Third-Party Claim, the appropriate Indemnitee shall (x) cooperate in all
reasonable respects with the Indemnifying Party in connection with such
defense and (y) not admit any liability with respect to, or settle, compromise
or discharge, such Third-Party Claim without the Indemnifying Party's prior
written consent.
(e) If the Indemnifying Party shall decline to assume the defense of any
such Third-Party Claim, or shall fail to notify the Indemnitee that it will
defend such claim within 30 days after receipt of the Indemnitee Notice, the
Indemnitee shall defend against such claim (provided that the Indemnitee shall
not settle such claim without the consent of the Indemnifying Party). The
expenses of all proceedings, contests or lawsuits in respect of such claims
shall be borne by the Indemnifying Party but only if the Indemnifying Party is
responsible pursuant to this Article V to indemnify the Indemnitee in respect
of the Third-Party Claim.
(f) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances with respect to which such Indemnitee may have any right or
claim relating to such Third-Party Claim against any claimant or plaintiff
asserting such Third-Party Claim. Such Indemnitee shall cooperate with such
Indemnifying Party in a reasonable manner, and at the cost and expense of such
Indemnifying Party, in prosecuting any subrogated right or claim.
(g) With respect to any Third-Party Claim for which the Indemnifying
Party assumes responsibility for defense, the Indemnifying Party shall inform
the Indemnitee, upon the reasonable written request of the Indemnitee, of the
status of efforts to resolve such Third-Party Claim. With respect to any
Third-Party Claim for which the Indemnifying Party does not assume such
responsibility, the Indemnitee shall inform the Indemnifying Party, upon the
reasonable written request of the Indemnifying Party, of the status of efforts
to resolve such Third-Party Claim.
5.5 Survival of Indemnities. The obligations of Wellsford Parent and
Newco under this Article V shall survive the sale or other transfer by it of
any assets or businesses or the assignment by it of any Liabilities, with
respect to any Loss of the other related to such assets, businesses or
Liabilities.
ARTICLE 6
CONDITIONS TO THE CONTRIBUTION AND THE DISTRIBUTIONS
6.1 Conditions Precedent to the Distributions. The obligation of
Wellsford Parent to cause the Contribution of the Contributed Assets pursuant
to Article II and to cause the consummation of the Distributions pursuant to
Article III shall be subject, at the option of Wellsford Parent, to the
fulfillment or waiver, of each of the following conditions:
(a) Effective Date of Registration Statement. Each of the Registration
Statement and the S-4 shall have been declared effective by order of the
Commission and shall not be the subject of any stop order or proceeding by the
Commission seeking a stop order.
(b) No Prohibitions. Consummation of the transactions contemplated
hereby shall not be prohibited by applicable law and no Governmental Authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect
and which materially restricts, prevents or prohibits consummation of the
Distribution, the Merger or any transaction contemplated by this Agreement or
the Merger Agreement, it being understood that the parties hereto hereby agree
to use their reasonable best efforts to cause any such decree, judgment,
injunction or other order to be vacated or lifted as promptly as possible.
(c) Conditions Precedent to Merger Satisfied. Each condition to the
closing of the Merger set forth in Sections 6.1 and 6.3 of the Merger
Agreement shall have been satisfied or waived.
ARTICLE 7
MISCELLANEOUS
7.1 Termination. This Agreement may be terminated and the Distribution
abandoned for any or no reason at any time prior to the Distribution by and in
the sole discretion of the Board of Trustees of Wellsford Parent without the
approval of Newco or the shareholders of Wellsford Parent. In the event of
such termination, no party will have any liability of any kind to any other
party.
7.2 Complete Agreement; Construction. This Agreement, including the
Schedules, constitutes the entire agreement between the parties with respect
to the subject matter hereof, and supersedes all previous negotiations,
commitments and writings with respect to such subject matter.
7.3 Survival of Agreements. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement will survive the Distribution Date.
7.4 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Maryland, without regard to the
principles of conflicts of laws thereof.
7.5 Notices. All notices and other communications hereunder must be in
writing and must be delivered by hand, mailed by registered or certified mail
(return receipt requested) or sent by facsimile transmission to the parties at
the following addresses (or at such other addresses for a party as may be
specified by like notice) and will be deemed given on the date on which such
notice is received:
To Wellsford Parent:
Before the Distribution Date, to:
Wellsford Residential Property Trust
610 Fifth Avenue, 7th Floor
New York, NY 10020
Attn: President
Fax: (212) 333-2323
After the Distribution Date, to:
Equity Residential Properties Trust
Two North Riverside Plaza
Suite 400
Chicago, IL 60606
Attn: President
Fax: (312) 207-5243
To Newco:
Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, NY 10020
Attn: President
Fax: (212) 333-2323
7.6 Amendments. This Agreement may not be modified or amended except by
an agreement in writing signed by the parties.
7.7 Successors and Assigns. Except in connection with the Merger, this
Agreement shall not be assignable, in whole or in part, directly or
indirectly, by either party hereto without the prior written consent of the
other, and any attempt to assign any rights or obligations arising under this
Agreement without such consent shall be void; provided, however, that the
provisions of this Agreement shall be binding upon, inure to the benefit of
and be enforceable by the parties and their respective successors and
permitted assigns; provided, further, that the rights and obligations of
Wellsford Parent under this Agreement may be assigned after the Merger to ERP
Operating Partnership.
7.8 No Third-Party Beneficiaries. Except for the provisions of Article
V relating to Indemnitees and as otherwise expressly provided herein, the
provisions of this Agreement are solely for the benefit of the parties hereto
and their respective successors and permitted assigns and should not be deemed
to confer upon third parties any remedy, claim, liability, reimbursement,
claim of action or other right in excess of those existing without reference
to this Agreement.
7.9 Title and Headings. Titles and headings to sections herein are
inserted for the convenience of reference only and are not intended to be a
part of or to affect the meaning or interpretation of this Agreement.
7.10 Legal Enforceability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder are specifically enforceable.
7.11 Counterparts. This Agreement may be executed in one or more
counterparts, each of which when executed shall be deemed an original, but all
of which together shall constitute one and the same instrument.
7.12 Non-Recourse. This Agreement and all documents, agreements,
understandings and arrangements relating hereto have been entered into or
executed on behalf of Wellsford Parent by the undersigned in his capacity as a
trustee or officer of Wellsford Parent, which has been formed as a Maryland
real estate investment trust pursuant to an Amended and Restated Declaration
of Trust of Wellsford Parent dated as of November 2, 1992, as amended and
restated, and not individually, and neither the trustees, officers or
shareholders of Wellsford Parent shall be personally bound or have any
personal liability hereunder. Newco shall look solely to the assets of
Wellsford Parent for satisfaction of any liability of Wellsford Parent with
respect of this Agreement and all documents, agreements, understandings and
arrangements relating to this Agreement and will not seek recourse or commence
any action against any of the trustees or officers of Wellsford Parent or any
of their personal assets for the performance or payment of any obligation of
Wellsford Parent hereunder or thereunder.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the day and year first above written.
WELLSFORD RESIDENTIAL PROPERTY TRUST
By: /s/ Jeffrey Lynford
-------------------------------------
Name: Jeffrey Lynford
Title: Chairman
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
------------------------------------
Name: Edward Lowenthal
Title: President
<PAGE>
SCHEDULE 2.1(a)
SONTERRA DOCUMENTS
1. Loan Agreement ("Loan Agreement"), dated as of June 28, 1996, by and
between Wellsford Residential Property Trust and Specified Properties VIII,
L.P., a Texas Limited Partnership ("Specified").
2. Waiver of Borrower's Condition, dated as of July 11, 1996, by
Specified.
3. Promissory Note, dated June 28, 1996, by Specified in favor of
Wellsford Residential Property Trust in the amount of $17,800,000.00 (the
"Note").
4. Deed of Trust, Security Agreement and Fixture Filing, made as of
June 28, 1996, by Specified, as Trustor, Chicago Title Insurance Company, as
Trustee, and Wellsford Residential Property Trust, as Beneficiary ("Deed of
Trust").
5. Guaranty Agreement, dated as of June 28, 1996, by John R. Carmichael
in favor of Wellsford Residential Property Trust.
6. Assignment of Leases and Rents, dated as of June 28, 1996, by and
from Specified to and for the benefit of Wellsford Residential Property Trust
("Assignment of Leases and Rents").
7. Assignment of Agreements, made as of June 28, 1996, by Specified to
Wellsford Residential Property Trust.
8. Consent and Agreement of Manager, by Lexford Properties, Inc., dated
as of July 15, 1996.
9. Hazardous Substances Remediation and Indemnification Agreement,
dated as of June 28, 1996, by Specified, Westwood Residential No. 9 Limited
Partnership, a Texas limited partnership, and Westwood Residential General
Partner No. 9, Inc., a Texas corporation, in favor of Wellsford Residential
Property Trust.
10. Security Agreement, dated as of June 28, 1996, between Specified and
Wellsford Residential Property Trust ("Security Agreement").
11. Letter Agreement, dated July 9, 1996, between Specified, Wellsford
Residential Property Trust and Chicago Title Insurance Company.
12. Lender's Title Policy No. 512169 issued by Chicago Title Insurance
Company, dated July 12, 1996 ("Lender's Title Policy").
13. Option Agreement, made as of June 28, 1996, by and between Specified
and Wellsford Residential Property Trust ("Option Agreement").
14. Memorandum of Option to Purchase, made as of June 28, 1996, by
Specified and Wellsford Residential Property Trust.
15. Waiver of Seller's Condition, dated as of July 11, 1996, by
Specified ("Seller's Waiver").
16. Owner's Title Policy No. 512169 issued by Chicago Title Insurance
Company, dated September 20, 1996.
<PAGE>
SCHEDULE 2.1(e)
SPLIT DOLLAR LIFE INSURANCE
1. Modification Agreement, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Edward Lowenthal.
2. Modification Agreement, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Jeffrey H. Lynford.
3. Modification Assignment, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Edward Lowenthal.
4. Modification Assignment, dated as of December 11, 1995, by and
between Wellsford Residential Property Trust and Jeffrey H. Lynford.
<PAGE>
SCHEDULE 2.2(a)
OPTION AGREEMENTS
$28,500,000
COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT
Dated as of May 30, 1997
between
ERP OPERATING LIMITED PARTNERSHIP
as Purchaser,
and
WELLSFORD REAL PROPERTIES, INC.
as Company
<PAGE>
TABLE OF CONTENTS
Article Page
1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Terms Generally . . . . . . . . . . . . . . . . . . . . . . . . . 7
2 THE AGGREGATE COMMITMENTS. . . . . . . . . . . . . . . . . . . . . . . 7
2.1 The Closing Date Purchase Commitment. . . . . . . . . . . . . . . 7
2.2 Payment of the Closing Date Purchase Commitment . . . . . . . . . 9
2.3 Term Purchase Commitment. . . . . . . . . . . . . . . . . . . . . 9
2.4 Notice of Purchase. . . . . . . . . . . . . . . . . . . . . . . . 9
2.5 Certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.6 Right of Purchaser to Purchase Uncalled Term Purchase
Commitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 10
3.1 Organization; Powers. . . . . . . . . . . . . . . . . . . . . . . 10
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.3 The Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Governmental Approvals. . . . . . . . . . . . . . . . . . . . . . 12
3.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . 12
3.7 Title to Properties; Default Under Agreements . . . . . . . . . . 12
3.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Litigation; Compliance with Laws. . . . . . . . . . . . . . . . . 12
3.10 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.11 Investment Company Act; Public Utility Holding Company Act. . . . 13
3.12 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.13 No Material Misstatements . . . . . . . . . . . . . . . . . . . . 13
3.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . 13
3.15 Environmental and Safety Matters. . . . . . . . . . . . . . . . . 13
4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . 14
4.1 First Purchase.. . . . . . . . . . . . . . . . . . . . . . . 14
4.2 All Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1 Existence: Businesses and Properties. . . . . . . . . . . . . . . 16
5.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.3 Obligations and Taxes . . . . . . . . . . . . . . . . . . . . . . 16
5.4 Financial Statements, Reports, etc. . . . . . . . . . . . . . . . 17
5.5 Litigation and Other Notices. . . . . . . . . . . . . . . . . . . 18
5.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.7 Maintaining Records; Access to Properties and Inspections . . . . 18
5.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.9 Issuance of Preferred Stock and Class A Common Stock. . . . . . . 18
5.10 Closing Date Director . . . . . . . . . . . . . . . . . . . . . . 18
5.11 Nomination as Director; Appointment of Person to Attend and
Observe Meetings. . . . . . . . . . . . . . . . . . . . . . . . . 18
5.12 Election as Director. . . . . . . . . . . . . . . . . . . . . . . 20
5.13 Voting of Stock . . . . . . . . . . . . . . . . . . . . . . . . . 21
5.14 Sale of Common Stock or Preferred Stock . . . . . . . . . . . . . 21
5.15 Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . . . 22
6 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.1 Termination of the Agreement. . . . . . . . . . . . . . . . . . . 24
7.2 Securities Law Matters. . . . . . . . . . . . . . . . . . . . . . 24
7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
7.4 Survival of Agreement . . . . . . . . . . . . . . . . . . . . . . 27
7.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.6 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.7 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.8 Waivers; Amendment. . . . . . . . . . . . . . . . . . . . . . . . 27
7.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 28
7.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . 28
7.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.13 Jurisdiction; Consent to Service of Process.. . . . . . . . . . . 28
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Articles Supplementary Classifying Preferred Stock
Exhibit B - Purchase Notice
Exhibit C - Charter and Bylaws of the Company
Exhibit D - Opinion of Counsel
Exhibit E - Registration Rights Agreement
Exhibit F - Class A Common Stock Terms
SCHEDULES
Schedule 3.3 - Capital Stock
Schedule 3.5 - Governmental Approvals
Schedule 3.8 - Subsidiaries
Schedule 3.9 - Litigation
Schedule 3.15 - Environmental and Safety Matters
<PAGE>
COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT
THIS COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT dated as of May 30,
1997, (this "Agreement") is entered into between ERP OPERATING LIMITED
PARTNERSHIP, an Illinois limited partnership (the "Purchaser"), and WELLSFORD
REAL PROPERTIES, INC., a Maryland corporation (the "Company").
In accordance with the terms and subject to the conditions set forth in this
Agreement, the Purchaser has agreed to purchase from the Company (i) on the
Closing Date the number of shares of Class A common stock, par value $.01 per
share, of the Company (the "Class A Common Stock") equal to the Closing Date
Purchase Commitment divided by the Issuance Price, and (ii) at any time during
the Purchase Term, the aggregate number of shares of Series A Convertible
Redeemable Preferred Stock of the Company (the "Preferred Stock") having the
terms set forth in Exhibit A hereto, not in excess of the Term Purchase
Commitment at the Purchase Price on the date of any such purchase.
Accordingly, the Company and the Purchaser agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall
have the meanings specified below:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with the Person specified.
"Aggregate Purchase Commitment" shall mean the Purchaser's Closing
Date Purchase Commitment and Term Purchase Commitment.
"Agreement" shall have the meaning ascribed to such term in the
preamble hereto.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Illinois) on which banks
are open for business in Chicago.
"Capital Lease" shall mean any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination
thereof, which obligations are required to be classified and accounted for
as capital leases on a balance sheet under GAAP and, for the purposes of
this Agreement, the amount of such obligations at any time shall be the
capitalized amount thereof at such time determined in accordance with
GAAP.
"Capital Lease Obligations" of any Person shall mean the obligations
of such Person to pay rent or other amounts under any Capital Lease.
A "Change in Control" shall be deemed to have occurred with respect
to the Company if (a) any Person or group (within the meaning of
Rule 13d-5 of the Securities and Exchange Commission as in effect on the
date hereof) other than the Purchaser or any of its Affiliates shall own,
directly or indirectly, beneficially or of record, shares representing
more than 50% of the aggregate ordinary voting power represented by the
issued and outstanding capital stock of the Company; or (b) a change shall
occur during any period in the Board of Directors of the Company in which
the individuals who constituted the Board of Directors of the Company at
the beginning of such period (together with any other director whose
election by the Board of Directors of the Company or whose nomination for
election by the stockholders of the Company was approved by a vote of at
least two-thirds of the directors then in office who either were directors
at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the directors of the Company then in office.
"Closing Date" shall mean May 30, 1997.
"Closing Date Purchase Commitment" shall mean the commitment of
Purchaser to purchase the number of shares of Class A Common Stock equal
to $3,500,000 divided by the Issuance Price on the Closing Date.
"Code" shall mean the Internal Revenue Code of 1986, as the same may
be amended from time to time.
"Class A Common Stock" shall have the meaning set forth in the
preamble hereto.
"Common Stock" shall mean shares of common stock, par value $.01 per
share, of the Company.
"Control" including the terms "Controlling", "Controlled by" and
"under common Control with", shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
"ERISA" shall mean Employment Retirement Income Securities Act, 29
USC 1001, et. seq. (1974), as amended.
"ERISA Affiliate" shall mean an affiliate as defined in Section
407(d)(7) of ERISA.
"Event of Default" shall have the meaning given such term in
Article 6.
"Fiscal Year" shall mean the fiscal year of the Company as provided
in the Bylaws of the Company.
"GAAP" shall mean generally accepted accounting principles, applied
on a consistent basis.
"Governmental Authority" shall mean any Federal, state, local or
foreign court or governmental agency, authority, instrumentality or
regulatory body.
"Gross Sales Price Per Share of Common Stock" shall mean (a) the
gross proceeds from all sales of Common Stock to institutional purchasers
taking place on or prior to the Closing Date and subject to written
commitments to purchase from institutional purchasers received on or prior
to the Closing Date, divided by (b) the aggregate number of shares so sold
and subject to such commitments.
"Guarantee," when used with respect to any Person, shall mean the
incurrence of any obligation, contingent or otherwise, of such Person
guaranteeing or having the economic effect of guaranteeing any
Indebtedness of any other Person (the "primary obligor") in any manner,
whether directly or indirectly, and including any obligation of such
Person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purpose or payment of) such Indebtedness or to purchase (or
to advance or supply funds for the purchase of) any security for the
payment of such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such Indebtedness of the
payment of such Indebtedness or (c) to maintain working capital, equity
capital or other financial statement condition or liquidity of the primary
obligor so as to enable the primary obligor to pay such Indebtedness;
provided, however, that the term "Guarantee" shall not include
endorsements of items by any Person for collection or deposit in the
ordinary course of business.
"Indebtedness" as applied to any Person shall mean (without
duplication) (a) any indebtedness for borrowed money which such Person has
directly or indirectly created, incurred or assumed, including, without
limitation, Capital Lease Obligations of such Person, (b) any indebtedness
incurred other than in the ordinary course of business, whether or not for
borrowed money, secured by any Lien in respect of property owned by such
Person, whether or not such Person has assumed or become liable for the
payment of such indebtedness, (c) any indebtedness, whether or not for
borrowed money, with respect to which such Person has become directly or
indirectly liable and which represents or has been incurred to finance the
purchase price (or a portion thereof) of any property or services or
business acquired by such Person, whether by purchase, consolidation,
merger or otherwise, (d) any Indebtedness of the character referred to in
clauses (a), (b) or (c) of this definition deemed to be extinguished under
generally accepted accounting principles but for which such Person remains
legally liable and (e) any Indebtedness of any other Person of the
character referred to in subdivision (a), (b), (c) or (d) of this
definition with respect to which the Person whose Indebtedness is being
determined has become liable by way of a Guarantee, including, without
limitation, any such Indebtedness of any partnership in which such Person
is a general partner.
"Issuance Price" shall mean the Gross Sales Price Per Share of Common
Stock determined as of the Closing Date or, in the event no sales of
Common Stock to any institutional purchaser take place on or prior to the
Closing Date or are subject to a written commitment to purchase from any
institutional purchaser received on or prior to the Closing Date,
"Issuance Price" shall mean the Net Book Value Per Share of Common Stock
determined as of the Closing Date.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right
of a third party with respect to such securities.
"Material Adverse Effect" shall mean a materially adverse effect on
the business, assets, prospects, operations or financial condition of the
Company and its Subsidiaries taken as a whole.
"Merger Agreement" shall mean that certain Agreement and Plan of
Merger by and between Equity Residential Properties Trust and Wellsford
Residential Property Trust ("Wellsford"), dated as of January 16, 1997.
"Multiemployer Plan" shall mean a multiemployer plan as defined in
Section 4001(a)(3) of ERISA to which the Company or any ERISA Affiliate
(other than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) is making or accruing an
obligation to make contributions, or has within any of the preceding five
plan years made or accrued an obligation to make contributions.
"Net Book Value Per Share of Common Stock" shall mean the
stockholders' equity of the Company determined in accordance with GAAP as
adjusted for all liabilities, including all costs related to the formation
of the Company as set forth in the financial statements of the Company,
less the liquidation value of all outstanding shares of preferred stock
including the Preferred Stock, divided by the number of shares of Common
Stock of the Company outstanding on such date, excluding the shares of
Class A Common Stock being purchased by the Purchaser on the Closing Date.
Net Book Value Per Share of Common Stock shall be determined in accordance
with Section 2.1 of this Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred
to and defined in ERISA.
"Person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Potential Event of Default" shall mean any event or condition which
upon notice, lapse of time or both would constitute an Event of Default.
"Preferred Stock" shall have the meaning set forth in the preamble
hereto.
"Purchase" shall have the meaning given such term in Article 4.
"Purchase Notice" shall have the meaning given such term in Section
2.4.
"Purchase Price" shall mean $25.00 per share of Preferred Stock.
"Purchase Term" shall mean the period of time beginning on the
Closing Date and ending three years from the Closing Date.
"Purchaser" shall have the meaning given to such term in the preamble
hereto.
"Purchaser Director" shall mean the director which the holders of the
Class A Common Stock are entitled to elect pursuant to the Charter of the
Company.
"Registration Rights Agreement" shall mean that certain Registration
Rights Agreement between the Purchaser and the Company dated as of the
date hereof.
"Responsible Officer" of any corporation shall mean any executive
officer of such corporation, and any other officer or similar official
thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.
"subsidiary" shall mean, with respect to any Person (herein referred
to as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or more than 50% of the general partnership interests are, at
the time any determination is being made, owned, controlled or held, or
(b) which is, at the time any determination is made, otherwise Controlled,
by the parent or one or more subsidiaries of the parent or by the parent
and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of the Company.
"Term Closing Date" shall have the meaning given to such term in
Section 2.4.
"Term Purchase Commitment" shall mean the commitment of Purchaser to
purchase 1,000,000 shares of Preferred Stock at the Purchase Price per
share. The Term Purchase Commitment is in addition to the Closing Date
Purchase Commitment.
"Warrant" shall mean any warrant issued pursuant to the Articles
Supplementary classifying the Preferred Stock.
"Wellsford" shall mean Wellsford Residential Property Trust, a
Maryland real estate investment trust.
1.2 Terms Generally. The definitions in Section 1.1 shall apply equally to
both the singular and plural forms of the terms defined. Whenever the context
may require, any pronoun shall include the corresponding masculine, feminine
and neuter forms. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". All references
herein to Articles, Sections, Exhibits and Schedules shall be deemed
references to Articles and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Except as otherwise
expressly provided herein, all terms of an accounting or financial nature
shall be construed in accordance with GAAP, as in effect from time to time;
provided, however, that, for purposes of determining compliance with any
covenant set forth in Article 5, such terms shall be construed in accordance
with GAAP as in effect on the date of this Agreement applied on a basis
consistent with the application used in preparing the Company's audited
financial statements; provided, further, that in making any calculation
required by this Agreement, for the purpose of determining the net income or
deficit or item of expense of or for any Subsidiary, notwithstanding any
reference herein to any period, the income, deficit or expense included in
such calculation with respect to such Subsidiary shall be included only from
the date such Subsidiary became a Subsidiary.
ARTICLE 2
THE AGGREGATE COMMITMENTS
2.1 The Closing Date Purchase Commitment. Subject to the terms and
conditions set forth in this Agreement, the Purchaser hereby agrees to
purchase from the Company on the Closing Date, Class A Common Stock, having
the terms set forth on Exhibit G hereto, and having an aggregate purchase
price of $3,500,000 at a price per share equal to the Issuance Price. The
number of shares of Class A Common Stock to be issued on the Closing Date will
be $3,500,000 divided by the Issuance Price, unless the Issuance Price is the
Net Book Value Per Share of Common Stock. In such event, the number of shares
issued on the Closing Date will be 350,000 based upon an estimated Issuance
Price of $10.00 per share and such number of shares shall be subject to
adjustment after the Closing Date in accordance with the following procedures:
(a) Within 30 days after the Closing Date, the Company shall furnish
to Purchaser (a) the balance sheet of the Company as of the Closing Date
("Closing Balance Sheet"), showing in reasonable detail the assets and
liabilities of the Company, accompanied by the report thereon of Ernst &
Young LLP stating that the Closing Balance Sheet has been prepared in
conformity with GAAP applied consistently with the principles used in
preparing the pro forma financial statements of the Company included in the
information furnished to the shareholders of Wellsford in connection with
Wellsford's distribution of the capital stock of the Company to the
shareholders of Wellsford, and (b) the Company's determination of Net Book
Value Per Share of Common Stock in accordance with this Agreement based upon
the Closing Balance Sheet.
(b) Purchaser shall have the right to object to the Company's
determination of the Net Book Value Per Share of Common Stock as not being
determined in accordance with this Agreement. If Purchaser does not object
to the Company's determination of the Net Book Value Per Share of Common
Stock within 15 days after delivery of the Closing Balance Sheet and such
determination to Purchaser (such period being referred to as the "Contest
Period"), then the Company's determination of the Net Book Value Per Share
of Common Stock shall be final, binding and conclusive on the parties. If
Purchaser objects to the Company's determination of Net Book Value Per Share
of Common Stock, it shall do so by notifying the Company thereof within the
Contest Period, which notice shall specify the grounds for such objection in
reasonable detail. The parties shall endeavor in good faith to resolve
promptly the matters to which Purchaser has objected. If the parties are
unable to resolve Purchaser's objections within ten (10) days after
Purchaser notified the Company of its objections, the Company shall engage
the Chicago, Illinois offices of Ernst & Young LLP (the "Independent
Accountants") to examine the calculation of the Net Book Value Per Share of
Common Stock in accordance with this Agreement. The Independent Accountants'
determination of the Net Book Value Per Share of Common Stock shall be
final, binding and conclusive on the parties.
(c) The fees of the Independent Accountants for making such
determination shall be borne by the parties in the proportion that the
difference between the ultimate determination of the Issuance Price by the
Independent Accountants and each party's position as to the Issuance Price
bears to each other. For example, if one party's position was that the
Issuance Price was $2.50 and the other party's was $3.00 and the Independent
Accounts' determination was $2.75, each party would bear 50% of the
Independent Accountants' fees.
(d) The actual number of shares of Class A Common Stock to be
purchased by Purchaser shall be $3,500,000 divided by the Issuance Price as
finally determined pursuant to clause (b) of this Section (the "Final
Number"). If the Final Number is more than 350,000 shares of Class A Common
Stock, within 10 days after the Issuance Price has been so finally
determined, the Company shall issue to Purchaser a certificate dated the
Closing Date evidencing the number of shares of Class A Common Stock equal
to the difference. If the Final Number is less than 350,000 shares of Class
A Common Stock, within 10 days after the Issuance Price has been so finally
determined, Purchaser shall surrender to the Company the certificate for
350,000 shares of Class A Common Stock issued to the Company on the Closing
Date in exchange for a new certificate, dated the Closing Date, evidencing
the Final Number of shares of Class A Common Stock.
(e) The Purchaser and the Company hereby agree that the Net Book Value
Per Share of Common Stock determined in accordance with this Section 2.1
shall be the Net Book Value Per Share of Common Stock for all purposes of
the Articles Supplementary Classifying the Preferred Stock attached hereto
as Exhibit A.
2.2 Payment of the Closing Date Purchase Commitment. Subject to
fulfillment of the conditions precedent set forth in Section 4.1, on the
Closing Date, Purchaser shall pay $3,500,000 to the Company on the Closing
Date by wire transfer of immediately available funds to such account as has
been designated to Purchaser by the Company prior to the Closing Date.
2.3 Term Purchase Commitment.
(a) Each Purchase of Preferred Stock pursuant to the Term Purchase
Commitment shall be in a minimum aggregate purchase price of $1,000,000 and
in multiples of $500,000 in excess thereof.
(b) Subject to the fulfillment of the conditions precedent set forth
in Section 4.2, on each Term Closing Date during the Purchase Term,
Purchaser shall purchase the number of shares of Preferred Stock equal to
the dollar amount of the Purchase requested divided by the Purchase Price.
Notwithstanding anything to the contrary in this Agreement, the aggregate
dollar amount of Purchases pursuant to the Term Purchase Commitment shall
not exceed $25,000,000.
2.4 Notice of Purchase. The Company shall give the Purchaser written or
telecopy notice (each a "Purchase Notice") ten (10) days before a proposed
Purchase pursuant to the Term Purchase Commitment in the event of a Purchase
in the amount of $5,000,000 or less, and twenty (20) days before a proposed
Purchase pursuant to the Term Purchase Commitment in the event of a Purchase
in an amount greater than $5,000,000. Each such notice shall be in
substantially the form of Exhibit B. Such notice shall be irrevocable if not
revoked within five (5) days after delivery and shall in each case refer to
this Agreement and specify a date (the "Term Closing Date") on which the
Purchase shall occur.
2.5 Certificates.
(a) The Company shall deliver to the Purchaser on the Closing Date a
certificate or certificates representing 350,000 shares of Class A Common
Stock, representing the estimated number of shares of Class A Common Stock
purchased by the Purchaser on the Closing Date.
(b) The Company shall deliver to the Purchaser on each Term Closing
Date a certificate or certificates representing the aggregate number of
shares of Preferred Stock purchased by the Purchaser on such Term Closing
Date.
2.6 Right of Purchaser to Purchase Uncalled Term Purchase Commitment. If
at the end of the Purchase Term Purchaser has purchased Preferred Stock having
an aggregate purchase price of less than $25,000,000 (the excess of
$25,000,000 over the aggregate purchase price paid by Purchaser for Preferred
Stock during the Purchase Term being referred to herein as the "Uncalled
Commitment"), then provided that Purchaser is not in breach of its obligation
to purchase Preferred Stock pursuant to a Purchase Notice delivered during the
Purchase Term, Purchaser shall have the right to purchase up to that number of
shares of Preferred Stock equal to the Uncalled Commitment divided by the
Purchase Price, exercisable at any time during the thirty (30) days following
the expiration of the Purchase Term by giving the Company written notice
("Subscription Notice") stating that Purchaser has elected to purchase shares
of Preferred Stock pursuant to this Section and specifying the number of
shares to be purchased (which may not exceed the Uncalled Commitment divided
by the Purchase Price). Such notice shall be irrevocable.
The closing of the purchase pursuant to the Subscription Notice shall take
place five (5) business days after the date the Subscription Notice was
delivered to the Company (the "Subscription Closing Date"). On the
Subscription Closing Date, Purchaser shall pay the aggregate Purchase Price
for the number of shares of Preferred Stock which Purchaser elected to
purchase pursuant to the Subscription Notice by wire transfer to such account
as has been designated to Purchaser by the Company prior to the Subscription
Closing Date, and the Company shall deliver to Purchaser (a) a certificate or
certificates representing the aggregate number of shares of Preferred Stock
purchased by Purchaser on the Subscription Closing Date; and (b) an opinion of
counsel to the Company licensed to practice in Maryland and reasonably
satisfactory to Purchaser dated the Subscription Closing Date in form and
substance reasonably satisfactory to Purchaser stating that the shares of
Preferred Stock issued to Purchaser on the Subscription Closing Date are duly
and validly issued, fully paid and nonassessable.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchaser that:
3.1 Organization; Powers. The Company and each of the Subsidiaries (a) is
a an entity duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization, (b) has all requisite power and
authority to own its property and assets and to carry on its business as now
conducted and as proposed to be conducted by the Company and the Subsidiaries,
(c) is qualified to do business in every jurisdiction where such qualification
is required, except where the failure so to qualify would not result in a
Material Adverse Effect, and (d) in the case of the Company, has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement (including, without limitation, the offering, issuance, sale and
delivery to the Purchaser of the shares of Preferred Stock and the issuance of
Common Stock upon conversion of any of the shares of Preferred Stock). The
Charter and Bylaws of the Company as amended to date, which are attached as
Exhibit C hereto, are complete and correct as of the date hereof and contain
the provisions attached hereto as Exhibit F.
3.2 Authorization. The execution, delivery and performance by the Company
of this Agreement and the transactions contemplated hereby, (including,
without limitation, the offering, issuance, sale and delivery to the Purchaser
of the shares of Preferred Stock, Class A Common Stock and the issuance of
Common Stock upon conversion of any shares of Preferred Stock or Class A
Common Stock), (a) have been duly authorized by all requisite corporate and,
if required, stockholder action and (b) will not (i) violate (A) any provision
of law, statute, rule or regulation to which the Company or any of its
Affiliates shall be subject, or of the certificate or articles of
incorporation or other constitutive documents or bylaws of the Company or any
Subsidiary, (B) any order of any Governmental Authority or (C) any provision
of any indenture or other material agreement or instrument to which the
Company or any Subsidiary is a party or by which any of them or any of their
property is or may be bound, (ii) be in conflict with, result in a breach of
or constitute (alone or with notice or lapse of time or both) a default under
any such indenture, agreement or other instrument or (iii) result in the
creation or imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by the Company or any Subsidiary.
3.3 The Capital Stock. Pursuant to the Charter of the Company, the Company
is authorized to issue 2,000,000 shares of Preferred Stock, none of which have
been issued as of the date hereof, 350,000 shares of Class A Common Stock,
339,806 of which have been issued as of the date hereof, and 17,650,000 shares
of Common Stock, 4,596,313 of which have been issued as of the date hereof.
Except as disclosed on Schedule 3.3 hereto, there are no existing options,
warrants, calls, subscriptions, convertible securities, or other rights,
agreements or commitments which obligate the Company to issue, transfer or
sell any shares of stock or equity interest of the Company.
GAR Enforceability. This Agreement has been duly executed and delivered by
the Company and constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency or other laws
affecting the enforcement of creditors' rights generally, or by general equity
principles, including but not limited to principles governing the availability
of the remedies of specific performance and injunctive relief.
3.5 Governmental Approvals. Except as set forth in Schedule 3.5, the
Company and the Company's Affiliates are not required to obtain any consent or
approval of, registration or filing with or any other action by any
Governmental Authority in connection with the execution, delivery and
performance of this Agreement, except such as have been made or obtained and
are in full force and effect.
3.6 Financial Statements. Any financial statements delivered pursuant to
Section 5.4 hereof (collectively, the "Financial Statements") have been
prepared in accordance with GAAP, and fairly present the financial condition
of the Company and its Subsidiaries as of the dates shown and the results of
their operations for the periods indicated.
3.7 Title to Properties; Default Under Agreements.
(a) Each of the Company and the Subsidiaries has good and valid title
to, or valid leasehold interests in, all its material properties and assets,
except for minor defects in title that do not interfere with its ability to
conduct its business as currently conducted or to utilize such properties
and assets for their intended purposes.
(b) Each of the Company and the Subsidiaries has complied with all
material obligations under all material agreements to which it is a party
and all such agreements are in full force and effect and the Company is not
in default under any of such agreements, except for defaults that would not
be likely, individually or in the aggregate, to result in a Material Adverse
Effect.
3.8 Subsidiaries. All Subsidiaries as of the date of this Agreement are
listed on Schedule 3.8 hereto. Except as set forth on Schedule 3.8 hereto, as
of the date of this Agreement, all the issued and outstanding capital stock of
each Subsidiary is owned by the Company or any other Subsidiary. There are no
other Persons in which the Company has an ownership interest or a right to
acquire an ownership interest as of the date of this Agreement.
3.9 Litigation; Compliance with Laws.
(a) Except as set forth in Schedule 3.9, there are not any actions,
suits or proceedings at law or in equity or by or before any Governmental
Authority now pending or, to the actual knowledge of the Company, threatened
against or affecting the Company, any Subsidiary or any business, property
or rights of any such Person (i) which involve this Agreement or (ii) as to
which there is a likelihood of an adverse determination and which, if
adversely determined, would be likely, individually or in the aggregate, to
result in a Material Adverse Effect.
(b) Neither the Company nor any of the Subsidiaries is in violation of
any law, rule or regulation, or in default with respect to any judgment,
writ, injunction or decree of any Governmental Authority, where such
violation or default would be likely to result in a Material Adverse Effect.
3.10 Agreements. Neither the Company nor any of the Subsidiaries is in
default in any manner under any provision of any indenture or other agreement
or instrument evidencing Indebtedness, or any other material agreement or
instrument to which it is a party or by which it or any of its properties or
assets are or may be bound, where such default would be likely to result in a
Material Adverse Effect.
3.11 Investment Company Act; Public Utility Holding Company Act. Neither
the Company nor any Subsidiary is (a) an "investment company" as defined in,
or subject to regulation under, the Investment Company Act of 1940 or (b) a
"holding company" as defined in, or subject to regulation under, the Public
Utility Holding Company Act of 1935.
3.12 Tax Returns. The Company and each of the Subsidiaries has filed or
caused to be filed all Federal, state and local tax returns required to have
been filed by it and has paid or caused to be paid all taxes shown to be due
and payable on such returns or on any assessments received by it, except taxes
that are being contested in good faith by appropriate proceedings and for
which the Company or such Subsidiary, as the case may be, shall have set aside
on its books adequate reserves.
3.13 No Material Misstatements. No representation or warranty herein or in
any Exhibit or Schedule hereto contains any material misstatement of fact or
omits to state any material fact necessary to make the statements therein, in
the light of the circumstances under which they are made not misleading.
3.14 Employee Benefit Plans. Each of the Company and each ERISA Affiliate
is in compliance in all material respects with the applicable provisions of
ERISA and the regulations and published interpretations thereunder.
3.15 Environmental and Safety Matters. Except as set forth in
Schedule 3.15, each of the Company and the Subsidiaries has complied with all
Federal, state, local and other statutes, ordinances, orders, judgments,
rulings and regulations relating to environmental pollution or to
environmental regulation or control or to employee health or safety, except
for instances of non-compliance that, individually or in the aggregate, are
not reasonably likely to result in a Material Adverse Effect. Except as set
forth in Schedule 3.15, neither the Company nor any Subsidiary has received
written notices of any material failure so to comply, which, if adversely
determined, individually or in the aggregate, would be reasonably likely to
result in a Material Adverse Effect. Except as set forth in Schedule 3.15,
the Company and the Subsidiaries do not generate, treat, store, transport,
dispose of or release at any facility owned or operated by any of them any
hazardous wastes, hazardous substances, hazardous materials, toxic substances,
toxic pollutants or substances similarly denominated, as those terms or
similar terms are used in the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Toxic Substance Control Act, the
Clean Air Act, the Clean Water Act or any other applicable law relating to
environmental pollution in violation of any law or any regulations promulgated
pursuant thereto, except for violations that, individually or in the
aggregate, would not be reasonably likely to result in a Material Adverse
Effect. Except as set forth in Schedule 3.15, the Company is aware of no
events, conditions or circumstances involving environmental pollution or
contamination or employee health or safety that could reasonably be expected
to result in liability on the part of the Company or any Subsidiary, except
for such events, conditions or circumstances that, individually or in the
aggregate, would not be reasonably likely to result in a Material Adverse
Effect.
ARTICLE 4
CONDITIONS PRECEDENT
The obligations of the Purchaser to purchase any shares of Preferred Stock
and Class A Common Stock (each of such events being called a "Purchase") on
and after the Closing Date, are subject to the condition precedent that the
Spin-Off and Merger (as defined in the Merger Agreement) shall have occurred
and to the satisfaction of all of the applicable conditions set forth below:
4.1 First Purchase. On the Closing Date:
(a) The Purchaser shall have received from the Company the following
documents:
(i) a good standing certificate of the Company issued by the
Secretary of State of Maryland and the Secretary of State of each state
in which the Company owns any property, except for any state in which
the failure of the Company to be in good standing will not have a
Material Adverse Effect;
(ii) Charter of the Company, and all amendments and supplements
thereto, certified by the Maryland Secretary of State;
(iii) Bylaws of the Company, as amended, certified as true and
correct by a Responsible Officer of the Company; and
(iv) the resolutions adopted by the Board of Directors of the
Company authorizing its execution, delivery and performance of its
obligations under this Agreement, certified by the Secretary of the
Company.
(b) The Purchaser shall have received an opinion of Ballard Spahr
Andrews & Ingersoll dated the Closing Date in form and substance reasonably
satisfactory to Purchaser addressing the matters set forth in Exhibit D
hereto.
(c) The Purchaser and the Company shall have entered into the
Registration Rights Agreement.
4.2 All Purchases. On the date of each Purchase:
(a) Except in connection with the Purchase on the Closing Date, the
Purchaser shall have received a Purchase Notice with respect to each such
other Purchase as required by Section 2.4.
(b) The representations and warranties set forth in Article 3 hereof
shall be true and correct in all material respects on and as of the date of
each Purchase with the same effect as though made on and as of such date,
except to the extent such representations and warranties expressly relate to
an earlier date.
(c) The Company shall be in compliance with all the terms and
provisions set forth herein on its part to be observed or performed, and at
the time of and as a result of each Purchase no Potential Event of Default
or Event of Default shall have occurred and be continuing, other than an
event which can be completely cured by applying the proceeds of such
Purchase, in which case the Company covenants and agrees to apply the
proceeds of the requested Purchase to the extent required to effect such
cure.
(d) There shall not have occurred, since the date of this Agreement,
any change that has resulted in or could reasonably be expected to result in
a Material Adverse Effect other than an event which can be completely cured
by applying the proceeds of such Purchase, in which case the Company
covenants and agrees to apply the proceeds of the requested Purchase to the
extent required to effect such cure.
(e) Purchaser shall have received an opinion of counsel to the Company
licensed to practice in Maryland and reasonably satisfactory to Purchaser
dated the Term Closing Date in form and substance reasonably satisfactory to
Purchaser stating that the shares of Preferred Stock issued to Purchaser on
the Term Closing Date are duly and validly issued, fully paid and
nonassessable.
Each Purchase shall be deemed to constitute a representation and warranty by
the Company on the Closing Date or applicable Term Closing Date relating to
such Purchase as to the matters specified in paragraphs (b), (c) and (d) of
this Section 4.2.
ARTICLE 5
AFFIRMATIVE COVENANTS
The Company covenants and agrees with the Purchaser that so long as this
Agreement shall remain in effect, the Company will, and will cause each of the
Subsidiaries to, and the Purchaser will, where applicable:
5.1 Existence: Businesses and Properties.
(a) Keep in full force and effect its legal existence.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses,
permits, franchises, authorizations, patents, copyrights, trademarks and
trade names material to the conduct of its business; comply in all material
respects with all applicable laws, rules, regulations and orders of any
Governmental Authority, whether now in effect or hereafter enacted; and at
all times maintain and preserve all property material to the conduct of such
business and keep such property in good repair, working order and condition
(reasonable wear and tear excepted) and from time to time make, or cause to
be made, all needful and proper repairs thereto necessary in order that the
business carried on in connection therewith may be properly conducted at all
times, except in each case described in this Section 5.1(b) where the
failure to do so would not result in a Material Adverse Effect.
5.2 Insurance. Keep its material insurable real properties adequately
insured at all times by financially sound and reputable insurers; maintain
such other insurance, to such extent and against such risks, including fire
and other risks insured against by extended coverage and public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it as is customary with companies in the same
or similar businesses; and maintain such other insurance as may be required by
law.
5.3 Obligations and Taxes. Pay its material Indebtedness and other
obligations promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided,
however, that such payment and discharge shall not be required with respect to
any such Indebtedness, tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Company or the Subsidiary, as the case may be, shall have
set aside on its books adequate reserves with respect thereto.
5.4 Financial Statements, Reports, etc. Furnish to the Purchaser:
(a) as soon as available, but not later than 90 days (60 days for a
preliminary copy of such statements) after the end of each Fiscal Year, the
consolidated and consolidating balance sheets and statements of operations,
stockholders' equity and cash flows, showing the financial condition of the
Company and its consolidated subsidiaries as of the close of such Fiscal
Year and the results of its operations and the operations of such
subsidiaries during such year, all audited by independent public accountants
of recognized national standing and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the
effect that such consolidated financial statements fairly present the
financial condition and results of operations of the Company on a
consolidated basis in accordance with GAAP consistently applied;
(b) as soon as available, but not later than 45 days (30 days for a
preliminary copy of such statements) after the end of each of the first
three fiscal quarters of each Fiscal Year, the consolidated and
consolidating balance sheets and statements of operations, stockholders'
equity and cash flows, showing the financial condition of the Company and
its consolidated subsidiaries as of the close of such fiscal quarter and the
results of its operations and the operations of such subsidiaries during
such fiscal quarter and the then elapsed portion of the Fiscal Year, all
certified by one of its Responsible Officers as fairly presenting the
financial condition and results of operations of the Company on a
consolidated basis in accordance with GAAP consistently applied, subject to
normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate of the accounting firm (in the case of
paragraph (a) above) or Responsible Officer of the Company (in the case of
paragraph (b) above) certifying that no Event of Default or Potential Event
of Default has occurred or, if such an Event of Default or Potential Event
of Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto;
(d) within five (5) Business Days after the same become publicly
available, copies of all periodic and other reports, proxy statements and
other materials filed by the Company with the Securities and Exchange
Commission, or any governmental authority succeeding to any of or all the
functions of said Commission, or with any national securities exchange, or
distributed to its shareholders, as the case may be; and
(e) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of the Company or any
Subsidiary, or compliance with the terms of this Agreement, as the Purchaser
may reasonably request.
5.5 Litigation and Other Notices. Furnish to the Purchaser prompt written
notice of the following:
(a) any Event of Default or Potential Event of Default, specifying the
nature and extent thereof and the corrective action (if any) proposed to be
taken with respect thereto;
(b) the filing or commencement of any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority,
against the Company or any Affiliate of the Company which could reasonably
be anticipated to result in a Material Adverse Effect; and
(c) any other development that has resulted in, or could reasonably be
anticipated to result in, a Material Adverse Effect.
5.6 ERISA. Comply in all material respects with the applicable provisions
of ERISA.
5.7 Maintaining Records; Access to Properties and Inspections. Maintain
all financial records in accordance with GAAP and so long as Purchaser is
obligated to purchase any shares of Preferred Stock pursuant to this
Agreement, permit any representatives designated by any Purchaser to visit and
inspect the financial records and the properties of the Company or any
Subsidiary at reasonable times during business hours and as often as requested
upon reasonable written notice, and permit any representatives designated by
the Purchaser to discuss the affairs, finances and condition of the Company or
any Subsidiary with the senior officers thereof and the independent
accountants therefor with prior written notice to and, if requested by
Company, participation of a Responsible Officer of the Company.
5.8 Use of Proceeds. The proceeds of any Purchase hereunder shall be used
by the Company for any proper corporate purpose.
5.9 Issuance of Preferred Stock and Class A Common Stock. The Company
shall issue Preferred Stock and Class A Common Stock solely to the Purchaser
pursuant to this Agreement and not to any other Person.
5.10 Closing Date Director. On the Closing Date, the Company agrees to
elect Douglas Crocker II to the Board of Directors of the Company for a term
expiring in 1999, and Mr. Crocker shall be deemed to be the nominee for
election to the Board of Directors of the Company during such period for
purposes of Section B(2) of the Company's Articles Supplementary for Class A
Common Stock.
5.11 Nomination as Director; Appointment of Person to Attend and Observe
Meetings.
(a) During the period specified in Section B(2) of the Articles
Supplementary of the Company for Class A Common Stock, at each annual
meeting of shareholders of the Company at which the Board seat of the
nominee of Purchaser is up for election, the Purchaser agrees to nominate
Douglas Crocker II for election to the Board of Directors of the Company, or
if Douglas Crocker II is unable or unwilling to serve, such member of senior
management of the Purchaser ("Senior Officer Nominee") as Purchaser and the
Company shall mutually agree. If the Company and the Purchaser cannot agree
on such Senior Officer Nominee to be nominated at least thirty (30) days
prior to the date on which the proxy statement relating to such annual
meeting of shareholders is proposed by the Company to be mailed to the
shareholders of the Company, Purchaser shall provide written notice (the
"Nominee Designation Notice") at least twenty-five (25) days prior to the
proposed mailing date to the Company of Purchaser's proposed Senior Officer
Nominee to be nominated for election to the Board of Directors of the
Company and three (3) alternative Senior Officer Nominees. Within three (3)
days after the Company's receipt of such notice from the Purchaser, the
Company shall give Purchaser written notice of which of such four Senior
Officer Nominees the Company designates from the Purchaser's written list of
Senior Officer Nominees to be nominated for election to the Board of
Directors of the Company (the "Designated Senior Officer Nominee") and the
Purchaser shall nominate such Designated Senior Officer Nominee for election
to the Board of Directors of the Company. If the Company does not provide
the Purchaser with written notice of its Designated Senior Officer Nominee
within three (3) days after the Company's receipt of the Nominee Designation
Notice, the Purchaser may nominate the proposed Senior Officer Nominee of
its choice for election to the Board of Directors of the Company. The
Company agrees to solicit proxies for Mr. Crocker or such other Senior
Officer Nominee nominated for election to the Board of Directors of the
Company by the Purchaser pursuant to this Section 5.11 in the same manner as
the Company solicits proxies for all other nominees for election to the
Board of Directors of the Company.
(b) In the event Mr. Crocker (or such other person subsequently
nominated by the Purchaser for election to the Board of Directors of the
Company ("Purchaser Nominee")), is unable or unwilling to serve as a
director if elected by the shareholders of the Company or is no longer
employed by Purchaser during such time as such person is a director of the
Company, Mr. Crocker or such Purchaser Nominee shall resign as a director of
the Company and a member of senior management of Purchaser (determined in
the manner set forth below) shall have the right to attend and observe all
special and regular meetings and other formal or informal proceedings of the
Board of Directors of the Company to which all members of the Board have
been invited until the next annual meeting of shareholders of the Company.
In the event that the Purchaser Nominee is not elected to the Board of
Directors of the Company at any annual meeting of the shareholders of the
Company, such Purchaser Nominee or another member of senior management of
Purchaser (as determined in the manner set forth below) shall have the right
to attend and observe all special and regular meetings and other formal or
informal proceedings of the Board of Directors of the Company to which all
members of the Board have been invited until such time as a Purchaser
Nominee is elected to the Board of Directors of the Company by the
shareholders of the Company. In the event the Purchaser shall have a right
to cause a member of its senior management to attend and observe regular and
special meetings and other formal or informal proceedings of the Board of
Directors of the Company under this Section 5.11(b), the Purchaser shall
deliver written notice to the Company of the member of its senior management
it desires to attend and observe such meetings or informal proceedings (the
"Senior Officer Observer"). In the event the Purchaser and the Company
cannot agree upon the Senior Officer Observer within three (3) days after
delivery of such notice to the Company, Purchaser shall provide written
notice (the "Observer Designation Notice") to the Company of Purchaser's
proposed Senior Officer Observer and three (3) alternative Senior Officer
Observers. Within three (3) days after the Company's receipt of such notice
from the Purchaser, the Company shall deliver written notice to Purchaser of
which of such four Senior Officer Observers the Company designates from the
Purchaser's written list of Senior Officer Observers (the "Designated Senior
Officer Observer"). If the Company does not provide the Purchaser with
written notice of its Designated Senior Officer Observer within three (3)
days after the Company's receipt of the Observer Designation Notice, the
Purchaser may select the proposed Senior Officer Observer of its choice.
5.12 Election as Director.
(a) Upon the occurrence and continuation of an Event of Default, if
Douglas Crocker II or such other Purchaser Nominee is not a member of the
Board of Directors of the Company, the Company agrees (i) to amend the
Bylaws of the Company to provide that the Board of Directors of the Company
shall consist of not less than eleven (11) directors; and (ii) that Section
5.12(b) hereof shall apply in lieu of Section 5.11 hereof.
(b) Upon the receipt by Purchaser of a ruling by the Internal Revenue
Service or an opinion of counsel satisfactory to the Purchaser, that the
right to elect the Purchaser Director will not cause EQR to lose its status
as a real estate investment trust under the Code Section 5.11 hereof shall
not apply and the Purchaser agrees to elect Douglas Crocker II to the Board
of Directors of the Company as the Purchaser Director. In the event Mr.
Crocker (or such other person subsequently elected by the Purchaser to the
Board of Directors of the Company), is unable or unwilling to serve as a
director or is no longer employed by Purchaser, the Purchaser agrees to
elect such member of senior management of the Purchaser ("Senior Officer")
to the Board of Directors of the Company as Purchaser and the Company shall
mutually agree. If the Company and the Purchaser cannot agree on such Senior
Officer to be elected within five (5) days after the date on which the
office of the Purchaser Director becomes vacant, Purchaser shall provide
written notice (the "Designation Notice") to the Company of Purchaser's
proposed Senior Officer to be elected and three (3) alternative Senior
Officers. Within three (3) days after the Company's receipt of such notice
from the Purchaser, the Company shall give Purchaser written notice of which
of such four Senior Officers the Company designates from the Purchaser's
written list of Senior Officers to be elected to the Board of Directors of
the Company (the "Designated Senior Officer") and the Purchaser shall elect
such Designated Senior Officer as the Purchaser Director. If the Company
does not provide the Purchaser with written notice of its Designated Senior
Officer within three (3) days after the Company's receipt of the Designation
Notice, the Purchaser may elect its proposed Senior Officer as the Purchaser
Director. The Company agrees not to hold any meeting of the Board of
Directors or take any Board of Directors' action if the Purchaser Director
office is vacant; provided, however, this sentence shall not be applicable
if Purchaser has failed within five (5) Business Days of written notice from
the Company that it proposes to hold a Board of Directors meeting or have
the Board of Directors otherwise act to provide the Company with the
Designation Notice. Notwithstanding the foregoing, if an Event of Default
has occurred, Purchaser may elect any person it chooses to serve as the
Purchaser Director and shall not be required to comply with the procedures
set forth in this Section.
5.13 Voting of Stock. So long as any shares of Preferred Stock, Class A
Common Stock or Common Stock are owned by Purchaser and any of its Affiliates
during the period ten (10) years from the Closing Date, the Company shall have
the right to direct the voting of all of such shares held by Purchaser and any
of its Affiliates, except as to the election of the Purchaser Director or any
matter relating to rights, preferences and privileges of the Preferred Stock
or Class A Common Stock. During such ten (10) year period, Purchaser agrees
to vote, and to cause its Affiliates to vote, such shares as directed by the
Company, except as to the election of the Purchaser Director or any matter
relating to rights, preferences and privileges of the Preferred Stock or Class
A Common Stock.
5.14 Sale of Common Stock or Preferred Stock. During the period beginning
on the Closing Date and ending ten (10) years from the Closing Date, Purchaser
shall first offer, in writing (a "Notice of Proposed Sale") to sell any shares
of Common Stock, Class A Common Stock, Preferred Stock or warrants to purchase
Common Stock owned by it to the Company prior to selling such shares to any
Person. The Notice of Proposed Sale shall specify the terms and conditions of
any sale. If the Company has not agreed, within twenty (20) days of receipt of
the Notice of Proposed Sale to purchase the shares of Common Stock, Class A
Common Stock or Preferred Stock offered by Purchaser upon the terms and
conditions set forth in the Notice of Proposed Sale, Purchaser shall have the
right to sell such shares offered to the Company to any other Person for a
period of ninety (90) days provided any sale is made on terms and conditions
no more favorable to such person than specified in the Notice of Proposed
Sale. If the Company agrees to purchase shares of Common Stock, Class A Common
Stock or Preferred Stock from the Purchaser, unless otherwise agreed by the
Company and the Purchaser, such purchase shall be consummated within twenty
(20) days of such agreement.
5.15 Confidentiality. The receipt of any information which is not publicly
available pursuant to Sections 5.4(e) and 5.7 shall be subject to such
reasonable confidentiality provisions (in writing signed by the Purchaser
and/or its representative effecting an inspection pursuant to Section 5.7 of
this Agreement, as the case may be) as the Company may reasonably require.
ARTICLE 6
EVENTS OF DEFAULT
6.1 Events of Default. The happening of any of the following events shall
be an "Event of Default" hereunder:
(a) any representation or warranty made in this Agreement, shall prove
to have been false or misleading in any material respect when so made,
deemed made or furnished;
(b) default shall be made in the due observance or performance by the
Company or any Subsidiary of any material covenant, condition or agreement
contained in this Agreement, or under the terms of the Articles
Supplementary Classifying the Preferred Stock attached hereto as Exhibit A,
after written notice of such default is given to the Company and such
default is not cured within fifteen (15) days of receipt of such notice;
(c) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of the Company or any Subsidiary, or of a substantial
part of the property or assets of the Company or a Subsidiary, under
Title 11 of the United States Code, as now constituted or hereafter amended,
or any other Federal or state bankruptcy, insolvency, receivership or
similar law, (ii) the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any
Subsidiary or for a substantial part of the property or assets of the
Company or a Subsidiary or (iii) the winding-up or liquidation of the
Company or any Subsidiary; and such proceeding or petition shall continue
undismissed for 90 days or an order or decree approving or ordering any of
the foregoing shall be entered;
(d) the Company or any Subsidiary shall (i) voluntarily commence any
proceeding or file any petition seeking relief under Title 11 of the United
States Code, as now constituted or hereafter amended, or any other Federal
or state bankruptcy, insolvency, receivership or similar law, (ii) apply for
or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Company or any
Subsidiary or for a substantial part of the property or assets of the
Company or any Subsidiary, (iii) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (iv) make
a general assignment for the benefit of creditors, (v) become unable, admit
in writing its inability or fail generally to pay its debts as they become
due or (vi) take any action for the purpose of effecting any of the
foregoing;
(e) one or more judgments for the payment of money in an aggregate
amount in excess of $250,000 shall be rendered against the Company, any
Subsidiary or any combination thereof and the same shall remain undischarged
for a period of 30 consecutive days during which execution shall not be
effectively stayed, or any judgment creditor shall levy upon assets or
properties of the Company or any Subsidiary to enforce any such judgment
which shall not be effectively stayed within 30 days;
(f) any material breach of any obligation under ERISA or any plan
under ERISA or any liability under ERISA in an amount exceeding $250,000,
which is not discharged within 60 days after the Company becomes aware of
same;
(g) there shall have occurred a Change in Control with respect to the
Company;
(h) there shall have occurred an Event of Default as defined in clause
(i) of the definition of an "Event of Default" in the Articles Supplementary
Classifying the Preferred Stock attached hereto as Exhibit A; or
(i) There shall have occurred a change that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
6.2 Remedies. Upon the occurrence of an Event of Default described in
Article 6, all obligations of the Purchaser to purchase any shares of
Preferred Stock hereunder shall automatically terminate unless the Purchase by
the Purchaser of shares of Preferred Stock pursuant to a Purchase Notice
received by Purchaser would cure such Event of Default (in which case the
Company covenants to apply the proceeds of the sale of such Preferred Stock to
the extent required to effect such cure), and (with respect to Events of
Default described in Section 6.1(c), (d), and (h)), the Purchaser shall have
the right to have the Company redeem the outstanding Preferred Stock upon the
terms and conditions set forth in the Articles Supplementary Classifying the
Preferred Stock attached hereto as Exhibit A. Notwithstanding the foregoing,
the occurrence of an Event of Default shall not be considered an Event of
Default for purposes of any Section of this Agreement if the Company, within
five (5) days of the occurrence of such Event of Default, delivers to
Purchaser a Purchase Notice and the proceeds of such related Purchase will
completely cure such Event of Default, in which case Purchaser shall use such
proceeds to the extent required to effect such cure.
ARTICLE 7
MISCELLANEOUS
7.1 Termination of the Agreement. Unless otherwise agreed by each of the
parties to this Agreement, if the Merger Agreement shall have been terminated,
all obligations of the Purchaser under this Agreement shall automatically
terminate at such time without notice to the Company. The Company shall have
the right at any time to terminate Purchaser's obligation to purchase any
additional Preferred Stock by giving notice thereof to Purchaser. Upon the
giving of such notice (which shall be irrevocable), Purchaser shall be
relieved of its commitment to purchase any Preferred Stock from the Company.
The termination of such commitment shall not relieve the parties of their
respective obligations under Sections 5.10, 5.11 and 5.12 of this Agreement.
7.2 Securities Law Matters. The Purchaser acknowledges and understands
that:
(a) The Purchaser has been furnished with and has carefully reviewed
the information relating to the Company set forth in the Equity Residential
Properties Trust and Wellsford Residential Property Trust Joint Proxy
Statement/Equity Residential Properties Trust Prospectus/Wellsford Real
Properties, Inc. Information Statement, dated April 25, 1997.
(b) The Purchaser has been afforded full and complete access to all
information and other materials relating to the Company and its affiliates,
and the properties and financial condition of the foregoing, and any other
matters relating to the Preferred Stock, Class A Common Stock, Common Stock
and Warrants of the Company which the Purchaser has requested, or deems
necessary in evaluating the merits and risks of acquiring the Preferred
Stock, Class A Common Stock, Common Stock and Warrants, and has been
afforded the opportunity to obtain any additional information necessary to
verify the accuracy of any representations or information set forth in the
Information.
(c) The Purchaser has had the opportunity to have answered any
questions concerning the financial condition or business or other
information with respect to the Company and its affiliates and the business,
properties and financial condition of the foregoing or with respect to the
merits and risks of an acquisition of the Preferred Stock, Class A Common
Stock, Common Stock and Warrants, and the undersigned has received complete
and satisfactory answers to all such questions.
(d) The Purchaser has not relied upon any information or
representation not contained in the Information. Neither the Company nor any
of its agents nor anyone purporting to act on their behalf have made any
representation to the undersigned with respect to any tax or economic
benefits to be derived from an investment in the Preferred Stock, Class A
Common Stock, Common Stock and Warrants. The Purchaser is relying solely
upon its own knowledge and upon the advice of its advisors with respect to
the tax, economic and other aspects of an investment in the Preferred Stock,
Class A Common Stock, Common Stock and Warrants.
(e) The Purchaser has carefully reviewed and understands the risks of,
and other considerations relating to, the acquisition of the Preferred
Stock, Class A Common Stock, Common Stock and Warrants and an investment in
the Company.
(f) An owner of Preferred Stock, Class A Common Stock, Common Stock
and Warrants must bear the economic risk of ownership thereof for an
indefinite period of time since purchase of Preferred Stock, Class A Common
Stock, Common Stock and Warrants involves the purchase of securities that
have not been registered under the Securities Act of 1933, as amended, and
therefore cannot be Transferred (as defined below) except as provided below.
(g) No federal or state agency has passed upon the Preferred Stock,
Class A Common Stock, Common Stock or Warrants or made any finding or
determination as to the fairness of an investment in the Preferred Stock,
Class A Common Stock, Common Stock or Warrants.
(h) Purchaser hereby covenants and agrees that the Preferred Stock,
Class A Common Stock, Common Stock and Warrants, including any Common Stock
issued upon conversion of the Preferred Stock or Class A Common Stock, or
any portion thereof, or upon exercise of the Warrants, may not be pledged,
encumbered, sold, transferred or otherwise disposed of (each a "Transfer")
except (a) pursuant to an effective registration statement under the
Securities Act of 1993, as amended (the "Act") or (b) pursuant to an
exemption from such registration pursuant to the Act and in compliance with
state securities and blue sky laws and an opinion of counsel provided to the
Company to the effect of this subparagraph (b), which opinion shall be in
form and substance reasonably satisfactory to the Company. The Purchaser
agrees that any Transfer of the Preferred Stock, Class A Common Stock,
Common Stock or Warrants in violation of this Agreement will be null and
void and the certificates representing the Preferred Stock, Class A Common
Stock, Common Stock and Warrants will bear an appropriate restrictive
legend.
