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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
________________
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES EXCHANGE ACT OF 1934
Wellsford Real Properties, Inc.
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(Exact Name of Registrant as Specified in its Charter)
Maryland 13-3926898
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
610 Fifth Avenue, New York, New York 10020
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (212) 333-2300
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Securities to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which
to be so Registered Each Class is to be Registered
Common Stock, $.01 par value per share American Stock Exchange
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Securities to be registered pursuant to Section 12(g) of the Act:
None
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(Title of Class)
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- ---------------------------------------------------------------------------
(Title of Class
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WELLSFORD REAL PROPERTIES, INC.
Cross Reference Sheet
Showing Location in the Joint Proxy Statement/Prospectus/Information
Statement of Information Required by Items in Form 10.
Location or Caption in
the Joint Proxy Statement/
Form 10 Item No. and Heading Prospectus/Information Statement
1. Business . . . . . . . . . . . . . Summary; Wellsford Real Properties,
Inc.; WRP Newco's Business and
Properties
2. Financial Information. . . . . . . Wellsford Real Properties, Inc.
(Predecessor) Summary Unaudited
Combined Financial Data;
Management's Discussion and
Analysis of Wellsford Real
Properties, Inc. (Predecessor)
3. Properties . . . . . . . . . . . . Summary; WRP Newco's Business and
Properties
4. Security Ownership of
Certain Beneficial Owners
and Management . . . . . . . . . Principal Stockholders of WRP Newco
5. Directors and Executive Officers Management of WRP Newco
6. Executive Compensation . . . . . . Management of WRP Newco
7. Certain Relationships and
Related Transactions . . . . . . WRP Newco's Certain Transactions
8. Legal Proceedings . . . . . . . . WRP Newco's Business and Properties
9. Market Price of and Dividends
on the Registrant's Common Equity
and Related Stockholder Matters . WRP Newco Dividend Policy;
Description of Capital Stock of WRP
Newco
10. Recent Sales of Unregistered
Securities . . . . . . . . . . . Recent Sales of Unregistered
Securities
11. Description of Registrant's
Securities to be Registered. . . Description of Capital Stock of WRP
Newco; Certain Provisions of
Maryland Law and of WRP Newco's
Charter and Bylaws
12. Indemnification of Directors
and Officers. . . . . . . . . . . Liability and Indemnification of
Directors and Officers
13. Financial Statements and
Supplementary Data . . . . . . . Summary; Wellsford Real Properties,
Inc. (Predecessor) Summary
Unaudited Combined Financial Data;
Wellsford Real Properties, Inc.
(Predecessor) Combined Balance
Sheets; Wellsford Real Properties, Inc.
(Predecessor) Combined Statement of
Income and Equity;Wellsford Real
Properties, Inc. (Predecessor) Combined
Statements
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of Cash Flows; Wellsford Real Properties,
Inc. (Predecessor) Pro Forma Combined
Income Statement; Wellsford Real
Properties, Inc. (Predecessor) Pro Forma
Combined Income Statement
14. Changes in and Disagreements
With Accountants on Accounting
and Financial Disclosure . . . . Not Applicable
15. Financial Statements and
Exhibits . . . . . . . . . . . . Final Statements and Exhibits
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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
Placement"):
Persons or Class
Type of Date Amount of of Persons to
Securities of Securities Whom Securities
Sold Sale Sold Sold Consideration
---------- ------ ---------- ---------------- -------------
Common Stock 2/28/97 (2) Wellsford Commercial (2)
Properties, L.L.C.(1)
(1) The members of Wellsford Commercial include Jeffrey H. Lynford, Edward
Lowenthal and the wife of Mark Germain who will be a director of the
Company who hold 16.4%, 16.4% and 13.8%, respectively, of the
ownership interests in Wellsford Commercial. See "WRP Newco's Certain
Transactions".
(2) Wellsford Commercial was issued approximately 225,000 shares of Common
Stock in exchange for the transfer of the contracts to purchase the
Point View office complex, Greenbrook and Chatham, subject to
adjustment based upon the Issuance Price. See "WRP Newco's Certain
Transactions".
The Company conducted the Private Placement pursuant to Section 4(2)
of the Securities Act. There was no underwriter involved in the Private
Placement.
LIABILITY AND 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
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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.
FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements all of which are in the Joint Proxy
Statement/Prospectus/Information Statement.
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA
Combined Income Statement For the Year
Ended December 31, 1996 (Unaudited)
Notes to Unaudited Combined Income Statement
Combined Balance Sheet, December 31, 1996
(Unaudited)
Notes to Unaudited Combined Balance Sheet,
December 31, 1996
HISTORICAL
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Report of Independent Auditors
Combined Balance Sheets
Combined Statement of Income and Equity
Combined Statements of Cash Flow
Notes to Combined Financial Statements
(b) Financial Statement Schedules.
None
(c) Exhibits.
Exhibit No. Description**
3.1 Form of Articles of Amendment and Restatement of the Company.
3.2 Form of Bylaws of the Company.
4.1 Specimen certificate for Common Stock.*
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 Operating Agreement of Park at Highlands LLC, dated as of April
27, 1995, between Wellsford Park Highlands Corp. and Al Feld.*
10.4 First Amendment to Operating Agreement of Park at Highlands
LLC, dated as of December 29, 1995, between Wellsford Park
Highlands Corp. and Al Feld.
10.5 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.
10.6 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.
10.7 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.
10.8 Credit Agreement, dated as of April __, 1997, between Park
Avenue Financing Company LLC, PAMC Co-Manager Inc., PAMC, 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.*
10.9 Assignment of Member's Interest, dated as of April __, 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).*
10.10 Assignment of Member's Interest, dated as of April __, 1997, by
PAMC Co-Manager Inc. and The First National Bank of Boston,
relating to 277 Park Avenue (relating to interests in the
Property Owner).*
10.11 Stock Pledge Agreement, dated as of April __, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in Park Avenue Management
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Corporation).*
10.12 Stock Pledge Agreement, dated as of April __, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in PAMC Co-Manager Inc.).*
10.13 Stock Pledge Agreement, dated as of April __, 1997, by Stanley
Stahl to The First National Bank of Boston, relating to 277
Park Avenue (relating to stock in PAMC, Inc.).*
10.14 Conditional Guaranty of Payment and Performance, dated as of
April __, 1997, by Stanley Stahl, relating to 277 Park Avenue.*
10.15 Cash Collateral Account Security, Pledge and Assignment
Agreement, dated as of April __, 1997, between 277 Park Avenue,
LLC, Park Avenue Financing Company LLC, PAMC Co-Manager Inc.
and The First National Bank of Boston, relating to 277 Park
Avenue.*
10.16 Recognition Agreement, dated as of April __, 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.*
10.17 Form of Contribution and Distribution Agreement by and between
Wellsford Residential Property Trust and the Company.
10.18 Form of Common Stock and Preferred Stock Purchase Agreement by
and between the Company and ERP Operating Limited Partnership.
10.19 Form of Registration Rights Agreement by and between the
Company and ERP Operating Limited Partnership.
10.20 Form of Agreement Regarding Palomino Park by and between the
Company and ERP Operating Limited Partnership.
10.21 Form of Credit Enhancement Agreement by and between the Company
and ERP Operating Limited Partnership, relating to Palomino
Park.
10.22 Form of Sonterra Agreement by and between the Company and ERP
Operating Partnership.
10.23 Form of 1997 Management Incentive Plan of the Company.*
10.24 Form of Employment Agreement between the Company and Jeffrey H.
Lynford.*
10.25 Form of Employment Agreement between the Company and Edward
Lowenthal.*
10.26 Form of Employment Agreement between the Company and Gregory F.
Hughes.*
10.27 Form of Employment Agreement between the Company and David M.
Strong.*
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 Point View office complex, 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.
______________________________
* To be filed by amendment
4
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** The Company acquired its interest in a number of these documents by
assignment.
5
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SIGNATURES
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
WELLSFORD REAL PROPERTIES, INC.
By:/s/ Edward Lowenthal
------------------------------------
Edward Lowenthal
President and Chief Executive Officer
Dated: April __, 1997.
6
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EQUITY RESIDENTIAL PROPERTIES TRUST
and
WELLSFORD RESIDENTIAL PROPERTY TRUST
JOINT PROXY STATEMENT
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EQUITY RESIDENTIAL PROPERTIES TRUST
PROSPECTUS
------
WELLSFORD REAL PROPERTIES, INC.
INFORMATION STATEMENT
This Joint Proxy Statement/Prospectus/Information Statement is being
furnished to the shareholders of Equity Residential Properties Trust, a Maryland
real estate investment trust ("EQR"), in connection with the solicitation of
proxies on behalf of the Board of Trustees of EQR ("EQR Board of Trustees") for
use at a special meeting of the holders of common shares of beneficial interest,
$.01 par value per share, of EQR ("EQR Common") to be held on May 28, 1997 and
at any adjournment or postponement thereof ("EQR Special Meeting"). At the EQR
Special Meeting, holders of EQR Common ("EQR Common Shareholders") will be asked
to approve the acquisition of the multifamily property business of Wellsford
Residential Property Trust, a Maryland real estate investment trust
("Wellsford"), by approving the merger of EQR and Wellsford (the "Merger")
pursuant to an Agreement and Plan of Merger dated as of January 16, 1997 by and
between EQR and Wellsford (the "Merger Agreement"). A copy of the Merger
Agreement is attached hereto as Appendix A. The surviving trust in the Merger
("Surviving Trust") will be one of the largest publicly traded real estate
investment trusts ("REIT") (based on the aggregate market value of its
outstanding equity capitalization), and will be a self-administered and self-
managed equity REIT. The Surviving Trust intends to continue the multifamily
property business objectives and acquisition strategies of EQR. The name of the
Surviving Trust will be Equity Residential Properties Trust.
This Joint Proxy Statement/Prospectus/Information Statement also is being
furnished to the shareholders of Wellsford in connection with the solicitation
of proxies on behalf of the
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Board of Trustees of Wellsford ("Wellsford Board of Trustees") for use at a
special meeting ("Wellsford Special Meeting" and, together with the EQR Special
Meeting, the "Meetings of Shareholders") of the holders of common shares of
beneficial interest, $.01 par value per share, of Wellsford ("Wellsford Common")
to be held on May 28, 1997 and at any adjournment or postponement thereof. At
the Wellsford Special Meeting, holders of Wellsford Common ("Wellsford Common
Shareholders") will be asked to approve (i) the Merger, including the adoption
of an amended and restated declaration of trust for the Surviving Trust
(excluding the Additional Provisions, as defined below), (ii) modifications to
certain sections, including Sections 2.3, 6.6, 9.1, 9.2 and 9.3 of, and the
addition of a new Article VII to, the amended and restated declaration of trust
of the Surviving Trust (the "Additional Provisions") as described more fully in
"Proposal Regarding Additional Declaration of Trust Provisions" below, (iii) the
issuance by Wellsford Real Properties, Inc. ("WRP Newco"), a subsidiary of
Wellsford, shares of which are to be distributed to the Wellsford Common
Shareholders, pro rata, immediately prior to the Merger, of up to 12,000,000
additional shares of common stock, $.01 par value per share, of WRP Newco ("WRP
Newco Common"), to satisfy the requirements of the American Stock Exchange
("ASE") (the "Additional Share Offering"), and (iv) the adoption of WRP Newco's
1997 Management Incentive Plan.
This Joint Proxy Statement/Prospectus/Information Statement also is
being furnished to the shareholders of Wellsford to provide them with
information regarding WRP Newco. Immediately prior to the Merger, Wellsford
will contribute certain of its assets to WRP Newco, WRP Newco will assume
certain liabilities of Wellsford, and Wellsford will distribute to the Wellsford
Common Shareholders, pro rata, all of the outstanding shares of WRP Newco Common
owned by Wellsford (the "Distribution"). In addition, an affiliate of EQR will
enter into certain financial and business arrangements with WRP Newco, as
described herein.
In considering whether to approve the Merger, the shareholders of EQR
and Wellsford voting on the Merger should consider, in addition to the other
information in this Joint Proxy Statement/Prospectus/Information Statement, the
matters discussed under "Risk Factors." Such matters include:
. The surviving trust is subject to the risks normally associated with
debt or preferred equity financings, including the risk that the
surviving trust's cash flow will be insufficient to meet required
payments of principal, interest and distributions.
. A substantial portion of the surviving trust's debt was issued
pursuant to indentures which restrict the amount of indebtedness
(including acquisition financing) that the surviving trust may incur.
. Immediately following consummation of the Merger, the surviving trust
will own properties and bonds collateralized by properties that are
subject to restrictive covenants or deed restrictions.
. Risks associated with (a) a potential change in the relative stock
prices of EQR Common and Wellsford Common prior to the effective time
of the Merger, and (b) a possible reduction in the market price of
Survivor Common following the Merger.
. EQR and Wellsford are large enterprises with operations in a number of
different states. There can be no assurance that costs or other
factors associated with the integration of the two companies would not
adversely affect future combined results of operations or the benefits
of expected cost savings.
. Shareholders of EQR and Wellsford do not have appraisal rights in
connection with the Merger under Maryland law.
Shareholders of Wellsford should also consider the matters discussed
under "Risk Factors" and "WRP Newco Risk Factors" in addition to the matters
discussed above. Such matters include:
. The obligation to pay a substantial break-up fee and/or break-up
expenses under certain circumstances may adversely affect the ability
of Wellsford to engage in another transaction in the event the Merger
is not consummated.
. Upon consummation of the Merger, holders of shares of Wellsford Common
will own approximately 17% of the Survivor Common and will not have
separate approval rights with respect to any actions or decisions of
the surviving trust.
. After the Merger, the distributions payable with respect to Survivor
Common are expected to be less than the distributions payable with
respect to Wellsford Common.
. Ownership of interests in WRP Newco may also involve significant
risks.
This Joint Proxy Statement/Prospectus/Information Statement also
relates to the common shares of beneficial interest, $.01 par value per share,
of the Surviving Trust issuable upon consummation of the Merger. On April 18,
1997, the last reported sales price of a share of EQR Common, on the NYSE was
$43.125. On April 18, 1997, the last reported sales price of a share of
Wellsford Common on the NYSE was $28.875.
This Joint Proxy Statement/Prospectus/Information Statement and the
forms of proxy are first being mailed to all of EQR Common Shareholders and
Wellsford Common Shareholders on or about April 16, 1997.
See "Risk Factors" beginning on page 41 for a discussion of certain
factors which should be considered by shareholders of EQR and Wellsford.
___________
THE SECURITIES TO WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS/
INFORMATION STATEMENT RELATE HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
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OR BY ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT/
PROSPECTUS/INFORMATION STATEMENT.ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus/Information Statement is April
25, 1997.
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AVAILABLE INFORMATION
EQR has filed a registration statement on Form S-4 (the "Registration
Statement") under the Securities Act of 1933, as amended ("Securities Act"),
with the Securities and Exchange Commission (the "Commission") covering the
common shares of beneficial interest and preferred shares of beneficial interest
of the Surviving Trust to be issued in connection with the Merger. As permitted
by the rules and regulations of the Commission, this Joint Proxy
Statement/Prospectus/Information Statement omits certain information, exhibits
and undertakings contained in the Registration Statement. For further
information pertaining to the securities offered hereby, reference is made to
the Registration Statement, including the exhibits filed as a part thereof.
EQR and Wellsford are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance
therewith, file reports, proxy statements and other information with the
Commission. WRP Newco has filed a registration statement on Form 10 and, as of
the date of the Distribution, WRP Newco will also be subject to the
informational requirements of the Exchange Act. Reports, proxy statements and
other information filed by EQR, Wellsford and WRP Newco can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549; and at its Regional Offices located
at Suite 1400, 500 West Madison Street, Chicago, Illinois 60661; and Seven World
Trade Center, Suite 1300, New York, New York 10048. 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 site 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. The
EQR Common and preferred shares of beneficial interest of EQR ("EQR Preferred"
and, collectively, "EQR Shares") and the Wellsford Common and preferred shares
of beneficial interest of Wellsford ("Wellsford Preferred" and, collectively,
"Wellsford Shares") are currently listed on the NYSE and such reports, proxy
statements and other information concerning EQR and Wellsford can be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005. WRP Newco
has applied for listing of the WRP Newco Common on the ASE.
All information contained in this Joint Proxy
Statement/Prospectus/Information Statement with respect to Wellsford and WRP
Newco has been supplied by Wellsford, and all information with respect to EQR
and ERP Operating Limited Partnership, an Illinois limited partnership ("ERP
Operating Partnership"), has been supplied by EQR.
No person is authorized to give any information or to make any
representation not contained in this Joint Proxy Statement/Prospectus/
Information Statement, or incorporated in it by reference, and, if given or
made, such information or representation should not be relied upon as having
been authorized. This Joint Proxy Statement/Prospectus/Information Statement
does not constitute an offer to sell, or a solicitation of an offer to purchase,
the
<PAGE>
securities offered by this Joint Proxy Statement/Prospectus/Information
Statement, or the solicitation of a proxy, in any jurisdiction where or from any
person to whom it is unlawful to make such offer, or solicitation of an offer,
or proxy solicitation. Neither the delivery of this Joint Proxy
Statement/Prospectus/Information Statement nor any distribution of the
securities offered pursuant to this Joint Proxy Statement/Prospectus/Information
Statement shall, under any circumstances, create an implication that there has
been no change in the affairs of EQR, Wellsford or WRP Newco since the date of
this Joint Proxy Statement/Prospectus/Information Statement.
All documents that are incorporated by reference in this Joint Proxy
Statement/Prospectus/Information Statement but which are not delivered herewith
are available without charge (other than exhibits to such documents which are
not specifically incorporated by reference therein) upon request from, in the
case of documents relating to EQR, Two North Riverside Plaza, Suite 400,
Chicago, Illinois 60606, Attention: Cynthia McHugh, telephone (312) 474-1300,
and, in the case of documents relating to Wellsford, 610 Fifth Avenue, New York,
New York 10020, Attention: Kim Ezzy, telephone (212) 333-2300. In order to
insure timely delivery of the documents, any request should be made by May 16,
1997.
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INFORMATION INCORPORATED BY REFERENCE
IN THIS JOINT PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT
The following documents filed with the Commission by EQR or by
Wellsford pursuant to the Exchange Act are hereby incorporated in this Joint
Proxy Statement/Prospectus/Information Statement by reference:
1. EQR's current report on Form 8-K dated May 23, 1996, as amended.
2. EQR's current report on Form 8- K dated November 15, 1996, as
amended.
3. EQR's annual report on Form 10-K for the year ended December 31,
1996, as amended by Form 10-K/A filed on April 3, 1997.
4. EQR's current report on Form 8-K dated January 16, 1997.
5. EQR's current report on Form 8-K dated March 12, 1997.
6. EQR's current report on Form 8- K dated March 17, 1997.
7. EQR's current report on Form 8-K dated March 19, 1997.
8. EQR's current report on Form 8-K dated March 20, 1997.
9. EQR's current report on Form 8-K dated March 24, 1997.
10. The information prescribed by Items 12, 13, 14, 15 and 16 of Form
S-11 contained in EQR's Registration Statement on Form S-11 (No.
33-80420) dated July 20, 1994, as amended.
11. The description of EQR Common contained in EQR's Registration
Statement on Form 8-A, as amended, dated August 10, 1993.
12. The description of EQR's 9-3/8% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per
share, contained in EQR's Registration Statement on Form 8-A, as
amended, dated May 17, 1995.
13. The description of Depositary Shares each representing a 1/10
fractional interest in EQR's 9-1/8% Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest, par value
$.01 per share, contained in EQR's Registration Statement on Form
8-A dated October 23, 1995.
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14. The description of Depositary Shares each representing a 1/10
fractional interest in EQR's 9-1/8% Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest, par value
$.01 per share, contained in EQR's Registration Statement on Form
8-A dated September 10, 1996.
15. Wellsford's annual report on Form 10-K for the year ended
December 31, 1996.
16. Wellsford's current report on Form 8-K, dated January 16, 1997.
17. Wellsford's current report on Form 8-K, dated February 3, 1997.
18. The description of Wellsford Common contained in Wellsford's
Registration Statement on Form 8-A dated November 10, 1992 and
the information thereby incorporated by reference contained in
Wellsford's Registration Statement on Form S-11 (No. 33-52406),
as amended by Amendment No. 1 thereto dated November 3, 1992,
under the heading "Description of Shares of Beneficial Interest."
19. The description of Wellsford's Series A Convertible Preferred
Shares of Beneficial Interest, par value $.01 per share,
contained in Wellsford's Registration Statement on Form S-11 (No.
33-69868) dated October 1, 1993 and in Amendments Nos. 1 and 2
thereto dated October 22, 1993 and November 4, 1993,
respectively, under the heading "Description of Series A
Cumulative Convertible Preferred Shares."
20. The description of Wellsford's Series B Cumulative Redeemable
Preferred Shares of Beneficial Interest, par value $.01 per
share, contained in Wellsford's Registration Statement on Form 8-
A dated September 5, 1995, under the heading "Description of
Registrant's Securities to be Registered."
21. All documents subsequently filed by EQR or Wellsford pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to
the date of the meetings of shareholders.
Any statement contained herein or in a document incorporated by
reference or deemed to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Joint Proxy Statement/Prospectus/
Information Statement to the extent that a statement contained in this Joint
Proxy Statement/Prospectus/Information Statement or in any other subsequently
filed document that also is or is deemed to be incorporated by reference in
this Joint Proxy Statement/Prospectus/Information Statement modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement/Prospectus/Information Statement.
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JOINT PROXY STATEMENT/PROSPECTUS/INFORMATION STATEMENT
TABLE OF CONTENTS
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SUMMARY..................................................................... 1
RISK FACTORS................................................................ 41
Conflicts of Interest.................................................. 41
Adverse Consequences of Debt Financing................................. 42
Restrictions on Indebtedness of the Surviving Trust.................... 42
Other Restrictive Covenants............................................ 43
Potential Change in Relative Stock Prices.............................. 43
Risks to Wellsford Common Shareholders................................. 43
No Appraisal Rights under Maryland Law................................. 44
Potential Adverse Effects of Combining the Companies................... 44
General Real Estate Investment Considerations ; Changes in Laws........ 44
Potential Environmental Liability Affecting the Surviving Trust........ 45
Consequences of Failure to Qualify as a REIT........................... 46
Dependence on Key Personnel............................................ 47
Distribution Requirements Potentially Increasing Indebtedness of the
Surviving Trust.................................................... 47
9.8% Ownership Limit................................................... 47
Limits on Changes in Control........................................... 48
Control and Influence by Significant Shareholders of EQR............... 49
Exemptions for Mr. Zell and Others from Maryland Business
Combination Law which Tend to Inhibit Takeovers.................... 50
Tax Termination of ERP Operating Partnership........................... 50
WRP NEWCO RISK FACTORS...................................................... 51
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General Risks...................................................................... 51
Nature of Investments Made by WRP Newco May Involve High Risk;
Illiquidity of Real Estate Investments...................................... 51
Difficulty of Locating Suitable Investments; Competition........................... 52
Risks of Acquisition, Development, Construction and Renovation Activities.......... 52
Vacancies at Existing Properties; Dependence on Rental Income from Real
Property.................................................................... 53
Operating Risks.................................................................... 54
Adverse Consequences of Debt Financing............................................. 54
Lack of Control and Other Risks of Equity Investments in and with Third
Parties..................................................................... 55
Risks of Investments in Debt Instruments........................................... 56
Risks of Investments in Mortgage Loans............................................. 56
Risk of Loss on Investments in Commercial Mortgage-Backed Securities............... 57
Limitations on Remedies............................................................ 57
Third-Party Bankruptcy Risks...................................................... 58
No Prior Operating History......................................................... 58
Risks of Uninsured Loss............................................................ 58
Potential Environmental Liability Related to the Properties........................ 59
Dependence on Key Personnel........................................................ 59
Tax Consequences of the Distribution............................................... 60
Changes in Policies Without Stockholder Approval................................... 60
Absence of Public Market; Risk of Changes in Share Price........................... 60
Costs of Compliance with the Americans with Disabilities Act and Similar
Laws........................................................................ 61
Noncompliance with Other Laws...................................................... 61
Effect on Common Stock Price of Shares Available for Future Sale................... 61
Hedging Policies/Risks............................................................. 62
Anti-Takeover Effect Resulting From a Staggered Board/Ability of Newco to
Issue Preferred Shares/and Certain Provisions of Maryland Law............... 62
THE MEETINGS OF SHAREHOLDERS............................................................ 63
EQR................................................................................ 63
Wellsford.......................................................................... 64
THE MERGER.............................................................................. 66
Terms of the Merger................................................................ 66
Background of the Merger........................................................... 66
Reasons for the Merger; Recommendation of the EQR Board of Trustees................ 72
Reasons for the Merger; Recommendation of the Wellsford Board of Trustees.......... 74
Opinion of Financial Advisor - EQR................................................. 77
Opinion of Financial Advisor - Wellsford........................................... 84
Effective Time of the Merger....................................................... 92
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Representations and Warranties; Conditions to the Merger................................... 92
Appraisal Rights........................................................................... 94
Regulatory Matters......................................................................... 94
Termination Provisions..................................................................... 94
Termination Fee and Expenses............................................................... 95
No Solicitation of Other Transactions...................................................... 96
Conversion of Shares....................................................................... 96
Appointment of Exchange Agent.............................................................. 98
Exchange of Certificates................................................................... 98
Conduct of Business Pending the Merger..................................................... 98
Waiver and Amendment....................................................................... 102
Stock Exchange Listing..................................................................... 102
Anticipated Accounting Treatment........................................................... 102
Shares Available for Resale................................................................ 102
Contribution of Assets of Wellsford to ERP Operating Partnership........................... 103
Federal Income Tax Consequences............................................................ 103
INTERESTS OF CERTAIN PERSONS IN THE MERGER AND DISTRIBUTION..................................... 118
Benefits of Key Executives................................................................. 118
Agreements with the Surviving Trust and ERP Operating Partnership.......................... 121
Agreements with WRP Newco.................................................................. 122
SURVIVING TRUST SELECTED UNAUDITED PRO FORMA COMBINED
FINANCIAL DATA...................................................................... 124
EQUITY RESIDENTIAL PROPERTIES TRUST SELECTED HISTORICAL AND
COMBINED FINANCIAL DATA............................................................. 127
WELLSFORD RESIDENTIAL PROPERTY TRUST SELECTED HISTORICAL
FINANCIAL DATA...................................................................... 130
UNAUDITED PRO FORMA FINANCIAL STATEMENTS OF THE SURVIVING
TRUST............................................................................... 133
POLICIES OF THE SURVIVING TRUST WITH RESPECT TO CERTAIN
ACTIVITIES.......................................................................... 141
Business Objectives and Operating Strategies........................................ 141
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Acquisition Strategies.............................................. 142
Disposition Strategies.............................................. 142
Investment Policies................................................. 142
Financing Policies.................................................. 143
Lending Policies.................................................... 144
Policies with Respect to Other Activities........................... 145
MANAGEMENT AND OPERATION OF THE SURVIVING TRUST AFTER THE
MERGER.............................................................. 145
Trustees and Executive Officers..................................... 145
Committees of the Board of Trustees................................. 149
Compensation of Trustees............................................ 150
Consulting Agreements............................................... 150
COMPARISON OF RIGHTS OF SHAREHOLDERS..................................... 150
Authorized and Issued Shares........................................ 151
Amendment to Declaration and Bylaws................................. 152
Special Meetings.................................................... 152
Boards of Trustees.................................................. 153
Mergers, Consolidations, and Sale of Substantially all Assets....... 154
Restrictions on the Ownership, Transfer or Issuance of Shares....... 155
PROPOSAL REGARDING ADDITIONAL DECLARATION OF TRUST
PROVISIONS.......................................................... 158
THE CONTRIBUTION AND DISTRIBUTION........................................ 161
Background of and Reasons for the Distribution...................... 161
Manner of Effecting the Contribution and Distribution............... 161
Listing and Trading of WRP Newco Common............................. 162
Conditions; Termination............................................. 163
Contribution and Distribution Agreement............................. 163
Tax Consequences of the Distribution................................ 164
WELLSFORD REAL PROPERTIES, INC........................................... 167
General............................................................. 167
Business Strategy................................................... 167
Initial Capital and Financing....................................... 168
WRP Newco Line of Credit............................................ 169
Management.......................................................... 170
Wellsford Acquisitions.............................................. 170
Wellsford Management and Development Practices...................... 170
Wellsford Equity and Debt Financing................................. 171
Wellsford Return to Shareholders.................................... 171
WRP NEWCO PRO FORMA CAPITALIZATION....................................... 171
WRP NEWCO DIVIDEND POLICY................................................ 172
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WRP NEWCO'S BUSINESS AND PROPERTIES..................................... 173
Wellsford Commercial Properties.......................................... 173
Wellsford High Yield Investment Portfolio........................... 176
Wellsford Property Development...................................... 177
CERTAIN AGREEMENTS BETWEEN WRP NEWCO AND ERP OPERATING
PARTNERSHIP......................................................... 180
Common Stock and Preferred Stock Purchase Agreement................. 180
Registration Rights Agreement....................................... 182
Agreement Regarding Palomino Park................................... 183
Credit Enhancement Agreement........................................ 186
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES OF WRP NEWCO................. 187
Investment Policies................................................. 187
Financing Policies.................................................. 188
Policies with Respect to Other Activities........................... 188
MANAGEMENT OF WRP NEWCO.................................................. 189
Directors and Executive Officers.................................... 189
Key Employee........................................................ 191
Compensation of Directors........................................... 191
Board Committees.................................................... 192
Executive Compensation.............................................. 192
Employment Agreements............................................... 193
Compensation Committee Interlocks and Insider Participation......... 194
PRINCIPAL STOCKHOLDERS OF WRP NEWCO...................................... 195
WRP NEWCO'S CERTAIN TRANSACTIONS......................................... 197
MANAGEMENT'S DISCUSSION AND ANALYSIS OF WELLSFORD REAL
PROPERTIES, INC. (PREDECESSOR)...................................... 198
REPORT OF INDEPENDENT AUDITORS........................................... 199
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WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED
BALANCE SHEETS....................................................... 200
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED
INCOME STATEMENT..................................................... 201
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) COMBINED
STATEMENTS OF CASH FLOW.............................................. 202
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA
COMBINED INCOME STATEMENT............................................ 208
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR) PRO FORMA
COMBINED BALANCE SHEET............................................... 211
DESCRIPTION OF CAPITAL STOCK OF WRP NEWCO................................. 214
General.............................................................. 214
Common Stock......................................................... 215
Preferred Stock...................................................... 215
Classification or Reclassification of Common Stock or Preferred Stock 216
Power to Issue Additional Shares of Common Stock and Preferred Stock. 216
Class A Common Stock................................................. 216
Series A 8% Convertible Redeemable Preferred Stock................... 218
CERTAIN PROVISIONS OF MARYLAND LAW AND OF WRP NEWCO'S
CHARTER AND BYLAWS................................................... 223
Classification of the Board of Directors............................. 223
Removal of Directors................................................. 224
Business Combinations................................................ 224
Amendment to the Charter and Bylaws.................................. 225
Merger, Consolidation, Sale of Assets................................ 225
Dissolution of WRP Newco............................................. 225
Advance Notice of Director Nominations and New Business.............. 225
Meetings of Stockholders............................................. 226
Limitation of Liability and Indemnification.......................... 227
PROPOSAL TO APPROVE WRP NEWCO ADDITIONAL SHARE OFFERING................... 228
PROPOSAL TO APPROVE WRP NEWCO'S 1997 MANAGEMENT INCENTIVE
PLAN................................................................. 229
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LEGAL MATTERS............................................................ 235
EXPERTS.................................................................. 236
SHAREHOLDER PROPOSALS.................................................... 236
APPENDIX A AGREEMENT AND PLAN OF MERGER............................... A-1
APPENDIX B ARTICLES OF MERGER......................................... B-1
APPENDIX C OPINION OF J.P. MORGAN SECURITIES INC...................... C-1
APPENDIX D OPINION OF MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED......................................... D-1
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements in the Summary and under captions "Risk Factors," "WRP
Newco Risk Factors," "The Merger - Reasons for the Merger; Recommendation of the
EQR Board of Trustees" "- Reasons for the Merger; Recommendation of the
Wellsford Board of Trustees," "-Opinion of Financial Advisor - EQR"
and "-Opinion of Financial Advisor - Wellsford" and elsewhere in this Joint
Proxy Statement/Prospectus/Information Statement constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). Such forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of EQR, Wellsford or WRP Newco 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: general economic and business
conditions, which will, among other things, affect demand for multifamily
properties, availability and credit worthiness of prospective tenants, lease
rents and the availability of financing; adverse changes in the real estate
markets including, among other things, competition with other companies, risks
of real estate development and acquisition; governmental actions and
initiatives; environmental/safety requirements; ability to achieve anticipated
cost savings and operating efficiencies from the Merger; and other changes and
factors referenced in this Joint Proxy Statement/Prospectus/Information
Statement and the documents incorporated herein by reference. With respect to
WRP Newco, such factors may also include: difficulty of locating suitable
investments; illiquidity of real estate investments; risks regarding the
Palomino Park development; limited control of entities in which investments are
made; risks of investments in debt instruments, including reduction in the value
of collateral and the inability to enforce remedies; risks of highly leveraged
transactions; dependence on key personnel; and lack of prior operating history.
See "Risk Factors" and "WRP Newco Risk Factors."
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy Statement/Prospectus/Information Statement. Reference is made
to, and this summary is qualified in its entirety by, the more detailed
information and financial statements contained in this Joint Proxy
Statement/Prospectus/Information Statement, the Appendices hereto and the
documents incorporated by reference herein.
Certain capitalized terms used in this summary are defined elsewhere in
this Joint Proxy Statement/Prospectus/Information Statement. As used in this
Joint Proxy Statement/Prospectus/Information Statement, except where the context
requires otherwise, "EQR" means Equity Residential Properties Trust, a Maryland
real estate investment trust and its subsidiaries; "ERP Operating Partnership"
means ERP Operating Limited Partnership, an Illinois limited partnership of
which EQR is the general partner, and its subsidiaries; "Wellsford" means
Wellsford Residential Property Trust, a Maryland real estate investment trust,
and its
<PAGE>
subsidiaries; and "WRP Newco" means Wellsford Real Properties, Inc., a
Maryland corporation, and its subsidiaries.
As used in this Joint Proxy Statement/Prospectus/Information Statement,
"Surviving Trust" means the surviving Maryland real estate investment trust in
the Merger. The name of the Surviving Trust will be Equity Residential
Properties Trust.
Parties to the Merger
EQR. EQR, one of the largest publicly traded REITs (based on the aggregate
market value of its outstanding equity capitalization), is a self-administered
and self-managed equity REIT. EQR was organized in March 1993 and commenced
operations as a publicly traded company on August 18, 1993 upon the completion
of its initial public offering (the "IPO"). EQR was formed to continue the
multifamily property business objectives and acquisition strategies of certain
affiliated entities controlled by Mr. Samuel Zell, Chairman of the Board of
Trustees of EQR. These entities had been engaged in the acquisition, ownership
and operation of multifamily properties since 1969. EQR's senior executives
average over 23 years of experience in the multifamily property business.
EQR is the largest publicly traded REIT owner of multifamily properties
(based on the number of apartment units owned and total revenues earned). As of
March 31, 1997, EQR owned or had interests in a portfolio of 250 multifamily
properties containing 75,100 apartment units and managed 12,804 additional units
owned by affiliated entities. As of March 31, 1997, the 250 properties EQR owned
or had interests in had an average occupancy rate of approximately 94%. These
properties are located in the following 31 states: Arizona, Arkansas,
California, Colorado, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas,
Kentucky, Louisiana, Maine, Maryland, Michigan, Minnesota, Missouri, New
Hampshire, New Jersey, New Mexico, Nevada, North Carolina, Ohio, Oklahoma,
Oregon, South Carolina, Tennessee, Texas, Virginia and Washington.
All of EQR's interests in its properties are held directly or indirectly
by, and substantially all of its operations relating to the properties are
conducted through, ERP Operating Partnership. EQR controls ERP Operating
Partnership as the sole general partner and, as of March 31, 1997, owned
approximately 88% of ERP Operating Partnership's outstanding partnership
interests (excluding preference units) ("OP Units"), which may be exchanged by
the holders thereof for either shares of EQR Common, on a one-for-one basis or,
at EQR's option, the cash equivalent thereof.
EQR's corporate headquarters and executive offices are located at Two North
Riverside Plaza, Suite 400, Chicago, Illinois 60606, and its telephone number is
(312) 474-1300. In addition, EQR has regional operations centers in Chicago,
Illinois; Dallas, Texas; Denver, Colorado; Seattle, Washington; Tampa, Florida
and Bethesda, Maryland, and area offices in Atlanta, Georgia; Las Vegas, Nevada;
Phoenix, Arizona; Portland, Oregon; San Antonio and
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Houston, Texas; Irvine, California; Ypsilanti, Michigan; Raleigh, North
Carolina; and Ft. Lauderdale, Florida.
Wellsford. Wellsford is a publicly traded, self-administered and self-
managed equity REIT, formed in 1992, which owns and operates multifamily
properties located in the Western, Southwestern and Pacific regions of the
United States. As of December 31, 1996, Wellsford owned 72 properties
containing 19,004 apartment units. Wellsford's average occupancy rate on March
24, 1997 was approximately 95.3%. Wellsford's properties are located in the
following states: Arizona, Colorado, New Mexico, Nevada, Oklahoma, Texas, Utah
and Washington.
Wellsford's corporate headquarters and executive offices are located at 610
Fifth Avenue, New York, New York 10020, and its telephone number is (212) 333-
2300. In addition, Wellsford has operating headquarters in Denver, Colorado and
area offices in Dallas, Texas; San Antonio, Texas; Tulsa, Oklahoma; Oklahoma
City, Oklahoma; Phoenix, Arizona; and Tacoma, Washington.
Terms of the Merger
The Merger Agreement provides that, upon satisfaction or waiver of the
conditions set forth therein, EQR will be merged into Wellsford. The name of
the Surviving Trust will be Equity Residential Properties Trust. The EQR Board
of Trustees and Wellsford Board of Trustees have each approved the Merger as set
forth in the Merger Agreement. Upon consummation of the Merger (the "Effective
Time"), each outstanding share of Wellsford Common will be converted into .625
(the "Exchange Ratio") of a common share of beneficial interest, $.01 par value
per share, of the Surviving Trust ("Survivor Common"). At the Effective Time,
each outstanding share of EQR Common will be converted into one share of
Survivor Common. At the Effective Time, each outstanding share of Wellsford
Preferred and EQR Preferred will be converted into one preferred share of the
Surviving Trust ("Survivor Preferred") having the same preferences and other
terms as the preferred shares previously outstanding of the same series;
provided, however, the conversion ratio for Wellsford's Series A Cumulative
Convertible Preferred Shares of Beneficial Interest, $.01 par value per share
("Wellsford Series A") will be adjusted in accordance with its terms. See "The
Merger - Terms of the Merger." At the Effective Time, approximately 3.2% of
Survivor Common will be owned by affiliates of the Surviving Trust (assuming
that no outstanding options are exercised and no OP Units are exchanged for
shares of EQR Common).
The Distribution of WRP Newco Common
Immediately prior to the Merger, Wellsford will contribute certain of its
assets, including an 80% interest in phases I and II of, and in options to
acquire and develop phases III, IV and V of, a 182-acre five-phase development
project located in Denver, Colorado ("Palomino Park"), a $17.8 million mortgage
receivable (the "Sonterra Loan"), on a 344-unit multifamily property located in
Tucson, Arizona ("Sonterra"), an option to purchase Sonterra and
3
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approximately $18 million of cash to WRP Newco and WRP Newco will assume certain
obligations of Wellsford (the "Contribution"). Immediately after the
Contribution and immediately prior to the Merger, Wellsford will distribute to
the holders of Wellsford Common all the outstanding shares of WRP Newco Common
owned by Wellsford as a distribution subject to income tax under Section 301 of
the Internal Revenue Code of 1986, as amended (the "Code"). Pursuant to the
Distribution, the holders of Wellsford Common will receive one share of WRP
Newco Common for each four shares of Wellsford Common owned by such holder. Cash
will be paid in lieu of fractional shares. The Contribution and the Distribution
are not subject to approval by the shareholders of Wellsford.
No shares of WRP Newco Common will be distributed to EQR Common
Shareholders. EQR Common Shareholders will participate indirectly in WRP Newco
through the interests of ERP Operating Partnership in WRP Newco as described
under "Certain Agreements between WRP Newco and ERP Operating Partnership."
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[Chart to be inserted depicting pre-Merger EQR & Wellsford]
5
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[Chart to be inserted depicting Surviving Trust & WRP Newco]
6
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[Map to be inserted depicting property interests of Surviving Trust]
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Reasons for the Merger; Recommendations of the Boards of Trustees
The EQR Board of Trustees believes that the Merger, including the
consideration to be paid by EQR, is fair and in the best interests of EQR and
its shareholders. The EQR Trustees who voted on the Merger unanimously approved
the Merger and unanimously recommend that the EQR Common Shareholders vote FOR
the Merger. The EQR Board of Trustees considered certain potentially negative
factors which could arise from the Merger. These included (i) the significant
costs involved in connection with consummating the Merger, (ii) the substantial
management time and effort required to effectuate the Merger and integrate the
businesses of EQR and Wellsford, (iii) the increase in the total debt of the
Surviving Trust from the total debt of EQR, (iv) the possible adverse effects
upon the market for shares of EQR Common and upon EQR's ability to raise capital
and issue equity in both the public and private markets which might result if
the Merger were not consummated, and (v) the risk that the anticipated benefits
of the Merger might not be fully realized. The favorable factors the EQR Board
of Trustees considered in reaching the foregoing conclusions were the beliefs
that (i) the Merger would solidify EQR's leadership position in the multifamily
property industry and the Surviving Trust will be one of the largest publicly
traded REITs (based on the aggregate market value of its outstanding equity
capitalization), (ii) the Merger would increase operating efficiencies through
economies of scale, (iii) the Merger would provide greater access to the public
equity and debt markets, (iv) the Surviving Trust would be a larger and
financially stronger company, which would make it easier to combine with other
entities, (v) the combination of the Wellsford properties with those of EQR
would expand the geographic focus of EQR's operations in the Southwest, Western
and Pacific regions of the United States, and (vi) the Merger could be
effectuated through the issuance of shares of equity to shareholders in the
Merger rather than through the use of cash or a separate public offering of
equity or debt securities. The EQR Board of Trustees also received the written
opinion, dated January 16, 1997, of J.P. Morgan Securities Inc. ("J.P. Morgan")
to the effect that, as of such date and based upon and subject to certain
matters stated therein, the consideration to be paid by EQR in connection with
the Merger was fair, from a financial point of view, to EQR. See "The Merger--
Reasons for the Merger; Recommendation of the EQR Board of Trustees" and
"Opinion of Financial Advisors--EQR."
The Wellsford Board of Trustees believes that the Merger and
Distribution are fair to, and in the best interests of, Wellsford and its
shareholders. By unanimous vote, the Wellsford Board of Trustees approved the
Merger, the Distribution and the transactions contemplated thereby, and
unanimously recommend that the Wellsford Common Shareholders vote FOR the
Merger. Although Wellsford Common Shareholders are not being asked to approve
the Distribution, approval of the Merger will, in effect, constitute approval of
the Distribution. The Board of Trustees reached its decision after careful
consideration of a wide variety of factors, including certain potentially
negative factors. These negative factors consisted of the following: (i) the
risk that the anticipated benefits of the Merger might not be fully realized;
(ii) the significant costs aggregating approximately $23.6 involved in
connection with consummating the
8
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Merger; (iii) the substantial management time and effort required to effectuate
the Merger; (iv) the possibility that Wellsford may be required, if the Merger
Agreement is terminated under certain circumstances, to pay EQR a Break-Up Fee
(as defined herein) of $14.0 million and to reimburse EQR Break-Up Expenses (as
defined herein) of up to $2.5 million; and (v) after the Merger, the
distributions payable with respect to the Survivor Common is expected to be
approximately 19.5% less than the distributions payable with respect to the
Wellsford Common based upon the current annualized distributions per share of
EQR Common and Wellsford Common.
In making its determination with respect to the Merger and the
Distribution, the Wellsford Board of Trustees also considered, among other
things, the following advantages: (i) the Merger would afford shareholders a
significant participation in a much larger and more geographically diversified
REIT with greater potential for long-term appreciation and improved access to
capital markets, (ii) the Merger was the best alternative reasonably available
to Wellsford Common Shareholders, providing the greatest feasibility and
potential to maximize shareholder value, (iii) the Merger offered anticipated
cost savings and operating efficiencies to the Surviving Trust, including the
anticipated reduction of overhead expenses by approximately $4.1 million per
year, (iv) the market capitalization of the Surviving Trust is expected to be
approximately $4 billion greater than the then-current market capitalization of
Wellsford, (v) the Exchange Ratio fairly reflected the relative contributions of
both companies to the combined entity, and (vi) the Merger would be tax-free.
The Wellsford Board of Trustees received further confirmation of its decision in
the form of the written opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), dated January 16, 1997, to the effect that, as
of such date and based upon certain assumptions and considerations, the
consideration to be received by Wellsford Common Shareholders pursuant to the
Merger and the Distribution was fair to such shareholders from a financial point
of view. See "The Merger - Reasons for the Merger" and "Opinion of Financial
Advisor - Wellsford."