(i) The Purchaser represents and warrants to the Company that:
(i) It is able to bear the economic risk of the acquisition of
the Preferred Stock, Class A Common Stock, Common Stock and Warrants.
(ii) It is an "accredited investor" as defined in Regulation D
promulgated under the Act.
(iii) The representatives of the Purchaser have been furnished
with and have carefully reviewed the Information. Such representatives
have such knowledge and experience in financial, business, securities
and real estate matters that they are capable of evaluating the merits
and risks of the acquisition of the Preferred Stock, Class A Common
Stock, Common Stock and Warrants and of making an informed investment
decision.
(iv) The Purchaser is acquiring and will acquire the Preferred
Stock, Class A Common Stock, Common Stock and Warrants, including any
Common Stock issuable upon conversion of the Preferred Stock or Class A
Common Stock or upon exercise of the Warrants for its own account, as
principal, for investment and not with a view to a Transfer thereof.
7.3 Notices. Notices and other communications provided for herein shall be
in writing and shall be delivered by hand or overnight courier service, mailed
or sent by telecopy, as follows:
(a) if to the Company: Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Edward Lowenthal
Telecopy No.: (212) 333-2323
with a copy to: Robinson Silverman Pearce Aronsohn &
Berman LLP
1290 Avenue of the Americas
New York, New York 10104-0053
Attn: Alan S. Pearce, Esq.
Telecopy No.: (212) 541-1411
(b) if to the Purchaser: ERP Operating Limited Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: President
Telecopy No.: (312) 207-5243
with a copy to: Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: Bruce C. Strohm, Esq.
Telecopy No.: (312) 454-0039
and: Rudnick & Wolfe
203 N. LaSalle St., Suite 1800
Chicago, Illinois 60601
Attn: Errol R. Halperin, Esq.
Telecopy No.: (312) 236-7516
Such notice will be deemed given when received.
7.4 Survival of Agreement. All covenants, agreements, representations and
warranties made by the Company herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement shall be considered to have been relied upon by the Purchaser and
shall survive the date of this Agreement, regardless of any investigation made
by the Purchaser or on its behalf, and shall continue in full force and effect
so long as the Aggregate Purchase Commitment has not been fulfilled or
terminated.
7.5 Binding Effect. This Agreement shall become effective when it shall
have been executed by the Company and the Purchaser.
7.6 Assignment. Neither the Company nor the Purchaser shall have the right
to assign its rights hereunder or any interest herein; provided, however, the
foregoing provision shall not limit the Purchaser's right to sell, transfer or
assign any shares of Common Stock, Class A Common Stock or Preferred Stock
owned by it subject to the provisions of Section 5.12 of this Agreement and
applicable securities laws.
7.7 Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF THE STATE OF MARYLAND.
7.8 Waivers; Amendment.
(a) No failure or delay of the Purchaser in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other
or further exercise thereof or the exercise of any other right or power.
The rights and remedies of the Purchaser hereunder are cumulative and are
not exclusive of any rights or remedies which they would otherwise have. No
waiver of any provision of this Agreement or consent to any departure by the
Company therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Unless otherwise specifically required, no notice or demand on the Company
in any case shall entitle the Company to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Company and the Purchaser.
7.9 Entire Agreement. This Agreement, including the exhibits and schedules
thereto, constitute the entire contract between the parties relative to the
subject matter hereof. Any previous agreement among the parties with respect
to the subject matter hereof is superseded by this Agreement. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party other
than the parties hereto any rights, remedies, obligations or liabilities under
or by reason of this Agreement.
7.10 Waiver of Jury Trial. Each party hereto hereby waives, to the fullest
extent permitted by applicable law, any right it may have to a trial by jury
in respect of any litigation directly or indirectly arising out of, under or
in connection with this Agreement.
7.11 Severability. In the event any one or more of the provisions contained
in this Agreement should be held invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained herein and therein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good-faith negotiations to replace the
invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
7.12 Headings. Article and Section headings and the Table of Contents used
herein are for convenience of reference only, are not part of this Agreement
and are not to affect the construction of, or to be taken into consideration
in interpreting, this Agreement.
7.13 Jurisdiction; Consent to Service of Process.
(a) EACH OF THE PURCHASER AND THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE
JURISDICTION OF ANY ILLINOIS OR NEW YORK STATE COURT OR FEDERAL COURT OF THE
UNITED STATES OF AMERICA SITTING IN THE CITY OF CHICAGO OR NEW YORK, AND ANY
APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY
JUDGMENT, AND EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH ILLINOIS OR NEW YORK STATE
OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. EACH OF THE
PARTIES HERETO AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS
AGREEMENT SHALL AFFECT ANY RIGHT THAT ANY PARTY MAY OTHERWISE HAVE TO BRING
ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT IN THE COURTS OF ANY
JURISDICTION.
(b) EACH OF THE PURCHASER AND THE COMPANY HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY
DO SO, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF
VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT IN ANY ILLINOIS OR NEW YORK STATE OR FEDERAL COURT. EACH OF THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY
LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION
OR PROCEEDING IN ANY SUCH COURT.
<PAGE>
IN WITNESS WHEREOF, the Company and the Purchaser have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
ERP OPERATING LIMITED PARTNERSHIP
By: EQUITY RESIDENTIAL PROPERTIES TRUST,
its general partner
By:/s/ Bruce C. Strohm
--------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Edward Lowenthal
--------------------------------
Name: Edward Lowenthal
Title: President
<PAGE>
EXHIBIT A
See Exhibit 3.3 to this Registration Statement
<PAGE>
EXHIBIT B
FORM OF NOTICE OF DRAW
TO: ERP OPERATING LIMITED PARTNERSHIP
-------------------------
-------------------------
Attention: --------------------
Telephone: (---) --------------
Telecopy: (---) -------------------
Pursuant to Section 4.2 of that certain Common Stock and Preferred Stock
Purchase Agreement (the "Agreement") dated as of ------------, 1997 by and
among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the "Company")
and ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership
("Purchaser"), this notice represents the Company's notice to Purchaser to
cause Purchaser to purchase --------- shares of Preferred Stock pursuant to
the Purchaser's Term Purchase Commitment on ---------------, 199-- (the "Term
Closing Date"). The aggregate purchase price of such Purchase shall be $------
.
The Company hereby certifies as follows:
(i) the representations and warranties as set forth in
Article 3 (except to the extent that such statements expressly are
made only as of an earlier date) of the Agreement are and shall be
true and correct in all material respects on and as of the date
hereof and the Term Closing Date specified herein; and
(ii) the Company has and shall have performed, or shall have
caused to be performed, in all material respects all agreements
and satisfied all conditions set forth in Section 4.2 of the
Agreement.
Unless otherwise defined herein, terms used herein shall have the
meanings in the Agreement.
Dated: --------------, 199--
WELLSFORD REAL PROPERTIES, INC.
By:---------------------------------
Name:---------------------------
Title:--------------------------
<PAGE>
EXHIBIT C
See Exhibits 3.1 and 3.4 to this Registration Statement.<PAGE>
EXHIBIT D
1. The Company is a corporation
duly organized and existing and in good standing under the laws of the State
of Maryland and has the corporate power to own its properties and to carry on
its business as presently conducted by it.
2. The Company has the requisite
corporate power and authority to execute, deliver and perform the obligations
set forth in the Agreement and the Registration Rights Agreement, each of
which has been duly authorized by all necessary corporate action, and the
execution and performance of which will not conflict with, or result in a
breach of the Company's Charter or Bylaws or, to the best of our knowledge and
belief without any duty of inquiry, any order, writ, injunction or decree of
any court or governmental authority, or any of the material terms, conditions
or provisions of any agreement or instrument to which the Company is a party
or by which the Company is bound.
3. The Agreement and the
Registration Rights Agreement have been duly executed and delivered by a duly
authorized officer of the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms. [BANKRUPTCY EXCEPTION]
4. The Class A Common Stock issued
to Purchaser on the date of this opinion pursuant to the terms of the
Agreement shall be duly and validly issued, fully paid and nonassessable.
5. The Preferred Stock issuable
pursuant to the terms of the Agreement has been duly and validly reserved for
issuance and, upon issuance in accordance with the terms of the Agreement,
shall be duly and validly issued, fully paid and nonassessable.
6. The Common Stock issuable upon
conversion of the Class A Common Stock and Preferred Stock and upon exercise
of the Warrants has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Company's Charter and the
Articles Supplementary, shall be duly and validly issued, fully paid and
nonassessable.
<PAGE>
EXHIBIT E
See Exhibit 10.27 to this Registration Statement
<PAGE>
EXHIBIT F
See Exhibit 3.2 to this Registration Statement
<PAGE>
SCHEDULE 3.3
CAPITAL STOCK
1. Options being assumed by the
Company pursuant to the Contribution and Distribution Agreement, dated as of
the date hereof, between the Company and Wellsford Residential Property Trust.
2. Options described in the Equity
Residential Properties Trust and Wellsford Residential Property Trust Joint
Proxy Statement/Equity Residential Properties Trust Prospectus/ Wellsford Real
Properties, Inc. Information Statement, dated April 25, 1997, under the
heading "Management of WRP Newco--Compensation of Directors."
3. Options issued to lower level
employees of the Company to purchase 12,000 shares of Common Stock in the
aggregate.
4. The shares of Common Stock to
be issued pursuant to purchase agreements to be executed on the date hereof in
connection with the Company's private placement of shares of Common Stock.
5. Shares of Common Stock issuable
under the Warrant issued to Purchaser on the date hereof.
<PAGE>
SCHEDULE 3.5
GOVERNMENTAL APPROVALS
Appropriate blue sky filings, if any.
<PAGE>
SCHEDULE 3.8
SUBSIDIARIES
Wellsford Chatham Corp.
Wellsford Wayne Corp.
Wellsford Greenbrook Corp.
Wellsford Park Highlands Corp.
Park at Highlands, L.L.C.
Red Canyon at Polomino Park L.L.C.
North American Medical Research Corp.
<PAGE>
SCHEDULE 3.9
LITIGATION; COMPLIANCE WITH LAWS
None
<PAGE>
SCHEDULE 3.15
ENVIRONMENTAL AND SAFETY MATTERS
Spray-on asbestos fireproofing is located at the Serpentine Building (part of
the Point View Complex).
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the 30th day of May,
1997, by and among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation
(the "Company"), and ERP OPERATING LIMITED PARTNERSHIP, an Illinois limited
partnership, and its successors, assigns and transferees (herein referred to
collectively as the "Holders" and individually as a "Holder").
W I T N E S S E T H:
WHEREAS, on the date hereof, Holder and the Company have entered into
that certain Common Stock and Preferred Stock Purchase Agreement (the "Stock
Purchase Agreement");
WHEREAS, pursuant to the terms of the Stock Purchase Agreement, Holder is
obligated to purchase shares of Class A common stock, par value $.01 per
share, of the Company ("Class A Common Stock") and Series A 8% Convertible
Redeemable Preferred Stock of the Company (the "Preferred Stock");
WHEREAS, pursuant to the Articles Supplementary classifying the Preferred
Stock attached as Exhibit A to the Stock Purchase Agreement ("Articles
Supplementary"), the Holder shall have the right to convert all or any of the
outstanding shares of Preferred Stock into shares of common stock, par value
$.01 per share, of the Company (the "Common Stock");
WHEREAS, pursuant to the Articles Supplementary classifying the Class A
Common Stock, the Holder shall have the right to convert all or any of the
outstanding shares of Class A Common Stock into shares of Common Stock; and
WHEREAS, the Company has agreed to provide the Holders with certain
registration rights as set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and undertakings
contained herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and subject to and on the
terms and conditions herein set forth, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Company" shall have the meaning set forth in the preamble and shall also
include the Company's successors.
"Demand Notice" shall have the meaning set forth in Section 2 hereof.
"Effective Date" shall mean the date of this Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Holder" or "Holders" shall have the meaning set forth in the preamble.
"Person" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, and any such prospectus as amended or supplemented by any
prospectus supplement with respect to the terms of the offering of any portion
of the Registrable Securities covered by a Registration Statement, and by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Public Sale" shall mean a public sale or distribution of Registrable
Securities, including a sale pursuant to Rule 144 (or any similar provision
then in effect) under the Securities Act.
"Registrable Securities" shall mean the Shares, excluding (i) Shares for
which a Registration Statement relating to the sale thereof by the Holder
shall have become effective under the Securities Act and which have been
disposed of by the Holder under such Registration Statement, and (ii) Shares
sold or otherwise distributed pursuant to Rule 144 under the Securities Act.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without
limitation: (i) all SEC or National Association of Securities Dealers, Inc.
("NASD") registration and filing fees, (ii) all fees and expenses incurred in
connection with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of counsel in connection with blue sky
qualification of any of the Registrable Securities and the preparation of a
Blue Sky Memorandum) and compliance with the rules of the NASD, (iii) all
expenses of any Persons engaged by the Company in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to the
performance of and compliance with this Agreement, (iv) all fees and expenses
incurred in connection with the listing, if any, of any of the Registrable
Securities on any securities exchange or exchanges pursuant to
Section 4(a)(viii) hereof, (v) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including
the expenses of any special audits or "cold comfort" letters, if any, required
by or incident to such performance and compliance, and (vi) the fees and
disbursements of counsel representing a selling Holder. Registration Expenses
shall specifically exclude underwriting discounts and commissions, and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a selling Holder, all of which shall be borne by such Holder in
all cases.
"Registration Notice" shall have the meaning set forth in Section 3
hereof.
"Registration Statement" shall mean a registration statement of the
Company and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act
which covers the Registrable Securities requested by Holders to be covered by
such registration statement, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
"Requesting Holder" shall mean each Holder who requests to participate in
an underwritten public offering of Company Common Stock.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended from
time to time.
"Shares" shall mean Preferred Stock issuable or issued, Common Stock
issuable or issued upon conversion of all or any portion of the shares of
Preferred Stock or Class A Common Stock and Common Stock issuable or issued
upon the exercise of warrants issued pursuant to the Articles Supplementary.
2. Registration Under the Securities Act.
(a) Filing of Registration Statement. After one (1) year from the
Effective Date hereof, as promptly as practicable after written notice (a
"Demand Notice") from the Holder requesting that the Company effect the
registration under the Securities Act of Registrable Securities having an
aggregate fair market value of $5,000,000 during the period three (3) years
from the Effective Date hereof ("Initial Period") or $7,500,000 at any time
after the Initial Period, the Company shall cause to be filed promptly a
Registration Statement or an amendment to a Registration Statement as
determined by the Company providing for the resale by the Holder of
Registrable Securities in accordance with the terms hereof and will use its
best efforts to cause any such Registration Statement to be declared effective
by the SEC as soon as reasonably practicable. Notwithstanding the foregoing,
Holder shall only have the right to deliver one Demand Notice during any
calendar year; provided, however, that during the period five (5) years from
the Effective Date hereof Holder shall not deliver more than four (4) Demand
Notices in the aggregate. Any such registration request by Holder shall
include all Shares which may be included in such Registration Statement at
such time. The Company agrees to use its best efforts to keep any such
Registration Statement continuously effective under the Securities Act until
such Shares covered thereby are no longer Registrable Securities and further
agrees to supplement or amend the Registration Statement, if and as required
by the rules, regulations or instructions applicable to the registration form
used by the Company for such Registration Statement or by the Securities Act
or by any other rules and regulations thereunder for such Registration
Statement. The Company may elect to register all Shares at any time.
(b) Expenses. The Company shall pay all Registration Expenses in
connection with any Registration Statement filed pursuant to this Section 2.
(c) Inclusion in Registration Statement. The Company may require
each Holder of Registrable Securities to furnish to the Company in writing
such information regarding the proposed offer or sale by such Holder of such
Registrable Securities as the Company may from time to time reasonably request
in writing. Any Holder who does not provide the information reasonably
requested by the Company in connection with the Registration Statement as
promptly as practicable after receipt of such request, but in no event later
than ten (10) days thereafter, shall not be entitled to have its Registrable
Securities included in the Registration Statement.
3. Incidental Registration.
If the Company proposes to register any shares of Common Stock for Public
Sale pursuant to an underwritten offering under the Securities Act (whether
proposed to be offered for sale by the Company or by any other Person) it will
give prompt written notice (a "Registration Notice") to the Holders of its
intention to do so. Upon the written request of any Holder (a "Requesting
Holder") delivered to the Company within fifteen (15) Business Days after the
receipt of a Registration Notice, which request shall specify the number of
Registrable Securities intended to be disposed of by such Requesting Holder,
the Company shall include the Shares specified in the request of such
Requesting Holder in the registration statement; provided, however, the
Registrable Securities requested by such Requesting Holder to be included in
the Registration Statement shall have an aggregate fair market value of
$5,000,000 during the Initial Period or $7,500,000 thereafter. The Company
will not be required to effect any registration pursuant to this Section 3 if
the Company shall have been advised in writing (with a copy to each Requesting
Holder) by a nationally recognized independent investment banking firm
selected by the Company to act as lead underwriter in connection with the
public offering of securities that, in such firm's opinion, a registration at
that time of additional securities would materially and adversely affect the
offering, in which case in the discretion of the Company, either:
(i) the Registrable Securities of the Requesting Holders shall
nevertheless be included in such Registration Statement subject to the
condition that the Requesting Holders may not offer or sell their
Registrable Securities included therein for a period of at least 90 days
after the initial effective date of such Registration Statement, or
(ii) if the Company should reasonably determine that the inclusion
of such Registrable Securities, notwithstanding the provisions of the
preceding clause (i), would materially adversely affect the offering
contemplated in such Registration Statement, and based on such
determination recommends inclusion in such Registration Statement of
fewer or none of the Registrable Securities of the Requesting Holders,
then (x) the number of Registrable Securities of the Requesting Holders
included in such Registration Statement shall be reduced, if the Company
recommends the inclusion of fewer Registrable Securities, or (y) none of
the Registrable Securities of the Requesting Holders shall be included in
such Registration Statement, if the Company recommends the inclusion of
none of such Registrable Securities; provided, however, that if
Registrable Securities are being offered for the account of other persons
or entities as well as the Company, such reduction shall not represent a
greater fraction of the number of securities intended to be offered by
the Requesting Holders than the fraction of similar reductions imposed on
such other persons or entities (other than the Company).
Notwithstanding the foregoing, Holder shall only have the right to deliver
one Registration Notice during any calendar year; provided, however, that
during the period five (5) years from the Effective Date hereof Holder shall
not deliver more than four (4) Registration Notices in the aggregate.
With respect to any proposed sale by the Holder of Registrable Securities
pursuant to this Section 3 the Company shall pay all Registration Expenses.
No registration of Registrable Securities effected under this Section 3
shall relieve the Company of its obligation to effect registrations of
Registrable Securities pursuant to Section 2.
The rights of the Holder under this Section 3 are solely incidental in
nature, and nothing in this Section 3 shall prevent the Company from reversing
a decision to file a Registration Statement pursuant to this Section 3 or from
withdrawing any such Registration Statement before it has become effective.
The incidental registration rights granted pursuant to this Section 3
shall not apply to (a) a registration relating to employee or director stock
option, purchase or other employee benefit plans, (b) a registration related
to a dividend reinvestment or share purchase plan or (c) a registration on
Form S-4 or Form S-8.
4. Registration Procedures.
(a) Obligations of the Company. In connection with any
Registration Statement pursuant to Sections 2 or 3 hereof, the Company shall:
(i) cause the Registration Statement to be available for the
sale of the Registrable Securities by Holders in one or
more transactions, in negotiated transactions, through the
writing of options on the Registrable Securities, or a
combination of such methods of sale, and to comply as to
form in all material respects with the requirements of the
applicable form and include all financial statements
required by the SEC to be filed therewith, and in the
event the Company is listed on the Nasdaq National Market
System ("NMS"), in one or more transactions on NMS or
otherwise in special offerings, exchange distributions or
secondary distribution pursuant to and in accordance with
the rules of the NMS, in the over-the-counter market;
(ii) (A) prepare and file with the SEC such amendments and
post-effective amendments to any Registration Statement as
may be necessary to keep each such Registration Statement
effective for the applicable period; (B) cause the
Prospectus included in each such Registration Statement to
be supplemented by any required prospectus supplement, and
as so supplemented to be filed pursuant to Rule 424 or any
similar rule that may be adopted under the Securities Act;
(C) respond promptly to any comments received from the SEC
with respect to each Registration Statement, or any
amendment, post-effective amendment or supplement relating
thereto; and (D) comply with the provisions of the
Securities Act applicable to issuers registering
securities under the circumstances provided herein with
respect to the disposition of securities covered by each
Registration Statement, except as otherwise provided in
Section 3 hereof;
(iii) furnish to each Holder of Registrable Securities,
without charge, as many copies of each Prospectus,
and any amendment or supplement thereto and such
other documents as they may reasonably request, in
order to facilitate the public sale or other
disposition of the Registrable Securities; the
Company consents to the use of the Prospectus, by
each such Holder of Registrable Securities, in
connection with the offering and sale of the
Registrable Securities covered by the Prospectus;
(iv) notify promptly each Holder of Registrable Securities and
confirm such advice in writing (A) of the issuance by the
SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose,
(B) if the Company receives any notification with respect
to the suspension of the qualification of the Registrable
Securities for sale in any jurisdiction or the initiation
of any proceeding for such purpose, and (C) of the
happening of any event during the period a Registration
Statement is effective as a result of which such
Registration Statement or the related Prospectus contains
any untrue statement of a material fact or omits to state
any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of
the Prospectus), not misleading;
(v) use its best effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement
at the earliest possible moment;
(vi) use its best efforts to register or qualify the
Registrable Securities by the time the applicable
Registration Statement is declared effective by the SEC
under all applicable state securities or "blue sky" laws
of such jurisdictions as any Holder of Registrable
Securities covered by a Registration Statement shall
reasonably request in writing, keep each such registration
or qualification effective during the period such
Registration Statement is required to be kept effective
and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of
such Registrable Securities owned by such Holder;
provided, however, that the Company shall not be required
to (A) qualify generally to do business in any
jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to
qualify but for this Section 4(a)(vi), (B) subject itself
to taxation in any such jurisdiction, or (C) submit to the
general service of process in any such jurisdiction;
(vii) upon the occurrence of any event contemplated by
Section 4(a)(iv)(C) hereof, use its best efforts
promptly to prepare and file a supplement or prepare,
file and obtain effectiveness of a post-effective
amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by
reference or file any other required document so
that, as thereafter delivered to the purchasers of
the Registrable Securities, such Prospectus will not
contain any untrue statement of a material fact or
omit to state a material fact required to be stated
therein or necessary to make the statements therein,
in the light of the circumstances under which they
were made, not misleading;
(viii) use its best efforts to cause all Registrable
Securities to be listed on any securities exchange on
which similar securities issued by the Company are
then listed;
(ix) provide a CUSIP number for all Registrable Securities, not
later than the effective date of the Registration
Statement or amendment thereto relating to such
Registrable Securities;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC and make
available to its security holders, as soon as reasonably
practicable, an earning statement covering at least twelve
(12) months which shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158
thereunder; and
(xi) use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with
or approved by such other governmental agencies or
authorities as may be necessary by virtue of the business
and operations of the Company to enable Holders to
consummate the disposition of such Registrable Securities.
(b) Obligations of Holders. In connection with and as a condition
to the Company's obligations with respect to a Registration Statement pursuant
to Sections 2 and 3 hereof and this Section 4, each Holder agrees that (i) it
will not offer or sell its Registrable Securities under the Registration
Statement until it has received copies of the supplemental or amended
Prospectus contemplated by Section 4(a)(ii) hereof and receives notice that
any post-effective amendment has become effective; and (ii) upon receipt of
any notice from the Company of the happening of any event of the kind
described in Section 4(a)(iv)(C) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Registration
Statement until such Holder receives copies of the supplemented or amended
Prospectus contemplated by Section 4(a)(vii) hereof and receives notice that
any post-effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the
Company) all copies in its possession, other than permanent file copies then
in such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice.
Each Holder will furnish to the Company all information relating to
the Holder required by the Securities Act to be included in the Registration
Statement.
The Company may require, as a condition to fulfilling its
obligations to register the Registrable Securities under Sections 2 or 3
hereof, that the Holders execute reasonable and customary indemnification
agreements for the benefit of the underwriters of the registration; provided,
however, that the Holders may not be required to indemnify the Company's
underwriters except with respect to information relating to the Holders
furnished by the Holders for use in such Registration Statement.
(c) Lockup. In the event the Company proposes to effect the
distribution of its securities through an underwritten public offering, each
Holder who then beneficially owns in excess of 100,000 shares agrees for a
period of time, beginning seven (7) days prior to the pricing of such offering
and ending thirty (30) days after such pricing that such Holder will forthwith
cease any sale or other disposition of any of the Registrable Securities
during such period of time, if requested in writing by the Company or
representatives of the underwriters for any such underwritten public offering;
provided, however, that Holders shall not be subject to more than one Lockup
Period during any twelve (12) month period.
(d) Postponement. The Company shall be entitled to postpone for a
reasonable period of time (but not in excess of 60 days) the filing of any
Registration Statement otherwise required to be prepared and filed by it
pursuant to Section 2 hereof, if the Board of Directors of the Company
determines, in its reasonable judgment, that such registration and offering
would materially interfere with any proposed financing, acquisition, corporate
reorganization or other material transaction involving the Company, and the
Company gives the Holders written notice of such determination within fourteen
(14) days of its receipt of a Demand Notice.
5. Indemnification; Contribution.
(a) Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Holder, each officer and director of such
Holder, and each Person, if any, who controls any Holder within the meaning of
Section 15 of the Securities Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment
thereto) pursuant to which Registrable Securities were
registered under the Securities Act, including all
documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the
light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the
aggregate amount paid in settlement of any litigation, or
investigation or proceeding by any governmental agency or
body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, if such
settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of
counsel), reasonably incurred in investigating,
preparing or defending against any litigation, or
investigation or proceeding by any governmental
agency or body, commenced or threatened, in each case
whether or not a party, or any claim whatsoever based
upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the
extent that any such expense is not paid under
subparagraph (i) or (ii) above;
provided, however, that the indemnity provided pursuant to this Section 5(a)
does not apply to any Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished to the Company by such Holder
expressly for use in a Registration Statement (or any amendment thereto) or
any Prospectus (or any amendment or supplement thereto).
(b) Indemnification by the Holders. Each Holder severally agrees
to indemnify and hold harmless the Company and the other selling Holders, and
each of their respective directors and officers (including each director and
officer of the Company who signed the Registration Statement), and each
Person, if any, who controls the Company or any other selling Holder within
the meaning of Section 15 of the Securities Act, to the same extent as the
indemnity contained in Section 5(a) hereof (except that any settlement
described in Section 5(a)(ii) shall be effected only with the written consent
of such Holder), but only insofar as such loss, liability, claim, damage or
expense arises out of or is based upon (i) any untrue statement or omission,
or alleged untrue statements or omissions, made in a Registration Statement
(or any amendment thereto) or any Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such selling Holder expressly for use in such Registration
Statement (or any amendment thereto) or such Prospectus (or any amendment or
supplement thereto), or (ii) such Holder's failure to deliver a Prospectus to
any purchaser of Registrable Securities where such a delivery obligation was
applicable to such Holder's sale of Registrable Securities and such Holder had
been provided with a reasonable number of copies of such Prospectus for the
relevant deliveries thereof. In no event shall the liability of any Holder
under this Section 5(b) be greater in amount than the dollar amount of the
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Each indemnified party
shall give reasonably prompt notice to each indemnifying party of any action
or proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party (i) shall not
relieve it from any liability which it may have under the indemnity agreement
provided in Section 5(a) or (b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) shall not, in any event, relieve the indemnifying party from
any obligations to any indemnified party other than the indemnification
obligation provided under Section 5(a) or (b) above. If the indemnifying
party so elects within a reasonable time after receipt of such notice, the
indemnifying party may assume the defense of such action or proceeding at such
indemnifying party's own expense with counsel chosen by the indemnifying party
and approved by the indemnified parties defendant in such action or
proceeding, which approval shall not be unreasonably withheld; provided,
however, that, if such indemnified party or parties reasonably determine that
a conflict of interest exists where it is advisable for such indemnified party
or parties to be represented by separate counsel or that, upon advice of
counsel, there may be legal defenses available to them which are different
from or in addition to those available to the indemnifying party, then the
indemnifying party shall not be entitled to assume such defense and the
indemnified party or parties shall be entitled to one separate counsel at the
indemnifying party's expense. If an indemnifying party is not entitled to
assume the defense of such action or proceeding as a result of the proviso to
the preceding sentence, such indemnifying party's counsel shall be entitled to
conduct the defense of such indemnified party or parties, it being understood
that both such counsel will cooperate with each other to conduct the defense
of such action or proceeding as efficiently as possible. If an indemnifying
party is not so entitled to assume the defense of such action or does not
assume such defense, after having received the notice referred to in the first
sentence of this paragraph, the indemnifying party or parties will pay the
reasonable fees and expenses of counsel for the indemnified party or parties.
In such event, however, no indemnifying party will be liable for any
settlement effected without the written consent of such indemnifying party.
If an indemnifying party is entitled to assume, and assumes, the defense of
such action or proceeding in accordance with this paragraph, such indemnifying
party shall not be liable for any fees and expenses of counsel for the
indemnified parties incurred thereafter in connection with such action or
proceeding. The indemnification obligations provided pursuant to Sections
5(a) and (b) hereof survive, with respect to a Holder, the transfer of
Registrable Securities by such Holder, and with respect to a Holder or the
Company, shall remain in full force and effect regardless of any investigation
made by or on behalf of any indemnified party.
(d) Contribution.
(i) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided
for in this Section 5 is for any reason held to be
unenforceable although applicable in accordance with its
terms, the Company and the selling Holders shall
contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such
indemnity agreement incurred by the Company and the
selling Holders, in such proportion as is appropriate to
reflect the relative fault of and benefits to the Company
on the one hand and the selling Holders on the other (in
such proportions that the selling Holders are severally,
not jointly, responsible for the balance), in connection
with the statements or omissions which resulted in such
losses, claims, damages, liabilities or expenses, as well
as any other relevant equitable considerations. The
relative benefits to the indemnifying party and
indemnified parties shall be determined by reference to,
among other things, the total proceeds received by the
indemnified party and indemnified parties in connection
with the offering to which such losses, claims, damages,
liabilities or expenses relate. The relative fault of the
indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether
the action in question, including any untrue or alleged
untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or
relates to information supplied by, such indemnifying
party or the indemnified parties, and the parties'
relative intent, knowledge, access to information and
opportunity to correct or prevent such action.
(ii) The Company and the Holders agree that it would not be
just or equitable if contribution pursuant to this
Section 5(d) were determined by pro rata allocation or by
any other method of allocation which does not take account
of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the
provisions of this Section 5(d), no selling Holder shall
be required to contribute any amount in excess of the
amount by which the total price at which the Registrable
Securities of such selling Holder were offered to the
public exceeds the amount of any damages which such
selling Holder would otherwise have been required to pay
by reason of such untrue statement or omission.
ELLSF Notwithstanding the foregoing, no Person guilty of
fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be
entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. For
purposes of this Section 5(d), each Person, if any,
who controls a Holder within the meaning of
Section 15 of the Securities Act and directors and
officers of a Holder shall have the same rights to
contribution as such Holder, and each director of the
Company, each officer of the Company who signed the
Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15
of the Securities Act shall have the same rights to
contribution as the Company.
(iv) The contribution provided for in this Section 5(d) shall
survive, with respect to a Holder, the transfer of
Registrable Securities by such Holder, and with respect to
a Holder or the Company, shall remain in full force and
effect regardless of any investigation made by or on
behalf of any indemnified party.
6. Rule 144 Sales.
(a) Reports. The Company covenants that it will file the reports
required to be filed by the Company under the Securities Act and the
Securities Exchange Act of 1934, as amended, and will take such further action
as any Holder of Registrable Securities may reasonably request, all to the
extent required to enable such Holder to sell Registrable Securities pursuant
to Rule 144 under the Securities Act.
(b) Certificates. In connection with any sale, transfer or other
disposition by any Holder of any Registrable Securities pursuant to Rule 144
under the Securities Act, the Company shall cooperate with such Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend,
and enable certificates for such Registrable Securities to be for such number
of shares and registered in such names as the selling Holders may reasonably
request at least two (2) business days prior to any sale of
Registrable Securities.
(c) Opinion That Shares Not Required to be Registered. The Company
shall not be required to fulfill any registration obligations under this
Agreement if the Company provides the Holder who desires to sell Registrable
Securities with an opinion, satisfactory to Holder in its reasonable
discretion, of counsel, satisfactory to Holder in its reasonable discretion,
stating that (i) the Holder is free to sell the Registrable Securities that
they desired to register in the manner proposed by such Holder (including but,
not limited to, an underwritten offering), without registering such
Registrable Securities, or (ii) such Registrable Securities can be sold under
Rule 144 of the Securities Act or otherwise without registration in the open
market in compliance with the Securities Act.
7. Miscellaneous.
(a) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holders of
a majority in amount of the outstanding Registrable Securities; provided,
however, that no amendment, modification or supplement or waiver or consent to
the departure with respect to the provisions of Sections 2, 3, 4, 5, 6 or 7
hereof shall be effective as against any Holder of Registrable Securities
unless consented to in writing by such Holder of Registrable Securities, as
the case may be. Notice of any amendment, modification or supplement to this
Agreement adopted in accordance with this Section 7(a) shall be provided by
the Company to each Holder of Registrable Securities at least
fifteen (15) days prior to the effective date of such amendment, modification
or supplement.
(b) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery, (i) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 7(b), which address initially is, with respect to each Holder,
the address set forth next to such Holder's name on the books and records of
the Company, or (ii) if to the Company, at: Wellsford Real Properties, Inc.,
610 Fifth Avenue, 7th Floor, New York, New York 10020, Attention: President,
Fax No. (212) 333-2323.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; three (3)
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied;
or at the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the Company and the Holder, including without limitation and without the
need for an express assignment, subsequent Holders. If any successor,
assignee or transferee of any Holder shall acquire Registrable Securities, in
any manner, whether by operation of law or otherwise, such Registrable
Securities, as the case may be, shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Securities such
Person shall be entitled to receive the benefits hereof and shall be
conclusively deemed to have agreed to be bound by all of the terms and
provisions hereof.
(d) Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(e) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MARYLAND WITHOUT GIVING
EFFECT TO THE CONFLICTS OF LAW PROVISIONS THEREOF.
(f) Specific Performance. The Company and the Holders hereto
acknowledge that there would be no adequate remedy at law if any party fails
to perform any of its obligations hereunder, and accordingly agree that each
party, in addition to any other remedy to which it may be entitled at law or
in equity, shall be entitled to compel specific performance of the obligations
of any other party under this Agreement in accordance with the terms and
conditions of this Agreement in any court of the United States or any State
thereof having jurisdiction.
(g) Entire Agreement. This Agreement is intended by the Company
and the Holder as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
Company and the Holder in respect of the subject matter contained herein.
This Agreement supersedes all prior agreements and understandings of the
Company and the Holder with respect to such subject matter.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Edward Lowenthal
---------------------------
Name: Edward Lowenthal
Title: President
ERP OPERATING LIMITED PARTNERSHIP*
By:/s/ Bruce C. Strohm
---------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
BY: EQUITY RESIDENTIAL PROPERTIES
TRUST,
its general partner
ASSIGNMENT AND ACCEPTANCE AGREEMENT
THIS ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") dated June
19, 1997, by and between BANKBOSTON, N.A. (formerly known as The First
National Bank of Boston) ("Assignor"), and WELLSFORD REAL PROPERTIES, INC.
("Assignee").
W I T N E S S E T H:
WHEREAS, Assignor is a party to that certain Credit Agreement dated as of
April 25, 1997 (as amended and in effect from time to time, the "Credit
Agreement"), by and among Park Avenue Financing Company, LLC, a Delaware
limited liability company, and PAMC Co-Manager Inc., a Delaware corporation
(collectively the "Borrower"), The First National Bank of Boston (now known as
BankBoston, N.A.), Assignee, the other banks which may become parties thereto
from time to time (collectively, the "Banks"), The First National Bank of
Boston (now known as BankBoston, N.A.), as Agent for the Banks (in such
capacity, the "Agent"), and certain other parties; and
WHEREAS, Assignor desires to transfer to Assignee a Commitment under the
Credit Agreement and its rights under the Credit Agreement (i) with respect to
the Commitment being assigned and (ii) its outstanding Loan with respect to
the Commitment;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00) and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, Assignor and Assignee hereby
agree as follows:
1. Definitions. Terms defined in the Credit Agreement and used herein
without definition shall have the respective meanings assigned to such terms
in the Credit Agreement.
2. Assignment.
(a) Subject to the terms and conditions of this Agreement and in
consideration of the payment to be made by Assignee to Assignor pursuant to
Paragraph 5 of this Agreement, effective as of the "Assignment Date" (as
defined in Paragraph 7 below), Assignor hereby irrevocably sells, transfers
and assigns to Assignee, without recourse a portion of its Note in the amount
of $5,000,000.00 representing a $5,000,000.00 Commitment, a six and one-fourth
percent (6.25%) Commitment Percentage and a six and one-fourth percent (6.25%)
interest in and to all of the other rights and obligations under the Credit
Agreement, the other Loan Documents and the Intercreditor Agreement dated as
of April 25, 1997 among the Banks and Agent (the "Intercreditor Agreement")
(the assigned interests being hereinafter referred to as the "Assigned
Interests"), including without limitation, Assignor's share of the outstanding
Loan under the Assigned Interests and the right to receive interest and
principal on and all other fees and amounts with respect to, the Assigned
Interests, all from and after the Assignment Date, all as if Assignee were an
original Bank under and signatory to the Credit Agreement having a Commitment
Percentage equal to such amount of the Assigned Interests.
EDG Assignee, subject to the terms and conditions hereof, hereby
assumes all obligations of Assignor with respect to the Assigned Interests
from and after the Assignment Date as if Assignee were an original Bank under
and signatory to the Credit Agreement and the Intercreditor Agreement, which
obligations shall include, but shall not be limited to, the obligation to
indemnify the Agent as provided therein (such obligations, together with all
other obligations set forth in the Credit Agreement, the other Loan Documents
and the Intercreditor Agreement, are hereinafter collectively referred to as
the "Assigned Obligations"). Assignor shall have no further duties or
obligations with respect to, and shall have no further interest in, the
Assigned Obligations or the Assigned Interests.
3. Representations and Requests of Assignor.
(a) Assignor represents and warrants to Assignee (i) that it is
legally authorized to, and has full power and authority to, enter into this
Agreement and perform its obligations under this Agreement; (ii) that as of
the date hereof, before giving effect to the assignment contemplated hereby,
the principal face amount of Assignor's Note is $60,000,000.00 and the
aggregate principal balance of the Loan made by it equals $60,000,000.00; and
(iii) that it has forwarded to the Agent the Note held by Assignor. Assignor
makes no representation or warranty, express or implied, and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Loan Documents or the execution, legality,
validity, enforceability, genuineness or sufficiency of any Loan Document or
any other instrument or document furnished pursuant thereto or in connection
with the Loan, the collectibility of the Loan, the continued solvency of the
Borrower, the Guarantor or any Additional Pledgor or the continued existence,
sufficiency or value of the Collateral or any assets of the Borrower, the
Guarantor or any Additional Pledgor which may be realized upon for the
repayment of the Loan, or the performance or observance by the Borrower, the
Guarantor, any Additional Pledgor or any other Person of any of their
respective obligations under the Loan Documents to which it is a party or any
other instrument or document delivered or executed pursuant thereto or in
connection with the Loan; other than that it is the legal and beneficial owner
of, or has the right to assign, the interest being assigned by it hereunder
and that such interest is free and clear of any adverse claim.
(b) Assignor requests that the Agent obtain replacement notes for
each of Assignor and Assignee as provided in the Credit Agreement.
4. Representations of Assignee. Assignee makes and confirms to the
Agent, Assignor and the other Banks all of the representations, warranties and
covenants of a Bank under Article 13 and 17 of the Credit Agreement and in
Paragraph 3 of the Intercreditor Agreement. Without limiting the foregoing,
Assignee (a) represents and warrants that it is legally authorized to, and has
full power and authority to, enter into this Agreement and perform its
obligations under this Agreement; (b) confirms that it has received a copy of
the Loan Documents and the Intercreditor Agreement, together with copies of
the most recent financial statements delivered pursuant to the Credit
Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Agreement; (c) agrees that it has and will, independently and without reliance
upon Assignor, any other Bank or the Agent and based upon such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in evaluating the Loan, the Loan Documents, the
creditworthiness of the Borrower, the Guarantor and the Additional Pledgors
and the value of the Collateral and other assets of the Borrower, the
Guarantor and the Additional Pledgors and taking or not taking action under
the Loan Documents and the Intercreditor Agreement; (d) appoints and
authorizes the Agent to take such action as agent on its behalf and to
exercise such powers as are reasonably incidental thereto pursuant to the
terms of the Loan Documents and the Intercreditor Agreement; (e) agrees that
it will become a party to and will perform in accordance with their terms all
the obligations which by the terms of the Loan Documents and the Intercreditor
Agreement are required to be performed by it as a Bank; and (f) represents and
warrants that Assignee does not control, is not controlled by, is not under
common control with and is otherwise free from influence or control by, the
Borrower, the Guarantor, the Managing Member and the Additional Pledgors.
5. Payments to Assignor. In consideration of the assignment made
pursuant to Paragraph 1 of this Agreement, Assignee agrees to pay to Assignor
on the Assignment Date, an amount equal to the aggregate principal amount
outstanding of the Loan owing to Assignor, in connection with the Assigned
Interests under the Credit Agreement and the other Loan Documents.
6. Intentionally Omitted.
7. Effectiveness.
(a) The effective date for this Agreement shall be June 19, 1997
(the "Assignment Date"). Following the execution of this Agreement, each
party hereto shall deliver its duly executed counterpart hereof to the Agent
for acceptance and recording in the Register by the Agent.
(b) Upon such acceptance and recording and from and after the
Assignment Date, (i) Assignee shall be a party to the Credit Agreement and the
Intercreditor Agreement and shall, to the extent of the Assigned Interests,
have the rights and obligations of a Bank thereunder, and (ii) Assignor shall,
with respect to the Assigned Interests, relinquish its rights and be released
from its obligations under the Credit Agreement and the Intercreditor
Agreement.
(c) Upon such acceptance and recording and from and after the
Assignment Date, the Agent shall make all payments in respect of the Assigned
Interests accruing after the Assignment Date (including payments of principal,
interest, fees and other amounts) to Assignee, and Agent is authorized to
retain from the next payment of Borrower and pay to Assignor interest at the
rate of twelve percent per annum as provided in the Credit Agreement with
respect to the Assigned Interests for the period accruing prior to the
Assignment Date.
8. Notices. Assignee specifies as its address for notices and its
Lending Office for all Loans, the offices set forth below:
Notice Address: Wellsford Real Properties, Inc.
610 Fifth Avenue
7th Floor
New York, New York 10020
Attn: Gregory Hughes
Fax: 212/333-2323
9. Payment Instructions. All payments to Assignee under the Credit
Agreement shall be made as provided in the Credit Agreement in accordance with
the following instructions:
Wellsford Real Properties, Inc.
Chase Manhattan Bank, N.A.
For the account of United States Trust Company of New York
Account No. 920-1-073195
In favor of: Wellsford Real Properties, Inc. Operating
Account
69-7266-7
10. Governing Law. THIS AGREEMENT IS INTENDED TO TAKE EFFECT AS A
SEALED INSTRUMENT FOR ALL PURPOSES AND TO BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE
TO CONFLICT OF LAWS).
11. Counterparts. This Agreement may be executed in any number of
counterparts which shall together constitute but one and the same agreement.
12. Amendments. This Agreement may not be amended, modified or
terminated except by an agreement in writing signed by Assignor and Assignee,
and consented to by Agent.
13. Successors. This Agreement shall inure to the benefit of the
parties hereto and their respective successors and assigns as permitted by the
terms of Credit Agreement and the Intercreditor Agreement.
IN WITNESS WHEREOF, intending to be legally bound, each of the
undersigned has caused this Agreement to be executed on its behalf by its
officers thereunto duly authorized, as of the date first above written.
ASSIGNOR:
BANKBOSTON, N.A.
(formerly known as The First National
Bank of Boston)
By:/s/ Jeffrey L. Warwick
--------------------------------
Title: Director
ASSIGNEE:
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Gregory F. Hughes
-------------------------------
Title: CFO
[SEAL]
<PAGE>
The undersigned, as Agent, acknowledges receipt of the foregoing
assignment and consents thereto (including, without limitation, such consents
as may be required by Section 17.1(a), (e) or (f) under the Credit
Agreement).
BANKBOSTON, N.A. (formerly
known as The First National Bank
of Boston), as Agent
By:/s/ Jeffrey L. Warwick
-----------------------------------
Title: Director
<PAGE>
The undersigned is a "Guarantor" and/or "Additional Pledgor" under one
or more of the Loan Documents. The Loan Documents executed by the undersigned
provide that the obligations of the undersigned extend to each other Note as
may be issued under the Credit Agreement. Each of the undersigned executes
the foregoing Agreement for the purpose of acknowledging that the Loan
Documents to which each of the undersigned is a party extends to and is
applicable to each new Note which is issued pursuant to the Credit Agreement
in connection with the foregoing Agreement and with respect to any Commitment
being retained by Assignor from and after such assignment.
GUARANTOR AND ADDITIONAL PLEDGOR:
- ------------------------------
/s/ Stanley Stahl
- ----------------------------------
STANLEY STAHL
ADDITIONAL PLEDGOR:
PAFC MANAGEMENT, INC., a Delaware
corporation
By:/s/ Stanley Stahl
----------------------------------
Title: Stanley Stahl, President
[CORPORATE SEAL]
REVOLVING CREDIT AGREEMENT
DATED AS OF MAY 30, 1997
among
WELLSFORD REAL PROPERTIES, INC., as Borrower
and
BANKBOSTON, N.A.,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
and
OTHER BANKS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT, as Banks
and
BANKBOSTON, N.A.,
AS AGENT
and
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
AS CO-AGENT
<PAGE>
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is made as of the 30th day of May, 1997,
by and among WELLSFORD REAL PROPERTIES, INC., a Maryland corporation having
its principal place of business at 610 Fifth Avenue, Seventh Floor, New York,
New York 10020 ("Borrower"), BANKBOSTON, N.A., a national banking association,
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a New York banking corporation, and
the other lending institutions which may become parties hereto pursuant to
Section 18 (collectively, the "Banks"), and BANKBOSTON, N.A., as Agent for the
Banks (the "Agent"), and MORGAN GUARANTY TRUST COMPANY OF NEW YORK, as Co-
Agent for the Banks (the "Co-Agent").
Section 14. DEFINITIONS AND RULES OF INTERPRETATION.
Section 14.1. Definitions. The following terms shall have the meanings
set forth in this Section l or elsewhere in the provisions of this Agreement
referred to below:
Adjustment Date. The earlier to occur of (i) the first anniversary of
the Closing Date, (ii) the date on which an Equity Offering is completed
having raised an amount of not less than $50,000,000; and (iii) the date on
which the Point View Office Complex is 90% leased pursuant to bona-fide arms-
length leases requiring the payment of current rent with tenants in actual
occupancy.
Agent. BankBoston, N.A., a national banking association, its successors
and assigns, acting as agent for the Banks.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent
may designate from time to time by notice to the Borrower and the Banks.
Agent's Special Counsel. Long Aldridge Norman LLP or such other counsel
as may be approved by the Agent.
Agreement. This Revolving Credit Agreement, including the Schedules and
Exhibits hereto.
Agreement Regarding Common Stock Purchase. The Agreement Regarding
Common Stock and Preferred Stock Purchase Agreement dated of even date
herewith among EQR, Borrower and Agent.
Agreement Regarding Fees. The Agreement Regarding Fees dated of even
date herewith among Borrower, BKB and Morgan.
Appraisal. An MAI appraisal of the value of a parcel of Mortgaged
Property or Collateral Property, determined on a fair market value basis,
performed by an independent appraiser selected by the Agent who is not an
employee of the Borrower, any Subsidiary of the Borrower, the Agent or a Bank,
the form and substance of such appraisal and the identity of the appraiser to
be in accordance with regulatory laws and policies (both regulatory and
internal) applicable to the Banks, including, without limitation, FIRREA, and
otherwise acceptable to the Majority Banks.
Appraised Value. The fair market value of a parcel of Mortgaged Property
or Collateral Property, determined by the most recent Appraisal of such parcel
or update obtained pursuant to Section 5.2 or Section 10.7, subject, however,
to such changes or adjustments to the value determined thereby as may be
required by the appraisal departments of the Majority Banks in their good
faith business judgment.
Assignment of Common Stock Agreement. The Assignment of Common Stock
Agreement from the Borrower to the Agent pursuant to which there shall be
assigned to the Agent for the benefit of the Banks a security interest in the
EQR Preferred Equity Commitment, such assignment to be in form and substance
satisfactory to the Majority Banks.
Assignment of Leases and Rents. Each of the collateral assignments of
leases and rents from the Borrower and the Guarantor to the Agent pursuant to
which there shall be assigned to the Agent for the benefit of the Banks a
security interest in the interest of such party, as lessor with respect to all
Leases of all or any part of a Mortgaged Property, each such collateral
assignment to be in form and substance satisfactory to the Majority Banks.
Balance Sheet Date. December 31, 1996
Banks. BKB, Morgan and any other Person who becomes an assignee of any
rights of a Bank pursuant to Section 18 (but not including any Participant, as
defined in Section 18).
Base Rate. The higher of (a) the annual rate of interest announced from
time to time by BKB at its head office in Boston, Massachusetts as its "base
rate", and (b) one-half of one percent (0.5%) above the Federal Funds
Effective Rate (rounded upwards, if necessary, to the next one-eighth of one
percent). Any change in the rate of interest payable hereunder resulting from
a change in the Base Rate shall become effective as of the opening of business
on the day on which such change in the Base Rate becomes effective.
Base Rate Loans. Those Loans bearing interest calculated by reference to
the Base Rate.
BKB. BankBoston, N.A., a national banking association.
Borrower. As defined in the preamble hereto.
Borrowing Base. At any time, the lesser of (a) the sum of (i) the EQR
Preferred Equity Commitment Allowance plus (ii) the Debt Service Coverage
Amount and (b) the sum of (i) the EQR Preferred Equity Commitment Allowance
plus (ii) the Designated Collateral Value.
Borrower Substitute Collateral. See Section 5.4.
Building. All of the buildings, structures and improvements now or
hereafter located on any Mortgaged Property or on any Collateral Property.
Building Service Equipment. All apparatus, fixtures and articles of
personal property owned by the Borrower or the Guarantor, now or hereafter
attached to or used or procured for use in connection with the operation or
maintenance of any building, structure or other improvement located on or
included in the Mortgaged Property, including, but without limiting the
generality of the foregoing, all engines, furnaces, boilers, stokers, pumps,
heaters, tanks, dynamos, motors, generators, switchboards, electrical
equipment, heating, plumbing, lifting and ventilating apparatus, air-cooling
and air-conditioning apparatus, gas and electric fixtures, elevators,
escalators, fittings, and machinery and all other equipment of every kind and
description, used or procured for use in the operation of a Building (except
apparatus, fixtures or articles of personal property belonging to lessees or
other occupants of such building or to persons other than the Borrower or the
Guarantor, unless the same be abandoned by any such lessee or other occupant
or person and shall become the Borrower's or the Guarantor's property by
reason of such abandonment), together with any and all replacements thereof
and additions thereto.
Business Day. Any day on which banking institutions in the city in which
the Agent's Head Office is located are open for the transaction of banking
business and, in the case of Eurodollar Rate Loans, which also is a Eurodollar
Business Day.
Capital Improvement Project. With respect to any Real Estate now or
hereafter owned by the Borrower or the Guarantor which is utilized principally
as commercial office space, capital improvements consisting of rehabilitation,
refurbishment, replacement and improvements to the existing Buildings on such
Real Estate which may be properly capitalized under generally accepted
accounting principles.
Capital Improvement Reserve. For any period (a) for the purpose of
testing compliance with the Consolidated Operating Cash Flow Coverage ratio
set forth in Section 9.2 hereof, an amount equal to thirty cents ($0.30)
multiplied by the weighted average of rentable square footage of Real Estate
owned by the Borrower and its Subsidiaries during such period; and (b) for the
purpose of testing compliance with the Borrowing Base covenant set forth in
Section 9.3 hereof, an amount equal to One and 50/100 Dollars ($1.50)
multiplied by the weighted average of rentable square footage of Real Estate
owned by the Borrower and its Subsidiaries during such period.
CERCLA. See Section 6.20.
Closing Date. The first date on which all of the conditions set forth in
Section 10 and Section 11 have been satisfied.
Co-Agent. Morgan.
Code. The Internal Revenue Code of 1986, as amended.
Collateral. All of the property, rights and interests of the Borrower or
the Guarantor, which are or are intended to be subject to the security
interests, liens and mortgages created by the Security Documents, including,
without limitation, the Mortgaged Property, the EQR Preferred Equity
Commitment and the Collateral Notes.
Collateral Assignment. Each of the Collateral Assignment of Documents,
Rights and Claims by the Borrower or the Guarantor to the Agent for the
benefit of the Banks pursuant to which the Collateral Notes and related
documents are pledged to the Agent.
Collateral Property. Collectively, the real property securing (or for
the purposes of this Agreement deemed to be securing) the Collateral Notes at
any time and, individually, any one such parcel of real property.
Collateral Notes. Collectively, the Qualifying Collateral Notes that are
pledged pursuant to the Collateral Assignments. Initially, the Collateral
Notes are the Sonterra Note and the 277 Park Avenue Note.
Commitment. With respect to each Bank, the amount set forth on Schedule
1 hereto as the amount of such Bank's Commitment to make or maintain Loans to
the Borrower, as the same may be reduced from time to time in accordance with
the terms of this Agreement.
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.
Compliance Certificate. See Section 7.4(e).
Consolidated or combined. With reference to any term defined herein,
that term as applied to the accounts of the Borrower and its Subsidiaries,
consolidated or combined in accordance with generally accepted accounting
principles.
Consolidated Operating Cash Flow. With respect to any Test Period, an
amount equal to the Operating Cash Flow of the Borrower and its Subsidiaries
for such period consolidated in accordance with generally accepted accounting
principles. The Consolidated Operating Cash Flow of the Borrower and its
Subsidiaries on the consolidated financial statements of the Borrower and its
Subsidiaries shall be adjusted as of the Closing Date to reflect the
Borrower's allocable share of such Consolidated Operating Cash Flow for the
relevant period or as of the date of determination.
Consolidated Tangible Net Worth. The amount by which Consolidated Total
Assets exceeds Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of the Borrower and its
Subsidiaries properly classified as intangible assets under generally
accepted accounting principles, including such items as good will, the
purchase price of acquired assets in excess of the fair market value
thereof, trademarks, trade names, service marks, brand names, copyrights,
patents and licenses, and rights with respect to the foregoing; plus
(b) all amounts representing any write-up in the book value of any
assets of the Borrower or its Subsidiaries resulting from a revaluation
thereof subsequent to the Balance Sheet Date.
Consolidated Total Assets. All assets of the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles. All Real Estate shall be valued on an
undepreciated cost basis. The assets of the Borrower and its Subsidiaries on
the consolidated financial statements of the Borrower and its Subsidiaries
shall be adjusted as of the Closing Date to reflect the Borrower's allocable
share of such assets for the relevant period or as of the date of
determination.
Consolidated Total Liabilities. All liabilities of the Borrower and
its Subsidiaries determined on a consolidated basis in accordance with
generally accepted accounting principles and all Indebtedness of the Borrower
and its Subsidiaries, whether or not so classified. The liabilities of the
Borrower and its Subsidiaries on the consolidated financial statements of the
Borrower and its Subsidiaries shall be adjusted as of the Closing Date to
reflect the Borrower's allocable share of such liabilities for the relevant
period or as of the date of determination.
Construction Inspector. A firm of professional engineers or architects
selected by the Agent and reasonably acceptable to the Borrower.
Conversion Request. A notice given by the Borrower to the Agent of its
election to convert or continue a Loan in accordance with Section 4.1.
Debt Offering. The issuance and sale by the Borrower or the Guarantor of
any debt securities of the Borrower or the Guarantor.
Debt Service. For any period of four consecutive fiscal quarters, the
sum of actual interest expense and mandatory or scheduled principal payments
due and payable during such period with respect to the Indebtedness, excluding
any balloon payments due upon maturity of any Indebtedness, amortized loan
fees and the capitalized interest expense and principal payments due with
respect to the construction loans on the Palomino Park Project. For the
initial twelve (12) months following the Closing Date, Debt Service shall be
determined by annualizing the Debt Service from and after the Closing Date in
a manner reasonably acceptable to the Agent and the Co-Agent.
Debt Service Coverage Amount. At any time determined by the Agent, an
amount equal to the maximum principal loan amount which, when bearing interest
at a rate per annum equal to the sum of the then-current annual yield on seven
(7) year obligations issued by the United States Treasury most recently prior
to such date plus one and three-quarters percent (1.75%), payable based on a
25 year mortgage style amortization schedule, could be paid by the monthly
principal and interest payment amount resulting from dividing (a) the
aggregate Operating Cash Flow from the Mortgaged Property and the Collateral
Notes for the preceding four fiscal quarters minus the Capital Improvement
Reserve (with respect to the Mortgaged Property only) divided by 1.5, by
(b) 12. The determination of the Debt Service Coverage Amount and the
components thereof by the Agent shall, so long as the same shall be determined
in good faith, be conclusive and binding absent manifest error.
Default. See Section 12.1.
Designated Collateral Value. At the relevant time of reference thereto,
the sum of (a) 70% of the outstanding principal balance of the Sonterra Note,
(b) 60% of the outstanding principal balance of the 277 Park Avenue Note and
any other Collateral Notes, and (c) not less than 40% but not greater than 60%
as determined by the consent of all of the Banks in their sole discretion, of
the Appraised Value of the Mortgaged Property.
Distribution. The declaration or payment of any dividend or distribution
on or in respect of any shares of the Borrower, other than dividends or
distributions payable solely in equity securities of the Borrower; the
purchase, redemption, exchange or other retirement of any shares of the
Borrower; directly or indirectly through a Subsidiary of the Borrower or
otherwise; the return of capital by the Borrower to its shareholders as such;
or any other distribution on or in respect of any shares of the Borrower.
Dollars or $. Dollars in lawful currency of the United States of America.
Domestic Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, located within the United States that will be making or maintaining Base
Rate Loans.
Drawdown Date. The date on which any Loan is made or is to be made, and
the date on which any Loan is converted or combined in accordance with Section
4.1.
Eligible Real Estate. Real Estate:
(a) which is owned in fee by the Borrower (or the Guarantor upon
the approval of all of the Banks in accordance with Section 5.4 hereof);
(b) which is located within the northeastern United States,
excluding those States which prescribe a "single-action" or similar rule
limiting the rights of creditors secured by real property, except to the
extent such exclusion is waived in writing by all of the Banks with
respect to a specific parcel of Real Estate;
(c) which is utilized principally for commercial office purposes;
(d) which is approved by all of the Banks after the date hereof in
their sole judgment;
(e) as to which all of the representations set forth in Section 6
of this Agreement concerning Mortgaged Property are true and correct; and
(f) as to which the Agent has received all Eligible Real Estate
Qualification Documents, so long as all of such documents remain in full
force and effect.
Eligible Real Estate Qualification Documents. With respect to any parcel
of Real Estate proposed to be included in the Eligible Real Estate each of the
following:
(a) Security Documents. Such Security Documents relating to such
Real Estate as the Majority Banks shall require, in form and substance
satisfactory to the Agent and the Majority Banks and duly executed and
delivered by the respective parties thereto.
(b) Enforceability Opinion. The favorable legal opinion of counsel
to the Borrower (or the Guarantor, as applicable) reasonably acceptable
to the Majority Banks qualified to practice in the State in which such
Real Estate is located, addressed to the Banks and in form and substance
satisfactory to the Majority Banks as to the enforceability of such
Security Documents and such other matters as the Majority Banks shall
reasonably request.
(c) Perfection of Liens. Evidence reasonably satisfactory to the
Majority Banks that the Security Documents are effective to create in
favor of the Agent a legal, valid and enforceable first (except for
Permitted Liens entitled to priority under applicable law) lien and
security interest in such Real Estate and that all filings, recordings,
deliveries of instruments and other actions necessary or desirable to
protect and preserve such liens or security interests have been duly
effected.
(d) Survey and Taxes. The Survey of such Real Estate, together
with the Surveyor Certification and evidence of payment of all real
estate taxes, assessments and municipal charges on such Real Estate which
on the date of determination are required to have been paid under Section
7.8.
(e) Title Insurance; Title Exception Documents. The Title Policy
covering such Real Estate, including all endorsements thereto, and
together with proof of payment of all fees and premiums for such policy,
and true and accurate copies of all documents listed as exceptions under
such policy.
(f) UCC Certification. A certification from the Title Insurance
Company or counsel satisfactory to the Majority Banks that a search of
the public records designated by the Majority Banks disclosed no
conditional sales contracts, security agreements, chattel mortgages,
leases of personalty, financing statements or title retention agreements
which affect any property, rights or interests of the Borrower (or the
Guarantor owning the fee simple interest in such Real Estate, as
applicable) that are or are intended to be subject to the security
interest, assignments, and mortgage liens created by the Security
Documents relating to such Real Estate except to the extent that the same
are discharged and removed prior to or simultaneously with the inclusion
of the Real Estate in the Collateral.
(g) Management Agreement. A true copy of the Management Agreement
relating to such Real Estate.
(h) Service Agreements. True copies of all material Service
Agreements relating to such Real Estate.
(i) Standard Form Leases. The forms of Lease to be used by the
Borrower (or the Guarantor owning the fee simple interest in such Real
Estate, as applicable) in connection with future leasing of such
Mortgaged Property, such forms of Lease to be in form and substance
satisfactory to the Agent.
(j) Subordination Agreements. A Subordination, Attornment and Non-
Disturbance Agreement from each tenant of such Real Estate as required by
the Agent, dated not more than sixty (60) days prior to the inclusion of
such Real Estate in the Collateral and satisfactory in form and substance
to the Agent.
(k) Estoppel Certificates. Estoppel certificates from each tenant
of such parcel of Real Estate which occupies 10,000 square feet or more
of such Real Estate and in the aggregate from tenants which occupy not
less than seventy-five percent (75%) of the total square footage of such
Real Estate, such certificates to be dated not more than sixty (60) days
prior to the inclusion of such Real Estate in the Collateral and to be
satisfactory in form and substance to the Agent.
(l) Certificates of Insurance. Each of (i) a current certificate
of insurance as to the insurance maintained on such Real Estate
(including flood insurance if necessary) from the insurer or an
independent insurance broker dated as of the date of determination,
identifying insurers, types of insurance, insurance limits, and policy
terms; (ii) certified copies of all policies evidencing such insurance
(or certificates therefor signed by the insurer or an agent authorized to
bind the insurer); and (iii) such further information and certificates
from the Borrower (or the Guarantor owning the fee simple interest in
such Real Estate, as applicable), its insurers and insurance brokers as
the Majority Banks may reasonably request, all of which shall be in
compliance with the requirements of this Agreement.