Opinions of Financial Advisors
EQR. At the meeting of the Board of Trustees of EQR on January 15, 1997,
J.P. Morgan rendered its oral opinion to the Board of Trustees of EQR that, as
of such date, the consideration to be paid by EQR in connection with the
proposed Merger was fair from a financial point of view to EQR. J.P. Morgan has
confirmed its January 15, 1997 oral opinion by delivering its written opinion to
the Board of Trustees of EQR, dated January 16, 1997, that as of such date, the
consideration to be paid by EQR in connection with the proposed Merger was fair
from a financial point of view to EQR. No limitations were imposed by EQR's
Board of Trustees upon J.P. Morgan with respect to the investigations made or
procedures followed by it in rendering its opinions. See "The Merger -Opinion of
Financial Advisor - EQR."
Wellsford. At the meeting of the Board of Trustees of Wellsford on January
16, 1997, Merrill Lynch rendered its oral opinion to the Board of Trustees of
Wellsford, and subsequently
9
<PAGE>
on such date Merrill Lynch delivered its written opinion, that, as of such date
and based upon the assumptions made, matters considered and limits of review, as
set forth in such opinion, the proposed consideration to be received by the
holders of Wellsford Common pursuant to the Merger and the Distribution was fair
to such shareholders from a financial point of view. No limitations were imposed
by Wellsford's Board of Trustees upon Merrill Lynch with respect to the
investigations made or procedures followed by it in rendering its opinions. See
"The Merger - Opinion of Financial Advisor - Wellsford."
Risk Factors
In considering whether to approve the Merger, the shareholders of EQR
and Wellsford voting on the Merger should consider, in addition to the other
information in this Joint Proxy Statement/Prospectus/Information Statement, the
matters discussed under "Risk Factors." Such matters include:
. Adverse consequences normally associated with debt or preferred equity
financing, including the risk that the Surviving Trust's cash flow
will be insufficient to meet required payments of principal and
interest.
. Risks associated with the potential change in the relative share
prices of EQR Common and Wellsford Common prior to the time the Merger
becomes effective.
. Possible payment of liquidated damages and expenses: the Merger
Agreement provides for a "Break-Up Fee" of $14 million (the "Break-Up
Fee") plus "Break-Up Expenses" of up to $2.5 million (the "Break-Up
Expenses") payable by Wellsford to EQR if the Merger Agreement is
terminated by either EQR or Wellsford under certain circumstances and,
within one year thereafter, Wellsford enters into an agreement
regarding an "Acquisition Proposal," as defined herein, which is
consummated. If the Merger Agreement is terminated by either EQR or
Wellsford under certain other circumstances, either EQR or Wellsford
will be required to pay the other party's Break-Up Expenses of up to
$2.5 million. See "The Merger-Termination Provisions."
. Possible conflicts of interest due to the fact that certain members of
management of Wellsford, pursuant to existing agreements, have certain
interests that arise in connection with the Merger and the
Distribution that are in addition to the interests of shareholders of
Wellsford generally.
. Shareholders of EQR and Wellsford do not have appraisal rights in
connection with the Merger under Maryland law.
10
<PAGE>
Interests of Certain Persons
In considering whether to approve the Merger, shareholders should be aware
that certain members of the management of Wellsford and the Wellsford Board of
Trustees have certain interests that arise in connection with the Merger and the
Distribution that are in addition to the interests of shareholders of Wellsford
generally. The Board of Trustees considered these interests and deliberated upon
any resulting conflicts of interest unanimously concluding that the advantages
of the Merger and Distribution and the benefits thereof to the shareholders
outweighed any conflicts of interest. These additional interests arise under
existing agreements with, and annual compensation awards from, Wellsford, which
were approved by Wellsford's independent trustees in prior years, and proposed
agreements with WRP Newco and the Surviving Trust relating to, among other
things, severance payments to be made to certain executive officers (but not
Jeffrey H. Lynford, Chairman of the Board, and Edward Lowenthal, President and
Chief Executive Officer), the forgiveness of loans made to certain executive
officers incurred to acquire shares of Wellsford Common, the issuance of
additional shares of Wellsford Common to certain executive officers, the
acceleration of vesting of restricted share grants issued to certain executive
officers (but not Messrs. Lynford and Lowenthal), payments to be made to certain
executive officers to satisfy income and excise tax obligations resulting from
certain monies and other benefits to be paid to them in connection with the
Merger and the issuance of WRP Newco stock options to certain executive officers
and trustees of Wellsford in replacement of certain existing Wellsford share
options and reload options granted in connection with the exercise of vested
Wellsford options. In addition, upon completion of the Merger, WRP Newco will
enter into employment agreements with Messrs. Lynford and Lowenthal for
approximately five and one-half years and employment agreements with Gregory F.
Hughes, Chief Financial Officer of Wellsford, and David M. Strong, a Vice
President of Wellsford, for two years. WRP Newco will also assume the existing
split dollar life insurance arrangements between Wellsford and Messrs. Lynford
and Lowenthal. See "Interests of Certain Persons in the Merger and
Distribution."
Further, upon completion of the Merger, Messrs. Lynford and Lowenthal will
each enter into a five-year consulting agreement with ERP Operating Partnership
and will be appointed to the Board of Trustees of the Surviving Trust for a
three-year term. In addition, Donald D. MacKenzie, Executive Vice President-
Director of Operations of Wellsford, will be a Senior Vice President of the
Surviving Trust upon completion of the Merger. The Surviving Trust will
indemnify each trustee and officer of Wellsford for all actions on or prior to
the Effective Time to the same extent such individuals were indemnified by
Wellsford prior to the Effective Time.
Effective Time of the Contribution and the Distribution
As stated in "The Contribution and Distribution," the Contribution and the
Distribution will take place immediately prior to the Merger.
11
<PAGE>
Effective Time of the Merger and Closing Date
The closing ("Closing") of the Merger will take place at 10:00 a.m. on
the date to be specified by EQR and Wellsford, which will be no later than the
third business day after satisfaction or waiver of the conditions set forth in
the Merger Agreement (the "Closing Date"), at the offices of Rudnick & Wolfe,
203 North LaSalle Street, Chicago, Illinois 60601, unless another date or place
is agreed to in writing by the parties. The Merger will become effective at the
time the State Department of Assessments and Taxation of Maryland (the
"Department") accepts for record the Articles of Merger (the "Articles"), or at
such time as EQR and Wellsford will agree should be specified in the Articles
(not to exceed 30 days after the Articles are accepted for record by the
Department). It is currently anticipated that the Merger will be effective on
or about May 30, 1997.
Conditions to the Merger
The obligations of EQR and Wellsford to consummate the Merger are subject
to the satisfaction or waiver of certain conditions, including, among others,
(i) obtaining the requisite approval of the shareholders of EQR and shareholders
of Wellsford, (ii) the absence of any material adverse change in the financial
condition, business or operations of Wellsford or EQR, (iii) the receipt of
certain legal opinions, including opinions with respect to the tax consequences
of the Merger, (iv) the receipt of all material consents, authorizations, orders
and approvals of governmental agencies and third parties, (v) the consummation
of certain transactions by and between EQR, ERP Operating Partnership and WRP
Newco, (vi) the execution of certain agreements between each of Wellsford and
EQR and their respective affiliates, and (vii) the consummation of the
Contribution and the Distribution. EQR and Wellsford each have the right to
waive any conditions to their respective obligations to consummate the Merger.
See "The Merger - Conditions of the Merger."
Appraisal Rights
Shareholders of Wellsford and shareholders of EQR are not entitled to
dissenting shareholders' appraisal rights under Maryland law. Maryland law does
not provide appraisal rights to shareholders of a REIT in connection with a
merger if their shares are listed on a national securities exchange, such as the
NYSE, on the record date for determining shareholders entitled to vote on such
merger. All of the shares of EQR and Wellsford outstanding on the record date
for determining the shareholders entitled to vote on the Merger were listed on
the NYSE.
Federal Income Tax Consequences
Tax Consequences of Merger. The Merger is intended to qualify as a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"). For a more detailed discussion of certain U.S. Federal
income tax consequences of the
12
<PAGE>
Merger and certain other matters related thereto, see "The Merger -- Federal
Income Tax Consequences."
Tax Consequences of Distribution. To the extent the fair market value of
the shares of WRP Newco Common distributed in the Distribution to Wellsford
Common Shareholders exceeds Wellsford's tax basis in such shares, gain will be
recognized by Wellsford. Assuming Wellsford qualifies as a REIT and has a
dividends paid deduction for distributions to its shareholders at least equal to
its REIT taxable income (as computed before taking into account the dividends
paid deduction), no REIT level tax will be incurred on account of the
Distribution.
The distribution of shares of WRP Newco Common will, however, be taxable to
Wellsford Common Shareholders to the same extent as any other distribution made
by Wellsford to the Wellsford Common Shareholders. Thus, so long as Wellsford
qualifies for taxation as a REIT, distributions with respect to its shares,
including the Distribution, made out of current or accumulated earnings and
profits allocable thereto (and not designated as capital gain dividends) will be
includible by the Wellsford Common Shareholders as ordinary income for Federal
income tax purposes. For a more detailed discussion, see "Tax Consequences of
the Distribution."
Termination
The Merger Agreement provides that it may be terminated in a number of
circumstances at any time prior to the Effective Time, whether before or after
the approval of the Merger by the shareholders of EQR and shareholders of
Wellsford. See "The Merger - Termination Provisions."
Termination Fees
Depending on the reason for the Merger Agreement's termination, Wellsford
may be required to pay EQR either the Break-Up Fee and Break-Up Expenses or
Break-Up Expenses, or EQR may be required to pay Wellsford the Break-Up
Expenses. See "The Merger - Termination Fees and Expenses."
Anticipated Accounting Treatment
The Merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16.
No Solicitation of Other Transactions
Wellsford has agreed that it (and its subsidiaries) will not, and will use
its best efforts to not permit its officers, trustees, employees, agents or
financial advisors to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal
13
<PAGE>
or offer (including, without limitation, any proposal or offer to its
shareholders) with respect to a merger, acquisition, tender offer, exchange
offer, consolidation, sale of assets or similar transactions involving all or
any significant portion of the assets or any equity securities of, it or any of
its subsidiaries, other than the transactions contemplated by the Merger
Agreement. The Merger Agreement does not, however, prohibit Wellsford from
entering into discussions with respect to an unsolicited proposal if the Board
of Trustees of Wellsford determines that such action is required by its duties
to its shareholders imposed by law.
EQR has agreed that if it enters into negotiations with another entity
having a class of equity securities registered under the Exchange Act regarding
the acquisition of such entity (whether effected through a merger,
consolidation, share exchange, tender offer or other form), then at least three
business days prior to executing any definitive agreement with such entity with
respect to such acquisition or making a tender offer for the shares or other
ownership interests of such entity, EQR will notify Wellsford of such
transaction and consult with Wellsford with respect thereto, it being
understood, however, that Wellsford will have no approval rights with respect
thereto.
Conversion of Shares; Exchange of Certificates
Each share of Wellsford Common outstanding immediately prior to the
Effective Time will be converted into .625 share of validly issued, fully paid
and nonassessable Survivor Common. Each share of EQR Common outstanding
immediately prior to the Effective Time will be converted into one share of
validly issued, fully paid and nonassessable Survivor Common. Each share of EQR
Preferred and Wellsford Preferred outstanding immediately prior to the Effective
Time will continue as one validly issued, fully paid and nonassessable share of
Survivor Preferred, with all the preferences, rights and powers that each share
previously had as shares issued by EQR or Wellsford, as the case may be, and
will rank pari passu with each other outstanding Survivor Preferred; provided,
however, that the conversion ratio relating to the Wellsford Series A will be
adjusted in accordance with its terms.
All shares of Wellsford Common, when converted pursuant to the Merger, will
no longer be outstanding and will automatically be canceled and retired and each
holder of a certificate representing Wellsford Common will cease to have any
rights with respect thereto, except the right to receive shares of Survivor
Common, and cash in lieu of any fractional shares of Survivor Common, as well as
any distributions declared with respect thereto with a record date after the
Effective Time. At the Effective Time, each certificate representing outstanding
shares of Wellsford Preferred will cease to have any rights with respect to such
shares, except the right to receive a certificate of the Surviving Trust
representing an equal number of Survivor Preferred. Wellsford Common
Shareholders should not tender their certificates for Wellsford Common with
their proxy. As promptly as practicable after the Effective Time, Boston
EquiServe LLP, an affiliate of First National Bank of Boston, as the exchange
agent ("Exchange Agent"), will mail to the shareholders of Wellsford transmittal
materials for use in exchanging certificates evidencing Wellsford Shares for
certificates evidencing shares of the Survivor
14
<PAGE>
Common or Survivor Preferred ("Survivor Shares"). See "The Merger - Exchange of
Certificates."
At the Effective Time, each certificate evidencing outstanding shares of
EQR Common and EQR Preferred will, without any action by the holders thereof,
thereafter evidence the same number of shares of Survivor Common and Survivor
Preferred, as the case may be.
Management of the Surviving Trust
The Surviving Trust will initially have twelve trustees. The Board of
Trustees of the Surviving Trust will be made up of the current trustees of EQR,
Jeffrey H. Lynford, the Chairman of the Wellsford Board of Trustees, and Edward
Lowenthal, a Trustee and the President of Wellsford. The Board of Trustees of
the Surviving Trust will be divided into three equally numbered classes serving
staggered three-year terms. One class will serve as trustees until the 1997
annual meeting of shareholders, one class will serve as trustees until the 1998
annual meeting of shareholders, and one class will serve as trustees until the
1999 annual meeting of shareholders.
Senior management of the Surviving Trust will be drawn from the present
management of EQR. As a condition to the consummation of the Merger, Jeffrey H.
Lynford and Edward Lowenthal will enter into consulting agreements with ERP
Operating Partnership. In addition, Donald MacKenzie, Executive Vice President-
Director of Operations of Wellsford, will be a Senior Vice President of the
Surviving Trust upon completion of the Merger. See "The Merger -Interests of
Certain Persons in the Merger and Distribution."
After the Merger, management and control of ERP Operating Partnership will
be vested in the Surviving Trust, which will serve as its sole general partner.
The Merger Agreement also contains provisions relating to, among other
things, employee benefits and indemnification and liability coverage of former
trustees and officers of Wellsford after the Merger. See "The Merger -Interests
of Certain Persons in the Merger and Distribution."
The Meetings of Shareholders
EQR
The EQR Special Meeting has been called to consider and vote on the
approval of the Merger. The EQR Special Meeting will be held on May 28, 1997 at
10:00 a.m., local time, at One North Franklin, Chicago, Illinois. Only holders
of record of EQR Common at the close of business on April 14, 1997 will be
entitled to vote at the EQR Special Meeting. Each holder of EQR Common is
entitled to one vote per share on the Merger as proposed in the notice of the
EQR Special Meeting. EQR had outstanding 53,713,158 shares of EQR Common as of
the
15
<PAGE>
close of business on April 1, 1997, of which 1,022,666 shares (or approximately
1.9% of the outstanding shares of EQR Common) (excluding 681,534 shares where
beneficial ownership is disclaimed) were owned beneficially by the officers and
trustees of EQR, and such persons have indicated their intention to vote such
shares in favor of each of the proposals. Approval of the Merger requires the
affirmative vote of two-thirds of the holders of the outstanding shares of EQR
Common.
Wellsford
The Wellsford Special Meeting has been called to consider and vote on the
approval of the Merger, including the adoption of an amended and restated
declaration of trust of the Surviving Trust, the approval of the Additional
Provisions, the approval of the Additional Share Offering and the adoption of
WRP Newco's 1997 Management Incentive Plan. See "--Proposal Regarding Additional
Declaration of Trust Provisions," "--Proposals Regarding WRP Newco," "Proposal
Regarding Additional Declaration of Trust Provisions," "Proposal to Approve WRP
Newco Additional Share Offering" and "Proposal to Approve WRP Newco's 1997
Management Incentive Plan." The Wellsford Special Meeting will be held on May
28, 1997, at 10:00 a.m., local time, at The Princeton Club, 15 West 43rd Street,
New York, New York. Only holders of record of Wellsford Common at the close of
business on April 14, 1997 will be entitled to notice of and to vote at the
Wellsford Special Meeting. Each holder of Wellsford Common is entitled to one
vote per share as proposed in the notice of the Wellsford Special Meeting.
Wellsford had outstanding 17,261,897 shares of Wellsford Common as of the close
of business on April 18, 1997, of which 599,828 shares (or approximately 3.5% of
the outstanding shares of Wellsford Common) (excludes 29,727 shares where
beneficial ownership is disclaimed) were owned beneficially by the officers and
trustees of Wellsford, and such persons have indicated their intention to vote
such shares in favor of the proposals. Approval of the Merger requires the
affirmative vote of the Wellsford Common Shareholders holding a majority of the
Wellsford Common Shares. Approval of the Additional Provisions requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Wellsford Common. Approval of the Additional Share Offering and adoption of WRP
Newco's 1997 Management Incentive Plan require the affirmative vote of the
holders of a majority of the outstanding shares of Wellsford Common voting.
Wellsford Common Shareholders may revoke their proxies at any time prior to the
voting thereof by giving written notice of such revocation to Wellsford, by
executing and delivering a proxy bearing a later date, or by attending the
Wellsford Special Meeting and voting in person.
16
<PAGE>
Surviving Trust Summary Unaudited Pro Forma Combined Financial Data
The following tables set forth the summary unaudited pro forma combined
financial data for the Surviving Trust as a combined entity, giving effect to
the Merger as if it had occurred on the dates indicated herein, after giving
effect to the pro forma adjustments described in the notes to the unaudited pro
forma financial statements included elsewhere in the Joint Proxy
Statement/Prospectus/Information Statement.
The summary unaudited pro forma combined operating data are presented as if
the Merger had been consummated at the beginning of the period presented.
The summary unaudited pro forma combined balance sheet data is presented as
if the Merger had occurred on December 31, 1996. The Merger has been accounted
for under the purchase method of accounting in accordance with the Accounting
Principles Board Opinion No. 16. In the opinion of management, all significant
adjustments necessary to reflect the effects of the Merger have been made.
The summary pro forma financial information should be read in conjunction
with, and is qualified in its entirety by, the respective historical audited
financial statements and notes thereto of EQR and Wellsford incorporated by
reference into this Joint Proxy Statement/Prospectus/Information Statement and
the unaudited pro forma financial statements and notes thereto included
elsewhere in the Joint Proxy Statement/Prospectus/Information Statement.
The summary unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of EQR and Wellsford would have been for the
period and dates presented. Nor does such data purport to represent the results
of future periods.
17
<PAGE>
SURVIVING TRUST
---------------
<TABLE>
<CAPTION>
OPERATING DATA: Pro Forma
Year Ended
December 31, 1996
------------------------
REVENUES: (Amount in thousands
except per share data)
<S> <C>
Rental income $578,820
Fee and asset management 6,749
Interest income-investment in mortgage notes 12,819
Interest and other income 11,061
--------
Total revenues 609,449
--------
EXPENSES:
Property and maintenance 167,526
Real estate taxes and insurance 54,010
Property management 21,506
Fee and asset management 3,837
Depreciation 124,211
Interest:
Expense incurred 103,538
Amortization of deferred financing costs 4,242
General and administrative 10,353
--------
Total Expenses 489,223
--------
Income before gain on disposition of properties and (loss) on joint venture communities 120,226
Gain on disposition of properties 22,336
(Loss) on joint venture communities (58)
--------
Income before extraordinary item and allocation to Minority Interests 142,504
Extraordinary Item:
Write-off of unamortized cost on refinanced debt (3,512)
--------
Income before allocation to Minority Interests 138,992
Income allocated to Minority Interests (15,706)
--------
Net income 123,286
Preferred distributions 41,563
--------
Net income available for Common Shares $ 81,723
========
Net income per weighted average Common Share outstanding $1.53
========
Weighted average Common Shares outstanding 53,317
========
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
Pro Forma
=================
December 31, 1996
-----------------
BALANCE SHEET DATA:
(at end of period)
<S> <C>
Real estate, after accumulated depreciation $3,708,310
==========
Total assets $3,968,482
==========
Total debt $1,576,869
==========
Minority Interests $ 190,793
==========
Shareholders' Equity $2,048,133
==========
</TABLE>
19
<PAGE>
Equity Residential Properties Trust Summary Historical and Combined Financial
Data
The following tables set forth summary historical and combined financial
data for EQR. The summary historical combined financial data for each of the
years ended December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the
audited financial statements of EQR as reported in its Annual Reports on Form
10-K. The summary historical financial data should be read in conjunction with,
and is qualified in its entirety by, the historical and combined financial
statements and notes thereto of EQR incorporated by reference into this Joint
Proxy Statement/Prospectus/Information Statement.
20
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUES
Rental income $ 454,412 $ 373,919 $ 220,727 $104,388 $ 86,597
Fee and asset management 6,749 7,030 4,739 4,651 4,215
Interest income-investment
in mortgage notes 12,819 4,862 -- -- --
Interest and other income 4,405 4,573 5,568 3,031 2,161
---------- ---------- ---------- -------- ---------
Total revenues 478,385 390,384 231,034 112,070 92,973
----------- ---------- ---------- -------- ---------
EXPENSES
Property and maintenance 127,172 112,186 66,534 35,324 30,680
Real estate taxes and insurance 44,128 37,002 23,028 11,403 10,274
Property management 17,512 15,213 10,249 4,938 2,912
Property management-non-recurring -- -- 879 -- --
Fee and asset management 3,837 3,837 2,056 2,242 2,403
Depreciation 93,253 72,410 37,273 15,384 13,442
Interest:
Expense incurred 81,351 78,375 37,044 26,042 31,926
Amortization of deferred financing
costs 4,242 3,444 1,930 3,322 2,702
Refinancing costs -- -- -- 3,284 --
General and administrative 9,857 8,129 6,053 1,994 1,915
---------- ---------- ---------- -------- ---------
Total expenses 381,352 330,646 185,046 103,933 96,254
---------- ---------- ---------- -------- ---------
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Income (loss) before gain on disposition
of properties, extraordinary items and
allocation to Minority Interests 97,033 59,738 45,988 8,137 (3,281)
Gain on disposition of properties 22,402 21,617 -- -- --
---------- ---------- ---------- -------- ---------
Income (loss) before extraordinary items and
allocation to Minority Interests 119,435 81,355 45,988 8,137 (3,281)
Extraordinary Items:
Write-off of unamortized costs on
refinanced debt (3,512) -- -- -- --
Gain on early extinguishment of debt -- 2,000 -- -- --
Gain on discharge of indebtedness -- -- -- 1,792 18,203
---------- ---------- ---------- -------- ---------
Income (loss) before allocation to
Minority Interests 115,923 83,355 45,988 9,929 14,922
Income allocated to Minority Interests (14,299) (15,636) (11,570) (3,834) --
---------- ---------- ---------- ------- ---------
Net income (loss) 101,624 67,719 34,418 6,095 14,922
Preferred distributions (29,015) (10,109) -- -- --
---------- ---------- ---------- -------- ---------
Net income (loss) available for Common Shares $ 72,609 $ 57,610 $ 34,418 $ 6,095 $ 14,922
========== ========== ========== ======== =========
Net income per weighted average
Common Share outstanding $ 1.70 $ 1.68 $ 1.34 $ .42 --
Weighted average Common Shares
outstanding 42,586 34,358 25,621 14,601 --
BALANCE SHEET DATA
(at end of period):
Real estate, before accumulated
depreciation $2,983,510 $2,186,636 $1,963,476 $634,577 $ 358,212
Real estate, after accumulated
depreciation $2,681,998 $1,969,453 $1,770,735 $478,210 $ 218,825
Total assets $2,986,127 $2,141,260 $1,847,685 $535,914 $ 238,878
Total debt $1,254,274 $1,002,219 $ 994,746 $278,642 $ 343,282
Minority Interests $ 150,637 $ 168,963 $ 177,438 $ 83,159 $ --
Shareholders' Equity (Net Deficit) $1,458,830 $ 884,517 $ 609,936 $146,485 $(122,094)
</TABLE>
22
<PAGE>
Wellsford Residential Property Trust Summary Historical Financial Data
The following tables set forth summary historical financial data for
Wellsford. The summary historical financial data for each of the years ended
December 31, 1992, 1993, 1994, 1995 and 1996 are derived from the audited
financial statements of Wellsford as reported in its Annual Reports on Form
10-K. The summary historical financial data should be read in conjunction with,
and is qualified in its entirety by, the historical financial statements and
notes thereto of Wellsford incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement. Certain reclassifications have been
made to Wellsford's historical financial data to conform to EQR's presentation.
23
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Historical (000s except per share data)
--------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 131,821 $ 131,232 $ 82,794 $ 42,007 $ 26,229
Expenses (109,035) (113,712) (73,299) (34,816) (26,991)
Gain (loss) on sale of
investment
communities (66) (819) -- 882 --
Loss on joint venture
communities (58) (279) -- -- --
--------- --------- -------- -------- --------
Income (loss) before
extraordinary item $ 22,662 $ 16,422 $ 9,495 $ 8,073 $ (762)
========= ========= ======== ======== ========
Net income (loss) $ 22,662 $ 10,869 $ 9,495 $ 8,073 $ (762)
Preferred dividends (12,548) (8,973) (7,000) (972) --
--------- --------- -------- -------- --------
Net income (loss)
available for
common
shareholders $ 10,114 $ 1,896 $ 2,495 $ 7,101 $ (762)
========= ========= ======== ======== ========
Net income (loss) per
common share $ 0.59 $ 0.11 $ 0.25 $ 0.91 $ (0.34)
========= ========= ======== ======== ========
Weighted average
number of common
shares outstanding 17,057 16,938 10,070 7,813 2,273
========= ========= ======== ======== ========
</TABLE>
24
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST
SUMMARY HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
Historical (000s except share data)
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Real Estate assets
before
accumulated
depreciation $795,580 $736,399 $747,519 $301,389 $156,568
Real estate assets
after accumulated
depreciation 711,614 677,908 712,742 282,224 143,787
Total Assets 756,289 729,638 745,754 322,400 165,963
Mortgages Payable 82,731 77,137 208,858 24,203 17,155
Convertible note
payable -- -- -- 46,070 55,358
Unsecured credit
facility 18,075 -- 140,000 -- --
Senior unsecured
notes 248,496 223,307 -- -- --
Shareholders' equity 376,686 398,359 371,655 239,775 89,986
Cash dividends
declared per
Series A preferred
share $1.75 $1.75 $1.75 $0.24 $ --
===== ===== ===== ===== =====
Cash dividends
declared per
Series B preferred
share $2.41 $0.86 $ -- $ -- $ --
===== ===== ===== ===== =====
Cash dividends
declared per
common share $1.94 $1.92 $1.80 $1.68 $0.16
===== ===== ===== ===== =====
</TABLE>
25
<PAGE>
Comparative Per Share Data
The following summary presents selected comparative unaudited per share
information for EQR and Wellsford on an historical basis and EQR and Wellsford
on a pro forma combined basis assuming the combination had been effective
throughout the periods presented. Wellsford pro forma equivalent per share
amounts are presented with respect to pro forma information. Such per share
amounts allow comparison of historical information with respect to the value of
one share of Wellsford Common to the corresponding information with respect to
the projected value of one share of Survivor Common as a result of the Merger by
multiplying the pro forma amounts by the Exchange Ratio of .625 to 1.
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
------------
<S> <C>
Net Income Per Common Share
EQR $ 1.70
Wellsford .59
Surviving Trust pro forma combined(A) 1.53
Wellsford pro forma equivalent (B) .96
Cash Distributions Declared Per Common Share
EQR $ 2.40
Wellsford 1.94
Surviving Trust pro forma combined(A) 2.40
Wellsford pro forma equivalent (B) 1.50
Shareholders' Equity Per Common Share
EQR $28.52
Wellsford 22.03
Surviving Trust pro forma combined(A) 33.10
Wellsford pro forma equivalent (B) 20.69
- -----------------------
</TABLE>
26
<PAGE>
(A) The pro forma combined Net Income Per Common Share and Cash Distributions
Declared Per Common Share data for the Surviving Trust has been prepared
assuming that in the Merger each share of Wellsford Common is converted into
.625 of a share of Survivor Common resulting in total weighted average
outstanding shares of Survivor Common of 53,317,000 for the year ended December
31, 1996. For the Shareholder's Equity Per Common Share data, total outstanding
shares of Survivor Common was 61,886,000 for the year ended December 31,
1996.
(B) The Wellsford pro forma equivalent is determined by multiplying the
Exchange Ratio (.625) by the Surviving Trust pro forma combined per share
amounts so that the per share amounts are equated to the comparative values for
each share of Wellsford Common.
27
<PAGE>
Comparative Share Prices
EQR
The EQR Common has been traded on the NYSE under the symbol "EQR" since
August 11, 1993. The following table sets forth the quarterly high and low sales
prices per share of EQR Common reported on the NYSE, as well as the quarterly
distributions declared per share of EQR Common, from January 1, 1995 through
April 18, 1997.
<TABLE>
<CAPTION>
High Low Distributions
------- ------ -------------
<S> <C> <C> <C>
1995
- ----
First Quarter........................... 29 1/8 25 5/8 .53
Second Quarter.......................... 29 3/4 24 7/8 .53
Third Quarter........................... 31 3/4 27 3/4 .53
Fourth Quarter.......................... 31 7/8 28 .59
1996
- ----
First Quarter........................... 33 3/4 28 1/4 .59
Second Quarter.......................... 33 1/2 30 7/8 .59
Third Quarter........................... 36 1/8 32 7/8 .59
Fourth Quarter.......................... 43 3/8 35 5/8 .625
1997
- ----
First Quarter........................... 45 39 3/4 .625(1)
Second Quarter (through April 18, 1997). 46 42 3/4 N/A
- ----------------
</TABLE>
(1) The first quarter distribution was paid on April 11, 1997 to shareholders
of record as of March 28, 1997 and represents an annual distribution rate
of $2.50 per share.
On April 18, 1997, the last reported sale price of a share of EQR Common on
the NYSE was 43 1/8 per share. On January 16, 1997, the last full trading day
prior to the pubic announcement of the Merger, the last reported sale price of a
share of EQR Common on the NYSE was 43 3/8. As of April 18, 1997, EQR's transfer
agent reported 544 record holders of EQR Common and, as of April 1997, The
Depository Trust Company held EQR Common on behalf of approximately 19,500
beneficial owners.
28
<PAGE>
Wellsford
The Wellsford Common has been traded on the NYSE under the symbol "WRP"
since November 20, 1992. The following table sets forth the quarterly high and
low sales prices per share of Wellsford Common reported on the NYSE, as well as
the quarterly distributions declared per share of Wellsford Common from January
1, 1995 through April 18, 1997.
<TABLE>
<CAPTION>
High Low Distributions
---- --- -------------
1995
- ----
<S> <C> <C> <C>
First Quarter............................ 21 3/4 19 1/4 $ .48
Second Quarter........................... 22 3/4 20 .48
Third Quarter............................ 22 3/4 21 1/8 .48
Fourth Quarter........................... 23 1/8 19 5/8 .48
1996
- ----
First Quarter............................ 24 1/4 21 3/8 .485
Second Quarter........................... 22 7/8 20 1/2 .485
Third Quarter............................ 23 1/8 20 3/4 .485
Fourth Quarter........................... 25 21 1/2 .485
1997
- ----
First Quarter............................ 31 3/4 24 1/8 .485
Second Quarter (through April 18, 1997).. 30 1/2 28 1/2 N/A
- ----------------------
</TABLE>
On April 18, 1997, the last reported sale price of a share of Wellsford
Common on the NYSE was 28 7/8 per share. On January 16, 1997, the last full
trading day prior to the pubic announcement of the Merger, the last reported
sale price of a share of Wellsford Common on the NYSE was 25 3/4. As of April
18, 1997, Wellsford's transfer agent reported 629 record holders of Wellsford
Common and, as of April 18, 1997, The Depository Trust Company held Wellsford
Common on behalf of approximately 13,500 beneficial owners.
BECAUSE THE EXCHANGE RATIO IS FIXED AND THE MARKET PRICE OF EQR COMMON IS
SUBJECT TO FLUCTUATION, THE MARKET VALUE OF THE SURVIVOR COMMON THAT HOLDERS OF
WELLSFORD COMMON WILL RECEIVE IN THE MERGER MAY INCREASE OR DECREASE PRIOR TO
AND FOLLOWING THE MERGER. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET
QUOTATIONS FOR EQR COMMON AND WELLSFORD COMMON.
29
<PAGE>
Proposal Regarding Additional Declaration of Trust Provisions
The Wellsford Common Shareholders are being asked to separately approve the
Additional Provisions to the Surviving Trust Declaration (defined herein) to
further conform the Surviving Trust Declaration to the terms of the EQR
Declaration (defined herein) and to update the Surviving Trust Declaration to
reflect the current approaches in the REIT industry regarding share ownership
restrictions necessary to maintain REIT status.
Removal of Trustees. Section 2.3 of the Wellsford Declaration currently
provides for the removal of Trustees, with or without cause, by the affirmative
vote of the holders of not less than two-thirds of the Wellsford Shares then
outstanding and entitled to vote on the election of trustees. The Additional
Provisions will provide for the removal of Trustees only with cause.
Restrictions on Transfer and Ownership of Shares. In order to maintain its
status as a REIT under the Code and Title 8, Section 6.6 of the Wellsford
Declaration currently imposes a number of restrictions on the transfer and
ownership of Wellsford Shares. See "Comparison of Rights of Shareholders -
Restrictions on the Ownership, Transfer or Issuance of Shares." Since the
adoption of the Wellsford Declaration in 1992, the comparable section of the
declarations of other REITs has evolved into more detailed provisions relating
to the applicable ownership limits and compliance with the Code. The Additional
Provisions will modify the restrictions on transfer to reflect the effects of
the Merger and the Surviving Trust's relationship with ERP Operating
Partnership.
Amendment to Declaration. Section 9.1 of the Wellsford Declaration currently
provides for its amendment by the affirmative vote of the holders of not less
than a majority of the Wellsford Shares outstanding and entitled to vote
thereon, except that amendments related to the removal of trustees, the
restrictions on the ownership of Wellsford Shares, the reorganization of
Wellsford and the merger, consolidation or sale of all or substantially of
Wellsford's property must be approved by the affirmative vote of the holders of
two-thirds of the Wellsford's Shares then outstanding and entitled to vote on
the matter. The Additional Provisions will require the foregoing to be approved
by a two-thirds vote of the Survivor Shares then outstanding and entitled to
vote thereon.
Mergers, Consolidation, or Sale of Trust Property. Section 9.2 of the Wellsford
Declaration currently states that, upon the affirmative vote of the holders of
not less than two-thirds of the Wellsford Shares then outstanding and entitled
to vote thereon, the trustees of Wellsford may reorganize Wellsford by creating
a separate entity into which Wellsford will merge or sell its assets. In
addition, Section 9.3 of the Wellsford Declaration currently provides that if
Wellsford is not the surviving entity in a merger or consolidation, or in the
event of a sale of all or substantially all of Wellsford's property, that
transaction must be approved by two-thirds of the Wellsford Shares then
outstanding and entitled to vote thereon. In all other cases, such a merger or
consolidation need only be approved by a majority of the Wellsford Shares then
outstanding and entitled to vote thereon. The Additional Provisions provide that
any merger, consolidation, or sale of all or substantially all of the Surviving
Trust's property will be required to be approved by the holders of a majority of
the Survivor Shares then outstanding and entitled to vote thereon. For a more
detailed description of the Additional Provisions, see "Proposal Regarding
Additional Declaration of Trust Provisions."
30
<PAGE>
Wellsford Real Properties, Inc.
WRP Newco 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 or equity
securities of entities engaged in such real estate businesses. Management will
concentrate its efforts on defining and building focused operating businesses
with recurring sources of income. WRP Newco intends to maximize shareholder
value over time through growth in cash flow and net asset value per share.
WRP Newco 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,
WRP Newco will initially focus 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, WRP Newco may in the future expand its real estate-related businesses
and activities.
WRP Newco currently does not intend to qualify as a REIT under the Code.
Consequently, WRP Newco will have 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 WRP Newco to distribute each year at least 95% of its net taxable
income, excluding capital gains), WRP Newco will have 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, WRP Newco will differ from
opportunity funds that are typically structured as private partnerships. In
that regard, the business of WRP Newco will be 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, WRP Newco's shareholders are expected to have enhanced
liquidity through their ability to sell or margin their stock. WRP Newco also
hopes to attract a broader range of investors because there will be no
stipulated investment minimum. However, unlike REITs and opportunity funds, WRP
Newco will be subject to corporate level taxation.
WRP Newco's management will include Jeffrey H. Lynford, Chairman, and
Edward Lowenthal, President and Chief Executive Officer, who were co-founders
of, and served in the same capacities at, Wellsford, supported by a management
team with experience in real estate acquisitions, development, asset management
and financing. WRP Newco 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 WRP Newco accomplish its business objectives. Since the completion
by Wellsford of the initial public offering of its common shares of beneficial
interest in November 1992 (the "Wellsford IPO"), Messrs. Lynford and Lowenthal,
through Wellsford Residential, acquired 69 multifamily properties containing
16,332 units. From calendar year 1992 through calendar year 1996, Wellsford's
revenues increased from $26.5 million to $131.8 million, representing a
compounded annual growth rate of approximately 49%, and Wellsford's earnings
before interest, depreciation and amortization ("Wellsford EBITDA") 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, WRP Newco has implemented its business strategy by identifying,
negotiating and, except in one instance, consummating the following initial
investments: (i) six office buildings located in Northern New Jersey containing
an aggregate of approximately 940,400 gross square feet, five of which are
vacant, acquired below replacement cost for an aggregate of $47.6 million, or
$50 per gross square foot of building area, with respect to which WRP Newco
currently expects to spend an aggregate of approximately $13.7 million in
renovation and repositioning costs; (ii) a $20 million subordinated secured
mezzanine loan with respect to a class A office building located at 277 Park
Avenue, New York City, expected to close in April 1997, (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 and
II of, and in options to acquire (at fixed prices) and develop Phases III, IV
and V of, a 1,880-unit class A multifamily development in a suburb of Denver,
Colorado. See "WRP Newco's Business and Properties".
Upon completion of the Distribution and consummation of the Merger, WRP
Newco expects to have available various sources of capital, financing and credit
support, including (i) the proceeds of $3.5 million from the acquisition by ERP
Operating Partnership of WRP Newco's Class A common stock, par value $.01 per
share ("WRP Newco Class A Common") at a price equal to the per share sales price
to any institutional purchaser of WRP Newco Common Stock on or prior to the
Effective Time or, if there is no such purchaser, at a price equal to the book
value (the "WRP Newco Book Value") per share of WRP Newco Common Stock (which is
currently estimated to be $10.43 per share) at the time of the Merger (the
"Issuance Price"), (ii) the commitment of ERP Operating Partnership to acquire
at WRP Newco's option up to $25 million of WRP Newco's Series A 8% Convertible
Redeemable Preferred Stock ("WRP Newco Series A Preferred"), each share of WRP
Newco Series A Preferred being convertible into shares of WRP Newco Common Stock
at a premium equal to 8% of the Issuance Price ("ERP Preferred Commitment") and
(iii) a $50 million two-year line of credit (extendible for one year) from The
First National Bank of Boston ("Bank of Boston") and Morgan Guaranty Trust
Company of New York ("Morgan Guaranty") ("WRP Newco Line of Credit") which will
initially bear interest at an annual rate equal to LIBOR plus 175 basis points.
The ERP Preferred Commitment will be pledged as security for the WRP Newco Line
of Credit. See "Wellsford Real Properties, Inc. - Initial Capital and
Financing" and "Description of Capital Stock of WRP Newco - Series A 8%
Convertible Redeemable Preferred Stock".
WRP Newco Risk Factors
In addition to general investment and real estate risks and those factors
set forth elsewhere in this Joint Proxy Statement/Prospectus/Information
Statement under "WRP Newco Risk Factors," in
31
<PAGE>
connection with WRP Newco's future business activities, Wellsford Common
Shareholders should be aware of, among other things, the following factors:
. Nature of investments may involve high risk.
. Illiquidity of WRP Newco's real estate investments.
. Competition in identifying and making investments and attracting
tenants.
. Risks of excessive costs and delays associated with the acquisition,
development, construction and renovation of properties.
. Risks of vacancies at existing properties.
. Lack of control and risks associated with equity investments in and
with third parties.
. Lack of limitation on the amount of debt that may be incurred and
risks of highly leveraged investments.
. Risks associated with debt instruments held by WRP Newco, 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 WRP Newco's cost of funds.
. Risks associated with investments in mortgage loans and junior
mortgages, including lack of control over the collateral and any foreclosure
procedures.
. 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.
. WRP Newco is a newly-formed entity without any prior operating
history.
. Risks of uninsured loss at WRP Newco's properties.
. Potential liability for unknown or future environmental liabilities.
. WRP Newco is dependent primarily upon the efforts of its Chairman of
the Board and President and Chief Executive Officer.
. Tax consequences of the Distribution.
. The ability of WRP Newco's Board of Directors to amend or revise WRP
Newco's investment and other policies without a vote of stockholders.
. The lack of a prior market for shares of WRP Newco Common.
. The potential antitakeover effect of certain provisions of WRP Newco's
Articles of Amendment and Restatement (the "Newco Charter") and Maryland law.
32
<PAGE>
Management
The management of WRP Newco will be led by substantially all of the current
senior management of Wellsford, including, as noted above, Messrs. Lynford and
Lowenthal. During the last 11 years Messrs. Lynford and Lowenthal, together
with other members of their team, succeeded in accomplishing the following:
. Researched and identified multifamily properties in the Southwestern
United States as an opportunity for above-market returns with modest
risk.
. Identified, evaluated and negotiated the acquisition of over 21,000
high-quality multifamily units in eight states. Wellsford currently
owns 72 multifamily properties containing 19,004 units. From calendar
year 1992 through calendar year 1996, Wellsford's revenues increased
from $26.5 million to $131.8 million, representing a compounded annual
growth rate of approximately 49%, and Wellsford EBITDA increased from
$13.8 million to $72.8 million, representing a compounded annual
growth rate of approximately 52%.
. Completed a $100 million initial public offering of Wellsford, which
was the first publicly-traded REIT dedicated exclusively to the
ownership of multifamily properties.
. Raised approximately $585 million in eight subsequent offerings of
Wellsford's common shares, convertible preferred shares, perpetual
preferred shares and senior unsecured debt.
. Obtained an investment grade rating for Wellsford'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").
. Obtained a $150 million unsecured line of credit for Wellsford from a
consortium of domestic and foreign banks.
. Consummated one of the first public REIT mergers when Wellsford
Residential acquired Holly Residential Properties, Inc.
. Created an internal property management operation for Wellsford which
directly managed 84% of its properties.
. Structured the Merger with EQR in a transaction that valued Wellsford
at approximately $1 billion.
Further, assuming consummation of the Merger, investors who bought their
shares of Wellsford Common at the initial public offering in November, 1992,
would have received an average annual return of approximately 22.8% on their
investment, based upon the April 1, 1997 closing market price of a share of EQR
Common on the NYSE and assuming (i) all distributions received on such shares of
Wellsford Common were immediately reinvested in Wellsford Common and (ii) a
33
<PAGE>
value for each share of WRP Newco Common distributed in the Distribution equal
to their book value (which is currently estimated to be $10.43 per share).
Business Strategy
In furtherance of its business strategy, WRP Newco will initially focus its
investments on three distinct aspects of the real estate business. As
opportunities emerge, WRP Newco may in the future expand or modify its real
estate-related businesses and activities.
Commercial Properties. WRP Newco 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. WRP Newco
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. WRP Newco also believes
that there are opportunities available to acquire properties that are not
attractive to REITs and institutional investors because the properties have no
or limited cash flow as a result of required rehabilitation and their not being
substantially leased.
High Yield Debt Investments. WRP Newco 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. WRP Newco 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.
Property Development. WRP Newco will engage in selective development
activities as opportunities arise and when justified by expected returns.
Initially, WRP Newco will continue the development of Palomino Park, its five-
phase residential community begun by Wellsford, taking advantage of the fixed-
price land purchase options obtained by Wellsford two years ago. This
development may be retained for investment and operated by WRP Newco, sold, or
converted to condominium ownership. See "WRP Newco's Business and Properties -
Wellsford Property Development - Palomino Park". 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, WRP
Newco may seek to obtain bond financing from local governmental authorities
which generally bear interest at rates substantially below rates with respect to
conventional financing.
WRP Newco 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 business.
Some of the entities in which WRP Newco may invest may be start-up companies or
companies in need of additional capital. WRP Newco may also manage and lease
properties owned by it or in which it has an equity or debt investment.
34
<PAGE>
Initial Capital and Financing
Initially, WRP Newco expects to have available the following sources of
capital, financing and credit support:
. $3.5 million of proceeds from the sale to ERP Operating Partnership
of shares of WRP Newco's Class A Common at a price equal to the Issuance
Price.
. $25 million pursuant to the ERP Preferred Commitment to acquire up
to 1,000,000 shares of WRP Newco Series A Preferred at the request of WRP
Newco and subject to certain limited conditions. Each share of WRP Newco
Series A Preferred is convertible into shares of WRP Newco Common at a
premium equal to 8% of the Issuance Price. The ERP Preferred Commitment
will be pledged as security for the WRP Newco Line of Credit.
. $50 million under a two-year line of credit as to which Bank of
Boston and Morgan Guaranty have issued a commitment. The WRP Newco Line of
Credit will initially bear interest at an annual rate equal to LIBOR plus
175 basis points and will be extendible for an additional one-year period.