(m) Hazardous Substance Assessments. A hazardous waste site
assessment report concerning Hazardous Substances and asbestos on such
Real Estate dated or updated not more than three months prior to the
inclusion of such Real Estate in the Collateral, from an Environmental
Engineer, such report to contain no qualifications except those that are
acceptable to the Majority Banks in their sole discretion and to
otherwise be in form and substance satisfactory to the Majority Banks.
(n) Certificate of Occupancy. A copy of the certificate(s) of
occupancy issued to the Borrower (or the Guarantor owning the fee simple
interest in such Real Estate, as applicable) for such parcel of Real
Estate permitting the use and occupancy of the Building thereon (or
evidence that any previously issued certificate(s) of occupancy is not
required to be reissued to the Borrower or the Guarantor), or a legal
opinion reasonably satisfactory to the Agent that no certificates of
occupancy are necessary to the use and occupancy thereof.
(o) Appraisal. An Appraisal of such Real Estate, in form and
substance satisfactory to the Majority Banks and dated not more than
three months prior to the inclusion of such Real Estate in the
Collateral.
(p) Zoning and Land Use Opinion of Counsel. A favorable opinion
concerning the Real Estate addressed to the Agent and dated the date of
the inclusion of such Real Estate in the Collateral, in form and
substance satisfactory to the Majority Banks, from counsel approved by
the Majority Banks admitted to practice in the State in which such parcel
is located, as to zoning and land use compliance, or such other evidence
regarding zoning and land use compliance as the Majority Banks may
approve in their reasonable discretion.
(q) Construction Inspector Report. A report or written
confirmation from the Construction Inspector satisfactory in form and
content to the Majority Banks, dated or updated not more than three
months prior to the inclusion of such Real Estate in the Collateral,
addressing such matters as the Majority Banks may reasonably require,
including without limitation that the Construction Inspector has reviewed
the plans and specifications or other available materials for all
Buildings on the Real Estate, that the condition of the Buildings is
good, that all Buildings were constructed and completed in a good and
workmanlike manner, that the Buildings satisfy all applicable building,
zoning, handicapped access and Environmental Laws applicable thereto,
whether or not the Real Estate and the Buildings thereon are a conforming
use under applicable zoning laws, and that utilities and public water and
sewer service are available at the lot lines of the Real Estate through
dedicated right-of-way or through insured perpetual private easements
approved by the Majority Banks and connected directly to the Building
with all necessary permits.
(r) Permit and Legal Compliance Assurances. Evidence satisfactory
to the Majority Banks that all activities being conducted on such Real
Estate which require federal, state or local licenses or permits have
been duly licensed and that such licenses or permits are in full force
and effect, and that the Real Estate, the Buildings and the use and
occupancy thereof are in compliance in all material respects with all
applicable federal, state or local laws, ordinances or regulations.
(s) Operating Statements. Operating statements for such Real
Estate in the form of such statements delivered to the Banks under
Section 6.4(c) covering each of the four fiscal quarters ending
immediately prior to the addition of such Mortgaged Property to the
Collateral.
(t) Doing Business Opinion. An opinion, dated the date of the
inclusion of such Real Estate in the Collateral, of legal counsel to the
Borrower (or the Guarantor owning the fee simple interest in such Real
Estate, as applicable) reasonably acceptable to the Majority Banks
qualified to practice in the State in which such Real Estate is located
to the effect that neither the Agent nor any Bank shall be required to
qualify to do business in such State or any political subdivision thereof
or to become liable to pay any taxes in such State or any political
subdivision thereof solely on account of the receipt of the lien on such
Real Estate securing the Obligation, such opinion to be satisfactory to
the Majority Banks.
(u) Additional Documents. Such other documents, certificates,
reports or assurances as the Majority Banks may reasonably require in
their discretion.
Employee Benefit Plan. Any employee benefit plan within the meaning of
Section 3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
Environmental Engineer. A firm of independent professional engineers or
other scientists generally recognized as expert in the detection, analysis and
remediation of Hazardous Substances and related environmental matters and
reasonably acceptable to the Agent.
Environmental Laws. See Section 6.20(a).
EQR. ERP Operating Limited Partnership.
EQR Preferred Equity Commitment. That certain Common Stock and Preferred
Stock Purchase Agreement dated as of May 30, 1997 between EQR and Borrower, as
modified and supplemented by the Agreement Regarding Common Stock Purchase.
EQR Preferred Equity Commitment Allowance. At any time, an amount equal
to ninety percent (90%) of the amount then available to be funded or paid
pursuant to the EQR Preferred Equity Commitment; provided that (a) EQR has not
notified the Borrower, Agent or any Bank of a refusal to pay the purchase
price to the Agent pursuant to the EQR Preferred Equity Commitment, or notice
of its intention to so refuse to pay the purchase price, (b) EQR has not
claimed that a default or event of default by Borrower has occurred under the
EQR Preferred Equity Commitment such that EQR is not obligated to pay amounts
to the Agent pursuant to the EQR Preferred Equity Commitment, (c) none of the
events described in Section 12.1(h), (i) or (j) have occurred with respect to
EQR, (d) EQR has not denied that it has any liability or obligation to the
Agent under the EQR Preferred Equity Commitment, has not notified the
Borrower, the Agent or any of the Banks of EQR's intention to attempt to
cancel or terminate the EQR Prefered Equity Commitment, and has not failed to
observe or comply with any term, covenant, condition or agreement under the
EQR Preferred Equity Commitment, or (e) no event has occurred which would
permit EQR to refuse to pay amounts to the Agent pursuant to the EQR Preferred
Equity Commitment.
Equity Offering. The issuance and sale by the Borrower or the Guarantor
of any of its equity securities.
ERISA. The Employee Retirement Income Security Act of 1974, as amended
and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a Guaranteed
Pension Plan within the meaning of Section 4043 of ERISA and the regulations
promulgated thereunder as to which the requirement of notice has not been
waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar Rate
Loan, the maximum rate (expressed as a decimal) at which any lender subject
thereto would be required to maintain reserves under Regulation D of the Board
of Governors of the Federal Reserve System (or any successor or similar
regulations relating to such reserve requirements) against "Eurocurrency
Liabilities" (as that term is used in Regulation D or any successor or similar
regulation), if such liabilities were outstanding. The Eurocurrency Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in the Eurocurrency Reserve Rate.
Eurodollar Business Day. Any day on which commercial banks are open for
international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Agent and the
Banks in their sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank designated
as such in Schedule 1 hereto; thereafter, such other office of such Bank, if
any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the quotient (rounded upwards to the
nearest 1/16 of one percent) of (a) the rate at which the Reference Bank's
Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business
Days prior to the beginning of such Interest Period in whatever interbank
eurodollar market may be selected by the Reference Bank in its sole
discretion, acting in good faith, for delivery on the first day of such
Interest Period for the number of days comprised therein and in an amount
comparable to the amount of the Eurodollar Rate Loan to which such Interest
Period applies, divided by (b) a number equal to 1.00 minus the Eurocurrency
Reserve Rate.
Eurodollar Rate Loans. Loans bearing interest calculated by reference to
a Eurodollar Rate.
Event of Default. See Section 12.1.
Federal Funds Effective Rate. For any day, the rate per annum equal to
the weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of
the quotations for such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent.
generally accepted accounting principles. Principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to
time and (b) consistently applied with past financial statements of the
Borrower adopting the same principles; provided that a certified public
accountant would, insofar as the use of such accounting principles is
pertinent, be in a position to deliver an unqualified opinion (other than a
qualification regarding changes in generally accepted accounting principles)
as to financial statements in which such principles have been properly
applied.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Guarantor. Collectively, each Subsidiary of the Borrower owning Mortgaged
Property which becomes a Guarantor in accordance with Section 5.4 hereof and,
individually, any one such Subsidiary.
Guaranty. Collectively, the Unconditional Guaranty of Payment and
Performance, in form and substance satisfactory to the Agent in its sole
discretion, which is required to be executed and delivered to the Agent by
each Guarantor pursuant to Section 5.4 hereof.
Hazardous Substances. See Section 6.20(b).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect (including, without limitation, all obligations evidenced by bonds,
debentures, notes or similar debt instruments and subordinated indebtedness);
(b) all liabilities secured by any mortgage, pledge, security interest, lien,
charge or other encumbrance existing on property owned or acquired subject
thereto, whether or not the liability secured thereby shall have been assumed;
and (c) all guarantees, interest rate and currency swap obligations,
endorsements and other contingent obligations whether direct or indirect in
respect of indebtedness of others, including contingent obligations that in
accordance with generally accepted accounting principles are required to be
footnoted on the Borrower's consolidated balance sheets and any obligation to
supply funds to or in any manner to invest directly or indirectly in a Person,
to purchase indebtedness, or to assure the owner of indebtedness against loss
through an agreement to purchase goods, supplies or services for the purpose
of enabling the debtor to make payment of the indebtedness held by such owner
or otherwise, and the obligation to reimburse the issuer in respect of any
letter of credit; (d) any obligation as a lessee or an obligor under a
capitalized lease; and (e) the Borrower's pro rata share of any of the above-
described obligations of its unconsolidated affiliates.
Indemnity Agreement. Collectively, the Indemnity Agreements Regarding
Hazardous Materials, dated or to be dated on or prior to the Closing Date,
made by the Borrower (and the Guarantor, if applicable) in favor of the Agent
and the Banks, pursuant to which such party agrees to indemnify the Agent and
the Banks with respect to Hazardous Substances and Environmental Laws, such
Indemnity Agreement to be in form and substance satisfactory to the Majority
Banks.
Interest Payment Date. (a) As to each Loan, the first day of each
calendar month during the term of such Loan, and (b) also as to each
Eurodollar Rate Loan, the last day of the Interest Period relating thereto.
Interest Period. With respect to each Eurodollar Rate Loan (a)
initially, the period commencing on the Drawdown Date of such Loan and ending
one, two, three or six months thereafter, and (b) thereafter, each period
commencing on the day following the last day of the next preceding Interest
Period applicable to such Loan and ending on the last day of one of the
periods set forth above, as selected by the Borrower in a Conversion Request;
provided that all of the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period with respect to a Eurodollar Rate Loan
would otherwise end on a day that is not a Eurodollar Business Day, that
Interest Period shall end and the next Interest Period shall commence on
the next preceding or succeeding Eurodollar Business Day as determined
conclusively by the Reference Bank in accordance with the then current
bank practice in the applicable eurodollar interbank market;
(B) if the Borrower shall fail to give notice as provided in
Section 4.1, the Borrower shall be deemed to have requested a conversion
of the affected Eurodollar Rate Loan to a Base Rate Loan on the last day
of the then current Interest Period with respect thereto; and
(C) no Interest Period relating to any Eurodollar Rate Loan shall
extend beyond the Maturity Date.
Investments. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities issued by any other Person, all
loans, advances, or extensions of credit to, or contributions to the capital
of, any other Person, all purchases of the securities or business or integral
part of the business of any other Person and commitments and options to make
such purchases, all interests in real property, and all other investments;
provided, however, that the term "Investment" shall not include (i) equipment,
inventory and other tangible personal property acquired in the ordinary course
of business, or (ii) current trade and customer accounts receivable for
services rendered in the ordinary course of business and payable in accordance
with customary trade terms. In determining the aggregate amount of
Investments outstanding at any particular time: (a) there shall be included
as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid; (b) there
shall be deducted in respect of each such Investment any amount received as a
return of capital (but only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution); (c) there shall not be
deducted in respect of any Investment any amounts received as earnings on such
Investment, whether as dividends, interest or otherwise, except that accrued
interest included as provided in the foregoing clause (a) may be deducted when
paid; and (d) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Leases. Leases, licenses and agreements whether written or oral,
relating to the use or occupation of space in or on the Building or on the
Real Estate.
Liens. See Section 8.2.
Loan Documents. This Agreement, the Notes, the Security Documents, the
Guaranty, and all other documents, instruments or agreements executed or
delivered by or on behalf of the Borrower or the Guarantor evidencing or
securing the Loans.
Loan Request. See Section 2.6.
Loans. The aggregate Loans to be made by the Banks hereunder.
Majority Banks. As of any date, the Bank or Banks whose aggregate
Commitment Percentage is equal to or greater than the required percentage, as
determined by the Banks, required to approve such matter, as disclosed by the
Agent to the Borrower from time to time.
Management Agreements. Agreements, whether written or oral, providing
for the management of the Mortgaged Property or any of them.
Maturity Date. May 30, 1999, as the same may be extended as provided in
Section 2.8, or such earlier date on which the Loans shall become due and
payable pursuant to the terms hereof.
Morgan. Morgan Guaranty Trust Company of New York, a New York banking
corporation.
Mortgaged Property. Collectively, the Eligible Real Estate which is
conveyed to and accepted by the Agent as security for the Obligations pursuant
to the Security Deeds.
Multiemployer Plan. Any multiemployer plan within the meaning of Section
3(37) of ERISA maintained or contributed to by the Borrower or any ERISA
Affiliate.
Net Capital Expenditures. With respect to any Person or asset for any
fiscal period, an amount equal to the amount of capital expenditures incurred
by such Person or with respect to such asset during such fiscal period
determined in accordance with generally accepted accounting principles.
Net Income (or Deficit). With respect to any Person (or any asset of any
Person) for any fiscal period, the net income (or deficit) of such Person (or
attributable to such asset), after deduction of all expenses, taxes and other
proper charges, determined in accordance with generally accepted accounting
principles.
Notes. See Section 2.4.
Notice. See Section 19.
Obligations. All indebtedness, obligations and liabilities of the
Borrower to any of the Banks and the Agent, individually or collectively,
under this Agreement or any of the other Loan Documents or in respect of any
of the Loans or the Notes, or other instruments at any time evidencing any of
the foregoing, whether existing on the date of this Agreement or arising or
incurred hereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise.
Operating Cash Flow. With respect to any Person (or any asset of any
Person) for any period, an amount equal to the sum of (a) the Net Income of
such Person (or attributable to such asset) for such period plus (b)
depreciation and amortization, interest expense, and any extraordinary or
non-recurring losses deducted in calculating such Net Income minus (c) any
extraordinary or nonrecurring gains included in calculating such Net Income.
Outstanding. With respect to the Loans, the aggregate unpaid principal
thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section 4002
of ERISA and any successor entity or entities having similar responsibilities.
Palomino Park Bonds. The Palomino Park Public Improvements Corporation
Assessment Lien Revenue Bonds, Series 1995, in the aggregate principal amount
of $14,755,000.00.
Palomino Park Project. A master planned five-phase multifamily
development project comprising approximately 182 acres located in Douglas
County, Colorado, Phase I of which is owned by Park at Highlands LLC, Phase II
of which is owned by Red Canyon at Palomino Park LLC and Phase III of which is
owned by Wellsford Park Highlands Corp. Wellsford Park Highlands Corp. holds
options to purchase Phases IV and V of the Palomino Park Project.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2.
Person. Any individual, corporation, partnership, limited liability
company, trust, unincorporated association, business, or other legal entity,
and any government or any governmental agency or political subdivision
thereof.
Pledge Agreement. Each agreement from time to time in effect in form and
substance satisfactory to the Majority Banks pursuant to which the Borrower or
the Guarantor may pledge cash, Short-term Investments or other property
referred to in clause (vii) of Section 5.1 as part of the Collateral securing
the Obligations.
Point View Office Complex. Certain real property and improvements
located in Wayne, New Jersey, consisting of the following: (i) a main campus
of two office buildings and (ii) two smaller office buildings located at 1700
and 1800 Valley Road.
Potential Collateral. Any property of the Borrower (or the Guarantor in
accordance with Section 5.4 hereof) which is not at the time included in the
Collateral and which consists of (i) Eligible Real Estate, (ii) Real Estate
which is capable of becoming Eligible Real Estate through the approval of all
of the Banks and the completion and delivery of Eligible Real Estate
Qualification Documents, (iii) Qualifying Collateral Notes, (iv) promissory
notes which may become Qualifying Collateral Notes through the approval of all
of the Banks and the completion and delivery of Qualifying Collateral Note
Qualification Documents, (v) cash, (vi) Short-term Investments and (vii) other
property referred to in clause (vii) of Section 5.1.
Qualifying Collateral Notes. Collectively, the Sonterra Note, the 277
Park Avenue Note and any other notes held by the Borrower or any of its
Subsidiaries which meet all of the following conditions: (i) no event which
with the passage of time or the giving of notice, or both, might constitute a
default shall have occurred under the applicable note or related loan
documents, (ii) the note and the related documents shall be free and clear of
all Liens other than the liens in favor of the Agent, (iii) the underlying
collateral for the note shall be a commercial office building (excluding the
collateral for the Sonterra Note which is multi-family housing) or shares or
other interests in an entity owning a commercial office building, and, based
on the Appraised Value of such underlying collateral, provides a loan to value
ratio of no more than eighty percent (80%) on all senior and subordinated
indebtedness secured thereby (for the purposes hereof, the collateral for the
277 Park Avenue Note shall be deemed to be the real property securing the
senior indebtedness of 277 Park Avenue, LLC to Column Financial, Inc., as the
initial mortgagee), and shall not have any material title, survey,
environmental or other defects and shall be otherwise acceptable to all of the
Banks, (iv) all such notes which evidence senior debt shall have a minimum pay
rate of 8-3/4%, (v) all such notes which evidence subordinate debt shall have
a minimum pay rate of 10-1/2%, (vi) the Agent shall have received all
Qualifying Collateral Note Qualification Documents, all of which remain in
full force and effect, and (vii) all of the Banks shall have approved the note
in the exercise of their sole discretion.
Qualifying Collateral Note Qualification Documents. With respect to any
note proposed to be included as a Qualifying Collateral Note each of the
following:
(a) a duly executed and delivered Collateral Assignment with respect to
such note and related documents, including Uniform Commercial Code financing
statements;
(b) the original note duly endorsed and delivered to the Agent;
(c) true and correct copies of any and all other instruments, documents
and agreements evidencing, securing or relating to such note;
(d) the items described in subsections (a) through (s) under the
definition of "Eligible Real Estate Qualification Documents" with respect to
the underlying collateral for the note, to the extent applicable; and
(e) such other documents, certificates, reports or assurances as the
Majority Banks may reasonably require in their discretion with regard to such
note or the underlying collateral therefor.
Real Estate. All real property at any time owned or leased (as lessee or
sublessee) by the Borrower or any of its Subsidiaries.
Record. The record, including computer records, maintained by the Agent
with respect to any Loan referred to in the Notes.
Reference Bank. BKB.
Register. See Section 18.2.
Release. See Section 6.20(c)(iii).
Rent Roll. A report prepared by the Borrower or the Guarantor, as
applicable, showing for each tenant its occupancy status, lease expiration
date, market rent, lease rent and other information in such form as may have
been approved by the Agent, such approval not to be unreasonably withheld.
Reportable Event. Any of the events set forth in Section 4043(b) of
ERISA or the regulations thereunder.
SEC. The federal Securities and Exchange Commission.
Security Deeds. The Mortgages, Deeds to Secure Debt and Deeds of Trust
from the Borrower (or the Guarantor in accordance with Section 5.4 hereof) to
the Agent for the benefit of the Banks (or to trustees named therein acting on
behalf of the Agent for the benefit of the Banks) pursuant to which the
Borrower or the Guarantor, if applicable, has conveyed a Mortgaged Property as
security for the Obligations.
Security Documents. Collectively, the Collateral Assignment, the
Security Deeds, the Assignments of Rents and Leases, the Indemnity Agreement,
the Guaranty, the Agreement Regarding Common Stock Purchase, the Assignment of
Common Stock Agreement, any further collateral assignments to the Agent for
the benefit of the Banks, and each Pledge Agreement, including, without
limitation, U.C.C.-1 financing statements executed and delivered in connection
therewith.
Service Agreement(s). Service agreements with third parties, whether
written or oral, relating to the operation, maintenance, security, finance or
insurance of Mortgaged Property.
Shareholders' Equity. At any date, the total consolidated shareholders'
equity of the Borrower and its Subsidiaries determined in accordance with
generally accepted accounting principles.
Short-term Investments. Investments described in subsections (a) through
(g), inclusive, of Section 8.3. For all purposes of this Agreement and the
other Loan Documents, the value of Short-term Investments at any time shall be
the current market value thereof determined in a manner reasonably
satisfactory to the Majority Banks.
Sonterra Note. That certain Promissory Note dated June 28, 1996, in the
original principal amount of $17,800,000.00, made by Specified Properties
VIII, L.P. payable to the order of Wellsford Residential Property Trust and
transferred by Wellsford Residential Property Trust to Borrower.
State. A state of the United States of America.
Subordination, Attornment and Non-Disturbance Agreement. An agreement
among the Agent, the Borrower (or the Guarantor, as applicable) and a tenant
under a Lease pursuant to which such tenant agrees to subordinate its rights
under the Lease to the lien of the Security Deed and agrees to recognize the
Agent or its successor in interest as landlord under the Lease in the event of
a foreclosure under the Security Deed, such agreement to be in form and
substance satisfactory to the Agent.
Subsidiary. Any corporation, association, partnership, limited liability
company, trust, or other business or other legal entity of which the
designated parent shall at any time own directly or indirectly through a
Subsidiary or Subsidiaries at least a majority (by number of votes or
controlling interests) of the outstanding Voting Interests.
Subsidiary Collateral. See Section 5.4.
Survey. An instrument survey of Mortgaged Property prepared by a
registered land surveyor which shall show the location of all buildings,
structures, easements and utility lines on such property, shall be sufficient
to remove the standard survey exception from the Title Policy, shall show that
all buildings and structures are within the lot lines of the Mortgaged
Property and shall not show any encroachments by others (or to the extent any
encroachments are shown, such encroachments shall be acceptable to the
Majority Banks in their sole discretion), shall show rights of way, adjoining
sites, establish building lines and street lines, the distance to, and names
of the nearest intersecting streets and such other details as the Majority
Banks may reasonably require; shall show the zoning district or districts in
which the Mortgaged Property is located and shall show whether or not the
Mortgaged Property is located in a flood hazard district as established by the
Federal Emergency Management Agency or any successor agency or is located in
any flood plain, flood hazard or wetland protection district established under
federal, state or local law and shall otherwise be in form and substance
reasonably satisfactory to the Majority Banks.
Surveyor Certification. With respect to each parcel of Mortgaged
Property, a certificate executed by the surveyor who prepared the Survey with
respect thereto, dated as of a recent date and containing such information
relating to such parcel as the Majority Banks or the Title Insurance Company
may reasonably require, such certificate to be reasonably satisfactory to the
Majority Banks in form and substance.
Syndication Agent. J. P. Morgan Securities, Inc., acting as syndication
agent for the Banks.
Test Period. See Section 9.2.
Title Insurance Company. Chicago Title Insurance Company or another
title insurance company or companies reasonably approved by the Majority
Banks.
Title Policy. With respect to each parcel of Mortgaged Property, an ALTA
standard form title insurance policy (or, if such form is not available, an
equivalent form of or legally promulgated form of mortgagee title insurance
policy reasonably acceptable to the Majority Banks) issued by a Title
Insurance Company (with such reinsurance or co-insurance as the Majority Banks
may require, any such reinsurance to be with direct access endorsements to the
extent available under applicable law) in such amount as the Majority Banks
may require insuring the priority of the Security Deeds and that the Borrower
(or the Guarantor, as applicable), holds marketable fee simple title (or good
and indefeasible fee simple title to any Real Estate in the State of Texas) to
such parcel, subject only to the encumbrances permitted by the Security Deed
and which shall not contain standard exceptions for mechanics liens, persons
in occupancy (other than tenants as tenants only under Leases) or matters
which would be shown by a survey, shall not insure over any matter except to
the extent that any such affirmative insurance is acceptable to the Majority
Banks in their sole discretion, and shall contain (a) a revolving credit
endorsement and (b) such other endorsements and affirmative insurance as the
Majority Banks reasonably may require and is available in the State in which
the Real Estate is located, including but not limited to (i) a comprehensive
endorsement, (ii) a variable rate of interest endorsement, (iii) a usury
endorsement, (iv) a doing business endorsement, (v) in States where available,
an ALTA form 3.1 zoning endorsement, (vi) a "tie-in" endorsement and (vii) a
"first loss" endorsement.
Total Commitment. The sum of the Commitments of the Banks, as in effect
from time to time.
277 Park Avenue Note. The Note dated as of April 25, 1997 made by Park
Avenue Financing Company, LLC and PAMC Co-Manager Inc. to the order of
Borrower in the original principal face amount of $20,000,000.00.
Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar
Rate Loan.
Voting Interests. Stock or similar ownership interests, of any class or
classes (however designated), the holders of which are at the time entitled,
as such holders, (a) to vote for the election of a majority of the directors
(or persons performing similar functions) of the corporation, association,
partnership, trust or other business entity involved, or (b) to control,
manage, or conduct the business of the corporation, partnership, association,
trust or other business entity involved.
Section 14.2. Rules of Interpretation.
(a) A reference to any document or agreement shall include such
document or agreement as amended, modified or supplemented from time to time
in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural includes the
singular.
(c) A reference to any law includes any amendment or modification
to such law.
(d) A reference to any Person includes its permitted successors and
permitted assigns.
(e) Accounting terms not otherwise defined herein have the meanings
assigned to them by generally accepted accounting principles applied on a
consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are not
limiting.
(g) The words "approval" and "approved", as the context so
determines, means an approval in writing given to the party seeking approval
after full and fair disclosure to the party giving approval of all material
facts necessary in order to determine whether approval should be granted.
(h) All terms not specifically defined herein or by generally
accepted accounting principles, which terms are defined in the Uniform
Commercial Code as in effect in the State of New York, have the meanings
assigned to them therein.
(i) Reference to a particular "Section ", refers to that section of
this Agreement unless otherwise indicated.
(j) The words "herein", "hereof", "hereunder" and words of like
import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
Section 15. THE REVOLVING CREDIT FACILITY.
Section 15.1. Commitment to Lend. Subject to the terms and conditions
set forth in this Agreement, each of the Banks severally agrees to lend to the
Borrower, and the Borrower may borrow (and repay and reborrow) from time to
time between the Closing Date and the Maturity Date upon notice by the
Borrower to the Agent given in accordance with Section 2.6, such sums as are
requested by the Borrower for the purposes set forth in Section 7.11 up to the
lesser of (a) a maximum aggregate principal amount outstanding (after giving
effect to all amounts requested) at any one time equal to such Bank's
Commitment and (b) such Bank's Commitment Percentage of the Borrowing Base;
provided, that, in all events no Default or Event of Default shall have
occurred and be continuing and the Borrower's financial statements as required
pursuant to Section 2.6(iv) shall demonstrate compliance with all covenants
set forth therein; and provided, further, that the outstanding principal
amount of the Loans (after giving effect to all amounts requested) shall not
at any time exceed the Total Commitment. The Loans shall be made pro rata in
accordance with each Bank's Commitment Percentage. The Loan Request shall
constitute a representation and warranty by the Borrower that all of the
conditions set forth in Section 10 and Section 11, in the case of the initial
Loan, and Section 11, in the case of all other Loans, have been satisfied on
the date of such funding.
Section 15.2. Facility Fee. The Borrower agrees to pay to the Agent for
the accounts of the Banks in accordance with their respective Commitment
Percentages a facility fee calculated at the rate of one-fourth of one percent
(1/4%) per annum on the average daily amount by which the Total Commitment
exceeds the outstanding principal amount of Loans during each calendar quarter
or portion thereof commencing on the date hereof and ending on the Maturity
Date. The facility fee shall be payable quarterly in arrears on the first day
of each calendar quarter for the immediately preceding calendar quarter or
portion thereof, or on any earlier date on which the Commitments shall be
reduced or shall terminate as provided in Section 2.3, with a final payment on
the Maturity Date.
Section 15.3. Reduction of Commitment. The Borrower shall have the
right at any time and from time to time upon five Business Days' prior written
notice to the Agent to reduce by $1,000,000 or an integral multiple of
$1,000,000 in excess thereof or to terminate entirely the unborrowed portion
of the Commitments, whereupon the Commitments of the Banks shall be reduced
pro rata in accordance with their respective Commitment Percentages of the
amount specified in such notice or, as the case may be, terminated, any such
reduction to be without penalty (unless such reduction requires repayment of a
Eurodollar Rate Loan). Promptly after receiving any notice of the Borrower
delivered pursuant to this Section 2.3, the Agent will notify the Banks of the
substance thereof. Upon the effective date of any such reduction or
termination, the Borrower shall pay to the Agent for the respective accounts
of the Banks the full amount of any facility fee under Section 2.2 then
accrued on the amount of the reduction. No reduction or termination of the
Commitments may be reinstated. Notwithstanding the foregoing, in no event
shall the Commitments be reduced to less than $35,000,000.
Section 15.4. Notes. The Loans shall be evidenced by a single
promissory note of the Borrower to each Bank in substantially the form of
Exhibit A hereto (collectively, the "Notes"), dated as of the Closing Date and
completed with appropriate insertions. One Note shall be payable to the order
of each Bank in the principal amount equal to such Bank's Commitment or, if
less, the outstanding amount of all Loans made by such Bank, plus interest
accrued thereon, as set forth below. The Borrower irrevocably authorizes the
Agent to make or cause to be made, at or about the time of the Drawdown Date
of any Loan or at the time of receipt of any payment of principal thereof, an
appropriate notation on the Agent's Record reflecting the making of such Loan
or (as the case may be) the receipt of such payment. The outstanding amount
of the Loans set forth on the Agent's Record shall be prima facie evidence of
the principal amount thereof owing and unpaid to each Bank, but the failure to
record, or any error in so recording, any such amount on the Agent's Record
shall not limit or otherwise affect the obligations of the Borrower hereunder
or under any Note to make payments of principal of or interest on any Note
when due.
Section 15.5. Interest on Loans.
(a) Each Base Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the date on which such
Base Rate Loan is converted to a Eurodollar Rate Loan at the Base Rate.
(b) Each Eurodollar Rate Loan shall bear interest for the period
commencing with the Drawdown Date thereof and ending on the last day of the
Interest Period with respect thereto at the rate of one and three-quarters
percent (1.75%) per annum above the Eurodollar Rate determined for such
Interest Period.
(c) The Borrower promises to pay interest on each Loan in arrears
on each Interest Payment Date with respect thereto.
(d) Base Rate Loans and Eurodollar Rate Loans may be converted to
Loans of the other Type as provided in Section 4.1.
Section 15.6. Requests for Loans. Except with respect to the initial
Loan, the Borrower shall give to the Agent written notice in the form of
Exhibit B hereto (or telephonic notice confirmed in writing in the form of
Exhibit B hereto) of each Loan requested hereunder (a "Loan Request") no less
than five (5) Business Days prior to the proposed Drawdown Date. The Borrower
shall not make a Loan Request more frequently than two times each month. Each
such notice shall specify with respect to the requested Loan the proposed
principal amount, Drawdown Date, Interest Period (if applicable) and Type.
Each such notice shall also contain (i) a statement as to the purpose for
which such advance shall be used (which purpose shall be in accordance with
the terms of Section 7.11), (ii) in the case of any advance relating to any
Capital Improvement Project (A) a statement that such advance will reimburse
the Borrower for or pay costs incurred for work on the applicable Capital
Improvement Project together with such evidence as the Majority Banks may
reasonably require to verify the cost of such work (which evidence may
include, without limitation, invoices and receipts) and that such work is in
place or that stored materials are properly secured (which evidence may
include a satisfactory report from the Construction Inspector), and (B) in the
event that such Capital Improvement Project relates to a Mortgaged Property
and if requested by the Majority Banks, delivery to the Agent of affidavits,
lien waivers or other evidence reasonably satisfactory to the Majority Banks
showing that all materialmen, laborers, subcontractors and any other parties
who might or could claim statutory or common law liens and are furnishing or
have furnished material or labor to the Mortgaged Property have been paid all
amounts due for such labor and materials, (iii) a certification by the chief
financial or chief accounting officer of the Borrower that the Borrower and
the Guarantor are and will be in compliance with all covenants under the Loan
Documents after giving effect to the making of such Loan, and (iv) a
Compliance Certificate prepared using the financial statements of the Borrower
most recently provided or required to be provided to the Agent under Section
6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to
give effect to the proposed advance. Promptly upon receipt of any such
notice, the Agent shall notify each of the Banks thereof. Except as provided
in this Section 2.6, each such Loan Request shall be irrevocable and binding
on the Borrower and shall obligate the Borrower to accept the Loan requested
from the Banks on the proposed Drawdown Date, provided that, in addition to
the Borrower's other remedies against any Bank which fails to advance its
proportionate share of a requested Loan, such Loan Request may be revoked by
the Borrower by notice received by the Agent no later than the Drawdown Date
if any Bank fails to advance its proportionate share of the requested Loan in
accordance with the terms of this Agreement, provided further that the
Borrower shall be liable in accordance with the terms of this Agreement
(including, without limitation, amounts due pursuant to Section 4.8) to any
Bank which is prepared to advance its proportionate share of the requested
Loan for any costs, expenses or damages incurred by such Bank as a result of
the Borrower's election to revoke such Loan Request. Nothing herein shall
prevent the Borrower or the funding Banks from seeking recourse against any
Bank that fails to advance its proportionate share of a requested Loan (but
not any other Bank) as required by this Agreement for the actual and
consequential damages incurred by the Borrower (including, without limitation,
amounts required to be paid under this Agreement by the Borrower to any Bank)
and such funding Banks proximately caused by such Bank that has failed to
advance its proportionate share, provided that in no event shall such Bank be
liable for punitive or exemplary damages. The Borrower may without cost or
penalty revoke a Loan Request by delivering notice thereof to each of the
Banks no later than three (3) Business Days prior to the Drawdown Date. Each
Loan Request shall be (a) for a Base Rate Loan in a minimum aggregate amount
of $1,000,000 or an integral multiple of $100,000 in excess thereof, or (b)
for a Eurodollar Rate Loan in a minimum aggregate amount of $2,000,000 or an
integral multiple of $100,000 in excess thereof; provided, however, that there
shall be no more than five (5) Eurodollar Rate Loans outstanding at any one
time. In the event that the proceeds from such Loan are to be used for a
purpose other than a Capital Improvement Project, then the Borrower shall
provide to the Agent as soon as practicable thereafter such evidence as the
Majority Banks shall reasonably require to evidence that such funds have been
used for such purpose (which evidence may include, without limitation, a
closing statement).
Section 15.7. Funds for Loans.
(a) Not later than 11:00 a.m. (Boston time) on the proposed
Drawdown Date of any Loans, each of the Banks will make available to the
Agent, at the Agent's Head Office, in immediately available funds, the amount
of such Bank's Commitment Percentage of the amount of the requested Loans
which may be disbursed pursuant to Section 2.1. Upon receipt from each Bank
of such amount, and upon receipt of the documents required by Section 10 and
Section 11 and the satisfaction of the other conditions set forth therein, to
the extent applicable, the Agent will make available to the Borrower the
aggregate amount of such Loans made available to the Agent by the Banks by
crediting such amount to the account of the Borrower maintained at the Agent's
Head Office. The failure or refusal of any Bank to make available to the
Agent at the aforesaid time and place on any Drawdown Date the amount of its
Commitment Percentage of the requested Loans shall not relieve any other Bank
from its several obligation hereunder to make available to the Agent the
amount of such other Bank's Commitment Percentage of any requested Loans,
including any additional Loans that may be requested subject to the terms and
conditions hereof to provide funds to replace those not advanced by the Bank
so failing or refusing, provided that the Borrower may by notice received by
the Agent no later than the Drawdown Date refuse to accept any Loan which is
not fully funded in accordance with the Borrower's Loan Request subject to the
terms of Section 2.6. In the event of any such failure or refusal, the Banks
not so failing or refusing shall be entitled to a priority secured position as
against the Bank or Banks so failing or refusing for such Loans as provided in
Section 12.4.
(b) Unless Agent shall have been notified by any Bank prior to the
applicable Drawdown Date that such Bank will not make available to Agent such
Bank's pro rata share of a proposed Loan, Agent may in its discretion assume
that such Bank has made such Loan available to Agent in accordance with the
provisions of this Agreement and Agent may, if it chooses, in reliance upon
such assumption make such Loan available to Borrower, and such Bank shall be
liable to the Agent for the amount of such advance.
Section 15.8. Extension of Maturity Date.
(a) The Borrower has requested the ability to extend the Maturity
Date. The Borrower acknowledges and agrees that the Banks have no agreement
or obligation to extend the Maturity Date. Notwithstanding the foregoing, the
Borrower may request that the Banks extend the Maturity Date by one (1) year
to May 30, 2000. If the Borrower desires to request that the Maturity Date be
extended to such date, the Borrower shall deliver written notice of such
request to the Agent not later than the date which is ninety (90) days prior
to the then effective Maturity Date (an "Extension Request"). The Agent shall
promptly provide a copy of such notice to each of the Banks. The Banks shall
notify the Agent within thirty (30) days of receipt of such notice from the
Agent of such Bank's approval or rejection of the Extension Request. No
Extension Request shall be deemed approved unless approved by all of the
Banks, which approval may be granted or withheld in each Bank's sole and
absolute discretion. In the event that a Bank shall fail to respond in
writing to the Agent within such thirty (30) day period, such Bank shall be
deemed to have rejected the Extension Request. The Agent shall promptly
notify the Borrower of the responses received from the Banks with respect to
the Extension Request.
(b) In the event that an Extension Request is approved as provided
in Section 2.8(a), each and every such approval shall be conditioned upon (i)
there being no Default or Event of Default outstanding as of the date of the
Extension Request or the Maturity Date, (ii) submission of an acceptable
Compliance Certificate, (iii) payment of an extension fee determined by the
Agent and the Co-Agent, and (iv) satisfaction of such other conditions
precedent as may be customarily required by the Banks prior to the
effectiveness of any extension of the Maturity Date.
Section 16. REPAYMENT OF THE LOANS.
Section 16.1. Stated Maturity. The Borrower promises to pay on the
Maturity Date, and there shall become absolutely due and payable on the
Maturity Date, all of the Loans outstanding on such date, together with any
and all accrued and unpaid interest thereon.
Section 16.2. Mandatory Prepayments. The Borrower promises to pay
principal of the Loans prior to the stated maturity as follows:
(a) If at any time the aggregate outstanding principal amount of
the Loans exceeds the Total Commitment or the Borrowing Base, then the
Borrower shall., subject to Borrower's rights pursuant to Section 12.1B,
immediately pay the amount of such excess to the Agent for the respective
accounts of the Banks for application to the Loans, together with any
additional interest payable pursuant to Section 4.8.
(b) If at any time the Borrower receives a payment or prepayment of
or in respect to the principal amount of any Collateral Note, then the
Borrower shall immediately pay such amount to the Agent for the respective
accounts of the Banks for application to the Loans, together with any
additional interest payable pursuant to Section 4.8.
Section 16.3. Optional Prepayments. The Borrower shall have the right,
at the Borrower's election, to prepay the outstanding amount of the Loans, as
a whole or in part, at any time without penalty or premium; provided, that the
full or partial prepayment of the outstanding amount of any Eurodollar Rate
Loans pursuant to this Section 3.3 may be made only on the last day of the
Interest Period relating thereto except as otherwise required pursuant to
Section 4.7. The Borrower shall give the Agent, no later than 10:00 a.m.,
Boston time, at least three Business Days prior written notice of any
prepayment pursuant to this Section 3.3 of any Base Rate Loans and at least
four Eurodollar Business Days notice of any proposed repayment pursuant to
this Section 3.3 of Eurodollar Rate Loans, in each case specifying the
proposed date of payment of Loans and the principal amount to be paid.
Section 16.4. Partial Prepayments. Each partial prepayment of the Loans
under Section 3.2(a) and Section 3.3 shall be in an integral multiple of
$100,000, shall be accompanied by the payment of accrued interest on the
principal prepaid to the date of payment and, after payment of such interest,
shall be applied, in the absence of instruction by the Borrower, first to the
principal of Base Rate Loans and then to the principal of Eurodollar Rate
Loans.
Section 16.5. Effect of Prepayments. Amounts of the Loans prepaid under
Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed as
provided in Section 2.
Section 17. CERTAIN GENERAL PROVISIONS.
Section 17.1. Conversion Options.
(a) The Borrower may elect from time to time to convert any
outstanding Loan to a Loan of another Type and such Loan shall thereafter bear
interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable;
provided that (i) with respect to any such conversion of a Eurodollar Rate
Loan to a Base Rate Loan, the Borrower shall give the Agent at least three
Business Days' prior written notice of such election, and such conversion
shall only be made on the last day of the Interest Period with respect to such
Eurodollar Rate Loan; (ii) with respect to any such conversion of a Base Rate
Loan to a Eurodollar Rate Loan, the Borrower shall give the Agent at least
four Eurodollar Business Days' prior written notice of such election and the
Interest Period requested for such Loan, the principal amount of the Loan so
converted shall be in a minimum aggregate amount of $2,000,000 or an integral
multiple of $100,000 in excess thereof and, after giving effect to the making
of such Loan, there shall be no more than five (5) Eurodollar Rate Loans
outstanding at any one time; and (iii) no Loan may be converted into a
Eurodollar Rate Loan when any Default or Event of Default has occurred and is
continuing. All or any part of the outstanding Loans of any Type may be
converted as provided herein, provided that no partial conversion shall result
in a Base Rate Loan in an aggregate principal amount of less than $1,000,000
or a Eurodollar Rate Loan in an aggregate principal amount of less than
$2,000,000 and that the aggregate principal amount of each Loan shall be in an
integral multiple of $100,000. On the date on which such conversion is being
made, each Bank shall take such action as is necessary to transfer its
Commitment Percentage of such Loans to its Domestic Lending Office or its
Eurodollar Lending Office, as the case may be. Each Conversion Request
relating to the conversion of a Base Rate Loan to a Eurodollar Rate Loan shall
be irrevocable by the Borrower.
(b) Any Loan may be continued as such Type upon the expiration of
an Interest Period with respect thereto by compliance by the Borrower with the
terms of Section 4.1; provided that no Eurodollar Rate Loan may be continued
as such when any Default of the type described in subsections (a), (b), (c) or
(d) of Section 12.1 or Event of Default has occurred and is continuing, but
shall be automatically converted to a Base Rate Loan on the last day of the
Interest Period relating thereto ending during the continuance of any Default
or Event of Default.
(c) In the event that the Borrower does not notify the Agent of its
election hereunder with respect to any Loan, such Loan shall be automatically
converted to a Base Rate Loan at the end of the applicable Interest Period.
Section 17.2. Closing Fee. The Borrower agrees to pay, on or before the
Closing Date, to the Agent for the ratable account of the Banks a closing fee
as specified in the Agreement Regarding Fees.
Section 17.3. Agent's Fee. The Borrower shall pay to the Agent, for the
Agent's own account, an Agent's fee as specified in the Agreement Regarding
Fees.
Section 17.4. Funds for Payments.
(a) All payments of principal, interest, facility fees, Agent's
fees, closing fees and any other amounts due hereunder or under any of the
other Loan Documents shall be made to the Agent, for the respective accounts
of the Banks and the Agent, as the case may be, at the Agent's Head Office,
not later than 3:00 p.m. (Boston time) on the day when due, in each case in
immediately available funds. The Agent is hereby authorized to charge the
account of the Borrower with BKB, on the dates when the amount thereof shall
become due and payable, with the amounts of the principal of and interest on
the Loans and all fees, charges, expenses and other amounts owing to the Agent
and/or the Banks under the Loan Documents.
(b) All payments by the Borrower hereunder and under any of the
other Loan Documents shall be made without setoff or counterclaim and free and
clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any
jurisdiction or any political subdivision thereof or taxing or other authority
therein unless the Borrower is compelled by law to make such deduction or
withholding. If any such obligation is imposed upon the Borrower with respect
to any amount payable by it hereunder or under any of the other Loan
Documents, the Borrower will pay to the Agent, for the account of the Banks or
(as the case may be) the Agent, on the date on which such amount is due and
payable hereunder or under such other Loan Document, such additional amount in
Dollars as shall be necessary to enable the Banks or the Agent to receive the
same net amount which the Banks or the Agent would have received on such due
date had no such obligation been imposed upon the Borrower. The Borrower will
deliver promptly to the Agent certificates or other valid vouchers for all
taxes or other charges deducted from or paid with respect to payments made by
the Borrower hereunder or under such other Loan Document.
Section 17.5. Computations. All computations of interest on the Loans
and of other fees to the extent applicable shall be based on a 360-day year
and paid for the actual number of days elapsed. Except as otherwise provided
in the definition of the term "Interest Period" with respect to Eurodollar
Rate Loans, whenever a payment hereunder or under any of the other Loan
Documents becomes due on a day that is not a Business Day, the due date for
such payment shall be extended to the next succeeding Business Day, and
interest shall accrue during such extension. The outstanding amount of the
Loans as reflected on the records of the Agent from time to time shall be
considered prima facie evidence of such amount.
Section 17.6. Inability to Determine Eurodollar Rate. In the event
that, prior to the commencement of any Interest Period relating to any
Eurodollar Rate Loan, the Agent shall determine that adequate and reasonable
methods do not exist for ascertaining the Eurodollar Rate for such Interest
Period, the Agent shall forthwith give notice of such determination (which
shall be conclusive and binding on the Borrower and the Banks) to the Borrower
and the Banks. In such event (a) any Loan Request with respect to Eurodollar
Rate Loans shall be automatically withdrawn and shall be deemed a request for
Base Rate Loans and (b) each Eurodollar Rate Loan will automatically, on the
last day of the then current Interest Period thereof, become a Base Rate Loan,
and the obligations of the Banks to make Eurodollar Rate Loans shall be
suspended until the Agent determines that the circumstances giving rise to
such suspension no longer exist, whereupon the Agent shall so notify the
Borrower and the Banks.
Section 17.7. Illegality. Notwithstanding any other provisions herein,
if any present or future law, regulation, treaty or directive or the
interpretation or application thereof shall make it unlawful, or any central
bank or other governmental authority having jurisdiction over a Bank or its
Eurodollar Lending Office shall assert that it is unlawful, for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice
of such circumstances to the Agent and the Borrower and thereupon (a) the
commitment of the Banks to make Eurodollar Rate Loans or convert Loans of
another type to Eurodollar Rate Loans shall forthwith be suspended and (b) the
Eurodollar Rate Loans then outstanding shall be converted automatically to
Base Rate Loans on the last day of each Interest Period applicable to such
Eurodollar Rate Loans or within such earlier period as may be required by law.
Section 17.8. Additional Interest. If any Eurodollar Rate Loan or any
portion thereof is repaid or is converted to a Base Rate Loan for any reason
on a date which is prior to the last day of the Interest Period applicable to
such Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for
the account of the Banks in accordance with their respective Commitment
Percentages, in addition to any amounts of interest otherwise payable
hereunder, any amounts required to compensate the Banks for any losses, costs
or expenses which may reasonably be incurred as a result of such payment or
conversion, including, without limitation, an amount equal to daily interest
for the unexpired portion of such Interest Period on the Eurodollar Rate Loan
or portion thereof so repaid or converted at a per annum rate equal to the
excess, if any, of (a) the interest rate calculated on the basis of the
Eurodollar Rate applicable to such Eurodollar Rate Loan minus (b) the yield
obtainable by the Agent upon the purchase of debt securities customarily
issued by the Treasury of the United States of America which have a maturity
date most closely approximating the last day of such Interest Period (it being
understood that the purchase of such securities shall not be required in order
for such amounts to be payable).
Section 17.9. Additional Costs, Etc. Notwithstanding anything herein to
the contrary, if any future applicable law or any amendment or modification of
present applicable law which expression, as used herein, includes statutes,
rules and regulations thereunder and legally binding interpretations thereof
by any competent court or by any governmental or other regulatory body or
official with appropriate jurisdiction charged with the administration or the
interpretation thereof and requests, directives, instructions and notices at
any time or from time to time hereafter made upon or otherwise issued to any
Bank or the Agent by any central bank or other fiscal, monetary or other
authority (whether or not having the force of law), shall:
(a) subject any Bank or the Agent to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to this
Agreement, the other Loan Documents, such Bank's Commitment or the Loans
(other than taxes based upon or measured by the income or profits of such Bank
or the Agent), or
(b) materially change the basis of taxation (except for changes in
taxes on income or profits) of payments to any Bank of the principal of or the
interest on any Loans or any other amounts payable to any Bank under this
Agreement or the other Loan Documents, or
(c) impose or increase or render applicable any special deposit,
reserve, assessment, liquidity, capital adequacy or other similar requirements
(whether or not having the force of law) against assets held by, or deposits
in or for the account of, or loans by, or commitments of an office of any Bank
beyond those in effect as of the date hereof, or
(d) impose on any Bank or the Agent any other conditions or
requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Bank's Commitment, or any class of loans or commitments of which
any of the Loans or such Bank's Commitment forms a part; and the result of any
of the foregoing is
(i) to increase the cost to any Bank of making, funding,
issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment, or
(ii) to reduce the amount of principal, interest or other
amount payable to such Bank or the Agent hereunder on account of such
Bank's Commitment or any of the Loans, or
(iii) to require such Bank or the Agent to make any payment
or to forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by
reference to the gross amount of any sum receivable or deemed received by
such Bank or the Agent from the Borrower hereunder,
then, and in each such case, the Borrower will, within fifteen (15) days of
demand made by such Bank or (as the case may be) the Agent at any time and
from time to time and as often as the occasion therefor may arise, pay to such
Bank or the Agent such additional amounts as such Bank or the Agent shall
determine in good faith to be sufficient to compensate such Bank or the Agent
for such additional cost, reduction, payment or foregone interest or other
sum. Each Bank and the Agent in determining such amounts may use any
reasonable averaging and attribution methods, generally applied by such Bank
or the Agent.
Section 17.10. Capital Adequacy. If after the date hereof any Bank
determines that (a) the adoption of or change in any law, rule, regulation or
guideline regarding capital requirements of general application for banks or
bank holding companies or any change in the interpretation or application
thereof by any governmental authority charged with the administration thereof,
or (b) compliance by such Bank or its parent bank holding company with any
future guideline, request or directive of any such entity regarding capital
adequacy or any amendment or change in interpretation of any existing
guideline, request or directive (whether or not having the force of law), has
the effect of reducing the return on such Bank's or such holding company's
capital as a consequence of such Bank's commitment to make Loans hereunder to
a level below that which such Bank or holding company could have achieved but
for such adoption, change or compliance (taking into consideration such Bank's
or such holding company's then existing policies with respect to capital
adequacy and assuming the full utilization of such entity's capital) by any
amount deemed by such Bank to be material, then such Bank may notify the
Borrower thereof. The Borrower agrees to pay to such Bank the amount of such
reduction in the return on capital as and when such reduction is determined,
upon presentation by such Bank of a statement of the amount setting for the
Bank's calculation thereof. In determining such amount, such Bank may use any
reasonable averaging and attribution methods, generally applied by such Bank
or the Agent.
Section 17.11. Indemnity of Borrower. The Borrower agrees to indemnify
each Bank and to hold each Bank harmless from and against any loss, cost or
expense that such Bank may sustain or incur as a consequence of (a) default by
the Borrower in payment of the principal amount of or any interest on any
Eurodollar Rate Loans as and when due and payable, including any such loss or
expense arising from interest or fees payable by such Bank to lenders of funds
obtained by it in order to maintain its Eurodollar Rate Loans, or (b) default
by the Borrower in making a borrowing or conversion after the Borrower has
given (or is deemed to have given) a Loan Request or a Conversion Request;
provided, however, that the Borrower shall not be required to so indemnify any
Bank pursuant to clause (b) above which fails or refuses to fund its
proportionate share of a Loan in accordance with the terms of this Agreement.
Section 17.12. Interest on Overdue Amounts; Late Charge. Overdue
principal and (to the extent permitted by applicable law) interest on the
Loans and all other overdue amounts payable hereunder or under any of the
other Loan Documents shall bear interest payable on demand at a rate per annum
equal to four percent (4.0%) above the Base Rate from the date due until such
amount shall be paid in full (after as well as before judgment). In addition,
the Borrower shall pay a late charge equal to three percent (3.0%) of any
amount of interest and/or principal payable on the Loans or any other amounts
payable hereunder or under the Loan Documents, which is not paid within ten
days of the date when due.
Section RDOC\W Intentionally Omitted.
Section 17.14. Certificate. A certificate setting forth any amounts
payable pursuant to Section 4.8, Section 4.9, Section 4.10, Section 4.11 or
Section 4.12 and a brief explanation of such amounts which are due, submitted
by any Bank or the Agent to the Borrower, shall be conclusive in the absence
of manifest error.
Section 17.15. Limitation on Interest. Notwithstanding anything in this
Agreement to the contrary, all agreements between the Borrower and the Banks
and the Agent, whether now existing or hereafter arising and whether written
or oral, are hereby limited so that in no contingency, whether by reason of
acceleration of the maturity of any of the Obligations or otherwise, shall the
interest contracted for, charged or received by the Banks exceed the maximum
amount permissible under applicable law. If, from any circumstance
whatsoever, interest would otherwise be payable to the Banks in excess of the
maximum lawful amount, the interest payable to the Banks shall be reduced to
the maximum amount permitted under applicable law; and if from any
circumstance the Banks shall ever receive anything of value deemed interest by
applicable law in excess of the maximum lawful amount, an amount equal to any
excessive interest shall be applied to the reduction of the principal balance
of the Obligations and to the payment of interest or, if such excessive
interest exceeds the unpaid balance of principal of the Obligations, such
excess shall be refunded to the Borrower. All interest paid or agreed to be
paid to the Banks shall, to the extent permitted by applicable law, be
amortized, prorated, allocated and spread throughout the full period until
payment in full of the principal of the Obligations (including the period of
any renewal or extension thereof) so that the interest thereon for such full
period shall not exceed the maximum amount permitted by applicable law. This
section shall control all agreements between the Borrower and the Banks and
the Agent.
Section 18. COLLATERAL SECURITY.
Section 18.1. Collateral. The Obligations shall be secured by (i) a
perfected first priority pledge to the Agent, for the benefit of the Banks, of
the Collateral Notes and related documents; (ii) a perfected first priority
assignment and security interest in favor of the Agent, for the benefit of the
Banks, in the EQR Preferred Equity Commitment; (iii) a perfected first
priority lien or security title to be held by the Agent for the benefit of the
Banks in the Mortgaged Property pursuant to the terms of the Security Deeds,
(iv) a perfected first priority security interest to be held by the Agent for
the benefit of the Banks in the Leases pursuant to the Assignments of Rents
and Leases, (v) the Indemnity Agreement, (vi) a perfected first priority lien
to be held by the Agent for the benefit of the Banks in cash and Short-term
Investments of the Borrower from time to time pledged to the Agent pursuant to
one or more Pledge Agreements and (vii) such additional collateral, if any, as
the Agent for the benefit of the Banks from time to time may accept as
security for the Obligations with the consent of the Majority Banks, whether
pursuant to Section 5.4 hereof or otherwise, which consent may be given or
withheld in the sole discretion of the Majority Banks. The Obligations shall
also be guaranteed pursuant to the Guaranty.
Section 18.2. Appraisals.
(a) The Agent on behalf of the Banks shall require biennial
Appraisals of each of the Mortgaged Property and Collateral Property, which
will be ordered, reviewed and approved by the appraisal departments of the
Majority Banks, in order to determine the current Appraised Value and
Designated Collateral Value of the Mortgaged Property and whether a Note may
be a Qualifying Collateral Note, and the Borrower shall pay to the Agent on
demand all reasonable costs of all such Appraisals; provided, however, that so
long as no Default or Event of Default shall have occurred and be continuing
and regulatory requirements of any Bank generally applicable to real estate
loans of the category made under this Agreement as reasonably interpreted by
such Bank shall not require more frequent Appraisals, the Borrower shall not
be required to pay for Appraisals more often than once in any 24-month period,
with the result that unless such condition shall occur the first Appraisals
for which the Borrower shall be financially responsible after the Closing Date
shall not be required prior to the Maturity Date.
(b) Notwithstanding the provisions of Section 5.2(a), the Majority
Banks may require the Agent to obtain Appraisals or the Banks may jointly
perform internal studies updating and revising prior Appraisals with respect
to the Mortgaged Property or such portion thereof as the Majority Banks shall
determine, for the purpose of determining the current Appraised Value and
Designated Collateral Value of the Mortgaged Property or whether a note is a
Qualifying Collateral Note (i) at any time following a condemnation of or
uninsured casualty to a Mortgaged Property or a Collateral Property (provided
that such Appraisal shall be limited to the affected Mortgaged Property or
Collateral Property), or (ii) in the event that there is a material adverse
change to the Borrower or the Guarantor or their respective assets. The
expense of such Appraisals and updates performed pursuant to this Section
5.2(b) shall be borne by the Borrower.
(c) In the event that the Agent shall advise the Borrower, on the
basis of any Appraisal or update pursuant to Section 5.2, that the Designated
Collateral Value is insufficient to comply with the requirements of Section
9.3, then until the Designated Collateral Value shall be restored to
compliance with Section 9.3 the Banks shall not be required to make advances
under Section 2.1.
Section 18.3. Release of Collateral. Provided no Default or Event of
Default shall have occurred hereunder and be continuing (or would exist
immediately after giving effect to the transactions contemplated by this
Section 5.3 except as provided in this Section 5.3), the Agent shall release a
Mortgaged Property or Collateral Note from the lien of the Security Documents
encumbering the same upon the request of the Borrower and upon the following
terms and conditions:
(a) The Borrower shall deliver to the Agent written notice of its
desire to obtain each such release no later than fifteen (15) days prior to
the date on which each such release is to be effected together with evidence
satisfactory to the Agent that such release is to facilitate a sale of such
Mortgaged Property or Collateral Note to an unrelated third party in a bona-
fide arms-length transaction for a cash sales price or a bona-fide refinance;
and
(b) The Borrower shall submit to the Agent with such request a
Compliance Certificate prepared using the financial statements of the Borrower
most recently provided or required to be provided to the Agent under Section
6.4 or Section 7.4 adjusted in the best good faith estimate of the Borrower to
give effect to the proposed release and demonstrating that no Default or Event
of Default with respect to the covenants referred to therein shall exist after
giving effect to such release; and
(c) The Borrower shall pay all reasonable costs and expenses of the
Agent in connection with such release, including without limitation,
reasonable attorney's fees; and
(d) The Borrower shall pay to the Agent for the account of the
Banks, which payment shall be applied to reduce the outstanding principal
balance of the Loans, a release price equal to 125% of the Designated
Collateral Value of the Collateral to be released as most recently determined
hereunder. Such payment shall be applied to reduce the outstanding principal
balance of the Loans; provided, that the Borrower shall not be required to
make a payment which would reduce the principal balance below zero.
Section 18.4. Subsidiary Collateral; Substitute Collateral.
(a) The Borrower from time to time may, by written request to the
Agent who shall promptly notify the Banks, request that certain assets of one
or more of its wholly-owned Subsidiaries (collectively, the "Subsidiary
Collateral") or certain other Potential Collateral owned by the Borrower (the
"Borrower Collateral") be included as Collateral to secure the Obligations and
for the purpose of increasing the Borrowing Base or replacing existing
Collateral. Notwithstanding the foregoing, no Subsidiary Collateral or
Borrower Collateral shall be included as Collateral unless and until the
following conditions precedent shall have been satisfied:
(i) if such proposed collateral is Real Estate, such Real
Estate shall be Eligible Real Estate, or if such collateral is a
promissory note, such note shall be a Qualifying Collateral Note;
(ii) the owner of any Subsidiary Collateral shall have executed
a Guaranty of the Obligations in form and substance satisfactory to the
Majority Banks, or, in the Majority Banks' sole discretion, shall have
been added as an additional Borrower hereunder pursuant to an amendment
to this Agreement in form and substance satisfactory to Agent and Agent's
Special Counsel;
(iii) the Borrower or the owner of the Subsidiary
Collateral, as applicable, shall have executed and delivered to the Agent
all Eligible Real Estate Qualification Documents, Qualifying Collateral
Note Qualification Documents or other instruments, documents, or
agreements, including Uniform Commercial Code financing statements, as
the Agent shall deem necessary or desirable to perfect a first priority
security interest in, or lien on, such Subsidiary Collateral or Borrower
Collateral, all of which instruments, documents or agreements shall be in
form and substance satisfactory to the Agent in its sole discretion; and
(iv) the Agent, on behalf of the Banks, shall have received any
other appraisals, surveys, rent rolls, environmental reports, title
insurance reports, certificates, opinions or other information or
documentation with respect to the Subsidiary Collateral or Borrower
Collateral as the Agent, in its sole discretion, shall deem necessary or
desirable.
The Borrower acknowledges that the decision of all of the Banks to grant
or withhold their consent to the acceptance of additional or Substitute
Collateral under this Section 5.4 or to accept collateral from a Subsidiary of
the Borrower or to provide for a co-Borrower shall be based entirely on such
factors as the Banks deem relevant in their sole discretion, including,
without limitation, those enumerated in clauses (i) through (iv) hereinabove,
and such consent may be granted or withheld solely at the discretion of the
Banks.
(b) In connection with each such addition or substitution, the
Borrower, within fifteen (15) days of the Borrower's request to add such
assets to the Collateral, shall pay to the Agent for the account of the Banks
a review fee of $5,000.00 for each asset to be added to be split equally by
the Banks, without regard to their respective Commitment Percentages.
Section 19. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and the Banks as
follows.
Section GARDO Corporate Authority, Etc.
(a) Incorporation; Good Standing. The Borrower (i) is a
corporation duly organized pursuant to its organizational documents and
amendments thereto filed with the Secretary of State of Maryland, and is
validly existing and in good standing under the laws of the State of Maryland,
(ii) has all requisite power to own its property and conduct its business as
now conducted and as presently contemplated, and (iii) is in good standing as
a foreign entity and is duly authorized to do business in the jurisdictions
where the Mortgaged Property is located and in each other jurisdiction where a
failure to be so qualified in such other jurisdiction could have a materially
adverse effect on the business, assets or financial condition of the Borrower.
(b) Subsidiaries. Each of the Subsidiaries of the Borrower and the
Guarantor (i) is a corporation, limited partnership, limited liability company
or trust duly organized under the laws of its State of organization and is
validly existing and in good standing under the laws thereof, (ii) has all
requisite power to own its property and conduct its business as now conducted
and as presently contemplated and (iii) is in good standing and is duly
authorized to do business in each jurisdiction where Mortgaged Property held
by it is located and in each other jurisdiction where a failure to be so
qualified could have a materially adverse effect on the business, assets or
financial condition of the Borrower or such Subsidiary or the Guarantor.
(c) Authorization. The execution, delivery and performance of this
Agreement and the other Loan Documents to which the Borrower or the Guarantor
are or are to become a party and the transactions contemplated hereby and
thereby (i) are within the authority of the such Person, (ii) have been duly
authorized by all necessary proceedings on the part of such Person, (iii) do
not and will not conflict with or result in any breach or contravention of any
provision of law, statute, rule or regulation to which such Person is subject
or any judgment, order, writ, injunction, license or permit applicable to such
Person, (iv) do not and will not conflict with or constitute a default
(whether with the passage of time or the giving of notice, or both) under any
provision of the articles of incorporation , bylaws, or other charter
documents of, or any agreement or other instrument binding upon, such Person,
or any of its properties, and (v) do not and will not result in or require the
imposition of any lien or other encumbrance on any of the properties, assets
or rights of the Borrower or the Guarantor, as applicable.
(d) Enforceability. The execution and delivery of this Agreement
and the other Loan Documents to which the Borrower or the Guarantor are or are
to become a party are valid and legally binding obligations of such Person
enforceable in accordance with the respective terms and provisions hereof and
thereof, except as enforceability is limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting generally
the enforcement of creditors' rights and except to the extent that
availability of the remedy of specific performance or injunctive relief is
subject to the discretion of the court before which any proceeding therefor
may be brought.