. Approximately $81.6 million in construction financing and credit
enhancement with respect to Palomino Park.
See "Wellsford Real Properties, Inc. - Initial Capital and Financing,"
"Description of Capital Stock of WRP Newco" and "Certain Agreements Between WRP
Newco and ERP Operating Partnership".
Initial Investments
In furtherance of its business strategy, WRP Newco has identified,
negotiated and, except in one instance, consummated the acquisition of the
following investments:
. 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 85.7% occupied at April 1, 1997. WRP Newco currently
intends to invest an aggregate of approximately $13.7 million to renovate and
reposition such properties. At the time of its acquisition of these properties,
WRP Newco obtained the right to develop for no additional consideration an
additional 1.1 million square feet of commercial space at these properties.
The buildings are described as follows:
<TABLE>
<CAPTION>
Location Purchase Price
in Purchase Price/ & Planned
Property New Gross Area Purchase Price Planned Impr. Per Sq.
Name Jersey (Sq. Ft.) Per Sq. Ft.(1) Improvements Ft.(1)
- -------- -------- ---------- ------------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Point View Wayne 560,000 $15.8 million/$28 $9.1 million $ 44.4
Main Campus
(two buildings)
Greenbrook Corp. Ctr. Fairfield 190,000 23.7 million/125 0.5 million 127.4
1700 Valley Road Wayne 70,600 1.0 million/14 0.2 million 17
Chatham Building(2) Chatham 65,000 5.1 million/78 3.1 million 126.2
1800 Valley Road Wayne 54,800 2.0 million/36 0.8 million 51.1
------- ------------------- -------------
Total/Weighted average 940,400 $47.6 million/$50.1 $13.7 million $ 65.2
- ------------------
</TABLE>
(1) Assumes no allocation of purchase price for undeveloped land.
(2) WRP Newco has entered into a ten-year lease for approximately 22,000 square
feet in the Chatham Building at an initial gross rent of $26.00 per square
foot and rising to approximately $28.00 per square foot in the sixth year.
. $20 million of an $80 million subordinated secured mezzanine loan to
the owner of 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"), expected to close in April 1997. The 277 Park Loan will be
payable in full in May, 2007 and will bear interest payable monthly at the rate
of approximately 12% per annum.
. A $17.8 million mortgage loan on, 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 payable monthly at the rate of 9% percent per annum.
. An approximate 80% interest in Phases I and II of, and in options to
acquire and develop Phases III, 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
65% completed 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. An aggregate of approximately $21.3 million has been invested in Palomino
Park, exclusive of amounts advanced under the existing construction loan for
Phase I. ERP Operating Partnership will have an approximate 20% interest in
Palomino Park.
35
<PAGE>
Certain Agreements Between WRP Newco and ERP Operating Partnership
. Common Stock and Preferred Stock Purchase Agreement - Provides for the
purchase by ERP Operating Partnership of (i) $3.5 million of WRP Newco Class A
Common and (ii) $25 million of WRP Newco Series A Preferred as requested by WRP
Newco over a 3-year period. ERP Operating Partnership is entitled to elect a
nominee to the WRP Newco Board of Directors for a minimum of two years. For ten
years after the Effective Time, WRP Newco has the right to direct the voting of
all shares of WRP Newco Series A Preferred, WRP Newco Class A Common and WRP
Newco Common owned by ERP Operating Partnership or any of its affiliates on most
matters. See "Certain Agreements Between WRP Newco and ERP Operating
Partnership--Common Stock and Preferred Stock Purchase Agreement."
. Registration Rights Agreement - Provides for registration rights at WRP
Newco's expense with respect to shares of WRP Newco Class A Common, WRP Newco
Series A Preferred and WRP Newco Common held by ERP Operating Partnership. See
"Certain Agreements Between WRP Newco and ERP Operating Partnership --
Registration Rights Agreement."
. Sonterra Option Agreement - Provides ERP Operating Partnership with a
right of first offer to acquire the Sonterra Option and a right to acquire the
Sonterra Option if WRP Newco does not exercise it. If WRP Newco acquires
Sonterra, ERP Operating Partnership will have a "Right of First/Last Offer" for
the property.
. Agreement Regarding Palomino Park - Governs the relationship between WRP
Newco and ERP Operating Partnership as 80% and 20% shareholders, respectively,
of the entity
36
<PAGE>
controlling Palomino Park, including certain rights of first offer and put/call
rights with respect to each other's shares. ERP Operating Partnership has also
agreed to be a stand-by purchaser of Phase I if the construction loan thereon is
not paid, and to be similarly obligated with respect to Phase II. See "Certain
Agreements Between WRP Newco and ERP Operating Partnership -- Agreement
Regarding Palomino Park."
. Credit Enhancement Agreement - Provides for ERP Operating Partnership to
make its own credit available for a period of eight years in the form of a
guaranty of WRP Newco's obligations to repay the bonds issued to finance the
park and certain infrastructure within Palomino Park. See "Certain Agreements
Between WRP Newco and ERP Operating Partnership -- Credit Enhancement
Agreement."
37
<PAGE>
Wellsford Real Properties, Inc. (Predecessor) Summary Unaudited Pro Forma
Combined Financial Data
The following tables set forth the summary unaudited pro forma combined
financial data for Wellsford Real Properties, Inc. (Predecessor) as a combined
entity, giving effect to the Merger, Contribution and Distribution 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 Joint Proxy Statement/Prospectus/
Information Statement.
The summary unaudited pro forma combined operating data are presented as if
the Merger, Contribution and Distribution had been consummated on January 1,
1996. In addition to the Merger, Contribution and Distribution, the pro forma
combined operating data gives effect to certain material events which occurred
between January 1, 1996 and March 31, 1997 as if they had occurred on January 1,
1996. See the notes to the unaudited Pro Forma Combined Income Statement for the
year ended December 31, 1996 included elsewhere in this Joint Proxy
Statement/Prospectus/Information Statement.
The summary unaudited pro forma combined balance sheet data are presented
as if the Merger, Contribution and Distribution had occurred on December 31,
1996. In addition to the Merger, Contribution and Distribution, the pro forma
combined balance sheet data gives effect to certain material events which
occurred between October 1, 1996 and March 31, 1997 as if they had occurred on
December 31, 1996. See the notes to the unaudited Pro Forma Combined Balance
Sheet at December 31, 1996 included elsewhere in this Joint Proxy
Statement/Prospectus/Information Statement. In the opinion of management, all
necessary adjustments necessary to reflect the effects of the Merger,
Contribution and Distribution have been made.
The summary unaudited pro forma financial data should be read in
conjunction with, and is qualified in its entirety by, the respective historical
financial statements and notes thereto of Wellsford and Wellsford Real
Properties, Inc. (Predecessor) incorporated by reference into, and included in,
this Joint Proxy Statement/Prospectus/Information Statement, respectively.
The summary unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of Wellsford Real Properties, Inc.
(Predecessor) would have been for the period and as of the date presented; nor
does such data purport to represent the results of future periods.
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<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Summary Unaudited Combined Financial Data
<TABLE>
<CAPTION>
Pro Forma Historical
Year Year
Ended Ended
December 31, December 31,
1996 1996
---- ----
(Unaudited)
(In thousands except per share data)
<S> <C> <C>
OPERATING DATA:
Revenues:
Rental income $3,632
Other income 250
Interest income 3,952 $757
--------------------------
7,834 757
--------------------------
Expenses:
Property operating and maintenance 852
Real estate taxes 428
Interest 1,550
General and administrative 1,750
Depreciation 510
Property management 181
--------------------------
5,271 0
--------------------------
Income before income taxes 2,563 757
Provision for income taxes 1,047
Net income $1,516 $757
=========================
Net income per common share $0.31
Weighted average common shares outstanding 4,900
<CAPTION>
Pro Forma Historical Historical
December 31, December 31, December 31,
1996 1996 1995
---- ---- ----
(Unaudited)
(In thousands)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Real estate $68,906 $21,306 $7,955
Mortgage notes and interest receivable $37,934 $17,934 $0
Total assets $113,192 $44,760 $18,369
Total debt $59,755 $14,755 $14,755
Total equity $51,109 $30,005 $3,614
</TABLE>
39
<PAGE>
Proposals Regarding WRP Newco
In order to satisfy the requirements of the ASE, Wellsford Common
Shareholders will also be asked to approve the Additional Share Offering.
Wellsford Common Shareholders will also be asked to approve the adoption of WRP
Newco's 1997 Management Incentive Plan.
The Additional Share Offering would dilute the equity of existing
stockholders if the purchase price for the Additional Shares is less than the
book value of WRP Newco Common on the date of the Distribution. On the other
hand, the Board of Trustees of Wellsford and the Board of Directors of WRP Newco
believe that the Additional Share Offering will provide more capital available
for investment, enhance WRP Newco's capital structure and increase the liquidity
of WRP Newco Common. See "Proposal to Approve WRP Newco Additional Share
Offering."
The issuance of shares of WRP Newco Common pursuant to WRP Newco's 1997
Management Incentive Plan could be dilutive to existing stockholders or could
adversely affect prevailing market prices. On the other hand, the Board of
Trustees of Wellsford and the Board of Directors of WRP Newco believe that WRP
Newco's 1997 Management Incentive Plan will enable WRP Newco to attract and
retain personnel and will align the interests of management with those of WRP
Newco's stockholders. See "Proposal to Approve WRP Newco's 1997 Management
Incentive Plan."
40
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RISK FACTORS
In considering whether to approve the Merger, the shareholders of EQR and
Wellsford should consider, in addition to the other information in this Proxy
Statement/Prospectus/Information Statement, the matters described in this
section.
Conflicts of Interest
In considering whether to approve the Merger, shareholders should be aware
that certain members of the management of Wellsford and the Wellsford Board of
Trustees have certain interests that arise in connection with the Merger and the
Contribution and Distribution that are in addition to the interests of
shareholders of Wellsford generally. These interests arise under existing
agreements with, and annual compensation awards from, Wellsford, which were
approved by Wellsford's independent trustees in previous years, and proposed
agreements with WRP Newco and the Surviving Trust relating to, among other
things, (i) severance payments to be made to Messrs. Kelley, MacKenzie, Hughes
and Strong, executive officers of Wellsford, in the amounts of $1,149,563,
$764,070, $692,440 and $585,000, respectively, approximately $240,051, $391,062,
$347,583 and $260,250 of which (assuming receipt of an annual bonus each year
equal to the average annual bonus received for the prior three fiscal years,
which bonuses are not guaranteed), respectively, will be received under existing
employment agreements if the Merger does not take place, (ii) the forgiveness of
approximately $1.5 million, $1.5 million, $281,000, $1.1 million, $1.1 million
and $369,000 of loans made to Messrs. Lynford, Lowenthal , Kelley, MacKenzie,
Hughes and Strong to acquire shares of Wellsford Common, approximately $659,000,
$659,000, $125,000, $503,000, $503,000 and $181,000 of which, respectively, will
be forgiven over the remaining terms of the loans if the Merger does not take
place, (iii) the issuance of 22,346 shares of Wellsford Common to each of
Messrs. Lynford, Lowenthal and Kelley, which will not be issued if the Merger is
not approved, (iv) the acceleration of vesting of 2,843 restricted shares issued
to each of Messrs. MacKenzie and Hughes, which will not be accelerated if the
Merger is not consummated, but would vest in subsequent years if Wellsford
satisfied certain performance criteria, (v) payments of $2.6 million, $2.4
million, $420,000, $1.0 million, $1.1 million and $500,000 to be made on behalf
of Messrs. Lynford, Lowenthal, Kelley, MacKenzie, Hughes and Strong,
respectively, to satisfy income and excise tax obligations resulting from
certain monies and other benefits to be paid to them in connection with the
Merger, subject to adjustment to the extent the actual value of Wellsford Common
at the Effective Time is greater or less than $27.50, which amounts will not be
paid if the Merger is not consummated and (vi) the issuance of WRP Newco stock
options to certain executive officers and trustees of Wellsford in replacement
of certain existing Wellsford share options and reload options granted in
connection with the exercise of vested Wellsford share options, which
replacement options will not be issued if the Merger is not consummated. See
"Interests of Certain Persons in the Merger and Distribution--Benefits of Key
Executives." In addition, upon completion of the Merger, WRP Newco will enter
into employment agreements with Messrs. Lynford and Lowenthal for approximately
five and one-half years at annual base salaries of $275,000 and employment
agreements with Messrs. Hughes
41
<PAGE>
and Strong for two years at annual base salaries of $175,000 and $125,000,
respectively. WRP Newco will also assume the existing split dollar life
insurance arrangements between Wellsford and Messrs. Lynford and Lowenthal.
Further, upon completion of the Merger, Messrs. Lynford and Lowenthal will
each enter into a five-year consulting agreement with ERP Operating Partnership
for annual compensation of $200,000. Subsequent to the Merger, Messrs. Lynford
and Lowenthal will also be appointed to the Board of Trustees of the Surviving
Trust for a three year term. In addition, Mr. MacKenzie, Executive Vice
President-Director of Operations of Wellsford, will be a Senior Vice President
of the Surviving Trust upon completion of the Merger at an initial salary of
$175,000 per annum. The Surviving Trust will indemnify each trustee and officer
of Wellsford for all actions on or prior to the Effective Time to the same
extent such individuals were indemnified by Wellsford prior to the Effective
Time. See "Interests of Certain Persons in the Merger and Distribution."
Adverse Consequences of Debt Financing and Preferred Shares
The Surviving Trust is subject to the risks normally associated with debt
or preferred equity financing, including the risk that the Surviving Trust's
cash flow will be insufficient to meet required payments of principal, interest
and distributions, the risk that existing indebtedness may not be refinanced or
that the terms of such refinancing will not be as favorable as the terms of
current indebtedness and the risk that necessary capital expenditures for such
purposes as renovations and other improvements may not be financed on favorable
terms or at all. If the Surviving Trust were unable to refinance its
indebtedness on acceptable terms, or at all, the Surviving Trust might be forced
to dispose of one or more of the properties on disadvantageous terms, which
might result in losses to the Surviving Trust and might adversely affect the
cash available for distributions to shareholders. If interest rates or other
factors at the time of the refinancing result in higher interest rates upon
refinancing, the Surviving Trust's interest expense would increase, which would
affect the Surviving Trust's ability to make distributions to its shareholders.
Furthermore, if a property is mortgaged to secure payment of indebtedness and
the Surviving Trust is unable to meet mortgage payments, the mortgagee could
foreclose upon the property, appoint a receiver and receive an assignment of
rents and leases or pursue other remedies, all with a consequent loss of income
and asset value to the Surviving Trust. Foreclosures could also create taxable
income without accompanying cash proceeds, thereby hindering the Surviving
Trust's ability to meet the REIT distribution requirements of the Code.
Restrictions on Indebtedness of the Surviving Trust
A substantial portion of the Surviving Trust's debt was issued pursuant to
five different indentures which restrict the amount of indebtedness (including
acquisition financing) the Surviving Trust may incur. Accordingly, in the event
that the Surviving Trust is unable to raise additional equity or borrow money
because of the debt restrictions in the indentures, the Surviving Trust's
ability to acquire additional properties may be limited. If the Surviving Trust
is unable to acquire additional properties, its ability to increase the
distributions with respect to
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<PAGE>
Surviving Common will be limited to management's ability to increase funds from
operations, and thereby cash available for distributions, from the existing
properties in the Surviving Trust's portfolio at such time.
Other Restrictive Covenants
Immediately following consummation of the Merger, the Surviving Trust will
own properties that are subject to restrictive covenants or deed restrictions
relating to current or previous tax-exempt bond financing and owns the bonds
collateralized by additional properties. The Surviving Trust will retain an
independent outside consultant to monitor compliance with the restrictive
covenants and deed restrictions that affect these properties. The bond
compliance requirements may have the effect of limiting the Surviving Trust's
income from certain of these properties in the event the Surviving Trust is
required to lower its rental rates to attract low or moderate income tenants, or
eligible/qualified tenants.
Potential Change in Relative Stock Prices
In considering whether to approve the Merger, shareholders of Wellsford and
EQR should consider the risks associated with (a) a potential change in the
relative stock prices of EQR Common and Wellsford Common prior to the Effective
Time, and (b) a possible reduction in the market price of Survivor Common
following the Merger, due to future sales of shares of Survivor Common or the
availability of such shares for future sales, government regulatory action, tax
laws, interest rates and market conditions in general.
Sales of a substantial number of shares of Survivor Common or the
perception that such sales could occur, could adversely affect prevailing market
prices for shares of Survivor Common.
Risks to Wellsford Common Shareholders
Termination Payments if Merger Fails to Occur. The Merger Agreement
provides for a Break-Up Fee payable by Wellsford of $14 million plus Break-Up
Expenses of up to $2.5 million if the Merger Agreement is terminated by either
EQR or Wellsford under certain circumstances and, within one year after such
termination, Wellsford enters into an agreement regarding an "Acquisition
Proposal" (as hereinafter defined), which is consummated. In addition, if the
Merger Agreement is terminated for certain reasons, EQR or Wellsford will be
required to pay the other party's Break-Up Expenses of up to $2.5 million. See
"The Merger -- Termination Fee and Expenses."
The obligation to pay the Break-Up Fee and/or Break-Up Expenses may
adversely affect the ability of Wellsford to engage in another transaction in
the event the Merger is not consummated.
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<PAGE>
Reduction in Ownership and Voting. Upon consummation of the Merger,
Wellsford Common Shareholders will own approximately 17% of the Survivor Common
and will not have separate approval rights with respect to any actions or
decisions of the Surviving Trust.
Reduction in Distributions. After the Merger, the distributions payable
with respect to Survivor Common are expected to be less than the distributions
payable with respect to Wellsford Common. Based upon the current annualized
distributions per share of EQR Common and Wellsford Common, the distributions
payable with respect to the Survivor Common would be approximately 19.5% less
than the distributions payable with respect to Wellsford Common.
No Appraisal Rights under Maryland Law
Shareholders of Wellsford and shareholders of EQR are not entitled to
dissenting shareholders' appraisal rights under Maryland law. Maryland law does
not provide appraisal rights to shareholders of a REIT in connection with a
merger if their shares are listed on a national securities exchange, such as the
NYSE, on the record date for determining shareholders entitled to vote on such
merger. All of the shares of EQR and Wellsford outstanding on the record date
for determining the shareholders entitled to vote on the Merger were listed on
the NYSE.
Potential Adverse Effects of Combining the Companies
EQR and Wellsford are large enterprises with operations in a number of
different states. There can be no assurance that costs or other factors
associated with the integration of the two companies would not adversely affect
future combined results of operations or the benefits of expected costs savings.
General Real Estate Investment Considerations; Changes in Laws
General. Real property investments are subject to varying degrees of risk
and are relatively illiquid. Income from real property investments and the
Surviving Trust's resulting ability to make expected distributions to
shareholders may be adversely affected by the general economic climate, local
conditions such as oversupply of apartment units or a reduction in demand for
apartment units in the area, the attractiveness of the properties owned by the
Surviving Trust to tenants, zoning or other regulatory restrictions, the ability
of the Surviving Trust to provide adequate maintenance and insurance, and
increased operating costs (including insurance premiums and real estate taxes).
The Surviving Trust's income would also be adversely affected if tenants were
unable to pay rent or the Surviving Trust were unable to rent apartment units on
favorable terms. If the Surviving Trust were unable to promptly relet units or
renew the leases for a significant number of apartment units, or if the rental
rates upon such renewal or reletting were significantly lower than expected
rates, then the Surviving Trust's funds from operations and ability to make
expected distributions to shareholders may be
44
<PAGE>
adversely affected. In addition, certain expenditures associated with each
equity investment (such as real estate taxes and maintenance costs) generally
are not reduced when circumstances cause a reduction in income from the
investment. Furthermore, real estate investments are relatively illiquid and,
therefore, will tend to limit the ability of the Surviving Trust to vary its
portfolio promptly in response to changes in economic or other conditions.
Changes in Laws. Increases in real estate taxes, income taxes and service
or other taxes generally are not passed through to tenants under existing leases
and may adversely affect the Surviving Trust's funds from operations and its
ability to make distributions to shareholders. Similarly, changes in laws
increasing the potential liability for environmental conditions existing on
properties or increasing the restrictions on discharges or other conditions may
result in significant unanticipated expenditures, which would adversely affect
the Surviving Trust's funds from operations and its ability to make
distributions to shareholders.
Potential Environmental Liability Affecting the Surviving Trust
Under various Federal, state and local environmental laws, ordinances and
regulations, an owner of real estate may be liable for the costs of removal or
remediation of certain hazardous or toxic substances on such property. These
laws often impose environmental liability without regard to whether the owner
knew of, or was responsible for, the presence of such hazardous or toxic
substances. The presence of such substances, or the failure properly to
remediate such substances, may adversely affect the owner's ability to sell or
rent the property or to borrow using the 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 laws impose liability for release of asbestos-
containing materials ("ACMs") into the air and third parties may seek recovery
from owners or operators of real properties for personal injury associated with
ACMs. In connection with the ownership (direct or indirect), operation,
management and development of real properties, the Surviving Trust 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 for certain
other related costs, including governmental fines and injuries to persons and
property.
All of EQR's properties have been the subject of a Phase I and, in certain
cases, a supplemental environmental assessment completed by qualified
independent environmental consultant companies. All of the environmental
assessments were conducted within the last five years and were obtained prior to
the acquisition by EQR of each of the properties. These environmental
assessments have not revealed, nor is EQR aware of, any environmental liability
that EQR's management believes would have a material adverse effect on the
Surviving Trust's business, results of operations, financial condition or
liquidity.
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<PAGE>
All of Wellsford's properties have been the subject of a Phase I or similar
environmental assessment completed by qualified independent environmental
consultant companies. Of these environmental assessments, 16 were conducted
during the period from 1989 through 1991 and 63 were conducted during the period
from 1992 through the present. These environmental assessments have not
revealed, nor is Wellsford aware of, any environmental liability that
Wellsford's management believes would have a material adverse effect on the
Surviving Trust's business, results of operations, financial condition or
liquidity.
No assurance can be given that existing environmental assessments with
respect to any EQR or Wellsford properties reveal all environmental liabilities,
that any prior owner of a property did not create any material environmental
condition not known to EQR or Wellsford, or that a material environmental
condition does not otherwise exist as to any one or more properties of EQR or
Wellsford.
Consequences of Failure to Qualify as a REIT
Taxation as a Corporation. The Surviving Trust intends to operate in a
manner so as to qualify as a REIT under the Code. However, no assurance can be
given that the Surviving Trust was organized and will be able to operate in a
manner so as to qualify or remain so qualified. Qualifications as a REIT
involves the satisfaction of numerous requirements (some on an annual and
quarterly basis) established under highly technical and complex Code provisions
for which there are only limited judicial or administrative interpretations, and
involves the determination of various factual matters and circumstances not
entirely within the Surviving Trust's control.
If the Surviving Trust were to fail to qualify as a REIT in any taxable
year, the Surviving Trust would be subject to Federal income tax (including any
applicable alternative minimum tax) on its taxable income at corporate rates.
Moreover, unless entitled to relief under certain statutory provisions, the
Surviving Trust also would be disqualified from treatment as a REIT for the four
taxable years following the year during which qualification is lost. This
treatment would reduce the net earnings of the Surviving Trust available for
investment or distribution to shareholders because of the additional tax
liability to the Surviving Trust for the years involved. In addition,
distributions to shareholders would no longer be required to be made. See
"Federal Income Tax Considerations."
Other Tax Liabilities. Even if the Surviving Trust qualifies as a REIT, it
will be subject to certain Federal, state and local taxes on its income and
property. See "The Merger--Federal Income Tax Consequences--Other Tax
Considerations--State and Local Taxes." In addition, the Surviving Trust's
management operations, which will be conducted through Equity Residential
Properties Management Limited Partnership , Equity Residential Properties
Management Limited Partnership II and Equity Residential Properties Management
Limited Partnership III (collectively, the "Management Partnerships") generally
will be subject to Federal income tax at regular corporate rates. See "The
Merger-- Federal Income Tax Consequences - Qualification of Surviving Trust as a
REIT."
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<PAGE>
Consequences of Failure to Qualify as Partnerships. The Surviving Trust
intends that ERP Operating Partnership, the Management Partnerships and each of
the other partnership and limited liability company subsidiaries will be
organized as partnerships and will qualify for treatment as such under the Code.
If any of such subsidiaries fails to qualify for such treatment under the Code,
the Surviving Trust would cease to qualify as a REIT, and such subsidiary would
be subject to Federal income tax (including any alternative minimum tax) on its
income at corporate rates. See "The Merger--Federal Income Tax Consequences--
Qualification of Surviving Trust as a REIT."
Each of EQR and Wellsford believes it has operated in a manner so as to
qualify as a REIT under the Code for all taxable years ending on or before
December 31, 1996 and for the period beginning January 1, 1997 and ending on the
date hereof.
Dependence on Key Personnel
The Surviving Trust will be dependent on the efforts of its executive
officers. While the Surviving Trust believes that it could find replacements for
these key personnel, the loss of their services may have a temporary adverse
effect on the operations of the Surviving Trust. None of these officers has
entered or will enter into employment agreements with the Surviving Trust.
Distribution Requirements Potentially Increasing Indebtedness of the Surviving
Trust
The Surviving Trust may be required from time to time, under certain
circumstances, to accrue as income for tax purposes interest and rent earned but
not yet received. In such event, or upon the repayment by the Surviving Trust of
principal on debt, the Surviving Trust could have taxable income without
sufficient cash to enable the Surviving Trust to meet the distribution
requirements of a REIT. Accordingly, the Surviving Trust could be required to
borrow funds or liquidate investments on adverse terms in order to meet such
distribution requirements. See "Federal Income Tax Considerations."
9.8% Ownership Limit; Inapplicability to Mr. Zell and Others
In order to maintain its qualification as a REIT under the Code, not more
than 50% of the value of the outstanding shares of beneficial interest of the
Surviving Trust may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities). Certain
beneficial owners (the "Zell Holders") affiliated with Mr. Zell and Equity
Properties Management Corp. ("EPMC") (i.e., beneficiaries of trusts established
for the benefit of Mr. Zell and his family and trusts established for the
benefit of the family of Mr. Robert Lurie, a deceased partner of Mr. Zell (the
"Lurie Family Trusts")) and certain entities controlled by Starwood Capital
Partners L.P. and its affiliates which contributed 23 of the properties to EQR
at the time of EQR's initial public offering (the "IPO") (the "Starwood Original
Owners") (through their potential ownership rights of EQR Common) together
constitute four individuals for purposes of this test and, under the Code, will
be deemed to own approximately 10%
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of the value of the outstanding shares of beneficial interest of the Surviving
Trust. Due to such concentration of ownership of the Surviving Trust, ownership
of more than 9.8% of the lesser of the number or value of the outstanding shares
of beneficial interest of the Surviving Trust by any single shareholder has been
restricted, with certain exceptions, for the purpose of maintaining the
Surviving Trust's qualification as a REIT under the Code. The Surviving Trust's
Board of Trustees, upon receipt of a ruling from the Internal Revenue Service
(the "Service"), an opinion of counsel or other evidence satisfactory to the
Board of Trustees and upon such other conditions as the Board of Trustees may
direct, may also exempt a proposed transferee from this restriction. See
"Comparison of Right of Shareholders --Restrictions on Ownership, Transfer and
Issuance of Shares." Additionally, the Surviving Trust's Declaration of Trust
will allow certain transfers of such Survivor Common without the transferees
being subject to the 9.8% ownership limit, provided such transfers do not result
in an increased concentration in the ownership of the Surviving Trust. Finally,
if the Additional Provisions are approved by the Wellsford Common Shareholders,
such restrictions in the Surviving Trust's Declaration of Trust will be reduced
to 5%. See "Proposal Regarding Additional Declaration of Trust Provisions."
Limits on Changes in Control
Ownership Limit. The 9.8% ownership limit, as well as the ability of the
Surviving Trust to issue additional Survivor Common or other shares of
beneficial interest (which may have rights and preferences senior to the
Survivor Common), may discourage a change of control of the Surviving Trust and
may also (i) deter tender offers for the Survivor Common, which offers may be
advantageous to shareholders, and (ii) limit the opportunity for shareholders to
receive a premium for their Survivor Common that might otherwise exist if an
investor were attempting to assemble a block of Survivor Common in excess of
9.8% of the outstanding shares of beneficial interest of the Surviving Trust or
otherwise effect a change of control of the Surviving Trust. If the Additional
Provisions are approved by the Wellsford Common Shareholders, such restrictions
in the Surviving Trust's Declaration of Trust will be reduced to 5%. See
"Proposal Regarding Additional Declaration of Trust Provisions."
Staggered Board. The Board of Trustees of the Surviving Trust will be
divided into three classes of trustees. The terms of the classes will expire in
1997, 1998 and 1999, respectively. As the term of each class expires, trustees
for that class will be elected for a three-year term and the trustees in the
other two classes will continue in office. The staggered terms for trustees may
impede the shareholders' ability to change control of the Surviving Trust even
if a change in control were in the shareholders' interest.
Preferred Shares. The Surviving Trust's Declaration will authorize the
Board of Trustees to issue up to 100,000,000 shares of Survivor Preferred and to
establish the preferences and rights (including the right to vote and the right
to convert into Survivor Common) of any Survivor Preferred issued. The power to
issue Survivor Preferred could have the effect of delaying or preventing a
change in control of the Surviving Trust even if a change in control
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<PAGE>
were in the shareholders' interest. There are additional limitations on
ownership regarding each outstanding series of EQR Preferred and Wellsford
Preferred.
Maryland Business Combination Law. Under the Maryland General Corporation
Law, as amended ("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 real
estate investment trust and any person who beneficially owns 10% or more of the
voting power of the trust's shares of beneficial interest or an affiliate of the
trust who, at any time within the two-year period prior to the date in question,
was the beneficial owner of 10% or more of the voting power of the trust's
shares of beneficial interest (an "Interested Shareholder"), or an affiliate of
such Interested Shareholder, are prohibited for five years after the most recent
date on which the Interested Shareholder becomes an Interested Shareholder.
Thereafter, any such business combination must be recommended by the board of
trustees of such trust and approved by the affirmative vote of at least (a) 80%
of the votes entitled to be cast by holders of outstanding voting shares of
beneficial interest of the trust and (b) two-thirds of the votes entitled to be
cast by holders of voting shares of beneficial interest of the trust other than
shares held by the Interested Shareholder with whom (or with whose affiliate)
the business combination is to be effected (unless, among other conditions, the
holders of the common shares of the trust receive a minimum price (as defined in
the MGCL) for their shares and the consideration is received in cash or in the
same form as previously paid by the Interested Shareholder for its common
shares). Such provisions could have the effect of inhibiting a change in control
even if a change in control were in the shareholders' interest.
Control and Influence by Significant Shareholders of EQR
As of December 31, 1996, the Zell Holders held certain OP Units issued at
the time of the IPO ("Original OP Units") to certain affiliates of Mr. Zell
which contributed 33 of the properties to EQR at the time of the IPO (the "Zell
Original Owners"), EPMC and other affiliates of Mr. Zell owned in the aggregate
approximately 7.92% of the shares of EQR Common (assuming that all of the
partnership interests in ERP Operating Partnership are exchanged for EQR
Common), and the Starwood Original Owners owned in the aggregate approximately
3.47% of the shares of EQR Common (assuming that all of the partnership
interests in ERP Operating Partnership are exchanged for EQR Common). The
Starwood Original Owners, together with the Zell Original Owners, will be
referred to as the "Original Owners." As of December 31, 1996, EQR had options
outstanding to purchase approximately 2.33 million shares of EQR Common which it
has granted to certain officers, employees and trustees of EQR and consultants
to EQR, some of whom are affiliated with Mr. Zell, representing in the aggregate
approximately 3.80% of the EQR Common (assuming that all such options are
exercised for EQR Common and all of the outstanding partnership interests in ERP
Operating Partnership are exchanged for EQR Common). Further, the consent of
affiliates of Mr. Zell who are Zell Holders and of the Starwood Original Owners
is required for certain amendments to ERP Operating Partnership's partnership
agreement. Accordingly, Mr. Zell and
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the Starwood Original Owners may continue to have substantial influence over the
Surviving Trust, which influence might not be consistent with the interests of
other shareholders, and on the outcome of any matters submitted to the Surviving
Trust's shareholders for approval. In addition, although there is no current
agreement, understanding or arrangement for these shareholders to act together
on any matter, these shareholders would be in a position to exercise significant
influence over the affairs of the Surviving Trust if they were to act together
in the future.
Exemptions for Mr. Zell and Others from Maryland Business Combination Law which
Tend to Inhibit Takeovers
As permitted by the MGCL, the Surviving Trust will exempt any business
combination involving Mr. Zell, the Zell Holders, EPMC and their respective
affiliates and associates, present or future, or any other person acting in
concert or as a group with any of the foregoing persons and, consequently, the
five-year prohibition and the super-majority vote requirements will not apply to
a business combination between any of them and the Surviving Trust. As a result,
Mr. Zell, the Zell Holders, EPMC, any present or future affiliate or associate
of theirs or any other person acting in concert or as a group with any of the
foregoing persons may be able to enter into business combinations with the
Surviving Trust, which may not be in the best interest of the shareholders,
without compliance by the Surviving Trust with the super-majority vote
requirements and other provisions of the MGCL.
Tax Termination of ERP Operating Partnership
In connection with the Merger, more than 50% of the total interest in ERP
Operating Partnership's capital and profits will be exchanged. Therefore, the
Merger will result in the termination of ERP Operating Partnership for federal
income tax purposes. Under existing Treasury Regulations under the Code, this
partnership termination will cause a deemed distribution of all of the assets of
ERP Operating Partnership to the partners of ERP Operating Partnership
(including the Surviving Trust) followed by a deemed re-contribution of such
assets by such partners to a newly formed partnership. See "The Merger - Federal
Income Tax Consequences - Tax Termination of ERP Operating Partnership." Such
deemed distribution and re-contribution is not expected to cause gain
recognition to the Surviving Trust because the amount of cash deemed distributed
to the Surviving Trust as a result of the deemed liquidation (including any
deemed distribution occurring under Code Section 752 as a result of a shifting
of liabilities among the partners of the ERP Operating Partnership) is not
expected to exceed the Surviving Trusts's adjusted basis in the ERP Operating
Partnership. Moreover, because the taxable years of both the ERP Operating
Partnership and the Surviving Trust end on the same date, the closing of the ERP
Operating Partnership's taxable year as a result of the termination should have
no adverse tax consequences to the Surviving Trust. However, the termination of
the ERP Operating Partnership will cause the assets of the ERP Operating
Partnership to be depreciated as if they were newly acquired by the ERP
Operating Partnership, possibly resulting in lower annual depreciation
deductions to the Surviving Trust for federal income tax purposes. This
reduction in depreciation deductions could cause a greater proportion of the
distribution to holders of Survivor Common and Survivor Preferred to be taxable
as dividends at ordinary income rates. See "Federal Income Tax Consequences--
Taxation of Taxable Domestic Shareholders." In addition the deemed re-
contribution of the
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assets to the ERP Operating Partnership could result in a reallocation of the
built-in gain attributable to the properties owned by the ERP Operating
Partnership. See "Federal Income Tax Consequences -- Tax Aspects of Surviving
Trust's Investment in Partnerships -- Tax Allocations With Respect to the
Properties."
WRP NEWCO RISK FACTORS
Ownership of WRP Newco Common involves the following material risks:
General Risks
If the properties of WRP Newco, of those entities in which it invests or of
those entities to which it will lend (collectively, the "WRP Newco Properties")
do not generate revenue sufficient to meet operating expenses, including debt
service and capital expenditures, the financial condition and results of
operations of WRP Newco may be adversely affected. WRP Newco's financial
condition and results of operations may be adversely affected by a number of
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 WRP Newco 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 WRP Newco Property is mortgaged to secure the payment
of indebtedness and if WRP Newco or the entity in which WRP Newco 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.
Nature of Investments Made by WRP Newco May Involve High Risk; Illiquidity of
Real Estate Investments
WRP Newco may make investments in real estate-related assets and businesses
which have experienced severe financial difficulties, which difficulties may
never be overcome. Since WRP Newco 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 WRP Newco.
Equity and debt investments in real estate may be relatively illiquid.
Such illiquidity limits the ability of WRP Newco to modify its portfolio in
response to changes in economic or
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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 WRP Newco.
Difficulty of Locating Suitable Investments; Competition
Identifying, completing and realizing on real estate investments has from
time to time been highly competitive, and involves a high degree of uncertainty.
WRP Newco 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 WRP Newco will
be able to locate and complete investments which satisfy WRP Newco'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 WRP Newco will compete for investments and its
services are far larger than WRP Newco, may have greater financial resources
than WRP Newco and may have management personnel with more experience than the
officers of WRP Newco.
Risks of Acquisition, Development, Construction and Renovation Activities
Acquisition. WRP Newco intends to acquire existing properties to the extent
that they can be acquired on advantageous terms and meet WRP Newco'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. WRP Newco also intends to pursue
the selective development, construction and renovation of commercial and
residential properties for its own account or the account of entities in which
it owns an equity interest as opportunities arise. Risks associated with WRP
Newco's development, construction and renovation activities include the risks
that: WRP Newco 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 WRP Newco, 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,
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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 WRP Newco. 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.
WRP Newco may elect not to exercise its option to purchase the land
underlying Phases III, IV and/or V of Palomino Park, in some cases after having
expended money and time to determine the feasibility of developing such Phase.
In addition, WRP Newco 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 or renovated by WRP Newco will be subject to the
risks associated with the ownership and operation of real estate described
elsewhere in this section entitled "WRP Newco Risk Factors."
Vacancies at Existing Properties; Dependence on Rental Income from Real Property
WRP Newco currently owns five office properties consisting of six
buildings, five of which buildings are vacant. The sixth office building is
currently approximately 85.7% leased. WRP Newco 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 WRP Newco to
lease these properties in a timely manner and on economically favorable terms
may have a material adverse effect on WRP Newco.
WRP Newco's cash flow, results of operations and value of its assets would
be adversely affected if a significant number of tenants of the WRP Newco
Properties failed to meet their lease obligations or if WRP Newco or the owner
of a WRP Newco 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 WRP Newco
Properties will not experience significant tenant defaults in the future.
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Operating Risks
The WRP Newco 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 WRP Newco and its financial condition may be adversely
affected.
Adverse Consequences of Debt Financing
Leverage. Some of the WRP Newco 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 WRP Newco receiving
a return. As a result of such leverage, WRP Newco 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 WRP Newco 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 WRP Newco, it also will increase the risk of loss on a leveraged
investment. If WRP Newco defaults on secured indebtedness, the lender may
foreclose and WRP Newco could lose its entire investment in the security for
such loan. Because WRP Newco may engage in portfolio financings where several
investments are cross-collateralized, multiple investments may be subject to the
risk of loss. As a result, WRP Newco 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 WRP
Newco reserves the right to obtain, may subject other assets of WRP Newco to
risk of loss.
Existing Debt Maturities; Foreclosures. WRP Newco anticipates that only a
portion of the principal of WRP Newco's indebtedness outstanding from time to
time will be repaid prior to maturity. However, WRP Newco may not have
sufficient funds to repay such indebtedness at maturity; it may therefore be
necessary for WRP Newco to refinance debt through additional debt financing or
equity offerings. If WRP Newco is unable to refinance this indebtedness on
acceptable terms, WRP Newco may be forced to dispose of properties upon
disadvantageous
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terms, which could result in losses to WRP Newco and adversely affect the amount
of cash available for further investment.
Risk of Rising Interest Rates. WRP Newco 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 WRP Newco
Line of Credit will bear interest at a variable rate. Accordingly, increases in
interest rates could increase WRP Newco's interest expense and adversely effect
the financial condition and results of operations of WRP Newco.
Covenants. Various credit facilities or other debt obligations may require
WRP Newco to comply with a number of customary financial and other covenants on
an ongoing basis. Failure to comply with such covenants may limit WRP Newco's
ability to borrow funds or may cause a default under its then-existing
indebtedness.
No Limitation on Debt. The organizational documents of WRP Newco do not
contain any limitation on the amount of indebtedness WRP Newco may incur. WRP
Newco also has the ability to use a more highly leveraged business strategy than
typically used by REITs. Accordingly, WRP Newco could become highly leveraged,
resulting in an increase in debt service that could increase the risk of default
on WRP Newco's indebtedness.
Lack of Control and Other Risks of Equity Investments in and with Third Parties
WRP Newco may invest in shares of "REITs" or other equity interests of
"REITs" or other entities that invest in real estate assets. In such cases, WRP
Newco 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 set forth in this section entitled "WRP Newco Risk Factors."
WRP Newco 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 WRP Newco'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 WRP Newco, and that such partners or co-venturers
may be in a position to take action contrary to the instructions or the requests
of WRP Newco and contrary to WRP Newco's policies or objectives. Such
investments may also have the potential risk of impasse on decisions, such as a
sale, because neither WRP Newco nor the partner or co-venturer would
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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, WRP Newco may
in certain circumstances be liable for the actions of its third-party partners
or co-venturers.
Risks of Investments in Debt Instruments
WRP Newco intends to originate 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 WRP Newco's cost of funds, and the risk that the collateral may be
mismanaged or otherwise decline in value during periods in which WRP Newco is
seeking to obtain control of the underlying real estate. WRP Newco 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 "WRP Newco 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 WRP Newco
invests will not be rated by any nationally-recognized rating agency. Generally,
the value of unrated classes is more subject to fluctuation due to economic
conditions than rated classes. WRP Newco'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 WRP Newco.
Risks of Investments in Mortgage Loans
To the extent WRP Newco invests in mortgage loans, such mortgage 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, WRP Newco may have to foreclose its mortgage or
protect its investment by acquiring title to a property and thereafter making
substantial improvements or repairs in order to maximize the property'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
obligations. Relatively high "loan-to-value" ratios and declines in the value of
the property may prevent WRP Newco from realizing an amount equal to its
mortgage loan upon foreclosure.
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WRP Newco may participate in loans originated by other financing
institutions. As a participant, WRP Newco may not have the sole authority to
declare a default under the mortgage or to control the property or any
foreclosure.
Any investments in junior mortgage loans which are subordinate to liens of
senior mortgages 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 mortgage, WRP Newco may make payments to prevent foreclosure
on the senior mortgage without necessarily improving WRP Newco's position with
respect to the subject real property. In such event, WRP Newco would be entitled
to share in the proceeds only after satisfaction of the amounts due to the
holder of the senior mortgage.
Risk of Loss on Investments in Commercial Mortgage-Backed Securities
As noted above, WRP Newco 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.
WRP Newco 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.
Limitations on Remedies
Although WRP Newco will have certain contractual remedies upon the default
by borrowers under certain debt instruments, such as foreclosing on the
underlying real estate or collecting rents generated therefrom, certain legal
requirements (including the risks of lender liability) may limit the ability of
WRP Newco to effectively exercise such remedies.
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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.
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 WRP Newco could
be liable to third parties in such circumstances. Furthermore, distributions
made to WRP Newco 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 WRP Newco 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.
No Prior Operating History
It should be noted that WRP Newco is a newly formed entity with no prior
operating history and that its properties and assets have only been recently
acquired.
Risks of Uninsured Loss
WRP Newco 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, WRP Newco
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 WRP Newco.
With respect to those properties in which WRP Newco holds an interest
through a mortgage, as well as those properties owned by entities to whom WRP
Newco makes unsecured loans, the borrowers will most likely be obligated to
maintain insurance on such properties and to arrange for WRP Newco to be covered
as a named insured on such policies. The face amount and scope of such
insurance coverage may be less comprehensive than WRP Newco 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 WRP Newco's
cash flow or financial condition.
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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 ACMs when such materials are in poor condition,
or in the event of renovation or demolition. Such laws impose liability for
release of asbestos-containing materials ("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 Point View office complex contains ACM's. Upon
acquisition of the property, WRP Newco intends to proceed with the removal of
ACM's 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, WRP Newco 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 Joint Proxy
Statement/Prospectus/Information Statement that are owned or to be acquired by
WRP Newco 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 WRP Newco's business.
Dependence on Key Personnel
WRP Newco is dependent primarily on the efforts of Jeffrey H. Lynford,
Chairman of the Board, and Edward Lowenthal, President, and the loss of either
of their services could have an adverse effect on the operations of WRP Newco.
Mr. Lynford and Mr. Lowenthal will each enter into employment agreements with
WRP Newco having a term of approximately five years. WRP Newco intends to retain
the services of individuals with expertise and experience
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in certain activities to be conducted by WRP Newco, and the loss of the services
of any of these individuals could also have an adverse effect on the operations
of WRP Newco.
Tax Consequences of the Distribution
To the extent the fair market value of the shares of WRP Newco Common
distributed in the Distribution to Wellsford Common Shareholders exceeds
Wellsford's tax basis in such shares, gain will be recognized by Wellsford.
Assuming Wellsford qualifies as a REIT and has a dividends paid deduction for
distributions to its shareholders at least equal to its REIT taxable income (as
computed before taking into account the dividends paid deduction), no REIT level
tax will be incurred on account of the Distribution.
The distribution of WRP Newco Common will, however, be taxable to Wellsford
Common Shareholders to the same extent as any other distribution made by
Wellsford to its shareholders. Management of Wellsford estimates that
approximately 50% of the value of the shares of WRP Newco Common received in the
Distribution will be taxable as ordinary income. Because this estimate is based,
in part, on future events, there can be no assurance as to the portion of the
value of the Distribution that will be taxable as ordinary income. The remainder
of the value of the shares of WRP Newco Common received in the Distribution will
either constitute a return of capital (reducing basis in the shares of Wellsford
Common that converted in the Merger into Survivor Common) or capital gain. For a
more detailed explanation, see "The Contribution and Distribution -- Tax
Consequences of the Distribution."