Section 19.2. Governmental Approvals. The execution, delivery and
performance by the Borrower and the Guarantor of this Agreement and the other
Loan Documents and the transactions contemplated hereby and thereby do not
require the approval or consent of, or filing with, any governmental agency or
authority other than those already obtained and the filing of the Security
Documents in the appropriate records office with respect thereto.
Section \EDGA Title to Properties: Leases. Except as indicated on
Schedule 6.3 hereto, the Borrower and its Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Borrower as at the Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances
except Permitted Liens.
Section 19.4. Financial Statements. The Borrower has furnished to each
of the Banks: (a) the consolidated balance sheet of the Borrower and its
Subsidiaries as of the Balance Sheet Date and their related consolidated
statements of income, changes in stockholder equity and cash flows for the
fiscal year then ended, audited and certified by Ernst & Young LLP, (b) an
unaudited consolidated balance sheet and an unaudited consolidated statement
of income and cash flows of the Borrower and its Subsidiaries for the fiscal
quarter of the Borrower ended since the Balance Sheet Date certified by
Borrower's chief financial or chief accounting officer to have been prepared
in accordance with generally accepted accounting principles consistent with
those used in the preparation of the annual audited statements delivered
pursuant to subsection (a) above and to fairly present the financial condition
of the Borrower and its Subsidiaries as at the close of business on the dates
thereof and the results of operations for the fiscal quarter then ended
(subject to year-end adjustments), and (c) to the extent there is any
Mortgaged Property, an unaudited consolidated statement of operating income
for the Mortgaged Property satisfactory in form to the Majority Banks and
certified by the Borrower's chief financial or accounting officer as fairly
presenting the operating income for such parcels for such periods. Such
balance sheet and statements of income, stockholder's equity and cash flows
have been prepared in accordance with generally accepted accounting principles
and fairly present the financial condition of the Borrower and its
Subsidiaries as of such dates and the results of the operations of the
Borrower and its Subsidiaries for such periods. There are no liabilities,
contingent or otherwise, of the Borrower or any of its Subsidiaries involving
material amounts not disclosed in said financial statements and the related
notes thereto.
Section 19.5. No Material Changes. Since the Balance Sheet Date, there
has occurred no materially adverse change in the financial condition or
business of the Borrower and its Subsidiaries taken as a whole as shown on or
reflected in the consolidated balance sheet of the Borrower as of the Balance
Sheet Date, or its consolidated statement of income or cash flows for the
fiscal year then ended, other than changes in the ordinary course of business
that have not had any materially adverse effect either individually or in the
aggregate on the business or financial condition of the Borrower and its
Subsidiaries taken as a whole.
Section 19.6. Franchises, Patents, Copyrights, Etc. The Borrower and
its Subsidiaries and the Guarantor possess all franchises, patents,
copyrights, trademarks, trade names, service marks, licenses and permits, and
rights in respect of the foregoing, adequate for the conduct of their business
substantially as now conducted without known conflict with any rights of
others.
Section 19.7. Litigation. Except as stated on Schedule 6.7 there are no
actions, suits, proceedings or investigations of any kind pending or
threatened against the Borrower or any of its Subsidiaries or the Guarantor
before any court, tribunal or administrative agency or board that, if
adversely determined, might, either in any case or in the aggregate,
materially adversely affect the properties, assets, financial condition or
business of the Borrower or the Guarantor or materially impair the right of
the Borrower or the Guarantor to carry on business substantially as now
conducted by it, or result in any liability not adequately covered by
insurance, or for which adequate reserves are not maintained on the balance
sheet of the Borrower or the Guarantor, or which question the validity of this
Agreement or any of the other Loan Documents, any action taken or to be taken
pursuant hereto or thereto or any lien or security interest created or
intended to be created pursuant hereto or thereto, or which will adversely
affect the ability of the Borrower or the Guarantor to pay and perform the
Obligations in the manner contemplated by this Agreement and the other Loan
Documents.
Section 19.8. No Materially Adverse Contracts, Etc. None of the
Borrower, any of its Subsidiaries nor the Guarantor is subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation that has or is expected in the future to have a materially
adverse effect on the business, assets or financial condition of the Borrower
or the Guarantor. None of the Borrower, any of its Subsidiaries nor the
Guarantor is a party to any contract or agreement that has or is expected, in
the judgment of the officers of such Person, to have any materially adverse
effect on the business of the Borrower or the Guarantor.
Section 19.9. Compliance with Other Instruments, Laws, Etc. None of the
Borrower, any of its Subsidiaries nor the Guarantor is in violation of any
provision of its charter or other organizational documents, by-laws, or any
agreement or instrument to which it may be subject or by which it or any of
its properties may be bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could
result in the imposition of substantial penalties or materially and adversely
affect the financial condition, properties or business of the Borrower or the
Guarantor.
Section 19.10. Tax Status. The Borrower, each of its Subsidiaries and
the Guarantor (a) has made or filed all federal and state income and all other
tax returns, reports and declarations required by any jurisdiction to which it
is subject, (b) has paid all taxes and other governmental assessments and
charges shown or determined to be due on such returns, reports and
declarations, except those being contested in good faith and by appropriate
proceedings and (c) has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which
such returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be due by the taxing authority of any jurisdiction,
and the officers of such Person know of no basis for any such claim.
Section 19.11. No Event of Default. No Default or Event of Default has
occurred and is continuing.
Section 19.12. Holding Company and Investment Company Acts. None of the
Borrower, any of its Subsidiaries nor the Guarantor is a "holding company", or
a "subsidiary company" of a "holding company", or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935; nor is it an "investment company", or an "affiliated company" or a
"principal underwriter" of an "investment company", as such terms are defined
in the Investment Company Act of 1940.
Section 19.13. Absence of UCC Financing Statements, Etc. Except with
respect to Permitted Liens, there is no financing statement, security
agreement, chattel mortgage, real estate mortgage or other document filed or
recorded with any filing records, registry, or other public office, that
purports to cover, affect or give notice of any present or possible future
lien on, or security interest or security title in, any property of the
Borrower or its Subsidiaries or rights thereunder.
Section 19.14. Setoff, Etc. The Collateral and the rights of the Agent
and the Banks with respect to the Collateral are not subject to any setoff,
claims, withholdings or other defenses. The Borrower and the Guarantor are
the owners of the Collateral free from any lien, security interest,
encumbrance or other claim or demand, except Permitted Liens.
Section 19.15. Certain Transactions. None of the officers, trustees,
directors, or employees of the Borrower, any of its Subsidiaries or the
Guarantor is a party to any transaction with the Borrower or any of its
Subsidiaries (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
trustee, director or such employee or, to the knowledge of the Borrower, any
corporation, partnership, trust or other entity in which any officer, trustee,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
Section 19.16. Employee Benefit Plans. The Borrower and each ERISA
Affiliate are in compliance in all material respects with ERISA. There has
been no Reportable Event with respect to any Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan. There has been no institution
of proceedings or any other action by PBGC, the Borrower or any ERISA
Affiliate to terminate or withdraw or partially withdraw from any such Plan
under any circumstances which could lead to material liabilities to PBGC or,
with respect to a Multiemployer Plan, the "Reorganization" or "Insolvency" (as
each such term is defined in ERISA) of any such Plan. To the best of the
Borrower's knowledge, no "prohibited transaction" (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) has occurred with respect to
any such Plan, and neither the consummation of the transactions provided for
in this Agreement and compliance by the Borrower with the provisions hereof
and the other Loan Documents will involve any prohibited transaction.
Section 19.17. ERISA Taxes. Neither the Borrower nor any ERISA
Affiliate thereof is currently and the Borrower has no reason to believe that
the Borrower or any ERISA Affiliate thereof will become subject to any
liability (other than routine expenses or contributions relating to the Plans
set forth on Schedule 6.17, if timely paid), tax or penalty whatsoever to any
person whomsoever, which liability, tax or penalty is directly or indirectly
related to any Plans set forth on Schedule 6.17 including, but not limited to,
any penalty or liability arising under Title I or Title IV of ERISA, any tax
or penalty resulting from a loss of deduction under Section s 404 and 419 of
the Code, or any tax or penalty under Chapter 43 of the Code, except such
liabilities, taxes or penalties (when taken as a whole) as will not have a
material adverse effect on the Borrower or upon its financial condition,
assets, business, operations, liabilities or prospects.
Section 19.18. Plan Payments. The Borrower and each ERISA Affiliate has
made full and timely payment of all amounts (i) required to be contributed
under the terms of each Plan set forth on Schedule 6.17 and applicable law and
(ii) required to be paid as expenses of each Plan set forth on Schedule 6.17.
No Plan set forth on Schedule 6.17 would have an "amount of unfunded benefit
liabilities" (as defined in Section 4001(a)(18) of ERISA) if such Plan were
terminated as of the date on which this representation and warranty is made.
Section 19.19. Regulations U and X. No portion of any Loan is to be
used for the purpose of purchasing or carrying any "margin security" or
"margin stock" as such terms are used in Regulations U and X of the Board of
Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and 224.
Section 19.20. Environmental Compliance. The Borrower has conducted or
caused to be conducted Phase I environmental site assessments with respect to
the past usage and condition of the Real Estate and the Collateral Property
and the operations conducted thereon, and is familiar with the present
condition and usage of the Real Estate and the operations conducted thereon
and, based upon such reports and knowledge, makes the following
representations and warranties.
(a) With respect to the Mortgaged Property, and to the best of the
Borrower's knowledge with respect to any other Real Estate and the Collateral
Property, none of the Borrower, its Subsidiaries, the Guarantor, the owner of
the Collateral Property, or any operator of the Real Estate or the Collateral
Property, or any operations thereon is in violation, or alleged violation, of
any judgment, decree, order, law, license, rule or regulation pertaining to
environmental matters, including without limitation, those arising under the
Resource Conservation and Recovery Act ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 as amended
("CERCLA"), the Superfund Amendments and Reauthorization Act of 1986 ("SARA"),
the Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances
Control Act, or any state or local statute, regulation, ordinance, order or
decree relating to the environment (hereinafter "Environmental Laws"), which
violation involves the Mortgaged Property, the Collateral Property or involves
other Real Estate and would have a material adverse effect on the environment
or the business, assets or financial condition of the Borrower, the Guarantor
or the owner of any of the Collateral Property.
(b) None of the Borrower, any of its Subsidiaries nor the Guarantor
has received any notice, nor to the best of the Borrower's knowledge has any
owner of a Collateral Property received notice, from any third party
including, without limitation, any federal, state or local governmental
authority, (i) that it has been identified by the United States Environmental
Protection Agency ("EPA") as a potentially responsible party under CERCLA with
respect to a site listed on the National Priorities List, 40 C.F.R. Part 300
Appendix B (1986); (ii) that any hazardous waste, as defined by 42 U.S.C.
Section 9601(5), any hazardous substances as defined by 42 U.S.C. Section
9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section
9601(33) or any toxic substances, oil or hazardous materials or other
chemicals or substances regulated by any Environmental Laws ("Hazardous
Substances") which it has generated, transported or disposed of have been
found at any site at which a federal, state or local agency or other third
party has conducted or has ordered that the Borrower, any of its Subsidiaries,
the Guarantor or, to the best of Borrower's knowledge, any owner of a
Collateral Property conduct a remedial investigation, removal or other
response action pursuant to any Environmental Law; or (iii) that it is or
shall be a named party to any claim, action, cause of action, complaint, or
legal or administrative proceeding (in each case, contingent or otherwise)
arising out of any third party's incurrence of costs, expenses, losses or
damages of any kind whatsoever in connection with the release of Hazardous
Substances.
(c) With respect to the Mortgaged Property, and to the best of the
Borrower's knowledge with respect to any other Real Estate and the Collateral
Property, except as specifically set forth in the environmental site
assessment reports for Sonterra at Williams Center prepared by EMG and dated
June 27, 1996 and for 277 Park Avenue prepared by IVI Environmental, Inc.
dated July 3, 1996, each of which has been provided to the Agent on or about
the date hereof or, in the case of Real Estate acquired after the date hereof,
the environmental site assessment reports with respect thereto provided to the
Agent under Section 7.4(h): (i) no portion of the Real Estate or the
Collateral Property has been used for the handling, processing, storage or
disposal of Hazardous Substances except in accordance with applicable
Environmental Laws, and no underground tank or other underground storage
receptacle for Hazardous Substances is located on any portion of the Mortgaged
Property or the Collateral Property; (ii) in the course of any activities
conducted by the Borrower, its Subsidiaries, the Guarantor or the operators of
its properties or the owners or operators of the Collateral Property, no
Hazardous Substances have been generated or are being used on the Real Estate
or the Collateral Property except in the ordinary course of business and in
accordance with applicable Environmental Laws; (iii) there has been no past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (a "Release") or
threatened Release of Hazardous Substances on, upon, into or from the
Mortgaged Property, or, to the best of the Borrower's knowledge, on, upon,
into or from the other properties of the Borrower, its Subsidiaries, the
Guarantor or the Collateral Property, which Release would have a material
adverse effect on the value of any of the Real Estate, the Collateral Property
or adjacent properties or the environment; (iv) to the best of the Borrower's
knowledge, there have been no Releases on, upon, from or into any real
property in the vicinity of any of the Real Estate or the Collateral Property
which, through soil or groundwater contamination, may have come to be located
on, and which would have a material adverse effect on the value of, the Real
Estate or the Collateral Property; and (v) any Hazardous Substances that have
been generated on any of the Real Estate or the Collateral Property have been
transported off-site only by carriers having an identification number issued
by the EPA or approved by a state or local environmental regulatory authority
having jurisdiction regarding the transportation of such substance and, to the
best knowledge of the Borrower without independent investigation, treated or
disposed of only by treatment or disposal facilities maintaining valid permits
as required under all applicable Environmental Laws, which transporters and
facilities have been and are, to the best of the Borrower's knowledge,
operating in compliance with such permits and applicable Environmental Laws.
(d) Neither the Borrower, its Subsidiaries, the Guarantor, the
Mortgaged Property nor any other Real Estate is subject to any applicable
Environmental Law requiring the performance of Hazardous Substances site
assessments, or the removal or remediation of Hazardous Substances, or the
giving of notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or statement by virtue
of the transactions set forth herein and contemplated hereby, or as a
condition to the recording of the Security Deed or to the effectiveness of any
other transactions contemplated hereby.
Section 19.21. Subsidiaries. Schedule 6.21 sets forth all of the
Subsidiaries of the Borrower. The form and jurisdiction of organization of
each of the Subsidiaries, and the Borrower's ownership interest therein, is
set forth in said Schedule 6.21.
Section 19.22. Leases. The Borrower has delivered to the Agent true
copies of the Leases and any amendments thereto relating to the Mortgaged
Property, to the extent there is any Mortgaged Property.
Section 19.23. Loan Documents. All of the representations and
warranties of the Borrower or the Guarantor made in the Loan Documents to
which it is a party or any document or instrument delivered to the Agent or
the Banks pursuant to or in connection with any of such Loan Documents are
true and correct in all material respects, and no such party has failed to
disclose such information as is necessary to make such representations and
warranties not misleading.
Section 19.24. Mortgaged Property. The Borrower makes the following
representations and warranties concerning each Mortgaged Property, to the
extent there is any Mortgaged Property:
(a) Off-Site Utilities. All water, sewer, electric, gas, telephone
and other utilities necessary for the use and operation of the Mortgaged
Property are installed to the property lines of the Mortgaged Property through
dedicated public rights-of-way or through perpetual private easements approved
by the Majority Banks with respect to which the applicable Security Deed
creates a valid and enforceable first lien and, except in the case of drainage
facilities, are connected to the Building located thereon with valid permits
and are adequate to service the Building in compliance with applicable law.
(b) Access, Etc. The streets abutting the Mortgaged Property are
dedicated and accepted public roads, to which the Mortgaged Property has
direct access by trucks and other motor vehicles and by foot, or are perpetual
private ways (with direct access by trucks and other motor vehicles and by
foot to public roads) to which the Mortgaged Property has direct access
approved by the Majority Banks and with respect to which the applicable
Security Deed creates a valid and enforceable first lien. All private ways
providing access to the Mortgaged Property are zoned in a manner which will
permit access to the Building over such ways by trucks and other commercial
and industrial vehicles.
(c) Independent Building. The Building is fully independent in all
respects including, without limitation, in respect of structural integrity,
heating, ventilating and air conditioning, plumbing, mechanical and other
operating and mechanical systems, and electrical, sanitation and water
systems, all of which are connected directly to off-site utilities located in
public streets or ways or through insured perpetual private easements approved
by the Majority Banks. The Building is located on a lot which is separately
assessed for purposes of real estate tax assessment and payment. The
Building, all Building Service Equipment and all paved or landscaped areas
related to or used in connection with the Building are, except as specifically
disclosed on a Survey delivered to the Agent prior to the date hereof, located
wholly within the perimeter lines of the lot or lots on which the Mortgaged
Property is located.
(d) Condition of Building; No Asbestos. Except as may otherwise be
specifically disclosed in any written engineering report furnished or caused
to be furnished by the Borrower to the Agent prior to the date hereof, the
Building is structurally sound, in good repair and free of material defects in
materials and workmanship. All major building systems located within the
Building, including without limitation heating, ventilating and air
conditioning, electrical, sprinkler, plumbing or other mechanical systems, are
in good working order and condition. No asbestos is located in or on the
Building, except for nonfriable asbestos or contained friable asbestos which
is being monitored and/or remediated in accordance with the recommendations of
an Environmental Engineer.
(e) Building Compliance with Law. Except as may otherwise be
specifically disclosed on the face of any certificate of occupancy delivered
to the Agent prior to the date hereof, the Building as presently constructed,
used, occupied and operated does not violate any applicable federal or state
law or governmental regulation, or any local ordinance, order or regulation,
including but not limited to laws, regulations, or ordinances relating to
zoning, building use and occupancy, subdivision control, fire protection,
health, sanitation, safety, handicapped access, historic preservation and
protection, tidelands, wetlands, flood control and Environmental Laws. The
Building complies with applicable zoning laws and regulations and is not a
so-called non-conforming use. The zoning laws permit use of the Building for
its current use. There is such number of parking spaces on the lot or lots on
which the Mortgaged Property is located as is adequate under the zoning laws
and regulations to permit use of the Building for its current use.
(f) No Required Mortgaged Property Consents, Permits, Etc. Neither
the Borrower, any of its Subsidiaries nor the Guarantor, as applicable, has
received notice of, or has knowledge of, any approvals, consents, licenses,
permits, utility installations and connections (including, without limitation,
drainage facilities), curb cuts and street openings, required by applicable
laws, rules, ordinances or regulations or any agreement affecting the
Mortgaged Property for the maintenance, operation, servicing and use of the
Mortgaged Property or the Building for its current use which have not been
granted, effected, or performed and completed (as the case may be), or any
fees or charges therefor which have not been fully paid, or which are no
longer in full force and effect. No such approvals, consents, permits or
licenses (including, without limitation, any railway siding agreements) will
terminate, or become void or voidable or terminable on any foreclosure sale of
the Mortgaged Property pursuant to the Security Deed. To the best knowledge
of the Borrower, there are no outstanding notices, suits, orders, decrees or
judgments relating to zoning, building use and occupancy, fire, health,
sanitation or other violations affecting, against, or with respect to, the
Mortgaged Property or any part thereof.
(g) Insurance. Neither the Borrower, any of its Subsidiaries nor
the Guarantor has received any notice from any insurer or its agent requiring
performance of any work with respect to the Mortgaged Property or canceling or
threatening to cancel any policy of insurance, and the Mortgaged Property
complies with the requirements of all carriers of insurance on the Mortgaged
Property.
(h) Real Property Taxes; Special Assessments. There are no unpaid
or outstanding real estate or other taxes or assessments on or against the
Mortgaged Property or any part thereof which are payable by the Borrower, any
Subsidiary of the Borrower or the Guarantor (except only real estate or other
taxes or assessments, that are not yet due and payable). The Borrower has
delivered or caused to be delivered to the Agent, or has requested from the
appropriate authorities and will deliver to the Agent promptly upon receipt,
true and correct copies of real estate tax bills for the Mortgaged Property
for the past three fiscal tax years. No abatement proceedings are pending
with reference to any real estate taxes assessed against the Mortgaged
Property. There are no betterment assessments or other special assessments
presently pending with respect to any portion of the Mortgaged Property, and
none of Borrower, any of its Subsidiaries nor the Guarantor has received any
notice of any such special assessment being contemplated.
(i) Historic Status. The Building is not a historic structure or
landmark and neither the Building nor the Mortgaged Property is located within
any historic district pursuant to any federal, state or local law or
governmental regulation.
(j) Eminent Domain; Casualty. There are no pending eminent domain
proceedings against the Mortgaged Property or any part thereof, and, to the
knowledge of the Borrower, no such proceedings are presently threatened or
contemplated by any taking authority. Neither the Mortgaged Property, the
Building nor any part thereof is now damaged or injured as a result of any
fire, explosion, accident, flood or other casualty.
(k) Leases. An accurate and complete Rent Roll and summary thereof
in a form reasonably satisfactory to the Majority Banks as of the date of
inclusion of each Mortgaged Property in the Collateral (or such other recent
date as may be acceptable to the Agent) with respect to all Leases of any
portion of the Mortgaged Property has been provided to the Agent. The Leases
reflected on such Rent Roll constitute as of the date thereof the sole
agreements and understandings relating to leasing or licensing of space at
such Mortgaged Property and in the Building relating thereto. There are no
occupancies, rights, privileges or licenses in or to any Mortgaged Property or
portion thereof other than pursuant to the Leases reflected in Rent Rolls
previously furnished to the Agent for such Mortgaged Property. Except as set
forth in each Rent Roll, the Leases reflected therein are in full force and
effect in accordance with their respective terms, without any payment default
or any other material default thereunder, nor are there any defenses,
counterclaims, offsets, concessions or rebates available to any tenant
thereunder, and none of the Borrower, any of its Subsidiaries nor the
Guarantor has given or made, any notice of any payment or other material
default, or any claim, which remains uncured or unsatisfied, with respect to
any of the Leases. The Rent Rolls furnished to the Banks accurately and
completely set forth all rents payable by and security, if any, deposited by
tenants, no tenant having paid more than one month's rent in advance. The
Borrower has reviewed the estoppel certificates delivered by the tenants of
the Mortgaged Property to the Agent and such estoppel certificates are true
and correct in all material respects. All tenant improvements or work to be
done, furnished or paid for by the Borrower, any of its Subsidiaries or the
Guarantor, as applicable, or credited or allowed to a tenant, for, or in
connection with, the Building pursuant to any Lease has been completed and
paid for or provided for in a manner satisfactory to the Agent. No material
leasing, brokerage or like commissions, fees or payments are due from the
Borrower, any of its Subsidiaries or the Guarantor in respect of the Leases.
(l) Service Agreements; Management Agreements. Except as listed on
Schedule 6.24, there are no material Service Agreements relating to the
operation and maintenance of the Building, the Mortgaged Property, or any
portion thereof. Borrower has delivered to Agent true, correct and complete
copies of the Management Agreements for the Mortgaged Property. To the best
knowledge of the Borrower, there are no material claims or any bases for
material claims in respect of the Mortgaged Property or its operation by any
party to any Service Agreement or Management Agreement.
(m) Other Material Real Property Agreements; No Options. There are
no material agreements pertaining to the Mortgaged Property, any Building
thereon or the operation or maintenance of either thereof other than as
described in this Agreement (including the Schedules hereto) or otherwise
disclosed in writing to the Agent and the Banks by the Borrower; and no person
or entity has any right or option to acquire the Mortgaged Property on any
Building thereon or any portion thereof or interest therein.
Section 19.25. Brokers. Neither the Borrower nor any of its
Subsidiaries has engaged or otherwise dealt with any broker, finder or similar
entity in connection with this Agreement or the Loans contemplated hereunder.
Section 19.26. Fair Consideration. The Borrower (and, as applicable,
the Guarantor), by receiving the benefits under this Agreement is receiving
"reasonably equivalent value" within the meaning of Section 548 of the
Bankruptcy Code, Title 11, U.S.C.A. and "fair consideration" within the
meaning of Consolidated Laws of New York Annotated, Chapter 12, Article 10,
Section 272 in exchange for the delivery of the Security Documents to Agent.
Section 19.27. Solvency. As of the Closing Date and after giving affect
to the transactions contemplated by this Agreement and the other Loan
Documents, including all of the Loans made or to be made hereunder neither the
Borrower nor the Guarantor is insolvent on a balance sheet basis, the sum of
such Person's assets exceeds the sum of such Person's liabilities, the
Borrower and the Guarantor is able to pay its debts as they become due, and
the Borrower and the Guarantor has sufficient capital to carry on its
business.
Section 19.28. Other Debt. None of the Borrower, the Guarantor nor any
of their respective Subsidiaries is in default in the payment of any other
Indebtedness or under any agreement, mortgage, deed of trust, security
agreement, financing agreement, indenture or lease to which any of them is a
party. The Borrower is not a party to or bound by any agreement, instrument
or indenture that may require the subordination in right or time of payment of
any of the Obligations to any other indebtedness or obligation of the
Borrower. The Borrower has provided to the Agent copies of all agreements,
mortgages, deeds of trust, financing agreements or other material agreements
binding upon Borrower, the Guarantor or their respective properties and
entered into by such Person as of the date of this Agreement with respect to
any Indebtedness of such Person.
Section 20. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
Section 20.1. Punctual Payment. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loans and all
interest and fees provided for in this Agreement, all in accordance with the
terms of this Agreement and the Notes as well as all other sums owing pursuant
to the Loan Documents.
Section 20.2. Maintenance of Office. The Borrower will maintain its
chief executive office at 610 Fifth Avenue, 7th Floor, New York County, New
York, New York, or at such other place in the United States of America as the
Borrower shall designate upon prior written notice to the Agent and the Banks,
where notices, presentations and demands to or upon the Borrower in respect of
the Loan Documents may be given or made.
Section 20.3. Records and Accounts. The Borrower will (a) keep, and
cause each of its Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance
with generally accepted accounting principles and (b) maintain adequate
accounts and reserves for all taxes (including income taxes), depreciation and
amortization of its properties and the properties of its Subsidiaries,
contingencies and other reserves. Neither the Borrower nor any of its
Subsidiaries shall, without the prior written consent of the Majority Banks,
(x) make any material changes to the accounting procedures used by such Person
in preparing the financial statements and other information described in
Section 6.4 (excluding the conversion of a Subsidiary's accounting procedures
such that they are consistent with the Borrower's accounting procedures) or
(y) change its fiscal year.
Section 20.4. Financial Statements, Certificates and Information. The
Borrower will deliver or cause to be delivered to each of the Banks:
(a) as soon as practicable, but in any event not later than 90 days
after the end of each fiscal year of the Borrower, the audited consolidated
balance sheet of the Borrower and its Subsidiaries at the end of such year,
and the related audited consolidated statements of income, changes in
shareholders' equity and cash flows for such year, each setting forth in
comparative form the figures for the previous fiscal year and all such
statements to be in reasonable detail, prepared in accordance with generally
accepted accounting principles, and accompanied by an auditor's report
prepared without qualification by Ernst & Young LLP or by another "Big Six"
accounting firm, the Form 10-K of the Borrower filed with the SEC (unless the
SEC has approved an extension, in which event the Borrower will deliver to the
Agent and each of the Banks a copy of the Form 10-K simultaneously with
delivery to the SEC), together with the unaudited annual operating statement
of each Mortgaged Property and Collateral Property (which statement shall also
be reconciled to the budget for the Mortgaged Property and the Collateral
Property), together with a certification by Borrower's chief financial or
chief accounting officer that the information contain in such statement fairly
presents the operations of the Mortgaged Property and the Collateral Property
for such period, and any other information the Banks may need to complete a
financial analysis of the Borrower;
(b) as soon as practicable, but in any event not later than 45 days
after the end of each fiscal quarter of the Borrower (including the fourth
quarter), copies of the unaudited consolidated balance sheet of the Borrower
and its Subsidiaries as at the end of such quarter, and the related unaudited
consolidated statements of income, changes in shareholders' equity and cash
flows for the portion of the Borrower's fiscal year then elapsed, and the
unaudited operating statement for the Mortgaged Property and the Collateral
Property for such quarter and year-to-date (which statement shall also be
reconciled to the budget for the Mortgaged Property and the Collateral
Property), all in reasonable detail and prepared in accordance with generally
accepted accounting principles (which may be provided by inclusion in the Form
10-Q of the Borrower for such period provided pursuant to subsection (c)
below), together with a certification by the principal financial or accounting
officer of the Borrower that the information contained in such financial
statements fairly presents the financial position of the Borrower and its
Subsidiaries and the operations of the Mortgaged Property and the Collateral
Property on the date thereof (subject to year-end adjustments);
(c) as soon as practicable, but in any event not later than 45 days
after the end of each of the first three fiscal quarters of the Borrower in
each year, copies of Form 10-Q of the Borrower filed with the SEC (unless the
SEC has approved an extension in which event the Borrower will deliver such
copies of the Form 10-Q to the Agent and each of the Banks simultaneously with
delivery to the SEC);
(d) as soon as practicable, but in any event not later than 45 days
after the end of each fiscal quarter of the Borrower (including the fourth
fiscal quarter in each year), copies of a consolidated statement of Operating
Cash Flow for such fiscal quarter for the Borrower and its Subsidiaries and a
statement of Operating Cash Flow for such fiscal quarter for each of the
Mortgaged Property and the Collateral Property, prepared in a manner
reasonable satisfactory to the Agent, together with a certification by the
Borrower's chief financial or chief accounting officer that the information
contained in such statement fairly presents the Operating Cash Flow of the
Borrower and its Subsidiaries and the Mortgaged Property and the Collateral
Property for such period;
(e) simultaneously with the delivery of the financial statements
referred to in subsections (a) and (b) above, a statement (a "Compliance
Certificate") certified by the principal financial or accounting officer of
the Borrower in the form of Exhibit C hereto setting forth in reasonable
detail computations evidencing compliance with the covenants contained in
Section 9, and (if applicable) reconciliations to reflect changes in generally
accepted accounting principles since the Balance Sheet Date;
(f) concurrently with the delivery of the financial statements
described in subsections (b) and (c) above, a certificate signed by the
President or Chief Financial Officer of the Borrower to the effect that,
having read this Agreement, and based upon an examination which they deem
sufficient to enable them to make an informed statement, there does not exist
any Default or Event of Default, or if such Default or Event of Default has
occurred, specifying the facts with respect thereto;
(g) contemporaneously with the filing, mailing or releasing
thereof, copies of all press releases and all material of a financial nature
filed with the SEC or sent to all of the stockholders of the Borrower;
(h) as soon as practicable but in any event not later than 45 days
after the end of each fiscal quarter of the Borrower (including the fourth
fiscal quarter in each year), updated Rent Rolls with respect to the Mortgaged
Property and the Collateral Property and a summary of each Rent Roll in form
reasonably satisfactory to the Majority Banks;
(i) not later than 30 days following each acquisition of an
interest in Real Estate by the Borrower or any of its Subsidiaries (which for
the purposes of this Section 7.4(h) shall include the Investments described in
Section 8.3(j)), each of the following: (i) a description of the property or
note acquired, (ii) an environmental site assessment prepared by an
Environmental Engineer stating no material qualification with respect to such
Real Estate or property, and (iii) a Compliance Certificate prepared using the
financial statements of the Borrower most recently provided or required to be
provided to the Banks under Section 6.4 or this Section 7.4 adjusted in the
best good-faith estimate of the Borrower to give effect to such acquisition
and demonstrating that no Default or Event of Default with respect to the
covenants referred to therein shall exist after giving effect to such
acquisition;
(j) as soon as practicable, but in any event not later than 30 days
prior to the beginning of each calendar year, the annual operating budget for
each of the Mortgaged Property and the Collateral Property, in form and
substance satisfactory to the Majority Banks;
(k) as soon as practicable, but in any event not later than 30 days
prior to the beginning of each calendar year, the annual operating budget for
each of the Mortgaged Property and the Collateral Property, in form and
substance satisfactory to the Majority Banks;
(l) as soon as practicable but in no event later than the 15th day
of each calendar month, a summary of each Rent Roll with respect to the
Mortgaged Property and the Collateral Property in form reasonably satisfactory
to the Majority Banks;
(m) promptly after they are filed with the Internal Revenue
Service, copies of all annual federal income tax returns and amendments
thereto of the Borrower and the Guarantor;
(n) not later than 45 days after the end of each fiscal quarter of
the Borrower (including the fourth fiscal quarter in each year), the market
comparable study conducted by the Borrower's internal staff or its property
managers, and at other times copies of such market studies relating to the
Mortgaged Property as are from time to time prepared by or on behalf of the
Borrower;
(o) within five (5) days of the funding of any amount pursuant to
the EQR Preferred Equity Commitment, notice of such funding and the amount
thereof;
(p) as soon as practicable, but in any event not later than two (2)
Business Days after the Borrower acquires knowledge of the same, (i) written
notice that EQR has notified the Borrower of a refusal to fund an amount
pursuant to the EQR Preferred Equity Commitment, or notice of its intention to
so refuse to make an advance, (ii) a claim by EQR of an event of default or
default by Borrower under the EQR Preferred Equity Commitment, or (iii) the
occurrence of any of the events described in Section 12.1(h), (i) or (j) with
respect to EQR;
(q) notice of the occurrence of the Adjustment Date within five (5)
days of the occurrence of the same; and
(r) from time to time such other financial data and information in
the possession of the Borrower (including without limitation auditors'
management letters, property inspection and environmental reports and
information as to zoning and other legal and regulatory changes affecting the
Borrower) as the Agent may reasonably request.
Section 20.5. Notices.
(a) Defaults. The Borrower will promptly notify the Agent in
writing of the occurrence of any Default or Event of Default. If any Person
shall give any notice or take any other action in respect of a claimed default
(whether or not constituting an Event of Default) under this Agreement or
under any note, evidence of indebtedness, indenture or other obligation to
which or with respect to which the Borrower, any of its Subsidiaries or the
Guarantor is a party or obligor, whether as principal or surety, and such
default would permit the holder of such note or obligation or other evidence
of indebtedness to accelerate the maturity thereof, which acceleration would
have a material adverse effect on the Borrower or the Guarantor, the Borrower
shall forthwith give written notice thereof to the Agent and each of the
Banks, describing the notice or action and the nature of the claimed default.
(b) Environmental Events. The Borrower will promptly give notice
to the Agent (i) upon the Borrower or the Guarantor obtaining knowledge of any
potential or known Release, or threat of Release, of any Hazardous Substances
at or from the Mortgaged Property or any Collateral Property; (ii) of any
violation of any Environmental Law that the Borrower, any of its Subsidiaries
or the Guarantor or, upon the Borrower obtaining knowledge thereof, any maker
of a Collateral Note, reports in writing or is reportable by such Person in
writing (or for which any written report supplemental to any oral report is
made) to any federal, state or local environmental agency and (iii) upon
becoming aware thereof, of any inquiry, proceeding, investigation, or other
action, including a notice from any agency of potential environmental
liability, of any federal, state or local environmental agency or board, that
in either case involves the Mortgaged Property or any Collateral Property or
has the potential to materially affect the assets, liabilities, financial
conditions or operations of the Borrower, any Subsidiary of the Borrower or
the maker of any Collateral Note or the Agent's liens on the Collateral
pursuant to the Security Documents.
(c) Notification of Claims Against Collateral. The Borrower will,
immediately upon becoming aware thereof, notify the Agent in writing of any
setoff, claims (including, with respect to the Mortgaged Property or any
Collateral Property, environmental claims), withholdings or other defenses to
which any of the Collateral, or the rights of the Agent or the Banks with
respect to the Collateral, are subject.
(d) Notice of Litigation and Judgments. The Borrower will give
notice to the Agent in writing within 15 days of becoming aware of any
litigation or proceedings threatened in writing or any pending litigation and
proceedings affecting the Borrower or any of its Subsidiaries or any Guarantor
or to which the Borrower, any of its Subsidiaries or the Guarantor is or is to
become a party involving an uninsured claim against the Borrower, any of its
Subsidiaries or the Guarantor that could reasonably be expected to have a
materially adverse effect on the Borrower or the Guarantor and stating the
nature and status of such litigation or proceedings. The Borrower will give
notice to the Agent, in writing, in form and detail satisfactory to the Agent
and each of the Banks, within ten days of any judgment not covered by
insurance, whether final or otherwise, against the Borrower, any of its
Subsidiaries or the Guarantor in an amount in excess of $250,000.
(e) Notice of Proposed Sales, Encumbrances, Refinance or Transfer
of Non-Mortgaged Property. The Borrower will give notice to the Agent of any
proposed or completed sale, encumbrance, refinance or transfer of any Real
Estate or other Investment described in Section 8.3 (j) of the Borrower or its
Subsidiaries other than Mortgaged Property within any fiscal quarter of the
Borrower, such notice to be submitted together with the Compliance Certificate
provided or required to be provided to the Banks under Section 7.4 with
respect to such fiscal quarter. The Compliance Certificate shall with respect
to any proposed or completed sale, encumbrance, refinance or transfer be
adjusted in the best good-faith estimate of the Borrower to give effect to
such sale, encumbrance, refinance or transfer and demonstrate that no Default
or Event of Default with respect to the covenants referred to therein shall
exist after giving effect to such sale, encumbrance, refinance or transfer.
Notwithstanding the foregoing, in the event of any sale, encumbrance,
refinance or transfer of any Real Estate or other Investment described in
Section 8.3(j) of the Borrower or its Subsidiaries other than the Mortgaged
Property involving an amount in excess of $10,000,000.00, the Borrower shall
promptly give notice to the Agent of such transaction, which notice shall be
accompanied by a Compliance Certificate prepared using the financial
statements of the Borrower most recently provided or required to be provided
to the Banks under Section 6.4 or Section 7.4 adjusted as provided in the
preceding sentence.
(f) Notification of Banks. Promptly after receiving any notice
under this Section 7.5, the Agent will forward a copy thereof to each of the
Banks, together with copies of any certificates or other written information
that accompanied such notice.
Section 20.6. Existence; Maintenance of Properties.
(a) The Borrower will do or cause to be done all things necessary
to preserve and keep in full force and effect its existence as a Maryland
corporation. The Borrower will cause each of its Subsidiaries to do or cause
to be done all things necessary to preserve and keep in full force and effect
its legal existence. The Borrower will do or cause to be done all things
necessary to preserve and keep in full force all of its rights and franchises
and those of its Subsidiaries. The Borrower will, and will cause each of its
Subsidiaries to, continue to engage primarily in the respective businesses now
conducted by each of them and in related businesses.
(b) The Borrower (i) will cause all of its properties and those of
its Subsidiaries used or useful in the conduct of its business or the business
of its Subsidiaries to be maintained and kept in good condition, repair and
working order (ordinary wear and tear excepted) and supplied with all
necessary equipment, and (ii) will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof in all cases in
which the failure so to do would have a material adverse effect on the
condition of the applicable Mortgaged Property or on the financial condition,
assets or operations of the Borrower or the Guarantor.
Section 20.7. Insurance. (a) The Borrower will, at its expense, procure
and maintain, or cause to be procured and maintained, for the benefit of the
Borrower and the Agent, insurance policies issued by such insurance companies,
in such amounts, in such form and substance, and with such coverages,
endorsements, deductibles and expiration dates as are acceptable to the Agent,
providing the following types of insurance covering the Mortgaged Property:
(i) "All Risks" property insurance (including broad form flood,
broad form earthquake and comprehensive boiler and machinery coverages)
on each Building and the contents therein of the Borrower and its
Subsidiaries in an amount not less than one hundred percent (100%) of the
full replacement cost of each Building and the contents therein of the
Borrower and its Subsidiaries, with deductibles not to exceed $10,000 for
any one occurrence, with a replacement cost coverage endorsement, and, if
requested by the Majority Banks, a contingent liability from operation of
building laws endorsement in such amounts as the Majority Banks may
require. Full replacement cost as used herein means the cost of
replacing the Building (exclusive of the cost of excavations, foundations
and footings below the lowest basement floor) and the contents therein of
the Borrower and its Subsidiaries without deduction for physical
depreciation thereof;
(ii) During the course of construction or repair of any Building
having a cost in excess of $250,000, the insurance required by clause (i)
above shall be written on a builders risk, completed value, non-reporting
form, meeting all of the terms required by clause (i) above, covering the
total value of work performed, materials, equipment, machinery and
supplies furnished, existing structures, and temporary structures being
erected on or near the Real Estate, including coverage against collapse
and damage during transit or while being stored off-site, and containing
a soft costs (including loss of rents) coverage endorsement and a
permission to occupy endorsement;
(iii) Flood insurance if at any time any Building is located in
any federally designated "special hazard area" (including any area having
special flood, mudslide and/or flood-related erosion hazards, and shown
on a Flood Hazard Boundary Map or a Flood Insurance Rate Map published by
the Federal Emergency Management Agency as Zone A, AO, Al-30, AE, A99,
AH, VO, Vl-30, VE, V, M or E) and the broad form flood coverage required
by clause (i) above is not available, in an amount equal to the full
replacement cost or the maximum amount then available under the National
Flood Insurance Program;
(iv) Rent loss insurance in an amount sufficient to recover at least
the total estimated gross receipts from all sources of income, including
without limitation, rental income, for the Real Estate for a twelve month
period;
(v) Commercial general liability insurance against claims for
personal injury (to include, without limitation, bodily injury and
personal and advertising injury) and property damage liability, all on an
occurrence basis, if commercially available, with such coverages as the
Majority Banks may reasonably request (including, without limitation,
contractual liability coverage, completed operations coverage for a
period of two years following completion of construction of any
improvements on the Real Estate, and coverages equivalent to an ISO broad
form endorsement), with a general aggregate limit of not less than
$1,000,000, a completed operations aggregate limit of not less than
$1,000,000, and a combined single "per occurrence" limit of not less than
$1,000,000 for bodily injury, property damage and medical payments;
(vi) During the course of construction or repair of any improvements
on the Real Estate, owner's contingent or protective liability insurance
covering claims not covered by or under the terms or provisions of the
insurance required by clause (v) above;
(vii) Employers liability insurance (with respect to the
Borrower's employees only);
(viii) Umbrella liability insurance with limits of not less than
$50,000,000 to be in excess of the limits of the insurance required by
clauses (v), (vi) and (vii) above, with coverage at least as broad as the
primary coverages of the insurance required by clauses (v), (vi) and
(vii) above, with any excess liability insurance to be at least as broad
as the coverages of the lead umbrella policy. All such policies shall be
endorsed to provide defense coverage obligations;
(ix) Workers' compensation insurance for all employees of the
Borrower or its Subsidiaries engaged on or with respect to the Real
Estate; and
(x) Such other insurance in such form and in such amounts as may
from time to time be required by the Majority Banks against other
insurable hazards and casualties which at the time are commonly insured
against in the case of properties of similar character and location to
the Real Estate.
The Borrower shall pay or cause to be paid all premiums on insurance
policies. The insurance policies with respect to all Mortgaged Property
provided for in clauses (v), (vi) and (viii) above with respect to all
Mortgaged Property shall name the Agent and each Bank as an additional
insured. The insurance policies provided for in clauses (i), (ii), (iii) and
(iv) above shall name the Agent as mortgagee and loss payee, shall be first
payable in case of loss to the Agent, and shall contain mortgage clauses and
lender's loss payable endorsements in form and substance acceptable to the
Majority Banks. The Borrower shall deliver duplicate originals or certified
copies of all such policies to the Majority Banks, and the Borrower shall
promptly furnish to the Majority Banks all renewal notices and evidence that
all premiums or portions thereof then due and payable have been paid. At
least 15 days prior to the expiration date of the policies, the Borrower shall
deliver to the Banks evidence of continued coverage, including a certificate
of insurance, as may be satisfactory to the Majority Banks.
(b) All policies of insurance required by this Agreement shall contain
clauses or endorsements to the effect that (i) no act or omission of either
the Borrower or any Subsidiary of the Borrower or anyone acting for the
Borrower or any Subsidiary of the Borrower shall affect the validity or
enforceability of such insurance insofar as the Agent is concerned, (ii) the
insurer waives any right of setoff, counterclaim, subrogation, or any
deduction in respect of any liability of the Borrower or any Subsidiary of the
Borrower and the Agent, (iii) such insurance is primary and without right of
contribution from any other insurance which may be available, (iv) such
policies shall not be modified, canceled or terminated prior to the scheduled
expiration date thereof without the insurer thereunder giving at least 15 days
prior written notice to the Agent by certified or registered mail, and (v)
that the Agent or the Banks shall not be liable for any premiums thereon or
subject to any assessments thereunder, and shall in all events be in amounts
sufficient to avoid any coinsurance liability.
(c) The insurance required by this Agreement may be effected through a
blanket policy or policies covering additional locations and property of the
Borrower, its Subsidiaries, and other Persons not included in the Mortgaged
Property, provided that such blanket policy or policies comply with all of the
terms and provisions of this Section 7.7 and contain endorsements or clauses
reasonably satisfactory to the Agent.
(d) All policies of insurance required by this Agreement shall be issued
by companies licensed to do business in the State where the policy is issued
and also in the states where the Real Estate is located and having a rating in
Best's Key Rating Guide of at least "A" and a financial size category of at
least "VIII".
(e) Neither the Borrower nor any Subsidiary of the Borrower shall carry
separate insurance, concurrent in kind or form or contributing in the event of
loss, with any insurance required under this Agreement unless such insurance
complies with the terms and provisions of this Section 7.7.
(f) In the event of any loss or damage to the Mortgaged Property, the
Borrower shall give immediate written notice to the insurance carrier and the
Agent, and the Agent shall furnish a copy of such notice promptly to each of
the Banks. The Borrower may make proof of loss and adjust and compromise any
claim under insurance policies which is of an amount not more than $250,000.00
so long as no Event of Default has occurred and is continuing and so long as
such claim is pursued diligently and in good faith. The Borrower hereby
irrevocably authorizes and empowers the Agent, at the Agent's option in the
Agent's sole discretion or at the request of the Majority Banks in their sole
discretion, as attorney in fact for the Borrower, to make proof of any loss
except as provided in the preceding sentence, to adjust and compromise any
claim under insurance policies, to appear in and prosecute any action arising
from such insurance policies, to collect and receive insurance proceeds, and
to deduct therefrom the Agent's expenses incurred in the collection of such
proceeds. If the Mortgaged Property is acquired by the Agent or any nominee
through foreclosure, deed in lieu of foreclosure or otherwise is acquired from
the owner thereof, all right, title and interest of the owner of such
Mortgaged Property in and to any insurance policies and unearned premiums
thereon and in and to the proceeds thereof resulting from loss or damage to
the Mortgaged Property prior to such sale or acquisition shall pass to the
Agent or any other successor in interest to the owner or purchaser or grantee
of the Mortgaged Property.
(g) Subject to the terms of the following sentence, the Borrower
authorizes the Agent, at the Agent's option or at the request of the Majority
Bank's in their sole discretion, to (i) apply the balance of such proceeds to
the payment of the Obligations whether or not then due, or (ii) if the Agent
or the Majority Bank shall require the reconstruction or repair of the
Mortgaged Property, to hold the balance of such proceeds to be used to pay all
taxes, charges, sewer use fees, water rates and assessments which may be
imposed upon the Mortgaged Property and the Obligations as they become due
during the course of reconstruction or repair of the Mortgaged Property and to
reimburse the Borrower, in accordance with such terms and conditions as Agent
may prescribe, for the cost of such reconstruction or repair of the Mortgaged
Property, and on completion of such reconstruction or repair to pay any excess
funds to the Borrower so long as no Default or Event of Default has occurred
and is continuing, or if a Default or Event of Default has occurred and is
continuing, to apply any of the excess to the payment of the Obligations.
Notwithstanding the foregoing, the Agent shall make such net proceeds
available to the Borrower to reconstruct and repair the Mortgaged Property, in
accordance with such terms and conditions as the Agent may prescribe for the
disbursement of such proceeds to assure completion of such reconstruction or
repair provided that (x) no Default or Event of Default shall have occurred
and be continuing, (y) the Borrower shall have provided to Agent additional
cash security in an amount equal to the amount reasonably estimated by the
Agent to be the amount in excess of such proceeds which will be required to
complete such repair or restoration, and (z) the Agent shall determine that
such repair or reconstruction can be completed prior to the Maturity Date.
(h) The Borrower, at its expense, will procure and maintain or cause to
be procured and maintained, insurance covering the Borrower and the Real
Estate other than the Mortgaged Property in such amounts and against such
risks and casualties as are customary for properties of similar character and
location, due regard being given to the type of improvements thereon, their
construction, location, use and occupancy.
(i) The Borrower shall provide or cause to be provided to the Agent for
the benefit of the Banks Title Policies for all of the Mortgaged Property
which shall at all times be in an aggregate amount of not less than the
initial Borrowing Base attributable to such Mortgaged Property. Each Title
Policy shall also contain, to the extent available, a tie-in endorsement
aggregating the insurance coverage provided under all of the policies with
tie-in endorsements.
Section 20.8. Taxes. The Borrower and each Subsidiary will duly pay and
discharge, or cause to be paid and discharged, before the same shall become
overdue, all taxes, assessments and other governmental charges imposed upon it
and upon the Mortgaged Property and the other Real Estate, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by
law become a lien or charge upon any of its property; provided that any such
tax, assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if the Borrower or such Subsidiary shall have set aside on its
books adequate reserves with respect thereto; and provided, further, that
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor, the Borrower and each Subsidiary of the
Borrower either (i) will provide a bond issued by a surety reasonably
acceptable to the Majority Banks and sufficient to stay all such proceedings
or (ii) if no such bond is provided, will pay each such tax, assessment,
charge, levy or claim.
Section 20.9. Inspection of Properties and Books. The Borrower shall
permit the Banks, through the Agent or any representative designated by the
Agent, at the Borrower's expense to visit and inspect any of the properties of
the Borrower or any of its Subsidiaries, to examine the books of account of
the Borrower and its Subsidiaries (and to make copies thereof and extracts
therefrom) and to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with, and to be advised as to the same by, its officers,
all at such reasonable times and intervals as the Agent or any Bank may
reasonably request. The Banks shall use good faith efforts to coordinate such
visits and inspections so as to minimize the interference with and disruption
to the Borrower's normal business operations.
Section 20.10. Compliance with Laws, Contracts, Licenses, and Permits.
The Borrower will comply with, and will cause each of its Subsidiaries to
comply in all respects with (i) all applicable laws and regulations now or
hereafter in effect wherever its business is conducted, including all
Environmental Laws, (ii) the provisions of its corporate charter, and other
charter documents and bylaws, (iii) all agreements and instruments to which it
is a party or by which it or any of its properties may be bound, (iv) all
applicable decrees, orders, and judgments, and (v) all licenses and permits
required by applicable laws and regulations for the conduct of its business or
the ownership, use or operation of its properties. If at any time while any
Loan or Note is outstanding or the Banks have any obligation to make Loans
hereunder, any authorization, consent, approval, permit or license from any
officer, agency or instrumentality of any government shall become necessary or
required in order that the Borrower may fulfill any of its obligations
hereunder, the Borrower will immediately take or cause to be taken all steps
necessary to obtain such authorization, consent, approval, permit or license
and furnish the Agent and the Banks with evidence thereof.
Section 20.11. Use of Proceeds. The Borrower will use the proceeds of
the Loans solely to provide short-term financing (a) for the acquisition of
fee interests by Borrower or, subject to the approval of the Majority Banks,
by a Subsidiary of the Borrower in Real Estate which is located in the
northeastern United States and utilized principally as commercial office
space, (b) for Capital Improvement Projects to Real Estate, provided, that 75%
of the aggregate amount of the proceeds of each advance of the Loans used for
such purpose shall be used for immediate income-enhancing purposes, (c) for
the acquisition of the Investments described in Section 8.3(j), (d) for the
repayment of Indebtedness incurred or assumed by the Borrower or any
Subsidiary of the Borrower in connection with the acquisitions and investments
described in Section 7.11(a) and (c), and to repay third party indebtedness of
the Borrower or its Subsidiaries incurred or assumed in connection with assets
acquired prior to the Closing Date, (e) for reasonable transaction costs
related to the transactions referred to in the preceding clauses (a) and (c),
(f) up to $5,000,000 for general working capital purposes, and (g) to finance
capital requirements at the Palomino Park Project.
Section 20.12. Further Assurances. The Borrower will cooperate with,
and will cause each of its Subsidiaries and the Guarantor to cooperate with,
the Agent and the Banks and execute such further instruments and documents as
the Banks or the Agent shall reasonably request to carry out to their
satisfaction the transactions contemplated by this Agreement and the other
Loan Documents.
Section 20.13. Management Agreements. The Borrower shall provide prompt
written notice to the Agent of any termination or material modification or
amendment of any Management Agreement, provided that, without the prior
consent of the Majority Banks, none of the Management Agreements shall be
modified or amended to increase the fees payable thereunder. None of the
Borrower, any of its Subsidiaries nor the Guarantor shall enter into any
Management Agreement or otherwise manage any of the Mortgaged Property except
with property and leasing managers having sufficient expertise and resources
to manage such properties as class B office buildings, and on leasing terms
and conditions no less favorable to the Borrower, its Subsidiaries or the
Guarantor than are contained in the Management Agreements delivered to the
Agent prior to the date hereof or are otherwise on then commercially
reasonable terms.
Section 20.14. ERISA Compliance. The Borrower will not permit the
present value of all employee benefits vested in all Employee Benefit Plans,
Multiemployer Plans and Guaranteed Pension Plans maintained by the Borrower
and any ERISA Affiliate thereof to exceed the present value of the assets
allocable to such vested benefits by an amount greater than $500,000.00 in the
aggregate. Neither the Borrower nor any ERISA Affiliate thereof will at any
time permit any such Plan maintained by it to engage in any "prohibited
transaction" as such term is defined in Section 4975 of the Code or Section
406 of ERISA, incur any "accumulated funding deficiency" as such term is
defined in Section 302 of ERISA, whether or not waived, or terminate any such
Plan in any manner which could result in the imposition of a lien on the
property of the Borrower or the Guarantor pursuant to Section 4068 of ERISA.
Section 20.15. Distribution of Income to the Borrower. The Borrower
shall cause all of its Subsidiaries to promptly distribute to the Borrower
(but not less frequently than once each fiscal quarter of the Borrower),
whether in the form of dividends, distributions or otherwise, all profits,
proceeds or other income relating to or arising from its Subsidiaries' use,
operation, financing, refinancing, sale or other disposition of their
respective assets and properties after (a) the payment by each Subsidiary of
its operating expenses and debt service for such quarter and (b) the
establishment of reasonable reserves for the payment of operating expenses not
paid on at least a quarterly basis and capital improvements to be made to such
Subsidiary's assets and properties approved by such Subsidiary in the ordinary
course of business consistent with its past practices.
Section 20.16. More Restrictive Agreements. Without limiting the terms
of Section 8.1, should the Borrower or the Guarantor enter into or modify any
agreements or documents pertaining to any existing or future Indebtedness,
Debt Offering or Equity Offering, which agreements or documents include
covenants (whether affirmative or negative), warranties, representations,
defaults or events of default (or any other provision which may have the same
practical effect as any of the foregoing) which are individually or in the
aggregate more restrictive against the Borrower, the Guarantor or their
respective Subsidiaries than those set forth herein or in any of the other
Loan Documents, the Borrower shall promptly notify the Agent and, if requested
by the Majority Banks, the Borrower, the Agent, and the Majority Banks shall
(and if applicable, the Borrower shall cause the Guarantor to) promptly amend
this Agreement and the other Loan Documents to include some or all of such
more restrictive provisions as determined by the Majority Banks in their sole
discretion.
Section 21. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any of the Banks has any obligation to make any Loans:
Section 21.1. Restrictions on Indebtedness. The Borrower will not, and
will not permit any of its Subsidiaries owning Collateral to, create, incur,
assume, guarantee or be or remain liable, contingently or otherwise, with
respect to any Indebtedness other than:
(a) Indebtedness to the Banks arising under any of the Loan
Documents;
(b) current liabilities of the Borrower or its Subsidiaries
incurred in the ordinary course of business but not incurred through (i) the
borrowing of money, or (ii) the obtaining of credit except for credit on an
open account basis customarily extended and in fact extended in connection
with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments, governmental
charges or levies and claims for labor, materials and supplies to the extent
that payment therefor shall not at the time be required to be made in
accordance with the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards that have been
in force for less than the applicable period for taking an appeal so long as
execution is not levied thereunder or in respect of which the Borrower or the
relevant Subsidiary shall at the time in good faith be prosecuting an appeal
or proceedings for review and in respect of which a stay of execution shall
have been obtained pending such appeal or review;
(e) endorsements for collection, deposit or negotiation and
warranties of products or services, in each case incurred in the ordinary
course of business;
(f) the Palomino Park Bonds; and
(g) Indebtedness in an amount not to exceed $20,000,000.00 to
Equity Residential Properties Trust, a Maryland real estate investment trust,
to be repaid no later than one week from the Closig Date with the proceeds of
an Equity Offering.
Nothing herein shall prohibit any Subsidiaries of Borrower that do not own any
Collateral from incurring Indebtedness other than that permitted in this
Section 8.1, provided that in no event shall the Borrower nor any of its
Subsidiaries owning Collateral be liable, contingently or otherwise, for any
such Indebtedness.
Section 21.2. Restrictions on Liens, Etc. The Borrower will not, and
will not permit any of its Subsidiaries owning Collateral to, (a) create or
incur or suffer to be created or incurred or to exist any lien, encumbrance,
mortgage, pledge, negative pledge, charge, restriction or other security
interest of any kind upon any of its property or assets of any character
whether now owned or hereafter acquired, or upon the income or profits
therefrom; (b) transfer any of its property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to payment of
its general creditors; (c) acquire, or agree or have an option to acquire, any
property or assets upon conditional sale or other title retention or purchase
money security agreement, device or arrangement; (d) suffer to exist for a
period of more than 30 days after the same shall have been incurred any
Indebtedness or claim or demand against it that if unpaid might by law or upon
bankruptcy or insolvency, or otherwise, be given any priority whatsoever over
its general creditors; (e) sell, assign, pledge or otherwise transfer any
accounts, contract rights, general intangibles, chattel paper or instruments,
with or without recourse; or (f) incur or maintain any obligation to any
holder of Indebtedness of the Borrower or such Subsidiary which prohibits the
creation or maintenance of any lien securing the Obligations (collectively
"Liens"); provided that the Borrower and any Subsidiary of the Borrower owning
Collateral may create or incur or suffer to be created or incurred or to
exist:
(i) liens in favor of the Borrower on all or part of the assets of
Subsidiaries of the Borrower securing Indebtedness owing by Subsidiaries
of the Borrower to the Borrower (provided that no such liens shall be
permitted with respect to any of the Collateral or on any other assets of
a Subsidiary which also owns any portion of the Collateral);
(ii) liens on properties to secure taxes, assessments and other
governmental charges or claims for labor, material or supplies in respect
of obligations not overdue;
(iii) deposits or pledges made in connection with, or to secure
payment of, workers' compensation, unemployment insurance, old age
pensions or other social security obligations;
(iv) liens on properties other than the Mortgaged Property or any
other Collateral in respect of judgments, awards or indebtedness, the
Indebtedness with respect to which is permitted by Section 8.1(d);
(v) encumbrances on properties other than the Mortgaged Property
consisting of easements, rights of way, zoning restrictions, restrictions
on the use of real property and defects and irregularities in the title
thereto, landlord's or lessor's liens under leases to which the Borrower
or a Subsidiary of the Borrower is a party, and other minor non-monetary
liens or encumbrances none of which interferes materially with the use of
the property affected in the ordinary conduct of the business of the
Borrower and its Subsidiaries, which defects do not individually or in
the aggregate have a materially adverse effect on the business of the
Borrower individually or of the Borrower and its Subsidiaries on a
consolidated basis;
(vi) liens in favor of the Agent and the Banks under the Loan
Documents; and
(vii) liens and encumbrances on a Mortgaged Property expressly
permitted under the terms of the Security Deed relating thereto.
Section 21.3. Restrictions on Investments. The Borrower will not, and
will not permit any of its Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the United
States of America that mature within one (1) year from the date of purchase by
the Borrower or its Subsidiary;
(b) marketable direct obligations of any of the following: Federal
Home Loan Mortgage Corporation, Student Loan Marketing Association, Federal
Home Loan Banks, Federal National Mortgage Association, Government National
Mortgage Association, Bank for Cooperatives, Federal Intermediate Credit
Banks, Federal Financing Banks, Export-Import Bank of the United States,
Federal Land Banks, or any other agency or instrumentality of the United
States of America;
(c) demand deposits, certificates of deposit, bankers acceptances
and time deposits of United States banks having total assets in excess of
$100,000,000; provided, however, that the aggregate amount at any time so
invested with any single bank having total assets of less than $1,000,000,000
will not exceed $200,000;
(d) securities commonly known as "commercial paper" issued by a
corporation organized and existing under the laws of the United States of
America or any State which at the time of purchase are rated by Moody's
Investors Service, Inc. or by Standard & Poor's Corporation at not less than
"P 1" if then rated by Moody's Investors Service, Inc., and not less than
"A 1", if then rated by Standard & Poor's Corporation;
(e) mortgage-backed securities guaranteed by the Government
National Mortgage Association, the Federal National Mortgage Association or
the Federal Home Loan Mortgage Corporation and other mortgage-backed bonds
which at the time of purchase are rated by Moody's Investors Service, Inc. or
by Standard & Poor's Corporation at not less than "Aa" if then rated by
Moody's Investors Service, Inc. and not less than "AA" if then rated by
Standard & Poor's Corporation;
(f) repurchase agreements having a term not greater than 90 days
and fully secured by securities described in the foregoing subsection (a), (b)
or (e) with banks described in the foregoing subsection (c) or with financial
institutions or other corporations having total assets in excess of
$500,000,000;
(g) shares of so-called "money market funds" registered with the
SEC under the Investment Company Act of 1940 which maintain a level per-share
value, invest principally in investments described in the foregoing
subsections (a) through (f) and have total assets in excess of $50,000,000;
(h) Investments in fee interests in Real Estate utilized
principally for commercial office space, including earnest money deposits
relating thereto and transaction costs;
(i) Investments in Subsidiaries of the Borrower;
(j) Investments in loans secured principally by mortgages or deeds
of trust on real property upon which are located completed improvements which
are principally used for commercial office purposes, leasehold interests in
properties which are used principally for commercial office purposes under
ground leases having not less than fifty (50) years of the leasehold term
remaining at the time of acquisition thereof by the Borrower, or interests in
public or private real estate investment trusts or other real estate companies
which principally own real property or shares or other interests in entities
which own real property or other interests in real property, all of which real
property is used principally for commercial office purposes;
(k) Investments in shares of the Borrower, provided that the
Borrower shall give notice to the Agent concurrently with the financial
statements provided in Section 7.4(b) of any such Investments that have
occurred during the preceding fiscal quarter of the Borrower; and
(l) Investments in Park at Highlands LLC and Red Canyon at Palomino
Park LLC, the entities owning the Palomino Park Project.
Section 21.4. Merger, Consolidation. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to any merger,
consolidation or other business combination, or agree to effect any asset
acquisition, stock acquisition or other acquisition without the prior written
consent of the Majority Banks except (i) the merger or consolidation of one or
more of the Subsidiaries of the Borrower with and into the Borrower and (ii)
the merger or consolidation of two or more Subsidiaries of the Borrower.
Section 21.5. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell
or transfer any Real Estate owned by it in order that then or thereafter the
Borrower or any Subsidiary shall lease back such Real Estate.
Section 21.6. Compliance with Environmental Laws. The Borrower will
not, and will not permit any of its Subsidiaries, to do any of the following:
(a) use any of the Real Estate or any portion thereof as a facility for the
handling, processing, storage or disposal of Hazardous Substances, except for
small quantities of Hazardous Substances used in the ordinary course of
business and in compliance with all applicable Environmental Laws, (b) cause
or permit to be located on any of the Real Estate any underground tank or
other underground storage receptacle for Hazardous Substances except in full
compliance with Environmental Laws, (c) generate any Hazardous Substances on
any of the Real Estate except in full compliance with Environmental Laws, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner
so as to cause a Release of Hazardous Substances on, upon or into the Real
Estate or any surrounding properties or any threatened Release of Hazardous
Substances which might give rise to liability under CERCLA or any other
Environmental Law, or (e) directly or indirectly transport or arrange for the
transport of any Hazardous Substances (except in compliance with all
Environmental Laws).
The Borrower shall:
(i) in the event of any change in Environmental Laws governing the
assessment, release or removal of Hazardous Substances, which change would
lead a prudent lender to require additional testing to avail itself of any
statutory insurance or limited liability, take all action (including, without
limitation, the conducting of engineering tests at the sole expense of the
Borrower) to confirm that no Hazardous Substances are or ever were Released or
disposed of on the Mortgaged Property; and
(ii) if any Release or disposal of Hazardous Substances shall occur
or shall have occurred on the Mortgaged Property (including without limitation
any such Release or disposal occurring prior to the acquisition of such
Mortgaged Property by the Borrower), cause the prompt containment and removal
of such Hazardous Substances and remediation of the Mortgaged Property in full
compliance with all applicable laws and regulations and to the satisfaction of
the Majority Banks; provided, that the Borrower shall be deemed to be in
compliance with Environmental Laws for the purpose of this clause (ii) so long
as it or a responsible third party with sufficient financial resources is
taking reasonable action to remediate or manage any event of noncompliance to
the satisfaction of the Majority Banks and no action shall have been commenced
by any enforcement agency. The Majority Banks may engage their own
Environmental Engineer to review the environmental assessments and the
Borrower's compliance with the covenants contained herein.
At any time after an Event of Default shall have occurred hereunder, or,
whether or not an Event of Default shall have occurred, at any time that the
Agent or the Majority Banks shall have reasonable grounds to believe that a
Release or threatened Release of Hazardous Substances may have occurred,
relating to any Mortgaged Property, or that any of the Mortgaged Property is
not in compliance with the Environmental Laws, the Agent may at its election
(and will at the request of the Majority Banks) obtain such environmental
assessments of such Mortgaged Property prepared by an Environmental Engineer
as may be necessary or advisable for the purpose of evaluating or confirming
(i) whether any Hazardous Substances are present in the soil or water at or
adjacent to such Mortgaged Property and (ii) whether the use and operation of
such Mortgaged Property comply with all Environmental Laws. Environmental
assessments may include detailed visual inspections of such Mortgaged Property
including, without limitation, any and all storage areas, storage tanks,
drains, dry wells and leaching areas, and the taking of soil samples, as well
as such other investigations or analyses as are necessary or appropriate for a
complete determination of the compliance of such Mortgaged Property and the
use and operation thereof with all applicable Environmental Laws. All such
environmental assessments shall be at the sole cost and expense of the
Borrower.
Section 21.7. Distributions. Prior to the first (1st) anniversary of
the Closing Date, the Borrower will not make any Distributions. Thereafter,
the Borrower will not make any Distributions which would cause it to violate
any of the following covenants:
(a) The Borrower shall make no Distributions in the event that an
Event of Default shall have occurred and be continuing or a Default or Event
of Default would be created after giving effect to such Distribution; and
(b) Notwithstanding the foregoing, at any time when an Event of
Default shall have occurred and the maturity of the Obligations has been
accelerated, the Borrower shall not make any Distributions whatsoever,
directly or indirectly.
Section 21.8. Asset Sales. Neither the Borrower nor any Subsidiary of
the Borrower shall sell, transfer or otherwise dispose of any Real Estate or
other Investment described in Section 8.3(j) (except as the result of a
condemnation or casualty and except for the granting of Permitted Liens)
unless there shall have been delivered to the Banks a statement that no
Default or Event of Default exists and a Compliance Certificate demonstrating
that the Borrower will be in compliance with its covenants referred to therein
after giving effect to such sale, transfer or other disposition.
Section 21.9. Development Activity. Neither the Borrower nor any
Subsidiary of the Borrower shall, without the prior written consent of the
Majority Banks, engage, directly or indirectly, in the development of
properties to be used principally for commercial office purposes or otherwise,
except for the Palomino Park Project. For purposes of this Section 8.9, the
term "development" shall include the new construction of an office building or
office park, but shall not include Capital Improvement Projects to existing
Real Estate which is already used principally for commercial office purposes.
The Borrower acknowledges that the decision of the Majority Banks to grant or
withhold such consent shall be based on such factors as the Majority Banks
deem relevant in their sole discretion, including without limitation, evidence
of sufficient funds both from borrowings and equity to complete such
development and evidence that the Borrower or its Subsidiary has the resources
and expertise necessary to complete such project. Nothing herein shall
prohibit the Borrower or any Subsidiary of the Borrower from entering into an
agreement to acquire Real Estate which has been developed and initially leased
by another Person.
Section 22. FINANCIAL COVENANTS OF BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans it will comply
with the following:
Section 22.1. Liabilities to Assets Ratio. The Borrower will not, at
the end of any fiscal quarter, permit the ratio of Consolidated Total
Liabilities to Consolidated Total Assets of the Borrower to exceed 0.60 to 1.
Section 22.2. Consolidated Operating Cash Flow Coverage. The Borrower
will not, at the end of any fiscal quarter, (a) until the occurrence of the
Adjustment Date, permit its Consolidated Operating Cash Flow for any period of
four consecutive fiscal quarters (treated as a single accounting period) (the
"Test Period"), minus the Capital Improvement Reserve for the Test Period to
be less than 1.3 times the Debt Service for the Test Period; and (b) after the
occurrence of the Adjustment Date, permit Consolidated Operating Cash Flow for
the Test Period minus the Capital Improvement Reserve for the Test Period to
be less than 1.5 times the Debt Service for the Test Period. In the event
that the Borrower shall not have any of the foregoing components for four (4)
consecutive fiscal quarters, then such components shall be annualized in a
manner reasonably satisfactory to the Agent and the Co-Agent.
Section 22.3. Borrowing Base. The Borrower will not permit the
outstanding principal balance of the Loans as of the date of determination to
be greater than the Borrowing Base as of the date of determination.
Section 22.4. Minimum Shareholders Equity. The Borrower will not, at
the end of any fiscal quarter, permit the Shareholders Equity to be less than
the sum of (a) $35,000,000 plus (b) eighty percent (80%) of the net proceeds
from any Equity Offering after the Closing Date.
Section 22.5. Real Estate Assets. The Borrower shall not permit its
direct or indirect interest in (i) undeveloped land and (ii) non-income
producing land assets or mortgages secured by non-income producing land assets
to exceed, in the aggregate, twenty-five percent (25%) of the Borrower's
Consolidated Total Assets.
Section 23. CLOSING CONDITIONS.
The obligations of the Agent and the Banks to make the initial Loans
shall be subject to the satisfaction of the following conditions precedent on
or prior to May 30, 1997:
Section 23.1. Loan Documents. Each of the Loan Documents shall have
been duly executed and delivered by the respective parties thereto, shall be
in full force and effect and shall be in form and substance satisfactory to
the Majority Banks. The Agent shall have received a fully executed copy of
each such document, except that each Bank shall have received a fully executed
counterpart of its Note. Each of the Collateral Notes shall have been
endorsed to and delivered to the Agent.
Section 23.2. Certified Copies of Organizational Documents. The Agent
shall have received from the Borrower a copy, certified as of a recent date by
the appropriate officer of the State in which the Borrower is organized or in
which the Mortgaged Property is located, and by a duly authorized officer of
the Borrower to be true and complete, of the articles of incorporation or
other organizational documents of the Borrower or its qualification to do
business, as applicable, as in effect on such date of certification.
Section 23.3. Bylaws; Resolutions. All action on the part of the
Borrower necessary for the valid execution, delivery and performance by the
Borrower of the Loan Documents to which it is or is to become a party shall
have been duly and effectively taken, and evidence thereof satisfactory to the
Agent shall have been provided to the Agent. The Agent shall have received
from the Borrower true copies of its bylaws and the resolutions adopted by its
board of directors or other governing body authorizing the transactions
described herein, each certified by its secretary or other duly authorized
officer as of a recent date to be true and complete.
Section 23.4. Incumbency Certificate; Authorized Signers. The Agent
shall have received from the Borrower an incumbency certificate, dated as of
the Closing Date, signed by a duly authorized officer of the Borrower and
giving the name and bearing a specimen signature of each individual who shall
be authorized: (a) to sign, in the name and on behalf of the Borrower, each of
the Loan Documents to which the Borrower is or is to become a party; (b) in
the case of the Borrower to make Loan and Conversion Requests; and (c) to give
notices and to take other action on behalf of the Borrower under the Loan
Documents.
Section 23.5. Opinion of Counsel. The Agent shall have received a
favorable opinion addressed to the Banks and the Agent and dated as of the
Closing Date, in form and substance satisfactory to the Banks and the Agent,
from Robinson, Silverman, Pearce, Aronsohn & Berman, counsel of the Borrower,
as to such matters as the Agent shall reasonably request.
Section 23.6. Payment of Fees. The Borrower shall have paid to the
Agent the commitment fee pursuant to Section 4.2.
Section 23.7. Appraisals. The Agent shall have received Appraisals of
the Mortgaged Property and the Collateral Property in form and substance
satisfactory to the Majority Banks prior to the Closing Date demonstrating
that the initial Collateral, when taken with the EQR Preferred Equity
Commitment Allowance, has a Designated Collateral Value that is in compliance
with the terms of this Agreement.
Section 23.8. Environmental Reports. The Agent shall have received
environmental site assessment reports for the Mortgaged Property and the
Collateral Property prepared by an Environmental Engineer no more than three
months prior to the Closing Date, which indicate the condition of the
Mortgaged Property and the Collateral Property and such other properties and
any Buildings thereon and which set forth no qualifications except those that
are acceptable to the Majority Banks in their sole discretion, and disclosing
that each piece of Mortgaged Property or Collateral Property and any Building
thereon is free of oil, underground storage tanks, asbestos or asbestos
containing material, lead paint and other Hazardous Substances (except to the
extent acceptable to the Majority Banks in their sole discretion), and which
reports are otherwise in form and substance satisfactory to the Majority
Banks).
Section 23.9. Insurance. The Agent shall have received duplicate
originals or certified copies of all policies of insurance required by this
Agreement.
Section 23.10. Performance; No Default. The Borrower shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by it on or prior to the Closing Date, and on the
Closing Date there shall exist no Default or Event of Default.
Section 23.11. Representations and Warranties. The representations and
warranties made by the Borrower and the Guarantor in the Loan Documents or
otherwise made by or on behalf of any Borrower, the Guarantor or any
Subsidiary thereof, in connection therewith or after the date thereof shall
have been true and correct in all material respects when made and shall also
be true and correct in all material respects on the Closing Date.
Section 23.12. Proceedings and Documents. All proceedings in connection
with the transactions contemplated by this Agreement and the other Loan
Documents shall be reasonably satisfactory to the Agent and the Agent's
Special Counsel in form and substance, and the Agent shall have received all
information and such counterpart originals or certified copies of such
documents and such other certificates, opinions or documents as the Agent and
the Agent's Special Counsel may reasonably require.
Section 23.13. Eligible Real Estate Qualification Documents and
Qualifying Collateral Note Qualification Documents. The Eligible Real Estate
Qualification Documents for each parcel of Mortgaged Property included in the
Collateral as of the Closing Date shall have been delivered to the Agent. The
Qualifying Collateral Note Qualification Documents for each Collateral Note
included in the Collateral as of the Closing Date shall have been delivered to
the Agent.
Section 23.14. Compliance Certificate. A Compliance Certificate dated
as of the date of the Closing Date demonstrating compliance with each of the
covenants calculated therein as of the most recent fiscal quarter end for
which the Borrower has provided financial statements under Section 6.4
adjusted in the best good faith estimate of the Borrower dated as of the date
of the Closing Date shall have been delivered to the Agent.
Section 23.15. Other Documents. To the extent requested by the Majority
Banks, executed copies of all material agreements of any nature whatsoever to
which the Borrower or any Subsidiary of the Borrower is a party affecting or
relating to the use, operation, development, construction or management of the
Mortgaged Property or the other Collateral.
Section 23.16. No Condemnation/Taking. The Agent shall have received
written confirmation from the Borrower that no condemnation proceedings are
pending or to the Borrower's knowledge threatened against any Mortgaged
Property or Collateral Property or, if any such proceedings are pending or
threatened, identifying the same and the Real Estate or Collateral Property
affected thereby and the Agent shall have determined that none of such
proceedings is or will be material to the Mortgaged Property or Collateral
Property affected thereby.
Section 23.17. Governmental Policy. Each Bank shall have determined
that there have been no material changes in governmental regulations or policy
affecting the Banks, the Borrower or the Guarantor.
Section 23.18. Other. The Agent shall have reviewed such other
documents, instruments, certificates, opinions, assurances, consents and
approvals as the Agent or the Agent's Special Counsel may reasonably have
requested.
Section 23.19. Consummation of Merger. The Borrower shall have
delivered or caused to be delivered evidence reasonably satisfactory to the
Banks in their sole discretion that the merger of Equity Residential Property
Trust and Wellsford Residential Property Trust shall have been consummated in
all respects prior to the Closing Date, that the successor corporation is a
public corporation listed on the New York Stock Exchange, and that the
Borrower is a public corporation listed on the American Stock Exchange.
Section 24. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, whether on or after
the Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
Section 24.1. Prior Conditions Satisfied. All conditions set forth in
Section 10 shall continue to be satisfied as of the date upon which any Loan
is to be made.
Section 24.2. Representations True; No Default. Each of the
representations and warranties contained in this Agreement, the other Loan
Documents or in any document or instrument delivered pursuant to or in
connection with this Agreement shall be true as of the date as of which they
were made and shall also be true at and as of the time of the making of such
Loan, with the same effect as if made at and as of that time (except to the
extent of changes resulting from transactions contemplated or permitted by
this Agreement and the other Loan Documents and changes occurring in the
ordinary course of business that singly or in the aggregate are not materially
adverse, and except to the extent that such representations and warranties
relate expressly to an earlier date) and no Default or Event of Default shall
have occurred and be continuing. Each of the Banks shall have received a
certificate of the Borrower signed by an authorized officer of the Borrower to
such effect.
Section 24.3. No Legal Impediment. No change shall have occurred in any
law or regulations thereunder or interpretations thereof that in the
reasonable opinion of any Bank would make it illegal for such Bank to make
such Loan.
Section 24.4. Governmental Regulation. Each Bank shall have received
such statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of
the Federal Reserve System.
Section 24.5. Proceedings and Documents. All proceedings in connection
with the Loan shall be satisfactory in substance and in form to the Majority
Banks, and the Majority Banks shall have received all information and such
counterpart originals or certified or other copies of such documents as the
Majority Banks may reasonably request.
Section 24.6. Borrowing Documents. In the case of any request for a
Loan, the Agent shall have received a copy of each of the following:
(a) the request for a Loan required by Section 2.6 in the form of
Exhibit B hereto, fully completed; and
(b) the Compliance Certificate required by clause (iv) of Section
2.6 prepared in a manner reasonably acceptable to the Agent.
Section 24.7. Endorsement to Title Policy. At such time as the Agent
shall determine in its discretion, to the extent available under applicable
law, a "date down" endorsement to each Title Policy indicating no change in
the state of title and containing no survey exceptions not approved by the
Majority Banks, which endorsement shall, expressly or by virtue of a proper
"revolving credit" clause or endorsement in the Title Policy, increase the
coverage of the Title Policy to the aggregate amount of all Loans advanced and
outstanding on or before the effective date of such endorsement (provided that
the amount of coverage under an individual Title Policy for an individual
Mortgaged Property need not equal the aggregate amount of all Loans), or if
such endorsement is not available, such other evidence and assurances as the
Majority Banks may reasonably require (which evidence may include, without
limitation, an affidavit from the Borrower or the Guarantor, as applicable,
stating that there have been no changes in title from the date of the last
effective date of the Title Policy).
Section 24.8. Future Advances Tax Payment. As a condition precedent to
any Bank's obligations to make any Loans in excess of an aggregate amount of
$50,000,000 (calculated as the sum of all Loans advanced hereunder without
deduction for any repayments of such Loans and regardless of whether such
Loans are outstanding at the time of reference hereto), the Borrower will pay
or cause to be paid to the Agent any mortgage, recording, intangible,
documentary stamp or other similar taxes and charges which the Agent
reasonably determines to be payable as a result of such Loan to any state or
any county or municipality thereof in which any of the Mortgaged Property is
located and deliver to the Agent such affidavits or other information which
the Agent reasonably determines to be necessary in connection with the payment
of such tax, in order to insure that the Security Deeds on Mortgaged Property
located in such state secure the Borrower's obligation with respect to the
Loans then being requested. The provisions of this Section 11.8 shall be
without limitation of the Borrower's obligations under other provisions of the
Loan Documents, including without limitation Section 15 hereof.
Section 25. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 25.1. Events of Default and Acceleration. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the Loans when
the same shall become due and payable, whether at the stated date of maturity
or any accelerated date of maturity or at any other date fixed for payment;
(b) the Borrower shall fail to pay any interest on the Loans or any
other sums due hereunder or under any of the other Loan Documents, when the
same shall become due and payable, whether at the stated date of maturity or
any accelerated date of maturity or at any other date fixed for payment;
(c) the Borrower shall fail to comply with any covenant contained
in Section 9.3, in which event, subject to the provisions of Section 12.1A,
the Borrower shall have the cure period or periods provided in Section 12.1B;
(d) the Borrower shall fail to comply with any covenant contained
in Section 9.1, Section 9.2, Section 9.4 or Section 9.5 and such failure shall
continue for 30 Business Days after written notice thereof shall have been
given to the Borrower by the Agent;
(e) the Borrower, any of its Subsidiaries, any Guarantor or any
other party shall fail to perform any other term, covenant or agreement
contained herein or in any of the other Loan Documents (other than those
specified above in this Section 12.1);
(f) any representation or warranty of the Borrower or any of its
Subsidiaries or any Guarantor in this Agreement or any other Loan Document, or
in any report, certificate, financial statement, request for a Loan, or in any
other document or instrument delivered pursuant to or in connection with this
Agreement, any advance of a Loan or any of the other Loan Documents shall
prove to have been false in any material respect upon the date when made or
deemed to have been made or repeated;
(g) the Borrower or any of its Subsidiaries or any Guarantor shall
fail to pay at maturity, or within any applicable period of grace, any
obligation for borrowed money or credit received, or fail to observe or
perform any material term, covenant or agreement contained in any agreement by
which it is bound, evidencing or securing any such borrowed money or credit
received for such period of time as would permit (assuming the giving of
appropriate notice if required) the holder or holders thereof or of any
obligations issued thereunder to accelerate the maturity thereof; provided
that the events described in this Section 12.1(g) shall not constitute an
Event of Default unless such failure to perform, together with other failures
to perform as described in this Section 12.1(g), involve singly or in the
aggregate obligations for borrowed money or credit received totaling in excess
of $10,000,000;
(h) the Borrower or any of its Subsidiaries or any Guarantor, (A)
shall make an assignment for the benefit of creditors, or admit in writing its
general inability to pay or generally fail to pay its debts as they mature or
become due, or shall petition or apply for the appointment of a trustee or
other custodian, liquidator or receiver of the Borrower or any of its
Subsidiaries or any Guarantor or of any substantial part of the assets of any
thereof, (B) shall commence any case or other proceeding relating to the
Borrower or any of its Subsidiaries or any Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect, or
(C) shall take any action to authorize or in furtherance of any of the
foregoing;
(i) a petition or application shall be filed for the appointment of
a trustee or other custodian, liquidator or receiver of the Borrower or any of
its Subsidiaries or any Guarantor or any substantial part of the assets of any
thereof, or a case or other proceeding shall be commenced against the Borrower
or any of its Subsidiaries or any Guarantor under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution or
liquidation or similar law of any jurisdiction, now or hereafter in effect,
and the Borrower or any of its Subsidiaries or any Guarantor shall indicate
its approval thereof, consent thereto or acquiescence therein or such
petition, application, case or proceeding shall not have been dismissed within
60 days following the filing or commencement thereof;
(j) a decree or order is entered appointing any such trustee,
custodian, liquidator or receiver or adjudicating the Borrower or any of its
Subsidiaries or any Guarantor bankrupt or insolvent, or approving a petition
in any such case or other proceeding, or a decree or order for relief is
entered in respect of the Borrower or any of its Subsidiaries or any
Guarantor, in each case of the foregoing in an involuntary case under federal
bankruptcy laws as now or hereafter constituted;
(k) there shall remain in force, undischarged, unsatisfied and
unstayed, for more than 60 days, whether or not consecutive, any uninsured
final judgment against the Borrower or any of its Subsidiaries or any
Guarantor that, with other outstanding uninsured final judgments,
undischarged, against the Borrower or any of its Subsidiaries or any Guarantor
exceeds in the aggregate $1,000,000.00;
(l) if any of the Loan Documents shall be canceled, terminated,
revoked or rescinded otherwise than in accordance with the terms thereof or
with the express prior written agreement, consent or approval of the Banks, or
any action at law, suit in equity or other legal proceeding to cancel, revoke
or rescind any of the Loan Documents shall be commenced by or on behalf of the
Borrower, any of its Subsidiaries or any Guarantor or any of their respective
holders of Voting Interests, or any court or any other governmental or
regulatory authority or agency of competent jurisdiction shall make a
determination that, or issue a judgment, order, decree or ruling to the effect
that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof in any material respect as
determined by the Majority Banks;
(m) any dissolution, termination, partial or complete liquidation,
merger or consolidation of the Borrower or any of its Subsidiaries or any
Guarantor, or any sale, transfer or other disposition of the assets of the
Borrower or any of its Subsidiaries or any Guarantor, other than as permitted
under the terms of this Agreement or the other Loan Documents;
(n) any suit or proceeding shall be filed against the Borrower, any
of its Subsidiaries, any Guarantor, any of the Mortgaged Property, any other
Collateral or any Collateral Property which in the good faith business
judgment of the Majority Banks after giving consideration to the likelihood of
success of such suit or proceeding and the availability of insurance to cover
any judgment with respect thereto and based on the information available to
them, if adversely determined, would have a materially adverse affect on the
ability of the Borrower or the Guarantor to perform each and every one of
their respective obligations under and by virtue of the Loan Documents;
(o) the Borrower or any Guarantor shall be indicted for a federal
crime, a punishment for which could include the forfeiture of any assets of
the Borrower or such Guarantor included in the Mortgaged Property;
(p) Jeffrey H. Lynford shall cease to be the Chairman of the Board
of, or Edward Lowenthal shall cease to be the President of, the Borrower, and
a competent and experienced successor for such Person shall not be approved by
the Majority Banks within six (6) months of such event;
(q) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably could be
expected to result in liability of any of the Borrower or a Guarantor to the
PBGC or such Guaranteed Pension Plan in an aggregate amount exceeding
$1,000,000 and such event in the circumstances occurring reasonably could
constitute grounds for the termination of such Guaranteed Pension Plan by the
PBGC or for the appointment by the appropriate United States District Court of
a trustee to administer such Guaranteed Pension Plan; or a trustee shall have
been appointed by the United States District Court to administer such Plan; or
the PBGC shall have instituted proceedings to terminate such Guaranteed
Pension Plan; or
(r) any Guarantor denies that such Guarantor has any liability or
obligation under the Guaranty or the Indemnity Agreement, or shall notify the
Agent or any of the Banks of such Guarantor's intention to attempt to cancel
or terminate the Guaranty or the Indemnity Agreement, or shall fail to observe
or comply with any term, covenant, condition or agreement under the Guaranty
or the Indemnity Agreement;
then, and in any such event, the Agent may, and upon the request of the
Majority Banks shall, by notice in writing to the Borrower declare all amounts
owing with respect to this Agreement, the Notes and the other Loan Documents
to be, and they shall thereupon forthwith become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; provided that in the event of any
Event of Default specified in Section 12.1(h), Section 12.1(i) or Section
12.1(j), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from any of the Banks or
the Agent.
Section 12.lA. Limitation of Cure Periods.
(a) Notwithstanding anything contained in Section 12.1 to the
contrary, (i) no Event of Default shall exist hereunder upon the occurrence of
any failure described in Section 12.1(b) in the event that the Borrower cures
such default within five (5) days following receipt of written notice of such
default, provided, however, that Borrower shall not be entitled to receive
more than two (2) notices in the aggregate pursuant to this clause (i) in any
period of 365 days ending on the date of any such occurrence of default, and
provided further that no such cure period shall apply to any payments due upon
the maturity of the Notes, and (ii) no Event of Default shall exist hereunder
upon the occurrence of any failure described in Section 12.1(e) in the event
that the Borrower cures such default with thirty (30) days following receipt
of written notice of such default, provided that the provisions of this clause
(ii) shall not pertain to defaults consisting of a failure to provide
insurance as required by Section 7.7, to any default consisting of a failure
to comply with Section 2.8 or Section 7.4(e), or to any default excluded from
any provision of cure of defaults contained in any other of the Loan
Documents.
(b) Notwithstanding the provisions of subsections (c) and (d) of
Section 12.1 or of Section 12.1B, the cure periods provided therein shall not
be allowed and the occurrence of a Default thereunder immediately shall
constitute an Event of Default for all purposes of this Agreement and the
other Loan Documents if, within the period of twelve months immediately
preceding the occurrence of such Default, there shall have occurred two
periods of cure or portions thereof under any one or more than one of said
subsections.
Section 12.lB. Certain Cure Periods.
(a) In the event that there shall occur any Default under Section
12.1(c), then within five Business Days after receipt of notice of such
Default from the Agent or the Majority Banks the Borrower may elect to cure
such Default by providing additional Collateral consisting of Potential
Collateral, and/or to reduce the Total Commitment and reduce the outstanding
Loans, in which event such actions shall be completed not later than 15 days
following the date on which the Borrower is notified that the Majority Banks
have approved the Borrower's proposed actions (or 60 days in the event that
the Borrower intends to provide additional Mortgaged Property). The
Borrower's notice of its election pursuant to the preceding sentence shall be
delivered to the Agent within the period of five Business Days provided above.
Within five Business Days after receipt of such advice, the Majority Banks
shall advise the Borrower as to whether in their good faith judgment the
actions proposed by the Borrower are sufficient to cure such Default without
the creation of any other Default hereunder. In the event that the Majority
Banks determine that Borrower's proposal is insufficient to cure such Default
or is otherwise not in accordance with the terms of this Agreement, the
Borrower within an additional three Business Days after such negative notice
may submit to the Agent an alternative plan or evidence establishing that the
Borrower's original election was sufficient. In the event that within the
times provided herein the Borrower shall have failed to provide evidence
satisfactory to the Majority Banks that Borrower's proposed actions are
sufficient to cure such Default in accordance with the terms hereof, the cure
period shall terminate and such Default immediately shall constitute an Event
of Default.
(b) In the event that the Borrower shall elect in whole or in part
under subsection 12.1B(a) to provide additional Collateral, the Real Estate or
promissory note to be added to the Collateral shall be Eligible Real Estate or
a Qualifying Collateral Note, respectively, and on or prior to the expiration
of the 60-day period each of the Eligible Real Estate Qualification Documents
or Qualifying Collateral Note Qualification Documents, respectively, shall
have been completed and provided to the Agent for the benefit of the Banks,
and, if such additional Collateral is owned by a Subsidiary of the Borrower,
such Subsidiary shall have executed and delivered a Guaranty and all other
provisions of Section 5.4 hereof shall have been satisfied.
Section 25.2. Termination of Commitments. If any one or more Events of
Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j) shall
occur, then immediately and without any action on the part of the Agent or any
Bank any unused portion of the credit hereunder shall terminate and the Banks
shall be relieved of all obligations to make Loans to the Borrower. If any
other Event of Default shall have occurred and be continuing, the Agent, upon
the election of the Majority Banks, may by notice to the Borrower terminate
the obligation to make Loans to the Borrower. No termination under this
Section 12.2 shall relieve the Borrower of its obligations to the Banks
arising under this Agreement or the other Loan Documents.
Section 25.3. Remedies. In case any one or more of the Events of Default
shall have occurred and be continuing, and whether or not the Banks shall have
accelerated the maturity of the Loans pursuant to Section 12.1, the Agent on
behalf of the Banks, may, with the consent of the Majority Banks but not
otherwise, proceed to protect and enforce their rights and remedies under this
Agreement, the Notes or any of the other Loan Documents by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations are
evidenced, including to the full extent permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right. Upon the occurrence of an
Event of Default, the Borrower shall upon the request of the Agent cause EQR
to fund or pay any and all amounts remaining to be paid or funded by EQR
pursuant to the EQR Preferred Equity Commitment and shall pay such amounts, up
to the amount of the Obligations, to the Agent. No remedy herein conferred
upon the Agent or the holder of any Note is intended to be exclusive of any
other remedy and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing at
law or in equity or by statute or any other provision of law. In the event
that all or any portion of the Obligations is collected by or through an
attorney-at-law, the Borrower shall pay all costs of collection including, but
not limited to, reasonable attorney's fees not to exceed fifteen percent (15%)
of such portion of the Obligations.
Section 25.4. Distribution of Collateral Proceeds. In the event that,
following the occurrence or during the continuance of any Event of Default,
any monies are received in connection with the enforcement of any of the
Security Documents, or otherwise with respect to the realization upon any of
the Collateral, such monies shall be distributed for application as follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or sustained
by the Agent to protect or preserve the collateral or in connection with the
collection of such monies by the Agent, for the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of the Agent under this Agreement or any of the other Loan
Documents or in respect of the Collateral or in support of any provision of
adequate indemnity to the Agent against any taxes or liens which by law shall
have, or may have, priority over the rights of the Agent to such monies;
(b) Second, to all other Obligations in such order or preference as
the Majority Banks shall determine; provided, however, that (i) distributions
in respect of such Obligations shall be made pari passu among Obligations with
respect to the Agent's fee payable pursuant to Section 4.3 and all other
Obligations, (ii) in the event that any Bank shall have wrongfully failed or
refused to make an advance under Section 2.7 and such failure or refusal shall
be continuing, advances made by other Banks during the pendency of such
failure or refusal shall be entitled to be repaid as to principal and accrued
interest in priority to the other Obligations described in this subsection
(b), and (iii) Obligations owing to the Banks with respect to each type of
Obligation such as interest, principal, fees and expenses, shall be made among
the Banks pro rata; and provided, further that the Majority Banks may in their
discretion make proper allowance to take into account any Obligations not then
due and payable; and
(c) Third, the excess, if any, shall be returned to the Borrower or
to such other Persons as are entitled thereto.
Section 26. SETOFF.
Regardless of the adequacy of any collateral, during the continuance
of any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of where
such deposits are held) or other sums credited by or due from any of the Banks
to the Borrower or any Guarantor and any securities or other property of the
Borrower or any Guarantor in the possession of such Bank may be applied to or
set off against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising, of the Borrower or any Guarantor to such Bank.
Each of the Banks agrees with each other Bank that if such Bank shall receive
from the Borrower or any Guarantor, whether by voluntary payment, exercise of
the right of setoff, or otherwise, and shall retain and apply to the payment
of the Note or Notes held by such Bank any amount in excess of its ratable
portion of the payments received by all of the Banks with respect to the Notes
held by all of the Banks, such Bank will make such disposition and
arrangements with the other Banks with respect to such excess, either by way
of distribution, pro tanto assignment of claims, subrogation or otherwise as
shall result in each Bank receiving in respect of the Notes held by it its
proportionate payment as contemplated by this Agreement; provided that if all
or any part of such excess payment is thereafter recovered from such Bank,
such disposition and arrangements shall be rescinded and the amount restored
to the extent of such recovery, but without interest.
Section 27. THE AGENT.
Section 27.1. Authorization. The Agent is authorized to take such
action on behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent. The
obligations of Agent hereunder are primarily administrative in nature, and
nothing contained in this Agreement or any of the other Loan Documents shall
be construed to constitute the Agent as a trustee for any Bank or to create
any agency or fiduciary relationship. The Borrower and any other Person shall
be entitled to conclusively rely on a statement from the Agent that it has the
authority to act for and bind the Banks pursuant to this Agreement and the
other Loan Documents.
Section 27.2. Employees and Agents. The Agent may exercise its powers
and execute its duties by or through employees or agents and shall be entitled
to take, and to rely on, advice of counsel concerning all matters pertaining
to its rights and duties under this Agreement and the other Loan Documents.
The Agent may utilize the services of such Persons as the Agent may reasonably
determine, and all reasonable fees and expenses of any such Persons shall be
paid by the Borrower.
Section 27.3. No Liability. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent, or employee thereof, shall be liable for
any waiver, consent or approval given or any action taken, or omitted to be
taken, in good faith by it or them hereunder or under any of the other Loan
Documents, or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever, except that the
Agent or such other Person, as the case may be, may be liable for losses due
to its willful misconduct or gross negligence.
Section 27.4. No Representations. The Agent shall not be responsible
for the execution or validity or enforceability of this Agreement, the Notes,
any of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein or in any of
the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any of its Subsidiaries or
the Guarantor, or be bound to ascertain or inquire as to the performance or
observance of any of the terms, conditions, covenants or agreements herein or
in any other of the Loan Documents. The Agent shall not be bound to ascertain
whether any notice, consent, waiver or request delivered to it by the Borrower
or the Guarantor or any holder of any of the Notes shall have been duly
authorized or is true, accurate and complete. The Agent has not made nor does
it now make any representations or warranties, express or implied, nor does it
assume any liability to the Banks, with respect to the creditworthiness or
financial condition of the Borrower or any of its Subsidiaries or the
Guarantor. Each Bank acknowledges that it has, independently and without
reliance upon the Agent or any other Bank, and based upon such information and
documents as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon the Agent or any other Bank,
based upon such information and documents as it deems appropriate at the time,
continue to make its own credit analysis and decisions in taking or not taking
action under this Agreement and the other Loan Documents.
Section 27.5. Payments.
(a) A payment by the Borrower or the Guarantor to the Agent
hereunder or under any of the other Loan Documents for the account of any Bank
shall constitute a payment to such Bank. The Agent agrees to distribute to
each Bank not later than one Business Day after the Agent's receipt of good
funds, determined in accordance with the Agent's customary practices, such
Bank's pro rata share of payments received by the Agent for the account of the
Banks except as otherwise expressly provided herein or in any of the other
Loan Documents.
(b) If in the opinion of the Agent the distribution of any amount
received by it in such capacity hereunder, under the Notes or under any of the
other Loan Documents might involve it in liability, it may refrain from making
distribution until its right to make distribution shall have been adjudicated
by a court of competent jurisdiction. If a court of competent jurisdiction
shall adjudge that any amount received and distributed by the Agent is to be
repaid, each Person to whom any such distribution shall have been made shall
either repay to the Agent its proportionate share of the amount so adjudged to
be repaid or shall pay over the same in such manner and to such Persons as
shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in this
Agreement or any of the other Loan Documents, any Bank that fails (i) to make
available to the Agent its pro rata share of any Loan or (ii) to comply with
the provisions of Section 13 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata share
of such payments due and payable to all of the Banks, in each case as, when
and to the full extent required by the provisions of this Agreement, shall be
deemed delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank
until such time as such delinquency is satisfied. A Delinquent Bank shall be
deemed to have assigned any and all payments due to it from the Borrower and
the Guarantor, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Loans. The
Delinquent Bank hereby authorizes the Agent to distribute such payments to the
nondelinquent Banks in proportion to their respective pro rata shares of all
outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in
full a delinquency when and if, as a result of application of the assigned
payments to all outstanding Loans of the nondelinquent Banks or as a result of
other payments by the Delinquent Banks to the nondelinquent Banks, the Banks'
respective pro rata shares of all outstanding Loans have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
Section 27.6. Holders of Notes. Subject to the terms of Article 18, the
Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished
in writing with a different name by such payee or by a subsequent holder,
assignee or transferee.
Section 27.7. Indemnity. The Banks ratably agree hereby to indemnify
and hold harmless the Agent from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which the Agent has not been reimbursed by the
Borrower as required by Section 15), and liabilities of every nature and
character arising out of or related to this Agreement, the Notes, or any of
the other Loan Documents or the transactions contemplated or evidenced hereby
or thereby, or the Agent's actions taken hereunder or thereunder, except to
the extent that any of the same shall be directly caused by the Agent's
willful misconduct or gross negligence.
Section 27.8. Agent as Bank. In its individual capacity, BKB shall have
the same obligations and the same rights, powers and privileges in respect to
its Commitment and the Loans made by it, and as the holder of any of the Notes
as it would have were it not also the Agent.
Section 27.9. Resignation. The Agent may resign at any time by giving
60 days' prior written notice thereof to the Banks and the Borrower. Upon any
such resignation, the Majority Banks shall have the right to appoint as a
successor Agent any Bank or any bank whose senior debt obligations are rated
not less than "A" or its equivalent by Moody's Investors Service, Inc. or not
less than "A" or its equivalent by Standard & Poor's corporation and which has
total assets in excess of $10 billion. Unless a Default or Event of Default
shall have occurred and be continuing, such successor Agent shall be
reasonably acceptable to the Borrower. If no successor Agent shall have been
so appointed by the Majority Banks and shall have accepted such appointment
within 30 days after the retiring Agent's giving of notice of resignation,
then the retiring Agent may, on behalf of the Banks, appoint a successor
Agent, which shall be a Bank or any bank whose debt obligations are rated not
less than "A" or its equivalent by Moody's Investors Service, Inc. or not less
than "A" or its equivalent by Standard & Poor's Corporation and which has
total assets in excess of $10 billion. Upon the acceptance of any appointment
as Agent hereunder by a successor Agent, such successor Agent shall thereupon
succeed to and become vested with all the rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations hereunder as Agent. After any retiring Agent's
resignation, the provisions of this Agreement and the other Loan Documents
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
Section 27.10. Duties in the Case of Enforcement. In case one or more
Events of Default have occurred and shall be continuing, and whether or not
acceleration of the Obligations shall have occurred, the Agent shall, if (a)
so requested by the Majority Banks and (b) the Banks have provided to the
Agent such additional indemnities and assurances against expenses and
liabilities as the Agent may reasonably request, proceed to enforce the
provisions of the Security Documents authorizing the sale or other disposition
of all or any part of the Collateral and exercise all or any such other legal
and equitable and other rights or remedies as it may have in respect of such
Collateral. The Majority Banks may direct the Agent in writing as to the
method and the extent of any such sale or other disposition, the Banks hereby
agreeing to indemnify and hold the Agent harmless from all liabilities
incurred in respect of all actions taken or omitted in accordance with such
directions, provided that the Agent need not comply with any such direction to
the extent that the Agent reasonably believes the Agent's compliance with such
direction to be unlawful or commercially unreasonable in any applicable
jurisdiction.
Section 28. EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein, (b) any taxes (including any interest and
penalties in respect thereto) payable by the Agent or any of the Banks (other
than taxes based upon the Agent's or any Bank's gross or net income, except
that the Agent and the Banks shall be entitled to indemnification for any and
all amounts paid by them in respect of taxes based on income or other taxes
assessed by any State in which Mortgaged Property or other Collateral is
located, such indemnification to be limited to taxes due solely on account of
the granting of Collateral under the Security Documents and to be net of any
credit allowed to the indemnified party from any other State on account of the
payment or incurrence of such tax by such indemnified party), including any
recording, mortgage, documentary or intangibles taxes in connection with the
Security Deeds and other Loan Documents, or other taxes payable on or with
respect to the transactions contemplated by this Agreement, including any such
taxes payable by the Agent or any of the Banks after the Closing Date (the
Borrower hereby agreeing to indemnify the Agent and each Bank with respect
thereto), (c) all title insurance premiums, appraisal fees, engineer's fees,
reasonable internal charges of the Agent (determined in good faith and in
accordance with the Agent's internal policies applicable generally to its
customers) for commercial finance exams and engineering and environmental
reviews and the reasonable fees, expenses and disbursements of the counsel to
the Agent, counsel for the Majority Banks and any local counsel to the Agent
incurred in connection with the preparation, administration or interpretation
of the Loan Documents and other instruments mentioned herein (excluding,
however, the preparation of agreements evidencing participations granted under
Section 18.4), the review of any additional or substitute Collateral, the
addition of any Guarantor, each closing hereunder, and amendments,
modifications, approvals, consents or waivers hereto or hereunder, (d) the
reasonable fees, expenses and disbursements of the Agent incurred by the Agent
in connection with the preparation, administration or interpretation of the
Loan Documents and other instruments mentioned herein, and the making of each
advance hereunder, (e) all reasonable out-of-pocket expenses (including
reasonable attorneys' fees and costs, which attorneys may be employees of any
Bank or the Agent and the fees and costs of appraisers, engineers, investment
bankers or other experts retained by any Bank or the Agent) incurred by any
Bank or the Agent in connection with (i) the enforcement of or preservation of
rights under any of the Loan Documents against the Borrower or the Guarantor
or the administration thereof after the occurrence of a Default or Event of
Default and (ii) any litigation, proceeding or dispute whether arising
hereunder or otherwise, in any way related to the Agent's or any of the Bank's
relationship with the Borrower or the Guarantor, and (f) all reasonable fees,
expenses and disbursements of any Bank or the Agent incurred in connection
with U.C.C. searches, U.C.C. filings, title rundowns, title searches or
mortgage recordings. The covenants of this Section 15 shall survive payment
or satisfaction of payment of amounts owing with respect to the Notes.
Section DGA INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent and the
Banks and each director, officer, employee, agent and Person who controls the
Agent or any Bank from and against any and all claims, actions and suits,
whether groundless or otherwise, and from and against any and all liabilities,
losses, damages and expenses of every nature and character arising out of or
relating to this Agreement or any of the other Loan Documents or the
transactions contemplated hereby and thereby including, without limitation,
(a) any leasing fees and any brokerage, finders or similar fees asserted
against any Person indemnified under this Section 16 based upon any agreement,
arrangement or action made or taken, or alleged to have been made or taken, by
the Borrower or any of its Subsidiaries or the Guarantor, (b) any condition of
the Mortgaged Property, (c) any actual or proposed use by the Borrower of the
proceeds of any of the Loans, (d) any actual or alleged infringement of any
patent, copyright, trademark, service mark or similar right of the Borrower,
any of its Subsidiaries or the Guarantor comprised in the Collateral, (e) the
Borrower and the Guarantor entering into or performing this Agreement or any
of the other Loan Documents, (f) any actual or alleged violation of any law,
ordinance, code, order, rule, regulation, approval, consent, permit or license
relating to the Mortgaged Property, or (g) with respect to the Borrower, its
Subsidiaries and the Guarantor and their respective properties and assets, the
violation of any Environmental Law, the Release or threatened Release of any
Hazardous Substances or any action, suit, proceeding or investigation brought
or threatened with respect to any Hazardous Substances (including, but not
limited to claims with respect to wrongful death, personal injury or damage to
property), in each case including, without limitation, the reasonable fees and
disbursements of counsel and allocated costs of internal counsel incurred in
connection with any such investigation, litigation or other proceeding;
provided, however, that the Borrower shall not be obligated under this Section
16 to indemnify any Person for liabilities arising from such Person's own
gross negligence or willful misconduct. In litigation, or the preparation
therefor, the Banks and the Agent shall be entitled to select a single law
firm as their own counsel and, in addition to the foregoing indemnity, the
Borrower agrees to pay promptly the reasonable fees and expenses of such
counsel. If, and to the extent that the obligations of the Borrower under
this Section 16 are unenforceable for any reason, the Borrower hereby agrees
to make the maximum contribution to the payment in satisfaction of such
obligations which is permissible under applicable law. The provisions of this
Section 16 shall survive the repayment of the Loans and the termination of the
obligations of the Banks hereunder.
Section 30. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made
herein, in the Notes, in any of the other Loan Documents or in any documents
or other papers delivered by or on behalf of the Borrower, any of its
Subsidiaries or the Guarantor pursuant hereto or thereto shall be deemed to
have been relied upon by the Banks and the Agent, notwithstanding any
investigation heretofore or hereafter made by any of them, and shall survive
the making by the Banks of any of the Loans, as herein contemplated, and shall
continue in full force and effect so long as any amount due under this
Agreement or the Notes or any of the other Loan Documents remains outstanding
or any Bank has any obligation to make any Loans. The indemnification
obligations of the Borrower provided herein and the other Loan Documents shall
survive the full repayment of amounts due and the termination of the
obligations of the Banks hereunder and thereunder to the extent provided
herein and therein. All statements contained in any certificate or other
paper delivered to any Bank or the Agent at any time by or on behalf of the
Borrower, any of its Subsidiaries or the Guarantor pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower or such Subsidiary or the
Guarantor hereunder.
Section 31. ASSIGNMENT AND PARTICIPATION.
Section 31.1. Conditions to Assignment by Banks. Except as provided
herein, each Bank may assign to one or more banks or other entities all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment Percentage and Commitment and
the same portion of the Loans at the time owing to it, and the Notes held by
it); provided that (a) the Agent shall have given its prior written consent to
such assignment, which consent shall not be unreasonably withheld (provided
that such consent shall not be required for any assignment to another Bank, to
a bank which is under common control with the assigning Bank or to a wholly-
owned Subsidiary of such Bank provided that such assignee shall remain a
wholly-owned Subsidiary of such Bank), (b) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, (c) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as
hereinafter defined), a notice of such assignment, together with any Notes
subject to such assignment, (d) in no event shall any voting, consent or
approval rights of a Bank be assigned to any Person controlling, controlled by
or under common control with, or which is not otherwise free from influence or
control by, the Borrower or the Guarantor, which rights shall instead be
allocated pro rata among the other remaining Banks, (e) such assignee shall
have a net worth as of the date of such assignment of not less than
$500,000,000 and (f) such assignee shall acquire an interest in the Loans of
not less than $10,000,000.00; provided, however, that after the occurrence of
an Event of Default, the Assigning Bank shall not be required to obtain the
prior written consent of the Agent to an assignment (but shall give prior
written notice of same) or comply with the requirement contained in subsection
(f) of this Section 18.1. No such assignment shall be made without the prior
consent of the Borrower, which consent shall not be unreasonably withheld or
delayed; provided that such consent shall not be required in the event that a
Default or Event of Default shall have occurred. Upon such execution,
delivery, acceptance and recording, of such notice of assignment, (i) the
assignee thereunder shall be a party hereto and all other Loan Documents
executed by the Banks and, to the extent provided in such assignment, have the
rights and obligations of a Bank hereunder, (ii) the assigning Bank shall, to
the extent provided in such assignment and upon payment to the Agent of the
registration fee referred to in Section 18.2, be released from its obligations
under this Agreement, and (iii) the Agent may unilaterally amend Schedule 1 to
reflect such assignment. In connection with each assignment, the assignee
shall represent and warrant to the Agent, the assignor and each other Bank as
to whether such assignee is controlling, controlled by, under common control
with or is not otherwise free from influence or control by, the Borrower or
the Guarantor.
Section 31.2. Register. The Agent shall maintain a copy of each
assignment delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Loans owing to the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each
Person whose name is recorded in the Register as a Bank hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower and the Banks at any reasonable time and from time to time upon
reasonable prior notice. Upon each such recordation, the assigning Bank
agrees to pay to the Agent a registration fee in the sum of $2,000.
Section 31.3. New Notes. Upon its receipt of an assignment executed by
the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (a) record the information contained therein in
the Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to
the Agent, in exchange for each surrendered Note, a new Note to the order of
such assignee in an amount equal to the amount assumed by such assignee
pursuant to such assignment and, if the assigning Bank has retained some
portion of its obligations hereunder, a new Note to the order of the assigning
Bank in an amount equal to the amount retained by it hereunder, and shall
cause the Guarantor to deliver to Agent an acknowledgment in form and
substance satisfactory to the Agent to the effect that the Guaranty extends
and is applicable to each new Note. Such new Notes shall provide that they
are replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such assignment and shall otherwise be in
substantially the form of the assigned Notes. The surrendered Notes shall be
canceled and returned to the Borrower.
Section 31.4. Participations. Each Bank may sell participations to one
or more banks or other entities in all or a portion of such Bank's rights and
obligations under this Agreement and the other Loan Documents; provided that
(a) any such sale or participation shall not affect the rights and duties of
the selling Bank hereunder to the Borrower, (b) such sale and participation
shall not entitle such participant any rights or privileges under this
Agreement or the Loan Documents (including, without limitation, the right to
approve waivers, amendments or modifications), (c) such participant shall have
no direct rights against the Borrower or the Guarantor except the rights
granted to the Banks pursuant to Section 13, (d) such sale is effected in
accordance with all applicable laws, and (e) such participant shall not be a
Person controlling, controlled by or under common control with, or which is
not otherwise free from influence or control by, the Borrower, any of its
Subsidiaries or the Guarantor.
Section 31.5. Pledge by Bank. Any Bank may at any time pledge all or
any portion of its interest and rights under this Agreement (including all or
any portion of its Note) to any of the twelve Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
Section 31.6. No Assignment by Borrower. The Borrower shall not assign
or transfer any of its rights or obligations under any of the Loan Documents
without the prior written consent of each of the Banks.
Section 31.7. Disclosure. The Borrower agrees that in addition to
disclosures made in accordance with standard banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder.
Section 32. NOTICES.
Each notice, demand, election or request provided for or permitted to be
given pursuant to this Agreement (hereinafter in this Section 19 referred to
as "Notice"), but specifically excluding to the maximum extent permitted by
law any notices of the institution or commencement of foreclosure proceedings,
must be in writing and shall be deemed to have been properly given or served
by personal delivery or by sending same by overnight courier or by depositing
same in the United States Mail, postpaid and registered or certified, return
receipt requested, or as expressly permitted herein, by telegraph, telecopy,
telefax or telex, and addressed as follows:
If to the Agent or BKB:
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
With a copy to:
BankBoston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mr. Dan Silbert
Telecopy No.: 770/390-8434
If to the Borrower:
Wellsford Real Properties, Inc.
620 Fifth Avenue
7th Floor
New York, New York 10020
Attn: Gregory F. Hughes
With a copy to:
Alan S. Pearce, Esq.
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
if to another Bank now a party to this Agreement, to the address set forth on
the signature page hereto, and to each other Bank which may hereafter become a
party to this Agreement at such address as may be designated by such Bank.
Each Notice shall be effective upon being personally delivered or upon being
sent by overnight courier or upon being deposited in the United States Mail as
aforesaid. The time period in which a response to such Notice must be given
or any action taken with respect thereto (if any), however, shall commence to
run from the date of receipt if personally delivered or sent by overnight
courier, or if so deposited in the United States Mail, the earlier of three
(3) Business Days following such deposit or the date of receipt as disclosed
on the return receipt. Rejection or other refusal to accept or the inability
to deliver because of changed address for which no notice was given shall be
deemed to be receipt of the Notice sent. By giving at least fifteen (15) days
prior Notice thereof, the Borrower, a Bank or Agent shall have the right from
time to time and at any time during the term of this Agreement to change their
respective addresses and each shall have the right to specify as its address
any other address within the United States of America.
Section 33. RELATIONSHIP.
The relationship between each Bank and the Borrower is solely that of a
lender and borrower, and nothing contained herein or in any of the other Loan
Documents shall in any manner be construed as making the parties hereto
partners, joint venturers or any other relationship other than lender and
borrower.
Section 34. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE STATE OF
NEW YORK AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS
OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE STATE OF NEW YORK OR ANY FEDERAL COURT SITTING THEREIN AND CONSENTS TO
THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF PROCESS IN ANY
SUCH SUIT BRING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS SPECIFIED IN
Section 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY NOW OR
HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT SUCH
SUIT IS BROUGHT IN AN INCONVENIENT COURT.
Section 35. HEADINGS.
The captions in this Agreement are for convenience of reference only and
shall not define or limit the provisions hereof.
Section 36. COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when
so executed and delivered shall be an original, and all of which together
shall constitute one instrument. In proving this Agreement it shall not be
necessary to produce or account for more than one such counterpart signed by
the party against whom enforcement is sought.
Section 37. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 27.
Section 38. WAIVER OF JURY TRIAL.
EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS
RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY
DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN
DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. THE BORROWER (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT THE
AGENT AND THE BANKS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS TO WHICH THEY ARE PARTIES BY, AMONG OTHER THINGS, THE
WAIVER AND CERTIFICATIONS CONTAINED IN THIS Section 25.
Section 39. DEALINGS WITH THE BORROWER.
The Banks and their affiliates may accept deposits from, extend credit to
and generally engage in any kind of banking, trust or other business with the
Borrower, its Subsidiaries, the Guarantor or any of their affiliates
regardless of the capacity of the Bank hereunder.
Section 40. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent or
approval required or permitted by this Agreement may be given, and any term of
this Agreement or of any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower or the
Guarantor of any terms of this Agreement or such other instrument or the
continuance of any Default or Event of Default may be waived (either generally
or in a particular instance and either retroactively or prospectively) with,
but only with, the written consent of the Majority Banks. Notwithstanding the
foregoing, none of the following may occur without the written consent of each
Bank: a change in the rate of interest on and the term of the Notes; a change
in the amount of the Commitments of the Banks; a forgiveness, reduction or
waiver of the principal of any unpaid Loan or any interest thereon or fee
payable under the Loan Documents; a change in the amount of any fee payable to
a Bank hereunder; the postponement of any date fixed for any payment of
principal of or interest on the Loan; an extension of the Maturity Date
(except as provided in Section 2.8); a change in the manner of distribution of
any payments to the Banks or the Agent; the release of the Borrower or the
Guarantor or any Collateral except as otherwise provided herein; an amendment
of the definition of Majority Banks or of any requirement for consent by all
of the Banks; any modification to require a Bank to fund a pro rata share of a
request for an advance of the Loan made by the Borrower other than based on
its Commitment Percentage; an amendment to this Section 27; an amendment of
the definition of Majority Banks; or an amendment of any provision of this
Agreement or the Loan Documents which requires the approval of all of the
Banks or the Majority Banks to require a lesser number of Banks to approve
such action. The amount of the Agent's fee payable for the Agent's account
and the provisions of Section 14 may not be amended without the written
consent of the Agent. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of dealing
or delay or omission on the part of the Agent or any Bank in exercising any
right shall operate as a waiver thereof or otherwise be prejudicial thereto.
No notice to or demand upon the Borrower shall entitle the Borrower to other
or further notice or demand in similar or other circumstances.
Section 41. SEVERABILITY.
The provisions of this Agreement are severable, and if any one
clause or provision hereof shall be held invalid or unenforceable in whole or
in part in any jurisdiction, then such invalidity or unenforceability shall
affect only such clause or provision, or part thereof, in such jurisdiction,
and shall not in any manner affect such clause or provision in any other
jurisdiction, or any other clause or provision of this Agreement in any
jurisdiction.
Section 42. NO UNWRITTEN AGREEMENTS.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
Section 43. TIME OF THE ESSENCE.
Time is of the essence with respect to each and every covenant, agreement
and obligation of the Borrower under this Agreement and the other Loan
Documents.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as
a sealed instrument as of the date first set forth above.
WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation
By:/s/ Gregory F. Hughes
---------------------------------------
Title: CFO
[CORPORATE SEAL]
<PAGE>
BANKBOSTON, N.A., a national banking
association, individually and as Agent
By:/s/ Mark E. Bashman
-----------------------------------
Title: Mark E. Bashman, MD
[BANK SEAL]
<PAGE>
MORGAN GUARANTY TRUST COMPANY OF NEW YORK, a
New York banking corporation, individually and
as Co-Agent
By:/s/ Timothy V. O'Donovan
---------------------------------------
Title: Timothy V. O'Donovan
Vice President
[SEAL]
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
Attn: Mr. Tim O'Donovan
<PAGE>
EXHIBIT A
FORM OF NOTE
$______________ May 30, 1997
FOR VALUE RECEIVED, the undersigned WELLSFORD REAL PROPERTIES, INC., a
Maryland corporation, hereby promises to pay to
____________________________________ or order, in accordance with the terms of
that certain Revolving Credit Agreement dated as of May 30, 1997 (the "Credit
Agreement"), as from time to time in effect, among the undersigned,
BankBoston, N.A., for itself and as Agent, Morgan Guaranty Trust Company of
New York, for itself and as Co-Agent, and such other Banks as may be from time
to time named therein, to the extent not sooner paid, on or before the
Maturity Date, the principal sum of ____________________________ DOLLARS
($______________), or such amount as may be advanced by the payee hereof under
the Credit Agreement with daily interest from the date hereof, computed as
provided in the Credit Agreement, on the principal amount hereof from time to
time unpaid, at a rate per annum on each portion of the principal amount which
shall at all times be equal to the rate of interest applicable to such portion
in accordance with the Credit Agreement, and with interest on overdue
principal and, to the extent permitted by applicable law, on overdue
installments of interest and late charges at the rates provided in the Credit
Agreement. Interest shall be payable on the dates specified in the Credit
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the prepayment in full hereof.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Credit Agreement.
Payments hereunder shall be made to BankBoston, N.A., as Agent for the payee
hereof, 100 Federal Street, Boston, Massachusetts 02110.
This Note is one of one or more Notes evidencing borrowings under and is
entitled to the benefits and subject to the provisions of the Credit
Agreement. The principal of this Note may be due and payable in whole or in
part prior to the maturity date stated above and is subject to mandatory
prepayment in the amounts and under the circumstances set forth in the Credit
Agreement, and may be prepaid in whole or from time to time in part, all as
set forth in the Credit Agreement.
Notwithstanding anything in this Note to the contrary, all agreements
between the Borrower and the Banks and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in
no contingency, whether by reason of acceleration of the maturity of any of
the Obligations or otherwise, shall the interest contracted for, charged or
received by the Banks exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, interest would otherwise be
payable to the Banks in excess of the maximum lawful amount, the interest
payable to the Banks shall be reduced to the maximum amount permitted under
applicable law; and if from any circumstance the Banks shall ever receive
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to
the reduction of the principal balance of the Obligations and to the payment
of interest or, if such excessive interest exceeds the unpaid balance of
principal of the Obligations, such excess shall be refunded to the Borrower.
All interest paid or agreed to be paid to the Banks shall, to the extent
permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full period until payment in full of the principal of the
Obligations (including the period of any renewal or extension thereof) so that
the interest thereon for such full period shall not exceed the maximum amount
permitted by applicable law. This paragraph shall control all agreements
between the Borrower and the Banks and the Agent.
In case an Event of Default shall occur, the entire principal amount of this
Note may become or be declared due and payable in the manner and with the
effect provided in said Credit Agreement.
This Note shall be governed by and construed in accordance with the laws of
the State of New York (without giving effect to the conflict of laws rules of
any jurisdiction).
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Credit Agreement, and assent to
extensions of time of payment or forbearance or other indulgence without
notice.
IN WITNESS WHEREOF the undersigned has by its duly authorized officers,
executed this Note under seal as of the day and year first above written.
WELLSFORD REAL PROPERTIES, INC.
By: _________________________
Title:
[CORPORATE SEAL]
<PAGE>
EXHIBIT B
FORM OF REQUEST FOR LOAN
BankBoston, N.A.,as Agent
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mr. Dan Silbert
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.6 of the Revolving Credit Agreement
dated as of May 30, 1997, as from time to time in effect (the "Credit
Agreement"), among Wellsford Real Properties, Inc. (the "Borrower"),
BankBoston, N.A., for itself and as Agent, Morgan Guaranty Trust Company of
New York, for itself and as Co-Agent, and the other Banks from time to time
party thereto, the Borrower hereby requests and certifies as follows:
1. Loan. The Borrower hereby requests a Loan under Section 2.1 of the
Credit Agreement:
Principal Amount: $
Type (Eurodollar, Base Rate):
Drawdown Date: , 19
Interest Period:
by credit to the general account of the Borrower with the Agent at the Agent's
Head Office.
2. Use of Proceeds. Such Loan shall be used for the following purposes
permitted by Section 7.11 of the Credit Agreement:
[Describe]
3. Capital Improvement Project. In the event that such Loan relates to
any Capital Improvement Project or portion thereof, the Borrower represents
and warrants that such Loan will reimburse the Borrower for or pay costs
incurred for work on the Capital Improvement Project identified above, which
work covered by this request is in place or is for stored materials which are
properly secured. Attached hereto are invoices, receipts or other evidence
satisfactory to the Majority Banks to verify the cost of such work. [Also
attached hereto are affidavits, lien waivers of other evidence reasonably
satisfactory to the Majority Banks showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished material or labor to the
Mortgaged Property in connection with such Capital Improvement Project have
been paid all amounts due for such labor and materials.]
4. No Default. The undersigned chief financial or chief accounting
officer of the Borrower certifies that the Borrower is and will be in
compliance with all covenants under the Loan Documents after giving effect to
the making of the Loan requested hereby. Attached to this Request for Loan is
a Compliance Certificate prepared using the financial statements of the
Borrower most recently provided or required to be provided under Section 6.4
or Section 7.4 of the Credit Agreement adjusted in the best good-faith
estimate of the Borrower to give effect to the making of the Loan requested
hereby.
5. Representations True. Each of the representations and warranties made
by or on behalf of the Borrower and its Subsidiaries and the Guarantor
contained in the Credit Agreement, in the other Loan Documents or in any
document or instrument delivered pursuant to or in connection with the Credit
Agreement was true as of the date as of which it was made and shall also be
true at and as of the Drawdown Date for the Loan requested hereby, with the
same effect as if made at and as of such Drawdown Date (except to the extent
of changes resulting from transactions contemplated or permitted by the Credit
Agreement and the other Loan Documents and changes occurring in the ordinary
course of business that singly or in the aggregate are not materially adverse,
and except to the extent that such representations and warranties relate
expressly to an earlier date) and no Default or Event of Default has occurred
and is continuing.
6. Other Conditions. All other conditions to the making of the Loan
requested hereby set forth in Section 11 of the Credit Agreement have been
satisfied. (Reference title insurance "date down", if applicable.)
7. Drawdown Date. Except to the extent, if any, specified by notice
actually received by the Agent prior to the Drawdown Date specified above, the
foregoing representations and warranties shall be deemed to have been made by
the Borrower on and as of such Drawdown Date.
8. Definitions. Terms defined in the Credit Agreement are used herein
with the meanings so defined.
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 199___.
WELLSFORD REAL PROPERTIES, INC.
By: __________________________
Chief Financial or
Chief Accounting Officer
<PAGE>
EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE
BankBoston, N.A.,
for itself and as Agent
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Mr. Dan Silbert
Morgan Guaranty Trust Company
of New York, for itself and as
Co-Agent
60 Wall Street
New York, New York 10260
Attn: Mr. Tim O'Donovan
Ladies and Gentlemen:
Reference is made to the Revolving Credit Agreement dated as of May 30, 1997
(the "Credit Agreement") by and among Wellsford Real Properties, Inc. (the
"Borrower"), BankBoston, N.A., for itself and as Agent, Morgan Guaranty Trust
Company of New York, for itself and as Co-Agent, and the other Banks from time
to time party thereto. Terms defined in the Credit Agreement and not
otherwise defined herein are used herein as defined in the Credit Agreement.