Changes in Policies Without Stockholder Approval
The investment, financing, borrowing and distribution policies of WRP Newco
and its policies with respect to all other activities, growth, debt,
capitalization and operations, will be determined by the WRP Newco 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 stockholders of WRP Newco. A change in these
policies could adversely affect WRP Newco's financial condition, results of
operations and the market price of WRP Newco Common. See "Policies with Respect
to Certain Activities of WRP Newco."
Absence of Public Market; Risk of Changes in Stock Price
Prior to the Distribution, there will be no public market for WRP Newco
Common, and there can be no assurance that an active trading market for WRP
Newco Common will develop following the Distribution or, if developed, that any
such market will be sustained. In the absence of a public trading market, an
investor may be unable to liquidate his investment in WRP Newco. The initial
valuation of the WRP Newco Common may not be indicative of the market price of
the WRP Newco Common after the Distribution. The prices at which WRP Newco
Common trades will be determined by the marketplace and may be influenced by
many factors,
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including, among others, the depth and liquidity of the market for WRP Newco
Common, investor perception of WRP Newco and its businesses, WRP Newco's
dividend policy, interest rates and general economic and market conditions.
Prices at which WRP Newco Common may trade after the Distribution 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 WRP Newco 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 WRP Newco believes that its properties
are substantially in compliance with present requirements of the ADA, WRP Newco
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 WRP Newco 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
WRP Newco, they could be substantial. If required changes involve greater
expense than WRP Newco currently anticipates, WRP Newco'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. WRP Newco 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 WRP Newco and could have an adverse effect on WRP Newco's results of
operations.
Effect on Common Stock Price of Shares Available for Future Sale
Sales of a substantial number of shares of WRP Newco Common, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the WRP Newco Common. Up to 12,000,000 shares of WRP Newco Common may
be issued pursuant to the Additional Share Offering and purchasers of the
Additional Shares may be able to sell such shares in the public market
immediately after purchase. In addition, 1,750,000 shares of WRP Newco Common
have been reserved for issuance pursuant to WRP Newco's 1997 Management
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Incentive Plan, and, when issued, these shares 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 WRP Newco Common will have on the market prices of WRP
Newco Common.
Hedging Policies/Risks
In connection with the financing of certain real estate investments, WRP
Newco may employ hedging techniques designed to protect WRP Newco 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 WRP Newco 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 WRP Newco
than if it had not entered into such hedging transactions.
Anti-Takeover Effect Resulting From a Staggered Board, Ability of WRP Newco to
Issue Preferred Stock and Certain Provisions of Maryland Law
WRP Newco'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 stockholders. The staggered terms
for directors may limit the stockholders' ability to change control of WRP Newco
even if a change of control were in the interests of stockholders.
The Newco 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
WRP Newco'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 MGCL, certain "business combinations" (including certain
issuances of equity securities) between a Maryland corporation and an Interested
Stockholder are prohibited for five years after the most recent date on which
the Interested Stockholder becomes an Interested Stockholder. Thereafter, unless
exempted, any such business combination must be approved by two supermajority
stockholder votes. The directors of WRP Newco 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
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combinations between such persons and WRP Newco. See "Certain Provisions of
Maryland Law and of WRP Newco'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 WRP Newco and
may inhibit a change in control under circumstances that could otherwise give
the holders of WRP Newco Common the opportunity to realize a premium over then-
prevailing market prices.
It should also be noted that for ten years after the Closing Date, WRP
Newco has the right to direct the voting of all shares of WRP Newco Series A
Preferred, WRP Newco Class A Common and WRP Newco Common 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 WRP Newco Series A Preferred or WRP Newco
Class A Common. Such voting right may hinder a change in control.
THE MEETINGS OF SHAREHOLDERS
EQR
The EQR Special Meeting has been called by the EQR Board of Trustees for
the purpose of approving the Merger. The EQR Special Meeting will be held on May
28, 1997, at 10:00 a.m., local time, at One North Franklin, Chicago, Illinois.
Only shareholders of record of EQR Common at the close of business on April 14,
1997 will be entitled to vote at the EQR Special Meeting. EQR had outstanding
53,713,158 shares of EQR Common as of the close of business on April 1, 1997, of
which 1,022,666 shares (or approximately 1.9% of the outstanding) shares of EQR
Common (excludes 681,534 shares where beneficial ownership is disclaimed) were
owned beneficially by the officers and trustees of EQR, and such persons have
indicated their intention to vote such shares in favor of the Merger. No EQR
Shares other than EQR Common are entitled to vote on the Merger. Each holder of
EQR Common is entitled to one vote per share on the Merger. If the accompanying
proxy form is signed and returned, the shares represented thereby will be voted
in accordance with any direction on the proxy form, or in the absence of a
direction, they will be voted FOR the Merger. The shareholder may revoke the
proxy at any time prior to the voting thereof by giving written notice of such
revocation to EQR, by executing and delivering a proxy bearing a later date, or
by attending the EQR Special Meeting and voting in person.
The expenses of the solicitation of EQR Common Shareholders will be paid by
EQR. In addition to the use of the mail, proxies may be solicited by trustees,
officers, or regular employees of EQR in person, by telecopy or by telephone.
Arrangements will also be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the shares of EQR Common held of record by such persons, and EQR will
reimburse such brokerage firms, custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection therewith. EQR
has retained MacKenzie
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Partners to assist in the solicitation of proxies. The fee of such firm is
estimated to be $6000, plus reimbursement for out-of-pocket costs and expenses.
The presence at the EQR Special Meeting, in person or by proxy, of the
holders of a majority of the outstanding shares of EQR Common is necessary to
constitute a quorum under the Amended and Restated Bylaws of EQR (the "EQR
Bylaws"). Votes cast by proxy or in person at the meeting will be tabulated by
election inspectors appointed for the meeting and will determine whether or not
a quorum is present. The election inspectors will treat abstentions and "broker
non-votes" (i.e., proxies of brokers who have limited authority to vote on
specified proposals) as shares that are present and entitled to vote for
purposes of determining the presence of a quorum at the meeting. Under Maryland
law and EQR's Amended and Restated Declaration of Trust (the "EQR
Declaration"), the affirmative vote of the holders of two-thirds of the
outstanding shares of EQR Common is required to approve the Merger.
EQR Common Shareholders may mark the accompanying EQR proxy to vote their
shares FOR or AGAINST, or to ABSTAIN with respect to, the Merger. Abstentions
and broker non-votes will have the effect of a vote against approval of the
Merger.
The EQR Trustees who voted on the Merger unanimously recommend that EQR
Common Shareholders vote FOR the Merger.
Pursuant to the EQR Bylaws, no business may be transacted at the EQR
Special Meeting except that referred to in the accompanying notice of the EQR
Special Meeting.
Wellsford
The Wellsford Special Meeting has been called by the Wellsford Board of
Trustees for the purpose of approving the Merger, including the adoption of an
amended and restated declaration of trust of the Surviving Trust, the Additional
Provisions, the Additional Share Offering by WRP Newco and the adoption of WRP
Newco's 1997 Management Incentive Plan. The Wellsford Special Meeting will be
held on May 28, 1997, at 10:00 a.m., local time, at The Princeton Club, 15 West
43rd Street, New York, New York . Only shareholders of record of Wellsford
Common at the close of business on April 14, 1997 will be entitled to vote at
the Wellsford Special Meeting. Wellsford had outstanding 17,261,897 shares of
Wellsford Common as of the close of business on April 18, 1997, of which 599,828
shares (or approximately 3.5% of the outstanding shares of Wellsford Common
(excludes 29,727 shares where beneficial ownership is disclaimed)) were owned
beneficially by the officers and trustees of Wellsford, and such persons have
indicated their intention to vote such shares in favor of the Merger, including
the adoption of an amended and restated declaration of trust of the Surviving
Trust, the Additional Provisions, the Additional Share Offering and the adoption
of WRP Newco's 1997 Management Incentive Plan. No Wellsford Shares other than
Wellsford Common are entitled to vote on the matters set forth in the notice of
the Wellsford Special Meeting. Each holder of
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Wellsford Common is entitled to one vote per share on the matters set forth in
the notice of the Wellsford Special Meeting. If the accompanying proxy form is
signed and returned, the shares represented thereby will be voted in accordance
with any direction on the proxy form, or in the absence of a direction, they
will be voted FOR the Merger, including adoption of the amended and restated
declaration of trust of the Surviving Trust, the Additional Provisions, the
Additional Share Offering by WRP Newco and the adoption of WRP Newco's 1997
Management Incentive Plan. The shareholder may revoke the proxy at any time
prior to the voting thereof by giving written notice of such revocation to
Wellsford, by executing and delivering a proxy bearing a later date, or by
attending the Wellsford Special Meeting and voting in person.
The expenses of the solicitation of Wellsford Common Shareholders will be
paid by Wellsford. In addition to the use of the mail, proxies may be solicited
by trustees, officers, or regular employees of Wellsford in person, by telecopy
or by telephone. Arrangements will also be made with brokerage firms and other
custodians, nominees and fiduciaries to forward solicitation material to the
beneficial owners of the shares of Wellsford Common held of record by such
persons, and Wellsford will reimburse such brokerage firms, custodians, nominees
and fiduciaries for reasonable out-of-pocket expenses incurred by them in
connection therewith. Wellsford has retained MacKenzie Partners to assist in the
solicitation of proxies. The fee of such firm is estimated to be $7,500, plus
reimbursement for out-of-pocket costs and expenses.
The presence at the Wellsford Special Meeting, in person or by proxy, of
the holders of a majority of the outstanding shares of Wellsford Common is
necessary to constitute a quorum under Wellsford's Bylaws (the "Wellsford
Bylaws"). Votes cast by proxy or in person at the Wellsford Special Meeting will
be tabulated by election inspectors appointed for the meeting who will determine
whether or not a quorum is present. The election inspectors will treat
abstentions and "broker non-votes" (i.e., proxies of brokers who have limited
authority to vote on specified proposals) as shares that are present and
entitled to vote for purposes of determining the presence of a quorum at the
meeting. Under Maryland law and Wellsford's Amended and Restated Declaration of
Trust (the "Wellsford Declaration"), the affirmative vote of the holders of a
majority of the outstanding shares of Wellsford Common is required to approve
the Merger. The affirmative vote of the holders of two-thirds of the outstanding
shares of Wellsford Common is required to approve the Additional Provisions. The
affirmative vote of the holders of a majority of shares of Wellsford Common
voting thereon is required to approve the Additional Share Offering and the
adoption of WRP Newco's 1997 Management Incentive Plan.
Wellsford Common Shareholders may mark the accompanying Wellsford proxy to
vote their shares FOR or AGAINST, or to ABSTAIN from voting with respect, to the
Merger, the Additional Provisions, the Additional Share Offering and WRP Newco's
1997 Management Incentive Plan. Abstentions and broker non-votes will be counted
in determining the presence of a quorum and will have the effect of a vote
against approval of the Merger and the Additional Provisions. An abstention and
a broker non-vote will have no effect on the proposal to approve
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the Additional Share Offering and adoption of WRP Newco's 1997 Management
Incentive Plan.
The Wellsford Board of Trustees unanimously recommends that Wellsford
Common Shareholders vote FOR the Merger, the Additional Provisions, the
Additional Share Offering and WRP Newco's 1997 Management Incentive Plan. The
WRP Newco Board of Directors unanimously recommends that Wellsford Common
Shareholders vote FOR the Additional Share Offering and WRP Newco's 1997
Management Incentive Plan.
The Wellsford Bylaws provide that no business will be transacted at the
Wellsford Special Meeting except that referred to in the accompanying notice of
the Wellsford Special Meeting.
THE MERGER
The description of the Merger contained in this Joint Proxy
Statement/Prospectus/Information Statement is qualified in its entirety by
reference to the Merger Agreement, the full text of which is attached as
Appendix A, and is incorporated herein by reference.
Terms of the Merger
The Merger Agreement provides that, upon satisfaction or waiver of the
conditions set forth therein, EQR will be merged into Wellsford. The name of the
Surviving Trust will be Equity Residential Properties Trust. At the Effective
Time, each outstanding share of Wellsford Common will be converted into .625 of
a share of Survivor Common. At the Effective Time, each outstanding share of EQR
Common will be converted into one share of Survivor Common. At the Effective
Time, each share of Wellsford Preferred and EQR Preferred will be converted into
one share of Survivor Preferred, having the same preferences and other terms as
the Wellsford Preferred or EQR Preferred previously outstanding of the same
series; provided, however, that the conversion ratio for the Wellsford Series A
will be adjusted in accordance with its terms. No fractional shares of Survivor
Common will be issued in connection with the Merger. In lieu thereof, holders of
Wellsford Common will receive a cash payment equal to the average closing price
of EQR Common on the NYSE for the five trading days immediately preceding the
Effective Time, multiplied by the fraction of the shares of Survivor Common to
which the holder would be entitled under the Merger Agreement.
Background of the Merger
Since 1993, Douglas Crocker, the President and Chief Executive Officer of
EQR and Jeffrey H. Lynford, the Chairman of the Board of Wellsford and Edward
Lowenthal, President and Chief Executive Officer of Wellsford, have had a
personal relationship arising out of their participation in the multifamily
property business. At various times during 1994 and 1995 Mr.
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Crocker, Mr. Lynford and Mr. Lowenthal have discussed the general status of the
multifamily property industry. Messrs. Crocker, Lynford and Lowenthal presumed
that the multifamily property industry would be the subject of combinations of
existing companies in the future, and separately considered whether their
respective companies should explore a combination with other companies.
On September 16, 1996, a regular quarterly Wellsford board meeting was held
at which Messrs. Lynford and Lowenthal reported on their discussions with
investment banking firms and other publicly traded REITs regarding possible
strategic combinations. They indicated that these discussions related primarily
to possible transactions in which Wellsford would acquire another entity or be
the survivor in a merger. The Board of Trustees of Wellsford authorized
management to engage in discussions regarding possible strategic business
combinations.
On September 24, 1996, Messrs. Crocker, Lynford and Lowenthal met to
discuss the multifamily property industry and real estate market in general and
whether combining the property portfolios of EQR and Wellsford made sense for
both companies and their shareholders. The parties expressed a general interest
in exploring the possibility of a combination of the companies.
On October 19, 1996, Messrs. Crocker and Lynford had a meeting at which
they specifically discussed each company's interest in pursuing merger
discussions. During such meeting, Mr. Crocker and Mr. Lynford considered
whether a merger would be in the best interests of both companies and their
shareholders. Among the issues considered were whether a merger would combine
the talents of their respective companies, reduce corporate overhead by
eliminating redundancies and create a larger company which might be attractive
to institutional investors and increase access to public equity and debt
markets. Mr. Crocker and Mr. Lynford discussed various exchange ratios for
Wellsford Common as well as possible funds from operations and adjusted funds
from operations ratios. Concluding that a merger might be in the best interests
of both companies and their shareholders, Mr. Crocker and Mr. Lynford decided to
pursue merger discussions.
On October 24, 1996, Mr. Crocker and Mr. Lowenthal met at the National
Association of Real Estate Investment Trusts ("NAREIT") Convention in Dallas,
Texas. Mr. Crocker and Mr. Lowenthal discussed revised numbers with respect to
funds from operations and adjusted funds from operations in connection with
possible exchange ratios. Mr. Crocker discussed the fact that he would like to
reach agreement on these numbers in order to further pursue a merger
transaction. Mr. Crocker and Mr. Lowenthal agreed to have each company's
internal accountants discuss exchange ratios and evaluations.
On November 13, 1996, Mr. Crocker, Mr. Lowenthal, Gregory F. Hughes, Chief
Financial Officer of Wellsford, David H. Lee, Senior Vice President - Capital
Markets of EQR, Gerald A. Spector, Executive Vice President of EQR, and David J.
Neithercut, Chief Financial Officer of EQR, met. Mr. Lowenthal presented the
exchange ratio as a topic for discussion.
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The parties exchanged views on relative assets and exchange values, but
disagreements remained regarding the method of valuation, the exchange ratio and
other material issues.
On November 27, 1996, Mr. Crocker met with Messrs. Lynford, Lowenthal and
Hughes at Wellsford's corporate offices. The parties again discussed valuation
and determined that EQR was not willing to value the development assets of
Wellsford on a going concern basis in the same manner as the other Wellsford
assets. The parties alternatively discussed the formation of a new Wellsford
subsidiary to be spun off to the common shareholders of Wellsford funded
primarily with the Wellsford development assets. The parties agreed that Mr.
Crocker would serve as a director on the proposed subsidiary's board of
directors and Messrs. Lowenthal and Lynford would serve as trustees on the EQR
Board of Trustees. The parties also discussed estimated financial results of
EQR for year-end 1997 and various employment issues, such as possible retention
of as many Wellsford employees as possible to meet EQR's staffing needs.
On December 9, 1996, a regular quarterly Wellsford board meeting was held
at which members of management of Wellsford and its legal counsel were present.
At such meeting, Messrs. Lynford and Lowenthal reported on the discussions they
had with other publicly traded REITs regarding possible business combination
transactions. They indicated that the only ongoing discussions at such time
were with EQR, and they reported the status and substance of these discussions,
including those relating to a possible spin-off of certain of Wellsford's
assets, and the nature and results of management's initial due diligence review
of the business and financial condition of EQR.
On December 12, 1996, Mr. Crocker, Mr. Lowenthal, Mr. Lynford, Mr. Hughes
and attorneys from EQR's legal staff, as well as representatives of Rudnick &
Wolfe, special counsel for EQR, and Robinson Silverman Pearce Aronsohn & Berman
LLP, special counsel for Wellsford, met to discuss the structure of a possible
merger transaction, the formation of the proposed subsidiary and the specific
assets to be transferred to the proposed subsidiary, and the possible pricing
matrix for the Wellsford Common. General terms were discussed. The tentative
Exchange Ratio was determined by establishing relative values for the EQR Common
and Wellsford Common. The value for EQR Common was based on its then market
value of $42.875 per share. No one specific valuation method was utilized in
connection with the determination of the value of the Wellsford Common. The
value for Wellsford Common was negotiated based upon, among other things, its
then market price of $25.00 per share and each party's evaluation of the value
of Wellsford's assets to be acquired in the Merger, which were estimated at
approximately $1,032.2 million, the budgeted net operating income, earnings
before interest, taxes, depreciation and amortization and funds from operations
for 1997 estimated to be generated from the assets to be acquired by EQR in the
merger were approximately $79.4 million, $76.7 million and $37.4 million,
respectively, the cost savings anticipated from the Merger, which were estimated
at $4.1 million per year and the costs associated with the Merger, including
employee severance and retention costs, which were estimated at $23.6 million.
With respect to the Wellsford Preferred, it was determined to value such shares
based upon their liquidation value because the distribution rates on Wellsford
Preferred were established as a percentage of their respective liquidation
values. It was tentatively agreed, subject to satisfactory resolution of other
material issues and completion of due diligence, that the exchange ratio would
be determined based upon a value
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of $27.50 per share for the Wellsford Common and $40.00 per share for the EQR
Common, subject to adjustment in the event of a decline in the market price of
EQR Common. In addition, it was tentatively agreed, subject to the additional
study of the relevant assets and completion of due diligence, that the assets to
be contributed to the new subsidiary would have an initial book value of at
least $2.50 per share. Although discussions were still ongoing, EQR and
Wellsford requested their legal counsel to prepare a draft of a merger agreement
and other related documents so that management of the companies could focus on
the issues that required resolution.
On December 20, 1996, Mr. Crocker and Mr. Lowenthal had a telephone call to
discuss certain open issues regarding the possible merger transaction. The costs
in connection with the possible merger transaction were discussed in detail.
On December 26, 1996, Messrs. Crocker, Lowenthal and Hughes discussed by
telephone concerns regarding the capitalization of the proposed subsidiary upon
consummation of the possible merger. Mr. Crocker suggested that EQR purchase
$3.5 million in shares of common stock of the proposed subsidiary plus an
additional 10% interest in Palomino Park.
From December 26, 1996 through January 9, 1997, the management of EQR and
Wellsford had a number of discussions regarding various business issues.
On January 9, 1997, a special EQR board meeting was held at which members
of management, representatives of EQR's financial and legal advisors were
present in person or by conference telephone call. At such meeting, the trustees
were informed of the status of discussions with Wellsford's management and the
reasons that a combination with Wellsford would be beneficial. In addition, the
trustees discussed with management and EQR's legal advisors, the current
operations of EQR and Wellsford, the form of consideration payable in the
proposed transaction, the valuation methodologies to be utilized by J.P. Morgan
for purposes of its opinion (see "The Merger-Opinion of EQR Financial Advisor"),
potential synergies expected by management to result from the proposed
transaction, certain governance, tax and due diligence matters and the time
table for completion of the transaction. The EQR Board of Trustees also reviewed
the tentative terms of the proposed merger between EQR and Wellsford.
Mr. Crocker provided the EQR Board of Trustees with a discussion of the
background and events leading up to the meeting with respect to the proposed
merger with Wellsford. Mr. Crocker then set forth the reasons he believed a
possible business combination with Wellsford would be appropriate for EQR. The
reasons discussed were (i) the combined entity would be the second largest
publicly-traded REIT in the United States and the largest REIT focusing
primarily on multifamily properties, with 317 properties, consisting of 90,873
apartment units; (ii) the combined market capitalization, would be approximately
$5 billion and would not significantly alter EQR's existing Debt to Total Market
Capitalization Ratio; and (iii) the merger would improve access to the public
debt and equity markets to support EQR's continued growth. Mr. Crocker also
noted that Mr. Lowenthal and Mr. Lynford would be
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added to the EQR Board of Trustees, assuming approval of the Merger by the
shareholders of each company.
EQR's legal counsel presented and explained the terms of the Merger
Agreement to the EQR Board of Trustees including closing conditions, termination
rights and liquidated damages and expense reimbursement provisions, and advised
the EQR Board of Trustees of their fiduciary obligations. A discussion followed
concerning the proposed merger.
The EQR Board of Trustees discussed the advantages and disadvantages to EQR
of the Merger, including the factors raised by Mr. Crocker. The principle
negative factor that the EQR Board of Trustees considered was the significant
costs involved in connection with consummating the Merger and the substantial
management time and effort required to effectuate the Merger and integrate the
businesses of EQR and Wellsford. The EQR Board of Trustees did not believe that
this factor was sufficient to outweigh the advantages of the Merger,
particularly in light of the lower payout ratio of the Surviving Trust based
upon funds from operations, and the similar Debt to Total Market Capitalization
Ratio of the Surviving Trust, as compared with the current ratio for EQR.
From January 12, 1997 through January 16, 1997, representatives of
management of EQR and Wellsford and their respective counsel met in Chicago to
discuss and resolve the remaining open business and legal issues.
On January 15, 1997, a special meeting of the EQR Board of Trustees was
held. Representatives of J.P. Morgan made a detailed presentation regarding the
proposed merger with Wellsford. J.P. Morgan's presentation included a discussion
of (i) the fairness from a financial point of view to EQR of the consideration
to be paid by EQR in the proposed merger; (ii) a summary of the financial terms
of the proposed merger; (iii) a valuation analysis; and (iv) a discussion of the
impact of the proposed merger on EQR. Also included in J.P. Morgan's oral
presentation of its fairness opinion were (i) an outline of J.P. Morgan's
fairness opinion process; (ii) a pro forma merger analysis; (iii) a fully loaded
share price analysis; (iv) a public trading multiples analysis; (v) a selected
transactions analysis; (vi) a share trading history analysis; (vii) an
historical exchange ratio analysis; (viii) a net asset value analysis; and (ix)
a WRP Newco analysis. See "- Opinion of Financial Advisor -- EQR."
Following such presentations, and after extensive discussion, the Board of
Trustees of EQR concluded that the advantages of the Merger outweighed the
potential risks and the EQR Trustees who voted on the Merger unanimously
approved the Merger Agreement and the related agreements contemplated thereby,
and authorized EQR management to enter into such agreements. J.P. Morgan
rendered its oral opinion to the effect that, as of that date and subject to the
assumptions made, procedures followed, matters considered and limits of its
review, the consideration to be paid by EQR in connection with the Merger was
fair, from a financial point of view, to EQR. J.P. Morgan's written opinion
confirming its oral opinion was delivered on January 16, 1997.
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On January 16, 1997, a special meeting of the Board of Trustees of
Wellsford was held at which members of management, representatives of Merrill
Lynch and legal counsel were present. At such meeting, the Wellsford Board of
Trustees was updated on the status of discussions with EQR regarding the
potential merger transaction between Wellsford and EQR. Mr. Lynford reviewed
with the Board of Trustees (i) the background of the proposed merger and spin-
off transaction, (ii) the current status of Wellsford's financial and business
plans without the proposed merger, including the feasibility of improving the
profitability of Wellsford's existing property portfolio and raising additional
capital and acquiring new properties, (iii) pertinent due diligence findings
with respect to EQR, with particular emphasis on the current operations and
properties of EQR and (iv) the potential benefits as well as the risks of the
proposed merger transaction as described below under "- Reasons for the Merger;
Recommendation of the Wellsford Board of Trustees."
Wellsford's legal counsel made a presentation to the Wellsford Board of
Trustees in which it explained the material terms of the proposed merger and
spin-off transaction and agreements related thereto, briefed the Board of
Trustees on certain legal issues raised by the proposed merger transaction and
advised the Board of Trustees of its fiduciary duties in connection with such
transaction.
Merrill Lynch presented its financial analysis of the merger transaction,
which included: (i) an overview of the proposed transaction setting forth, among
other things, a summary of the key transaction terms and a description of the
Distribution, (ii) an analysis of the stock trading history of each of Wellsford
Common and EQR Common, (iii) valuation analyses of Wellsford, EQR and WRP Newco,
(iv) a comparison of each of Wellsford and EQR with selected publicly traded
companies, (v) a comparison of the proposed financial terms of the Merger with
the financial terms of other relevant mergers and acquisitions and (vi) a pro
forma merger analysis. Merrill Lynch concluded its presentation by orally
advising the Wellsford Board of Trustees that as of that date, based upon the
facts and circumstances as they existed at that time, and subject to certain
assumptions, factors and limitations, the proposed consideration to be received
by the holders of Wellsford Common, pursuant to the Merger and Distribution, was
fair to such shareholders from a financial point of view.
Following such presentations, and after extensive discussion of the
advantages and disadvantages of the proposed merger transaction as described
under "- Reasons for the Merger; Recommendations of the Wellsford Board of
Trustees," the Board of Trustees of Wellsford concluded that the advantages of
the Merger and Distribution outweighed the potential risks, and unanimously
approved the merger transaction, the spin-off, the Merger Agreement and all
transactions contemplated thereby.
EQR and Wellsford did not believe that the Merger or the Contribution and
Distribution would have a material adverse effect on the results of operations,
liquidity or capital resources of the Surviving Trust and believed that the
advantages of such transactions outweighed the disadvantages.
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The Merger Agreement was executed on January 16, 1997.
Reasons for the Merger; Recommendation of the EQR Board of Trustees
The EQR Board of Trustees believes that the Merger, including the
consideration, is fair and in the best interests of EQR and its shareholders.
Accordingly, the EQR Trustees who voted on the Merger unanimously approved the
Merger and unanimously recommend approval of the Merger by the shareholders of
EQR. In reaching this determination, the EQR Board of Trustees consulted with
EQR management, as well as its financial advisors, J.P. Morgan, legal counsel
and accountants, and considered a number of factors. The material factors that
the EQR Board of Trustees considered in approving the Merger and unanimously
recommending approval of the Merger are that:
(i) The EQR Board of Trustees believes that the Merger would solidify
EQR's leadership position in the multifamily property industry. The EQR Board of
Trustees viewed this as favorable because the combined entity would own and
operate 317 multifamily properties consisting of 90,873 apartment units; would
have funds from operations on a pro forma basis for the nine months ended
September 30, 1996 of approximately $155.4 million and would have a combined
market capitalization, as of September 30, 1996, of approximately $5.0 billion
with an initial Debt to Total Market Capitalization Ratio of approximately 31%.
(ii) The EQR Board of Trustees believes that the Merger would increase
operating efficiency through economies of scales, which the EQR Board of
Trustees viewed as favorable as the combined entity would realize significant
savings in overhead and expenses (such savings are estimated to be approximately
$3.7 million per annum).
(iii) The EQR Board of Trustees believes that the Merger would provide
greater access to the public equity and debt markets. The Debt to Total Market
Capitalization Ratio for EQR as of September 30, 1996 was approximately 31.5%,
while the ratio on a pro forma basis of the Surviving Trust as of the same date
would be approximately 31%. The EQR Board of Trustees viewed this favorably
because of management's belief, based in part on discussions with advisors,
investment banking firms and lenders, that it would provide EQR Common
Shareholders with enhanced liquidity and make the Survivor Common a more
attractive investment for institutional investors.
(iv) The EQR Board of Trustees believes that the Surviving Trust would be
a larger and financially stronger company, which would make it easier to combine
with other public or private entities. The EQR Board of Trustees viewed this as
favorable because it would provide another efficient and attractive means of
growth.
(v) The EQR Board of Trustees believes that the combination of the
Wellsford properties (approximately 19,000 units) with those of EQR will expand
the geographic focus of EQR's ownership and operation of properties and enhance
EQR's operations in the Southwest,
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Western and Pacific Northwest regions of the United States. The EQR Board of
Trustees viewed this as favorable because it would limit the impact that adverse
economic or real estate conditions in a particular region may have on EQR as a
whole and provide EQR the opportunity for additional expansion in these regions.
(vi) The Unaudited Pro Forma Combined Financial Statements for the nine
months ended September 30, 1996 on a pro forma basis illustrated the effects of
the Merger. On a pro forma basis funds from operations for the Surviving Trust
are $155.4 million for the nine months ended September 30, 1996 instead of
$113.3 million for EQR on a historical basis. The EQR Board of Trustees viewed
this as favorable because it would most likely increase the Surviving Trust's
funds from operations available for distribution to shareholders and holders of
OP Units. Funds from operations available for distribution is not the same as
cash available for distribution as it does not reflect cash required for capital
expenditures and principal repayments on debt.
(vii) The Merger could be effectuated through the issuance of new equity
valued at $464 million (based upon a market price of $43.375 per share of EQR
Common on January 16, 1997), rather than through the use of cash or a public
offering of equity or debt securities, which the EQR Board of Trustees viewed as
favorable.
(viii) J.P. Morgan delivered an oral opinion on January 15, 1997 to the
effect that, as of such date and based upon and subject to certain matters
stated therein, the consideration to be paid by EQR in connection with the
Merger was fair, from a financial point of view, to EQR. The EQR Board of
Trustees viewed such opinion as favorable not only because of the conclusion
reached by J.P. Morgan, but also because such conclusion was consistent with the
opinion of EQR's management.
(ix) The EQR Board of Trustees believes the terms of the Merger Agreement
to be fair to EQR.
(x) Under generally accepted accounting principles, the Merger will be
accounted for as a purchase, and for federal income tax purposes the Merger will
be a tax-free transaction, which the EQR Board of Trustees viewed as favorable
because, with certain possible exceptions, no gain or loss will be recognized by
EQR, Wellsford or a shareholder of Wellsford who receives shares of Survivor
Common for shares of Wellsford Common exchanged therefor (except with respect to
any cash received in lieu of a fractional interest in a share of EQR Common).
The EQR Board of Trustees also considered certain potentially negative
factors which could arise from the Merger. These included, among others, the
significant costs involved in connection with consummating the Merger and the
substantial management time and effort required to effectuate the Merger and
integrate the businesses of EQR and Wellsford. The EQR Board of Trustees
considered that the Merger would increase the debt of the Surviving Trust.
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The Surviving Trust will assume all of Wellsford's outstanding debt of
approximately $330 million. The EQR Board of Trustees recognized this increase
could adversely affect the ability of the Surviving Trust to obtain debt
financing for additional growth and would subject EQR to the risks of higher
leverage. Overall, however, the EQR Board of Trustees concluded that the
increase in debt would be within EQR's policies with respect to the incurrence
of debt. In addition, the EQR Board of Trustees considered the possible adverse
effects upon the market for EQR Common Shares and upon EQR's ability to raise
capital and issue equity in both the public and private markets which might
result if the Merger were not consummated. Finally, the EQR Board of Trustees
considered the risk that the anticipated benefits of the Merger might not be
fully realized. The EQR Board of Trustees did not believe that the negative
factors were sufficient, either individually or collectively, to outweigh the
advantages of the Merger.
The EQR Board of Trustees viewed as adequate the conditions to the closing
in the Merger Agreement, including the condition that no change in the financial
condition, business or operations of Wellsford will have occurred that would
have a material adverse effect, other than a change which affects EQR and
Wellsford in a substantially similar manner.
In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the EQR Board of Trustees did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weight to the
specific factors considered in reaching its determination.
The EQR Board of Trustees view the indemnification provisions relating to
Wellsford trustees and officers as a continuing responsibility and approved of
the continuation of the indemnification of the Wellsford trustees and officers
as part of the negotiated transaction.
The EQR Board of Trustees believes that the proposed transaction is fair to
and in the best interests of EQR and its shareholders. The EQR Trustees who
voted on the Merger unanimously approved the Merger, and unanimously recommend
that the shareholders of EQR vote FOR the Merger.
In the event the Merger is not consummated for any reason, EQR will
continue to pursue its business objectives.
Reasons for the Merger; Recommendation of the Wellsford Board of Trustees
At a special meeting of the Wellsford Board of Trustees held on January 16,
1997, members of Wellsford management, representatives of Merrill Lynch and
legal counsel made presentations concerning the business and prospects of
Wellsford and EQR. As part of its deliberations, the Wellsford Board of Trustees
considered, among other factors, the age, condition and geographic
diversification of EQR's assets, the depth and experience of its management and
its credit rating and analyzed its capital structure, funds from operations and
Debt to Total Market Capitalization Ratio, as well
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as its future prospects and opportunities for growth as a combined company with
Wellsford. The Wellsford Board of Trustees also reviewed the terms of the Merger
Agreement and the Contribution and Distribution Agreement with Wellsford's
management and Wellsford's financial and legal advisors. By unanimous vote, the
Wellsford Board of Trustees determined that the Merger and the Distribution were
fair to, and in the best interests of, Wellsford and its shareholders, approved
and adopted the Merger Agreement, the Contribution and Distribution Agreement
and the transactions contemplated thereby, and resolved to recommend that
Wellsford's shareholders approve the Merger. Although Wellsford Common
Shareholders are not being asked to approve the Distribution, approval of the
Merger will, in effect, constitute approval of the Distribution.
The Wellsford Board of Trustees believes that the Merger offers Wellsford's
shareholders an opportunity to take advantage of the general trend in the real
estate industry towards consolidation, by affording shareholders a significant
participation in a much larger and more geographically diversified REIT with
greater potential for long-term appreciation and improved access to capital
markets.
In making its determination with respect to the Merger and the
Distribution, the Wellsford Board of Trustees also considered, among other
things, that:
(i) the Merger represents the alternative which has the greatest
feasibility and offers the greatest potential to maximize shareholder
value. In this regard, the Board considered the discussions management
conducted with investment banking firms and other publicly traded REITs
regarding possible strategic combinations, as well as EQR's size, financial
resources, geographic diversification and credit rating and the expertise
and experience of EQR's management;
(ii) after management's discussions with other parties regarding
possible strategic business combinations, the Merger was the best
alternative reasonably available to Wellsford's shareholders. The Board
believed that after management's discussions with investment banking firms
and other publicly traded REITs, there were no other prospective purchasers
that had both the financial ability to complete the transaction and would
be willing to pay an aggregate consideration greater than that to be paid
by EQR in the Merger. Other possible strategic business combinations,
including potential acquisitions of other companies, were rejected for many
reasons, including the lack of management depth and experience, age and
condition of the applicable assets, lack of geographic diversification,
insufficient credit rating, insufficient cost savings and size of the other
company;
(iii) the anticipated cost savings and operating efficiencies
available to the Surviving Trust from the Merger, particularly from a
reduction of general and administrative overhead expenses, the costs of
capital, bulk purchasing, advertising and property management;
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(iv) the terms of the Merger Agreement, which the Wellsford Board of
Trustees viewed as favorable because it believed them to be fair to
Wellsford and its shareholders and because the terms were reached through
extensive arms-length negotiations. In this regard, the Wellsford Board of
Trustees noted that the Exchange Ratio fairly reflected the relative
contributions of both companies to the combined entity and represented an
attractive opportunity for shareholders to continue their investment and
maintain their receipt of quarterly dividends, but with significantly
expanded geographic diversification;
(v) the Surviving Trust will have significantly greater market
capitalization which could increase the liquidity of Survivor Common after
the Merger. In this regard, the Board noted that the market capitalization
of the Surviving Trust is expected to be approximately $4 billion greater
than the then current market capitalization of Wellsford and the Surviving
Trust would have approximately 60,000,000 shares of Survivor Common
outstanding after the Merger;
(vi) the Distribution will enable shareholders to participate in an
opportunity to maximize the value of the Contributed Assets (as defined
herein) because EQR did not wish to acquire the Contributed Assets for a
price that Wellsford considered to be adequate value for such assets;
(vii) the structure of the Merger, particularly the fact that the
Merger, as a "stock-for-stock" transaction, rather than a "cash-for-stock"
transaction, will provide an opportunity for Wellsford's shareholders to
participate in any future appreciation of the Surviving Trust;
(viii) the tax-free nature of the Merger; and
(ix) the opinion, analyses and presentations of Merrill Lynch,
including the opinion that the proposed consideration to be received by
Wellsford Common Shareholders pursuant to the Merger and the Distribution
was fair to such shareholders from a financial point of view, which
supported the conclusions reached by the Board after its own deliberations
and analyses.
The Wellsford Board of Trustees also considered certain potentially
negative factors in its deliberations concerning the Merger, including, among
others:
(i) the risk that the anticipated benefits of the Merger might not be
fully realized;
(ii) the significant costs involved in connection with consummating
the Merger;
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(iii) the substantial management time and effort required to
effectuate the Merger;
(iv) the possibility that Wellsford may be required, if the Merger
Agreement is terminated under certain circumstances, to pay EQR a Break-Up
Fee of $14.0 million and to reimburse EQR Break-Up Expenses of up to $2.5
million; and
(v) that the dividend rate payable with respect to the EQR Common is
less than the dividend rate payable with respect to the Wellsford Common.
In addition to the above factors, the Board of Trustees was mindful of and
evaluated the actual and potential conflicts of interest. In view of the wide
variety of factors considered by the Wellsford Board of Trustees, the Board of
Trustees did not quantify or otherwise attempt to assign relative weights to the
specific factors considered in making its determination. However, after due
consideration of their fiduciary obligations, in the unanimous view of the
Wellsford Board of Trustees, the potential conflicts of interest and potentially
negative factors considered by it were not sufficient, either individually or
collectively, to outweigh the positive factors considered by it in its
deliberations relating to the Merger.
Opinion of Financial Advisor - EQR
At the meeting of the Board of Trustees of EQR on January 15, 1997, J.P.
Morgan rendered its oral opinion to the Board of Trustees of EQR that, as of
such date, the consideration to be paid by EQR in connection with the proposed
Merger was fair from a financial point of view to EQR. J.P. Morgan has confirmed
its January 15, 1997 oral opinion by delivering its written opinion to the Board
of Trustees of EQR, dated January 16, 1997, that, as of such date, the
consideration to be paid by EQR in connection with the proposed Merger was fair
from a financial point of view to EQR. J.P. Morgan has not been requested to,
and will not, update its opinion prior to the Closing. No limitations were
imposed by EQR's Board of Trustees upon J.P. Morgan with respect to the
investigations made or procedures followed by it in rendering its opinions.
The full text of the written opinion of J.P. Morgan dated January 16, 1997,
which sets forth the assumptions made, matters considered and limits on the
review undertaken, is attached as Appendix C to this Joint Proxy
Statement/Prospectus/Information Statement and is incorporated herein by
reference. EQR Common Shareholders are urged to read the opinion in its
entirety. J.P. Morgan's written opinion is addressed to the Board of Trustees of
EQR, is directed only to the consideration to be paid in connection with the
Merger and does not constitute a recommendation to any shareholder of EQR as to
how such shareholder should vote at the EQR Special Meeting. The summary of the
opinion of J.P. Morgan set forth in this Joint Proxy Statement/Prospectus/
Information Statement is qualified in its entirety by reference to the full text
of such opinion. In the opinion of EQR, no events or significant changes in
information have occurred that would alter the opinion of J.P. Morgan. However,
if such an event or
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change does occur, including, without limitation, an amendment to the Merger
Agreement or Contribution and Distribution Agreement which materially affects
the financial terms of either of such agreements, a revised fairness opinion
will be requested.
In arriving at its opinion, J.P. Morgan reviewed, among other things, the
Merger Agreement; the audited financial statements of EQR and Wellsford for the
fiscal year ended December 31, 1995, and the unaudited financial statements of
EQR and Wellsford for the nine months ended September 30, 1996; current and
historical market prices of the EQR Common and Wellsford Common; certain
publicly available information concerning the business of Wellsford and of
certain other companies engaged in businesses comparable to those of Wellsford,
and the reported market prices for certain other companies' securities deemed
comparable; publicly available terms of certain transactions involving companies
comparable to Wellsford and the consideration received for such companies; the
terms of other business combinations deemed relevant by J.P. Morgan; certain
internal financial analyses and estimates of budgeted 1997 funds from operations
and net operating income prepared by EQR and Wellsford and their respective
managements; and certain agreements with respect to outstanding indebtedness or
obligations of EQR and Wellsford. J.P. Morgan also held discussions with certain
members of the management of EQR and Wellsford with respect to certain aspects
of the Merger, and the past and current business operations of EQR and
Wellsford, the financial condition and future prospects and operations of EQR
and Wellsford, and certain other matters believed necessary or appropriate to
J.P. Morgan's inquiry. In addition, J.P. Morgan reviewed such other financial
studies and analyses and considered such other information as it deemed
appropriate for the purposes of its opinion.
J.P. Morgan relied upon and assumed, without independent verification, the
accuracy and completeness of all information that was publicly available or that
was furnished to it by EQR and Wellsford or otherwise reviewed by J.P. Morgan,
and J.P. Morgan has not assumed any responsibility or liability therefor. J.P.
Morgan has not conducted any valuation or appraisal of any assets or
liabilities, nor have any valuations or appraisals been provided to J.P. Morgan.
In relying on financial analyses and forecasts provided to J.P. Morgan, J.P.
Morgan has assumed that they have been reasonably prepared based on assumptions
reflecting the best currently available estimates and judgments by management as
to the expected future results of operations and financial condition of EQR and
Wellsford to which such analyses or forecasts relate. J.P. Morgan has also
assumed that the Merger will have the tax consequences described in discussions
with, and materials furnished to J.P. Morgan by, representatives of EQR, and
that the other transactions contemplated by the Merger Agreement will be
consummated as described in the Merger Agreement.
The projections utilized by J.P. Morgan in connection with its opinion were
derived by calculating the average of the 1997 projections for both EQR and
Wellsford, as projected by the REIT equity analyst community, of (i) total
rental revenues, (ii) net operating income, (iii) earnings before interest,
taxes, depreciation and amortization ("EBITDA"), (iv) FFO and (v) FFO per share
(as provided by First Call, an online data service available to subscribers
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which compiles earnings estimates by research analysts). This resulted in
projected 1997 total rental revenues, net operating income, EBITDA, FFO and FFO
per share of approximately $554.1 million, $337.8 million, $340.4 million,
$202.5 million and $3.43 per share, respectively, for EQR, and approximately
$138.0 million, $78.8 million, $77.7 million, $38.5 million and $2.25 per share,
respectively, for Wellsford.
No representation or warranty was made by any party with respect to these
projections. Financial projections are subject to contingencies beyond
management's control and realization of the projections depends on numerous
factors, including among other things, the cost of integrating the companies,
the completion of pending developments, the actual cost in relation to such
projects and decisions by management to modify business plans to address
changing needs and a changing operating environment. All material events and
circumstances cannot be predicted and unanticipated events and circumstances are
likely to occur. Accordingly, there may be differences between the projected
results of operations and the actual results of operations of the respective
companies, and such differences could be material. In the event that the
financial projections prove to be materially different, the conclusions reached
in the opinion of J.P. Morgan could be materially affected.
J.P. Morgan's opinions are based on economic, market and other conditions
as in effect on, and the information made available to J.P. Morgan as of, the
date of such opinions. Subsequent developments may affect the written opinion
dated January 16, 1997, and J.P. Morgan does not have any obligation to update,
revise, or reaffirm such opinion. J.P. Morgan expressed no opinion as to the
price at which the EQR Common or Wellsford Common will trade at any future time.
In accordance with customary investment banking practice, J.P. Morgan
employed generally accepted valuation methods in reaching its opinion. The
following is a summary of the material financial analyses utilized by J.P.
Morgan in connection with providing its opinion.
Pro Forma Merger Analysis. J.P. Morgan analyzed the effect of the Merger
on, among other things, the estimated First Call funds from operations ("FFO")
per share of EQR Common for the year ended December 31, 1997. In doing so, J.P.
Morgan combined the average of various equity analyst estimated 1997 operating
results for Wellsford and EQR and assumed certain savings in accounting and
general and administrative expenses per estimates provided by the management of
EQR. J.P. Morgan observed a total projected post-Merger incremental accretion of
4.4% to EQR's First Call 1997 FFO estimate of $3.43 per share. The analysis
assumed the January 8, 1997 closing price of $42.50 per share for EQR Common in
calculating the purchase price for Wellsford Common.
J.P. Morgan also analyzed the effect of the Merger on EQR's 1997 pro forma
equity market capitalization, total market capitalization, leverage ratios and
dividend payout ratio. In this regard, J.P. Morgan noted that the pro forma
equity market capitalization for EQR would be approximately $2.96 billion,
assuming a share price of $42.50 (EQR's closing share price on
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January 8, 1997) and 69,702,788 shares of EQR Common outstanding after
completion of the Merger, and a total post-Merger pro forma market
capitalization of approximately $5.27 billion. J.P. Morgan further noted that
(i) EQR's Debt to Total Market Capitalization Ratio would increase slightly,
upon completion of the Merger, from 32.2% prior to the Merger to 33.3% after the
assumption of Wellsford's outstanding debt plus the incremental debt incurred
from the payment of certain transaction costs, and (ii) the ratio of debt plus
perpetual preferred stock to total market capitalization also increases slightly
from 41.3% to 41.9% after accounting for the assumption and re-issuance of
Wellsford Preferred by EQR.
J.P. Morgan also noted that EQR's management intends to retain its current
dividend of $2.50 per common share for the combined company.
Fully-Loaded Share Price. J.P. Morgan calculated the fully-loaded share
price being paid by EQR for Wellsford Common. The fully-loaded share price
adjusts the implied share price of $26.56 (calculated as the January 8, 1997
closing price of $42.50 per share for EQR Common multiplied by the .625 exchange
ratio) for certain additional amounts being paid by EQR, including payments to
key executives of Wellsford in compensation, benefits, payments, accelerations,
share options and share appreciation rights. These additional payments are more
particularly described in the Merger Agreement. J.P. Morgan calculated that
these additional amounts create a fully-loaded price of up to $28.05 per share
of Wellsford Common. Based on the fully-loaded share price, J.P. Morgan
calculated a range of FFO multiples from a high of 13.0x (excluding synergies
and accounting) to a low of 9.6x (including synergies and accounting).
Public Trading Multiples Analysis. Using publicly available information,
J.P. Morgan compared selected financial and stock market data of Wellsford with
similar data for selected publicly traded companies (each, a "Comparable
Company" and, collectively, the "Comparable Companies") engaged in businesses
which J.P. Morgan judged to be analogous to that of Wellsford's. The companies
selected by J.P. Morgan were Security Capital Pacific Trust, United Dominion
Realty Trust, Post Properties, Inc., Avalon Properties, Inc., Merry Land &
Investment Company, Inc., Security Capital Atlantic, Inc., Gables Residential
Trust, Camden Property Trust, Irvine Apartment Communities, Evans Withycombe
Residential, Inc., Oasis Residential, Inc. and Smith Residential Realty. These
companies were selected, among other reasons, because of their specialization in
the multifamily REIT sector.
For each Comparable Company, publicly available financial performance data
through the twelve months ended September 30, 1996 was measured. J.P. Morgan
calculated the multiples of current stock price, as of January 8, 1997, to
analysts estimates for 1997 First Call FFO for each of the Comparable Companies
to determine the 1997 FFO trading multiples. J.P. Morgan's calculations
resulted in a range of 1997 FFO multiples from 10.1x to 13.9x (excluding the
highest and lowest). These multiples were then applied to Wellsford's First
Call 1997 FFO per share estimate (less $0.09 per share associated with the
Sonterra Loan contributed to WRP
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Newco), yielding a range of implied trading values for Wellsford's common stock
of approximately $21.88 to $29.98 per share. J.P. Morgan also observed that the
Comparable Companies had a range of debt to total market capitalization of 27.7%
to 44.5%.
Selected Transaction Analysis. Using publicly available information, J.P.
Morgan examined selected transactions with respect to purchase price per share
to calculate FFO transaction multiples. Specifically, J.P. Morgan reviewed the
following six transactions (collectively, the "Transaction Comparables") that it
deemed relevant: Camden Property Trust/Paragon Group (pending): (J.P. Morgan's
estimate of the transaction multiple was based upon the announced exchange ratio
multiplied by the January 8, 1997 closing price for Camden's common stock,
divided by the 1997 First Call estimate of FFO for Paragon), United Dominion
Realty Trust/South West Property Trust, Inc., BRE Properties/California REIT,
Mid-America Apartment Communities/America First REIT, Inc., and Wellsford
Residential Property Trust/Holly Residential Properties, Inc. J.P. Morgan
observed a range of transaction multiples from 8.3x to 11.2x First Call FFO of
the acquired companies. This range was then applied to Wellsford's First Call
1997 FFO per share, as adjusted for the Sonterra Loan, resulting in a range of
equity values for Wellsford's common stock of between $17.91 and $24.17 per
share. J.P. Morgan noted that this range was below both the implied and fully-
loaded prices for Wellsford Common.
J.P. Morgan concluded that the multifamily REIT Transaction Comparables
were imperfect comparisons to the Merger and therefore did not provide a fully
meaningful test of the exchange ratio or the purchase price per share for
Wellsford Common. In arriving at this conclusion J.P. Morgan reviewed the FFO
multiples for the Transaction Comparables universe and compared them to both the
average First Call FFO trading multiple for the acquired multifamily REITs and
to the average trading FFO multiple for the Comparable Companies, corresponding
to the period from July 8, 1994 to January 8, 1997 during which the transactions
took place. J.P. Morgan observed that the average FFO trading multiple for the
acquired multifamily REITs was significantly below that of the Comparable
Companies and that the four most comparable of the acquired multifamily REITs
were purchased at a discount to the average FFO trading multiple for the
Comparable Companies for the corresponding time period. Based on this analysis,
J.P. Morgan discounted the relevance of the multifamily REIT Transaction
Comparables as a measure of the multiple for Wellsford's purchase price.
J.P. Morgan also noted that when certain other transactions from other REIT
sectors were included in the transaction analysis, the range of FFO multiples
became 8.2x to 13.4x, resulting in a range of $17.80 to $28.88 per share for
Wellsford's common stock. These additional transactions were Highwoods
Properties Inc./Crocker Realty, Simon Property Group, Inc./DeBartolo Realty
Corporation, Horizon Outlet Centers, Inc./McArthur/Glen Realty Corporation, and
Omega Healthcare Investors/Health Equity Properties, Inc.
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Share Trading History Analysis. Based on publicly available information,
J.P. Morgan reviewed the history of trading prices for Wellsford Common and EQR
Common for the 52-week period ending January 8, 1997 and compared the 52-week
high/low range of $25.00 to $20.75 per share for Wellsford Common to both the
implied purchase price per share of $26.56 (calculated as the product of the
January 8, 1997 closing price for EQR Common times the exchange ratio of .625)
and the fully-loaded price per share of $28.05. J.P. Morgan noted that the
implied price for Wellsford Common was at a premium to the 52-week high.
Historical Exchange Ratio Analysis. J.P. Morgan reviewed the historical
exchange ratio of the daily closing price per share of Wellsford Common to the
daily closing price per share of EQR Common for the period from January 9, 1996
to January 8, 1997. To compensate in the value of Wellsford's share price for
the loss of income resulting from the contribution of the Sonterra Loan to WRP
Newco, J.P. Morgan calculated the First Call 1996 FFO multiple for each of
Wellsford's daily closing prices beginning August 1, 1996 (the commencement date
of the mortgage loan). Adjusting Wellsford's First Call 1996 FFO downwards by
$0.09, J.P. Morgan multiplied the above FFO multiple times the adjusted First
Call 1996 FFO to arrive at an adjusted Wellsford share price for each closing
price from August 1, 1996 to January 8, 1997. This adjusted share price was
then used in the calculation of the historical exchange ratios. The exchange
ratios of the daily closing prices of one share of Wellsford Common, as adjusted
for the Sonterra Loan, to one share of EQR Common on January 9, 1996 and on
January 8, 1997, were 0.777 and 0.575, respectively. J.P. Morgan noted a one-
year low to high range (adjusted for the Sonterra mortgage) of between 0.569 and
0.780; an average one-year unadjusted exchange ratio of 0.662 versus an adjusted
ratio of 0.658; an average six-month unadjusted exchange ratio of 0.626 versus
an adjusted ratio of 0.623; and an average one-month unadjusted exchange ratio
of 0.583 versus an adjusted ratio of 0.579. In addition, such analysis implied
a one-year historical share price range for Wellsford of $24.18 to $33.15, as
calculated by multiplying EQR Common's January 8, 1997 closing price of $42.50
by the 52-week low and high values for the exchange ratios, respectively.
Net Asset Value Analysis. Using the publicly available unaudited results
for each company for the period ending September 30, 1996, J.P. Morgan
calculated the Net Asset Value ("NAV") per share for both Wellsford Common and
EQR Common. In so doing, J.P. Morgan applied a range of capitalization rates
from 8.5% to 9.5% to projections by Wellsford and EQR for the stabilized 1997
net operating income ("NOI") of the properties, calculated as the average of the
estimated 1997 NOI for each company as projected by the REIT analyst community,
including projected acquisitions related NOI, in order to calculate a gross real
estate value, to which was added the gross value of other assets, excluding the
Wellsford assets to be contributed to WRP Newco, less each company's respective
outstanding debt and liabilities, to arrive at an equity NAV. The equity NAV
per share was then calculated by dividing the equity NAV by the number of common
shares outstanding for each company. This analysis indicated an NAV exchange
ratio range for the two companies of between 0.470 to 0.742, and an implied
range
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for the price of Wellsford Common of $19.96 to $31.54 per share, assuming a
January 8, 1997 closing price of $42.50 per share for EQR Common.
WRP Newco Analysis. As a part of its opinion, J.P. Morgan reviewed the
terms of EQR's investments in and commitments to WRP Newco. These include the
following items: an agreement by EQR to invest $3.5 million in WRP Newco Common
at the time of the Merger in return for receiving an approximately 7.5% interest
in WRP Newco; a commitment to purchase up to $25 million of preferred stock with
an 8.0% dividend and 8.0% conversion premium; a 20.0% interest in the Palomino
Park development (10.0% received through the purchase of Wellsford, and an
additional 10.0% purchased for $1.5 million in cash); credit enhancement for
$14.8 million in bonds outstanding on Palomino Park; and a two-part standby
purchase obligation for Palomino Park Phases I and II. J.P. Morgan noted that
EQR is to be compensated at competitive market based rates for its investments
in WRP Newco.
The summary set forth above does not purport to be a complete description
of the analyses or data presented by J.P. Morgan. The preparation of a fairness
opinion is a complex process and is not necessarily susceptible to partial
analysis or summary description. J.P. Morgan believes that the summary set
forth above and their analyses must be considered as a whole and that selecting
portions thereof, without considering all of its analyses, could create an
incomplete view of the processes underlying its analyses and opinion. J.P.
Morgan based its analyses on assumptions that it deemed reasonable, including
assumptions concerning general business and economic conditions and industry-
specific factors. The other principal assumptions upon which J.P. Morgan based
its analyses are set forth above under the description of each such analysis.
J.P. Morgan's analyses are not necessarily indicative of actual values or actual
future results that might be achieved, which values may be higher or lower than
those indicated. Moreover, J.P. Morgan's analyses are not and do not purport to
be appraisals or otherwise reflective of the prices at which businesses actually
could be bought or sold.
As a part of its investment banking business, J.P. Morgan and its
affiliates are continually engaged in the valuation of businesses and their
securities in connection with Mergers and acquisitions, investments for passive
and control purposes, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes. J.P. Morgan was selected to deliver an opinion to
EQR's Board of Trustees with respect to the Merger on the basis of such
experience and its familiarity with EQR.
For the delivery of its opinion, J.P. Morgan received a fee of $600,000
from EQR. In addition, EQR reimbursed J.P. Morgan for its reasonable expenses
incurred in connection with its services, including the fees and disbursements
of counsel, and agreed to indemnify J.P. Morgan against certain liabilities,
including liabilities arising under the Federal securities laws.
J.P. Morgan and its affiliates (including Morgan Guaranty Trust Company of
New York) maintain banking and other business relationships with EQR and its
affiliates pursuant to which
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J.P. Morgan has received an aggregate of approximately $490,000 in fees over the
past two years, and with Wellsford and its affiliates pursuant to which J.P.
Morgan has received an aggregate of approximately $638,000 in fees over the past
two years. In the ordinary course of their businesses, affiliates of J.P. Morgan
may actively trade the debt and equity securities of EQR or Wellsford for their
own accounts or for the accounts of customers and, accordingly, they may at any
time hold long or short positions in such securities.
Opinion of Financial Advisor - Wellsford
Wellsford. At the meeting of the Board of Trustees of Wellsford on January
16, 1997, Merrill Lynch rendered its oral opinion to the Wellsford Board of
Trustees, and subsequently on such date Merrill Lynch delivered its written
opinion (the "Merrill Lynch Opinion"), to the effect that, as of such date and
based upon the assumptions made, matters considered and limits of review, the
proposed consideration to be received by Wellsford Common Shareholders pursuant
to the Merger and the Distribution was fair to such shareholders from a
financial point of view. Merrill Lynch has not been requested to, and will not,
update its opinion prior to Closing. No limitations were imposed by Wellsford's
Board of Trustees upon Merrill Lynch with respect to the investigations made or
procedures followed by it in rendering its opinion.
A copy of the Merrill Lynch Opinion which sets forth the assumptions made,
matters considered and certain limitations on the scope of review undertaken by
Merrill Lynch, is attached hereto as Appendix D and is incorporated by reference
herein. The description of the written opinion set forth herein is qualified in
its entirety by reference to the full text of the written opinion. Shareholders
of Wellsford are urged to read such opinion in its entirety. In the opinion of
Wellsford, no events or significant changes in information have occurred that
would alter the opinion of Merrill Lynch. However, if such an event or change
does occur, including, without limitation, an amendment to the Merger Agreement
or Contribution and Distribution Agreement which materially affects the
financial terms of either of such agreements, a revised fairness opinion will be
requested.
THE MERRILL LYNCH OPINION IS ADDRESSED TO THE WELLSFORD BOARD OF TRUSTEES
AND ADDRESSES ONLY THE FAIRNESS FROM A FINANCIAL POINT OF VIEW OF THE PROPOSED
CONSIDERATION TO BE RECEIVED BY WELLSFORD COMMON SHAREHOLDERS PURSUANT TO THE
MERGER AND THE DISTRIBUTION AND DOES NOT CONSTITUTE, NOR SHOULD IT BE CONSTRUED
AS, A RECOMMENDATION TO ANY WELLSFORD COMMON SHAREHOLDER AS TO HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE WELLSFORD SPECIAL MEETING. THE PROPOSED
CONSIDERATION TO BE RECEIVED BY WELLSFORD COMMON SHAREHOLDERS PURSUANT TO THE
MERGER AND THE DISTRIBUTION WAS DETERMINED ON THE BASIS OF NEGOTIATIONS BETWEEN
WELLSFORD AND EQR AND WAS APPROVED BY THE WELLSFORD BOARD OF TRUSTEES.
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In connection with the preparation of the Merrill Lynch Opinion, Merrill
Lynch, among other things: (i) reviewed Wellsford's Annual Report on Form 10-K
and related financial information for the fiscal year ended December 31, 1995
and Wellsford's Reports on Form 10-Q and the related unaudited financial
information for the quarterly periods ended March 31, 1996, June 30, 1996 and
September 30, 1996; (ii) reviewed EQR's Annual Report on Form 10-K and related
financial information for the fiscal year ended December 31, 1995 and EQR's
Reports on Form 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1996, June 30, 1996 and September 30, 1996;
(iii) reviewed certain information, including certain financial forecasts and
assumptions, relating to the business, earnings, cash flow, assets and prospects
of (A) Wellsford and WRP Newco and (B) EQR, furnished to it by Wellsford and
EQR, respectively; (iv) reviewed estimates of prospective synergies resulting
from the Merger prepared by the managements of Wellsford and EQR and discussed
such estimates with the managements of both companies; (v) conducted discussions
with members of senior management of Wellsford and EQR concerning the respective
businesses and prospects of (A) Wellsford and WRP Newco and (B) EQR; (vi)
reviewed the historical market prices and trading activity for Wellsford Common
and EQR Common and compared them with that of certain companies which Merrill
Lynch deemed to be reasonably similar to Wellsford and EQR, respectively; (vii)
compared the results of operations of Wellsford and EQR with that of certain
companies which Merrill Lynch deemed to be reasonably similar to Wellsford and
EQR, respectively; (viii) compared the proposed financial terms of the Merger
with the financial terms of certain other mergers and acquisitions which Merrill
Lynch deemed to be relevant; (ix) considered the pro forma effect of the Merger
on the combined entity's capitalization ratios and earnings, cash flow and book
value per share; (x) reviewed the Merger Agreement; (xi) reviewed the financial
terms of the Contribution and Distribution as set forth in the Merger Agreement
and the forms of Contribution and Distribution Agreement and Stock Purchase
Agreement attached as exhibits thereto; and (xii) reviewed such other financial
studies and analyses and performed such other investigations and took into
account such other matters as Merrill Lynch deemed necessary, including its
assessment of general economic, market and monetary conditions.
In preparing the Merrill Lynch Opinion, Merrill Lynch relied on the
accuracy and completeness of all information supplied or otherwise made
available to it by Wellsford and EQR, and did not independently verify such
information or undertake an independent appraisal or evaluation of the assets or
liabilities of Wellsford or EQR. With respect to the financial forecasts,
assumptions and estimates of prospective synergies resulting from the Merger
furnished by Wellsford and the financial forecasts, assumptions and estimates of
prospective synergies resulting from the Merger furnished by EQR, Merrill Lynch
assumed that they had been reasonably prepared and reflected the best currently
available estimates and judgment of Wellsford's or EQR's management as to the
expected future financial performance of Wellsford, WRP Newco or EQR, as the
case may be. Merrill Lynch further assumed that the Merger will qualify as a
tax-free reorganization to the holders of Wellsford Common (except to the
extent, if any, of cash received in lieu of fractional shares). In addition,
Merrill Lynch further assumed that the Distribution will be consummated without
any material modification to the terms set
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forth in the forms of Contribution and Distribution Agreement and Stock
Purchase Agreement reviewed by it. As a matter of policy, Wellsford does not
publicly disclose internal management forecasts, projections or estimates of the
type furnished to Merrill Lynch in connection with its analysis of the Merger,
and such forecasts, projections and estimates were not prepared with a view
towards public disclosure. These forecasts, projections and estimates were based
on numerous variables and assumptions which are inherently uncertain and which
may not be within the control of management of Wellsford, including, without
limitation, general economic, regulatory and competitive conditions.
Accordingly, actual results could vary materially from those set forth in such
forecasts, projections and estimates.
In connection with rendering its opinion, Merrill Lynch was not authorized
to, and did not, solicit indications of interest from third parties to purchase
the outstanding Wellsford Common or otherwise enter into a business combination
with Wellsford. Merrill Lynch's opinion as to the fairness from a financial
point of view of the proposed consideration to be received by holders of
Wellsford Common addresses the ownership position in the combined entity to be
received by the holders of Wellsford Common pursuant to the Merger on the terms
set forth in the Merger Agreement based upon the relative contributions of
Wellsford and EQR to the combined entity and after giving effect to the
Contribution and Distribution. Merrill Lynch expressed no opinion as to prices
at which the Survivor Common or the WRP Newco Common will trade following the
consummation of the Contribution and Distribution and the Merger or prices which
could be obtained for the Survivor Common in a sale of the combined entity
following the consummation of the Merger. Merrill Lynch did not consider, and
its opinion does not address, the tax consequences of the Distribution to the
holders of Wellsford Common. The Merrill Lynch Opinion does not address the
relative merits of the Merger as compared with any other business plan or
opportunity that might be presented to Wellsford, including alternative business
combinations with third parties, or the effect of any other arrangement in which
Wellsford might engage.
At the meeting of the Wellsford Board of Trustees held on January 16, 1997,
Merrill Lynch presented certain financial analyses accompanied by written
materials in connection with the delivery of its fairness opinion. The
following is a summary of the material financial and comparative analyses
performed by Merrill Lynch in arriving at its opinion.
Historical Trading Performance and Current Capitalization. Merrill Lynch
reviewed certain trading information for each of Wellsford and EQR and, on the
basis thereof, calculated their respective market values, market capitalizations
and trading multiples based on stock prices as of January 14, 1997 of $24.63 for
Wellsford and $42.88 for EQR. For this purpose, Merrill Lynch defined "total
market capitalization" as market value of the relevant company's common equity
(including operating partnership units), plus preferred stock at liquidation
value plus total debt less cash. Merrill Lynch then calculated the market value
of each of Wellsford and EQR as a multiple of projected FFO (based on mean First
Call estimates) and Adjusted Funds From Operations ("AFFO") (based on estimates
from Merrill Lynch Research). For Wellsford, the FFO multiples for 1996 and
1997 were 11.7x and 11.0x, respectively, and the AFFO multiples for 1996 and
1997 were 12.6x and 11.8x, respectively. For EQR, the FFO multiples for 1996
and 1997 were 13.8x and 12.5x, respectively, and the AFFO multiples for 1996 and
1997 were 16.0x and 14.4x, respectively.
Merrill Lynch also reviewed the share price history for Wellsford for the
period January 7, 1996 through January 10, 1997, and for EQR for the period
January 7, 1996 through January
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9, 1997 and noted certain events and public announcements made by the respective
companies during such periods.
Analysis of Selected Comparable Publicly Traded Companies. Using publicly
available information and estimates of future financial results published by
First Call and taken from Merrill Lynch Research, Merrill Lynch compared certain
financial and operating information and ratios for both Wellsford and EQR with
the corresponding financial and operating information for a group of publicly
traded companies engaged primarily in the ownership, management, operation and
acquisition of multifamily properties which Merrill Lynch deemed to be
reasonably comparable to Wellsford and EQR. For the purpose of its analyses,
the following companies were used as comparable companies to Wellsford: Evans
Withycombe Residential, Inc., Amli Residential Properties Trust, Camden Property
Trust, Oasis Residential, Inc. and Apartment Investment & Management Co.
(collectively, the "Wellsford Comparable Companies"); and the following
companies were used as comparable companies to EQR: Security Capital Pacific
Trust, United Dominion Realty Trust, Inc., Wellsford, Merry Land & Investment
Co., Inc., Security Capital Atlantic, Inc. and Apartment Investment & Management
Co. (collectively, the "EQR Comparable Companies").
Merrill Lynch's calculations resulted in the following relevant ranges for
the Wellsford Comparable Companies and for Wellsford as of January 14, 1997: a
range of debt to total market capitalization of 32.3% to 43.1%, with a mean of
40.8% (with Wellsford at 37.2%); a range of dividend yields of 6.4% to 7.5%,
with a mean of 7.1% (with Wellsford at 7.9%); a range of 1996 AFFO payout ratios
of 87.6% to 102.6%, with a mean of 95.4% calculated on the basis of projected
results for 1996 (with Wellsford at 99.0%); a range of market value as a
multiple of projected 1996 FFO of 11.1x to 11.9x, with a mean of 11.5x (with
Wellsford at 11.7x); a range of market value as a multiple of projected 1997 FFO
of 10.1x to 11.3x, with a mean of 10.7x (with Wellsford at 11.0x); a range of
market value as a multiple of projected 1996 AFFO of 12.6x to 13.9x, with a mean
of 13.2x (with Wellsford at 12.6x); and a range of market value as a multiple of
projected 1997 AFFO of 11.5x to 13.1x, with a mean of 12.2x (with Wellsford at
11.8x).
Merrill Lynch's calculations resulted in the following relevant ranges for
the EQR Comparable Companies and for EQR as of January 14, 1997: a range of
dividend yields of 5.8% to 7.9%, with a mean of 6.5% (with EQR at 5.8%); a range
of debt to total market capitalization of 11.5% to 42.9%, with a mean of 31.7%
(with EQR at 27.9%); a range of 1996 AFFO payout ratios of 82.2% to 99.0%, with
a mean of 90.2% calculated on the basis of projected results for 1996 (with EQR
at 93.3%); a range of market value as a multiple of projected 1996 FFO of 10.9x
to 15.5x, with a mean of 12.6x (with EQR at 13.8x); a range of market value as a
multiple of projected 1997 FFO of 10.1x to 14.6x, with a mean of 11.8x (with EQR
at 12.5x); a range of market value as a multiple of projected 1996 AFFO of 12.2x
to 15.5x, with a mean of 13.7x (with EQR at 16.0x); and a range of market value
as a multiple of projected 1997 AFFO of 11.8x to 14.0x, with a mean of 13.0x
(with EQR at 14.4x).
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None of the companies utilized in the above analysis for comparative
purposes is, of course, identical to Wellsford or EQR. Accordingly, a complete
analysis of the results of the foregoing calculations cannot be limited to a
quantitative review of such results and involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the Wellsford Comparable Companies and the EQR Comparable Companies, and other
factors that could affect the public trading value of the Wellsford Comparable
Companies and the EQR Comparable Companies, as well as that of Wellsford or EQR.
In addition, the multiples of market value to estimated 1996 and projected 1997
FFO and AFFO for the Wellsford Comparable Companies and the EQR Comparable
Companies are based on projections prepared by research analysts using only
publicly available information. Accordingly, such estimates may or may not
prove to be accurate.
Comparable Transactions Analysis. Merrill Lynch also compared certain
financial ratios of the Merger with those of selected other mergers and
strategic transactions involving REITs which Merrill Lynch deemed to be
reasonably comparable to the Merger. These transactions were Camden Property
Trust's proposed merger with Paragon Group, Inc., Chateau Properties, Inc.'s
merger with ROC Communities, Inc., United Dominion Realty, Inc.'s merger with
South West Property Trust Inc., Highwoods Properties Inc.'s acquisition of
Crocker Realty Trust, Inc., Simon Property Group, Inc.'s merger with DeBartolo
Realty Corporation, Bradley Real Estate Inc.'s merger with Tucker Properties
Corp., BRE Properties Inc.'s Merger with REIT of California, Horizon Outlet
Center Inc.'s merger with McArthur Glen Realty Corp., Mid America Apartment
Communities Inc.'s merger with America First REIT, Inc. and Wellsford's merger
with Holly Residential Properties, Inc.
Using publicly available information and estimates of financial results as
published by First Call, Merrill Lynch calculated the premium of the implied
offer value per share relative to the acquired company's stock price on the day
before announcement of the respective transaction and the implied offer value
per share for the acquired company, as of the day before the announcement of the
respective transaction, as a multiple of the projected FFO per share for such
company. This analysis yielded a range of premiums/(discounts) of (0.8%) to
38.0% with a mean of 12.2% and a range of transaction FFO multiples of 6.6x to
15.5x with a mean of 10.2x.
Merrill Lynch observed that, based on the closing price of EQR Common on
the NYSE of $42.88 per share as of January 14, 1997, the Exchange Ratio yielded
an implied offer value in the Merger of $26.80 per share of Wellsford Common.
Together with the per share valuation range for Newco Common of $2.43 to $2.82,
the implied premium range of the aggregate consideration to be received in the
Merger and the Distribution over the closing market price of Wellsford Common on
January 14, 1997 was 18.7% to 20.3% and represented a range of implied offer
values in the Merger and the Distribution for the Wellsford Common as a multiple
of Wellsford's projected 1997 FFO of 12.2x to 12.4x.
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Discounted Cash Flow Analysis. Merrill Lynch performed discounted cash
flow analyses (i.e., an analysis of the present value of the projected levered
cash flows for the periods and using the discount rates indicated) of Wellsford
based upon projections provided by Wellsford's management of Wellsford's
dividends, FFO and AFFO for the years 1997 through 2001, inclusive, using
discount rates reflecting an equity cost of capital ranging from 15.0% to 17.0%
and terminal value multiples of calendar year 2001 FFO ranging from 10.5x to
12.5x and terminal value multiples of calendar year 2001 AFFO ranging from 11.5x
to 13.5x. Based upon Wellsford Management's projection of FFO per share of
$2.39 in 1997 increasing gradually to $3.27 in 2001 (assuming a compound
annual growth rate of 9.1%) and AFFO per share of $2.25 in 1997 increasing
gradually to $3.10 in 2001 (assuming a compound annual growth rate of 9.2%). The
range of present values per Wellsford share was $22.07 to $27.85 using the FFO
and AFFO discounted dividend methods and $24.50 to $29.47 based upon the
discounted AFFO method.
Merrill Lynch also performed discounted cash flow analyses of EQR based
upon projections and assumptions provided by EQR's management of EQR's
dividends, FFO and AFFO for the years 1997 through 2001, inclusive, using
discount rates reflecting an equity cost of capital ranging from 14.0% to 16.0%
and terminal value multiples of calendar year 2001 FFO ranging from 12.5x to
14.5x and terminal value multiples of calendar year 2001 AFFO ranging from 14.0x
to 16.0x. The range of present values per EQR share was $36.63 to $44.51 using
the FFO and AFFO discounted dividend methods and $39.89 to $47.41 based upon the
discounted AFFO method.
Net Asset Valuation Analysis. Merrill Lynch performed a net asset
valuation for Wellsford based on an asset-by-asset real estate valuation of
Wellsford's properties, an estimation of the current value for Wellsford's other
assets and liabilities, and an estimation of Wellsford's debt balances as of
December 31, 1996. The real estate valuation utilized property specific
projections prepared by Wellsford's management for the year 1997. For the
operating portfolio of Wellsford, the valuation utilized the direct
capitalization method on 1997 property net operating income after capital
reserves and a range of capitalization rates of 8.50% to 9.25%. These
calculations indicated a per share net asset valuation range for Wellsford of
$25.58 to $28.27.
Merrill Lynch also performed a net asset valuation for EQR based on an
asset-by-asset real estate valuation of EQR's properties, an estimation of the
current values for EQR's other assets and liabilities, and an estimation of
EQR's debt balances as of December 31, 1996. The real estate valuation utilized
property specific projections prepared by EQR's management for the year 1997.
For the operating portfolio of EQR, the valuation utilized the direct
capitalization method on 1997 property net operating income after capital
reserves and a range of capitalization rates of 8.25% to 9.25%. These
calculations indicated a per share net asset valuation range for EQR of $32.53
to $35.95.
Merrill Lynch also performed a net asset valuation for WRP Newco based on
an asset-by-asset valuation. Merrill Lynch arrived at a range of values by
summing the following: (i) the implied value range for WRP Newco's interest in
the Sonterra Assets, (ii) the implied value range for WRP Newco's interest in
Palomino Park, net of associated liabilities, and (iii) cash
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and cash equivalents less total debt. These calculations indicated a net asset
valuation range for WRP Newco Common allocable to each share of Wellsford Common
in the Distribution of $2.43 to $2.82, of which amount $1.45 was attributable to
cash and cash equivalents.
Relative Discounted Cash Flow Analysis. Merrill Lynch utilized the results
of the discounted cash flow analyses of Wellsford and EQR described above after
adjusting the projections relating to Wellsford to give effect to the
Distribution (as so adjusted, the "Post-Distribution Wellsford") to calculate a
range of implied exchange ratios based on a comparison of the relative ranges of
value for EQR and Post-Distribution Wellsford. When the low Post-Distribution
Wellsford discounted cash flow value was compared to the high EQR discounted
cash flow value and the high Post-Distribution Wellsford discounted cash flow
value was compared to the low EQR discounted cash flow value, the analysis
yielded an implied exchange ratio range of 0.442 to 0.660. The Exchange Ratio
under the Merger Agreement is set at .625, subject to adjustment as set forth in
the Merger Agreement.
Contribution Analysis. Merrill Lynch observed that Wellsford Common
Shareholders would own 15.3% of the common shares of the combined entity
outstanding after the Merger and Distribution (assuming an Exchange Ratio of
.625), after giving effect to the issuance of the Merger consideration. Merrill
Lynch reviewed certain projected operating and financial information, including,
among other things, FFO and AFFO for Post-Distribution Wellsford, EQR and the
pro forma combined entity without giving effect to potential transaction
synergies. Merrill Lynch observed that in 1997, 1998 and 1999 Post-Distribution
Wellsford would contribute (without giving effect to potential transaction
synergies) 16.0%, 14.1% and 13.2% to the combined entity's FFO, respectively,
and 16.6%, 14.6% and 13.6% to the combined entity's AFFO, respectively. Merrill
Lynch also reviewed the relative contributions to the pro forma combined net
asset valuation. The analysis indicated that Post-Distribution Wellsford would
contribute 17.1% of the combined net asset value based upon the midpoints of the
net asset value ranges.
Pro Forma Combination Analysis. Merrill Lynch analyzed the pro forma
effects resulting from the Merger, including the potential impact on EQR's
projected stand alone FFO per share and the anticipated accretion (i.e., the
incremental increase) to EQR's FFO per share resulting from the Merger. Merrill
Lynch observed that, after giving effect to Wellsford management's estimates of
potential transaction synergies, the Merger would be accretive to EQR's
projected FFO per share in each of the years 1997 through 1999, inclusive.
Merrill Lynch also observed that the indicated annual dividend per Wellsford
share pro forma for the Merger would be $1.56 per Wellsford share, or a 19.5%
implied reduction in Wellsford's current indicated dividend rate.
Capitalization. In addition, Merrill Lynch compared EQR's book
capitalization as of December 31, 1996 to (i) its book capitalization as of
December 31, 1996 pro forma for the Merger and (ii) based on projections of
Wellsford and EQR managements, EQR's book
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capitalization as of December 31, 1997 pro forma for the Merger. The total debt
to book equity ratio was 87.1%, 79.4% and 80.5% as of December 31, 1996, pro
forma December 31, 1996 and pro forma December 31, 1997, respectively. The total
debt to capitalization ratio was 46.6%, 44.2% and 44.6% as of such respective
dates. EBITDA as a multiple of interest expense was 3.2x, 3.3x and 3.5x as of
such respective dates, EBITDA as a multiple of fixed charges was 2.4x, 2.4x and
2.5x as of such respective dates, EBITDA less capital expenditures as a multiple
of interest expense was 3.0x, 3.1x and 3.2x as of such respective dates and
EBITDA less capital expenditures as a multiple of fixed charges was 2.2x, 2.3x
and 2.3x as of such respective dates. Additionally, based on projections of
Wellsford's management for WRP Newco, Merrill Lynch observed that the total debt
to capitalization ratio of WRP Newco as of December 31, 1997 was 25.4%.
The summary set forth above does not purport to be a complete description
of the analyses performed by Merrill Lynch in arriving at its opinion. The
preparation of a fairness opinion is a complex process and not necessarily
susceptible to partial or summary description. Merrill Lynch believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all factors
and analyses, could create a misleading view of the processes underlying its
analyses set forth in its opinion. In its analyses, Merrill Lynch made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond EQR's, Wellsford's and
Merrill Lynch's control. Any estimates contained in Merrill Lynch's analyses are
not necessarily indicative of actual values, which may be significantly more or
less favorable than as set forth therein. Estimated values do not purport to be
appraisals and do not necessarily reflect the prices at which businesses or
companies may be sold in the future, and such estimates are inherently subject
to uncertainty.
The Wellsford Board of Trustees selected Merrill Lynch to render a fairness
opinion because Merrill Lynch is an internationally recognized investment
banking firm with substantial experience in transactions similar to the Merger
and because it is familiar with Wellsford and its business. Merrill Lynch has
from time to time rendered investment banking, financial advisory and other
services to Wellsford and EQR for which it has received aggregate compensation
in the amount of $6.7 million from EQR and $2.3 million from Wellsford, in each
case since January 1, 1995. Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with Mergers and
acquisitions, leveraged buyouts, negotiated underwritings, secondary
distributions of listed and unlisted securities and private placements.
Pursuant to a letter agreement dated January 14, 1997, Wellsford has agreed
to pay Merrill Lynch fees as follows: (i) a cash fee of $500,000 payable upon
the delivery of the Merrill Lynch Opinion, and (ii) an additional cash fee of $2
million (less the fees paid to Merrill Lynch pursuant to (i) above) to be paid
contingent upon the Closing of the Merger. WRP Newco has agreed with Wellsford
to be responsible for $250,000 of such fees. Wellsford also agreed to reimburse
Merrill Lynch for its reasonable out-of-pocket expenses incurred in connection
with its advisory work, including the reasonable fees and disbursements of its
legal
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counsel, subject to certain limitations, and to indemnify Merrill Lynch and
certain related persons against certain liabilities arising out of or in
conjunction with its rendering of services under its engagement, including
certain liabilities under the federal securities laws.
In the ordinary course of its business, Merrill Lynch may actively trade in
the securities of Wellsford and EQR for its own account and the account of its
customers and, accordingly, may at any time hold a long or short position in
such securities.
Effective Time of the Merger
If the Merger is approved by the requisite vote of shareholders of
Wellsford and shareholders of EQR, and the other conditions to the Merger are
satisfied or waived, the Merger will become effective at the time the Department
accepts the Articles for record or at a different time established in the
Articles, not to exceed 30 days after the Articles are accepted for record by
the Department. It is presently anticipated that such filing and acceptance
will be made on or about May 30, 1997, and that the Effective Time of the Merger
will occur on such date unless a different date is specified in the Articles, as
discussed above, although there can be no assurance as to whether or when the
Merger will occur. The Articles are attached hereto as Appendix B. See
"--Representation and Warranties; Conditions to the Merger."
Representations and Warranties; Conditions to the Merger
The Merger Agreement contains representations and warranties by EQR and
Wellsford regarding, among other things, their organization and good standing,
capitalization, ownership and capitalization of their subsidiaries,
qualification to do business, authority to enter into the Merger Agreement and
related agreements, filings with the Commission, reliability of financial
statements, compliance with applicable laws and regulations, taxation and
qualification as a REIT, properties, development rights (with respect to
Wellsford only), environmental matters, contracts, debt instruments, employee
benefit plans, undisclosed liabilities and the absence of certain legal
proceedings and other events, including material adverse changes in the parties'
businesses, financial condition or results of operations. These representations
and warranties will not survive the Effective Time.
The respective obligations of EQR and Wellsford to effect the Merger are
subject to the following conditions: (i) approval of the Merger Agreement, and
the transactions contemplated therein, by the shareholders of Wellsford and EQR,
(ii) approval by the NYSE of the listing of the shares of Survivor Common to be
issued in the Merger, (iii) the Registration Statement shall not be the subject
of any stop order or proceeding by the Commission seeking a stop order, (iv) no
injunctions or restraints shall have been issued by any court of competent
jurisdiction preventing the consummation of the Merger, (v) all state securities
laws shall have been complied with, (vi) execution of the Contribution and
Distribution Agreement, (vii) execution of the Common and Preferred Stock
Purchase Agreement between ERP Operating Partnership and WRP Newco (the "Stock
Purchase Agreement"), (viii) execution of the Palomino Credit
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Enhancement Agreement between ERP Operating Partnership and WRP Newco, (ix)
execution of the Sonterra Right of First Offer Agreement between WRP Newco and
ERP Operating Partnership, (x) execution of the Palomino Agreement between WRP
Newco and ERP Operating Partnership, (xi) execution of the Transaction and
Termination Costs Agreement among EQR, Wellsford and WRP Newco, (xii) execution
of the Consulting Agreements of Jeffrey H. Lynford and Edward Lowenthal and
(xiii) the receipt of the opinion of Ballard Spahr Andrews & Ingersoll to the
effect that the Merger Agreement and Articles are enforceable under Maryland
law.
The obligations of Wellsford and EQR to effect the Merger are subject to
the following additional conditions: (i) all representations and warranties made
by the parties shall be true and correct as of the Closing Date, which shall be
deemed the case unless the breach of such representations and warranties, in the
aggregate, could reasonably be expected to have a material adverse effect with
respect to such parties, (ii) each party shall have performed its obligations
under the Merger Agreement, (iii) as of the Closing Date, neither party, nor any
of their subsidiaries, will have suffered a material adverse change in its
business, financial condition or results of operations taken as a whole (a
"Material Adverse Change"), (iv) each party shall have received an opinion of
counsel from counsel to the other party stating that commencing with its taxable
year ended December 31, 1993, its client was organized and has operated in
conformity with the requirements for qualification as a REIT under the Code, (v)
each party shall have received an opinion of counsel dated as of the closing
date, to the effect that the Merger will qualify as a reorganization under the
provisions of Section 368(a) of the Code, (vi) each party shall have received a
"comfort letter" from the other party's accountants, (vii) each party shall have
received an opinion from counsel to the other party addressing certain issues as
set out in the Merger Agreement, and (viii) the receipt of all consents and
waivers from third parties necessary in connection with the consummation of the
transactions contemplated by the Merger Agreement.
The obligation of EQR to effect the Merger is further subject to the
following conditions: (i) unless Wellsford Holly Management, Inc. ("Wellsford
Management Inc.") is dissolved before the Closing Date, the voting shares of
Wellsford Management Inc. shall have been transferred to EQR's designees as
provided for in the Merger Agreement, (ii) certain executives of Wellsford who
have agreed to the conversion of their options to purchase Wellsford Common into
options to purchase WRP Newco Common will have executed agreements releasing the
Surviving Trust from any obligations of Wellsford to them under options to
purchase Wellsford Common which are exchanged for or converted into options to
purchase WRP Newco Common, (iii) the Articles of Incorporation of WPHC shall
have been amended to modify its equity structure as provided in the Merger
Agreement and (iv) Wellsford's ownership interest in WPHC immediately prior to
the Distribution by Wellsford of WRP Newco Common shall consist solely of 80
voting shares of WPHC and 20 non-voting shares of WPHC.
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Appraisal Rights
Shareholders of Wellsford and shareholders of EQR are not entitled to
dissenting shareholders' appraisal rights under Maryland law. Maryland law does
not provide appraisal rights to shareholders of a real estate investment trust
in connection with a merger if their shares are listed on a national securities
exchange, such as the NYSE, on the record date for determining shareholders
entitled to vote on such merger. All of the shares of EQR and Wellsford
outstanding on the record date for determining the shareholders entitled to vote
on the Merger were listed on the NYSE.
Regulatory Matters
EQR and Wellsford believe that the Merger may be consummated without
notification being given or certain information being furnished to the Federal
Trade Commission (the "FTC") or the Antitrust Division of the Department of
Justice (the "Antitrust Division") pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR Act"), and that no waiting period
requirements under the HSR Act are applicable to the Merger. However, at any
time before or after the Effective Time, either the Antitrust Division or the
FTC could take such action under the antitrust laws as it deems necessary or
desirable in the public interest, or certain other persons could take action
under the antitrust laws, including seeking to enjoin the Merger. EQR and
Wellsford believe that consummation of the Merger would not violate any
antitrust laws. However, there can be no assurance that a challenge to the
Merger on antitrust grounds will not be made or, if a challenge is made, what
the result will be.
Termination Provisions
The Merger Agreement provides that it may be terminated at any time prior
to the filing of the Articles with the Department, whether before or after
approval of the Merger by the shareholders of Wellsford and EQR, by mutual
written consent, duly authorized by the Boards of Trustees of EQR and Wellsford.
In addition, the Merger Agreement may be terminated by EQR or Wellsford (i) if
the Merger has not been consummated by August 1, 1997 (provided the terminating
party will not have breached in any material respect its obligations under the
Merger Agreement in any manner that will have proximately contributed to the
occurrence of such failure), (ii) upon a breach of any representation, warranty,
covenant, obligation or agreement, on the part of the non-terminating party set
forth in the Merger Agreement, such that certain conditions set forth in the
Merger Agreement would be incapable of being satisfied by August 1, 1997, (iii)
if the requisite vote of the shareholders of EQR or Wellsford will not have been
obtained at the meeting of such shareholders, or (iv) if an order, decree,
ruling or other action permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by the Merger Agreement will have
become final and non-appealable.
The Merger Agreement may be terminated by Wellsford, if prior to the
Wellsford Special Meeting, the Wellsford Board of Trustees withdraws or modifies
its approval or recommendation
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of the Merger in connection with, or approves or recommends, a Superior
Acquisition Proposal (as defined hereinafter). The Merger Agreement may be
terminated by EQR if (i) prior to the Wellsford Special Meeting, the Wellsford
Board of Trustees withdraws or modifies in any manner adverse to EQR its
approval or recommendation of the Merger or the Merger Agreement in connection
with, or approves or recommends, a Superior Acquisition Proposal, or (ii)
Wellsford enters into a definitive agreement with respect to any Acquisition
Proposal.
The Merger Agreement defines an "Acquisition Proposal" as a merger,
acquisition, tender offer, exchange offer, consolidation, sale of assets or
similar transaction involving all or any significant portion of the assets or
any equity securities of, Wellsford or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement. The Merger Agreement defines
a "Superior Acquisition Proposal" as a bona fide acquisition proposal by a third
party which a majority of the members of the Wellsford Board of Trustees
determines in good faith to be more favorable to Wellsford's shareholders from a
financial point of view than the Merger and which the Board of Trustees of
Wellsford determines is reasonably capable of being consummated.