Pursuant to the Credit Agreement, the Borrower is furnishing to you herewith
(or has most recently furnished to you) the financial statements of the
Borrower and its Subsidiaries for the fiscal period ended _______________ (the
"Balance Sheet Date"). Such financial statements have been prepared in
accordance with generally accepted accounting principles and present fairly
the financial position of the Borrower and the Subsidiaries covered thereby at
the date thereof and the results of their operations for the periods covered
thereby, subject in the case of interim statements only to normal year-end
audit adjustments.
This certificate is submitted in compliance with requirements of Section
2.6(iv), Section 5.3(b), Section 7.4(i), Section 7.5(e), Section 8.8, Section
10.14 or Section 11.6(b) of the Credit Agreement. If this certificate is
provided under a provision other than Section 7.4(i), the calculations
provided below are made using the financial statements of the Borrower and its
Subsidiaries as of the Balance Sheet Date adjusted in the best good-faith
estimate of the Borrower to give effect to the making of a Loan, extension of
the Maturity Date, acquisition or disposition of property or other event that
occasions the preparation of this certificate; and the nature of such event
and the Borrower's estimate of its effects are set forth in reasonable detail
in an attachment hereto. The undersigned officer of the Borrower is its chief
financial or chief accounting officer.
The undersigned officer has caused the provisions of the Credit Agreement to
be reviewed and has no knowledge of any Default or Event of Default. (Note: If
the signer does have knowledge of any Default or Event of Default, the form of
certificate should be revised to specify the Default or Event of Default, the
nature thereof and the actions taken, being taken or proposed to be taken by
the Borrower with respect thereto.]
The Borrower is providing the following information to demonstrate
compliance as of the date hereof with the following covenants:
I. Section 9.1. Liabilities to Assets Ratio.
A. Consolidated Total Liabilities
per balance sheet $____________
B. Consolidated Total Assets per
balance sheet $____________
Ratio of A to B may not exceed 0.60 to 1.
II. Section 9.2. Consolidated Operating Cash
Flow Coverage.
A. Consolidated Operating Cash Flow =
Consolidated Net Income for
most recent quarter $____________
Plus depreciation and amortization $____________
Plus interest expense $____________
Plus extraordinary or non-recurring
losses $____________
Minus extraordinary or non-
recurring gains ($__________)
Subtotal for most recent quarter $___________
Consolidated Operating Cash Flow
for three prior quarters:
Quarter ended __________ $___________
Quarter ended __________ $___________
Quarter ended __________ $___________
Total $___________
Minus Capital Improvement Reserve for four
prior quarters ($__________)
Total $ __________
B. Debt Service for four prior
quarters $___________
Prior to the Adjustment Date, A must
equal or exceed 130% of B. After the
Adjustment Date, A must equal or exceed
150% of B.
III. Section 9.3. Borrower Base.
A. Total outstanding principal
balance of Loans (after giving
effect to any Loan Request) $__________
B. Borrowing Base
Lesser of
1. EQR Preferred Equity Commitment Allowance $__________
Plus Debt Service Coverage Amount $ _________
Total $ _________
2. EQR Preferred Equity Commitment Allowance $ _________
Plus Designated Collateral Value $ _________
Total $ _________
Ratio of A to B may not be more than 1 To 1.
IV. Section 9.4. Minimum Shareholders' Equity
A. Shareholders' Equity $ _________
B. $35,000,000.00 $35,000,000.00
Plus 80% of net proceeds from any Equity Offering
after Closing Date $ _________
Total $ _________
A must equal or exceed B
V. Section 9.5. Real Estate Assets
A. Consolidated Total Assets $ _________
B. Value of direct or indirect interests
in undeveloped land $ _________
Plus Value of direct or indirect interests
in non-income producing land assets or
mortgages secured by non-income producing
land assets $ _________
Total $ _________
B may not exceed 25% of A
<PAGE>
SCHEDULE 1
BANKS AND COMMITMENTS
Name and Address Commitment Commitment Percentage
- ---------------- ---------- ----------------------
BankBoston, N.A. $25,000,000 50%
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Eurodollar Lending Office
Same as above
Morgan Guaranty Trust $25,000,000 50%
Company of New York
60 Wall Street
New York, New York 10260
Attn: Tim O'Donovan
Eurodollar Lending Office
Same as above
Total Commitment $50,000,000 100%
- ----------------
<PAGE>
SCHEDULE 6.3
TITLE TO PROPERTIES; LEASES
1. $36,757,533.00 construction loan from NationsBank to Park at Highlands
LLC.
2. $29,379,819.00 constructon loan from NationsBank to Red Canyon at
Palomino Park LLC.
<PAGE>
SCHEDULE 6.7
LITIGATION
None.
<PAGE>
SCHEDULE 6.17
ERISA PLANS
On May 28, 1997, the Borrower's board of directors authorized a qualified
profit sharing plan pursuant to the provisons of Section 401(a) of the Code,
including without limitation a plan pursuant to Section 401(k) of the Code.
<PAGE>
SCHEDULE 6.21
SUBSIDIARIES OF THE BORROWER
. Wellsford Chatham Corp. (wholly-owned)
. Wellsford Wayne Corp. (wholly-owned) (1)
. Wellsford Greenbrook Corp. (wholly-owned)
. Wellsford Park Highlands Corp. (80% upon consummation of merger on May 30,
1997) (2)
___________________
(1) North American Medical Research Corp. is a wholly-owned subsidiary of
Wellsford Wayne Corp.
(2) Wellsford Park Highlands Corp. owns 99% of Red Canyon at Palomino Park
LLC and Park at Highlands LLC.
<PAGE>
SCHEDULE 6.24
AGREEMENTS
NONE
AGREEMENT REGARDING COMMON STOCK
AND PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT REGARDING COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT
(this "Agreement") dated as of May 30, 1997 is entered into among ERP
OPERATING LIMITED PARTNERSHIP, an Illinois limited partnership (the
"Purchaser"), WELLSFORD REAL PROPERTIES, INC., a Maryland corporation (the
"Borrower"), and BANKBOSTON, N.A., a national banking association ("BKB"), as
Agent for itself and the other "Banks" from time to time party to the "Credit
Agreement" (as such terms are hereinafter defined) (BKB, in its capacity as
Agent is hereinafter referred to as "Agent").
W I T N E S S E T H:
WHEREAS, the Purchaser and Borrower have entered into that certain Common
Stock and Preferred Stock Purchase Agreement, dated as of May 30, 1997 (the
"Stock Purchase Agreement"); and
WHEREAS, pursuant to that certain Revolving Credit Agreement dated of even
date herewith among the Borrower, BKB, Morgan Guaranty Trust Company of New
York and Agent (as the same may be varied, extended, supplemented,
consolidated, amended, renewed, modified or restated, the "Credit Agreement"),
the "Banks" (as defined in the Credit Agreement) have agreed to provide a
revolving credit loan to the Borrower of up to $50,000,000.00 (the "Loan"),
which Loan is evidenced by those certain Notes made by the Borrower to the
order of the Banks in the aggregate principal face amount of $50,000,000.00;
and
WHEREAS, Borrower has requested that the Banks advance certain funds to
Borrower based on amounts available to be funded by Purchaser pursuant to the
Stock Purchase Agreement; and
WHEREAS, Agent and the Banks have required, as a condition to the advance of
proceeds of the Loan against amounts available to be funded under the Stock
Purchase Agreement, that the parties hereto execute and deliver this
Agreement;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), to induce the Agent and the Banks to enter into the Credit
Agreement, and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto to hereby
covenant and agree as follows:
1. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.
2. Obligations Unconditional. Purchaser hereby agrees with Agent that,
notwithstanding anything in the Stock Purchase Agreement to the contrary, the
obligation of the Purchaser to consummate a "Purchase" (as defined in the
Stock Purchase Agreement) during the "Purchase Term" (as defined in the Stock
Purchase Agreement) and to pay the purchase price in connection with such
purchase pursuant to the Stock Purchase Agreement shall be the absolute,
unconditional and irrevocable obligation of Purchaser, and shall not be
subject to the satisfaction of any condition set forth in the Stock Purchase
Agreement, the absence of any "Potential Event of Default", "Event of Default"
(as such terms are defined in the Stock Purchase Agreement) or any other
default of any nature thereunder, or any set off, counterclaim, defense or
other circumstance whatsoever; provided, however, that Purchaser shall have no
obligation to consummate a "Purchase" (as such term is defined in the Stock
Purchase Agreement) in the event that (x) an involuntary proceeding shall have
been commenced or an involuntary petition shall have been filed in a court of
competent jurisdiction seeking relief in respect of the Borrower under Title
11 of the United States Code, as now constituted or hereafter amended, and
such proceeding or petition shall continue undismissed for ninety (90) days or
an order or decree approving or ordering the foregoing shall be entered, or
(y) the Borrower shall have voluntarily commenced any proceeding or filed any
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended (the foregoing events described in (x) and
(y) being hereinafter referred to as the "Bankruptcy Default"). Without
limiting the generality of the foregoing, Purchaser agrees that its
obligations under this Agreement and the Stock Purchase Agreement shall not be
affected or impaired by, and hereby waives and agrees not to assert or take
advantage or any defense based on, (a) any failure by Borrower to satisfy any
conditions set forth in Article 4 of the Stock Purchase Agreement or the
occurrence of any Potential Event of Default or Event of Default (other than a
Bankruptcy Default) under the Stock Purchase Agreement, (b) any lack of
validity or enforceability of the Stock Purchase Agreement, (c) the existence
of any claim, setoff, defense or any right which Purchaser may have at any
time against the Borrower, the Agent or the Banks, (d) any statement,
certificate or any other document presented pursuant to the Stock Purchase
Agreement or hereunder proving to be fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect
whatsoever, (e) any breach of any agreement or dispute among or between
Purchaser and the Borrower, (f) any non-application or misapplication by the
Borrower of the proceeds of any "Purchase" (as such term is defined in the
Stock Purchase Agreement), (g) any extension of time for or delay, renewal or
compromise of other indulgence or modification granted or agreed to by the
Agent or the Banks with or without notice to or approval by the Purchaser with
respect to transactions contemplated by the Agreement, the Credit Agreement or
any other Loan Documents; (h) any other legal or equitable defenses whatsoever
to which Purchaser might otherwise be entitled, or (i) any failure on the part
of Borrower to take any other action in connection with a Purchase or to
deliver to Purchaser the certificate representing shares of Preferred Stock.
Except as provided in Paragraph 3, below, Purchaser shall fund such amounts to
Borrower as required by the terms of this Agreement upon receipt of written
demand for such amounts.
3. Payment to Agent. Purchaser agrees to, and Borrower hereby irrevocably
authorizes and directs Purchaser to, pay directly to Agent in immediately
available funds any and all amounts to be funded or paid by Purchaser pursuant
to the Stock Purchase Agreement upon receipt of a written notice from Agent,
executed by a purported officer of Agent, demanding payment of any and all
amounts to be funded or paid by Purchaser pursuant to the Stock Purchase
Agreement. Agent shall be entitled to, and Borrower hereby irrevocably
consents to and authorizes Agent to, make such demand at any time (whether
before or after the occurrence of a Default or Event of Default) as determined
by Agent in its sole and absolute discretion. No further notice or
authorization shall be required from Borrower in order to authorize the
payment of all such sums directly to Agent. Purchaser shall have no right or
obligation to inquire as to the right of Agent to make such demand, and the
obligation of Purchaser hereunder shall not be affected by any notice or claim
of Borrower to the contrary. Borrower waives any right to require that such
payments be made to Borrower following delivery of such demand by Agent unless
and until such demand is revoked in writing by Agent. Borrower agrees that
Borrower shall have no right or claim against Purchaser for or by reason of
such payments made directly to Agent following the receipt of such written
demand. Upon payment of such amounts to Agent, Borrower shall recognize such
payments as having been made to Borrower pursuant to the Stock Purchase
Agreement. Any such amounts received by Agent shall be applied to the
Obligations in such order as the Agent shall determine.
4. Assignment of Stock Purchase Agreement. Purchaser acknowledges that
the rights of the Borrower pursuant to the Stock Purchase Agreement and this
Agreement have been assigned to Agent, and Purchaser expressly consents to
said assignment and agrees that such assignment shall not constitute a
"Potential Event of Default", "Event of Default" (as such terms are defined in
the Stock Purchase Agreement) or other default of any nature under the Stock
Purchase Agreement, and that upon the transfer to Agent or a nominee of Agent
or the Banks of the rights of Borrower under this Agreement and Stock Purchase
Agreement by foreclosure or transfer in lieu thereof, Agent, the Banks or such
nominee shall be entitled to exercise all rights, powers and privileges under
the Stock Purchase Agreement and this Agreement to collect and receive any and
all amounts to be funded or paid by Purchaser pursuant thereto and this
Agreement; provided that the foregoing shall not limit or impair the rights of
the Agent to receive payments as provided in Paragraph 3, above.
5. Representations of Purchaser. Purchaser hereby represents and warrants
to the Agent as follows: (a) the Stock Purchase Agreement is in full force and
effect and has not been modified, and Borrower is entitled to the benefits
thereof; (b) no default (or event which would with the giving of notice or the
passage of any applicable grace or notice and cure period might become a
default) exists under the Stock Purchase Agreement; (c) there are no setoffs,
defenses or counterclaims in favor of Purchaser with respect to the Stock
Purchase Agreement, and to the extent that any such setoffs, defenses or
counterclaims might be alleged to exist, the same are hereby waived and
released by Purchaser; (d) the execution, delivery and performance of the
Stock Purchase Agreement and this Agreement are within the authority of
Purchaser, have been duly authorized by all necessary proceedings on the part
of Purchaser, do not and will not conflict with or result in any breach or
contravention of any provision of law, statute, rule or regulation to which
Purchaser is subject or any judgment, order, writ, injunction, license or
permit applicable to Purchaser, do not and will not conflict with or
constitute a default (with the passage of time or the giving of notice or
both) under any provision of the organizational documents of, or any mortgage,
indenture, agreement, contract or other instrument binding upon Purchaser or
any of its properties; and (e) this Agreement and the Stock Purchase Agreement
constitute the valid and legally binding obligations of Purchaser enforceable
in accordance with their respective terms and provisions, except as
enforceability is limited by bankruptcy or other laws relating to or affecting
generally the enforcement of creditors' rights and the effect of general
principles of equity.
6. Covenants of Purchaser. Purchaser hereby covenants and agrees with
Borrower and Agent that it will not modify, amend, cancel, release, surrender
or terminate the Stock Purchase Agreement or this Agreement without the prior
written consent of the Agent, which consent may be withheld by the Agent in
its sole and absolute discretion.
7. Liability of Agent and Banks. Anything herein, in the Stock Purchase
Agreement or any other instrument to the contrary notwithstanding,
(a) Borrower shall remain liable under the Stock Purchase Agreement, for the
performance of its obligations, (b) the exercise by Agent of any of its rights
hereunder or under the Loan Documents shall not release Borrower from any of
its duties or obligations under the Stock Purchase Agreement or under the Loan
Documents, and (c) Agent shall not have any obligations or liability under the
Stock Purchase Agreement or otherwise by reason of this Agreement or the Loan
Documents, nor shall Agent be obligated to perform any of the obligations or
duties of Borrower thereunder; provided, however, that any failure of Borrower
to perform such obligations shall not create a defense to the obligations of
Purchaser hereunder.
8. Amendments and Waivers. No amendment or waiver of any provision of
this Agreement nor consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by all parties
hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No delay or
omission of Agent to exercise any right, power or remedy accruing upon any
Event of Default shall exhaust or impair any such right, power or remedy or
shall be construed to be a waiver of any such Event of Default, or
acquiescence therein; and every right, power and remedy given by this
Agreement to Agent may be exercised from time to time and as often as may be
deemed expedient by Agent.
9. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.
10. Notices. Each notice, demand, election or request provided or
permitted to be given pursuant to this Assignment (hereinafter in this
Paragraph 10 referred to as "Notice"), must be in writing and shall be deemed
to have been properly given or served by personal delivery or by sending same
by overnight courier or by depositing same in the United States Mail, postpaid
and registered or certified, return receipt requested as follows:
If to the Agent:
Bank Boston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
With a copy to:
Bank Boston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, GA 30346
Attn: Mr. Dan Silbert
If to the Borrower:
Wellsford Real Properties, Inc.
610 Fifth Avenue
7th Floor
New York, New York 10020
Attn: Gregory Hughes
If to Purchaser:
ERP Operating Limited Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
Attn: President
Each Notice shall be effective upon being personally delivered or upon being
sent by overnight courier or upon being deposited in the United States Mail as
aforesaid. The time period in which a response to such Notice must be given
or any action taken with respect thereto (if any), however, shall commence to
run from the date of receipt if personally delivered or sent by overnight
courier, or if so deposited in the United States Mail, the earlier of three
(3) Business Days following such deposit or the date of receipt as disclosed
on the return receipt. Rejection or other refusal to accept or the inability
to deliver because of changed address for which no notice was given shall be
deemed to be receipt of the Notice sent. By giving at least fifteen (15) days
prior Notice thereof, the parties hereto shall have the right from time to
time and at any time during the term of this Agreement to change their
respective addresses and each shall have the right to specify as its address
any other address within the United States of America.
11. Conflicting Provisions. In the event of a conflict between the terms
of this Agreement and the terms of the Stock Purchase Agreement, the terms of
this Agreement shall be deemed controlling in all respects until such time as
the Obligations are paid in full.
12. Successors and Assigns. This Agreement shall be binding upon, and
shall inure to the benefit of the parties hereto and the Banks, their
respective legal representatives, successors, successors-in-title and assigns;
provided that as to the Agent and the Banks, this Agreement may only be
assigned to a successor Agent or Bank pursuant to the Credit Agreement, a
nominee of any or all of them or any purchaser (other than Borrower) at a
foreclosure of the collateral pledged pursuant to the Assignment of Common
Stock Agreement.
13. Term. This Agreement shall continue and be effective until the
indefeasible payment in full of the Obligations.
14. Waivers of Purchaser. All of the Obligations shall be deemed to have
been made or incurred in reliance upon this Agreement, and Purchaser expressly
waives all notice of the incurring of the Obligations from time to time under
the Credit Agreement or otherwise and all other notices not specifically
required pursuant to the terms of this Agreement or by law. Purchaser agrees
that Agent and the Banks shall be entitled to manage and supervise the Loans
to Borrower in accordance with such practices as they deem appropriate under
the circumstances. Purchaser agrees that neither Agent nor any Bank has made
any warranties or representations with respect to the due execution, legality,
validity, completeness or enforceability of the Credit Agreement or the other
Loan Documents or the collectability of the Obligations; and that neither the
Agent nor the Banks shall have any responsibility to Purchaser to advise it of
information known to any of them regarding the financial condition of Borrower
or of any circumstances bearing upon the non-payment of the Obligations or any
other indebtedness of Borrower. All agreements and obligations of Purchaser
hereunder shall remain in full force and effect irrespective of: (a) any
change in the time, manner or place of payment of the Obligations, or any
other term of all or any of the Loan Documents; (b) any change, release or
non-perfection of any Collateral, or any release or amendment or waiver of or
consent to the departure from, any of the Loan Documents; or (c) any other
circumstances which might otherwise constitute a defense available to, or a
discharge of, Borrower in respect of the Obligations or Purchaser in respect
to its obligations under this Agreement or the Stock Purchase Agreement.
15. Rights of Borrower. The rights of the Borrower pursuant to the Stock
Purchase Agreement shall not be enlarged by this Agreement, which rights of
Borrower shall continue to be governed by the Stock Purchase Agreement;
provided that the rights of the Agent as a successor of the Borrower shall be
subject to the terms of this Agreement.
16. Miscellaneous. Time is of the essence of this Agreement. Title or
captions of paragraphs hereof are for convenience only and neither limit nor
amplify the provisions hereof. If, for any circumstances whatsoever,
fulfillment of any provision of this Agreement shall involve transcending the
limit of validity presently prescribed by applicable law, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein operates or would prospectively operate to invalidate this
Agreement, in whole or in part, then such clause or provision only shall be
held for naught, as though not herein contained, and the remainder of this
Agreement shall remain operative and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under
seal on the date first above written.
AGENT:
BANK BOSTON, N.A., a national banking association,
individually and as Agent
By:/s/ Mark E. Bashman
------------------------------------
Mark E. Basham, Managing Director
[Signatures continued on next page]
<PAGE>
BORROWER:
WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation
By:/s/ Gregory F. Hughes
---------------------------------------
Name: Gregory F. Hughes
Title: Chief Financial Officer
[CORPORATE SEAL]
[Signatures continued on next page]
<PAGE>
PURCHASER:
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential Properties
Trust, its sole General Partner
By:/s/ Bruce Strohm
-------------------------------
Name:
Title:
[CORPORATE SEAL]
ASSIGNMENT OF COMMON STOCK AGREEMENTS
THIS ASSIGNMENT OF COMMON STOCK AGREEMENTS (this "Assignment"), made as of
the 30th day of May, 1997, by WELLSFORD REAL PROPERTIES, INC., a Maryland
corporation ("Assignor"), to BANKBOSTON, N.A., a national banking association
("BKB"), as Agent for itself and the other "Banks" from time to time party to
the "Credit Agreement" (as such terms are hereinafter defined) (BKB, in its
capacity as Agent is hereinafter referred to as "Agent").
W I T N E S S E T H:
WHEREAS, Assignor and ERP Operating Limited Partnership, on Illinois limited
partnership ("ERP"), have entered into that certain Common Stock and Preferred
Stock Purchase Agreement dated as of May 30, 1997 (the "Stock Purchase
Agreement"), pursuant to which ERP has agreed to purchase certain interests in
Assignor; and
WHEREAS, pursuant to that certain Revolving Credit Agreement dated of even
date herewith among Assignor, BKB, Morgan Guaranty Trust Company of New York,
individually and as Co-Agent, and Agent (as the same may be varied, extended,
supplemented, consolidated, amended, replaced, renewed, modified or restated,
the "Credit Agreement"), the "Banks" (as defined in the Credit Agreement) have
agreed to provide a revolving credit loan to Assignor of up to $50,000,000.00
(the "Loan"), which Loan is evidenced by those certain Notes made by Assignor
to the order of the Banks in the aggregate principal face amount of
$50,000,000.00 (such Notes, as the same may be varied, extended, supplemented,
consolidated, amended, replaced, renewed, modified or restated, is hereinafter
collectively referred to as the "Note");
WHEREAS, Agent, Assignor and ERP have entered into that certain Agreement
Regarding Common Stock and Preferred Stock Purchase Agreement dated of even
date herewith (the "Common Stock Agreement"); and
WHEREAS, Agent has required, as a condition to the making of the Loan to
Assignor, that Assignor execute this Assignment to secure the obligations of
Assignor under the Note, the Credit Agreement and certain other agreements;
NOW, THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), and other good and valuable considerations, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby
covenant and agree as follows:
6. Definitions. Capitalized terms used herein that are not otherwise
defined herein shall have the meaning set forth in the Credit Agreement.
7. Grant of Security Interest. As security for the payment and
performance by Assignor of each and all of the duties, responsibilities and
obligations under this Assignment and the Credit Agreement, the Note and any
and all agreements evidencing, securing or otherwise relating to the
obligations evidenced by the Note and the Credit Agreement (this Assignment,
the Credit Agreement, the Note and such other agreements, together with any
and all renewals, modifications, consolidations and extensions thereof, are
hereinafter referred to collectively as the "Loan Documents"; and said duties,
responsibilities and obligations of Assignor are hereinafter referred to
collectively as the "Obligations"), Assignor does hereby transfer, assign,
pledge, convey and grant to Agent, and does hereby grant a security interest
to Agent in, all right, title and interest of Assignor in and to the
following:
(a) All right, title, interest, claims or rights of Assignor in and to
the Stock Purchase Agreement and the Common Stock Agreement (collectively, the
"Common Stock Agreements") together with any and all other property at any
time and from time to time receivable or otherwise distributed in respect of
or in exchange for all or any thereof; and
(b) Any and all dividends, profits, proceeds, accounts, income,
distributions, and payments of any kind or nature whatsoever now or hereafter
distributable or payable by ERP to Assignor with respect to the Common Stock
Agreements, and any and all proceeds from any transfer, assignment or pledge
of any interest of Assignor in, or claim or right against, ERP (regardless of
whether such transfer, assignment or pledge is permitted under the terms
hereof or the other Loan Documents), and all claims, choses in action or
things in action now or hereafter arising against ERP; and
(c) All accounts, contract rights and general intangibles now or
hereafter arising from any of the foregoing; and
(d) All notes or other documents or instruments now or hereafter
evidencing or securing any of the foregoing; and
(e) All documents, writings, leases, books, files, records, computer
tapes, programs, ledger books and ledger pages arising from or used in
connection with any of the foregoing; and
(f) All renewals, extensions, additions, substitutions or replacements
of any of the foregoing; and
(g) All powers, options, rights, privileges and immunities pertaining
to any of the foregoing; and
(h) All proceeds of any of the foregoing and all cash, security or
other property distributed on account of any of the foregoing (including
without limitation, all stock rights, stock splits, subscription rights,
dividends, new certificates and new securities).
All of the foregoing described in this paragraph 2 is hereinafter referred to
collectively as the "Collateral".
8. Obligations Secured. This Assignment secures the payment and
performance by Assignor of the Obligations.
9. Collection of Collateral.
(a) It is acknowledged and agreed by the parties hereto that Agent
shall have sole and exclusive possession of the Collateral and that this
Assignment constitutes a present, absolute and current assignment of all the
Collateral and is effective upon the execution and delivery hereof. Payments
under or with respect to the Collateral shall be made as follows:
(i) Assignor shall have no right to receive payments made under
or with respect to the Collateral (including, without limitation any
Collateral from or relating to any sale, transfer, assignment,
conveyance, option or other disposition of, or any pledge, mortgage,
encumbrance, financing or refinancing of any of the Collateral,
regardless of whether such event is permitted under the terms of the
Loan Documents), and all such payments shall be delivered directly by
ERP to Agent.
(ii) If Assignor shall receive any payments made under or with
respect to the Collateral (including, without limitation any Collateral
from or relating to any sale, transfer, assignment, conveyance, option
or other disposition of, or any pledge, mortgage, encumbrance,
financing or refinancing of any of the Collateral, regardless of
whether such event is permitted under the terms of the Loan Documents),
Assignor shall hold all such payments in trust for Agent, will not co-
mingle such payments with other funds of Assignor, and will immediately
pay and deliver in kind, all such payments directly to Agent for
application by Agent in satisfaction of the Obligations in such order
as Agent in its sole and absolute discretion shall determine.
(iii) Assignor hereby agrees for the benefit of ERP that all
payments actually received by Agent shall be deemed payments to
Assignor by ERP. Agent shall apply any and all such payments actually
received by Agent in satisfaction of the Obligations in such order as
Agent in its sole and absolute discretion shall determine. Agent shall
return to Assignor that portion of any payments actually received by
Agent from ERP which Agent determines, in the exercise of its sole and
absolute discretion, is not needed to repay the Obligations.
(iv) In furtherance of the foregoing, Assignor does hereby notify
and direct ERP and its partners that all payments under or with respect
to the Collateral shall be made directly to Agent at the address of
Agent set forth in the Common Stock Agreement.
(b) Assignor shall cause ERP promptly to pay all sums payable by ERP
or any partner thereof under the terms of the Common Stock Agreements.
(c) Assignor hereby irrevocably designates and appoints Agent its true
and lawful attorney-in-fact, which appointment is coupled with an interest,
either in the name of Agent, or in the name of Assignor, at Assignor's sole
cost and expense, to take any or all of the following actions:
(i) to ask, demand, sue for, attach, levy, settle, compromise,
collect, compound, recover, receive and give receipt and acquittances
for any and all Collateral and to take any and all actions as Agent may
deem necessary or desirable in order to realize upon the Collateral, or
any portion thereof, including, without limitation, making any
statements and doing and taking any actions on behalf of Assignor which
are otherwise required of Assignor under the terms of any agreement as
conditions precedent to the receipt of payments with respect to the
Collateral, and the right and power to receive, endorse, assign and
deliver, in the name of Assignor, any checks, notes, drafts,
instruments or other evidences of payment received in payment of or on
account of all or any portion of the Collateral, and Assignor hereby
waives presentment, demand, protest and notice of demand, protest and
non-payment of any instrument so endorsed; and
(ii) to institute one or more actions against ERP or any
partner thereof in connection with the collection of the Collateral, to
prosecute to judgment, settle or dismiss any such actions, and to make
any compromise or settlement deemed desirable, in Agent's good faith
judgment, with respect to the Collateral, to extend the time of
payment, arrange for payment in installments or otherwise modify the
terms of the Common Stock Agreements with respect to the Collateral or
release ERP or any partner thereof from their respective obligations to
pay any sums due under the Common Stock Agreements, without incurring
responsibility to, or affecting any liability of, Assignor under the
Common Stock Agreements;
it being specifically understood and agreed, however, that Agent shall not be
obligated in any manner whatsoever to give any notices of default (except as
may be specifically required herein or the other Loan Documents) or to
exercise any such power or authority or be in any way responsible for the
preservation, maintenance, collection of or realizing upon the Collateral, or
any portion thereof, or any of Assignor' rights therein. The foregoing
appointment is irrevocable and continuing and any such rights, powers and
privileges shall be exclusive in Agent, its successors and assigns until this
Assignment terminates as provided in Paragraph 13, below.
10. Warranties and Covenants. Assignor does hereby warrant and represent
to, and covenant and agree with, Agent as follows:
(a) All duties, obligations and responsibilities required to be
performed by Assignor as of the date hereof under the Common Stock Agreements
have been performed, and no default or condition which with the passage of
time or the giving of notice, or both, would constitute a default exists under
the Common Stock Agreements.
(b) A true, correct and complete copy of the Common Stock Agreements,
together with all amendments thereto, is attached hereto as Exhibit "A". The
Common Stock Agreements are in full force and effect. Except for the Loan
Documents and the Common Stock Agreement, neither Assignor nor any of its
directors, officers or shareholders is a party to or is bound by any
indenture, contract or other agreement which purports to prohibit, restrict,
limit or control the transfer or pledge of the Collateral.
(c) Assignor is and shall remain the sole, lawful, beneficial and
record owner of the Collateral, free and clear of all liens, restrictions,
claims, pledges, encumbrances, charges, claims of third parties and rights of
set-off or recoupment whatsoever (other than those in favor of Agent hereunder
with respect to the Collateral), and Assignor has the full and complete right,
power and authority to create a security interest in the Collateral in favor
of Agent, in accordance with the terms and provisions of this Assignment.
Assignor is not and will not become a party to or otherwise be bound by any
agreement, other than the Loan Documents and the Common Stock Agreement, which
restricts in any manner the rights of any present or future holder of any of
the Collateral. No Person has any option, right of first refusal, right of
first offer or other right to acquire all or any portion of the Collateral.
(d) Upon the delivery to Agent of the Common Stock Agreements, this
Assignment creates a valid and binding first priority security interest in the
Collateral securing the payment and performance of the Obligations and the
performance by Assignor of its obligations hereunder and by Assignor of its
obligations under the Loan Documents, and upon the filing of U.C.C. Financing
Statements with the Secretary of State of New York and the Office of the
Register of the City of New York, New York County, all filings and other
actions necessary to perfect and protect such security interests shall have
been duly made and taken. Neither Assignor nor ERP has performed or will
perform any acts which might prevent Agent from enforcing any of the terms and
conditions of this Assignment or which would limit Agent in any such
enforcement.
(e) All original notes and other documents or instruments evidencing,
constituting, guaranteeing or securing any of the Collateral or any right to
receive payments with respect to the Collateral have been endorsed to and
delivered to Agent.
(f) For the purposes of Article 9-401 of the New York Uniform
Commercial Code, the principal place of business of Assignor is located in New
York County, New York. In the event that Assignor has more than one place of
business in the State of New York, its chief executive office is located in
New York County, New York. In order to perfect the pledge and security
interests granted herein against Assignor, U.C.C. Financing Statements must be
filed with Secretary of State of New York and the Office of the Register of
the City of New York, New York County.
11. General Covenants. Assignor covenants and agrees that, so long as this
Assignment is continuing:
(a) Assignor shall not, without the prior written consent of Agent,
which consent may be withheld by Agent in its sole and absolute discretion,
directly, indirectly or by operation of law, sell, transfer, assign, dispose
of, pledge, convey, option, mortgage, hypothecate or encumber any of the
Collateral.
(b) Assignor shall at all times defend the Collateral against all
claims and demands of all persons at any time claiming any interest in the
Collateral adverse to Agent's interest in the Collateral as granted hereunder.
(c) So long as this Assignment remains in effect, Assignor shall not
modify, amend, cancel, release, surrender, terminate or permit the
modification, amendment, cancellation, release, surrender or termination of,
the Common Stock Agreements, without in each instance the prior written
consent of Agent, which consent may be withheld by Agent in its sole and
absolute discretion; provided, however, that Agent shall not unreasonably
withhold its consent to any modification or amendment of the Common Stock
Agreements which does not affect or have an impact on the Collateral or the
rights and benefits afforded to Agent pursuant to this Assignment (such
modifications or amendments described in the foregoing proviso are hereinafter
referred to as the "Minor Amendments").
(d) Assignor shall perform all of its respective duties,
responsibilities and obligations under the Common Stock Agreements and with
respect to the Collateral and shall diligently and in good faith protect the
value of the Collateral. Assignor shall not, without the prior written
consent of Agent, which consent may be withheld by Agent in its sole and
absolute discretion, take any action that would, in the exercise of Agent's
reasonable judgment, jeopardize or diminish the security afforded to Agent by
the Collateral.
(e) Assignor shall pay all taxes and other charges against the
Collateral, shall not use the Collateral illegally, and shall not suffer to
exist any loss, theft, damage or destruction of the Collateral and shall
suffer to exist no levy, seizure or attachment of the Collateral.
(f) Assignor, at the request of Agent, shall take such actions as
Agent may reasonably require to enforce the terms of the Common Stock
Agreements or any other contract, agreement or instrument included in, giving
rise to, creating, establishing, evidencing or relating to the Collateral or
to collect or enforce any claim for payment or other right or privilege
assigned to Agent hereunder.
(g) Assignor authorizes Agent, at the expense of Assignor, to execute
and file any financing statement or statements reasonably deemed necessary by
Agent to perfect its security interest in any of the Collateral. Any such
financing statement may be signed by Agent alone. Assignor will sign and
deliver any financing statements and other documents, and perform such other
acts as Agent reasonably may deem necessary or desirable from time to time to
establish and maintain in favor of Agent, valid and perfected security
interests in the Collateral, free of all other liens, encumbrances, security
interests and claims other than as permitted by the terms of this Assignment.
Assignor shall do anything else Agent may reasonably require from time to time
to establish a valid security interest in and to further protect and perfect
its security interest in the Collateral.
(h) Except for those items of the Collateral that are delivered to
Agent as provided herein, the Collateral, and all records of Assignor relative
to the Collateral, are and will be kept at the office of Assignor located in
New York County, New York. Assignor shall give Agent not fewer than thirty
(30) days prior written notice of any proposed change in the Company's or
Assignor's name and any proposed change in the location of the Collateral or
of such records, and Assignor will not, without the prior written consent of
Agent, move the Collateral or such records to a location outside of New York
County, New York or keep duplicate records with respect to the Collateral at
any address outside such county. Nothing contained in this subparagraph shall
be construed so as to prevent Assignor from keeping material abstracted from
the books and records described herein at any of its offices as necessity or
convenience dictates. Assignor shall permit the Agent or any representative
designated by the Agent, at Agent's expense and upon reasonable advance notice
(which may be oral), to examine the books of account of Assignor (and to make
copies thereof and extracts therefrom) and to discuss the affairs, finances
and accounts of Assignor, and to be advised as to the same by, its officers
and directors, all at such reasonable times and intervals as the Agent may
reasonably request. The Agent shall use good faith efforts to coordinate such
visits and inspections so as to minimize the interference with and disruption
to Assignor's normal business operations.
(i) If any amounts are due from ERP to Assignor and the obligations to
repay such amount is to be evidenced by a separate document or instrument,
then as evidence of such obligations, Assignor shall cause ERP to issue
Assignor, as the evidence of any obligations of ERP to pay such amount to
Assignor in the future, a promissory note bearing the legend attached hereto
as Exhibit "B" and which note shall provide that all payments due under such
promissory note are to be paid directly to Agent as required by and applied as
provided in the Loan Documents until the Obligations are paid in full or this
Assignment is otherwise terminated as provided herein. No other evidence of
such obligations shall be executed by ERP to Assignor.
(j) Assignor shall promptly deliver to Agent any note or other
document or instrument entered into after the date hereof which evidences,
constitutes, guarantees or secures any of the Collateral or any right to
receive payments with respect to the Collateral, which notes or other
documents and instruments shall be accompanied by such endorsements or
assignments as Agent may require to transfer title to Agent.
(k) Assignor will provide to Agent such documents and reports
respecting the Collateral in such form and detail as Agent reasonably may
request from time to time.
(l) Anything herein to the contrary notwithstanding, (i) Assignor
shall remain liable under the Common Stock Agreements and all other contracts,
agreements and instruments included in, giving rise to, creating,
establishing, evidencing or relating to the Collateral to the extent set forth
therein to perform all of its duties and obligations to the same extent as if
this Assignment had not been executed, (ii) the exercise by Agent of any of
its rights hereunder shall not release Assignor from any of its duties or
obligations under the Common Stock Agreements or any such contracts,
agreements and instruments, and (iii) Agent shall not have any obligation or
liability under the Common Stock Agreements or any such contract, agreement or
instrument by reason of this Assignment, nor shall Agent be obligated to
perform any of the obligations or duties of Assignor thereunder or to take any
action to collect or enforce any claim for payment or other right or privilege
assigned to Agent hereunder.
(m) If Assignor shall at any time be entitled to receive or shall
receive any cash, stock certificate or other property, option or right, upon,
in respect of, as an addition to, or in substitution or exchange for any of
the Collateral, whether for value paid by Assignor or otherwise, Assignor
agrees that the same shall be deemed to be Collateral and shall be delivered
directly to Agent in each case accompanied by proper instruments of assignment
duly executed by Assignor in such a form as may be required by Agent, to be
held by Agent subject to the terms hereof, as further security for the
Obligations (except as otherwise provided herein with respect to the
application of the foregoing to the Obligations). If Assignor receives any of
the foregoing directly, Assignor agrees to hold such cash or other property in
trust for the benefit of Agent, and to surrender such cash or other property
to Agent immediately.
(n) Assignor shall not, without the prior written consent of Agent,
which consent may be withheld by Agent in its sole and absolute discretion,
vote on, approve or otherwise take any action with respect to any matter which
pursuant to the terms of the Common Stock Agreements requires the approval of
Assignor as the owner of the Collateral.
12. Events of Default. An Event of Default shall exist hereunder upon the
occurrence of any of the following:
(a) Any warranty, representation or statement made by or on behalf of
Assignor in this Assignment proves untrue or misleading in any material
respect; or
(b) Assignor shall fail to duly and fully comply with any covenant,
condition or agreement in Paragraph 6(a), 6(c), 6(d), 6(e), 6(i), 6(j), 6(m)
or 6(n) of this Assignment; or
(c) Assignor shall fail to duly and fully comply with any other
covenant, condition or agreement of this Assignment (other than those
specified above in this Paragraph 7) and the same is not cured within thirty
(30) days following receipt of written notice of such default; or
(d) The occurrence of an Event of Default under any of the Loan
Documents.
13. Remedies.
(a) Upon the occurrence and during the continuance of any Event of
Default, Agent may take any action deemed by Agent to be necessary or
appropriate to the enforcement of the rights and remedies of Agent under this
Assignment and the Loan Documents, including, without limitation, the exercise
of its rights and remedies with respect to any or all of the Collateral. The
remedies of Agent shall include, without limitation, all rights and remedies
specified in the Loan Documents and this Assignment, all remedies of Agent
under applicable general or statutory law, and the remedies of a secured party
under the Uniform Commercial Code as enacted in the State of New York,
regardless of whether the Uniform Commercial Code has been enacted or enacted
in that form in any other jurisdiction in which such right or remedy is
asserted. Any notice required by law, including, but not limited to, notice
of the intended disposition of all or any portion of the Collateral, shall be
reasonably and properly given in the manner prescribed for the giving of
notice herein, and, in the case of any notice of disposition, if given at
least ten (10) calendar days prior to such disposition. Agent may require
Assignor to assemble the Collateral and make it available to Agent at any
place to be designated by Agent which is reasonably convenient to both
parties. It is expressly understood and agreed that Agent shall be entitled
to dispose of the Collateral at any public or private sale, and that Agent
shall be entitled to bid and purchase at any such sale. In the event that
Agent is the successful bidder at any public or private sale of any note or
other document or instrument evidencing Assignor' right to receive a
Distribution, Agent shall be entitled to credit the amount bid by Agent
against the obligations evidenced by such note, document or instrument rather
than the obligations evidenced by the Note. To the extent the Collateral
consist of marketable securities, Agent shall not be obligated to sell such
securities for the highest price obtainable, but shall sell them at the market
price available on the date of sale. Agent shall not be obligated to make any
sale of the Collateral if it shall determine not to do so regardless of the
fact that notice of sale of the Collateral may have been given. Agent may,
without notice or publication, adjourn any public sale from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. Each such purchaser at any such sale shall hold the Collateral
sold absolutely free from claim or right on the part of Assignor. In the
event that any consent, approval or authorization of any governmental agency
or commission will be necessary to effectuate any such sale or sales, Assignor
shall execute all such applications or other instruments as Agent may deem
reasonably necessary to obtain such consent, approval or authorization. Agent
may notify any account debtor or obligor with respect to the Collateral to
make payment directly to Agent, and may demand, collect, receipt for, settle,
compromise, adjust, sue for, foreclose or realize upon the Collateral as Agent
may determine whether or not the Obligations or the Collateral are due, and
for the purpose of realizing Agent's rights therein, Agent may receive, open
and dispose of mail addressed to Assignor and endorse notes, checks, drafts,
money orders, documents of title or other evidences of payment, shipment or
storage of any form of Collateral on behalf and in the name of Assignor, as
its attorney-in-fact. In addition, Assignor hereby irrevocably designates and
appoints Agent its true and lawful attorney-in-fact either in the name of
Agent or Assignor to (i) sign Assignor's name on any Collateral, drafts
against account debtors, assignments, any proof of claim in any bankruptcy or
other insolvency proceeding involving any account debtor, any notice of lien,
claim of lien or assignment or satisfaction of lien, or on any financing
statement or continuation statement under the Uniform Commercial Code;
(ii) send verifications of accounts receivable to any account debtor; and
(iii) in connection with a transfer of the Collateral as described above sign
in Assignor's name any documents necessary to transfer title to the Collateral
to Agent or any third party. All acts of said power of attorney are hereby
ratified and approved and Agent shall not be liable for any mistake of law or
fact made in connection therewith. This power of attorney is coupled with an
interest and shall be irrevocable so long as any amounts remain unpaid on any
of the Obligations. All remedies of Agent shall be cumulative to the full
extent provided by law, all without liability except to account for property
actually received, but the Agent shall have no duty to exercise such rights
and shall not be responsible for any failure to do so or delay in so doing.
Pursuit by Agent of certain judicial or other remedies shall not abate nor bar
other remedies with respect to the Obligations or to other portions of the
Collateral. Agent may exercise its rights to the Collateral without resorting
or regard to other collateral or sources of security or reimbursement for the
Obligations.
(b) If Assignor fails to perform any agreement or covenant contained
in this Assignment beyond any applicable period for notice and cure, Agent may
itself perform, or cause to be performed, any agreement or covenant of
Assignor contained in this Assignment which Assignor shall fail to perform,
and the cost of such performance, together with any reasonable expenses,
including reasonable attorneys' fees actually incurred (including attorneys'
fees incurred in any appeal) by Agent in connection therewith, shall be
payable by Assignor upon demand and shall constitute a part of the Obligations
and shall bear interest at the rate for overdue amounts as set forth in the
Credit Agreement.
(c) Whether or not an Event of Default has occurred and whether or not
Agent is the absolute owner of the Collateral, Agent may take such action as
Agent may deem necessary to protect the Collateral or its security interest
therein, Agent being hereby authorized to pay, purchase, contest and
compromise any encumbrance, charge or lien which in the reasonable judgment of
Agent appears to be prior or superior to its security interest, and in
exercising any such powers and authority to pay necessary expenses, employ
counsel and pay reasonable attorney's fees. Any such advances made or
expenses incurred by Agent shall be deemed advanced under the Loan Documents,
shall increase the indebtedness evidenced and secured thereby, shall be
payable upon demand and shall bear interest at the rate for overdue payments
set forth in the Credit Agreement.
14. Duties of Agent. The powers conferred on Agent hereunder are solely to
protect its interest in the Collateral and shall not impose any duty upon it
to exercise any such powers. Agent's duty with reference to the Collateral
shall be solely to use slight care in the custody and preservation of the
Collateral, which shall not include any steps necessary to preserve rights
against prior parties. Agent shall have no responsibility or liability for
the collection of any Collateral or by reason of any invalidity, lack of value
or uncollectability of any of the payments received by it.
15. Indemnification.
C\W It is specifically understood and agreed that this Assignment
shall not operate to place any responsibility or obligation whatsoever upon
Agent, and that in accepting this Assignment, Agent neither assumes nor agrees
to perform at any time whatsoever any obligation or duty of Assignor relating
to the Collateral or under the Common Stock Agreements or any other mortgage,
indenture, contract, agreement or instrument to which Assignor is a party or
to which it is subject, all of which obligations and duties shall be and
remain with and upon Assignor.
(b) Assignor agrees to indemnify, defend and hold Agent harmless from
and against any and all claims, expenses, losses and liabilities growing out
of or resulting from this Assignment (including, without limitation,
enforcement of this Assignment) or acts taken or omitted by Agent hereunder or
in connection herewith, except claims, expenses, losses or liabilities
resulting from Agent's gross negligence or wilful misconduct.
(c) Assignor upon demand shall pay to Agent the amount of any and all
reasonable expenses, including, without limitation, the reasonable fees and
disbursements of counsel actually incurred (including those incurred in any
appeal), and of any experts and agents, which Agent may incur in connection
with (i) the administration of this Assignment, (ii) the sale of, collection
from, or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of Agent hereunder, or (iv) the failure by
Assignor to perform or observe any of the provisions hereof beyond any
applicable period for notice and cure.
16. Security Interest Absolute. All rights of Agent, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:
(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;
(b) Any change in the time (including the extension of the maturity
date of the Note), manner or place of payment of, or in any other term of, all
or any of the Obligations or any other amendment or waiver of or any consent
to any departure from the Loan Documents;
(c) Any exchange, release or nonperfection of any other collateral for
the Obligations, or any release or amendment or waiver of or consent to
departure from any of the Loan Documents with respect to all or any part of
the Obligations; or
(d) Any other circumstance (other than payment of the Obligations in
full) that might otherwise constitute a defense available to, or a discharge
of, Assignor or any third party for the Obligations or any part thereof.
17. Amendments and Waivers. No amendment or waiver of any provision of
this Assignment nor consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by Agent, and then
such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No delay or omission of Agent to
exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be
a waiver of any such Event of Default, or acquiescence therein; and every
right, power and remedy given by this Assignment to Agent may be exercised
from time to time and as often as may be deemed expedient by Agent. Failure
on the part of Agent to complain of any act or failure to act which
constitutes an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by Agent of Agent's rights hereunder
or impair any rights, powers or remedies consequent on any Event of Default.
Assignor hereby waives to the extent permitted by law all rights which
Assignor has or may have under and by virtue of the Uniform Commercial Code as
enacted in the State of New York, and any federal, state, county or municipal
statute, regulation, ordinance, Constitution or charter, now or hereafter
existing, similar in effect thereto providing any right of Assignor to notice
and to a judicial hearing prior to seizure by Agent of any of the Collateral.
Assignor hereby waives and renounces for itself, its heirs, successors and
assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshaling, forbearance, valuation, stay,
extension, homestead, redemption and appraisement now provided or which may
hereafter be provided by the Constitution and laws of the United States and of
any state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement of this Assignment and the collection of
any of the Obligations.
18. Continuing Security Interest; Transfer of Note; Release of Collateral.
This Assignment shall create a continuing security interest in the Collateral
and shall (a) remain in full force and effect until the indefeasible payment
in full of the Obligations, (b) be binding upon Assignor and its permitted
successors and assigns, and (c) inure, together with the rights and remedies
of Agent hereunder, to the benefit of Agent and its successors, transferees
and assigns. Upon the indefeasible payment in full of the Obligations, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Assignor. Upon any such termination, Agent will
execute and deliver to Assignor such documents as Assignor shall reasonably
request to evidence such termination.
19. Modifications, Etc. Assignor hereby consents and agrees that Agent may
at any time and from time to time, without notice to or further consent from
Assignor, either with or without consideration, surrender any property or
other security of any kind or nature whatsoever held by it or by any person,
firm or corporation on its behalf or for its account, securing the
Obligations; substitute for any Collateral so held by it, other collateral of
like kind; agree to modification of the terms of the Loan Documents; extend or
renew the Loan Documents for any period; grant releases, compromises and
indulgences with respect to the Loan Documents for any period; grant releases,
compromises and indulgences with respect to the Loan Documents to any persons
or entities now or hereafter liable thereunder or hereunder; release any
guarantor, endorser or any other Person liable with respect to the
Obligations; or take or fail to take any action of any type whatsoever; and no
such action which Agent shall take or fail to take in connection with the Loan
Documents, or any of them, or any security for the payment of the Obligations
or for the performance of any obligations or undertakings of Assignor, nor any
course of dealing with Assignor or any other person, shall release Assignor'
obligations hereunder, affect this Assignment in any way or afford Assignor
any recourse against Agent.
20. Securities Act. In view of the position of Assignor in relation to the
Collateral, or because of other current or future circumstances, a question
may arise under the Securities Act of 1933, as amended, and all rules and
regulations issued pursuant thereto or any similar federal, state or local
law, rule, regulation or order (collectively the "Applicable Law") hereafter
enacted analogous in purpose or effect (such Act and any such similar law as
from time to time in effect being called the "Federal Securities Laws") with
respect to any disposition of the Collateral permitted hereunder. Assignor
understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of Agent if Agent were to attempt to
dispose of all or any part of the Collateral in accordance with the terms
hereof, and might also limit the extent to which or the manner in which any
subsequent transferee of any Collateral could dispose of the same. Similarly,
there may be other legal restrictions or limitations affecting the Agent in
any attempt to dispose of all or part of the Collateral in accordance with the
terms hereof under applicable Blue Sky or other state securities laws or
similar Applicable Law analogous in purpose or effect. Assignor recognizes
that in light of the foregoing restrictions and limitations Agent may, with
respect to any sale of the Collateral, limit the purchasers to those who will
agree, among other things, to acquire such Collateral for their own account,
for investment, and not with a view to the distribution or resale thereof.
Assignor acknowledges and agrees that in light of the foregoing restrictions
and limitations, the Agent in its sole and absolute discretion may, in
accordance with Applicable Law, (a) proceed to make such a sale whether or not
a registration statement for the purpose of registering such Collateral or
part thereof shall have been filed under the Federal Securities Laws and (b)
approach and negotiate with a single potential purchaser to effect such sale.
Assignor acknowledges and agrees that any such sale might result in prices and
other terms less favorable to the seller if such sale were a public sale
without such restrictions. In the event of any such sale, Agent shall incur
no responsibility or liability for selling all or any part of the Collateral
in accordance with the terms hereof at a price that Agent, in its sole and
absolute discretion, may in good faith deem reasonable under the
circumstances, notwithstanding the possibility that a substantially higher
price might have been realized if the sale were deferred until after
registration as aforesaid or if more than a single purchaser were approached.
The provisions of this paragraph will apply notwithstanding the existence of a
public or private market upon which the quotations or sales prices may exceed
substantially the price at which the Agent sells.
21. Governing Law; Terms. THIS ASSIGNMENT SHALL BE GOVERNED BY AND
CONSTRUED UNDER THE INTERNAL LAWS OF THE STATE OF NEW YORK.
22. Notices. Each notice, demand, election or request provided for or
permitted to be given pursuant to this Assignment shall be deemed to have been
properly given or served if given in the manner provided in the Credit
Agreement.
23. No Unwritten Agreements. THE WRITTEN LOAN DOCUMENTS REPRESENT THE
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
24. Miscellaneous. Time is of the essence of this Assignment. Title or
captions of paragraphs hereof are for convenience only and neither limit nor
amplify the provisions hereof. If, for any circumstances whatsoever,
fulfillment of any provision of this Assignment shall involve transcending the
limit of validity presently prescribed by applicable law, the obligation to be
fulfilled shall be reduced to the limit of such validity; and if any clause or
provision herein operates or would prospectively operate to invalidate this
Assignment, in whole or in part, then such clause or provision only shall be
held for naught, as though not herein contained, and the remainder of this
Assignment shall remain operative and in full force and effect.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, Assignor and Agent have executed this Assignment under
seal on the date first above written.
AGENT:
BANKBOSTON, N.A., a national banking association,
individually and as Agent
By:/s/ Mark E. Basham
----------------------------------
Mark E. Basham, Managing Director
[Signatures continued on next page]
<PAGE>
ASSIGNOR:
WELLSFORD REAL PROPERTIES,
a Maryland corporation
By:/s/ Gregory F. Hughes
------------------------------
Title: chief Financial Officer
[CORPORATE SEAL]
<PAGE>
EXHIBIT "A"
COMMON STOCK AGREEMENTS
<PAGE>
EXHIBIT "B"
PROMISSORY NOTE LEGEND
"THIS NOTE HAS BEEN PLEDGED BY WELLSFORD REAL PROPERTIES, INC., ("ASSIGNOR")
TO BANKBOSTON, N.A. ("AGENT") PURSUANT TO AN ASSIGNMENT OF COMMON STOCK
AGREEMENT DATED AS OF MAY 30, 1997 (THE "AGREEMENT"). ALL AMOUNTS PAYABLE TO
ASSIGNOR PURSUANT TO THIS NOTE SHALL BE PAID DIRECTLY TO AGENT AS REQUIRED BY
THE AGREEMENT."
COLLATERAL ASSIGNMENT OF DOCUMENTS, RIGHTS AND CLAIMS
(INCLUDING COLLATERAL ASSIGNMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES
AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING)
NOTE TO PIMA COUNTY, ARIZONA RECORDER: THIS COLLATERAL ASSIGNMENT RELATES TO
SEVERAL DOCUMENTS PREVIOUSLY RECORDED IN THE OFFICE OF THE PIMA COUNTY,
ARIZONA RECORDER. THE DOCUMENTS (INCLUDING THE RECORDING INFORMATION RELATED
TO THE DOCUMENTS) ARE DESCRIBED AT ITEMS A.3., A.5, A.9. AND A.10. ON THE
ATTACHED EXHIBIT A. PLEASE ENSURE THAT THIS COLLATERAL ASSIGNMENT IS INDEXED
IN THE RECORDS RELATING TO EACH OF THOSE DOCUMENTS.
THIS COLLATERAL ASSIGNMENT OF DOCUMENTS, RIGHTS AND CLAIMS (INCLUDING
COLLATERAL ASSIGNMENT OF DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING) (hereinafter referred to as this
"Assignment"), made as of the 30th day of May, 1997, by WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation ("Borrower"), to BANKBOSTON, N.A., a
national banking association, whose mailing address is 100 Federal Street,
Boston, Massachusetts 02110, as Agent for itself, Morgan Guaranty Trust
Company of New York, whose mailing address is 60 Wall Street, New York, New
York 10260 and the other lenders (collectively, the "Lenders") from time to
time party to the Credit Agreement (as hereinafter defined) (in such capacity,
"Agent"). The Agent is acting as agent for the Lenders pursuant to the Credit
Agreement. The Lenders as of the date hereof are BankBoston, N.A. and Morgan
Guaranty Trust Company of New York.
W I T N E S S E T H:
WHEREAS, the Lenders have agreed to provide a revolving credit facility
(the "Loan") to Borrower pursuant to the Credit Agreement, which Loan is
evidenced by the Notes (as hereinafter defined); and
WHEREAS, as additional security for the Loan, Borrower desires to assign
to Agent, for the benefit of the Lenders, and grant to Agent, for the benefit
of the Lenders, a security interest in and to, all of Borrower's right, title,
equity and interest in and to the Collateral (as hereinafter defined);
NOW THEREFORE, for and in consideration of the sum of Ten and No/100
Dollars ($10.00), the mutual covenants and promises herein contained, and
other good and valuable considerations, the receipt and sufficiency of which
are hereby acknowledged, Borrower and Agent do hereby covenant and agree as
follows:
ARTICLE ONE
DEFINITIONS
1.01 In addition to such other terms as are elsewhere defined herein, the
following terms shall have the following meanings, as used in this Assignment
and in any exhibits attached hereto, unless the context requires otherwise:
"BKB" shall mean BankBoston, N.A., a national banking association.
"Collateral" shall mean collectively,
(a) The notes, deeds of trust, assignments, pledges, financing
statements and other documents and instruments described on Exhibit "A"
attached hereto and made a part hereof, including, without limitation,
the Collateral Notes and the Collateral Deeds of Trust, the Collateral
Security Documents and all rights and interests thereunder, together with
any and all amendments, modifications, consolidations, replacements,
renewals, restatements or supplements thereto; and
(b) All security for the indebtedness evidenced by the
documents and instruments described in Section 1.01(a) above, including
without limitation the Property, and all liens, security interests and
title of Borrower with respect thereto; and
(c) All documents evidencing the documents and instruments
described in Section 1.01(a) above or any security therefor or guaranties
thereof, all title insurance (whether evidenced by policies, commitments
or otherwise) issued with respect to the Property and to any other
security for the documents and instruments described in Section 1.01(a)
above, all accounts, funds, lockboxes, leases, books, files, records,
programs, ledger books, computer tapes arising from or created in
connection with such documents and instruments and all other instruments,
documents, agreements and writings now or hereafter executed by or in
favor of Borrower or any prior holder of such documents and instruments
in connection with any of the foregoing, and all other documents now or
hereafter delivered or to be delivered to Borrower or any prior holder of
such documents and instruments under the documents and instruments
described in Section 1.01(a) above (all of said Collateral Notes,
Collateral Deeds of Trust, Collateral Security Documents and other
documents, policies, instruments and agreements, and any and all
additions, renewals, extensions, amendments, modifications,
consolidations, restatements or supplements thereto of any of the
foregoing, being hereinafter referred to collectively as the "Collateral
Documents"); and
(d) All payments of any kind or nature whatsoever, now or
hereafter due and to become due under the Collateral Documents, all
collections thereon and all other amounts paid thereunder, including
without limitation all prepayments under the Collateral Documents, and
all other cash and non-cash proceeds of the Collateral Documents, or of
any other collateral for the obligations of Maker under the Collateral
Documents and on account of any claim, rights or choses in action against
Maker or otherwise pursuant to the Collateral Documents held by Borrower;
and
(e) All claims, rights and privileges obtained by Borrower in
connection with the making of the loan to Maker evidenced by the
Collateral Documents, together with the Property and all other property
described in the Collateral Documents, and all the powers, options,
privileges, immunities, claims, actions and causes of action contained in
or arising from any of the foregoing;
(f) All present and future accounts, general intangibles,
contract rights, chattel paper or instruments arising out of or with
respect to any of the foregoing;
(g) Any and all renewals and extensions of any of the
foregoing and any and all replacements or substitutions for any of the
foregoing; and
(h) All proceeds and products of the foregoing of every type.
"Collateral Deeds of Trust" shall mean collectively, the deeds of
trust, mortgages and deeds to secure debt described as item A.3 on
Exhibit "A" attached hereto and made a part hereof as the same may now or
hereafter be modified, amended, extended, renewed, consolidated, restated
or supplemented.
"Collateral Notes" shall mean, collectively, the Sonterra Note, the
277 Park Avenue Note and the other promissory notes described as items
A.2 and B.2 on Exhibit "A" attached hereto and made a part hereof as the
same may now or hereafter be modified, amended, extended, renewed,
consolidated, restated or supplemented.
"Collateral Security Documents" shall mean, collectively, the stock
pledge agreements, assignments of member's interests, credit agreement
and other instruments and documents described as items B.1, B.3-7, B.14
and B.15 on Exhibit "A" attached hereto.
"Credit Agreement" shall mean the Revolving Credit Agreement dated
of even date herewith among Borrower, BKB, Morgan, the other lending
institutions party thereto and Agent, as originally executed, or if
varied, extended, supplemented, consolidated, amended or restated from
time to time as so varied, extended, supplemented, consolidated, amended
or restated.
"Default" shall mean any event which, with the giving of notice or
the lapse of time, or both, would become and Event of Default.
"Event of Default" shall mean (a) any default in the payment or
performance of the obligations of Borrower hereunder, or (b) any
representation or warranty of Borrower hereunder proving to be untrue in
any material respect, or (c) any Event of Default under the Credit
Agreement, or (d) any default (for which no cure period is provided, or
with respect to which the applicable cure period has expired without cure
having been accepted) shall exist under the Collateral Documents or any
of them (there shall be no right to cure an Event of Default under (d),
above.)
"Loan Documents" shall have the meaning given to such term in the
Credit Agreement.
"Maker" shall mean, individually and collectively, the maker of each
of the Collateral Notes.
"Morgan" shall mean Morgan Guaranty Trust Company of New York, a New
York banking corporation.
"Notes" shall have the meaning given such term in the Credit
Agreement.
"Obligations" shall mean:
(a) The debt evidenced by the Notes together with interest as
therein provided;
(b) The full and prompt and payment and performance of all of
the provisions, agreements, covenants and obligations contained in the
Credit Agreement;
(c) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and
contained in any other of the Loan Documents, and the payment of all
other sums therein covenanted to be paid; and
(d) Any and all additional advances made by Agent or any
Lender to protect or preserve the Collateral or the security interest
created hereby.
"Property" shall mean the real and personal property encumbered by
the Collateral Documents.
"Sonterra Note" shall have the meaning given to such term in the
Credit Agreement.
"277 Park Avenue Note" shall have the meaning given to such term in
the Credit Agreement.
ARTICLE TWO
ASSIGNMENT
2.01 Assignment of, and Grant of Security Interest in, the Collateral.
As security for the full and prompt payment and performance by Borrower of
the Obligations, Borrower hereby transfers, assigns, pledges, conveys to,
grants a security interest in, and deposits with, Agent, for the benefit of
Lenders, the Collateral and all right, title, equity and interest of Borrower
in and to the Collateral. It is the intention of the parties hereto that
Agent shall have a continuing, general lien upon, security title to and
security interest in the Collateral for the benefit of Lenders.
2.02 Terms of Assignment. It is acknowledged and agreed by the parties
hereto that Agent shall have sole and exclusive possession of the Collateral
and that this Assignment constitutes a present and current assignment of all
the Collateral and is effective upon the execution and delivery hereof.
Payments under or with respect to the Collateral shall be made as follows:
(a) Except as hereinafter specifically set forth, Borrower shall
have no right to receive payments made under or with respect to the
Collateral, and all such payments shall be delivered directly by Maker or
any other party liable thereon to Agent for the benefit of Lenders.
(b) If Borrower shall receive any payments made under or with
respect to the Collateral, Borrower shall hold all such payments in trust
for Agent, will not co-mingle such payments with other funds of Borrower,
and will immediately pay and deliver in kind, all such payments directly
to Agent for application by Agent and Lenders in satisfaction of the
Obligations in such order as Agent and Lenders shall determine in
accordance with the applicable provisions of the Credit Agreement.