Termination Fee and Expenses
The Merger Agreement provides for certain payments by Wellsford to EQR in
connection with the termination of the Merger Agreement. These payments are (i)
a Break-Up Fee of $14 million, plus (ii) Break-Up Expenses equal to the out-of-
pocket expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereunder, up to a maximum of $2.5 million. If the
Merger Agreement is terminated due to the Wellsford Board of Trustees having
withdrawn or modified its approval or recommendation of the Merger or the Merger
Agreement in connection with, or having approved or recommended a Superior
Acquisition Proposal, or if Wellsford will have entered into a definitive
agreement with respect to any Acquisition Proposal, Wellsford is obligated to
pay EQR the Break-Up Fee. Additionally, if the Merger Agreement is terminated
due to a breach of any representation, warranty, covenant, obligation or
agreement by Wellsford or EQR, or failure by either Wellsford or EQR to obtain
the required shareholder approval, then the breaching party, or the party which
failed to obtain such shareholder approval, shall pay to the other party an
amount equal to the Break-Up Expenses. If the Merger is not consummated, other
than due to the termination of the Merger Agreement by (i) the mutual written
consent of the respective Boards of Trustees of EQR and Wellsford, (ii) either
party, upon the failure by EQR to obtain the required shareholder approval, or
(iii) Wellsford, upon a breach of any representation, warranty, covenant,
obligation or agreement on the part of EQR resulting in a "material adverse
effect" to EQR, and either prior to the termination of the Merger Agreement or
within 12 months thereafter, Wellsford or any of its subsidiaries enters into
any written Acquisition Proposal which is subsequently consummated, Wellsford is
required to pay the Break-Up Fee to EQR, as compensation and liquidated damages
for the loss suffered by EQR as a result of the failure of the Merger to be
consummated and to avoid the difficulty of determining damages under the
circumstances. Neither party shall have any liability to the other after
payment of the Break-Up Fee.
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Except as described above, all costs and expenses incurred in connection
with the Merger Agreement and the transactions contemplated thereby (the
"Transaction Costs") will be allocated between EQR and the Surviving Trust. If
the portion of the Transaction Costs allocated to the Surviving Trust exceeds an
amount specified in the Merger Agreement, WRP Newco will be obligated to
reimburse the Surviving Trust for such excess amount. If WRP Newco becomes
obligated to reimburse the Surviving Trust in the manner described above, the
funds contributed to WRP Newco by Wellsford under the Contribution and
Distribution Agreement will be decreased by an amount equal to the amount which
WRP Newco is obligated to reimburse the Surviving Trust.
No Solicitation of Other Transactions
Wellsford has agreed that (i) it and its subsidiaries will not, and it will
use its best efforts not to permit its officers, trustees, employees, agents or
financial advisors to initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its shareholders) with
respect to a merger, acquisition, tender offer, exchange offer, consolidation,
sale of assets or similar transactions involving all or any significant portion
of the assets or any equity securities of, it or any of its subsidiaries, other
than the transactions contemplated by the Merger Agreement and (ii) it will
notify EQR immediately if Wellsford receives any such inquiries or proposals, or
any requests for such information, or if any negotiations or discussions are
sought to be initiated or continued with it with respect to any of the
foregoing. The Merger Agreement does not, however, prohibit a party from
entering into discussion with respect to an unsolicited proposal if the Board of
Trustees of that party determines that such action is required by its duties to
its shareholders imposed by law.
EQR has agreed that if it enters into negotiations with another entity
having a class of equity securities registered under the Exchange Act regarding
the acquisition of such entity (whether effected through a merger,
consolidation, share exchange, tender offer or other form), then at least three
business days prior to executing any definitive agreement with such entity with
respect to such acquisition or making a tender offer for the shares or other
ownership interests of such entity, EQR shall notify Wellsford of such
transaction and consult with Wellsford with respect thereto, it being
understood, however, that Wellsford shall have no approval rights with respect
thereto.
Conversion of Shares
Each share of Wellsford Common outstanding immediately prior to the
Effective Time will be converted into .625 of a share of Survivor Common. All
such shares of Wellsford Common, when so converted, will cease to be outstanding
and will automatically be cancelled and retired and each holder of a certificate
representing any such shares will cease to have any rights with respect thereto,
except the right to receive the shares of Survivor Common and any cash, without
interest, in lieu of fractional shares to be issued or paid in consideration
therefor
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upon the surrender of such certificate in accordance with the Merger Agreement,
as well as dividends and distributions declared with a record date after the
Effective Time.
Each share of Wellsford Preferred, consisting of Wellsford Series A and
Wellsford's Series B Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Wellsford Series B"), outstanding immediately prior to the Effective
Time will continue as a preferred share of the Surviving Trust with its same
preferences and other terms except that each share of Wellsford Series A will be
redesignated as one share of Series D Convertible Preferred Share of Beneficial
Interest in the Surviving Trust ("Survivor Series D") and each share of
Wellsford Series B will be redesignated as one share of Series E Cumulative
Redeemable Preferred Share of Beneficial Interest in the Surviving Trust
("Survivor Series E"); provided, however, that the conversion ratio for Survivor
Series D shall be adjusted in accordance with its terms. At the Effective Time,
each certificate representing outstanding shares of Wellsford Series A and
Wellsford Series B will cease to have any rights with respect to such shares,
except the right to receive a certificate of the Surviving Trust representing an
equal number of Survivor Series D or Survivor Series E, as the case may be.
Each share of EQR Common outstanding immediately prior to the Effective
Time will be converted into and continue as one share of Survivor Common. At the
Effective Time, each certificate representing shares of EQR Common will
thereafter represent an equal number of shares of Survivor Common.
Each share of EQR Preferred, consisting of 9 3/8% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, $.01 par value per share
(the "Series A Preferred Shares"), 9 1/8% Series B Cumulative Redeemable
Preferred Shares of Beneficial Interest, $.01 par value per share (the "Series B
Preferred Shares"), and 9 1/8% Series C Cumulative Redeemable Preferred Shares
of Beneficial Interest, $.01 par value per share (the "Series C Preferred
Shares"), outstanding immediately prior to the Effective Time will be converted
into and continue with its same preferences as one share of the Surviving
Trust's 9 3/8% Series A Cumulative Redeemable Preferred Shares of Beneficial
Interest ("Survivor Series A"), the Surviving Trust's 9 1/8% Series B Cumulative
Redeemable Preferred Shares of Beneficial Interest ("Survivor Series B"), and
the Surviving Trust's 9 1/8% Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest ("Survivor Series C"), respectively. At the Effective Time,
each certificate evidencing outstanding shares of Series A Preferred Shares,
Series B Preferred Shares or Series C Preferred Shares will thereafter evidence
an equal number of shares of Survivor Series A, Survivor Series B or Survivor
Series C, respectively.
The issuance, terms and conditions of the Survivor Common and the Survivor
Preferred (collectively, the "Survivor Shares") will be governed by the
Surviving Trust's Declaration. For a detailed description of the provisions of
the Surviving Trust's Declaration, see "Proposal Regarding Additional
Declaration of Trust Provisions" and "Comparison of Rights of
Shareholders."
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Appointment of Exchange Agent
In order to facilitate distribution of certificates representing shares of
the Surviving Trust to Wellsford shareholders, the Surviving Trust will appoint
Boston EquiServe LLP, an affiliate of First National Bank of Boston, to act as
Exchange Agent in connection with the Merger. The Exchange Agent will enter
into an agreement with EQR and Wellsford pursuant to which it will agree to act
as agent for purposes of distributing the certificates representing shares of
the Surviving Trust to Wellsford shareholders.
Exchange of Certificates
Wellsford shareholders should not tender their certificates representing
Wellsford shares with their proxy. Promptly after the Effective Time, the
Exchange Agent will mail to all Wellsford shareholders transmittal materials,
including a letter of transmittal (the "Letter of Transmittal") for use in
exchanging certificates evidencing Wellsford Shares for certificates evidencing
Survivor Shares. As soon as practicable after the Letter of Transmittal is
properly completed and returned, along with the certificates evidencing
Wellsford Shares, to the Exchange Agent, the person specified in the Letter of
Transmittal will receive certificates for the number of whole shares of Survivor
Shares and, to the extent applicable, any cash in lieu of fractional shares of
Survivor Common, to which such person is entitled as a result of the Merger.
The Letter of Transmittal is expected to provide instructions for shareholders
who have lost or misplaced their certificates and wish to tender their shares.
Each Survivor Share for which Wellsford Shares are exchanged in the Merger
will be deemed to have been issued at the Effective Time. Accordingly, Wellsford
shareholders who receive Survivor Shares in the Merger will be entitled to
receive any dividends or other distributions which may be payable to all holders
of record of Survivor Shares with respect to any record date after the Effective
Time. No holder of Wellsford Shares will be entitled to receive Survivor Shares
or cash in lieu of fractional Survivor Common, and no dividends or other
distributions will be paid with respect to any Survivor Shares, until the
certificate or certificates formerly representing such holder's Wellsford Shares
have been surrendered in accordance with the procedures described above. At the
time such surrender has been accomplished, a certificate representing the
appropriate number of Survivor Shares will be issued and accrued dividends and
other distributions on such Survivor Shares will be paid without interest.
Existing shareholders of EQR are not required to tender their certificates
representing EQR Shares. Certificates for EQR Shares will represent the same
number and type of Survivor Shares.
Conduct of Business Pending the Merger
Except as (i) contemplated by the Merger Agreement, (ii) necessary to
accomplish the Distribution, (iii) as disclosed to EQR, or (iv) consented to in
writing by EQR, Wellsford will, and will cause each of its subsidiaries to: (a)
conduct its business only in the usual, regular and
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ordinary course and in substantially the same manner as before the date of the
Merger Agreement, (b) use reasonable efforts to preserve intact its business
organizations and goodwill and keep available the services of its officers and
employees, (c) confer on a regular basis with one or more representatives of EQR
to report operational matters of materiality and, subject to certain
qualifications, any proposals to engage in material transactions, (d) promptly
notify EQR of any material emergency or other material change in the condition
(financial or otherwise), business, properties, assets, liabilities, prospects
or the normal course of its businesses or in the operation of its properties, or
of any material governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), (e) promptly
deliver to EQR true and correct copies of any report, statement or schedule
filed with the Commission subsequent to the date of the Merger Agreement, (f)
maintain its books and records in accordance with generally accepted accounting
principles ("GAAP") consistently applied and not change in any material manner
any of its methods, principles or practices of accounting in effect at the
"Financial Statement Date" (as defined in the Merger Agreement), except as may
be required by the Commission, applicable law or GAAP, (g) duly and timely file
all reports, tax returns and other documents required to be filed with Federal,
state, local and other authorities, subject to extensions permitted by law,
provided Wellsford notifies EQR that it is availing itself of such extensions
and provided such extensions do not adversely affect Wellsford's status as a
qualified REIT under the Code, (h) not make or rescind any express or deemed
election relative to taxes (unless required by law or necessary to preserve
Wellsford's status as a REIT or the status of any Wellsford subsidiaries as a
partnership for Federal income tax purposes), (i) not acquire, enter into any
option to acquire, or exercise an option or contract to acquire, additional real
property, incur additional indebtedness except for working capital under its
revolving line(s) of credit, encumber assets or commence construction of, or
enter into any agreement or commitment to develop or construct, other real
estate projects, except in the ordinary course of business, which shall include
all activities necessary to proceed with the acquisition, ownership and
construction of Phases I, II and III of Palomino Park in accordance with the
agreements in existence on the date of the Merger Agreement and previously
furnished to EQR, (j) not amend its Declaration of Trust, Bylaws, or the
articles of incorporation, bylaws, partnership agreement, joint venture
agreement or comparable charter or organization document of any subsidiary
without EQR's prior written consent; provided that EQR will not unreasonably
withhold or delay its consent to non-material amendments to organizational
documents of such subsidiaries, (k) make no change in the number of shares of
beneficial interest or capital stock, other than pursuant to (i) the exercise of
options, rights or similar securities outstanding as of the date hereof and
disclosed to EQR, (ii) the conversion ratio of Wellsford Series A pursuant to
the terms of the Articles Supplementary for the Wellsford Series A, (iii)
options to purchase Wellsford Common which are issued, and (iv) the Dividend
Reinvestment and Share Purchase Plan of Wellsford, (l) grant no options or other
right or commitment relating to its shares of beneficial interest or capital
stock, membership interests or units of limited partnership interest or any
security convertible into its shares of beneficial interest or capital stock,
membership interests or units of limited partnership interest, or any security
the value of which is measured by shares of beneficial interest, or any security
subordinated to the claim of its general creditors, (m) not (i) authorize,
declare, set aside or pay any dividend or make any other distribution or
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payment with respect to any shares of its beneficial interest or capital stock,
except as provided in the Merger Agreement and in connection with the use of
shares of beneficial interest to pay the exercise price or tax withholding in
connection with equity-based employee benefit plans, or (ii) directly or
indirectly redeem, purchase or otherwise acquire any shares of beneficial
interest, membership interests or units of limited partnership interest or any
option, warrant or right to acquire, or security convertible into, shares of
beneficial interest, membership interests, or units of limited partnership
interest, (n) not sell, lease, mortgage, subject to lien or otherwise dispose of
any material part of its assets, individually or in the aggregate, except in the
ordinary course of business or as disclosed to EQR, (o) not make any loans,
advances or capital contributions to, or investments in, any other person or
entity, other than (i) loans, advances and capital contributions to Wellsford
subsidiaries in existence on the date of the Merger Agreement (other than WRP
Newco) and (ii) loans to WRP Newco and WRP Newco subsidiaries bearing interest
at a rate per annum equal to the rate of interest payable under the Second
Amended and Restated Revolving Credit Agreement dated June 30, 1995 between
Wellsford and First National Bank of Boston; (p) not pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past practice
or in accordance with their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated financial statements (or
the notes thereto) furnished to EQR or incurred in the ordinary course of
business consistent with past practice, (q) not enter into any commitment,
contractual obligation, capital expenditure or transaction (each, a
"Commitment") which may result in total payments or liability by or to it in
excess of $1 million or aggregate Commitments in excess of $5 million, (r) not
guarantee the indebtedness of another person or entity, enter into any "keep
well" or other agreement to maintain any financial statement condition of
another person or entity or enter into any arrangement having the economic
effect of any of the foregoing, other than guarantees of indebtedness of WRP
Newco and its subsidiaries provided, that on the Closing Date, the Surviving
Trust is released from any obligations with respect to such guarantees, or the
indebtedness so guaranteed is paid in full without payment by the Surviving
Trust or its subsidiaries, (s) not enter into any Commitment with any officer,
trustee, consultant or affiliate of Wellsford or any of the Wellsford's
subsidiaries, except as contemplated by the Merger Agreement, (t) not increase
any compensation or enter into or amend any employment agreement with any of its
officers, directors or employees earning more than $50,000 per annum, other than
waivers by employees of benefits under such agreements, (u) not adopt any new
employee benefit plan or amend any existing plans or rights, except for changes
which are required by law and changes which are not more favorable to
participants than provisions presently in effect, and (v) not settle any
shareholder derivative or class action claims arising out of or in connection
with any of the transactions contemplated by the Merger Agreement, (w) not
change the ownership of any of its subsidiaries except pursuant to the
Contribution Agreement and (x) not accept a promissory note in payment of the
exercise price payable under any option to purchase shares of Wellsford Common.
Wellsford has agreed to cause WRP Newco and its subsidiaries to repay, on the
Closing Date, all its loans made to any of them and to procure, on the Closing
Date, the release of Wellsford and its subsidiaries from any guarantees of the
obligations of WRP Newco and its subsidiaries other than the guarantees
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contemplated under the Credit Enhancement Agreement and Palomino Agreement by
Wellsford. In the event WRP Newco is unable to repay such loans to Wellsford on
the Closing Date, EQR may, at its option, and in lieu of terminating the Merger
Agreement, require WRP Newco to execute and deliver to the Surviving Trust a
promissory note in the amount of such indebtedness, payable in 12 equal
consecutive monthly installments together with interest thereon.
For purposes of this section, the Merger Agreement provides that any
contract, transaction or other event will be deemed to be material if it would
result or is expected to result in a net impact on Wellsford's consolidated
income statement in excess of $1 million, or on Wellsford's consolidated balance
sheet in excess of $1 million.
Prior to the Effective Time, WRP Newco and its subsidiaries will not be
bound by the restrictions which would otherwise be applicable under (a), (b),
(c), (d), (i), (j), (k), (l), (m)(ii), (n), (o), (p), (q), (r), (s), (t), (u),
or (w) above; provided, however, that in no event may WRP Newco: (i) issue any
of its shares to any person or entity other than Wellsford prior to the
Distribution for less than fair value; (ii) take any action or fail to take any
action which would reasonably be expected to result in the termination of or a
challenge to Wellsford's status as a REIT within the meaning of Section 856 of
the Code, or result in a Material Adverse Effect to Wellsford; (iii) enter into
any contract which creates or imposes any obligation on, or otherwise purports
to bind, Wellsford or any of the other Wellsford subsidiaries; (iv) take any
action or omit to take any action which causes a default under any loan
agreement to which Wellsford is a party; (v) amend its Articles of Incorporation
or By-laws in any manner which is inconsistent with the provisions of the WRP
Newco Stock Purchase Agreement.
Prior to the Effective Time, except as (i) contemplated by the Merger
Agreement, or (ii) consented to in writing by Wellsford, EQR will, and will
cause each of its subsidiaries to: (a) use its reasonable efforts to preserve
intact its business organizations and goodwill and keep available the services
of its officers and employees, (b) confer on a regular basis with one or more
representatives of Wellsford to report operational matters of materiality which
could have a EQR Material Adverse Effect (as defined in the Merger Agreement),
(c) promptly notify Wellsford of any material emergency or other material change
in the condition (financial or otherwise), business, properties, assets,
liabilities, prospects or the normal course of its businesses or in the
operation of its properties, or of any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated), (d) promptly deliver to Wellsford true and correct copies of any
report, statement or schedule filed with the Commission subsequent to the date
of the Merger Agreement, (e) maintain its books and records in accordance with
GAAP consistently applied, and (f) duly and timely file all reports, tax returns
and other documents required to be filed with Federal, state, local and other
authorities.
In addition, during the period beginning the day after the fifth (5th)
trading day prior to the date of this Joint Proxy Statement/Prospectus/
Information Statement and ending on (but including) the Closing Date, EQR will
not (a) issue any EQR Common or other securities
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convertible into EQR Common in any single transaction or series of transactions
having an aggregate issuance price in excess of $250 million, or (b) announce
any merger with or acquisition of all or substantially all the assets of another
entity which has net assets in excess of $250 million.
Waiver and Amendment
The Merger Agreement provides that, at any time prior to the Effective
Time, either party may, to the extent legally allowed and set forth in a written
instrument signed on behalf of such party, (i) extend the time for the
performance of any of the obligations or other acts of the other party, (ii)
waive any inaccuracies in the representations and warranties contained in the
Merger Agreement or in any document delivered pursuant thereto and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained in the Merger Agreement.
The Merger Agreement provides that it may be amended by the parties by
action taken by the Boards of Trustees of EQR and Wellsford, at any time before
or after approval of the Merger Agreement by the shareholders of EQR or
Wellsford and prior to the filing of the Articles of Merger with the Department.
After any such approval by the shareholders of EQR or Wellsford, no amendment
may be made which by law requires the further approval of shareholders or
partners without obtaining such further approval.
Stock Exchange Listing
The Surviving Trust will apply to list the Survivor Shares issuable in
connection with the Merger on the NYSE. Approval of the listing of such shares
on the NYSE, subject to official notice of issuance, is a condition to the
respective obligations of the parties to consummate the Merger.
Anticipated Accounting Treatment
The Merger will be treated as a purchase in accordance with Accounting
Principles Board Opinion No. 16. Purchase accounting for a merger is the same as
the accounting treatment used for the acquisition of any group of assets. The
fair market value of the consideration given by the Surviving Trust in the
Merger will be used as the valuation basis of the combination. The assets
acquired and liabilities assumed of Wellsford will be recorded at their relative
fair market values as of the Effective Date. The financial statements of the
Surviving Trust will reflect the combined operations of EQR and Wellsford from
the date of the Merger.
Shares Available for Resale
The issuance of Survivor Common upon consummation of the Merger will be
registered under the Securities Act. Such shares may be traded freely and
without restriction by those
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shareholders not deemed to be "affiliates" of Wellsford as that term is defined
in the rules and regulations promulgated pursuant to the Securities Act.
"Affiliates" are generally defined as persons who control, are controlled by or
are under common control with an issuer. This Joint Proxy Statement/Prospectus
/Information Statement does not cover any resales of Survivor Common received by
affiliates of Wellsford.
Contribution of Assets of Wellsford to ERP Operating Partnership
Immediately after the Effective Time, the assets of Wellsford at the
Effective Time, subject to the liabilities of Wellsford, will be contributed by
the Surviving Trust to ERP Operating Partnership, in exchange for general
partner units of ERP Operating Partnership equal in number to the number of
shares of Survivor Common issued to the Wellsford Common Shareholders and
preferred units of ERP Operating Partnership equal in number to the number of
outstanding shares of Wellsford Preferred. In connection with the contribution
of assets to ERP Operating Partnership by the Surviving Trust, all of
Wellsford's senior unsecured indebtedness will become the obligation of ERP
Operating Partnership. ERP Operating Partnership will assume the Surviving
Trust's full and complete obligations with respect to Wellsford's senior
unsecured debt which will become an unconditional obligation of ERP Operating
Partnership. ERP Operating Partnership will execute and deliver a legally
binding assumption agreement in connection with the assumption of such Wellsford
unsecured debt.
Federal Income Tax Consequences
The following is a general summary of the material United States Federal
income tax consequences of the Merger to EQR, Wellsford and their respective
shareholders. The following summary is based upon current provisions of the
Code, existing, temporary and final regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change
(possibly on a retroactive basis). No attempt has been made to comment on all
United States Federal income tax consequences of the Distribution and the Merger
that may be relevant to particular holders of Wellsford Shares and EQR Shares,
including holders that are subject to special tax rules such as dealers in
securities, mutual funds, insurance companies, tax-exempt entities, holders who
do not hold their Wellsford Shares or EQR Shares as capital assets and holders
that, for United States Federal income tax purposes, are non-resident alien
individuals, foreign corporations, foreign partnerships or foreign estates or
trusts.
The tax discussion set forth below is included for general information
only. It is not intended to be, nor should it be construed to be, legal or tax
advice to any particular holder of Wellsford Shares or EQR Shares. Because of
the particular tax attributes of holders of Wellsford Shares or EQR Shares, the
Merger may have differing tax implications for such holders. Accordingly,
holders of Wellsford Shares or EQR Shares are urged to consult with their own
legal and tax advisers regarding the United States federal income
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tax consequences of the Merger and any other consequences to them of the Merger
under state, local and foreign tax laws.
Tax Consequences of Merger. Rudnick & Wolfe, counsel to EQR in connection
with the Merger, has rendered an opinion to EQR that on the basis of the facts,
representations and assumptions set forth in such opinion:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and EQR and Wellsford will each be a party to such
reorganization within the meaning of Section 368(b) of the code;
(ii) no gain or loss will be recognized by EQR as a result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of EQR upon
the exchange of their EQR Common solely for Survivor Common pursuant to the
Merger;
(iv) no gain or loss will be recognized by the shareholders of EQR upon
the exchange of their EQR Preferred solely for Survivor Preferred pursuant to
the Merger;
(v) the tax basis of the Survivor Common received or deemed to be
received by any holder of EQR Common in exchange for EQR Common pursuant to the
Merger will be the same as the tax basis of such EQR Common exchanged therefor;
(vi) the tax basis of the Survivor Preferred received or deemed to be
received by any holder of EQR Preferred in exchange for EQR Preferred pursuant
to the Merger will be the same as the tax basis of such EQR Preferred exchanged
therefor;
(vii) the holding period for Survivor Common and Survivor Preferred
received in exchange for EQR Common and EQR Preferred, respectively, pursuant to
the Merger will include the period that such EQR Common and EQR Preferred were
held by the holder, provided that such EQR Common and EQR Preferred were held as
capital assets by such holder at the Effective Time;
(viii) subsequent to the Merger, the proposed method of operation
described in this Joint Proxy Statement/Prospectus/Information Statement and as
represented by EQR should enable the Surviving Trust to satisfy the requirements
under the Code to qualify as a REIT for federal income tax purposes; and
(ix) ERP Operating Partnership will be classified as a partnership for
federal income tax purposes.
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Robinson Silverman Pearce Aronsohn & Berman LLP, counsel to Wellsford in
connection with the Merger, has rendered an opinion to Wellsford that on the
basis of the facts, representations and assumptions set forth in such opinion:
(i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Code, and EQR and Wellsford will each be a party to such
reorganization within the meaning of Section 368(b) of the Code;
(ii) no gain or loss for federal income tax purposes will be recognized
by Wellsford as a result of the Merger;
(iii) no gain or loss will be recognized by the shareholders of Wellsford
upon the exchange of their Wellsford Common solely for Survivor Common pursuant
to the Merger;
(iv) no gain or loss will be recognized by the shareholders of Wellsford
upon the exchange of their Wellsford Preferred solely for Survivor Preferred
pursuant to the Merger;
(v) the tax basis of the Survivor Common received or deemed to be
received by any holder of Wellsford Common in exchange for Wellsford Common
pursuant to the Merger will be the same as the tax basis of such Wellsford
Common exchanged therefor;
(vi) the tax basis of the Survivor Preferred received or deemed to be
received by any holder of Wellsford Preferred in exchange for Wellsford
Preferred pursuant to the Merger will be the same as the tax basis of such
Wellsford Preferred exchanged therefor;
(vii) the holding period for Survivor Common and Survivor Preferred
received in exchange for Wellsford Common and Wellsford Preferred, respectively,
pursuant to the Merger will include the period that such shares of Wellsford
Common and Wellsford Preferred, respectively, were held by the holder, provided
that such Wellsford Common and Wellsford Preferred were held as capital assets
by such holder at the Effective Time; and
(viii) a shareholder of Wellsford Common who receives cash in lieu of a
fractional share of Wellsford Common pursuant to the Merger will recognize gain
or loss equal to the difference, if any, between such shareholder's basis in the
fractional share and the amount of cash received.
Shareholders of EQR and Wellsford should be aware that such opinions of
counsel are not binding on the United States IRS, and no assurance is or will be
given that the IRS would not adopt a contrary position or that the IRS position
would not be sustained by a court.
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Qualification of Surviving Trust as a REIT.
General. Wellsford elected REIT status commencing with its taxable year
ending December 31, 1992. In the opinion of Robinson Silverman Pearce Aronsohn &
Berman LLP, which has acted as counsel to Wellsford, Wellsford was organized and
has operated in conformity with the requirements for qualification and taxation
as a REIT under the Code for its taxable years ended December 31, 1992 through
December 31, 1996. Rudnick & Wolfe has opined that, (i) EQR was organized and
has operated in conformity with the requirements for qualification and taxation
as a REIT under the Code for its taxable years ended December 31, 1993 through
December 31, 1996, and (ii) subsequent to the Merger, the Surviving Trust's
proposed method of operation described in this Joint ProxyStatement/Prospectus/
Information Statement and as represented by EQR should enable it to meet the
requirements for qualification and taxation as a REIT. It must be emphasized
that this opinion is based on various assumptions relating to the organization
and operation of the Surviving Trust, ERP Operating Partnership, the Management
Partnerships, Equity Residential Properties Management Corp., Equity Residential
Properties Management Corp. II, Equity Residential Properties Management Corp.
III and Wellsford Management Corp. (collectively, the "Management Corps."), the
limited partnerships and limited liability companies (the "Financing
Partnerships") that own the beneficial interest of certain properties encumbered
by mortgage financing, and various qualified REIT subsidiaries wholly owned by
the Surviving Trust (each a "QRS Corporation") (collectively, the Management
Partnerships, the Management Corps., the Financing partnerships and the QRS
Corporations may be referred to as the "Subsidiary Entities"), and is
conditioned upon certain representations made by EQR and ERP Operating
Partnership as to certain relevant factual matters, including matters related to
the organization, expected operation, and assets of the Surviving Trust, ERP
Operating Partnership and the Subsidiary Entities. The Surviving Trust's
qualification and taxation as a REIT depend upon the Surviving Trust's ability
to meet on a continuing basis, through actual annual operating and other
results, the various requirements under the Code and described in the Prospectus
with regard to, among other things, the sources of its gross income, the
composition of its assets, the level of its dividends to shareholders, and the
diversity of its share ownership. Neither Rudnick & Wolfe nor Robinson Silverman
Pearce Aronsohn & Berman LLP will review the Surviving Trust's compliance with
these requirements on a continuing basis. No assurance can be given that the
actual results of the operations of the Surviving Trust, ERP Operating
Partnership, and the Subsidiary Entities, the sources of their income, the
nature of their assets, the level of the Surviving Trust's dividends to
shareholders and the diversity of its share ownership for any given taxable year
will satisfy the requirements under the Code for qualification and taxation as a
REIT.
In any year in which the Surviving Trust qualifies as a REIT, generally it
will not be subject to Federal income tax on that portion of its REIT taxable
income or capital gain which is distributed to shareholders. This treatment
substantially eliminates the "double taxation" (at both the corporate and
shareholder levels) that generally results from the use of corporate investment
vehicles. The Surviving Trust may, however, be subject to tax at normal
corporate rates upon any taxable income or capital gain not distributed.
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If the Surviving Trust should fail to satisfy either the 75% or the 95%
gross income test (as discussed below), and nonetheless maintains its
qualification as a REIT because certain other requirements are met, it will be
subject to a 100% tax on the greater of the amount by which it fails the 75% or
the 95% test, multiplied by a fraction intended to reflect its profitability.
The Surviving Trust will also be subject to a 100% tax on net income derived
from any "prohibited transaction," as described below. In addition, if the
Surviving Trust should fail to distribute during each calendar year at least the
sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT
capital gain net income for such year, and (iii) any undistributed taxable
income from prior years, the Surviving Trust would be subject to a 4% excise tax
on the excess of such required distribution over the amounts actually
distributed. The Surviving Trust may also be subject to the corporate
"alternative minimum tax," as well as tax in certain situations and on certain
transactions not presently contemplated. The Surviving Trust will use the
calendar year both for Federal income tax purposes and for financial reporting
purposes.
In order to qualify as a REIT, the Surviving Trust must meet, among others,
the following requirements:
Share Ownership Test. Shares of beneficial interest of the Surviving Trust
must be held by a minimum of 100 persons for at least 335 days of a taxable year
that is 12 months, or during a proportionate part of a taxable year of less than
12 months. In addition, no more than 50% in value of the shares of beneficial
interest of the Surviving Trust may be owned, directly or indirectly and by
applying certain constructive ownership rules, by five or fewer individuals
during the last half of each taxable year. EQR and Wellsford believe that they
have each satisfied both of these tests, and EQR believes the Surviving Trust
will continue to do so. In order to help comply with the second of these tests,
the Surviving Trust has placed certain restrictions on the transfer of the
Survivor Common and Survivor Preferred that are intended to prevent further
concentration of share ownership.
Asset Tests. At the close of each quarter of the Surviving Trust's taxable
year, the Surviving Trust must satisfy two tests relating to the nature of its
assets. First, at least 75% of the value of the Surviving Trust's total assets
must be represented by any combination of interests in real property, interests
in mortgages on real property, shares in other REITs, cash, cash items and
certain government securities. Second, although the remaining 25% of the
Surviving Trust's assets generally may be invested without restriction,
securities in this class may not exceed either (i) 5% of the value of the
Surviving Trust's total assets as to any one issuer, or (ii) 10% of the
outstanding voting securities of any one issuer. Where the Surviving Trust
invests in a partnership, it will be deemed to own a proportionate share of the
partnership's assets. The Surviving Trust's investment in the properties of
Wellsford through its interest in ERP Operating Partnership will constitute
qualified assets for purposes of the 75% asset test.
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ERP Operating Partnership will own none of the voting stock of the
Management Corps. except for Wellsford Management Inc., in which ERP Operating
Partnership will own 10% of the voting stock. ERP Operating Partnership will
own 100% of the non-voting stock of each of the Management Corps. ERP Operating
Partnership will also own 100% of the Class A Common Stock of WRP Newco and 100%
of the Series A 8% Convertible Redeemable Preferred Stock of WRP Newco. By
virtue of its partnership interest in ERP Operating Partnership, the Surviving
Trust will be deemed to own its pro rata share of the assets of ERP Operating
Partnership, including the stock of the Management Corps. and WRP Newco as
described above. ERP Operating Partnership has not and does not intend to own
more than 10% of the voting securities of the Management Corps. or WRP Newco.
In addition, based upon its analysis of the estimated value of the stock of
the Management Corps. and WRP Newco owned by ERP Operating Partnership relative
to the estimated value of the other assets owned by ERP Operating Partnership,
EQR believes that its pro rata share of the stock of WRP Newco and each
Management Corp. held by ERP Operating Partnership will not exceed 5% of the
total value of the Surviving Trust's assets. No independent appraisals,
however, have been obtained to support this conclusion. This 5% limitation must
be satisfied not only on the date that the Surviving Trust first acquires stock
of WRP Newco or a Management Corp., but also at the end of each quarter in which
the Surviving Trust increases its interest in WRP Newco or any of the Management
Corps. (including as a result of increasing its interest in ERP Operating
Partnership as the holders of OP Units exercise their exchange rights).
Although the Surviving Trust plans to take steps to ensure that it satisfies the
5% value test for any quarter with respect to which retesting is to occur, there
can be no assurance that such steps will always be successful or will not
require a reduction in ERP Operating Partnership's overall interest in the
Management Corps.
The Surviving Trust's indirect interests as a general partner in the
Financing Partnerships are held through the QRS Corporations, each of which is
organized and operated as a "qualified REIT subsidiary" within the meaning of
the Code. Qualified REIT subsidiaries are not treated as separate entities from
their parent REIT. Instead, all assets, liabilities and items of income,
deduction and credit of each QRS Corporation will be treated as assets,
liabilities and items of the Surviving Trust. Each QRS Corporation therefore
will not be subject to Federal corporate income taxation, although it may be
subject to state or local taxation. In addition, the Surviving Trust's
ownership of the voting stock of each QRS Corporation will not violate the
general restriction against ownership of more than 10% of the voting securities
of any issuer.
Gross Income Tests. There are three separate percentage tests relating to
the sources of the Surviving Trust's gross income which must be satisfied for
each taxable year. For purposes of these tests, where the Surviving Trust
invests in a partnership, the Surviving Trust will be treated as receiving its
share of the income and loss of the partnership, and the gross income of the
partnership will retain the same character in the hands of the Surviving Trust
as it has in the hands of the partnership.
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1. The 75% Test. At least 75% of the Surviving Trust's gross income for
each taxable year must be "qualifying income." Qualifying income generally
includes (i) rents from real property (except as modified below); (ii) interest
on obligations collateralized by mortgages on, or interests in, real property;
(iii) gains from the sale or other disposition of interests in real property and
real estate mortgages, other than gain from property held primarily for sale to
customers in the ordinary course of the Surviving Trust's trade or business
("dealer property"); (iv) distributions on shares in other REITs, as well as
gain from the sale of such shares; (v) abatements and refunds of real property
taxes; (vi) income from the operation, and gain from the sale, of property
acquired at or in lieu of a foreclosure of a mortgage collateralized by such
property ("foreclosure property"); (vii) commitment fees received for agreeing
to make loans collateralized by mortgages on real property or to purchase or
lease real property; and (viii) certain qualified temporary investment income
attributable to the investment of new capital received by the Surviving Trust in
exchange for its shares (including the Securities offered hereby) during the
one-year period following the receipt of such new capital.
Rents received from a tenant will not, however, qualify as rents from real
property in satisfying the 75% test (or the 95% gross income test described
below) if the Surviving Trust, or an owner of 10% or more of the Surviving
Trust, directly or constructively owns 10% or more of such tenant. In addition,
if rent attributable to personal property leased in connection with a lease of
real property is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not qualify
as rents from real property. Moreover, an amount received or accrued will not
qualify as rents from real property (or as interest income) for purposes of the
75% and 95% gross income tests if it is based in whole or in part on the income
or profits of any person. Finally, for rents received to qualify as rents from
real property, the Surviving Trust generally must not operate or manage the
property or furnish or render services to tenants, other than through an
"independent contractor" from whom the Surviving Trust derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent that
the services provided by the Surviving Trust are "usually or customarily
rendered" in connection with the rental of space for occupancy only, and are not
otherwise considered "rendered to the occupant."
The Surviving Trust, through the Management Partnerships, will provide
certain services with respect to the properties of Wellsford and any newly
acquired multifamily residential properties. The Surviving Trust believes that
the services provided by the Management Partnerships are usually or customarily
rendered in connection with the rental of space for occupancy only, and
therefore that the provision of such services has not caused, and will not in
the future cause the rents received with respect to the Properties to fail to
qualify as rents from real property for purposes of the 75% and 95% gross income
tests.
2. The 95% Test. At least 95% of the Surviving Trust's gross income for
the taxable year must be derived from the above-described qualifying income, or
from dividends, interest or gains from the sale or disposition of stock or other
securities that are not dealer property.
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Dividends (including the Surviving Trust's share of dividends paid by the
Management Corps.) and interest on any obligations not collateralized by an
interest in real property and any payments made on behalf of the Surviving Trust
by a financial institution pursuant to a rate protection agreement will be
included as qualifying income for purposes of the 95% gross income test, but not
for purposes of the 75% test. For purposes of determining whether the Surviving
Trust complies with the 75% and 95% income tests, qualifying income does not
include income from prohibited transactions. A "prohibited transaction" is a
sale of dealer property, excluding certain dealer property held by the Surviving
Trust for at least four years and excluding foreclosure property.
The Surviving Trust's investment in the Properties, through ERP Operating
Partnership, in major part will give rise to rental income qualifying under the
75% and 95% gross income tests. Gains on sales of the Properties or of the
Surviving Trust's interest in ERP Operating Partnership will generally qualify
under the 75% and 95% gross income tests. EQR believes that the income on its
other investments, including its indirect investment in WRP Newco and the
Management Corps., will not cause the Surviving Trust to fail the 75% or 95%
gross income test for any year, and the Surviving Trust anticipates that this
will continue to be the case.
Even if the Surviving Trust fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may still qualify as a REIT for such
year if it is entitled to relief under certain provisions of the Code. These
relief provisions will generally be available if: (i) the Surviving Trust's
failure to comply was due to reasonable cause and not to willful neglect; (ii)
the Surviving Trust reports the nature and amount of each item of its income
included in the tests on a schedule attached to its tax return; and (iii) any
incorrect information on this schedule is not due to fraud with intent to evade
tax. If these relief provisions apply, the Surviving Trust, however, will still
be subject to a 100% tax based upon the greater of the amount by which it fails
either the 75% or 95% gross income test for that year, less certain adjustments.
3. The 30% Test. The Surviving Trust must derive less than 30% of its
gross income for each taxable year from the sale or other disposition of (i)
real property held for less than four years (other than foreclosure property and
involuntary conversions), (ii) stock or securities held for less than one year,
and (iii) property in a prohibited transaction. EQR does not anticipate that it
will have any substantial difficulty in complying with this test.
Annual Distribution Requirements. The Surviving Trust, in order to qualify
as a REIT, is required to make dividend distributions (other than capital gain
dividends) to its shareholders each year in an amount at least equal to (A) the
sum of (i) 95% of the Surviving Trust's REIT taxable income (computed without
regard to the dividends paid deduction and the Surviving Trust's net capital
gain) and (ii) 95% of the net income (after tax), if any, from foreclosure
property, minus (B) the sum of certain items of non-cash income. Such
distributions must be paid in the taxable year to which they relate, or in the
following taxable year if declared before
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the Surviving Trust timely files its tax return for such year and if paid on or
before the first regular dividend payment after such declaration. To the extent
that the Surviving Trust does not distribute all of its net capital gain or
distributes at least 95%, but less than 100%, of its REIT taxable income, as
adjusted, it will be subject to tax on the undistributed amount at regular
capital gains or ordinary corporate tax rates, as the case may be.
The Surviving Trust has made and intends to continue to make timely
distributions sufficient to satisfy the annual distribution requirements. In
this regard, the partnership agreement of ERP Operating Partnership authorizes
the Surviving Trust, as general partner, to take such steps as may be necessary
to cause ERP Operating Partnership to distribute to its partners an amount
sufficient to permit the Surviving Trust to meet these distribution
requirements. It is possible that the Surviving Trust may not have sufficient
cash or other liquid assets to meet the 95% dividend requirement, due to the
payment of principal on debt or to timing differences between the actual receipt
of income and actual payment of expenses on the one hand, and the inclusion of
such income and deduction of such expenses in computing the Surviving Trust's
REIT taxable income on the other hand. To avoid any problem with the 95%
distribution requirement, the Surviving Trust will closely monitor the
relationship between its REIT taxable income and cash flow and, if necessary,
will borrow funds (or cause ERP Operating Partnership or other affiliates to
borrow funds) in order to satisfy the distribution requirement.
Failure to Qualify. If the Surviving Trust fails to qualify for taxation
as a REIT in any taxable year and the relief provisions do not apply, the
Surviving Trust will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates. Distributions to
shareholders in any year in which the Surviving Trust fails to qualify will not
be required and, if made, will not be deductible by the Surviving Trust. In
such event, to the extent of current and accumulated earnings and profits, all
distributions to shareholders will be taxable as ordinary income, and, subject
to certain limitations in the Code, corporate distributees may be eligible for
the dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Surviving Trust also will be ineligible for
qualification as a REIT for the four taxable years following the year during
which qualification was lost.
Tax Aspects of the Surviving Trust's Investments in Partnerships.
General. The Surviving Trust will hold direct or indirect interests in ERP
Operating Partnership, WRP Newco, the Management Partnerships and certain
Financing Partnerships (each individually a "Partnership" and, collectively, the
"Partnerships"). The Surviving Trust believes that each of the Partnerships
qualifies as a partnership (as opposed to an association taxable as a
corporation) for Federal income tax purposes. If any of the Partnerships were
to be treated as an association, it would be taxable as a corporation and
therefore subject to an entity-level tax on its income. In such a situation,
the character of the Surviving Trust's assets and items of gross income would
change, which would preclude the Surviving Trust from
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satisfying the asset tests and possibly the income tests (see "Certain Federal
Income Tax Consequences--Taxation of the Surviving Trust--Asset Tests" and "--
Gross Income Tests"), and in turn would prevent the Surviving Trust from
qualifying as a REIT.
Tax Termination of ERP Operating Partnership. Pursuant to Section
708(b)(1)(B) of the Code, if within a twelve-month period, there is a sale or
exchange of 50 percent or more of the total interest in a partnership's capital
and profits, the partnership terminates for federal income tax purposes.
Treasury Regulations under Code Section 708(b)(1)(B) (the "Section 708
Regulations") provide that if a partnership is deemed terminated by a sale or
exchange of an interest, the following is deemed to occur: (a) the partnership
distributes all of its assets subject to all of its liabilities to the purchaser
and the other remaining partners in proportion to their respective interests in
the partnership assets; and, (b) immediately thereafter, the purchaser and the
other remaining partners contribute the assets, subject to the liabilities
encumbering such assets, to a new partnership. Under the Section 708
Regulations, the deemed termination of a partnership will result in the closing
of the partnership's taxable year and recognition of gain under Code Section 731
if the amount of money deemed distributed to the partner (including any money
deemed distributed upon a shift in the liabilities of the partnership under Code
Section 752) exceeds such partner's adjusted basis in his partnership interest.
Any built-in gain or loss attributable to the assets re-contributed to the
partnership must be allocated among the partners of the new partnership under
Code Section 704(c). See "Tax Aspects of Surviving Trusts Investment in
Partnerships -- Tax Allocations With Respect to the Properties." In addition,
the deemed termination requires the partnership to depreciate its assets as if
they were newly acquired by the partnership at the time of termination. As a
result, such assets must be depreciated over each asset's depreciable life
beginning as of the date of the deemed termination.
In connection with the Merger, more than 50 percent of the total interest
in ERP Operating Partnership's capital and profits will be exchanged. Therefore,
the Merger will result in the termination of ERP Operating Partnership under
Code Section 708(b)(1)(B). Accordingly, under the Section 708 Regulations, all
of the assets of ERP Operating Partnership will be deemed to be distributed to
the partners of ERP Operating Partnership (including the Surviving Trust) and
re-contributed by such partners to a newly formed partnership. Such deemed
distribution and re-contribution is not expected to cause gain recognition to
the Surviving Trust under Code Section 731(a) because the amount of cash deemed
distributed to the Surviving Trust as a result of the deemed liquidation
(including any deemed distribution occurring under Code Section 752 as a result
of a shifting of liabilities among the partners of the ERP Operating
Partnership) is not expected to exceed the Surviving Trusts's adjusted basis in
the ERP Operating Partnership. Moreover, because the taxable years of both the
ERP Operating Partnership and the Surviving Trust end on the same date, the
closing of the ERP Operating Partnership's taxable year should have no adverse
tax consequences to the Surviving Trust. However, the termination of the ERP
Operating Partnership will cause the assets of the ERP Operating Partnership to
be depreciated as if they were newly acquired by the ERP Operating Partnership,
possibly resulting in lower annual depreciation deductions to the Surviving
Trust for federal income tax purposes. In addition, the deemed re-contribution
of the assets to the ERP Operating Partnership could
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result in a reallocation of the built-in gain attributable to the properties
owned by the ERP Operating Partnership. See "Tax Aspects of Surviving Trusts
Investment in Partnerships -- Tax Allocations With Respect to the Properties."
Proposed Treasury Regulations recently promulgated by the Treasury
Department (the "Proposed 708 Regulations") would alter the tax consequences of
a termination under Code Section 708(b)(1)(B). Under the Proposed Section 708
Regulations, if a partnership is terminated by a sale or exchange of an
interest, the following would be deemed to occur: (a) the partnership transfers
all of its assets and liabilities to a new partnership in exchange for an
interest in the new partnership; and (b) immediately thereafter, the terminated
partnership distributes all of the interests in the new partnership to the
purchasing partner and the other remaining partners in liquidation of the
terminated partnership. The effect of the Proposed Regulations would be to (i)
eliminate any possibility of gain recognition to the partners of the ERP
Operating Partnership under Code Section 731, and (ii) eliminate any potential
reallocation of ERP Operating Partnership's basis and any Section 704(c) built-
in gain with respect to the properties currently held by the ERP Operating
Partnership. However, under the Proposed 708 Regulations, the ERP Operating
Partnership would still be required to depreciate its properties as newly
acquired assets, possibly resulting in lower depreciation deductions to the
Surviving Trust for federal income tax purposes. The Proposed Section 708
Regulation will apply to the deemed termination of ERP Operating Partnership if
the Proposed Section 708 Regulations shall have been published as final
regulations in the Federal Register as of the effective date of the Merger.
Tax Allocations with Respect to the Properties. Pursuant to Section 704(c)
of the Code, income, gain, loss and deduction attributable to appreciated or
depreciated property that is contributed to a partnership in exchange for an
interest in the partnership (such as certain of the Properties contributed to
ERP Operating Partnership in connection with both the initial public offering of
EQR and the Merger) (the "Contributed Properties") must be allocated in a manner
such that the contributing partner is charged with, or benefits from,
respectively, the unrealized gain or unrealized loss associated with the
property at the time of the contribution. The amount of such unrealized gain or
unrealized loss is generally equal to the difference between the fair market
value and the adjusted tax basis of contributed property at the time of
contribution (a "Book-Tax Difference"). Such allocations are solely for Federal
income tax purposes and do not affect the book capital accounts or other
economic or legal arrangements among the partners. ERP Operating Partnership
Agreement (as well as the Financing Partnerships agreements) require such
allocations to be made in a manner consistent with Section 704(c). As a result,
certain limited partners of ERP Operating Partnership will be allocated lower
amounts of depreciation deductions for tax purposes and increased taxable income
and gain on sale by the Partnerships of the contributed assets (including
certain of the Contributed Properties). These allocations will tend to
eliminate the Book-Tax Difference over the lives of the Partnerships. However,
the special allocation rules of Section 704(c) as applied by the Surviving Trust
will not always entirely rectify the Book-Tax Difference on an annual basis or
with respect to a specific taxable transaction such as a sale. Thus, the
carryover basis of the contributed assets
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in the hands of the Partnerships will cause the Surviving Trust to be allocated
lower depreciation and other deductions, and possibly greater amounts of taxable
income in the event of a sale of such contributed assets in excess of the
economic or book income allocated to it as a result of such sale. This may cause
the Surviving Trust to recognize taxable income in excess of cash proceeds,
which might adversely affect the Surviving Trust's ability to comply with the
REIT distribution requirements. See "Qualification of the Surviving Trust as a
REIT--Annual Distribution Requirements."
Sale of the Properties. The Surviving Trust's share of any gain realized
by ERP Operating Partnership on the sale of any dealer property generally will
be treated as income from a prohibited transaction that is subject to a 100%
penalty tax. See "Qualification of the Surviving Trust as a REIT--Gross Income
Tests--The 95% Test." Under existing law, whether property is dealer property is
a question of fact that depends on all the facts and circumstances with respect
to the particular transaction. The Partnerships have held and intend to continue
to hold the Properties for investment with a view to long-term appreciation, to
engage in the business of acquiring, developing, owning and operating the
Properties and other multifamily residential properties and to make such
occasional sales of the Properties as are consistent with the Surviving Trust's
investment objectives. Based upon such investment objectives, the Surviving
Trust believes that in general the Properties should not be considered dealer
property and that the amount of income from prohibited transactions, if any,
will not be material.
Taxation of Taxable Domestic Shareholders.
General. As long as the Surviving Trust qualifies as a REIT, distributions
made to the Surviving Trust's taxable domestic shareholders, with respect to
their shares out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for shareholders that are corporations. For purposes of determining whether
distributions on the Securities are out of current or accumulated earnings and
profits, the earnings and profits of the Surviving Trust will be allocated first
to the Survivor Preferred Shares and second to the Survivor Common Shares.
There can be no assurance, however, that the Surviving Trust will have
sufficient earnings and profits to cover distributions on the Survivor Preferred
Shares. Dividends that are designated as capital gain dividends will be taxed
as long-term capital gains (to the extent that they do not exceed the Surviving
Trust's actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held its Securities. However, corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. For a discussion on the manner in which that
portion of any dividends designated by the Surviving Trust as capital gains
dividends will be allocated among the holders of Survivor Preferred Shares and
Survivor Common Shares, see "Description of Shares of Beneficial Interest--
Survivor Preferred Shares--Distributions." To the extent that the Surviving
Trust makes distributions in excess of current and accumulated earnings and
profits,
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these distributions are treated first as a tax-free return of capital
to the shareholder, reducing the tax basis of a shareholder's Securities by the
amount of such distribution (but not below zero), with distributions in excess
of the shareholder's tax basis taxable as capital gains (if the Securities are
held as a capital asset). In addition, any dividend declared by the Surviving
Trust in October, November or December of any year and payable to a shareholder
of record on a specific date in any such month will be treated as both paid by
the Surviving Trust and received by the shareholder on December 31 of such year,
provided that the dividend is actually paid by the Surviving Trust during
January of the following calendar year. Shareholders may not include in their
individual income tax returns any net operating losses or capital losses of the
Surviving Trust.
In general, any loss upon a sale or exchange of securities by a shareholder
who has held such securities for six months or less (after applying certain
holding period rules) will be treated as a long-term capital loss, to the extent
of distributions from the Surviving Trust received by such shareholder are
required to be treated by such shareholder as long-term capital gains.
Taxation of Tax-Exempt Shareholders.
Most tax-exempt employees' pension trusts are not subject to Federal income
tax except to the extent of their receipt of "unrelated business taxable income"
as defined in Section 512(a) of the Code ("UBTI"). Distributions by the
Surviving Trust to a shareholder that is a tax-exempt entity should not
constitute UBTI, provided that the tax-exempt entity has not financed the
acquisition of its securities with "acquisition indebtedness" within the meaning
of the Code and the securities are not otherwise used in an unrelated trade or
business of the tax-exempt entity. In addition, for taxable years beginning on
or after January 1, 1994, certain pension trusts that own more than 10% of a
"pension-held REIT" must report a portion of the distribution that they receive
from such a REIT as UBTI. The Surviving Trust has not been and does not expect
to be treated as a pension-held REIT for purposes of this rule.
Taxation of Foreign Shareholders.
The following is a discussion of certain anticipated U.S. Federal income
tax consequences of the ownership and disposition of securities applicable to
Non-U.S. Holders of such securities. A "Non-U.S. Holder" is any person other
than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, or (iii) an estate or trust whose income
is includible in gross income for U.S. Federal income tax purposes regardless
of its source. The discussion is based on current law and is for general
information only.
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Distributions From the Surviving Trust.
1. Ordinary Dividends. The portion of dividends received by Non-U.S.
Holders payable out of the Surviving Trust's earnings and profits which are not
attributable to capital gains of the Surviving Trust or of ERP Operating
Partnership and which are not effectively connected with a U.S. trade or
business of the Non-U.S. Holder will be subject to U.S. withholding tax at the
rate of 30% (unless reduced by an applicable treaty). In general, Non-U.S.
Holders will not be considered engaged in a U.S. trade or business solely as a
result of their ownership of securities. In cases where the dividend income
from a Non-U.S. Holder's investment in securities is (or is treated as)
effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or
business, the Non-U.S. Holder generally will be subject to U.S. tax at graduated
rates, in the same manner as U.S. shareholders are taxed with respect to such
dividends (and may also be subject to the 30% branch profits tax in the case of
a Non-U.S. Holder that is a foreign corporation).
2. Non-Dividend Distributions. Distributions by the Surviving Trust
which are not dividends out of the earnings and profits of the Surviving Trust
will not be subject to U.S. income or withholding tax. If it cannot be
determined at the time a distribution is made whether or not such distribution
will be in excess of the Surviving Trust's current and accumulated earnings and
profits, the entire distribution will be subject to withholding at the rate
applicable to dividends. However, the Non-U.S. Holder may seek a refund of such
amounts from the Service if it is subsequently determined that such distribution
was, in fact, in excess of current and accumulated earnings and profits of the
Surviving Trust.
3. Capital Gain Dividends. Under the Foreign Investment in Real Property
Tax Act of 1980 ("FIRPTA"), a distribution made by the Surviving Trust to a Non-
U.S. Holder, to the extent attributable to gains from dispositions of United
States Real Property Interests ("USRPIs") such as the Properties beneficially
owned by the Surviving Trust will be considered effectively connected with a
U.S. trade or business of the Non-U.S. Holder and subject to U.S. income tax at
the rate applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. In
addition, the Surviving Trust will be required to withhold tax equal to 35% of
the amount of dividends to the extent such dividends constitute gains from any
USRPI. Distributions subject to FIRPTA may also be subject to a 30% branch
profits tax in the hands of a foreign corporate shareholder that is not entitled
to treaty exemption.
Dispositions of Securities. Unless securities constitute a USRPI, a sale
of securities by a Non-U.S. Holder generally will not be subject to U.S.
taxation under FIRPTA. The securities will not constitute a USRPI if the
Surviving Trust is a "domestically controlled REIT." A domestically controlled
REIT is a REIT in which, at all times during a specified testing period, less
than 50% in value of its securities is held directly or indirectly by Non-U.S.
Holders. The Surviving Trust believes that it has been and anticipates that it
will continue to be a domestically
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<PAGE>
controlled REIT, and therefore that the sale of securities will not be subject
to taxation under FIRPTA. Because the securities will be publicly traded,
however, no assurance can be given the Surviving Trust will continue to be a
domestically controlled REIT. If the Surviving Trust does not constitute a
domestically controlled REIT, a Non-U.S. Holder's sale of securities generally
will still not be subject to tax under FIRPTA as a sale of a USRPI provided that
(i) the securities are "regularly traded" (as defined by applicable Treasury
regulations) on an established securities market and (ii) the selling Non-U.S.
Holder held 5% or less of the Surviving Trust's outstanding securities at all
times during a specified testing period.
If gain on the sale of securities were subject to taxation under FIRPTA,
the Non-U.S. Holder would be subject to the same treatment as a U.S. shareholder
with respect to such gain (subject to applicable alternative minimum tax and a
special alternative minimum tax in the case of nonresident alien individuals)
and the purchaser of securities could be required to withhold 10% of the
purchase price and remit such amount to the Service. Capital gains not subject
to FIRPTA will nonetheless be taxable in the United States to a Non-U.S. Holder
in two cases: (i) if the Non-U.S. Holder's investment in securities is
effectively connected with a U.S. trade or business conducted by such Non-U.S.
Holder, the Non-U.S. Holder will be subject to the same treatment as a U.S.
shareholder with respect to such gain, or (ii) if the Non-U.S. Holder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, the
nonresident alien individual will be subject to a 30% tax on the individual's
capital gain.
Other Tax Considerations.
WRP Newco and the Management Corps. A portion of the cash to be used by
ERP Operating Partnership to fund distributions to its partners, including the
Surviving Trust, is expected to come from WRP Newco and the Management Corps.
through payments of dividends on the stock of WRP Newco and the Management
Corps. held by ERP Operating Partnership. The Management Corps. will pay Federal
and state income tax at the full applicable corporate rates on their taxable
income. The Management Corps. will attempt to minimize the amount of such taxes,
but there can be no assurance whether or the extent to which measures taken to
minimize taxes will be successful. To the extent that WRP Newco and/or the
Management Corps. are required to pay Federal, state or local taxes, the cash
available to WRP Newco for distribution by the Surviving Trust, among its
shareholders will be reduced accordingly.
State and Local Taxes. The Surviving Trust and its shareholders may be
subject to state or local taxation in various jurisdictions, including those in
which it or they transact business or reside. The state and local tax treatment
of the Surviving Trust and its shareholders may not conform to the Federal
income tax consequences discussed above. Consequently, prospective shareholders
should consult their own tax advisors regarding the effect of state and local
tax laws on an investment in the shares of beneficial interest of the Surviving
Trust.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER AND DISTRIBUTION
In considering whether to approve the Merger, shareholders should be aware
that certain members of the management of Wellsford and the Wellsford Board of
Trustees have certain interests that arise in connection with the Merger and the
Distribution that are in addition to the interests of shareholders of Wellsford
generally. These interests arise under existing agreements with, and previously
approved annual compensation awards from, Wellsford and proposed agreements with
WRP Newco and the Surviving Trust.
Benefits of Key Executives
Each key executive of Wellsford, consisting of Messrs. Lynford, Lowenthal,
Kelley, MacKenzie, Hughes and Strong, has an existing employment agreement with
Wellsford that entitles him to certain benefits as described below. In addition,
in prior years each of the executives has earned and received additional
compensation in the form of share loans, grants of restricted shares and share
options. Members of the Board of Trustees of Wellsford have also been granted
share options over the years. Set forth below is a discussion of the treatment
of the various benefits and other compensation to be paid in connection with the
Merger to the key executives and the Trustees by reason of these pre-existing
agreements.
A. Severance Payments. Certain executive officers (but not Messrs. Lynford
and Lowenthal) will be entitled to receive severance payments under their
employment agreements as follows: $1,149,000 for Mr. Kelley, $764,070 for Mr.
MacKenzie, $692,440 for Mr. Hughes, and $585,000 for Mr. Strong.
B. Share Loans. Under the existing agreements, Wellsford's key executives
previously purchased Wellsford Common over the years at their then fair market
value, the purchase price of which was borrowed from Wellsford and evidenced by
a ten-year promissory note. Under the agreements, 5% of the principal balance of
the promissory notes is forgiven each year provided the executive remains in the
employ of Wellsford and the remaining 50% is due at the end of the ten year term
of the promissory note. Upon a change of control, such as the Merger, the then
remaining principal balance of the loans will be forgiven for Messrs. Lynford,
Lowenthal, Kelley, MacKenzie, Hughes, and Strong in the amounts of approximately
$1.5 million, $1.5 million, $281,000, $1.1 million, $1.1 million and $369,000,
respectively.
C. Change In Control Share Grants. In accordance with the terms of the
existing agreements between Wellsford and Messrs. Lynford, Lowenthal and Kelley,
immediately prior to the Merger and Distribution, Messrs. Lynford, Lowenthal and
Kelley will each be issued 22,346 shares of Wellsford Common, which shares will
participate in the Distribution and Merger on the same basis as all other shares
of Wellsford Common.
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D. Restricted Share Grants. Restricted share grants have previously been
made to Messrs. Lynford, Lowenthal, MacKenzie and Hughes, portions of which have
vested and portions of which remain subject to forfeiture. All restricted
shares, whether vested or not, will participate in the Distribution and Merger
on the same basis as all other shares of Wellsford Common. Messrs. Lynford and
Lowenthal each hold restricted share grants for 11,375 shares of Wellsford
Common that will continue to remain subject to forfeiture restrictions. The
shares of Survivor Common and the shares of WRP Newco Common to be received by
Messrs. Lynford and Lowenthal on account of the 11,375 restricted shares of
Wellsford Common held by each of them will be forfeited (as to 50% on January 1,
1998 and 50% on January 1, 1999) unless the Surviving Trust achieves on a
consolidated basis a minimum 5% increase in funds from operations per share for
the twelve-month period ending on the December 31 immediately preceding the
applicable vesting date over FFO per share for the preceding twelve-month
period. The portions of the restricted share grants issued to Messrs. MacKenzie
and Hughes that remain subject to forfeiture will become fully vested at the
Effective Time. Accordingly, 2,843 shares of Wellsford Common will vest upon the
Merger for each of Messrs. MacKenzie and Hughes, which shares will participate
in the Distribution and the Merger.
E. Tax Payments. Pursuant to the existing employment agreements with the
key executives of Wellsford, in connection with the Merger the Surviving Trust
will pay on behalf of Messrs. Lynford, Lowenthal, Kelley, MacKenzie, Hughes and
Strong approximately $2.6 million, $2.4 million, $420,000, $1.0 million, $1.1
million and $500,000, respectively, on account of the Federal, state and local
income and excise tax liabilities to the Internal Revenue Service and the
various state and local tax authorities. These payments are based on an
estimated value of Wellsford Common at the Effective Time of $27.50 per share
and will be adjusted based upon the actual value of Wellsford Common at the
Effective Time.
F. Wellsford Options.
------------------
Over the years, the key executives of Wellsford have been granted share
options in connection with services previously rendered by them. The treatment
of both the vested options and the nonvested options are described below.
(a) Vested Options.
--------------
All vested options (both incentive share options and nonqualified options)
held by Messrs. Lynford, Lowenthal, Kelley, Hughes and Strong were exercised
prior to the Merger by tendering existing shares of Wellsford Common in payment
of the exercise price. The tendered shares of Wellsford Common were valued at
$27.50 per share for purposes of payment of the exercise price regardless of
their actual value on the date of exercise, and will be accounted for as a cost
of the Merger. Pursuant to existing agreements, each executive officer that
exercised a vested option was granted a new option to purchase additional shares
of Wellsford Common at $27.50 per share (a "Reload Option"). These Reload
Options issued to Messrs. Lynford,
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Lowenthal, Kelley, Hughes and Strong will be assumed by WRP Newco and amended,
thereby becoming options to purchase WRP Newco Common, as more fully described
in (c) below.
(b) Nonvested Options.
-----------------
The nonvested portion of each Wellsford option held by Messrs. Lynford,
Lowenthal, Hughes and Strong will be assumed by WRP Newco and amended thereby
becoming an option to purchase WRP Newco Common, as more fully described in (c)
below.
(c) Assumed Options.
---------------
For each of Messrs. Lynford, Lowenthal, Kelley, Hughes and Strong, WRP
Newco will assume and amend their Wellsford nonvested options (other than Mr.
Kelley) and Reload Options so that they become options to purchase WRP Newco
Common. With respect to Wellsford nonvested nonqualified options and Reload
Options, the number of WRP Newco nonqualified options will be calculated by
dividing the value of such Wellsford options by the value of the option to
purchase one share of WRP Newco Common. Reload Options will be valued using an
exercise price of $27.50 per share. The exercise price of each WRP Newco
nonqualified option will be the Issuance Price (as defined under "Certain
Agreements between WRP Newco and ERP Operating Partnership -- Common Stock and
Preferred Stock Purchase Agreement") and the term of each such WRP Newco option
will be for an initial term of six years with a four year extension if the
optionee is employed by WRP Newco at the end of four years. These options will
become exercisable as follows: 25% after two years, an additional 25% after
three years, an additional 25% after four years and the remaining 25% after five
years from the date of the Merger. All options will be valued using a
mathematical option pricing formula that incorporates certain assumptions,
including an estimated value of the underlying shares, share option exercise
prices, the duration of the share options and the volatility of the underlying
shares (the "Option Pricing Formula"). Based on the foregoing, the total number
of shares of WRP Newco Common subject to options with respect to Wellsford
nonvested options (other than Mr. Kelley) and Reload Options assumed by WRP
Newco will be approximately as follows: 427,534, 427,534, 162,049, 78,410 and
24,159, for Messrs. Lynford, Lowenthal, Kelley, Hughes and Strong, respectively.
These amounts will be adjusted based upon the actual value of Wellsford Common
(and the actual value of the Wellsford options assumed by WRP Newco) at the
Effective Time.
The nonvested incentive share options held by Messrs. Lynford, Lowenthal,
Hughes and Strong will also be assumed by WRP Newco and amended to become WRP
Newco incentive stock options. These amended options will continue to be
nonvested incentive stock options just as they were before the Merger and will
maintain the same vesting schedule as the Wellsford incentive share options
assumed. These WRP Newco nonvested incentive stock options will reflect the
inherent value of, and have a term equal to the remaining term of, the Wellsford
incentive share options assumed, as required by Treasury Regulation Section
1.425-1(a). Based on the foregoing, the total number of shares of WRP Newco
Common subject to options with
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respect to Wellsford nonvested incentive share options assumed by WRP Newco will
be approximately as follows: 25,171, 25,171, 24,195, and 16,467 for Messrs.
Lynford, Lowenthal, Hughes and Strong, respectively.
G. Options Held By Trustees. Outstanding options of Wellsford held by
persons whose benefits are not described above will vest at the Effective Time
and each such optionee will have the right to continue their option subject to
adjustment for the Exchange Rate or the right to relinquish all option rights in
exchange for a cash payment of $27.50 per share for each option relinquished
less the exercise price per share. All existing options to purchase Wellsford
Common granted to the non-employee Trustees of Wellsford (other than Mr. Du
Bois) will be assumed by WRP Newco and amended thereby becoming options to
purchase WRP Newco Common. The number of options to purchase WRP Newco Common
will be calculated by dividing the value of each Trustee's existing options to
purchase Wellsford Common by the value of the option to purchase one share of
WRP Newco Common. The options to purchase WRP Newco Common will be exercisable
immediately, and will have an initial term of six years (regardless of whether
or not the optionee remains a director of WRP Newco) with a four-year extension
if the optionee is a trustee or director of WRP Newco at the end of four years.
The exercise price of the options to purchase WRP Newco Common shall be the
Issuance Price. All options will be valued using the Option Pricing Formula.
Options to purchase 15,000 shares of Wellsford Common have been previously
granted to each of Messrs. Germain, Hoenemeyer and Sixt, respectively. These
options will be assumed by WRP Newco and amended to become options to purchase
approximately 38,515, 38,515 and 38,515 shares of WRP Newco Common,
respectively, at the Effective Time, assuming a fair market value of Wellsford
Common of $29.75 per share at the Effective Time. Options to purchase 15,000
shares of Wellsford Common previously held by Mr. Du Bois have been exercised by
paying the exercise price.
Agreements with the Surviving Trust and ERP Operating Partnership
Consulting Agreements. Messrs. Lynford and Lowenthal will each execute a
consulting agreement with ERP Operating Partnership. The consulting agreements
will each be for a term of five years from the Effective Time. Pursuant to the
consulting agreements each of Messrs. Lynford and Lowenthal will serve as a
senior management consultant to ERP Operating Partnership and, in all events,
will receive compensation at the rate of $200,000 per year plus reimbursement
for reasonable out-of-pocket expenses.
Appointment to Board of Trustees of Surviving Trust. At or shortly after
the Effective Time, each of Messrs. Lynford and Lowenthal will be appointed to
the Board of Trustees of the Surviving Trust for a term ending at the annual
meeting of the Surviving Trust in the year 1997. EQR has agreed to cause Messrs.
Lynford and Lowenthal to be nominated for election as trustees at the 1997
annual meeting of the Surviving Trust for a term ending at the annual meeting of
the Surviving Trust in the year 2000.
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Indemnification. The Surviving Trust will indemnify each trustee and
officer of Wellsford to the same extent after the Effective Time as such
individuals were indemnified by Wellsford prior to the Effective Time.
Severance and Retention Benefits. As of the Effective Time, the Surviving
Trust will adopt a severance and retention program (the "Retention Program") for
specified employees of Wellsford who are not officers. The aggregate
obligations of the Surviving Trust under the Retention Program will not exceed
$544,575. Pursuant to the Retention Program, any employee who stays for 6
months after the Effective Time or is terminated without cause by the Surviving
Trust will be entitled to a bonus in a specified amount. The Retention Program
will not require the Surviving Trust to continue the employment of any employee
of Wellsford after the Effective Time.
Senior Officer. Mr. MacKenzie will be a Senior Vice President of the
Surviving Trust at an initial salary of $175,000 per annum. Under his proposed
employment arrangement, on the Effective Date, Mr. MacKenzie intends to exchange
all rights under all of his existing Wellsford options for an option to purchase
52,903 shares of Survivor Common . These options will be fully vested on the
date of issuance and will have an exercise price equal to the fair market value
of Survivor Common on the date of issuance. In addition, on the Effective Date
Mr. MacKenzie will receive an option to purchase 35,000 shares of Survivor
Common. These options will vest over a period of three years and will have an
exercise price equal to the fair market value of Survivor Common on the date of
the grant. Mr. MacKenzie will also receive on the Effective Date an option to
purchase an additional number of shares of Survivor Common which will be
calculated by multiplying (i) the difference in value, if any, between a share
of EQR Common on the date of his initial agreement to work for EQR (February 7,
1997) and a share of Survivor Common on the date of the grant by (ii) 87,903,
and then dividing the resulting number by eight. These additional options will
vest over three years and will have an exercise price equal to the fair market
value of Survivor Common on the date of the grant.
Agreements with WRP Newco
Employment Agreements. WRP Newco will enter into employment agreements as
of the Effective Time with Messrs. Lynford and Lowenthal, which will expire on
December 31, 2002 and will provide for cash compensation to be paid to each of
them of $275,000 per annum. WRP Newco will also enter into employment
agreements as of the Effective Time with Messrs. Hughes and Strong, which will
expire two years after the Effective Time, and will provide for annual cash
compensation to be paid to each of them of $175,000 and $125,000, respectively.
Each of Messrs. Lynford, Lowenthal, Hughes and Strong are also entitled to
incentive compensation as determined by the Compensation Committee. In
addition, Mr. Hughes is entitled to incentive compensation equal to at least 50%
of his annual base salary. See "Management of WRP Newco -- Employment
Agreements."
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Split Dollar Life Insurance. The existing split dollar life insurance
arrangements between Wellsford and Messrs. Lynford and Lowenthal will be assumed
by WRP Newco.
Consultant. Upon completion of the Merger, William Cockrum, a consultant
to Wellsford, will receive a consulting fee of $500,000, payable $250,000 in
cash and $250,000 by the issuance of shares of WRP Newco Common.
New Options. In addition to the stock options in WRP Newco Common referred
to in "-- Benefits to Key Executives," immediately following the Distribution
and Merger, WRP Newco intends to grant new stock options to purchase shares of
WRP Newco Common to WRP Newco's non-employee directors and certain executive
officers. WRP Newco intends to grant options to purchase 42,750 shares of WRP
Newco Common to each of Messrs. Du Bois, Germain, Hoenemeyer and Sixt, options
to purchase 21,375 shares of WRP Newco Common to Mr. Crocker, and options to
purchase 85,500 shares of WRP Newco Common to each of Messrs. Lynford,
Lowenthal, Hughes and Strong.
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SURVIVING TRUST
SELECTED UNAUDITED PRO FORMA
COMBINED FINANCIAL DATA
The following tables set forth the selected unaudited pro forma combined
financial data for the Surviving Trust as a combined entity, giving effect to
the Merger as if it had occurred on the dates indicated herein, after giving
effect to the pro forma adjustments described in the notes to the unaudited pro
forma financial statements included elsewhere in the Joint Proxy
Statement/Prospectus/Information Statement.
The selected unaudited pro forma combined operating data are presented as
if the Merger had been consummated at the beginning of the period presented.
The selected unaudited pro forma combined balance sheet data is presented
as if the Merger had occurred on December 31, 1996. The Merger has been
accounted for under the purchase method of accounting in accordance with the
Accounting Principles Board Opinion No. 16. In the opinion of management, all
significant adjustments necessary to reflect the effects of the Merger have been
made.
The selected pro forma financial information should be read in conjunction
with, and is qualified in its entirety by, the respective historical audited
financial statements and notes thereto of EQR and Wellsford incorporated by
reference into this Joint Proxy Statement/Prospectus/Information Statement and
the unaudited pro forma financial statements and notes thereto included
elsewhere in the Joint Proxy Statement/Prospectus/Information Statement.
The selected unaudited pro forma operating and balance sheet data are
presented for comparative purposes only and are not necessarily indicative of
what the actual combined results of EQR and Wellsford would have been for the
period and dates presented. Nor does such data purport to represent the results
of future periods.
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SURVIVING TRUST
---------------
<TABLE>
<CAPTION>
OPERATING DATA: Pro Forma
Year Ended
December 31, 1996
-----------------
REVENUES: (Amount in thousands except
<S> <C>
Rental income $578,820
Fee and asset management 6,749
Interest income-investment in mortgage notes 12,819
Interest and other income 11,061
--------
Total revenues 609,449
--------
EXPENSES:
Property and maintenance 167,526
Real estate taxes and insurance 54,010
Property management 21,506
Fee and asset management 3,837
Depreciation 124,211
Interest:
Expense incurred 103,538
Amortization of deferred financing costs 4,242
General and administrative 10,353
--------
Total Expenses 489,223
--------
Income before gain on disposition of properties and (loss) on joint venture communities 120,226
Gain on disposition of properties 22,336
(Loss) on joint venture communities (58)
--------
Income before extraordinary item and allocation to Minority Interests 142,504
Extraordinary Item:
Write-off of unamortized cost on refinanced debt (3,512)
--------
Income before allocation to Minority Interests 138,992
Income allocated to Minority Interests (15,706)
--------
Net income 123,286
Preferred distributions 41,563
--------
Net income available for Common Shares $ 81,723
========
Net income per weighted average Common Share outstanding $1.53
========
Weighted average Common Shares outstanding 53,317
========
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Pro Forma
December 31, 1996
-----------------
BALANCE SHEET DATA:
(at end of period)
<S> <C>
Real estate, after accumulated depreciation $3,708,310
Total assets $3,968,482
Total debt $1,576,869
Minority Interests $ 190,793
Shareholders' Equity $2,048,133
</TABLE>
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EQUITY RESIDENTIAL PROPERTIES TRUST
SELECTED HISTORICAL AND COMBINED FINANCIAL DATA
The following tables set forth selected historical and combined financial
data for EQR. The selected historical combined financial data for each of the
years ended December 31, 1992, 1993, 1994 , 1995 and 1996 are derived from the
audited financial statements of EQR as reported in its Annual Reports on Form
10-K . The selected historical financial data should be read in conjunction
with, and is qualified in its entirety by, the historical and combined financial
statements and notes thereto of EQR incorporated by reference into this Joint
Proxy Statement/Prospectus/Information Statement.
127
<PAGE>
EQUITY RESIDENTIAL PROPERTIES TRUST
CONSOLIDATED AND COMBINED HISTORICAL FINANCIAL INFORMATION
(Amounts in thousands except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
REVENUES
Rental income $454,412 $373,919 $220,727 $104,388 $ 86,597
Fee and asset management 6,749 7,030 4,739 4,651 4,215
Interest income-investment
in mortgage notes 12,819 4,862 -- -- --
Interest and other income 4,405 4,573 5,568 3,031 2,161
-------- -------- -------- -------- -------
Total revenues 478,385 390,384 231,034 112,070 92,973
-------- -------- -------- -------- -------
EXPENSES
Property and maintenance 127,172 112,186 66,534 35,324 30,680
Real estate taxes and insurance 44,128 37,002 23,028 11,403 10,274
Property management 17,512 15,213 10,249 4,938 2,912
Property management - non-recurring -- -- 879 -- --
Fee and asset management 3,837 3,887 2,056 2,242 2,403
Depreciation 93,253 72,410 37,273 15,384 13,442
Interest:
Expense incurred 81,351 78,375 37,044 26,042 31,926
Amortization of deferred financing costs 4,242 3,444 1,930 3,322 2,702
Refinancing costs -- -- -- 3,284 --
General and administrative 9,857 8,129 6,053 1,994 1,915
-------- -------- --------- -------- -------
Total expenses 381,352 330,646 185,046 103,933 96,254
-------- -------- --------- -------- -------
</TABLE>
128
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Income (loss) before gain on disposition
of properties, extraordinary items and
allocation to Minority Interests 97,033 59,738 45,988 8,137 (3,281)
Gain on disposition of properties 22,402 21,617 -- -- --
---------- ---------- ---------- -------- ---------
Income (loss) before extraordinary items and
allocation to Minority Interests 119,435 81,355 45,988 8,137 (3,281)
Extraordinary Items:
Write-off of unamortized costs on
refinanced debt (3,512) -- -- -- --
Gain on early extinguishment of debt -- 2,000 -- -- --
Gain on discharge of indebtedness -- -- -- 1,792 18,203
---------- ---------- ---------- -------- ---------
Income (loss) before allocation to
Minority Interests 115,923 83,355 45,988 9,929 14,922
Income allocated to Minority Interests (14,299) (15,636) (11,570) (3,834) --
---------- ---------- ---------- -------- ---------
Net income (loss) 101,624 67,719 34,418 6,095 14,922
Preferred distributions (29,015) (10,109) -- -- --
---------- ---------- ---------- -------- ---------
Net income (loss) available for Common Shares $ 72,609 $ 57,610 $ 34,418 $ 6,095 $ 14,922
========== ========== ========== ======== =========
Net income per weighted average
Common Share outstanding $ 1.70 $ 1.68 $ 1.34 $ .42 --
Weighted average Common Shares
outstanding 42,586 34,358 25,621 14,601 --
BALANCE SHEET DATA
(at end of period):
Real estate, after accumulated
depreciation $2,983,510 $2,186,636 $1,963,476 $634,577 $ 358,212
Real estate, after accumulated
depreciation $2,681,998 $1,969,453 $1,770,735 $478,210 $ 218,825
Total assets $2,986,127 $2,141,260 $1,847,685 $535,914 $ 238,878
Total debt $1,254,274 $1,002,219 $ 994,746 $278,642 $ 343,282
Minority Interests 150,637 $ 168,963 $ 177,438 $ 83,159 $ --
Shareholders' Equity (Net Deficit) $1,458,830 $ 884,517 $ 609,936 $146,485 $(122,094)
</TABLE>
129
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST
SELECTED HISTORICAL FINANCIAL DATA
The following tables set forth selected historical financial data for Wellsford.
The selected historical financial data for each of the years ended December 31,
1992, 1993, 1994, 1995 and 1996 are derived from the audited financial
statements of Wellsford as reported in its Annual Reports on Form 10-K. The
selected historical financial data should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements and notes
thereto of Wellsford incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement. Certain reclassifications have been
made to Wellsford's historical financial data to conform to EQR's presentation.
130
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
Historical (000s except per share data)
--------------------------------------------------------
1996 1995 1994 1993 1992
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 131,821 $ 131,232 $ 82,794 $ 42,007 $ 26,229
Expenses (109,035) (113,712) (73,299) (34,816) (26,991)
Gain (loss) on sale of
investment
communities (66) (819) -- 882 --
Loss on joint venture (58) (279) -- -- --
communities --------- --------- -------- -------- --------
Income (loss) before
extraordinary item $ 22,662 $ 16,422 $ 9,495 $ 8,073 $ (762)
========= ========= ======== ======== ========
Net income (loss) $ 22,662 $ 10,869 $ 9,495 $ 8,073 $ (762)
Preferred dividends (12,548) (8,973) (7,000) (972) --
--------- --------- -------- -------- --------
Net income (loss)
available for
common
shareholders $ 10,114 $ 1,896 $ 2,495 $ 7,101 $ (762)
========= ========= ======== ======== ========
Net income (loss) per
common share $0.59 $ 0.11 $ 0.25 $0.91 $(0.34)
========= ========= ======== ======== ========
Weighted average
number of common
shares outstanding 17,057 16,938 10,070 7,813 2,273
========= ========= ======== ======== ========
</TABLE>
131
<PAGE>
WELLSFORD RESIDENTIAL PROPERTY TRUST
SELECTED HISTORICAL FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
Historical (000s except share data)
==================================================
1996 1995 1994 1993 1992
--------------------------------------------------
<S> <C> <C> <C> <C> <C>
Real Estate assets
before accumulated
depreciation $795,580 $736,399 $747,519 $301,389 $156,568
Real estate assets
after accumulated
depreciation 711,614 677,908 712,742 282,224 143,787
Total Assets 756,289 729,638 745,754 322,400 165,963
Mortgages Payable 82,731 77,137 208,858 24,203 17,155
Convertible note
payable -- -- -- 46,070 55,358
Unsecured credit
facility 18,075 -- 140,000 -- --
Senior unsecured
notes 248,496 223,307 -- -- --
Shareholders' equity 376,686 398,359 371,655 239,775 89,986
Cash dividends
declared per
Series A preferred
share $ 1.75 $ 1.75 $ 1.75 $ 0.24 $ --
======== ======== ======== ======== ========
Cash dividends
declared per
Series B preferred
share $ 2.41 $ 0.86 $ -- $ -- $ --
======== ======== ======== ======== ========
Cash dividends
declared per
common share $ 1.94 $ 1.92 $ 1.80 $ 1.68 $ 0.16
======== ======== ======== ======== ========
</TABLE>
132
<PAGE>
SURVIVING TRUST
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
The Unaudited Pro Forma Combined Balance Sheet gives effect to the proposed
Merger of Equity Residential Properties Trust ("EQR") and Wellsford Residential
Property Trust ("Wellsford") as if the Merger had occurred on December 31,
1996. The Unaudited Pro Forma Combined Balance Sheet gives effect to the Merger
under the purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16. In the opinion of management, all significant adjustments
necessary to reflect the effects of the Merger have been made.
The 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 EQR and Wellsford would have been at December 31, 1996,
nor does it purport to represent the future combined financial position of EQR
and Wellsford. This Unaudited Pro Forma Combined Balance Sheet should be read in
conjunction with, and is qualified in its entirety by, the respective historical
financial statements and notes thereto of EQR and Wellsford incorporated by
reference into the Joint Proxy Statement/Prospectus/Information Statement.
133
<PAGE>
SURVIVING TRUST
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma Surviving Trust
EQR WRP Merger Pro Forma
Historical Historical (A) Adjustments (B) Combined
<S> <C> <C> <C> <C>
ASSETS
Rental property, net $2,681,998 $689,403 $336,909 (C) $3,708,310
Real Estate held for disposition -- -- -- --
Construction in progress -- 22,211 (21,306) (D) 905
Investment in mortgage notes, net 86,596 17,800 (17,800) (E) 86,596
Cash and cash equivalents 147,271 10,811 (67,112) (F) 90,970
Rents receivables 1,450 -- -- 1,450
Deposits-restricted 20,637 7,667 (5,520) (G) 22,784
Escrows deposits-mortgage 15,434 -- -- 15,434
Deferred financing costs, net 14,555 5,401 (5,401) (H) 14,555
Other assets 18,186 2,996 6,296 (I) 27,478
---------- -------- -------- ----------
Total assets $2,986,127 $756,289 $226,066 $3,968,482
========== ======== ======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $ 755,434 $ 82,731 $ (8,632) (J) $ 829,533
Line of credit -- 18,075 (18,075) (K) --
Notes, net 498,840 248,496 -- 747,336
Accounts payable and accrued expenses 33,117 15,617 -- 48,734
Accrued interest payable 12,737 -- -- 12,737
Due to affiliates 628 -- -- 628
Rents received in advance and other liabilities 15,838 -- -- 15,838
Security deposits 14,128 3,250 -- 17,378
Distributions payable 45,938 11,434 -- 57,372
---------- -------- -------- ----------
Total liabilities 1,376,660 379,603 (26,707) 1,729,556
---------- -------- -------- ----------
Commitments and contingencies (L)
Minority Interests 150,637 -- 40,156 (M) 190,793 (M)
---------- -------- -------- ----------
Shareholders' equity:
Common shares 512 171 (64) (N) 619
Preferred shares 393,000 63 (63) (O) 393,000
Series D Convertible Preferred Shares -- -- 99,995 (O) 99,995
Series E Preferred Shares -- -- 57,500 (O) 57,500
Employee notes (5,255) (6,553) 6,553 (P) (5,255)
Paid in capital 1,146,989 461,290 (29,589) (Q) 1,578,690
Distributions in excess of accumulated earnings (76,416) (78,285) 78,285 (R) (76,416)
---------- -------- -------- ----------
Total Shareholders' Equity 1,458,830 376,686 212,617 2,048,133
---------- -------- -------- ----------
Total liabilities and shareholders' equity $2,986,127 $756,289 $226,066 $3,968,482
========== ======== ======== ==========
</TABLE>
134
<PAGE>
SURVIVING TRUST
BASIS OF PRESENTATION TO UNAUDITED PRO FORMA
COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1996 is presented as if the Merger had occurred on January 1, 1996.
The Unaudited Pro Forma Combined Statement of Operations gives effect to the
Merger under the purchase method of accounting in accordance with Accounting
Principles Board Opinion No. 16, and the combined entity qualifying as a REIT,
distributing at least 95% of its taxable income, and therefore, incurring no
federal income tax liability for the year. In the opinion of management, all
significant adjustments necessary to reflect the effects of these transactions
have been made.
The Unaudited Pro Forma Combined Statement of Operations is presented for
comparative purposes only and is not necessarily indicative of what the actual
combined results of EQR and Wellsford would have been for the year ended
December 31, 1996, nor does it purport to be indicative of the results of
operations in future periods. The Unaudited Pro Forma Combined Statement of
Operations should be read in conjunction with, and are qualified in their
entirety by, the respective historical financial statements and notes thereto of
EQR and Wellsford incorporated by reference into this Joint Proxy
Statement/Prospectus/Information Statement.
135
<PAGE>
SURVIVING TRUST
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Surviving Trust
EQR Wellsford Merger Pro Forma
Historical Historical (S) Adjustments Combined
<S> <C> <C> <C> <C>
REVENUES
Rental Income $454,412 $124,408 $ (757)(T) $578,820
Fee and asset management 6,749 - 6,749
Interest income-investment in mortgage notes 12,819 757 12,819
Interest and other income 4,405 6,656 11,061
-------- -------- -------- --------
Total revenues 478,385 131,821 (757) 609,449
-------- -------- -------- --------
EXPENSES
Property and maintenance 127,172 40,354 167,526
Real estate taxes and insurance 44,128 9,882 54,010
Property management 17,512 4,770 (776)(U) 21,506
Fee and asset management 3,837 - 3,837
Depreciation 93,253 25,179 5,779 (V) 124,211
Interest:
Expense incurred 81,351 23,599 (1,412)(W) 103,538
Amortization of deferred financing costs 4,242 1,386 (1,386)(X) 4,242
General and administrative 9,857 3,865 (3,369)(Y) 10,353
-------- -------- -------- --------
Total expenses 381,352 109,035 (1,164) 489,223
-------- -------- -------- --------
Income before gain on disposition of properties,
(loss) on joint venture communities, extraordinary
items and allocation to Minority Interests 97,033 22,786 407 120,226
Gain (loss) on disposition of properties 22,402 (66) - 22,336
(Loss) on joint venture communities - (58) - (58)
-------- -------- -------- --------
Income before extraordinary items 119,435 22,662 407 142,504
Extraordinary item:
Write-off of unamortized costs on refinanced debt (3,512) - - (3,512)
-------- -------- -------- --------
Income before allocation to Minority Interests 115,923 22,662 407 138,992
(Income) allocated to Minority Interests (14,299) - (1,407)(Z) (15,706)
-------- -------- -------- --------
Net income 101,624 22,662 (1,000) 123,286
Preferred distributions (29,015) (12,548) (41,563)
-------- -------- -------- --------
Net income available to common shares $ 72,609 $ 10,114 $ (1,000) $ 81,723
======== ======== ======== ========
Net income per weighted average Common
Shares outstanding $ 1.70 $ 0.59 $ 0.16 $ 1.53
======== ======== ======== ========
Weighted average Common Shares Outstanding 42,586 17,057 (6,326)(AA) 53,317
======== ======== ======== ========
</TABLE>
136
<PAGE>
SURVIVING TRUST
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(A) Certain reclassifications have been made to Wellsford's historical balance
sheet to conform to EQR's balance sheet presentation.
(B) Represents adjustments to record the Merger in accordance with the purchase
method of accounting, based upon the assumed purchase price of $1,032,226
assuming a market value of $44.00 per share of EQR's common shares, as
follows:
<TABLE>
<CAPTION>
<S> <C>
Issuance of 10,731 common shares of beneficial interest of EQR,
based on the .625 exchange rate, in exchange for 17,169
common shares of Wellsford, which includes 67 common shares of
Wellsford issued immediately prior to the merger $ 472,164
Issuance of EQR Series D Preferred Shares of Beneficial Interest 99,995
Issuance of EQR Series E Preferred Shares of Beneficial Interest 57,500
Assumption of Wellsford's liabilities, net of spin-off to WRP NewCo
of $6,786 372,817
Adjustment to increase the assumed Wellsford debt to its fair value
(see Note J) 6,123
Merger costs (see calculation below) 23,627
----------
$1,032,226
==========
The value of the issuance of the EQR Series D Preferred Shares of
Beneficial Interest and the EQR Series E Preferred Shares of Beneficial
Interest is based upon Wellsford's outstanding shares of 3,999.8 Series A
Convertible Preferred Shares with a liquidation preference at $25 per share
and Wellsford's outstanding shares of 2,300 Series B Preferred Shares with
a liquidation preference at $25 per share, respectively.
The following is a calculation of the estimated fees and other expenses related to the Merger:
Employee termination costs $ 10,063
Buyout of stock options 4,227
Advisory fees 2,350
Legal and accounting fees 2,225
Consulting contracts 2,000
Other, including printing, filing, transfer and spin-off costs 2,762
----------
TOTAL $ 23,627
==========
(C) Represents the estimated increase in Wellsford's rental property, net based
upon EQR's purchase price and the adjustment to eliminate the basis of
Wellsford's net assets acquired:
Purchase Price (see Note B) $1,032,226
Less: Historical basis of Wellsford's net assets acquired
Rental property, net 689,403
Construction in progress, net of spin-off to WRP NewCo of $21,306 905
Restricted deposits, net of spin-off to WRP NewCo of $5,520 2,147
Other assets, net of spin-off to WRP NewCo of $134 2,862
----------
Step-up to record fair value of Wellsford rental property $ 336,909
==========
(D) Decrease reflects the spin-off of costs related to the Palomino Park project to WRP NewCo.
(E) Decrease results from the spin-off of the Sonterra mortgage notes receivable to WRP NewCo.