(c) Borrower hereby agrees for the benefit of Maker that all
payments actually received by Agent shall be deemed payments to Borrower
by Maker. Agent and Lenders shall apply any and all such payments
actually received by Agent in satisfaction of the Obligations in such
order as Agent and Lenders shall determine in accordance with the
applicable provisions of the Credit Agreement. Agent shall return to
Borrower that portion of any payments actually received by Agent from
Maker which Agent determines, in the exercise of its sole discretion, is
not needed to repay the Obligations.
(d) In furtherance of the foregoing, Borrower does hereby notify
and direct Maker that all payments under or with respect to the
Collateral shall be made directly to Agent at the address of Agent set
forth in the Credit Agreement.
Notwithstanding anything in this Section 2.02 to the contrary, so long as no
Event of Default has occurred, Borrower shall have a license (revocable upon
the occurrence of an Event of Default) to collect, but no more than one (1)
month prior to accrual, all amounts payable and to be applied as current
interest under the Collateral Notes or any other Collateral Document; it being
understood and agreed that such license shall not extend to other amounts
payable under the Collateral Notes or other Collateral Documents, including,
without limitation, any voluntary or involuntary payment of principal.
ARTICLE THREE
COVENANTS, REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby warrants and represents to, and covenants and agrees
with, Agent as follows:
3.01 Delivery of Collateral The original of each Collateral Note,
endorsed by Borrower, and the original of each Collateral Deed of Trust and
Collateral Security Document has been delivered to Agent. All actions
required under any Collateral Note or any other Collateral Document and
applicable law have been duly taken in order to constitute Borrower the holder
of the Collateral Notes and the Collateral Documents and to constitute Agent
the holder of a first priority security interest in each Collateral Note and
Collateral Document. None of the Collateral Notes, Collateral Deeds of Trust,
Collateral Security Documents and other Collateral Documents has been amended,
modified, consolidated, supplemented or replaced except as expressly described
on Exhibit "A" attached hereto.
3.02 Enforceability of This Assignment. This Assignment constitutes the
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws generally affecting the rights of creditors.
3.03 Right to Execute This Assignment. There are no restrictions on the
transfer of the Collateral, and Borrower has full right, power and authority
to enter into, deliver and execute this Assignment. The execution and
delivery of this Assignment, and the consummation of the transactions
contemplated herein, and the fulfillment of, and the compliance with, the
terms and conditions of this Assignment do not and will not (i) violate or
conflict with any of the terms or provisions of the Collateral; (ii) violate
any provision of any judicial or administrative order, award, judgment or
decree applicable to Borrower or the Property; or (iii) conflict with, result
in a breach of or a right to cancel, or constitute a default under, the
articles of incorporation or by-laws of Borrower, or any agreement or
instrument to which Borrower is a party or by which Borrower or the Property
is bound.
3.04 No Amendment of Collateral. Borrower shall not make any additional
loans or advances which would be secured by the Collateral Deeds of Trust or
the Collateral Security Documents except for protective advances thereunder,
and shall not abandon, alter, amend, cancel, modify, release, relinquish,
supplement, surrender, terminate or waive, and shall not enter into or give
any agreement, approval or consent with respect to, any of the Collateral or
any part thereof or any interest therein or any collateral for the obligations
evidenced by the Collateral Notes or other Collateral Documents, and any
attempt to do so without the prior written consent of Agent shall be void and
ineffective.
3.05 Pending Litigation. There are no actions, suits or proceedings
pending, or to the knowledge of Borrower, threatened against or affecting
Borrower, Maker or the Property, or any of them at law or in equity, or before
or by any government authority.
3.06 No Defenses. The assignment of the Collateral pursuant to this
Assignment creates no defense to the payment thereof and is effective to
convey to Agent, for the benefit of Lenders, all rights of Borrower to collect
the Collateral.
3.07 Information About Collateral. The names, amounts owing, due dates
and other facts furnished to Agent with respect to any of the Collateral have
been and will be correctly stated. Borrower shall, immediately upon request
by Agent, execute and deliver to Agent a sworn affidavit setting forth in
detail any and all amounts or payments received by Borrower with respect to
the Collateral or any portion thereof during any period specified by Agent or
such other reports or information in such form and detail as Agent shall
request from time to time. Borrower shall promptly forward to Agent copies of
all financial or property information, budgets, leases, leasing reports, rent
rolls, insurance certificates and policies, default notices, acceleration
notices and all other communications or information received by Borrower or
any agent for Borrower from Maker or from any other party, or sent by Borrower
or any agent for Borrower, relating to the Collateral and/or Maker and/or the
Property. All records of Borrower relative to the Collateral are and will be
kept at the office of Borrower located in New York County, New York. Borrower
shall give Agent not fewer than thirty (30) days prior written notice of any
proposed change in Borrower's name and any proposed change in the location of
the Collateral or of such records, and Borrower will not, without the prior
written consent of Agent, move the Collateral or such records to a location
outside of New York County, New York or keep duplicate records with respect to
the Collateral at any address outside such county. Nothing contained in this
subparagraph shall be construed so as to prevent Borrower from keeping
material abstracted from the books and records described herein at any of its
offices as necessity or convenience dictates.
3.08 Good Title. Borrower is and shall remain the sole, lawful and
beneficial owner of the Collateral free and clear of all liens, restrictions,
claims, pledges and encumbrances whatsoever and has the full and complete
right, power and authority to create a security interest in the Collateral in
favor of Agent in accordance with the terms and provisions of this Assignment.
The security interest in the Collateral created hereunder constitutes and will
at all times continue to constitute a valid and enforceable first priority
perfected security interest in the Collateral in favor of Agent, free and
clear of all liens, claims, encumbrances and rights of others. Borrower has
made no contract or arrangement of any kind or type whatsoever (whether oral
or written, formal or informal), the performance of which by the other party
thereto could give rise to a lien on the Collateral. Borrower at all times
will defend the Collateral and its proceeds against the claims and demands of
all third persons at any time claiming any interest in the Collateral adverse
to Agent's interest in the Collateral as granted hereunder.
3.09 Status of the Collateral. The Collateral is valid and enforceable
in accordance with its terms, subject to insolvency, bankruptcy, moratorium
and other laws affecting creditors' rights generally, and is in compliance
with all applicable laws. The Collateral Documents create a valid,
enforceable and perfected first priority lien and security interest in all
collateral covered thereby, and the Borrower shall take such actions as are
necessary (including, without limitation, the filing of continuation
statements) to cause the Collateral Documents to remain a valid, enforceable
and perfected first priority lien and security interest therein.
3.10 No Future Encumbrance or Transfer. Borrower shall not encumber,
pledge, anticipate, borrow against, or create any right of offset against the
Collateral, and shall not transfer, assign, sell, dispose of, pledge, or
convey, option, mortgage, hypothecate or encumber all or any portion of the
Collateral.
3.11 Consents. Any and all consents required to be obtained in
connection with the execution, delivery and performance of this Assignment,
including without limitation any such consents required by the Collateral
Documents, have been obtained. Without limiting the generality of the
foregoing, the execution, delivery and performance of all obligations under
this Assignment do not and will not require any authorization, consent,
approval, order, license or permit from, or filing, registration, or
qualification with, or exemption from any of the foregoing from, any
governmental agency or other person.
3.12 Perfection of Security Interest.
(a) For the purposes of Article 9-401 of the New York Uniform
Commercial Code, the principal place of business of Borrower is located in New
York County, New York. In the event that Borrower has more than one place of
business in the State of New York, its chief executive office is located in
New York County, New York. In order to perfect the pledge and security
interests granted herein against Borrower, U.C.C. Financing Statements must be
filed with Secretary of State of New York and the Office of the Register of
the City of New York, New York County.
(b) Borrower shall, at the request of Agent, execute, acknowledge,
and deliver all such further assignments, security agreements, financing
statements, endorsements, and assurances as Agent from time to time may
require for the better assuring, conveying, assigning and confirming to Agent
the Collateral and the rights hereby conveyed or assigned or intended now or
hereafter to be conveyed or assigned, and for carrying out the intention or
facilitating the performance of the terms of this Assignment, and upon any
failure by Borrower so to do, Agent may make, execute, record, file, rerecord
and/or refile, acknowledge and deliver any and all such further assignments,
security agreements, financing statements, endorsements and assurances for and
in the name of Borrower, and Borrower hereby irrevocably appoints Agent the
agent and attorney-in-fact (with full power of substitutions) of Borrower so
to do. This power is coupled with an interest. Without limiting the
generality of the foregoing, Borrower will obtain such waivers of lien,
estoppel certificates or subordination agreements as Lender may require to
insure the priority of its security interest in the Collateral. Borrower also
shall furnish to Agent such evidence as Agent reasonably may require from time
to time to confirm the value of the Collateral.
3.13 Collateral Compliance and Defense. Borrower shall remain liable and
comply with all obligations of Borrower under the Collateral and all other
contracts, agreements and instruments related thereto to the extent set forth
therein and to the same extent as if this Assignment had not been executed.
Borrower, at its sole cost and expense, shall defend any claims against the
Collateral or any action that might affect the Collateral or any interest
therein. The exercise by Agent of any of its rights hereunder shall not
release Maker from any of its duties or obligations under the Collateral or
any contracts, agreements and instruments related thereto.
3.14 Protecting Collateral. Borrower will, but only with the prior
written approval of Agent, diligently and in good faith do all things and take
all actions, including, without limitation, bringing appropriate actions
against any Maker which are necessary or desirable to enforce the obligations
of such Maker to make all payments under the Collateral Documents to which it
is a party, and to protect and preserve the interest of Agent under this
Assignment. Borrower shall pay all taxes and other charges against the
Collateral, shall not use the Property illegally, and shall not suffer to
exist any loss, theft, damage or destruction of the Property or levy, seizure
or attachment of the Property.
3.15 Borrower Conduct. Borrower has done no act or omitted to do any act
which might prevent Agent from, or limit Agent in, acting under any of the
provisions herein.
3.16 No Offset. The Collateral Notes evidence bona fide indebtedness
owing to Borrower by Maker, and no Maker has any rights to setoff,
counterclaim or defenses with respect to the payment or performance of any
obligations under the Collateral Documents.
3.17 No Event of Default Under Loan Documents. No Default or Event of
Default by Borrower or any other party exists under this Assignment, and no
event has occurred and is continuing which with notice or the passage of time
or both would constitute a Default or Event of Default hereunder or under any
of the other Loan Documents.
3.18 Custody of Collateral. Agent's duty with reference to the
Collateral shall be solely to use slight care in the custody and preservation
of the Collateral, which shall not include any steps necessary to preserve
rights against prior parties.
3.19 Related Documents. There are no documents or agreements which
conflict with or vary the terms of the Collateral Documents, and there are no
other documents which have not been delivered to Agent which affect or in any
way relate to the Collateral Documents.
3.20 No Maker Default. Each Maker is the sole obligor and grantor under
the Collateral to which it is a party as reflected on Exhibit "A" attached
hereto, and no event or circumstance has occurred which, with the passage of
time or the giving of notice, or both, might constitute a default under any of
the terms, covenants or conditions of the Collateral. In the event of a
default of any nature under the terms and conditions of the Collateral or the
Collateral Documents, Borrower shall promptly deliver to Agent written notice
of such default, which notice shall specify in reasonable detail the nature of
such default.
3.21 No Prepayment. No prepayment with respect to the Collateral has
been collected or received by Borrower. No prepayment of the indebtedness
evidenced by the Collateral Documents will be collected or received by
Borrower without the prior written consent of Agent except for such prepayment
as may be expressly permitted by the terms of the Collateral Documents.
3.22 Collateral Indebtedness. As of May 30, 1997, the aggregate unpaid
principal balance of the Sonterra Note is $17,800,000.00, and the aggregate
unpaid principal balance of the 277 Park Avenue Note is $20,000,000.00.
3.23 Non-Disturbance Agreements. Borrower has not, and to the best of
Borrower's knowledge and belief, no Maker or any prior holder of the
Collateral Documents has, entered into any agreement with any tenant or other
occupant of the Property which is real property, the effect of which is to
permit such tenant to remain in possession of such Property following a
foreclosure of any Collateral Deed of Trust. Borrower shall not execute or
deliver, nor permit to be executed or delivered, any such non-disturbance
agreement without the prior written consent of Agent.
3.24 Leasing Approvals. Borrower shall not approve any leasing
parameters or leases for any Property which is real property without the prior
written consent of Agent, and Borrower shall deliver all such leases and
leasing parameters to Agent promptly upon receipt to enable Agent an adequate
period of time to review the same prior to the expiration of any applicable
review period permitted under the Collateral Documents.
3.25 Escrows. Any amounts deposited with Borrower as escrows or deposits
pursuant to any Collateral Document (including, without limitation, escrows
for taxes and insurance) shall be deposited with Agent and shall be used only
for the purposes permitted in the Collateral Documents.
3.26 Additions; Substitutions. If Borrower shall at any time be entitled
to receive or shall receive any cash, certificate or other property, option or
right, upon, in respect of, as an addition to, or in substitution or exchange
for any of the Collateral or as a result of the exercise of any rights or
remedies under the Collateral Documents, whether for value paid by Borrower or
otherwise, Borrower agrees that the same shall be deemed to be Collateral and
shall be delivered directly to Agent in each case accompanied by proper
instruments of encumbrance or assignment (including without limitation a deed
of trust) as reasonably required by Agent duly executed by Borrower in such a
form as may be required by Agent to be held by Agent subject to the terms
hereof, as further security for the Obligations (except as otherwise provided
herein with respect to the application of the foregoing to the Obligations).
If Borrower receives any of the foregoing directly, Borrower agrees to hold
such cash or other property in trust for the benefit of Agent, and to
surrender such cash or other property to Agent immediately.
ARTICLE FOUR
ACTION BY LENDER
4.01 Action by Agent. Whether or not an Event of Default has occurred
and whether or not Agent is the absolute owner of the Collateral:
(a) Agent may take such action as Agent may deem necessary to
protect the Collateral or its security interest therein, Agent being
hereby authorized to pay, purchase, contest and compromise any
encumbrance, charge or lien which in the judgment of Agent appears to be
prior or superior to its security interest, and in exercising any such
powers and authority to pay necessary expenses, employ counsel and pay
attorney's fees.
(b) Agent shall be under no duty or obligation to (i) preserve,
process, develop, maintain or protect the Collateral or any of Borrower's
rights or interests therein, or (ii) make or give any notices of default
(except as may be specifically required herein), presentments, demands
for performance, notices of non-performance or dishonor, protests,
notices of protests or notices of any other nature whatsoever in
connection with the Collateral on behalf of Borrower or any other person
having any interest therein; and Agent does not assume and shall not be
obligated to perform the obligations of Borrower, if any, with respect to
the Collateral. Agent may, at any time and from time to time, without
notice or demand and at the expense of Borrower, make requests for
information concerning the Collateral from any obligor thereon.
(c) Agent may, at its sole option, make advances to protect the
Collateral and its security therein, or for any reason for which Borrower
is permitted under the terms of the Collateral Documents to make
advances, and any such advances made by Agent shall be deemed advanced
under the Collateral Documents, increasing the indebtedness evidenced and
secured thereby, and also shall be deemed advances under the Loan
Documents, increasing the Obligations.
(d) Agent may at any time compromise, transfer and assign the
Collateral or any portion thereof and this Assignment.
4.02 Attorney-In-Fact. Borrower hereby nominates and irrevocably
designates and appoints Agent its true and lawful agent and attorney-in-fact
(with full power of substitution), which appointment is coupled with an
interest either in the name of Agent or in the name of Borrower, at Borrower's
sole cost and expense, to take any or all of the following actions::
(a) To do all acts and things and execute all documents which Agent
may deem necessary or advisable to perfect and continue perfected the
security interest created by this Assignment and to preserve, process,
develop, maintain and protect the Collateral and the value thereof and
Agent's interest therein, including, without limitation, preparing,
signing, filing and recording, for Borrower in Borrower's name, or for
Borrower on behalf of any Maker, any financing statement covering or
constituting a part of the Collateral;
(b) To do any and every act which Borrower is obligated to do under
this Assignment;
(c) Whether before or after the occurrence of an Event of Default,
to ask for, demand, sue for, attach, levy, settle, compromise, collect,
compound, recover, receive and give receipt and acquittances for any and
all sums owing or which may become due with respect to the Collateral; to
endorse, in the name of Borrower, all checks, notes, drafts, money
orders, evidences of payment, or other instruments received in payment
of, or on account of, the Collateral or any portion thereof; and to take
any and all actions as Agent may deem necessary or desirable in order to
realize upon the Collateral, or any portion thereof, including, without
limitation, making any statements and doing or taking any acts on behalf
of Borrower which are otherwise required of Borrower under the terms of
the Collateral or any portion thereof as conditions precedent to the
payment of the obligations evidenced by, or to the exercise of, the
Collateral or any portion thereof; and to exercise any rights and
remedies available under the Collateral Documents and to execute any
document or instrument which Agent may deem necessary or desirable in
connection therewith, including pleadings, consent orders, stipulations,
and other documents and instruments which Agent may deem necessary or
desirable in connection with judicial or nonjudicial foreclosure of the
Collateral Deeds of Trust or any deed of trust or other security
agreement included within the Collateral Documents or other legal actions
or proceedings with respect to the Collateral. In addition, Assignor
hereby irrevocably designates and appoints Agent its true and lawful
attorney-in-fact (with full power of substitution) either in the name of
Agent or Assignor (which power is coupled with an interest) to (i) sign
Assignor's name on any Collateral, drafts against account debtors,
assignments, any proof of claim in any bankruptcy or other insolvency
proceeding involving any account debtor, any notice of lien, claim of
lien or assignment or satisfaction of lien, or on any financing statement
or continuation statement under the Uniform Commercial Code; (ii) send
verifications of accounts receivable to any account debtor; and (iii) in
connection with a transfer of the Collateral as described above sign in
Assignor's name any documents necessary to transfer title to the
Collateral to Agent or any third party.
(d) To endorse and transfer the Collateral upon foreclosure;
provided, however, that Agent shall be under no obligation whatsoever to take
any of the foregoing actions or to exercise any of the foregoing authority or
power, and Agent shall have no liability or responsibility for any act or
omission taken with respect thereto. All of said rights and powers may be
exercised by Agent at any time, whether or not an Event of Default has
occurred and whether or not Agent is the absolute owner of the Collateral.
The foregoing appointment of the Agent as Borrower's attorney-in-fact is
irrevocable, coupled with an interest, with full power of substitution, and
cannot be revoked by insolvency, reorganization, merger, consolidation or
otherwise. All acts of said power of attorney are hereby ratified and
approved and Agent shall not be liable for any mistake of law or fact made in
connection therewith.
4.03 Necessity for Agent Action or Consent. So long as this Assignment
shall be held by Agent as security for the Obligations, (a) no approval,
consent, election, waiver or other matter which is given or required to be
given or which inures to the benefit of Borrower under the Collateral
Documents shall be deemed to have been given unless and until given by Agent;
(b) any matter which is to be established or determined to the satisfaction of
Borrower, or which is accepted or required to be accepted by Borrower, shall
not be deemed to have been so established, determined or accepted unless and
until so established, determined or accepted by Agent; (c) any matter which is
to be received by, delivered to, assigned to or held by Borrower, including
any notice to Borrower under the Collateral Documents, shall be deemed to have
been received, delivered, assigned or held only when so received, delivered,
assigned or held by or to Agent; (d) nothing contained in any of the
Collateral Documents may be modified, amended or waived in any manner or
respect whatsoever without the consent of Agent, and any such attempted
modification, amendment or waiver without such consent shall be null and void;
(e) no Collateral may be released without the execution of the documentation
of release by Agent, and any attempted release without such execution by Agent
shall be null and void; and (f) any exercise of discretion by Borrower, any
requirements imposed or to be imposed, or permitted to be imposed, by Borrower
hereunder, shall be deemed to have been exercised or imposed only when so
exercised or imposed by Agent. The rights of Agent under this section may be
exercised by Agent solely at the option of Agent or the Agent upon the
direction of the Majority Banks (as defined in the Credit Agreement) in
accordance with the Credit Agreement, and Agent shall have no obligation to
give any consent or take any other action whatsoever contemplated hereby.
Without implying any limitation upon the scope of Section 7.01 hereof, it is
specifically noted that the provisions of Section 7.01 hereof apply, without
limitation, to any action or failure to act on the part of Lender with respect
to the matters contemplated by this Section 4.03.
ARTICLE FIVE
ENFORCEMENT OF COLLATERAL DOCUMENTS
Borrower acknowledges and agrees that Agent at all times, whether or not
an Event of Default has occurred and whether or not Agent is the absolute
owner of the Collateral, shall have the right, but not the obligation, to
exercise and enforce, in its own name or in Borrower's name, any or all rights
and remedies of Borrower under the Collateral Documents to the exclusion of
Borrower, including but not limited to the right to inspect the Property, to
receive information and documents, to declare due the indebtedness secured by
the Collateral Documents upon the occurrence of a default thereunder, to grant
or withhold approvals, and to exercise discretion with respect to any matter.
Borrower shall not exercise or attempt to exercise any such right or remedy
except at the written request of Agent and only in strict accordance with the
instructions of Agent. Agent may, at its option, enforce or conduct any
action for foreclosure (including nonjudicial foreclosure) under the
Collateral Documents in its own name or in the name of Borrower, and Borrower
specifically consents to any foreclosure (including nonjudicial foreclosure)
under any or all of the Collateral Documents or any other action taken by
Agent even though such action may release any person from personal liability
on any of the Collateral Documents. Upon the exercise by Agent of any such
remedies, any amount bid by Agent or any Lender at any sale of any of the
Property or any other Collateral for the Collateral Note may, at the option of
Agent or such Lender, be deemed to be a credit bid of the indebtedness
evidenced by the Collateral Note and the indebtedness evidenced by the Note,
or either or both of them; Agent shall be entitled to set off the amount of
any such bid against any such indebtedness, all at the election of Agent, in
its sole discretion; and any or all proceeds of the Collateral Note may be
applied against the indebtedness evidenced by the Note in such order as Agent
and the Majority Banks shall elect in accordance with the Credit Agreement,
and Agent or any Lender shall hold any property obtained by Agent or such
Lender at any such sale free and clear of any interest or claims of Borrower,
regardless of whether Agent shall have exercised any remedy under this
Assignment with respect to any of the Collateral Documents, or shall have sold
any of the Collateral Documents or obtained absolute title thereto pursuant to
its rights and remedies under the Uniform Commercial Code. Borrower hereby
agrees to pay to Agent, immediately upon demand, all costs and expenses,
including without limitation attorney's fees, incurred by Agent in connection
with the enforcement or foreclosure of any Collateral Documents, with interest
from the date of expenditure at the rate for overdue payments specified in the
Credit Agreement, to the extent permitted by applicable laws.
ARTICLE SIX
REMEDIES
6.01 Remedies. Upon the occurrence of any Event of Default, without
prejudice to the rights of Agent to enforce claims against Borrower for
damages for failure to fulfill any of its obligations under any of the Loan
Documents, Agent, for the benefit of the Lenders, shall have, in addition to
all other rights and remedies that Agent may have under this Assignment and by
law, all of the rights and remedies hereinafter set forth, and it may exercise
without further notice to Borrower, except as may be specifically required
herein or in the other Loan Documents, any action deemed by Agent to be
necessary or appropriate to the enforcement of the rights and remedies of
Agent under the Assignment and the Loan Documents, including the exercise of
any one, more, or all of the following remedies, in its sole discretion,
without thereby waiving any of the others:
(a) Agent shall have the right immediately to exercise all of its
rights and remedies provided under the Notes, and any of the other Loan
Documents.
(b) Agent shall have the right to collect and to continue to
collect all payments on the Collateral; to renew, extend, modify, amend,
accelerate, accept partial payments on, make allowances and adjustments
and issue credits with respect to, release, settle, compromise, compound,
collect or otherwise liquidate, on terms acceptable to Agent, in whole or
in part, the Collateral and any amounts owing thereon or any guaranty or
security therefor; to enter into any other agreement relating to or
affecting the Collateral; to give all consents, waivers and ratifications
in respect of the Collateral and exercise all other rights, powers and
remedies and otherwise act with respect thereto as if it were the owner
thereof; and to enforce payments and prosecute any action or proceeding
with respect to any and all of the Collateral and take or bring, in
Agent's name or in the name of Borrower, all steps, actions, suits or
proceedings deemed by Agent necessary or desirable to affect collection
of or to realize upon the Collateral.
(c) Agent shall have all of the rights and remedies of a secured
party under the Uniform Commercial Code as in effect at that time,
including, without limitation, the right to take possession of any of the
Collateral, and to sell or otherwise dispose of the same.
(d) Agent shall have all of the rights and remedies of a lender
under applicable general or statutory law.
(e) Agent shall have the right to foreclose the liens and security
interests created under this Assignment or under any other agreement
relating to the Collateral by any available judicial procedure or without
judicial process; and to sell, assign, lease or otherwise dispose of the
Collateral or any part thereof, either at public or private sale, in lots
or in bulk, for cash, on credit or for future delivery, or otherwise,
with or without representations or warranties, and upon such terms as
shall be acceptable to Agent in its sole discretion.
6.02 Sale of Collateral. In the event Agent shall determine to sell the
Collateral or any portion thereof, any such sale shall be held at such time or
times and at such place or places as Agent may determine in the exercise of
its sole discretion. Agent or any Lender may bid (which bid may be, in whole
or in part, in the form of cancellation of Obligations) for and purchase for
the account of Agent or such Lender or any nominee of Agent or such Lender the
whole or any part of the Collateral. In the event that Agent or a Lender is
the successful bidder at any public or private sale of the Collateral or any
portion thereof, the amount bid by Agent or such Lender may be credited
against the obligations as provided in Section 6.03. Agent shall not be
obligated to make any sale of the Collateral if it shall determine not to do
so regardless of the fact that notice of sale of the Collateral may have been
given. Agent may, without notice or publication, adjourn any public sale from
time to time by announcement at the time and place fixed for sale, and such
sale may, without further notice, be made at the time and place to which the
same was so adjourned. Any requirement of sending reasonable notice to
Borrower, including, but not limited to, notice of the intended disposition of
all or any portion of the Collateral, shall be deemed met if such notice is
given to Borrower pursuant to the Credit Agreement at least ten (10) days
before such disposition. Upon consummation of any sale of the Collateral,
Agent shall have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such
sale shall hold the Collateral sold absolutely free from claim or right on the
part of Borrower, and Borrower hereby waives to the extent permitted by law
all rights of redemption, stay and appraisal which it now has or may at any
time in the future have under any rule of law or statute now existing or
hereafter enacted.
6.03 Application of Net Proceeds. The net cash proceeds resulting from
the collection, liquidation, sale, lease or other disposition of the
Collateral shall be applied to the payment and satisfaction, pro tanto, of the
Obligations as provided in the Credit Agreement.
6.04 No Limitation of Remedies. No remedy conferred upon or reserved to
Agent herein or in any of the Loan Documents or in the Collateral is intended
to be exclusive of any other remedy conferred upon or reserved to Agent under
such instruments or under any applicable laws. Each such remedy shall be
cumulative and concurrent and shall be in addition to each and every other
remedy now or hereafter existing under such instruments or at law or in
equity. No delay or omission by Agent to exercise any right, power or remedy
provided in this Assignment, the Note, or the other Loan Documents or
otherwise accruing upon any Event of Default shall impair in any manner any
such right, power or remedy, or shall be construed to be a waiver of any such
default or acquiescence therein, and each and every right, power and remedy of
Agent may be exercised from time as often as may be deemed expedient by Agent.
6.05 Rights Independent; Adequacy of Collateral. The security interest
created hereunder is independent of any other security for the Obligations or
the obligations of any other party or any guarantor, and upon the occurrence
of an Event of Default hereunder, Agent may proceed in the enforcement hereof
independently of any other right or remedy that Agent may at any time hold
with respect to the Obligations or any other security or guaranty therefor.
Agent may file a separate action or actions against Borrower hereunder,
whether action is brought and prosecuted with respect to any other security or
against any other party or any guarantor, or whether any other party or any
guarantor is joined in any such action or actions.
6.06 Performance of Borrower's Obligations. If Borrower fails to perform
any agreement or covenant contained in this Assignment beyond any applicable
period for notice and cure, Agent may itself perform, or cause to be
performed, any agreement or covenant of Borrower contained in this Assignment
which Borrower shall fail to perform, and the cost of such performance,
together with any reasonable expenses, including reasonable attorneys' fees
actually incurred (including attorneys' fees incurred in any appeal) by Agent
in connection therewith, shall be payable by Borrower upon demand and shall
constitute a part of the Obligations and shall bear interest at the rate for
overdue amounts as set forth in the Credit Agreement.
ARTICLE SEVEN
GENERAL CONDITIONS
7.01 Indemnification. It is specifically understood and agreed that this
Assignment shall not operate to place any responsibility or obligation
whatsoever upon Agent, and that in accepting this Assignment, Agent neither
assumes nor agrees to perform at any time whatsoever any obligation or duty of
Borrower with respect to the Collateral, all of which obligations and duties
shall be and remain with and upon Borrower. Borrower agrees to release,
indemnify, defend and to hold harmless, and does hereby release, indemnify,
defend and hold harmless, Agent and Lenders from and against any and all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including, without limitation, attorneys fees and expenses)
imposed upon or incurred by Agent or any Lender by reason of this Assignment
and any claim and demand whatsoever which may be asserted against Agent by
reason of any alleged obligation or undertaking to be performed or discharged
by Agent under or by reason of this Assignment. In the event Agent or any
Lender incurs any such liability, obligation, claim, damage, penalty, costs or
expenses under or by reason of this Assignment, or in the defense of any
claims or demands arising out of or in connection with this Assignment, the
amount of such liability, obligation, claim, damage, penalty, cost or expense
shall be added to the Obligations, shall bear interest at the rate for overdue
payments specified in the Credit Agreement from the date incurred until paid
and shall be due and payable immediately upon demand.
7.02 Further Assurances. Borrower agrees to do such further acts and
things, and to execute and deliver such additional conveyances, assignments,
agreements, documents and instruments as Agent may at any time request in
connection with the administration or enforcement of this Assignment or
related to the Collateral or any part thereof or in order to better assure and
confirm unto Agent its rights, powers and remedies hereunder. Without
limiting the generality of the foregoing, at any time and from time to time,
upon request by Agent, Borrower will make, execute and deliver, or cause to be
made, executed and delivered, to Agent and, where appropriate, cause to be
recorded and/or filed and from time to time thereafter to be re-recorded
and/or refiled at such time and in such offices and places as shall be deemed
desirable by Agent, any and all such other and further assignments, deeds to
secure debt, mortgages, deeds of trust, security agreements, financing
statements, continuation statements, instruments of further assurance,
certificates and other documents as may, in the opinion of Agent, be necessary
or desirable in order to effectuate, complete, or perfect, or to continue and
preserve (a) the obligations of Borrower under this Assignment and (b) the
security interest created by this Assignment as a first and prior security
interest upon the Collateral. Upon any failure by Borrower so to do, Agent
may make, execute, record, file, re-record and/or refile any and all such
assignments, deeds to secure debt, mortgages, deeds of trust, security
agreements, financing statements, continuation statements, instruments,
certificates, and documents for and in the name of Borrower, and Borrower
hereby irrevocably appoints Agent the agent and attorney-in-fact of Borrower
(with full power of substitution) so to do. This power is coupled with an
interest.
7.03 Expenses and Costs of Agent. Borrower agrees to pay to Agent all
advances, charges, costs and expenses, including all reasonable attorney's
fees, incurred or paid by Agent in exercising any right, power or remedy
conferred by this Assignment, or in the enforcement thereof, whether or not an
action is filed hereon, together with interest from the date of the
expenditure at the rate for overdue payments specified in the Credit
Agreement, to the extent permitted by applicable law, it being specifically
understood and agreed by Borrower that all such advances, charges, costs and
expenses shall constitute Obligations.
7.04 Release of Collateral and Termination. Upon the payment and
satisfaction in full of the Obligations and the termination of the obligation
of the Lenders to make further advances to Borrower under the Credit
Agreement, Agent, upon receipt of written request therefor from Borrower and
at Borrower's expense, shall execute and deliver to Borrower such documents as
may be necessary to release the liens and interests on the Collateral created
by this Assignment.
7.05 Security Interest Absolute. All rights of Agent, and the security
interests hereunder, and all of the obligations secured hereby, shall be
absolute and unconditional, irrespective of:
(a) Any lack of validity or enforceability of the Loan Documents or
any other agreement or instrument relating thereto;
(b) Any change in the time (including the extension of the maturity
date of the Notes), manner or place of payment of, or in any other term of,
all or any of the Obligations or any other amendment or waiver of or any
consent to any departure from the Loan Documents;
(c) Any exchange, release or nonperfection of any other collateral
for the Obligations, or any release or amendment or waiver of or consent to
departure from any of the Loan Documents with respect to all or any part of
the Obligations; or
(d) Any other circumstance (other than payment of the Obligations
in full) that might otherwise constitute a defense available to, or a
discharge of, Borrower or any third party for the Obligations or any part
thereof.
7.06 Amendments and Waivers. No amendment or waiver of any provision of
this Assignment nor consent to any departure therefrom shall in any event be
effective unless the same shall be in writing and signed by Agent, and then
such waiver or consent shall be effective only in the specific instance and
for the specific purpose for which given. No delay or omission of Agent to
exercise any right, power or remedy accruing upon any Event of Default shall
exhaust or impair any such right, power or remedy or shall be construed to be
a waiver of any such Event of Default, or acquiescence therein; and every
right, power and remedy given by this Assignment to Agent may be exercised
from time to time and as often as may be deemed expedient by Agent. Failure
on the part of Agent to complain of any act or failure to act which
constitutes an Event of Default, irrespective of how long such failure
continues, shall not constitute a waiver by Agent of Agent's rights hereunder
or impair any rights, powers or remedies consequent on any Event of Default.
Borrower hereby waives to the extent permitted by law all rights which
Borrower has or may have under and by virtue of the Uniform Commercial Code as
enacted in the State of New York, and any federal, state, county or municipal
statute, regulation, ordinance, Constitution or charter, now or hereafter
existing, similar in effect thereto providing any right of Borrower to notice
and to a judicial hearing prior to seizure by Agent of any of the Collateral.
Borrower hereby waives and renounces for itself, its heirs, successors and
assigns, all rights to the benefits of any statute of limitations and any
moratorium, reinstatement, marshaling, forbearance, valuation, stay,
extension, homestead, redemption and appraisement now provided or which may
hereafter be provided by the Constitution and laws of the United States and of
any state thereof, both as to itself and in and to all of its property, real
and personal, against the enforcement of this Agreement and the collection of
any of the Obligations.
7.07 Survival of Certain Agreements. Notwithstanding the repayment of
the Obligations and the cancellation or transfer of the Loan Documents, or any
foreclosure of or other realization upon the Collateral, the agreement of
Borrower contained herein or in any of the other Loan Documents to pay the
costs and expenses of Agent or the Lenders in connection with the Loan and
all agreements of Borrower contained herein or in any of the other Loan
Documents to indemnify and/or hold harmless Agent or the Lenders shall
continue in full force and effect so long as there exists any possibility of
expense or liability on the part of Agent or the Lenders.
7.08 Law Governing. THIS ASSIGNMENT SHALL BE GOVERNED BY AND CONSTRUED
UNDER THE LAWS OF THE STATE OF NEW YORK, EXCEPT TO THE EXTENT OF PROCEDURAL
AND SUBSTANTIVE MATTERS RELATING ONLY TO THE CREATION, PERFECTION AND
FORECLOSURE OF LIENS, AND ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE
COLLATERAL DESCRIBED IN PART "A" OF EXHIBIT "A", WHICH MATTERS SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF ARIZONA.
7.09 Communications. All communications required or permitted under the
terms of this Agreement shall be given in the manner set forth in the Credit
Agreement.
7.10 Incorporation. The following provisions of the Credit Agreement are
hereby incorporated by reference as though fully set forth herein: Sections
22, 27, 28, 29 and 30.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Borrower has executed this Assignment under seal, as
of the day and year first above written.
WELLSFORD REAL PROPERTIES, INC.,
a Maryland corporation
By:/s/ Gregory F. Hughes
Name: Gregory F. Hughes
Title: VP - CFO
[CORPORATE SEAL]
WITNESS:
The undersigned has executed this Collateral Assignment solely for the
purpose of witnessing the grant of power of attorney by Borrower to Agent, as
described in this Collateral Assignment.
/s/ Scott Zucker
------------------------------------
Print Name: Scott Zucker
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 30th day of May,
1997, by Gregory F. Hughes, as Chief Financial Officer, of Wellsford Real
Properties, Inc., a Maryland corporation.
WITNESS MY HAND and official seal.
My commission expires: 4/30/98
/s/ Walter Curchack
-------------------------------------
Notary Public
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
The foregoing instrument was acknowledged before me this 30th day of May,
1997, by Scott Zucker.
WITNESS MY HAND and official seal.
My commission expires: 4/30/98
/s/ Walter Curchack
-----------------------------------
Notary Public
<PAGE>
EXHIBIT "A"
COLLATERAL DOCUMENTS
A. Sonterra Documents:
1. Loan Agreement dated June 28, 1996, in the original principal amount
of $17,800,000.00, by and between Wellsford Residential Property Trust, as
Lender, and Specified Properties VIII, L.P., as Borrower.
2. Promissory Note dated June 28, 1996, in the original principal
amount of $17,800,000.00 made by Specified Properties VIII, L.P. to the order
of Wellsford Residential Property Trust, its successors or assigns.
3. Deed of Trust, Security Agreement and Fixture Filing, dated June 28,
1996, from Specified Properties VIII, L.P., as trustor, to Chicago Title
Insurance Company, as trustee, for Wellsford Residential Property Trust, as
beneficiary, and recorded July 12, 1996, with the Office of the Recorder of
Pima County, Arizona, in Docket 10335 at Page 367.
4. Guaranty Agreement dated June 28, 1996, by John R. Carmichael in
favor of Wellsford Residential Property Trust.
5. Assignment of Leases and Rents dated June 28, 1996, by Specified
Properties VIII, L.P. for the benefit of Wellsford Residential Property Trust
and recorded July 12, 1996, with the Office of the Recorder of Pima County,
Arizona, in Docket 10335 at Page 409.
6. Assignment of Agreements dated June 28, 1996, by Specified
Properties VIII, L.P. to Wellsford Residential Property Trust.
7. Consent and Agreement of Manager dated July 15, 1996, by Lexford
Properties, Inc. as manager.
8. Hazardous Substances Remediation and Indemnification Agreement dated
June 28, 1996, by Specified Properties VIII, L.P., Westwood Residential No. 9
Limited Partnership, and Westwood Residential General Partner No. 9, Inc. in
favor of Wellsford Residential Property Trust.
9. Security Agreement dated June 28, 1996, by Specified Properties
VIII, L.P. in favor of Wellsford Residential Property Trust and recorded July
12, 1996, with the Office of the Recorder of Pima County, Arizona, in Docket
10335 at Page 420.
10. UCC-1 Financing Statements naming Specified Properties VIII, L.P.,
as debtor, and Wellsford Residential Property Trust, as secured party,
recorded July 12, 1996, with the Office of the Recorder of Pima County,
Arizona, in Docket 10335 at Page 433; filed July 19, 1996, with the Secretary
of State of Arizona as No. 92564; and filed July 15, 1996 with the Secretary
of State of Texas as No. 138070.
11. Waiver of Borrower's Conditions dated July 11, 1996, by Specified
Properties VIII, L.P., as "Borrower", whereby Borrower agreed to waive Section
2.6 of the Loan Agreement described in Item 1, above, which conditioned the
Borrower's obligations under the Loan Agreement upon the approval of the Loan
Agreement by Borrower's limited partner.
12. Escrow Agreement dated July 9, 1996, among Chicago Title Insurance
Company, Wellsford Residential Property Trust and Specified Properties VIII,
L.P.
13. FIRPTA Certification dated July 9, 1996, by Specified Properties
VIII, L.P., certifying that Specified Properties VIII, L.P. is not a foreign
person.
14. Loan Closing Statement [Borrower's Statement] dated July 11, 1995
[sic], signed by Specified Properties VIII, L.P.
15. Opinion Letter of Jones, Day, Reavis & Pogue dated July 11, 1996, as
counsel for Specified Properties VIII, L.P., Westwood Residential No. 9
Limited Partnership, and Westwood Residential General Partner No. 9, Inc.
16. Mortgagee's Title Insurance Policy dated July 12, 1996, issued by
Chicago Title Insurance Company for the amount of $17,800,000.00 in favor of
Wellsford Residential Property Trust, as insured.
B. Park Avenue Documents:
Credit Agreement dated as of April 25, 1997 among Park Avenue Financing
Company, LLC ("Holding Company"), PAMC Co-Manager, Inc. ("Co-Managing Member";
Holding Company and Co-Managing Member are sometimes hereinafter referred to
as the "Park Avenue Borrowers"), PAFC Management, Inc. ("Holding Company
Managing Member"), Stanley Stahl ("Guarantor"), The First National Bank of
Boston ("FNBB"), Borrower and FNBB, as Agent (the "Park Avenue Agent").
Note dated April 25, 1997 by the Park Avenue Borrowers to the order of
Borrower in the principal face amount of $20,000,000.00;
Assignment of Member's Interest dated as of April 25, 1997 by Holding Company
Managing Member and Guarantor to Park Avenue Agent.
Assignment of Member's Interest dated as of April 25, 1997, by Park Avenue
Borrowers to Park Avenue Agent.
Stock Pledge Agreement dated as of April 25, 1997 by Guarantor in favor of
Park Avenue Agent, relating to stock of Guarantor in Park Avenue Management
Corporation.
Stock Pledge Agreement dated as of April 25, 1997 by Guarantor in favor of
Park Avenue Agent, relating to the stock of Guarantor in Co-Managing Member.
Stock Pledge Agreement dated as of April 25, 1997 by Guarantor in favor of
Park Avenue Agent, relating to the stock of Guarantor in Holding Company
Managing Member.
Acknowledgment dated as of April 25, 1997 of 277 Park Avenue, LLC in favor of
Park Avenue Agent.
Acknowledgment dated as of April 25, 1997 by Holding Company in favor of Park
Avenue Agent.
Acknowledgment dated as of April 25, 1997 by Park Avenue Management
Corporation in favor of Park Avenue Agent.
Acknowledgments by Co-Managing Member, Holding Company Managing Member and
Park Avenue Management Corporation in favor of Park Avenue Agent dated as of
April 25, 1997.
Acknowledgment and Agreement dated as of April 25, 1997 by Guarantor, Park
Avenue Management Corporation, Co-Managing Member, Holding Company and Holding
Company Managing Member for the benefit of the banks under the Credit
Agreement described in Item B.1 above.
Indemnity Agreement Regarding Hazardous Materials dated as of April 25, 1997
by Park Avenue Borrowers and Guarantor in favor of Park Avenue Agent and the
banks under the Credit Agreement described in Item B.1 above.
Conditional Guaranty of Payment and Performance dated as of April 25, 1997 by
Guarantor in favor of Park Avenue Agent and the banks under the Credit
Agreement described in Item B.1 above.
Cash Collateral Account Security, Pledge and Assignment Agreement dated as of
April 25, 1997 among 277 Park Avenue, LLC, Park Avenue Borrowers, Park Avenue
Management Corporation, Guarantor and Park Avenue Agent.
Intercreditor Agreement dated as of April 25, 1997, among FNBB and Borrower.
UCC-1 Financing Statements executed by Holding Company in favor of Park Avenue
Agent and recorded with the New York Secretary of State, Register of the City
of New York, New York County, City of Boston, Massachusetts, Massachusetts
Secretary of State and Delaware Secretary of State.
UCC-1 Financing Statements executed by Co-Manager in favor of Park Avenue
Agent and recorded with the Register of the City of New York, New York County,
New York Secretary of State, City of Boston, Massachusetts, Massachusetts
Secretary of State and Delaware Secretary of State.
UCC-1 Financing Statements executed by Holding Company Managing Member in
favor of Park Avenue Agent and recorded in the Register of the City of New
York, New York County, New York Secretary of State and Delaware Secretary of
State.
UCC-1 Financing Statements executed by Guarantor in favor of Park Avenue Agent
and recorded in the Register of the City of New York, New York County, New
York Secretary of State and Delaware Secretary of State.
Legal Opinions dated as of April 25, 1997 by Latham & Watkins in favor of
Borrower and others.
Management Company's Agreement dated as of April 25, 1997 by Stahl Real Estate
Co. in favor of Park Avenue Agent and the banks a party to the Credit
Agreement described in Item B.1 above.
Recognition Agreement dated as of April 25, 1997 among FNBB, individually and
as agent, Borrower, Column Financial, Inc., Park Avenue Borrowers and 277 Park
Avenue, LLC.
All rights, remedies, collateral instruments or other documents made or
granted in favor of Borrower or its predecessors in interest in connection
with the loans evidenced by the Loan Agreement described in Item A.1, above,
and the Credit Agreement described in Item B.1, above and secured by the Deed
of Trust, Security Agreement and Fixture Filing described in Item A.3, above,
and the documents described in Items B.3 and B.3-7 above, (collectively the
"Loans"), including, without limitation: (i) all guaranties, pledges, security
interests, mortgages, deeds of trust, assignments of rents, assignments of
management agreement, assignments of stock or partnership units, financing
statements, or other rights, interests or collateral securing or guaranteeing
payment of such Loans; and (ii) all other rights and remedies of the Borrower
in connection with the Loans, whether provided by contract or otherwise
available under applicable law or in equity, including, without limitation,
all rights and remedies provided under any loan agreements, security
agreements, indemnities, letters of credit, title insurance policies, fire and
casualty insurance policies, flood hazard insurance policies, life insurance
policies, escrow, accounts, certificates of deposit, proceeds, claims
(including proofs of claim), demands, causes of action and judgments in favor
of Borrower or its predecessors in interest relating to the Loans, or other
instruments or documents made, issued or delivered to or in favor of Borrower
or its predecessors in interest in connection with the Loans, all as the same
may have been amended from time to time.
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New
York, New York 10020 (the "Company"), and JEFFREY H. LYNFORD, an individual
residing at 10 Holly Branch Road, Katonah, New York 10536 (the "Executive").
WHEREAS, the Executive is an executive of Wellsford Residential
Property Trust, a Maryland real estate investment trust ("Wellsford
Residential");
WHEREAS, Equity Residential Properties Trust, a Maryland real estate
investment trust ("EQR"), is merging with and into Wellsford Residential as of
the date hereof (the "Merger");
WHEREAS, immediately prior to the Merger, Wellsford Residential is
distributing to its common shareholders, pro rata, all of the shares of common
stock that it owns in the Company (the "Distribution"); and
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company.
IT IS AGREED:
1. Duties. (a) During the term of the Executive's employment
hereunder the Executive shall serve and the Company shall employ the Executive
as Chairman of the Board to perform such executive or administrative services
for the Company consistent with those of a Chairman of the Board as may be
assigned to the Executive by the directors of the Company. The Executive
hereby accepts such employment and agrees to perform such services.
(b) The Executive shall devote such time, attention and energies
during business hours to the performance of his duties hereunder as is
necessary to properly carry out the responsibilities of his office.
(c) The Executive shall cooperate with the Company, including
taking such medical examinations as the Company reasonably shall deem
necessary, if the Company shall desire to obtain medical, disability or life
insurance with respect to the Executive. Where reasonably possible, the
Company shall cooperate with the Executive's request to have such examinations
performed by the Executive's personal physician or another physician
reasonably acceptable to the Executive.
(d) The Executive shall not be required to relocate or conduct the
Company's business outside the New York, New York area in order to perform his
duties under this Agreement but shall undertake such reasonable business
travel as may be necessary to perform said duties (for which the Executive
shall be reimbursed pursuant to Section 4 below for costs and expenses
incurred in connection therewith).
2. Employment Term. This Agreement shall commence on May 30, 1997
and shall continue in effect through December 31, 2002; provided, however,
that, on January 1, 2003 and on each January 1 thereafter, the term of this
Agreement shall automatically be extended for one additional year beyond such
January 1 unless, not later than June 30 of the preceding year, either the
Executive or the Company shall have given notice to the other not to extend
this Agreement.
3. Compensation. For all services rendered by the Executive
pursuant to this Agreement:
(a) The Company shall pay to the Executive an annual base salary at
the following rates:
(i) for the period from May 30, 1997 through December 31,
1997 - $275,000;
(ii) for the period from January 1, 1998 through December 31,
1998 - $283,250;
(iii) for the period from January 1, 1999 through December 31,
1999 - $291,748;
(iv) for the period from January 1, 2000 through December 31,
2000 - $300,500;
(v) for the period from January 1, 2001 through December 31,
2001 - $309,515;
(vi) for the period from January 1, 2002 through December 31,
2002 - $318,800; and
(vii) for each additional year thereafter, the annual base
salary for the immediately preceding year plus 3% of
such annual base salary.
All such compensation shall be paid bi-weekly or at such other regular
intervals, not less frequently than monthly, as the Company may establish from
time to time for executive employees of the Company.
(b) In addition to the compensation set forth in subsection 3(a)
above, the Executive shall be awarded such bonus for each calendar year or
partial calendar year of his employment hereunder as the directors of the
Company shall determine in their sole discretion. In determining such bonus,
the Executive understands that the directors will consider, without
limitation, the following factors with respect to the applicable calendar year
or partial calendar year: the Company's financial performance, business
performance and growth during such period; Executive's responsibilities as an
officer of the Company (including his participation in transactions of
particular financial or business significance to the Company) during such
period; the total compensation package paid to executive officers having
similar responsibilities as the Executive who are employed by entities which
are similar to the Company; and such other factors as the directors may deem
appropriate in their sole discretion. Such bonus may consist of cash; grants
of shares ("Shares") of Common Stock of the Company; options to purchase
Shares; loans to purchase Shares; share appreciation rights (whether
independent of or in conjunction with awards of options); and such other
awards as the directors in their sole discretion may deem appropriate and
which they believe are in furtherance of the growth of long-term stockholder
value of the Company.
4. Expenses. (a) The Company shall pay for all legal and
accounting fees and expenses incurred by the Executive in connection with the
structuring, negotiation and preparation of this Agreement. The Company shall
reimburse the Executive for all out-of-pocket expenses actually and
necessarily incurred by him in the conduct of the business of the Company
against reasonable substantiation submitted with respect thereto.
(b) Unless the provisions of subsection 4(c) below shall apply, the
Company shall reimburse the Executive for all legal fees and related expenses
(including the costs of experts, evidence and counsel) paid by the Executive
as a result of (i) the termination of Executive's employment (including all
such fees and expenses, if any, incurred in contesting or disputing any such
termination of employment), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits, (iii) the Executive's hearing before the
directors as contemplated in subsection 6(c) of this Agreement or (iv) any
action taken by the Company against the Executive; provided, however, that the
Company shall reimburse the legal fees and related expenses described in this
subsection 4(b) only if and when a final judgement has been rendered in favor
of the Executive and all appeals related to any such action have been
exhausted.
(c) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (i) the termination of Executive's
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment), (ii) the
Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits, (iii) the
Executive's hearing before the directors as contemplated in subsection 6(c) of
this Agreement or (iv) any action taken by the Company against the Executive,
unless and until such time that a final judgement has been rendered in favor
of the Company and all appeals related to any such action have been exhausted;
provided, however, that the circumstances set forth above occurred on or after
a change in control of the Company.
(d) For purposes of this Agreement, a "change in control of the
Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the date hereof,
whether or not the Company is then subject to such reporting requirement,
provided, however, that there shall not be deemed to be a "change in control"
of the Company if immediately prior to the occurrence of what would otherwise
be a "change in control" of the Company (a) the Executive is the other party
to the transaction (a "Control Event") that would otherwise result in a
"change in control" of the Company or (b) the Executive is an executive
officer, trustee, director or more than 5% equity holder of the other party to
the Control Event or of any entity, directly or indirectly, controlling such
other party,
(ii) the Company merges or consolidates with, or sells all
or substantially all of its assets to, another company (each, a
"Transaction"), provided, however, that a Transaction shall not be deemed to
result in a "change in control" of the Company if (a) immediately prior
thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the
shareholders of the Company, immediately before such Transaction own, directly
or indirectly, immediately following such Transaction in excess of fifty
percent (50%) of the combined voting power of the outstanding voting
securities of the corporation or other entity resulting from such Transaction
(the "Surviving Corporation") in substantially the same proportion as their
ownership of the voting securities of the Company immediately before such
Transaction and (2) the individuals who were members of the Company's Board of
Directors immediately prior to the execution of the agreement providing for
such Transaction constitute at least a majority of the members of the board of
directors or the board of trustees, as the case may be, of the Surviving
Corporation, or of a corporation or other entity beneficially directly or
indirectly owning a majority of the outstanding voting securities of the
Surviving Corporation, or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each,
an "Other Transaction") and (a) the shareholders of the Company, immediately
before such Other Transaction own, directly or indirectly, immediately
following such Other Transaction 50% or less of the combined voting power of
the outstanding voting securities of the corporation or other entity resulting
from such Other Transaction (the "Other Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities
of the Company immediately before such Other Transaction or (b) the
individuals who were members of the Company's Board of Directors immediately
prior to the execution of the agreement providing for such Other Transaction
constitute less than a majority of the members of the board of directors or
the board of trustees, as the case may be, of the Other Surviving Corporation,
or of a corporation or other entity beneficially directly or indirectly owning
a majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed
to result in a "change in control" of the Company if immediately prior thereto
the circumstances in (i)(a) or (i)(b) above exist.
5. Benefits. The Executive shall be entitled to six weeks of paid
vacation each year and such other medical and other benefits as are afforded
from time to time to all executive employees of the Company. The Company
shall indemnify the Executive in the performance of his duties pursuant to the
bylaws of the Company and to the fullest extent allowed by applicable law,
including, without limitation, legal fees.
6. Earlier Termination. (a) If the Executive shall fail, because
of illness or incapacity, to render the services contemplated by this
Agreement for six successive months or for shorter periods aggregating nine
months in any calendar year, the directors of the Company may determine, on
the basis of medical evidence satisfactory to the Company, in the Company's
sole discretion, that the Executive has become disabled. If within thirty
(30) days after the date on which written notice of such determination is
given to the Executive, the Executive shall not have returned to the full-time
performance of his duties hereunder, this Agreement and the employment of the
Executive hereunder shall be deemed terminated in accordance with Section 8
hereof.
(b) Except as otherwise provided in this Agreement, if the
Executive shall die during the term of this Agreement, this Agreement shall be
deemed to have been terminated as of the date of death of the Executive.
(c) The Company, by notice to the Executive, may terminate this
Agreement for proper cause. As used herein, "proper cause" shall mean (i) the
willful and continued failure by the Executive to substantially perform his
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure resulting from termination by the Executive for Good
Reason (as defined below)) after a written demand for substantial performance
is delivered to the Executive by the directors of the Company, which demand
specifically identifies the manner in which the directors believe that the
Executive has not substantially performed his duties, or (ii) the willful
engaging by the Executive in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
subsection 6(c), no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive
otherwise than in good faith and in a manner that the Executive reasonably
believed was in or not opposed to the best interests of the Company and its
shareholders. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for proper cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of all of the
directors of the Company at a meeting of the directors called and held for
such purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with counsel of his choosing, to be heard before the
directors not less than 10 business days after the giving of such notice),
finding that in the good faith opinion of the directors, the Executive
conducted himself as set forth above in clause (i) or (ii) of the first
sentence of this subsection 6(c) and specifying the particulars of such
conduct in detail.
(d) The Executive may terminate this Agreement for "Good Reason" if
any of the following events occurs:
(i) the assignment to the Executive of any duties materially
inconsistent with his status as a senior executive officer of the
Company or a substantial alteration in the nature or status of his
responsibilities;
(ii) the Company's breach of any of its agreements or
obligations under this Agreement;
(iii) the failure by the Company to pay the Executive any
annual installment of a previous award under any bonus or incentive
compensation arrangement;
(iv) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 14 hereof;
(v) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination (defined
below) satisfying the requirements of Section 7 below; or
(vi) any change in control of the Company.
7. Notice of Termination. Any purported termination of the
Executive's employment by the Company or by the Executive shall be
communicated by a written Notice of Termination to the other party hereto in
accordance with Section 16 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
8. Date of Termination, Etc. "Date of Termination" shall mean (a)
if the Executive's employment is terminated for disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not
have returned to the full-time performance of his duties during such thirty
(30) day period), and (b) if the Executive's employment is terminated pursuant
to subsection 6(c) or 6(d) above or for any other reason (other than
disability), the date specified in the Notice of Termination (which, in the
case of a termination pursuant to subsection 6(c) above shall not be less than
thirty (30) days, and in the case of a termination pursuant to subsection 6(d)
above shall not be less than thirty (30) nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given); provided,
however, if within thirty (30) days after any Notice of Termination is given
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
the date on which the dispute is finally resolved, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or the time for appeal therefrom having expired and no appeal
having been perfected), except that with respect to a termination of this
Agreement by reason of expiration of its term as provided in Section 2, the
Date of Termination shall be the date the term hereof expires pursuant to
Section 2, regardless of whether a dispute exists with respect thereto;
provided, further, that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay the Executive his full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base salary and
installments under any bonus or incentive compensation plan) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which he was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this Section.
Amounts paid under this Section 8 are in addition to all other amounts due
under this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement. If it is finally determined by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected), that the
Executive was terminated for proper cause, the Executive shall promptly remit
to the Company the amount of any cash payments and the value of any non-cash
benefits paid pursuant to this Section 8 to which the Executive would not
otherwise have been entitled.
9. Compensation Upon Termination or During Disability. Upon
termination of the Executive's employment or during a period of disability the
Executive shall be entitled to the following compensation and benefits:
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his base salary at the rate in effect
at the commencement of any such period until his employment is terminated
pursuant to subsection 6(a) hereof, together with any bonus that may be
payable pursuant to subsection 3(b). Thereafter, the compensation provided in
Section 3 hereof shall continue to be paid to the Executive for the longer of
(i) a period of 36 months after such termination and (ii) the remaining term
of this Agreement pursuant to Section 2 hereof, in either case at the annual
base salary in effect at the time his employment is terminated, and the
Executive shall continue to be covered by the Company's health, dental and
life insurance benefits for such period.
(b) If the Executive's employment shall be terminated, at any time
prior to a change in control of the Company, for proper cause or by him other
than for Good Reason, the Executive shall be paid the Executive's full base
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given and the Company shall thereafter have no
further obligations to the Executive under this Agreement.
(c) If the Executive's employment shall be terminated by reason of
the Executive's death, the compensation provided in subsection 3(a) hereof
shall be paid to the person designated from time to time in writing by the
Executive and, if not so designated, to the Executive's estate for the longer
of (i) a period of 36 months following such termination and (ii) the remaining
term of this Agreement pursuant to Section 2 hereof, in either case at the
annual base salary in effect at the time of his death. The person designated
by the Executive and, if not so designated, the Executive's estate shall also
receive (i) any bonus awarded pursuant to subsection 3(b) and not yet paid and
(ii) with respect to the year in which the Executive dies (in the event the
directors of the Company have not yet determined whether to award the
Executive a bonus for such calendar year), a bonus equal to the product of (x)
the annual base salary payable to the Executive pursuant to subsection 3(a)
from January 1 of the year in which the Executive shall have died through the
last day of the month during which the Executive shall have died and (y) the
Deemed Bonus Fraction (as defined in subsection 9(d) below).
(d) If the Executive's employment shall be terminated (I) by the
Company other than for proper cause or disability or (II) by the Executive for
Good Reason, then the Executive shall be entitled to the benefits provided
below:
(i) the Company shall pay as severance pay to the Executive,
not later than the Date of Termination, a lump sum severance payment
(the "Severance Payment") equal to (A) the aggregate of all
compensation due to the Executive hereunder had his employment not
been so terminated, including, without limitation, all bonus
payments which would have been due to the Executive pursuant to
subsection 3(b), assuming that the Executive would have received a
bonus for each calendar year equal to the product of (x) the annual
base salary that would be payable to the Executive pursuant to
subsection 3(a) for such calendar year and (y) the greater of (i)
1/2 or (ii) the percentage of the Executive's base salary for the
immediately preceding fiscal year that was paid to the Executive as
a bonus for the immediately preceding fiscal year, expressed as a
fraction (the greater of clauses (i) and (ii) being herein referred
to as the "Deemed Bonus Fraction"), through the expiration of this
Agreement, plus (B) the greater of (x) the aggregate of all
compensation due to the Executive hereunder had his employment not
been so terminated, including, without limitation, all bonus
payments which would have been due to the Executive pursuant to
subsection 3(b), assuming that the Executive would have received a
bonus for each calendar year equal to the product of (i) the annual
base salary that would be payable to the Executive pursuant to
subsection 3(a) for such calendar year and (ii) the Deemed Bonus
Fraction, through the expiration of this Agreement (assuming, solely
for purposes of this subsection 9(d)(i)(B)(x), that this Agreement
expires on the last day of the thirty-sixth month following the end
of the calendar year in which the Date of Termination occurs), or
(y) 2.99 times the "base amount" within the meaning of Sections
280G(b)(3) and 280G(d) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any applicable temporary or final
regulations promulgated thereunder, or its equivalent as provided in
any successor statute or regulation; provided, however, if the
Executive's employment shall be terminated other than pursuant to
subsection 6(d)(vi), the Severance Payment shall equal only the
greatest of the amounts set forth in subsection 9(d)(i)(A),
9(d)(i)(B)(x) or 9(d)(i)(B)(y) above. If Section 280G of the Code
(and any successor provisions thereto) shall be repealed or
otherwise be inapplicable, then the Severance Payment under clause
(i)(B)(y) above shall equal 2.99 times the average of the
Executive's annual compensation (from the Company or from Wellsford
Residential, as the case may) during the three calendar year period
preceding the calendar year in which the Date of Termination occurs.
For purposes of determining annual compensation in the preceding
sentence, compensation payable to the Executive by the Company or by
Wellsford Residential shall include every type and form of
compensation includible in the Executive's gross income in respect
of his employment by the Company or by Wellsford Residential
(including, without limitation, all income reported on an Internal
Revenue Service Form W-2), compensation income recognized as a
result of the Executive's exercise of stock options or sale of the
stock so acquired and including, without limitation, any annual
bonus payments previously paid to such Executive. For purposes of
calculating the "base amount" within the meaning of Sections
280G(b)(3) and 280G(d) of the Code and annual compensation in the
second preceding sentence, any income of the Executive that
constitutes a "parachute payment" within the meaning of Section
280G(b)(2) of the Code shall not be taken into account in making
such calculations; and
(ii) an amount equal to the Additional Amount pursuant to
Section 10 below.
(e) If the Executive's employment shall be terminated, at any time
following a change in control of the Company, for proper cause, the Company
shall pay the Executive his full base salary through the Date of Termination
at the higher of the rate in effect at the time Notice of Termination is given
and the rate in effect immediately prior to the change in control of the
Company and the Company shall have no further obligations to the Executive
under this Agreement.
(f) In addition to all other amounts payable to the Executive under
this Section 9, the Executive shall be entitled to receive all benefits
payable to him under the Company's Pension Plans applicable to him and any
other plan or agreement relating to retirement benefits as in effect upon the
occurrence of a change in control.
(g) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 9 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 9 be reduced by any compensation earned by him as the result of
employment by another employer or by retirement benefits after the Date of
Termination, or otherwise, except as specifically provided in this Section 9.
10. Additional Amount. Whether or not Section 9 is applicable, if
in the opinion of tax counsel selected by the Executive and reasonably accept-
able to the Company, the Executive has or will receive any compensation or
recognize any income (whether or not pursuant to this Agreement or any plan or
other arrangement of the Company and whether or not the Executive's employment
with the Company has terminated) which constitute an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code (or for which a
tax is otherwise payable under Section 4999 of the Code), then the Company
shall pay the Executive an additional amount (the "Additional Amount") equal
to the sum of (i) all taxes payable by the Executive under Section 4999 of the
Code with respect to (a) all such excess parachute payments (or otherwise),
and (b) the Additional Amount, plus (ii) all federal, state and local income
taxes payable by Executive with respect to the Additional Amount. The amounts
payable pursuant to this Section 10 shall be paid by the Company to the
Executive within 30 days of the written request therefor made by the
Executive, but in all events (whether or not there has been a written request
by the Executive) not later than the date of the "change in control of the
Company", unless otherwise agreed to in writing by the Executive.
11. Income Tax Payment. Whether or not Section 9 is applicable, if
(i) the Executive has or will receive any compensation or recognize any income
(whether or not pursuant to this Agreement or any plan or other arrangement of
the Company and whether or not the Executive's employment with the Company has
terminated) in connection with a "change in control" of the Company (as that
term may be interpreted in this Agreement and any plan or other arrangement of
the Company), and (ii) such compensation or income represents non-cash
compensation or income, then the Company shall pay the Executive in cash an
amount (the "Income Tax Payment") equal to all federal, state and local income
taxes payable by Executive with respect to such non-cash compensation or
income. The Income Tax Payment shall be paid by the Company to the Executive
not later than the date of the "change in control of the Company", unless
otherwise agreed to in writing by the Executive.
12. Indemnification. The Company shall indemnify and hold harmless
the Executive for and against, and shall pay to the Executive an amount (the
"Indemnified Amount") equal to, the sum of (i) all taxes payable by the
Executive under Section 4999 of the Code with respect to (a) any compensation
received and any income recognized by the Executive in connection with the
Merger and Distribution as described in the Joint Proxy Statement/
Prospectus/Information Statement, dated April 25, 1997, of Wellsford
Residential and EQR and (b) the Indemnified Amount, plus (ii) all federal,
state and local income taxes payable by Executive with respect to the
Indemnified Amount; provided, however, that the Company shall have no
obligations under this Section 12 with respect to items comprising the
Indemnified Amount to the extent already paid on behalf of the Executive by
Wellsford Residential or the surviving trust in the Merger.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
14. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agreements. No provision of this Agreement
may be waived or changed, except by a writing signed by the party to be
charged with such waiver or change.
15. Successors; Binding Agreement. (a) This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would
still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there is no such designee, to the Executive's estate.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree in writing to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain and deliver to
Executive such assumption and agreement prior to (but effective only upon)
such succession shall be a breach of this Agreement, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement, expressly, by operation of law, or otherwise.
16. Notices. All notices provided for in this Agreement shall be
in writing, and shall be deemed to have been duly given when delivered
personally to the party to receive the same, when given by telex, telegram or
mailgram, or when mailed first class postage prepaid, by registered or
certified mail, return receipt requested, addressed to the party to receive
the same at his or its address above set forth, or such other address as the
party to receive the same shall have specified by written notice given in the
manner provided for in this Section 16. All notices shall be deemed to have
been given as of the date of personal delivery, transmittal or mailing
thereof.
17. Severability. If any provision in this Agreement is determined
to be invalid, it shall not affect the validity or enforceability of any of
the other remaining provisions hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
-----------------------------
Name: Edward Lowenthal
Title: President
EXECUTIVE:
/s/ Jeffrey H. Lynford
---------------------------------
Jeffrey H. Lynford
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New
York, New York 10020 (the "Company"), and EDWARD LOWENTHAL, an individual
residing at 201 Hamilton Road, Ridgewood, New Jersey 07450 (the "Executive").
WHEREAS, the Executive is an executive of Wellsford Residential
Property Trust, a Maryland real estate investment trust ("Wellsford
Residential");
WHEREAS, Equity Residential Properties Trust, a Maryland real
estate investment trust ("EQR"), is merging with and into Wellsford
Residential as of the date hereof (the "Merger");
WHEREAS, immediately prior to the Merger, Wellsford Residential
is distributing to its common shareholders, pro rata, all of the shares of
common stock that it owns in the Company (the "Distribution"); and
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company.
IT IS AGREED:
1. Duties. (a) During the term of the Executive's
employment hereunder the Executive shall serve and the Company shall employ
the Executive as Chairman of the Board to perform such executive or
administrative services for the Company consistent with those of a Chairman of
the Board as may be assigned to the Executive by the directors of the Company.
The Executive hereby accepts such employment and agrees to perform such ser-
vices.
(b) The Executive shall devote such time, attention and
energies during business hours to the performance of his duties hereunder as
is necessary to properly carry out the responsibilities of his office.
(c) The Executive shall cooperate with the Company, including
taking such medical examinations as the Company reasonably shall deem
necessary, if the Company shall desire to obtain medical, disability or life
insurance with respect to the Executive. Where reasonably possible, the
Company shall cooperate with the Executive's request to have such examinations
performed by the Executive's personal physician or another physician
reasonably acceptable to the Executive.
(d) The Executive shall not be required to relocate or conduct
the Company's business outside the New York, New York area in order to perform
his duties under this Agreement but shall undertake such reasonable business
travel as may be necessary to perform said duties (for which the Executive
shall be reimbursed pursuant to Section 4 below for costs and expenses
incurred in connection therewith).
2. Employment Term. This Agreement shall commence on May 30,
1997 and shall continue in effect through December 31, 2002; provided,
however, that, on January 1, 2003 and on each January 1 thereafter, the term
of this Agreement shall automatically be extended for one additional year
beyond such January 1 unless, not later than June 30 of the preceding year,
either the Executive or the Company shall have given notice to the other not
to extend this Agreement.
3. Compensation. For all services rendered by the Executive
pursuant to this Agreement:
(a) The Company shall pay to the Executive an annual base
salary at the following rates:
(i) for the period from May 30, 1997 through December 31,
1997 - $275,000;
(ii) for the period from January 1, 1998 through December 31,
1998 - $283,250;
(iii) for the period from January 1, 1999 through December 31,
1999 - $291,748;
(iv) for the period from January 1, 2000 through December 31,
2000 - $300,500;
(v) for the period from January 1, 2001 through December 31,
2001 - $309,515;
(vi) for the period from January 1, 2002 through December 31,
2002 - $318,800; and
(vii) for each additional year thereafter, the annual base
salary for the immediately preceding year plus 3% of
such annual base salary.
All such compensation shall be paid bi-weekly or at such other regular
intervals, not less frequently than monthly, as the Company may establish from
time to time for executive employees of the Company.
(b) In addition to the compensation set forth in subsection 3(a)
above, the Executive shall be awarded such bonus for each calendar year or
partial calendar year of his employment hereunder as the directors of the
Company shall determine in their sole discretion. In determining such bonus,
the Executive understands that the directors will consider, without
limitation, the following factors with respect to the applicable calendar year
or partial calendar year: the Company's financial performance, business
performance and growth during such period; Executive's responsibilities as an
officer of the Company (including his participation in transactions of
particular financial or business significance to the Company) during such
period; the total compensation package paid to executive officers having
similar responsibilities as the Executive who are employed by entities which
are similar to the Company; and such other factors as the directors may deem
appropriate in their sole discretion. Such bonus may consist of cash; grants
of shares ("Shares") of Common Stock of the Company; options to purchase
Shares; loans to purchase Shares; share appreciation rights (whether
independent of or in conjunction with awards of options); and such other
awards as the directors in their sole discretion may deem appropriate and
which they believe are in furtherance of the growth of long-term stockholder
value of the Company.
4. Expenses. (a) The Company shall pay for all legal and
accounting fees and expenses incurred by the Executive in connection with the
structuring, negotiation and preparation of this Agreement. The Company shall
reimburse the Executive for all out-of-pocket expenses actually and
necessarily incurred by him in the conduct of the business of the Company
against reasonable substantiation submitted with respect thereto.
(b) Unless the provisions of subsection 4(c) below shall apply, the
Company shall reimburse the Executive for all legal fees and related expenses
(including the costs of experts, evidence and counsel) paid by the Executive
as a result of (i) the termination of Executive's employment (including all
such fees and expenses, if any, incurred in contesting or disputing any such
termination of employment), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits, (iii) the Executive's hearing before the
directors as contemplated in subsection 6(c) of this Agreement or (iv) any
action taken by the Company against the Executive; provided, however, that the
Company shall reimburse the legal fees and related expenses described in this
subsection 4(b) only if and when a final judgement has been rendered in favor
of the Executive and all appeals related to any such action have been
exhausted.
(c) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (i) the termination of Executive's
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment), (ii) the
Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits, (iii) the
Executive's hearing before the directors as contemplated in subsection 6(c) of
this Agreement or (iv) any action taken by the Company against the Executive,
unless and until such time that a final judgement has been rendered in favor
of the Company and all appeals related to any such action have been exhausted;
provided, however, that the circumstances set forth above occurred on or after
a change in control of the Company.
(d) For purposes of this Agreement, a "change in control of the
Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the date hereof,
whether or not the Company is then subject to such reporting requirement,
provided, however, that there shall not be deemed to be a "change in control"
of the Company if immediately prior to the occurrence of what would otherwise
be a "change in control" of the Company (a) the Executive is the other party
to the transaction (a "Control Event") that would otherwise result in a
"change in control" of the Company or (b) the Executive is an executive
officer, trustee, director or more than 5% equity holder of the other party to
the Control Event or of any entity, directly or indirectly, controlling such
other party,
(ii) the Company merges or consolidates with, or sells all
or substantially all of its assets to, another company (each, a
"Transaction"), provided, however, that a Transaction shall not be deemed to
result in a "change in control" of the Company if (a) immediately prior
thereto the circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the
shareholders of the Company, immediately before such Transaction own, directly
or indirectly, immediately following such Transaction in excess of fifty
percent (50%) of the combined voting power of the outstanding voting
securities of the corporation or other entity resulting from such Transaction
(the "Surviving Corporation") in substantially the same proportion as their
ownership of the voting securities of the Company immediately before such
Transaction and (2) the individuals who were members of the Company's Board of
Directors immediately prior to the execution of the agreement providing for
such Transaction constitute at least a majority of the members of the board of
directors or the board of trustees, as the case may be, of the Surviving
Corporation, or of a corporation or other entity beneficially directly or
indirectly owning a majority of the outstanding voting securities of the
Surviving Corporation, or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each,
an "Other Transaction") and (a) the shareholders of the Company, immediately
before such Other Transaction own, directly or indirectly, immediately
following such Other Transaction 50% or less of the combined voting power of
the outstanding voting securities of the corporation or other entity resulting
from such Other Transaction (the "Other Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities
of the Company immediately before such Other Transaction or (b) the
individuals who were members of the Company's Board of Directors immediately
prior to the execution of the agreement providing for such Other Transaction
constitute less than a majority of the members of the board of directors or
the board of trustees, as the case may be, of the Other Surviving Corporation,
or of a corporation or other entity beneficially directly or indirectly owning
a majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed
to result in a "change in control" of the Company if immediately prior thereto
the circumstances in (i)(a) or (i)(b) above exist.
5. Benefits. The Executive shall be entitled to six weeks of paid
vacation each year and such other medical and other benefits as are afforded
from time to time to all executive employees of the Company. The Company
shall indemnify the Executive in the performance of his duties pursuant to the
bylaws of the Company and to the fullest extent allowed by applicable law,
including, without limitation, legal fees.
6. Earlier Termination. (a) If the Executive shall fail, because
of illness or incapacity, to render the services contemplated by this
Agreement for six successive months or for shorter periods aggregating nine
months in any calendar year, the directors of the Company may determine, on
the basis of medical evidence satisfactory to the Company, in the Company's
sole discretion, that the Executive has become disabled. If within thirty
(30) days after the date on which written notice of such determination is
given to the Executive, the Executive shall not have returned to the full-time
performance of his duties hereunder, this Agreement and the employment of the
Executive hereunder shall be deemed terminated in accordance with Section 8
hereof.
(b) Except as otherwise provided in this Agreement, if the
Executive shall die during the term of this Agreement, this Agreement shall be
deemed to have been terminated as of the date of death of the Executive.
(c) The Company, by notice to the Executive, may terminate this
Agreement for proper cause. As used herein, "proper cause" shall mean (i) the
willful and continued failure by the Executive to substantially perform his
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure resulting from termination by the Executive for Good
Reason (as defined below)) after a written demand for substantial performance
is delivered to the Executive by the directors of the Company, which demand
specifically identifies the manner in which the directors believe that the
Executive has not substantially performed his duties, or (ii) the willful
engaging by the Executive in conduct which is demonstrably and materially
injurious to the Company, monetarily or otherwise. For purposes of this
subsection 6(c), no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive
otherwise than in good faith and in a manner that the Executive reasonably
believed was in or not opposed to the best interests of the Company and its
shareholders. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for proper cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters (3/4) of all of the
directors of the Company at a meeting of the directors called and held for
such purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with counsel of his choosing, to be heard before the
directors not less than 10 business days after the giving of such notice),
finding that in the good faith opinion of the directors, the Executive
conducted himself as set forth above in clause (i) or (ii) of the first
sentence of this subsection 6(c) and specifying the particulars of such
conduct in detail.
(d) The Executive may terminate this Agreement for "Good Reason" if
any of the following events occurs:
(i) the assignment to the Executive of any duties materially
inconsistent with his status as a senior executive officer of the
Company or a substantial alteration in the nature or status of his
responsibilities;
(ii) the Company's breach of any of its agreements or
obligations under this Agreement;
(iii) the failure by the Company to pay the Executive any
annual installment of a previous award under any bonus or incentive
compensation arrangement;
(iv) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement, as contemplated in Section 14 hereof;
(v) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination (defined
below) satisfying the requirements of Section 7 below; or
(vi) any change in control of the Company.
7. Notice of Termination. Any purported termination of the
Executive's employment by the Company or by the Executive shall be
communicated by a written Notice of Termination to the other party hereto in
accordance with Section 16 hereof. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
8. Date of Termination, Etc. "Date of Termination" shall mean (a)
if the Executive's employment is terminated for disability, thirty (30) days
after Notice of Termination is given (provided that the Executive shall not
have returned to the full-time performance of his duties during such thirty
(30) day period), and (b) if the Executive's employment is terminated pursuant
to subsection 6(c) or 6(d) above or for any other reason (other than
disability), the date specified in the Notice of Termination (which, in the
case of a termination pursuant to subsection 6(c) above shall not be less than
thirty (30) days, and in the case of a termination pursuant to subsection 6(d)
above shall not be less than thirty (30) nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given); provided,
however, if within thirty (30) days after any Notice of Termination is given
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
the date on which the dispute is finally resolved, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or the time for appeal therefrom having expired and no appeal
having been perfected), except that with respect to a termination of this
Agreement by reason of expiration of its term as provided in Section 2, the
Date of Termination shall be the date the term hereof expires pursuant to
Section 2, regardless of whether a dispute exists with respect thereto;
provided, further, that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute, the Company will continue to
pay the Executive his full compensation in effect when the notice giving rise
to the dispute was given (including, but not limited to, base salary and
installments under any bonus or incentive compensation plan) and continue the
Executive as a participant in all compensation, benefit and insurance plans in
which he was participating when the notice giving rise to the dispute was
given, until the dispute is finally resolved in accordance with this Section.
Amounts paid under this Section 8 are in addition to all other amounts due
under this Agreement and shall not be offset against or reduce any other
amounts due under this Agreement. If it is finally determined by a binding
arbitration award, or by a final judgment, order or decree of a court of
competent jurisdiction (which is not appealable or the time for appeal
therefrom having expired and no appeal having been perfected), that the
Executive was terminated for proper cause, the Executive shall promptly remit
to the Company the amount of any cash payments and the value of any non-cash
benefits paid pursuant to this Section 8 to which the Executive would not
otherwise have been entitled.
9. Compensation Upon Termination or During Disability. Upon
termination of the Executive's employment or during a period of disability the
Executive shall be entitled to the following compensation and benefits:
(a) During any period that the Executive fails to perform his
duties hereunder as a result of incapacity due to physical or mental illness,
the Executive shall continue to receive his base salary at the rate in effect
at the commencement of any such period until his employment is terminated
pursuant to subsection 6(a) hereof, together with any bonus that may be
payable pursuant to subsection 3(b). Thereafter, the compensation provided in
Section 3 hereof shall continue to be paid to the Executive for the longer of
(i) a period of 36 months after such termination and (ii) the remaining term
of this Agreement pursuant to Section 2 hereof, in either case at the annual
base salary in effect at the time his employment is terminated, and the
Executive shall continue to be covered by the Company's health, dental and
life insurance benefits for such period.
(b) If the Executive's employment shall be terminated, at any time
prior to a change in control of the Company, for proper cause or by him other
than for Good Reason, the Executive shall be paid the Executive's full base
salary through the Date of Termination at the rate in effect at the time
Notice of Termination is given and the Company shall thereafter have no
further obligations to the Executive under this Agreement.
(c) If the Executive's employment shall be terminated by reason of
the Executive's death, the compensation provided in subsection 3(a) hereof
shall be paid to the person designated from time to time in writing by the
Executive and, if not so designated, to the Executive's estate for the longer
of (i) a period of 36 months following such termination and (ii) the remaining
term of this Agreement pursuant to Section 2 hereof, in either case at the
annual base salary in effect at the time of his death. The person designated
by the Executive and, if not so designated, the Executive's estate shall also
receive (i) any bonus awarded pursuant to subsection 3(b) and not yet paid and
(ii) with respect to the year in which the Executive dies (in the event the
directors of the Company have not yet determined whether to award the
Executive a bonus for such calendar year), a bonus equal to the product of (x)
the annual base salary payable to the Executive pursuant to subsection 3(a)
from January 1 of the year in which the Executive shall have died through the
last day of the month during which the Executive shall have died and (y) the
Deemed Bonus Fraction (as defined in subsection 9(d) below).
(d) If the Executive's employment shall be terminated (I) by the
Company other than for proper cause or disability or (II) by the Executive for
Good Reason, then the Executive shall be entitled to the benefits provided
below:
(i) the Company shall pay as severance pay to the Executive,
not later than the Date of Termination, a lump sum severance payment
(the "Severance Payment") equal to (A) the aggregate of all
compensation due to the Executive hereunder had his employment not
been so terminated, including, without limitation, all bonus
payments which would have been due to the Executive pursuant to
subsection 3(b), assuming that the Executive would have received a
bonus for each calendar year equal to the product of (x) the annual
base salary that would be payable to the Executive pursuant to
subsection 3(a) for such calendar year and (y) the greater of (i)
1/2 or (ii) the percentage of the Executive's base salary for the
immediately preceding fiscal year that was paid to the Executive as
a bonus for the immediately preceding fiscal year, expressed as a
fraction (the greater of clauses (i) and (ii) being herein referred
to as the "Deemed Bonus Fraction"), through the expiration of this
Agreement, plus (B) the greater of (x) the aggregate of all
compensation due to the Executive hereunder had his employment not
been so terminated, including, without limitation, all bonus
payments which would have been due to the Executive pursuant to
subsection 3(b), assuming that the Executive would have received a
bonus for each calendar year equal to the product of (i) the annual
base salary that would be payable to the Executive pursuant to
subsection 3(a) for such calendar year and (ii) the Deemed Bonus
Fraction, through the expiration of this Agreement (assuming, solely
for purposes of this subsection 9(d)(i)(B)(x), that this Agreement
expires on the last day of the thirty-sixth month following the end
of the calendar year in which the Date of Termination occurs), or
(y) 2.99 times the "base amount" within the meaning of Sections
280G(b)(3) and 280G(d) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any applicable temporary or final
regulations promulgated thereunder, or its equivalent as provided in
any successor statute or regulation; provided, however, if the
Executive's employment shall be terminated other than pursuant to
subsection 6(d)(vi), the Severance Payment shall equal only the
greatest of the amounts set forth in subsection 9(d)(i)(A),
9(d)(i)(B)(x) or 9(d)(i)(B)(y) above. If Section 280G of the Code
(and any successor provisions thereto) shall be repealed or
otherwise be inapplicable, then the Severance Payment under clause
(i)(B)(y) above shall equal 2.99 times the average of the
Executive's annual compensation (from the Company or from Wellsford
Residential, as the case may) during the three calendar year period
preceding the calendar year in which the Date of Termination occurs.
For purposes of determining annual compensation in the preceding
sentence, compensation payable to the Executive by the Company or by
Wellsford Residential shall include every type and form of
compensation includible in the Executive's gross income in respect
of his employment by the Company or by Wellsford Residential
(including, without limitation, all income reported on an Internal
Revenue Service Form W-2), compensation income recognized as a
result of the Executive's exercise of stock options or sale of the
stock so acquired and including, without limitation, any annual
bonus payments previously paid to such Executive. For purposes of
calculating the "base amount" within the meaning of Sections
280G(b)(3) and 280G(d) of the Code and annual compensation in the
second preceding sentence, any income of the Executive that
constitutes a "parachute payment" within the meaning of Section
280G(b)(2) of the Code shall not be taken into account in making
such calculations; and
(ii) an amount equal to the Additional Amount pursuant to
Section 10 below.
(e) If the Executive's employment shall be terminated, at any time
following a change in control of the Company, for proper cause, the Company
shall pay the Executive his full base salary through the Date of Termination
at the higher of the rate in effect at the time Notice of Termination is given
and the rate in effect immediately prior to the change in control of the
Company and the Company shall have no further obligations to the Executive
under this Agreement.
(f) In addition to all other amounts payable to the Executive under
this Section 9, the Executive shall be entitled to receive all benefits
payable to him under the Company's Pension Plans applicable to him and any
other plan or agreement relating to retirement benefits as in effect upon the
occurrence of a change in control.
(g) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 9 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 9 be reduced by any compensation earned by him as the result of
employment by another employer or by retirement benefits after the Date of
Termination, or otherwise, except as specifically provided in this Section 9.
10. Additional Amount. Whether or not Section 9 is applicable, if
in the opinion of tax counsel selected by the Executive and reasonably accept-
able to the Company, the Executive has or will receive any compensation or
recognize any income (whether or not pursuant to this Agreement or any plan or
other arrangement of the Company and whether or not the Executive's employment
with the Company has terminated) which constitute an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code (or for which a
tax is otherwise payable under Section 4999 of the Code), then the Company
shall pay the Executive an additional amount (the "Additional Amount") equal
to the sum of (i) all taxes payable by the Executive under Section 4999 of the
Code with respect to (a) all such excess parachute payments (or otherwise),
and (b) the Additional Amount, plus (ii) all federal, state and local income
taxes payable by Executive with respect to the Additional Amount. The amounts
payable pursuant to this Section 10 shall be paid by the Company to the
Executive within 30 days of the written request therefor made by the
Executive, but in all events (whether or not there has been a written request
by the Executive) not later than the date of the "change in control of the
Company", unless otherwise agreed to in writing by the Executive.
11. Income Tax Payment. Whether or not Section 9 is applicable, if
(i) the Executive has or will receive any compensation or recognize any income
(whether or not pursuant to this Agreement or any plan or other arrangement of
the Company and whether or not the Executive's employment with the Company has
terminated) in connection with a "change in control" of the Company (as that
term may be interpreted in this Agreement and any plan or other arrangement of
the Company), and (ii) such compensation or income represents non-cash
compensation or income, then the Company shall pay the Executive in cash an
amount (the "Income Tax Payment") equal to all federal, state and local income
taxes payable by Executive with respect to such non-cash compensation or
income. The Income Tax Payment shall be paid by the Company to the Executive
not later than the date of the "change in control of the Company", unless
otherwise agreed to in writing by the Executive.
12. Indemnification. The Company shall indemnify and hold harmless
the Executive for and against, and shall pay to the Executive an amount (the
"Indemnified Amount") equal to, the sum of (i) all taxes payable by the
Executive under Section 4999 of the Code with respect to (a) any compensation
received and any income recognized by the Executive in connection with the
Merger and Distribution as described in the Joint Proxy Statement/
Prospectus/Information Statement, dated April 25, 1997, of Wellsford
Residential and EQR and (b) the Indemnified Amount, plus (ii) all federal,
state and local income taxes payable by Executive with respect to the
Indemnified Amount; provided, however, that the Company shall have no
obligations under this Section 12 with respect to items comprising the
Indemnified Amount to the extent already paid on behalf of the Executive by
Wellsford Residential or the surviving trust in the Merger.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
14. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agreements. No provision of this Agreement
may be waived or changed, except by a writing signed by the party to be
charged with such waiver or change.
15. Successors; Binding Agreement. (a) This Agreement shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive should die while any amount would
still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to the Executive's devisee, legatee or other
designee or, if there is no such designee, to the Executive's estate.
(b) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree in writing to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain and deliver to
Executive such assumption and agreement prior to (but effective only upon)
such succession shall be a breach of this Agreement, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement, expressly, by operation of law, or otherwise.
16. Notices. All notices provided for in this Agreement shall be
in writing, and shall be deemed to have been duly given when delivered
personally to the party to receive the same, when given by telex, telegram or
mailgram, or when mailed first class postage prepaid, by registered or
certified mail, return receipt requested, addressed to the party to receive
the same at his or its address above set forth, or such other address as the
party to receive the same shall have specified by written notice given in the
manner provided for in this Section 16. All notices shall be deemed to have
been given as of the date of personal delivery, transmittal or mailing
thereof.
17. Severability. If any provision in this Agreement is determined
to be invalid, it shall not affect the validity or enforceability of any of
the other remaining provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Jeffrey H. Lynford
-------------------------------
Name: Jeffrey H. Lynford
Title: Chairman of the Board
EXECUTIVE:
/s/ Edward Lowenthal
---------------------------------
Edward Lowenthal
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New
York, New York 10020 (the "Company"), and Gregory F. Hughes, an individual
residing at 5 Somerset Avenue, Garden City, New York 11530 ("Executive").
WHEREAS, the Executive is an executive of Wellsford Residential
Property Trust, a Maryland real estate investment trust ("Wellsford
Residential");
WHEREAS, Equity Residential Properties Trust, a Maryland real
estate investment trust, is merging with and into Wellsford Residential as of
the date hereof (the "Merger");
WHEREAS, immediately prior to the Merger, Wellsford Residential
is distributing to its common shareholders, pro rata, all of the shares of
common stock that it owns in the Company; and
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company.
IT IS AGREED:
1. Duties. (a) During the term of the Executive's
employment hereunder the Executive shall serve and the Company shall employ
the Executive as Chief Financial Officer to perform such executive or
administrative services for the Company consistent with those of a Chief
Financial Officer as may be assigned to the Executive by the directors,
Chairman of the Board or President of the Company. The Executive hereby
accepts such employment and agrees to perform such services.
(b) The Executive shall devote substantially all of his
time, attention and energies during business hours to the performance of his
duties hereunder. The Executive shall give advance written notice to the
Chairman of the Board and President of any intended active involvement in any
other business enterprise.
(c) The Executive shall cooperate with the Company,
including taking such medical examinations as the Company reasonably shall
deem necessary, if the Company shall desire to obtain medical, disability or
life insurance with respect to the Executive.
(d) The Executive shall not be required to relocate or
conduct the Company's business outside the New York, New York area in order to
perform his duties under this Agreement but shall undertake such reasonable
business travel as may be necessary to perform said duties (for which the
Executive shall be reimbursed pursuant to Section 4 below for costs and
expenses incurred in connection therewith).
2. Employment Term. This Agreement shall commence on May 30,
1997 and shall continue in effect through May 29, 1999; provided, however,
that, on May 30, 1999 and on each May 30 thereafter, the term of this
Agreement shall automatically be extended for one additional year beyond such
May 30 unless, not later than the immediately preceding February 28, either
the Executive or the Company shall have given notice to the other not to
extend this Agreement.
3. Compensation. For all services rendered by the Executive
pursuant to this Agreement:
(a) The Company shall pay to the Executive an annual base
salary at the following rates:
(i) for the period from May 30, 1997 through May 29, 1998 -
$200,000;
(ii) for the period from May 30, 1998 through May 29, 1999 -
$206,000; and
(iii) for each additional year thereafter, the annual base
salary for the immediately preceding year plus three
percent (3%) of such annual base salary.
All such compensation shall be paid bi-weekly or at such other regular
intervals, not less frequently than monthly, as the Company may establish from
time to time for executive officers of the Company.
(b) In addition to the compensation set forth in subsection 3(a)
above, during the term of this Agreement, the Executive shall be entitled to a
cash bonus after the end of each calendar year (and after the end of any
partial calendar year in which this Agreement shall expire pursuant to Section
2) equal to at least 50% of the base salary paid to the Executive for such
calendar year (including, in the case of calendar year 1997, the base salary
paid to the Executive by Wellsford Residential) or partial calendar year
pursuant to subsection 3(a). The determination of the amount of the bonus
shall be made by the Compensation Committee based upon the Executive's and the
Company's performance during such calendar year or partial calendar year, as
the case may be. The Company shall announce to the Executive the amount of
his bonus for each year during December of such year (or during the month in
which this Agreement shall expire, if applicable) and pay such bonus during
the following January (or during the month following expiration of this
Agreement, as the case may be), unless otherwise agreed to by the Executive
and the Company.
4. Expenses. (a) The Company shall reimburse the Executive for
all out-of-pocket expenses actually and necessarily incurred by him in the
conduct of the business of the Company against reasonable substantiation
submitted with respect thereto.
(b) Unless the provisions of subsection 4(c) below shall apply, the
Company shall reimburse the Executive for all legal fees and related expenses
(including the costs of experts, evidence and counsel) paid by the Executive
as a result of (i) the termination of Executive's employment (including all
such fees and expenses, if any, incurred in contesting or disputing any such
termination of employment), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits or (iii) any action taken by the Company against
the Executive; provided, however, that the Company shall reimburse the legal
fees and related expenses described in this subsection 4(b) only if and when a
final judgement has been rendered in favor of the Executive and all appeals
related to any such action have been exhausted.
(c) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (i) the termination of Executive's
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment), (ii) the
Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits or (iii) any
action taken by the Company against the Executive, unless and until such time
that a final judgement has been rendered in favor of the Company and all
appeals related to any such action have been exhausted; provided, however,
that the circumstances set forth above occurred on or after a change in
control of the Company.
(d) For purposes of this Agreement, a "change in control of the
Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the date hereof,
whether or not the Company is then subject to such reporting requirement,
provided, however, that there shall not be deemed to be a "change in control"
of the Company if immediately prior to the occurrence of what would otherwise
be a "change in control" of the Company (a) the Executive is the other party
to the transaction (a "Control Event") that would otherwise result in a
"change in control" of the Company or (b) the Executive is an executive
officer, trustee, director or more than 5% equity holder of the other party to
the Control Event or of any entity, directly or indirectly, controlling such
other party,
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a
"change in control" of the Company if (a) immediately prior thereto the
circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of
the Company, immediately before such Transaction own, directly or indirectly,
immediately following such Transaction in excess of fifty percent (50%) of the
combined voting power of the outstanding voting securities of the corporation
or other entity resulting from such Transaction (the "Surviving Corporation")
in substantially the same proportion as their ownership of the voting
securities of the Company immediately before such Transaction and (2) the
individuals who were members of the Company's Board of Trustees immediately
prior to the execution of the agreement providing for such Transaction
constitute at least a majority of the members of the board of directors or the
board of trustees, as the case may be, of the Surviving Corporation, or of a
corporation or other entity beneficially directly or indirectly owning a
majority of the outstanding voting securities of the Surviving Corporation, or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each,
an "Other Transaction") and (a) the shareholders of the Company, immediately
before such Other Transaction own, directly or indirectly, immediately
following such Other Transaction 50% or less of the combined voting power of
the outstanding voting securities of the corporation or other entity resulting
from such Other Transaction (the "Other Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities
of the Company immediately before such Other Transaction or (b) the
individuals who were members of the Company's Board of Trustees immediately
prior to the execution of the agreement providing for such Other Transaction
constitute less than a majority of the members of the board of directors or
the board of trustees, as the case may be, of the Other Surviving Corporation,
or of a corporation or other entity beneficially directly or indirectly owning
a majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed
to result in a "change in control" of the Company if immediately prior thereto
the circumstances in (i)(a) or (i)(b) above exist.
5. Benefits. The Executive shall be entitled to such paid
vacation time each year and such other medical benefits as are afforded from
time to time to all executive officers of the Company (other than the Chairman
of the Board and the President). The Company shall indemnify the Executive in
the performance of his duties pursuant to the bylaws of the Company and to the
fullest extent allowed by applicable law, including, without limitation, legal
fees.
6. Earlier Termination. (a) If the Executive shall die during
the term of this Agreement, this Agreement shall be deemed to have been
terminated as of the date of the Executive's death, and the Company shall pay
to the legal representative of the Executive's estate all monies due hereunder
prorated through the last day of the month during which the Executive shall
have died, as well as a bonus equal to the product of (x) the base salary
payable to the Executive pursuant to subsection 3(a) from January 1 of the
year in which the Executive shall have died through the last day of the month
during which the Executive shall have died and (y) the greater of (i) 1/2 or
(ii) the percentage of the Executive's base salary for the immediately
preceding fiscal year that was paid to the Executive as a bonus for the
immediately preceding fiscal year, expressed as a fraction (the greater of
clauses (i) and (ii) being herein referred to as the "Deemed Bonus Fraction").
(b) If the Executive shall fail, because of illness or incapacity,
to render the services contemplated by this Agreement for six consecutive
months or for shorter periods aggregating nine months in any calendar year,
the Company may determine (as set forth in subsection (d) below) that the
Executive has become disabled. If within thirty (30) days after the date on
which written notice of such determination is given to the Executive, the
Executive shall not have returned to the continuing full-time performance of
his duties hereunder, this Agreement and the employment of the Executive
hereunder shall be deemed terminated and the Company shall pay to the
Executive all monies due hereunder prorated through the last day of the month
during which such termination shall occur, as well as a bonus equal to the
product of (x) the base salary payable to the Executive pursuant to subsection
3(a) from January 1 of the year in which this Agreement is terminated through
the last day of the month during which this Agreement is terminated and (y)
the Deemed Bonus Fraction.
(c) The Company, by written notice to the Executive specifying the
reason therefor, may terminate this Agreement for Cause as determined pursuant
to subsection (d) below. As used herein, "Cause" shall be defined as actions
by the Executive which constitute malfeasance. Malfeasance includes, but is
not limited to, the Executive engaging in fraud, dishonest conduct or other
criminal conduct.
(d) A determination of disability or Cause shall be made in the
reasonable and sole discretion of the Company's Chairman of the Board of the
Company. The Company's Board of Directors shall, upon request of the
Executive, review the decision of whether the Executive has become disabled or
has been discharged, released or terminated for Cause and the Board of
Directors shall confirm, modify or reverse such determination in its sole
discretion.
(e) The Executive may terminate this Agreement if any change in
control of the Company occurs.
7. Compensation Upon Termination Upon a Change in Control. (a)If
after a change in control of the Company the Executive's employment shall be
terminated (I) by the Company other than for Cause or (II) by the Executive,
then the Executive shall be entitled to the benefits provided below:
(i) the Company shall pay the Executive, not later than the
date of termination, (x) his full base salary through the date of
termination, (y) compensation for accrued vacation time, plus (z) a
pro rata portion of the Executive's annual bonus for the calendar
year in which the termination occurs, assuming that the Executive
would have received a bonus for such full calendar year equal to the
product of (A) the base salary that would be payable to the
Executive pursuant to subsection 3(a) for such full calendar year
and (B) the Deemed Bonus Fraction;
(ii) the Company shall pay as severance pay to the Executive,
not later than the date of termination, a lump sum severance payment
(the "Severance Payment") equal to the greater of (x) the aggregate
of all compensation due to the Executive hereunder had his
employment not been so terminated (without duplication of subsection
7(a)(i) above), including, without limitation, all bonus payments
which would have been due to the Executive pursuant to subsection
3(b), through the expiration of this Agreement assuming that the
Executive would have received a bonus for each calendar year through
the expiration of this Agreement equal to the product of (A) the
base salary payable to the Executive pursuant to subsection 3(a) for
each such calendar year and (B) the Deemed Bonus Fraction, or (y) 2
times the "base amount" within the meaning of Sections 280G(b)(3)
and 280G(d) of the Internal Revenue Code of 1986, as amended (the
"Code"), and any applicable temporary or final regulations
promulgated thereunder, or its equivalent as provided in any
successor statute or regulation. If Section 280G of the Code (and
any successor provisions thereto) shall be repealed or otherwise be
inapplicable, then the Severance Payment under clause (ii)(y) above
shall equal 2 times the average of the Executive's annual
compensation during the three calendar year period preceding the
calendar year in which the date of termination occurs. For purposes
of determining annual compensation in the preceding sentence,
compensation payable to the Executive by the Company (including
Wellsford Residential) shall include every type and form of
compensation includible in the Executive's gross income in respect
of his employment by the Company (including Wellsford Residential)
(including, without limitation, all income reported on an Internal
Revenue Service Form W-2), compensation income recognized as a
result of the Executive's exercise of stock options or sale of the
stock so acquired and including, without limitation, any annual
bonus payments previously paid to such Executive. For purposes of
calculating the "base amount" within the meaning of Sections
280G(b)(3) and 280G(d) of the Code and annual compensation in the
second preceding sentence, any income of the Executive that
constitutes a "parachute payment" within the meaning of Section
280G(b)(2) of the Code shall not be taken into account in making
such calculations; and
(iii) an amount equal to the Additional Amount pursuant to
Section 8 below.
(b) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 7 be reduced by any compensation earned by him as the result of
employment by another employer or by retirement benefits after the date of
termination, or otherwise, except as specifically provided in this Section 7.
8. Additional Amount. Whether or not Section 7 is applicable, if
in the opinion of tax counsel selected by the Executive and reasonably accept-
able to the Company, the Executive has or will receive any compensation or
recognize any income (whether or not pursuant to this Agreement or any plan or
other arrangement of the Company and whether or not the Executive's employment
with the Company has terminated) which constitute an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code (or for which a
tax is otherwise payable under Section 4999 of the Code), then the Company
shall pay the Executive an additional amount (the "Additional Amount") equal
to the sum of (i) all taxes payable by the Executive under Section 4999 of the
Code with respect to all such excess parachute payments (or otherwise) and the
Additional Amount, plus (ii) all federal, state and local income taxes payable
by Executive with respect to the Additional Amount. The amounts payable
pursuant to this Section 8 shall be paid by the Company to the Executive
within 30 days of the written request therefor made by the Executive.
9. Protection of Confidential Information; Non-Competition.
(a) The Executive acknowledges that (i) the Company will
suffer substantial damage which will be difficult to compute if the Executive
violates any of the provisions of this Section 9, and (ii) the provisions of
this Agreement are reasonable and necessary for the protection of the business
of the Company.
(b) The Executive agrees that he will not at any time,
either during the term of this Agreement or thereafter, divulge to any person,
firm or corporation any material information obtained or learned by him during
the course of his employment with the Company, with regard to the operational,
financial, business or other affairs of the Company, its officers or
directors, except (i) in the course of performing his duties hereunder, (ii)
with the Chairman of the Board's or President's express written consent; (iii)
to the extent that any such information is in the public domain other than as
a result of the Executive's breach of any of his obligations hereunder; or
(iv) where required to be disclosed by court order, subpoena or other
government process.
(c) Upon termination of his employment with the Company, or
any time the Company may so request, the Executive will promptly deliver to
the Company all memoranda, notes, records, reports, manuals, drawings,
blueprints, software and other documents (and all copies thereof) relating to
the business of the Company and all property associated therewith, which he
may then possess or have under his control.
(d) During the term of this Agreement and any renewal hereof
(including any remaining portion of the stated term of this Agreement or any
renewal term hereof following the termination of the Executive's employment by
the Executive unless such termination occurs after a change in control of the
Company), and provided the Executive's employment has not been terminated by
the Company with or without Cause, the Executive without the prior written
permission of the Chairman of the Board or President shall not in the United
States, its territories or possessions, directly or indirectly, (i) enter into
the employ of or render any services to any person, firm or corporation
engaged in any competitive business; (ii) engage in any competitive business
for his own account; (iii) become associated with or interested in any
competitive business as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, director, consultant, advisor
or in any other relationship or capacity; (iv) employ or retain, or have or
cause any other person or entity to employ or retain, any person who was
employed or retained by the Company while the Executive was employed by the
Company; or (v) solicit, interfere with, or endeavor to entice away from the
Company any of its customers or sources of supply. However, nothing in this
Agreement shall preclude the Executive from investing his personal assets in
the securities of any corporation or other business entity which is engaged in
a competitive business if such securities are traded on a national stock
exchange or in the over-the-counter market and if such investment does not
result in his beneficially owning, at any time, more than 1% of the publicly-
traded equity securities of such competitor. A competitive business shall not
include (i) any privately owned enterprise or (ii) any publicly owned
enterprise engaged in such a business outside of the geographic regions and
states in which the Company operates at the time of the termination of this
Agreement.
(e) If the Executive commits a breach of any of the
provisions of subsection (b) or (d) above, the Company shall have the right
and remedy to have the provisions of this Agreement specifically enforced by
any court having equity jurisdiction, it being acknowledged and agreed by the
Executive that the services being rendered hereunder to the Company are of a
special, unique and extraordinary character and that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. Each of the
rights and remedies enumerated in this subsection (e) shall be independent of
the other, and shall be severally enforceable, and such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or equity.
(f) If any provision of subsection (b) or (d) is held to be
unenforceable because of the scope, duration or area of its applicability, the
tribunal making such determination shall have the power to modify such scope,
duration, or area, or all of them, and such provision or provisions shall then
be applicable in such modified form.
10. Governing Law; Arbitration. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, without regard to New York's conflicts of law principles. Any dispute
or controversy arising under this Agreement, or out of the interpretation
hereof, or based upon the breach hereof, shall be resolved by arbitration held
at the offices of the American Arbitration Association in the City of New York
in accordance with the rules and regulations of such association prevailing at
the time of the demand for arbitration by either party hereto, and the
decision of the arbitrator or arbitrators shall be final and binding upon both
parties hereto, provided, however, that the arbitrator or arbitrators shall
only have the power and authority to interpret, and not to modify or amend,
the terms and provisions hereof. Judgment upon an award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. Notwithstanding anything contained in this Section 10, either party
shall have the right to seek preliminary injunctive relief in any court in the
City of New York in aid of, and pending the final decision in, the arbitration
proceeding.
11. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agreements. No provision of this Agreement
may be waived or changed, except by a writing signed by the party to be
charged with such waiver or change.
12. Successors; Binding Agreement. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
13. Notices. All notices provided for in this Agreement shall be
in writing, and shall be deemed to have been duly given when delivered
personally to the party to receive the same, when given by telex, telegram or
mailgram, or when mailed first class postage prepaid, by registered or
certified mail, return receipt requested, addressed to the party to receive
the same at his or its address above set forth, or such other address as the
party to receive the same shall have specified by written notice given in the
manner provided for in this Section 13. All notices shall be deemed to have
been given as of the date of personal delivery, transmittal or mailing
thereof.
<PAGE>
14. Severability. If any provision in this Agreement is determined
to be invalid, it shall not affect the validity or enforceability of any of
the other remaining provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
-------------------------------
Edward Lowenthal
President
EXECUTIVE:
/s/ Gregory F. Hughes
- ------------------------
Gregory F. Hughes
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT, dated as of May 30, 1997, between WELLSFORD REAL
PROPERTIES, INC., a Maryland corporation with offices at 610 Fifth Avenue, New
York, New York 10020 (the "Company"), and
David M. Strong, an individual residing at 1450 Wynkoop, Apt. 5B, Denver,
Colorado 80202 ("Executive").
WHEREAS, the Executive is an executive of Wellsford Residential
Property Trust, a Maryland real estate investment trust ("Wellsford
Residential");
WHEREAS, Equity Residential Properties Trust, a Maryland real
estate investment trust, is merging with and into Wellsford Residential as of
the date hereof (the "Merger");
WHEREAS, immediately prior to the Merger, Wellsford Residential
is distributing to its common shareholders, pro rata, all of the shares of
common stock that it owns in the Company; and
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company.
IT IS AGREED:
1. Duties. (a) During the term of the Executive's
employment hereunder the Executive shall serve and the Company shall employ
the Executive as Vice President for Development to perform such executive or
administrative services for the Company consistent with those of a Vice
President as may be assigned to the Executive by the directors, Chairman of
the Board or President of the Company. The Executive hereby accepts such
employment and agrees to perform such services.
(b) The Executive shall devote substantially all of his
time, attention and energies during business hours to the performance of his
duties hereunder. The Executive shall give advance written notice to the
Chairman of the Board and President of any intended active involvement in any
other business enterprise.
(c) The Executive shall cooperate with the Company,
including taking such medical examinations as the Company reasonably shall
deem necessary, if the Company shall desire to obtain medical, disability or
life insurance with respect to the Executive.
(d) The Executive shall not be required to relocate or
conduct the Company's business outside the Denver, Colorado area in order to
perform his duties under this Agreement but shall undertake such reasonable
business travel as may be necessary to perform said duties (for which the
Executive shall be reimbursed pursuant to Section 4 below for costs and
expenses incurred in connection therewith).
2. Employment Term. This Agreement shall commence on May 30,
1997 and shall continue in effect through May 29, 1999; provided, however,
that, on May 30, 1999 and on each May 30 thereafter, the term of this
Agreement shall automatically be extended for one additional year beyond such
May 30 unless, not later than the immediately preceding February 28, either
the Executive or the Company shall have given notice to the other not to
extend this Agreement.
3. Compensation. For all services rendered by the Executive
pursuant to this Agreement:
(a) The Company shall pay to the Executive an annual base
salary at the following rates:
(i) for the period from May 30, 1997 through May 29, 1998 -
$125,000;
(ii) for the period from May 30, 1998 through May 29, 1999 -
$145,000; and
(iii) for each additional year thereafter, the annual base
salary for the immediately preceding year plus three
percent (3%) of such annual base salary.
All such compensation shall be paid bi-weekly or at such other regular
intervals, not less frequently than monthly, as the Company may establish from
time to time for executive officers of the Company.
(b) In addition to the compensation set forth in subsection 3(a)
above, during the term of this Agreement, the Executive may be entitled to a
cash bonus after the end of each calendar year based upon the Executive's and
the Company's performance during such calendar year, as may be determined by
the Compensation Committee. The Company shall announce to the Executive the
amount of his bonus for each year during December of such year (or during the
month in which this Agreement shall expire, if applicable) and pay such bonus
during the following January (or during the month following expiration of this
Agreement, as the case may be), unless otherwise agreed to by the Executive
and the Company.
4. Expenses. (a) The Company shall reimburse the Executive for
all out-of-pocket expenses actually and necessarily incurred by him in the
conduct of the business of the Company against reasonable substantiation
submitted with respect thereto.
(b) Unless the provisions of subsection 4(c) below shall apply, the
Company shall reimburse the Executive for all legal fees and related expenses
(including the costs of experts, evidence and counsel) paid by the Executive
as a result of (i) the termination of Executive's employment (including all
such fees and expenses, if any, incurred in contesting or disputing any such
termination of employment), (ii) the Executive seeking to obtain or enforce
any right or benefit provided by this Agreement or by any other plan or
arrangement maintained by the Company under which the Executive is or may be
entitled to receive benefits or (iii) any action taken by the Company against
the Executive; provided, however, that the Company shall reimburse the legal
fees and related expenses described in this subsection 4(b) only if and when a
final judgement has been rendered in favor of the Executive and all appeals
related to any such action have been exhausted.
(c) The Company shall pay all legal fees and related expenses
(including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (i) the termination of Executive's
employment (including all such fees and expenses, if any, incurred in
contesting or disputing any such termination of employment), (ii) the
Executive seeking to obtain or enforce any right or benefit provided by this
Agreement or by any other plan or arrangement maintained by the Company under
which the Executive is or may be entitled to receive benefits or (iii) any
action taken by the Company against the Executive, unless and until such time
that a final judgement has been rendered in favor of the Company and all
appeals related to any such action have been exhausted; provided, however,
that the circumstances set forth above occurred on or after a change in
control of the Company.
(d) For purposes of this Agreement, a "change in control of the
Company" shall be deemed to occur if:
(i) there shall have occurred a change in control of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), as in effect on the date hereof,
whether or not the Company is then subject to such reporting requirement,
provided, however, that there shall not be deemed to be a "change in control"
of the Company if immediately prior to the occurrence of what would otherwise
be a "change in control" of the Company (a) the Executive is the other party
to the transaction (a "Control Event") that would otherwise result in a
"change in control" of the Company or (b) the Executive is an executive
officer, trustee, director or more than 5% equity holder of the other party to
the Control Event or of any entity, directly or indirectly, controlling such
other party,
(ii) the Company merges or consolidates with, or sells all or
substantially all of its assets to, another company (each, a "Transaction"),
provided, however, that a Transaction shall not be deemed to result in a
"change in control" of the Company if (a) immediately prior thereto the
circumstances in (i)(a) or (i)(b) above exist, or (b) (1) the shareholders of
the Company, immediately before such Transaction own, directly or indirectly,
immediately following such Transaction in excess of fifty percent (50%) of the
combined voting power of the outstanding voting securities of the corporation
or other entity resulting from such Transaction (the "Surviving Corporation")
in substantially the same proportion as their ownership of the voting
securities of the Company immediately before such Transaction and (2) the
individuals who were members of the Company's Board of Trustees immediately
prior to the execution of the agreement providing for such Transaction
constitute at least a majority of the members of the board of directors or the
board of trustees, as the case may be, of the Surviving Corporation, or of a
corporation or other entity beneficially directly or indirectly owning a
majority of the outstanding voting securities of the Surviving Corporation, or
(iii) the Company acquires assets of another company or a
subsidiary of the Company merges or consolidates with another company (each,
an "Other Transaction") and (a) the shareholders of the Company, immediately
before such Other Transaction own, directly or indirectly, immediately
following such Other Transaction 50% or less of the combined voting power of
the outstanding voting securities of the corporation or other entity resulting
from such Other Transaction (the "Other Surviving Corporation") in
substantially the same proportion as their ownership of the voting securities
of the Company immediately before such Other Transaction or (b) the
individuals who were members of the Company's Board of Trustees immediately
prior to the execution of the agreement providing for such Other Transaction
constitute less than a majority of the members of the board of directors or
the board of trustees, as the case may be, of the Other Surviving Corporation,
or of a corporation or other entity beneficially directly or indirectly owning
a majority of the outstanding voting securities of the Other Surviving
Corporation, provided, however, that an Other Transaction shall not be deemed
to result in a "change in control" of the Company if immediately prior thereto
the circumstances in (i)(a) or (i)(b) above exist.
5. Benefits. The Executive shall be entitled to such paid
vacation time each year and such other medical benefits as are afforded from
time to time to all executive officers of the Company (other than the Chairman
of the Board and the President). The Company shall indemnify the Executive in
the performance of his duties pursuant to the bylaws of the Company and to the
fullest extent allowed by applicable law, including, without limitation, legal
fees.
6. Earlier Termination. (a) If the Executive shall die during
the term of this Agreement, this Agreement shall be deemed to have been
terminated as of the date of the Executive's death, and the Company shall pay
to the legal representative of the Executive's estate all monies due hereunder
prorated through the last day of the month during which the Executive shall
have died, as well as a bonus equal to the product of (x) the base salary
payable to the Executive pursuant to subsection 3(a) from January 1 of the
year in which the Executive shall have died through the last day of the month
during which the Executive shall have died and (y) the greater of (i) 1/2 or
(ii) the percentage of the Executive's base salary for the immediately
preceding fiscal year that was paid to the Executive as a bonus for the
immediately preceding fiscal year, expressed as a fraction (the greater of
clauses (i) and (ii) being herein referred to as the "Deemed Bonus Fraction").
(b) If the Executive shall fail, because of illness or incapacity,
to render the services contemplated by this Agreement for six consecutive
months or for shorter periods aggregating nine months in any calendar year,
the Company may determine (as set forth in subsection (d) below) that the
Executive has become disabled. If within thirty (30) days after the date on
which written notice of such determination is given to the Executive, the
Executive shall not have returned to the continuing full-time performance of
his duties hereunder, this Agreement and the employment of the Executive
hereunder shall be deemed terminated and the Company shall pay to the
Executive all monies due hereunder prorated through the last day of the month
during which such termination shall occur, as well as a bonus equal to the
product of (x) the base salary payable to the Executive pursuant to subsection
3(a) from January 1 of the year in which this Agreement is terminated through
the last day of the month during which this Agreement is terminated and (y)
the Deemed Bonus Fraction.
(c) The Company, by written notice to the Executive specifying the
reason therefor, may terminate this Agreement for Cause as determined pursuant
to subsection (d) below. As used herein, "Cause" shall be defined as actions
by the Executive which constitute malfeasance. Malfeasance includes, but is
not limited to, the Executive engaging in fraud, dishonest conduct or other
criminal conduct.
(d) A determination of disability or Cause shall be made in the
reasonable and sole discretion of the Company's Chairman of the Board of the
Company. The Company's Board of Directors shall, upon request of the
Executive, review the decision of whether the Executive has become disabled or
has been discharged, released or terminated for Cause and the Board of
Directors shall confirm, modify or reverse such determination in its sole
discretion.
(e) The Executive may terminate this Agreement if any change in
control of the Company occurs.
7. Compensation Upon Termination Upon a Change in Control. (a)If
after a change in control of the Company the Executive's employment shall be
terminated (I) by the Company other than for Cause or (II) by the Executive,
then the Executive shall be entitled to the benefits provided below:
(i) the Company shall pay the Executive, not later than the
date of termination, (x) his full base salary through the date of
termination, (y) compensation for accrued vacation time, plus (z) a
pro rata portion of the Executive's annual bonus for the calendar
year in which the termination occurs, assuming that the Executive
would have received a bonus for such full calendar year equal to the
product of (A) the base salary that would be payable to the
Executive pursuant to subsection 3(a) for such full calendar year
and (B) the Deemed Bonus Fraction;
(ii) the Company shall pay as severance pay to the Executive,
not later than the date of termination, a lump sum severance payment
(the "Severance Payment") equal to the greater of (x) the aggregate
of all compensation due to the Executive hereunder had his
employment not been so terminated (without duplication of subsection
7(a)(i) above), including, without limitation, all bonus payments
which would have been due to the Executive pursuant to subsection
3(b), through the expiration of this Agreement assuming that the
Executive would have received a bonus for each calendar year through
the expiration of this Agreement equal to the product of (A) the
base salary payable to the Executive pursuant to subsection 3(a) for
each such calendar year and (B) the Deemed Bonus Fraction, or (y) 2
times the "base amount" within the meaning of Sections 280G(b)(3)
and 280G(d) of the Internal Revenue Code of 1986, as amended (the
"Code"), and any applicable temporary or final regulations
promulgated thereunder, or its equivalent as provided in any
successor statute or regulation. If Section 280G of the Code (and
any successor provisions thereto) shall be repealed or otherwise be
inapplicable, then the Severance Payment under clause (ii)(y) above
shall equal 2 times the average of the Executive's annual
compensation during the three calendar year period preceding the
calendar year in which the date of termination occurs. For purposes
of determining annual compensation in the preceding sentence,
compensation payable to the Executive by the Company (including
Wellsford Residential) shall include every type and form of
compensation includible in the Executive's gross income in respect
of his employment by the Company (including Wellsford Residential)
(including, without limitation, all income reported on an Internal
Revenue Service Form W-2), compensation income recognized as a
result of the Executive's exercise of stock options or sale of the
stock so acquired and including, without limitation, any annual
bonus payments previously paid to such Executive. For purposes of
calculating the "base amount" within the meaning of Sections
280G(b)(3) and 280G(d) of the Code and annual compensation in the
second preceding sentence, any income of the Executive that
constitutes a "parachute payment" within the meaning of Section
280G(b)(2) of the Code shall not be taken into account in making
such calculations; and
(iii) an amount equal to the Additional Amount pursuant to
Section 8 below.
(b) The Executive shall not be required to mitigate the amount of
any payment provided for in this Section 7 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
Section 7 be reduced by any compensation earned by him as the result of
employment by another employer or by retirement benefits after the date of
termination, or otherwise, except as specifically provided in this Section 7.
8. Additional Amount. Whether or not Section 7 is applicable, if
in the opinion of tax counsel selected by the Executive and reasonably accept-
able to the Company, the Executive has or will receive any compensation or
recognize any income (whether or not pursuant to this Agreement or any plan or
other arrangement of the Company and whether or not the Executive's employment
with the Company has terminated) which constitute an "excess parachute
payment" within the meaning of Section 280G(b)(1) of the Code (or for which a
tax is otherwise payable under Section 4999 of the Code), then the Company
shall pay the Executive an additional amount (the "Additional Amount") equal
to the sum of (i) all taxes payable by the Executive under Section 4999 of the
Code with respect to all such excess parachute payments (or otherwise) and the
Additional Amount, plus (ii) all federal, state and local income taxes payable
by Executive with respect to the Additional Amount. The amounts payable
pursuant to this Section 8 shall be paid by the Company to the Executive
within 30 days of the written request therefor made by the Executive.
9. Protection of Confidential Information; Non-Competition.
(a) The Executive acknowledges that (i) the Company will
suffer substantial damage which will be difficult to compute if the Executive
violates any of the provisions of this Section 9, and (ii) the provisions of
this Agreement are reasonable and necessary for the protection of the business
of the Company.
(b) The Executive agrees that he will not at any time,
either during the term of this Agreement or thereafter, divulge to any person,
firm or corporation any material information obtained or learned by him during
the course of his employment with the Company, with regard to the operational,
financial, business or other affairs of the Company, its officers or
directors, except (i) in the course of performing his duties hereunder, (ii)
with the Chairman of the Board's or President's express written consent; (iii)
to the extent that any such information is in the public domain other than as
a result of the Executive's breach of any of his obligations hereunder; or
(iv) where required to be disclosed by court order, subpoena or other
government process.
(c) Upon termination of his employment with the Company, or
any time the Company may so request, the Executive will promptly deliver to
the Company all memoranda, notes, records, reports, manuals, drawings,
blueprints, software and other documents (and all copies thereof) relating to
the business of the Company and all property associated therewith, which he
may then possess or have under his control.
(d) During the term of this Agreement and any renewal hereof
(including any remaining portion of the stated term of this Agreement or any
renewal term hereof following the termination of the Executive's employment by
the Executive unless such termination occurs after a change in control of the
Company), and provided the Executive's employment has not been terminated by
the Company with or without Cause, the Executive without the prior written
permission of the Chairman of the Board or President shall not in the United
States, its territories or possessions, directly or indirectly, (i) enter into
the employ of or render any services to any person, firm or corporation
engaged in any competitive business; (ii) engage in any competitive business
for his own account; (iii) become associated with or interested in any
competitive business as an individual, partner, shareholder, creditor,
director, officer, principal, agent, employee, director, consultant, advisor
or in any other relationship or capacity; (iv) employ or retain, or have or
cause any other person or entity to employ or retain, any person who was
employed or retained by the Company while the Executive was employed by the
Company; or (v) solicit, interfere with, or endeavor to entice away from the
Company any of its customers or sources of supply. However, nothing in this
Agreement shall preclude the Executive from investing his personal assets in
the securities of any corporation or other business entity which is engaged in
a competitive business if such securities are traded on a national stock
exchange or in the over-the-counter market and if such investment does not
result in his beneficially owning, at any time, more than 1% of the publicly-
traded equity securities of such competitor. A competitive business shall not
include (i) any privately owned enterprise or (ii) any publicly owned
enterprise engaged in such a business outside of the geographic regions and
states in which the Company operates at the time of the termination of this
Agreement.
(e) If the Executive commits a breach of any of the
provisions of subsection (b) or (d) above, the Company shall have the right
and remedy to have the provisions of this Agreement specifically enforced by
any court having equity jurisdiction, it being acknowledged and agreed by the
Executive that the services being rendered hereunder to the Company are of a
special, unique and extraordinary character and that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide an adequate remedy to the Company. Each of the
rights and remedies enumerated in this subsection (e) shall be independent of
the other, and shall be severally enforceable, and such rights and remedies
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company under law or equity.
(f) If any provision of subsection (b) or (d) is held to be
unenforceable because of the scope, duration or area of its applicability, the
tribunal making such determination shall have the power to modify such scope,
duration, or area, or all of them, and such provision or provisions shall then
be applicable in such modified form.
10. Governing Law; Arbitration. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, without regard to New York's conflicts of law principles. Any dispute
or controversy arising under this Agreement, or out of the interpretation
hereof, or based upon the breach hereof, shall be resolved by arbitration held
at the offices of the American Arbitration Association in the City of New York
in accordance with the rules and regulations of such association prevailing at
the time of the demand for arbitration by either party hereto, and the
decision of the arbitrator or arbitrators shall be final and binding upon both
parties hereto, provided, however, that the arbitrator or arbitrators shall
only have the power and authority to interpret, and not to modify or amend,
the terms and provisions hereof. Judgment upon an award rendered by the
arbitrator or arbitrators may be entered in any court having jurisdiction
thereof. Notwithstanding anything contained in this Section 10, either party
shall have the right to seek preliminary injunctive relief in any court in the
City of New York in aid of, and pending the final decision in, the arbitration
proceeding.
11. Entire Agreement. This Agreement sets forth the entire
agreement of the parties and is intended to supersede all prior employment
negotiations, understandings and agreements. No provision of this Agreement
may be waived or changed, except by a writing signed by the party to be
charged with such waiver or change.
12. Successors; Binding Agreement. This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.
13. Notices. All notices provided for in this Agreement shall be
in writing, and shall be deemed to have been duly given when delivered
personally to the party to receive the same, when given by telex, telegram or
mailgram, or when mailed first class postage prepaid, by registered or
certified mail, return receipt requested, addressed to the party to receive
the same at his or its address above set forth, or such other address as the
party to receive the same shall have specified by written notice given in the
manner provided for in this Section 13. All notices shall be deemed to have
been given as of the date of personal delivery, transmittal or mailing
thereof.
14. Severability. If any provision in this Agreement is determined
to be invalid, it shall not affect the validity or enforceability of any of
the other remaining provisions hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the date first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
-------------------------------
Edward Lowenthal
President
EXECUTIVE:
/s/ David M. Strong
- -----------------------------
David M. Strong
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary* State of Organization
- ------------------ ---------------------
Wellsford Greenbrook Corp. New Jersey
Wellsford Wayne Corp. New Jersey
Wellsford Chatham Corp. New Jersey
North American Medical Research Corp. New Jersey
Wellsford Park Highlands Corp. Colorado
Park at Highlands LLC Colorado
Red Canyon at Palomino Park LLC Colorado
Wellsford Ventures, Inc. Maryland
___________________________
* Each subsidiary does business under the name indicated below.
July 29, 1997
Wellsford Real Properties, Inc.
610 Fifth Avenue
New York, New York 10020
Dear Sirs:
We hereby consent to the
inclusion of our opinion in the Registration Statement (the "Registration
Statement") on Form
S-11 of Wellsford Real Properties, Inc. (the "Company") relating to the sale
of 12,242,719 shares of common stock, $.01 par value per share, of the
Company, under the caption "Certain United States Federal Income Tax
Considerations" and to the reference to this firm under the caption "Legal
Matters". In giving such consent, we do not hereby admit that we are in the
category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended.
Very truly yours,
ROBINSON SILVERMAN PEARCE
ARONSOHN & BERMAN LLP
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated February 28, 1997, with respect to the combined
financial statements of The Predecessor to Wellsford Real Properties, Inc., in
the Registration Statement (Form S-11) and related Prospectus of Wellsford
Real Properties, Inc. for the registration of 12,242,719 shares of its common
stock.
Ernst & Young LLP
New York, New York
July 25, 1997