</TABLE>
137
<PAGE>
SURVIVING TRUST
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
<S> <C>
(F) Decrease to Cash and Cash Equivalents reflects the following:
Spin-off of WRP NewCo, including an investment of $2,930 for EQR's 20%
interest in the Palomino Park project (see Note I) $21,710
The expected payment for Merger (see Note B) and registration costs (see Note Q) 23,827
Repayment of Wellsford's line of credit 18,075
EQR's purchase of WRP NewCo common stock 3,500
-------
$67,112
=======
(G) Decrease results from the spin-off of restricted cash to WRP NewCo for the Palomino Park project.
(H) Decrease due to elimination of Wellsford deferred loan costs in connection with the Merger.
(I) Increase to Other Assets reflects the following:
EQR purchase of WRP NewCo common stock $ 3,500
EQR's 20% investment in the Palomino Park project 2,930
Spin-off to WRP NewCo of interest receivable related to the Sonterra
mortgage notes receivable. (134)
-------
$ 6,296
=======
(J) Decrease to Mortgage Notes Payable reflects the following:
Spin-off of bonds on the Palomino Park project to WRP NewCo $14,755
Premium required to adjust Wellsford's debt to its estimated fair value (6,123)
-------
$ 8,632
=======
</TABLE>
(K) Reflects the repayment of Wellsford's line of credit from EQR's cash
balances. It is assumed that additional Wellsford borrowings of $7,969 that
would be incurred in connection with the spin-off of WRP NewCo are repaid
from EQR's cash balances.
(L) ERP Operating Partnership has committed to acquire up to 1,000 shares of
WRP NewCo Series A 8% Convertible Redeemable Preferred Stock; has provided
stand-by obligations with respect to a $36,800 agreement with respect to
the construction financing of Phase I of Palomino Park and $30,000 pursuant
to an agreement expected to be entered into with respect to the
construction financing for Phase II of Palomino Park; and a $14,800 credit
enhancement with respect to bonds issued to finance certain public
improvements at Palomino Park.
(M) The pro forma allocation to the Minority Interests is based upon the
percentage owned by such Minority Interests as follows:
<TABLE>
<CAPTION>
<S> <C>
Total Shareholders' Equity and Minority Interests $2,238,926
Less: Preferred Shares, Series D Convertible and Series E Preferred shares (550,495)
----------
1,688,431
Minority Interests percentage ownership in ERP Operating Partnership (see Note Q) 11.3%
----------
Pro Forma Combined Minority Interests ownership in ERP Operating Partnerships 190,793
EQR historical Minority Interests ownership in ERP Operating Partnership 150,637
----------
Adjustment to Minority Interests ownership in ERP Operating Partnership $ 40,156
==========
</TABLE>
138
<PAGE>
SURVIVING TRUST
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(N) Decrease results from elimination of Wellsford common shares at $.01 par
value ($171) net of the issuance of EQR common shares at $.01 par value
$107 (see Note C).
O) Elimination of $63 of Wellsford Preferred Shares and the issuance of
$99,995 of EQR Series D Convertible Preferred Shares and of $57,500 of EQR
Series E Preferred Shares (see Note C).
P) Reflects the elimination of restricted stock and the forgiveness of all of
Wellsford's employee notes as a result of the Merger.
Q) Decrease to paid in capital to reflect the following:
<TABLE>
<CAPTION>
<S> <C>
Issuance of 10,731 EQR common shares at $44.00 per share $ 472,164
Par value of common shares issued (107)
Registration costs incurred in connection with the Merger (200)
Wellsford's historical shareholders' equity (461,290)
Adjustment to Minority Interests ownership in ERP Operating Partnership (see Note M) (40,156)
-----------
$ (29,589)
===========
</TABLE>
The 11.3% Minority Interests ownership in EQR, is calculated as follows:
<TABLE>
<CAPTION>
Shares Units
------ -----
<S> <C> <C>
Wellsford's historical Shares outstanding 17,169 --
=========== =========
EQR's Shares/Units to be issued based on the .625 Merger exchange ratio 10,731 10,731
EQR's historical Shares/Units outstanding 51,155 59,013
----------- ---------
EQR's proforma Shares/Units outstanding 61,886 69,744
=========== =========
EQR ownership percentage of ERP Operating Partnership 88.7%
===========
Minority Interests ownership percentage of ERP Operating Partnership 11.3%
===========
</TABLE>
R) Reflects the elimination of Wellsford's distribution in excess of
accumulated earnings to paid in capital, as a result of the Merger.
139
<PAGE>
SURVIVING TRUST
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(S) Certain reclassifications have been made to Wellsford's Historical
Statement of Operations to conform to EQR's Statement of Operations
presentation.
(T) Decrease results from the loss of interest income related to the spin-off
of the $17,800 Sonterra mortgage notes receivable to WRP NewCo.
(U) Decrease results from operating efficiencies expected to occur as a result
of the Merger.
(V) Represents the net increase in depreciation of real estate owned as a
result of recording the Wellsford real estate assets at fair value versus
historical cost. Depreciation is computed on a straight-line basis over the
estimated useful lives of the related assets which have a useful life of
approximately 30 years.
<TABLE>
<CAPTION>
<S> <C>
The calculation of the fair value of depreciable real estate assets at December 31, 1996 is as follows:
Historical basis of Wellsford's rental property $ 689,403
Plus: Step up to Wellsford's rental property, net (see Note C) 336,909
------------------
Pro forma basis of Wellsford's rental property at fair value 1,026,312
Less: Fair value allocated to land (102,631)
------------------
Pro forma basis of Wellsford's depreciable rental property at fair value $ 923,681
==================
Calculation of depreciation of rental property for the year ended December 31, 1996 is as follows:
Depreciation expense based upon an estimated useful life of approximately $ 30,789
30 years
Less: historic Wellsford depreciation of rental property (25,010)
------------------
Pro forma adjustment $ 5,779
==================
(W) Decrease results from the amortization of the premium required to record
Wellsford's debt at it's estimated fair value.
(X) Decrease results from the elimination of amortization of Wellsford's
deferred financing costs, which costs would be eliminated in connection
with the Merger.
(Y) Decrease results from identified historic costs of certain items which are
anticipated to be eliminated or reduced as a result of the Merger as
follows:
<C>
Duplication of public company expenses $ 626
Net reduction in salary, benefits and occupancy 1,732
Other 1,011
-------------------
Total $ 3,369
===================
</TABLE>
(Z) A portion of income was allocated to Minority Interests representing
interests in ERP Operating Partnership not owned by EQR. The pro forma
allocation to Minority Interests (represented by OP Units) is based upon
the percentage estimated to be owned by such Minority Interests as a result
of the pro forma transactions.
(AA) Decrease of Weighted Average Common Shares Outstanding based on the
conversion of Wellsford common shares to EQR common shares at a conversion
ratio of .625 Wellsford shares per EQR share and a par value of $.01.
140
<PAGE>
POLICIES OF THE SURVIVING TRUST
WITH RESPECT TO CERTAIN ACTIVITIES
The following section sets forth the policies expected to be implemented by
the Surviving Trust upon the effectiveness of the Merger with respect to certain
matters. These policies may be amended or revised from time to time at the
discretion of the Board of Trustees of the Surviving Trust without a vote of the
shareholders of the Surviving Trust.
Business Objectives and Operating Strategies
The Surviving Trust will seek to maximize both current income and long-term
growth in income. The Surviving Trust will focus on acquiring multifamily
properties that have strong cash flow potential with the intent to hold such
properties for long-term investment and capital appreciation.
The Surviving Trust's primary business objectives are to increase
distributions on a per share of Survivor Common basis, to increase the value of
its properties and to increase shareholders' value.
The Surviving Trust's strategies for accomplishing these objectives will
be:
. maintaining and increasing property occupancy while increasing rental
rates;
. controlling expenses, providing regular preventive maintenance, making
periodic renovations and enhancing amenities;
. maintaining a Debt to Total Market Capitalization Ratio of less than
50%; and
. pursuing acquisitions that: (i) are available at prices below
estimated replacement costs; (ii) have potential for rental rate
and/or occupancy increases; (iii) have attractive locations in their
respective markets; and (iv) provide anticipated total returns that
will increase the Surviving Trust's distributions per share of
Survivor Common and the Surviving Trust's overall market value.
The Surviving Trust will be committed to tenant satisfaction by striving to
anticipate industry trends and implementing strategies and policies consistent
with providing quality tenant services. In addition, the Surviving Trust will
continuously survey rental rates of competing properties and conduct
satisfaction surveys of residents to determine the factors they consider most
important in choosing a particular apartment unit.
141
<PAGE>
Acquisition Strategies
The Surviving Trust anticipates that future property acquisitions will be
located in the continental United States. Management will use market information
to evaluate acquisition opportunities. The Surviving Trust's market data base
will allow it to review the primary economic indicators of the markets where the
Surviving Trust currently manages properties and where it expects to expand its
operations. Acquisitions may be financed from various sources of capital, which
may include undistributed funds from operations, issuance of additional equity
securities, sales of properties and collateralized and uncollateralized
borrowings. In addition, the Surviving Trust may acquire additional multifamily
properties in transactions that include the issuance of OP Units as
consideration for the acquired properties. Such transactions may, in certain
circumstances, partially defer the sellers' tax consequences.
When evaluating potential acquisitions, the Surviving Trust will consider:
(i) the geographic area and type of community; (ii) the location, construction
quality, condition and design of the property; (iii) the current and projected
cash flow of the property and the ability to increase cash flow; (iv) the
potential for capital appreciation of the property, (v) the terms of resident
leases, including the potential for rent increases; (vi) the potential for
economic growth and the tax and regulatory environment of the community in which
the property is located; (vii) the occupancy and demand by residents for
properties of a similar type in the vicinity (the overall market and submarket);
(viii) the prospects for liquidity through sale, financing or refinancing of the
property; and (ix) competition from existing multifamily properties and the
potential for the construction of new multifamily properties in the area. The
Surviving Trust expects to purchase multifamily properties with physical and
market characteristics similar to the properties.
Disposition Strategies
Management will use market information to evaluate dispositions. The
Surviving Trust intends to dispose of its properties in cities or markets where
the level of new construction is increasing or the economy is expected to
decline substantially. The Surviving Trust will also dispose of properties in
markets where it does not intend to establish long-term concentrations. The
Surviving Trust will reinvest the proceeds received from property dispositions
to fund property acquisitions. In addition, when feasible the Surviving Trust
will structure these transactions as tax deferred exchanges.
Investment Policies
Investments in Real Estate or Interests in Real Estate. The Surviving
Trust's investment objectives will be to increase cash flow and the value of the
properties, and to acquire established income-producing multifamily properties
with cash flow growth potential. Additionally, where prudent and possible, the
Surviving Trust will seek to upgrade its existing properties and any newly
acquired multifamily properties. The Surviving Trust's business is
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focused on multifamily properties, although such properties may include retail
and recreational facilities. The Surviving Trust's policy will be to acquire
assets primarily for current income generation and long-term value appreciation;
however, where appropriate, the Surviving Trust will sell certain of its
properties.
The Surviving Trust expects to pursue its investment objectives through the
direct and indirect ownership of properties and the ownership of interests in
other entities. The Surviving Trust will focus on properties in those markets
where the Surviving Trust currently has operations and in new markets targeted
by management. Future investments, including the activities described below,
will not be limited to any geographic area or to a specified percentage of the
Surviving Trust's assets. The Surviving Trust also may participate with other
entities in property ownership through joint ventures or other types of co-
ownership. Equity investments may be subject to existing mortgage financing and
other indebtedness or such financing or indebtedness may be incurred in
connection with acquiring investments. Any such financing or indebtedness will
have priority over the Surviving Trust's equity interest in such property.
Investments in Real Estate Mortgages. While the Surviving Trust will
emphasize equity real estate investments in multifamily properties, it may, in
its discretion, invest in mortgages and other interests related to multifamily
properties. The Surviving Trust does not intend to invest to a significant
extent in mortgages or deeds of trust, but may acquire mortgages as a strategy
for acquiring a property, subject to the investment restrictions applicable to
REITs. The mortgages in which the Surviving Trust may invest may be either first
mortgages or junior mortgages, and may or may not be insured by a governmental
agency. The Surviving Trust may also invest in mortgage-related securities.
Furthermore, the Surviving Trust may seek to issue securities representing
interest in such mortgage-related securities as a method of raising additional
funds.
Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers. Subject to the gross income and asset tests for
REIT qualification, the Surviving Trust also may invest in securities of
entities engaged in real estate activities or securities of other issuers,
including for the purpose of exercising control over such entities. The
Surviving Trust may acquire all or substantially all of the securities or assets
of other REITs or similar entities where such investments would be consistent
with the Surviving Trust's investment policies. In any event, the Surviving
Trust does not intend that its investments in securities will require it to
register as an "investment company" under the Investment Surviving Trust Act of
1940, and the Surviving Trust would intend to divest securities before any such
registration would be required.
Financing Policies
The Surviving Trust intends to maintain a Debt to Total Market
Capitalization Ratio of 50% or less. The Surviving Trust, however, may from time
to time re-evaluate this policy and
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decrease or increase such ratio in light of then current economic conditions,
relative costs to the Surviving Trust of debt and equity capital, market values
of the properties, growth and acquisition opportunities and other factors. There
will be no limit on the Surviving Trust's Debt to Total Market Capitalization
Ratio imposed by the Surviving Trust's Declaration of Trust or Bylaws. To the
extent that the Board of Trustees of the Surviving Trust determines to obtain
additional capital, the Surviving Trust may issue debt or equity securities, or
cause ERP Operating Partnership to issue additional OP Units, or retain earnings
(subject to provisions in the Code requiring distributions of income to maintain
REIT status), or a combination of these methods. As long as ERP Operating
Partnership is in existence, the proceeds of all equity capital raised by the
Surviving Trust will be contributed to ERP Operating Partnership in exchange for
additional interests in ERP Operating Partnership, which will dilute the
ownership interest of holders of OP Units. It is the Surviving Trust's policy
that it shall not incur indebtedness other than short-term trade, employee
compensation, dividends payable or similar indebtedness that will be paid in the
ordinary course of business, and that indebtedness shall instead be incurred by
the ERP Operating Partnership to the extent necessary to fund the business
activities conducted by the ERP Operating Partnership.
The Surviving Trust owns several properties that are subject to restrictive
covenants or deed restrictions relating to current or previous tax-exempt bond
financings and owns the bonds collateralized by several additional properties.
The Surviving Trust has retained an independent outside consultant to monitor
compliance with the restrictive covenants and deed restrictions that affect
these properties. The bond compliance requirements may have the effect of
limiting the Surviving Trust's income from these properties if the Surviving
Trust is required to lower its rental rates to attract low or moderate income
tenants, or eligible/qualified tenants.
To the extent that the Board of Trustees determines to obtain debt
financing the Surviving Trust intends to do so generally through mortgages on
its properties and through lines of credit; however, the Surviving Trust may
also issue additional debt securities in the future. Such indebtedness may be
recourse, non-recourse or cross-collateralized and may contain cross-default
provisions. The Surviving Trust will 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.
In the future, the Surviving Trust may seek to extend, expand, reduce or renew
its lines of credit, or obtain new credit facilities or lines of credit, subject
to its general policy on debt capitalization, for the purpose of making
acquisitions or capital improvements or providing working capital to the
Surviving Trust or meeting the taxable income distribution requirements for
REITs under the Code if the Surviving Trust has taxable income without receipt
of cash sufficient to enable the Surviving Trust to meet such distribution
requirements.
Lending Policies
Although it is not presently contemplated, the Surviving Trust may consider
offering purchase money financing in connection with the sale of multifamily
properties where the
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provision of such financing will increase the value received by the Surviving
Trust for the property sold.
Policies with Respect to Other Activities
Although it is not presently contemplated, the Surviving Trust may make
investments other than as previously described. All investments will be related
to the multifamily residential business. The Surviving Trust will have authority
to offer Survivor Common or other equity or debt securities in exchange for
property or other REITS and to repurchase or otherwise reacquire Survivor Common
or any other securities and may engage in such activities in the future.
Similarly, the Surviving Trust may offer additional OP Units or other equity
interests in ERP Operating Partnership that are exchangeable into Survivor
Common in exchange for property. The Surviving Trust may also make loans to
joint ventures in which it may participate in the future. The Surviving Trust
will not engage in trading, underwriting or the agency distribution or sale of
securities of other issuers. At all times, the Surviving Trust intends to make
investments in such a manner as to be consistent with the requirements of the
Code to qualify as a REIT unless, because of circumstances or changes in the
Code (or the regulations promulgated thereunder), the Board of Trustees
determines that it is no longer in the best interests of the Surviving Trust to
continue to have the Surviving Trust qualify as a REIT. The Surviving Trust's
policies with respect to such activities may be reviewed and modified from time
to time by the Surviving Trust's trustees without notice to or the vote of the
shareholders.
MANAGEMENT AND OPERATION OF THE
SURVIVING TRUST AFTER THE MERGER
Trustees and Executive Officers
The following table sets forth as of the consummation of the Merger the
names, positions and ages of the executive officers and trustees of the
Surviving Trust.
<TABLE>
<CAPTION>
Name Position Age
- ---------------------- -------------------------------------------------- ---
<S> <C> <C>
Samuel Zell Chairman of the Board of Trustees (term expires 55
in 1999)
Douglas Crocker II President, Chief Executive Officer and Trustee 56
(term expires in 1998)
David J. Neithercut Executive Vice President and Chief Financial 41
Officer
Gregory H. Smith Executive Vice President-Asset Management 46
Gerald A. Spector Executive Vice President, Chief Operating Officer 50
and Trustee (term expires in 1998)
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Name Position Age
---- -------- ---
Bruce C. Strohm Executive Vice President, General Counsel and 42
Secretary
Frederick C. Tuomi Executive Vice President-Property Management 42
Alan W. George Executive Vice President-Acquisitions 39
Michael J. McHugh Senior Vice President, Chief Accounting Officer 41
and Treasurer
John W. Alexander Trustee (term expires in 1999) 50
Henry H. Goldberg Trustee (term expires in 1999) 58
Errol R. Halperin Trustee (term expires in 1999) 56
James D. Harper, Jr. Trustee (term expires in 1998) 63
Sheli Z. Rosenberg Trustee (term expires in 1998) 55
Barry S. Sternlicht Trustee (term expires in 1997) 36
B. Joseph White Trustee (term expires in 1997) 49
Jeffrey H. Lynford Trustee (term expires in 1997)* 49
Edward Lowenthal Trustee (term expires in 1997)* 52
</TABLE>
*After the Effective Time, each of Messrs. Lynford and Lowenthal will be
appointed to the Board of Trustees of the Surviving Trust for a term ending
at the annual meeting of the Surviving Trust in the year 1997. EQR has
agreed to cause Messrs. Lynford and Lowenthal to be nominated for election
as trustees at the Surviving Trust's 1997 annual meeting for a term ending
at the annual meeting of the Surviving Trust in the year 2000.
The following is a biographical summary as of March 1, 1997 of the
experience of the executive officers and trustees of the Surviving Trust.
Samuel Zell has been Chairman of the Board of EQR since March 1993. Mr.
Zell is chairman of the board of directors of Equity Group Investments, Inc., an
owner, manager and financier of real estate and corporations ("EGI"), American
Classic Voyages Co., an owner and operator of cruise lines ("American Classic"),
and Anixter International Inc., a provider of integrated network and cabling
systems ("Anixter"). Mr. Zell is chairman of the board and chief executive
officer of both Capsure Holdings Corp., a holding company whose principal
subsidiaries are specialty property and casualty insurers ("Capsure"), and
Manufactured Home Communities, Inc., a REIT specializing in the ownership and
management of manufactured home communities ("MHC"). He is co-chairman of the
board of directors of Revco D.S., Inc.,
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a drugstore chain ("Revco"), and is a director of Quality Food Centers, Inc., an
owner and operator of supermarkets, Sealy Corporation, a bedding manufacturer
("Sealy"), Ramco Energy PLC, an independent oil company based in the United
Kingdom, and TeleTech Holdings, Inc., a provider of telephone and computer based
customer care solutions.
Douglas Crocker II has been President, Chief Executive Officer and a
Trustee of EQR since March 1993. Mr. Crocker is a director of Horizon Group,
Inc., 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 since January 1993. He has been an
executive vice president of Equity Financial and Management Company ("EF&M"), a
subsidiary of 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.
David J. Neithercut has been Executive Vice President and Chief Financial
Officer of EQR since February 1995. Mr. Neithercut had been Vice President--
Financing of EQR from September 1993 until February 1995. Mr. Neithercut was a
senior vice president--finance of EGI from January 1995 until February 1995. He
was a vice president--finance of Equity Assets Management, Inc., a subsidiary of
EGI providing real estate ownership services ("EAM"), from October 1990 until
December 1994.
Gregory H. Smith has been Executive Vice President--Asset Management of EQR
since December 1994. Mr. Smith was a senior vice president of Strategic Realty
Advisors, Inc., a real estate and advisory company, from January 1994 until
December 1994. Mr. Smith had been employed at VMS Realty Partners, a sponsor of
public and private real estate limited partnerships, from June 1989 until
December 1993, most recently serving as first vice president.
Gerald A. Spector has been a Trustee and Executive Vice President of EQR
since March 1993 and Chief Operating Officer of EQR since February 1995. Mr.
Spector was the Treasurer of EQR from March 1993 through February 1995. Mr.
Spector had been an officer of EF&M since January 1973, most recently serving as
vice president from November 1994 through January 1996. Mr. Spector was
executive vice president and chief operating officer of EF&M from September 1990
through November 1994. Mr. Spector had been an officer of EGI since January
1998, most recently serving as vice president from November 1994 through January
1996. Mr. Spector was executive vice president and chief operating officer of
EGI from January 1991 through January 1994.
Bruce C. Strohm has been Executive Vice President and General Counsel of
EQR since March 1995 and Secretary since November 1995. Mr. Strohm was an
Assistant Secretary since
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March 1995 and Vice President of EQR since its formation. Mr. Strohm was a vice
president of Rosenberg & Liebentritt, P.C., a law firm ("R&L"), most recently
serving as a member of the firm's management committee.
Frederick C. Tuomi has been Executive Vice President--Property Management
of EQR since January 1994. Mr. Tuomi had been president of RAM Partners, Inc.,
a subsidiary of Post Properties, Inc., a REIT, from March 1991 to January 1994.
Mr. Tuomi was president of Pilot Property Company, a property management
company, from July 1988 until March 1991.
Alan W. George has been Executive Vice President - Acquisitions of EQR
since February 1997, Senior Vice President-Acquisitions of EQR from December
1995 until February 1997 and Vice President-Acquisitions and asset manager of
EQR from December 1993 to December 1995. Mr. George was vice president-asset
management of EAM from June 1992 until August 1993. He was vice president-asset
management for American Real Estate Group, a real estate investment company,
from 1990 to 1992.
Michael J. McHugh has been Senior Vice President of EQR since November 1994
and Chief Accounting Officer and Treasurer of EQR since February 1995. From May
1990 until January 1995, Mr. McHugh was senior vice president and chief
financial officer of First Capital.
John W. Alexander has been a Trustee of EQR since May 1993. Mr. Alexander
has been the president of Mallard Creek Capital Partners, Inc., primarily an
investment company with interests in real estate and development entities, since
February 1994. He is a partner of Meringoff Equities, a real estate investment
and development company, and is a director of Jacor Communications, Inc., an
owner and operator of radio stations ("Jacor").
Henry H. Goldberg has been a Trustee of EQR since January 1995. Mr.
Goldberg is chairman of the board, chief executive officer and founder of Artery
Properties, Inc. Founded in 1959, Artery Properties, Inc. is a diversified real
estate company. Mr. Goldberg was the direct or indirect general partner (or an
executive thereof) of seven partnerships owning residential apartment
communities and one commercial office building, each of which filed petitions
under the Federal bankruptcy laws during 1992 and 1993. Each of the
partnerships is now out of bankruptcy through a reorganization plan agreed to by
the project lender.
Errol R. Halperin became a Trustee of EQR in May 1993. Mr. Halperin has
been an attorney at Rudnick & Wolfe, a law firm, since 1979, serving as a senior
partner and a member of such firm's policy committee since 1981, specializing in
Federal income tax counseling and real estate and corporate transactions.
James D. Harper, Jr. became a Trustee of EQR in May 1993. Since 1982, Mr.
Harper has been president of JDH Realty Co., a real estate development and
investment company. Since 1988, he has been a co-managing partner in AH
Development, S.E. and AH HA
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Investments, S.E., special limited partnerships formed to develop over 400 acres
of land in Puerto Rico.
Sheli Z. Rosenberg has been a Trustee of EQR since March 1993. She is a
principal of the law firm of R&L. Ms. Rosenberg is chief executive officer,
president and a director of EGI. Ms. Rosenberg has been a director of Jacor
since 1994 and has been the chairman of its board of directors since February
1996. Ms. Rosenberg is a director of Capsure, Falcon Building Products, Inc., a
manufacturer and supplier of building products ("Falcon"), American Classic,
MHC, Anixter, Sealy, and Revco.
Barry S. Sternlicht became a Trustee of EQR in May 1993. Mr. Sternlicht has
been chief executive officer and president of Starwood Capital Group, L.P. since
1993 and president of Starwood Capital Partners, L.P., a privately owned real
estate investment firm, since its formation in 1991. Mr. Sternlicht is chairman
of the board and chief executive officer of Starwood Lodging Trust, a REIT
specializing in the ownership of hotels, and co-chairman of the board of Westin
Hotels & Resorts Company, an owner and operator of hotels. Mr. Sternlicht is a
director of Angeles Participating Mortgage Trust, a mortgage REIT, U.S.
Franchise Systems, a hotel franchise company, and Starwood Lodging Corporation,
which manages hotels owned by Starwood Lodging Trust.
B. Joseph White became a Trustee of EQR since May 1993. Mr. White has been
a professor at the University of Michigan Business School since 1987 and has
served as Dean since 1991. Mr. White is a director of Falcon, Union Pump
Company, a manufacturer of pumps, and Kelly Services, Inc., an employment
agency.
For biographical descriptions of Jeffrey H. Lynford and Edward Lowenthal
see "Management of WRP Newco-Directors and Executive Officers."
Committees of the Board of Trustees
There will be three standing committees of the Board of Trustees of the
Surviving Trust: the Executive Committee, the Compensation Committee and the
Audit Committee, which are described further below.
Executive Committee: The Executive Committee will be comprised of Messrs.
Alexander, Crocker and Zell. The Executive Committee will have the authority
within certain parameters to acquire, dispose of and finance investments for the
Surviving Trust and execute contracts and agreements, including those related to
the borrowing of money by the Surviving Trust, and generally exercise all other
powers of the Board, except as prohibited by law.
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Compensation Committee: The Compensation Committee will be comprised of
Messrs. Halperin and Harper and Ms. Rosenberg. Mr. Harper will be the chairman.
The Compensation Committee will review and make recommendations concerning
proposals by management with respect to compensation, bonuses, employment
agreements and other benefits and policies respecting such matters for the
executive officers of the Surviving Trust.
Audit Committee: The Audit Committee will be comprised of Messrs. White,
Alexander, Halperin, Sternlicht and Goldberg. Mr. White will be the chairman.
The Audit Committee will make recommendations concerning the engagement of
independent public accountants, review the plans and results of the audit
engagement with the independent public accountants, approve professional
services provided by the independent public accountants, review the independence
of the independent public accountants, consider the range of audit and non-audit
fees and review the adequacy of the Surviving Trust's internal accounting
controls.
Compensation of Trustees
Trustees who are not employees of the Surviving Trust receive an annual fee
of $20,000 for serving as trustees. In addition, trustees who serve on the
Audit Committee, the Executive Committee or the Compensation Committee will
receive an additional $1,000 per annum for each committee on which they serve.
Committee chairs receive an additional $500 per annum. The Surviving Trust will
also reimburse the trustees of each committee for travel expenses incurred in
connection with their activities on behalf of the Surviving Trust. Each trustee
will also be granted options to purchase 5,000 shares of Survivor Common at the
fair market value of such shares at the close of business on the date of the
first trustees' meeting following each annual meeting of shareholders.
Consulting Agreements
Messrs. Lynford and Lowenthal will each execute a consulting agreement with
ERP Operating Partnership. The consulting agreements will each be for a term of
five years from the Effective Time. Pursuant to the consulting agreements, each
of Messrs. Lynford and Lowenthal will serve as a senior management consultant to
ERP Operating Partnership and, in all events, will receive compensation at the
rate of $200,000 per year plus reimbursement for reasonable out-of-pocket
expenses.
COMPARISON OF RIGHTS OF SHAREHOLDERS
At the Effective Time, the shareholders of Wellsford and EQR will become
shareholders of the Surviving Trust. The rights of Wellsford's shareholders are
presently governed by Title 8 of the Corporations and Associations Article of
the Annotated Code of Maryland ("Title 8"), the Wellsford Declaration, and the
Wellsford Bylaws. The rights of EQR's shareholders are presently governed by
Title 8, the EQR Declaration and EQR Bylaws. The rights of the
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shareholders of the Surviving Trust will be governed by Title 8, the Surviving
Trust's Declaration and the Surviving Trust's Bylaws. Upon approval of the
Merger by the Wellsford Common Shareholders and at the Effective Time, the
Wellsford Declaration will be amended and restated to substantially conform the
Wellsford Declaration to the terms of the EQR Declaration (except for the
Additional Provisions that require approval by a two-thirds vote of the
Wellsford Common Shareholders, which are being voted upon separately). The
Wellsford Declaration, as amended and restated (including, if so approved, the
Additional Provisions) will serve as the Surviving Trust's Declaration.
The following discussion summarizes certain significant differences between
the rights of shareholders of EQR, Wellsford and the Surviving Trust as a result
of certain of these amendments. This summary does not purport to be complete
and is subject to and qualified in its entirety by reference to the EQR
Declaration and Bylaws, the Wellsford Declaration and Bylaws and the Surviving
Trust's Declaration and Bylaws. In addition, upon the separate approval by an
affirmative vote of the holders of not less than two-thirds of the outstanding
shares of Wellsford Common, the Declaration of the Surviving Trust will be
modified to include the Additional Provisions. See "Proposal Regarding
Additional Declaration of Trust Provisions." This summary does not take into
account the modifications contemplated by the Additional Provisions, which are
discussed in "Proposal Regarding Additional Declaration of Trust Provisions."
Rights of the shareholders of EQR and Wellsford which are and will remain the
same after the Merger are not discussed.
Authorized and Issued Shares
The Wellsford Declaration authorizes the issuance of 100,000,000 shares of
beneficial interest, which consists of shares of Wellsford Common and such other
types or classes as the Wellsford Board of Trustees may create and authorize
from time to time and designate as representing a beneficial interest in
Wellsford. The designation and number of outstanding shares of beneficial
interest of Wellsford as of April 21, 1997, was as follows: (i) 17,261,897 of
Wellsford Common; (ii) 3,999,800 shares of Wellsford Series A; and (iii)
2,300,000 shares of Wellsford Series B.
The EQR Declaration authorizes the issuance of 110,000,000 shares of
beneficial interest, of which 100,000,000 are EQR Common and 10,000,000 are
Preferred Shares which may be issued from time to time, in one or more series.
The designation and number of outstanding shares of beneficial interest in EQR
as of April 1, 1997, was as follows: (i) 53,713,158 of EQR Common; (ii)
6,120,000 shares of EQR Series A; (iii) 500,000 shares of EQR Series B
represented by 5,000,000 depository shares; (iv) 460,000 shares of EQR Series C
represented by 4,600,000 depository shares; and (v) no excess shares of
beneficial interest.
The Declaration of the Surviving Trust will authorize the issuance of
300,000,000 shares of beneficial interest, of which 200,000,000 will be shares
of Survivor Common and 100,000,000 will be preferred shares of beneficial
interest of the Surviving Trust, of which (a) 6,900,000 shares have been
designated as 9-3/8% Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest, (b) 575,000 shares have been designated as 9-1/8% Series B
Cumulative Redeemable Shares of Beneficial Interest, (c) 460,000 shares have
been designated as 9-1/8% Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest, (d) 4,600,000 shares have been designated as Series D
Cumulative Convertible Preferred Shares of Beneficial Interest and (e) 2,300,000
shares have been designated as Series E Cumulative Redeemable Preferred Shares
of Beneficial Interest. Shares of beneficial interest may be
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issued from time to time, as authorized by the Board of Trustees of the
Surviving Trust. As of the Effective Date, the designation and number of the
outstanding shares of beneficial interest in the Surviving Trust, based upon the
shares outstanding as of April 1, 1997, will be as follows: (i) 64,483,878 of
Survivor Common; (ii) 6,120,000 of Survivor Series A; (iii) 500,000 of Survivor
Series B represented by 5,000,000 depository shares; (iv) 460,000 of Survivor
Series C represented by 4,600,000 depository shares; (v) 3,999,800 of Survivor
Series D; and (vi) 2,300,000 of Survivor Series E.
Amendment to Declaration and Bylaws
As permitted by Title 8, the Wellsford Declaration provides that the
Wellsford Board of Trustees may, by a two-thirds vote, amend the Wellsford
Declaration from time to time in order to enable Wellsford to qualify and remain
qualified as a REIT under the Code and Title 8. Except as set forth in the
preceding sentence and in the Articles Supplementary that set forth the rights
and preferences of the holders of Wellsford Preferred, the Wellsford Declaration
may be amended only by the affirmative vote of the holders of not less than a
majority of the shares of beneficial interest then outstanding and entitled to
vote thereon, and in certain cases may be amended only by the affirmative vote
of the holders of not less than two-thirds of such shares. Amendments to the
provisions of the Wellsford Declaration relating to the removal of trustees, the
restrictions on ownership of its shares of beneficial interest, the
reorganization of Wellsford and mergers, consolidations and sales of all or
substantially all of Wellsford's property must be approved by the affirmative
vote of holders of not less than two-thirds of the shares of beneficial interest
then outstanding and entitled to vote on the matter.
As permitted by Title 8, the EQR Declaration provides that the EQR Board of
Trustees may, by a two-thirds vote, amend the EQR Declaration from time to time
in order to enable EQR to qualify and remain qualified as REIT under the Code
and under Title 8. Except as set forth in the previous sentence and in the terms
of preferred shares of beneficial interest, the EQR Declaration may be amended
only by the affirmative vote of the holders of not less than two-thirds of the
shares of beneficial interest then outstanding and entitled to vote thereon.
The Declaration of the Surviving Trust will provide for its amendment in
the same manner as the Wellsford Declaration. The amendment provisions of the
Declaration of the Surviving Trust will also be affected by the Additional
Provisions, if approved. See "Proposal Regarding Additional Declaration of Trust
Provisions."
Special Meetings
The Wellsford Bylaws provide that the chairman, the president or one-third
of the trustees of Wellsford may call a special meeting of Wellsford's
shareholders. A special meeting shall also be called by the secretary of
Wellsford upon the written request of holders of shares entitled to cast not
less than a majority of all the votes entitled to be cast at such meeting.
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The EQR Bylaws provide that the chairman, the president or one-third of the
trustees of EQR may call a special meeting of EQR's shareholders. A special
meeting shall be called by the secretary of EQR upon the written request of EQR
Shareholders entitled to cast not less than 25% of all the votes entitled to be
cast at such meeting.
The Bylaws of the Surviving Trust will provide for special meetings in the
same manner as the EQR Bylaws.
Boards of Trustees
The Wellsford Declaration states that the trustees of Wellsford shall be
divided into three classes as nearly equal in number as possible, with the term
of each class of trustees expiring at the annual meeting of shareholders in the
third year following the year of their election. This classified Board of
Trustees could have the effect of making the removal of incumbents more time
consuming and difficult, which could delay, defer or prevent a third party from
making a timely offer or otherwise attempting to obtain control, even though
such an attempt might be beneficial to the company and its shareholders. Thus,
the classified board could increase the likelihood that incumbents will retain
their positions.
The Wellsford Declaration provides that a trustee may be removed, with or
without cause, by the affirmative vote of the holders of not less than two-
thirds of the shares of beneficial interest then outstanding and entitled to
vote in the election of trustees. Amendments to this section of the Wellsford
Declaration must be approved by the holders of not less than two-thirds of the
shares of beneficial interest outstanding and entitled to vote on the matter.
The EQR Declaration contains substantially similar provisions regarding the
classification of trustees as the Wellsford Declaration; however, the EQR
Declaration provides that a trustee may be removed only with cause, by the vote
of the holders of not less than two-thirds of the shares of beneficial interest
then outstanding and entitled to vote in the election of trustees. The EQR
Declaration defines cause as (i) material theft, fraud or embezzlement or active
and deliberate dishonesty by a trustee, (ii) habitual neglect of duty by a
trustee having a material and adverse significance to the trust, or (iii) the
conviction of a trustee for a felony or of any crime involving moral turpitude.
The Declaration of the Surviving Trust will contain provisions paralleling
those of the Wellsford Declaration relating to the classification and removal of
trustees. The method of removing trustees under the Declaration of the Surviving
Trust will also be affected by the Additional Provisions, if approved. See
"Proposal Regarding Additional Declaration of Trust Provisions."
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Mergers, Consolidations, and Sale of Substantially all Assets
Declaration Provisions. Under the Wellsford Declaration, any merger or
consolidation involving Wellsford or any sale or other disposition of all or
substantially all of Wellsford's property must be approved by its trustees and
submitted to its shareholders for approval, such approval to be obtained by the
affirmative vote of (i) holders of not less than two-thirds of all the shares of
beneficial interest then outstanding and entitled to vote thereon, if Wellsford
is not the surviving entity in any merger or consolidation or in the event of a
proposed sale or disposition of all or substantially all of Wellsford's
property, or (ii) holders of not less than a majority of all the shares of
beneficial interest then outstanding and entitled to vote thereon, in all other
cases. Amending this section of the Wellsford Declaration requires the
affirmative vote of the holders of two-thirds of the shares of beneficial
interest outstanding and entitled to vote on the matter.
The EQR Declaration does not address the vote required for a merger or
consolidation involving EQR or EQR's property. Under Title 8, a merger must be
approved by the affirmative vote of two-thirds of all the shareholders entitled
to vote on the matter unless otherwise provided in the declaration of trust.
The Declaration of the Surviving Trust will contain provisions paralleling
those of the Wellsford Declaration relating to shareholder approval of mergers,
consolidations and sales of assets. The Declaration of the Surviving Trust will
provide that the Surviving Trust may sell or otherwise dispose of all or
substantially all of its property only upon the affirmative vote of the holders
of not less than two-thirds of all the shares then outstanding and entitled to
vote on the matter. These shareholder approval requirements for mergers,
consolidations and sales of assets under the Declaration of the Surviving Trust
will also be affected by the Additional Provisions, if approved. See "Proposal
Regarding Additional Declaration of Trust Provisions."
Statutory Restrictions. 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 REIT and (i) any person who beneficially owns 10% or more of the
voting power of the REIT's shares or an affiliate of the REIT who, at any time
within the two-year period prior to the date in question, was the beneficial
owner of 10% or more of the voting power of the then outstanding voting shares
of beneficial interest of the REIT (an "Interested Shareholder) or (ii) an
affiliate of an Interested Shareholder are prohibited for five years after the
most recent date on which the Interested Shareholder becomes an Interested
Shareholder. Thereafter, any such business combination must be recommended by
the Board of Trustees of such REIT and approved by the affirmative vote of at
least (a) 80% of the votes entitled to be cast by holders of outstanding shares
of the REIT and (b) two-thirds of the votes entitled to be cast by holders of
voting shares of the REIT other than shares held by the Interested Shareholder
with whom (or with whose affiliate) the business combination is to be effected,
unless, among other conditions, the REIT's common shareholders
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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 Shareholder for its shares. These provisions of Maryland law do not
apply, however, to business combinations that are approved or exempted by the
board of trustees of the REIT prior to the time that the Interested Shareholder
becomes an Interested Shareholder. The Surviving Trust will exempt any business
combination involving Mr. Zell, the Zell Holders, EPMC and their respective
affiliates and associates, present or future, or any other person acting in
concert or as a group with any of the foregoing persons and, consequently, the
five-year prohibition and the super-majority vote requirements will not apply to
a business combination between any of them and the Surviving Trust.
In addition to the restrictions on certain business combinations, the MGCL
also provides that "control shares" of a Maryland REIT acquired in a "control
share acquisition" have no voting rights except to the extent approved by a vote
of two-thirds of the votes entitled to be cast on the matter, excluding shares
owned by the acquiror, by officers or by directors who are employees of the
REIT. "Control Shares" are voting shares which, if aggregated with all other
such shares previously acquired by the acquiror, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing trustees within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, (ii) one-third or more
but less than a majority, or (iii) a majority or more of all voting power. A
"control share acquisition" means the acquisition of control shares, subject to
certain exceptions. Despite these restrictions on Control Share acquisitions,
the MGCL provides that a REIT may effectively exempt itself from such
restrictions by a provision contained in its Declaration or Bylaws. The
Wellsford Bylaws and EQR Bylaws both contain provisions stating that the
restrictions regarding Control Shares will not apply to any acquisition of its
shares by any person, and the Bylaws of the Surviving Trust will contain a
similar provision.
Restrictions on the Ownership, Transfer or Issuance of Shares
The Wellsford Declaration, subject to certain exceptions, provides that no
holder (other than (i) Edward Lowenthal and Jeffrey H. Lynford, and (ii) any
other person approved by the trustees) may own more than 9.8% (the "WRP
Ownership Limit") of the lesser of the number or value (in either case as
determined in good faith by the trustees) of the total outstanding shares of
beneficial interest. The Wellsford Declaration provides that the trustees may
waive the WRP Ownership Limit if evidence satisfactory to the trustees and to
Wellsford's tax counsel is presented that such ownership will not then or in the
future jeopardize Wellsford's status as a REIT. As a condition of such waiver,
the intended transferee must give written notice to Wellsford of the proposed
transfer and must furnish such opinions of counsel, affidavits, undertakings,
agreements and information as may be required by the trustees no later than the
15th day prior to any transfer which, if consummated, would result in the
intended transferee owning shares in excess of the WRP Ownership Limit. The
foregoing restrictions on transferability and ownership will not apply if the
Wellsford Board of Trustees determines that
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it is no longer in the best interests of Wellsford to attempt to qualify, or to
continue to qualify, as a REIT. Any transfer of shares of beneficial interest
that would (i) create a direct or indirect ownership of shares of beneficial
interest in excess of the WRP Ownership Limit, (ii) result in the shares of
beneficial interest being owned by fewer than 100 persons, or (iii) result in
Wellsford being "closely held" within the meaning of Section 856(h) of the Code,
will be null and void, and the intended transferee will acquire no rights to
such shares of beneficial interest. The Wellsford Declaration provides that
Wellsford, by notice to the holder thereof, may purchase any or all shares of
beneficial interest of Wellsford (the "Excess Shares") that are proposed to be
transferred pursuant to a transfer which, if consummated, would result in the
intended transferee owning shares of beneficial ownership in excess of the WRP
Ownership Limit or would otherwise jeopardize Wellsford's REIT status. The
purchase price of any Excess Shares will be equal to the fair market value of
such excess Shares as reflected in the closing sales price for the shares of
beneficial interest, if then listed on a national securities exchange. From and
after the date fixed for purchase by the trustees, the holder of such shares of
beneficial interest to be purchased by Wellsford will cease to be entitled to
dividends, distributions, voting rights and other benefits with respect to such
shares except the right to payment of the purchase price for the shares. Any
dividend or distribution paid to a proposed transferee on Excess Shares prior to
the discovery by Wellsford that such shares of beneficial interest have been
transferred in violation of the provisions of the Wellsford Declaration shall be
repaid to Wellsford upon demand. If the foregoing transfer restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the intended transferee of any Excess Shares may be deemed,
at Wellsford's option, to have acted as an agent on behalf of Wellsford in
acquiring such Excess Shares and to hold such Excess Shares on behalf of
Wellsford.
The Wellsford Declaration requires that all persons who own, directly or
indirectly, more than 5% in number or value of the total outstanding shares of
beneficial interest of Wellsford must give a written notice to Wellsford
containing the information specified in the Wellsford Declaration by January 31
of each year. In addition, each shareholder irrespective of such shareholder's
ownership shall upon demand be required to disclose to Wellsford in writing such
information with respect to the direct, indirect and constructive ownership of
beneficial interests as the trustees deem necessary to comply with the
provisions of the Code applicable to a REIT, to comply with the requirements of
any taxing authority or governmental agency or to determine any such compliance.
The EQR Declaration, subject to certain exceptions, provides that no holder
may own, or be deemed to own by virtue of the attribution provisions of the
Code, more than 5% (the "EQR Ownership Limit") of the lesser of the number of
shares or value of the issued and outstanding shares of beneficial interest of
EQR. The EQR Board of Trustees, upon receipt of a ruling from the Service, an
opinion of counsel or other evidence satisfactory to the EQR Board of Trustees
and upon such other conditions as the EQR Board of Trustees may direct, may also
exempt a proposed transferee from the EQR Ownership Limit. As a condition of
such exemption, the intended transferee must give written notice to EQR of the
proposed transfer no
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later than the fifteenth day prior to any transfer which, if consummated, would
result in the intended transferee owning shares in excess of the EQR Ownership
Limit. Any transfer of EQR Common or EQR Preferred that would (i) create a
direct or indirect ownership of shares of beneficial interest in excess of the
EQR Ownership Limit, (ii) result in the shares of beneficial interest being
owned by fewer than 100 persons, or (iii) result in EQR being "closely held"
within the meaning of Section 856(h) of the Code, will be void ab initio, and
the intended transferee will acquire no rights to the shares of beneficial
interest. The foregoing restrictions on transferability and ownership will not
apply if the EQR Board of Trustees determines that it is no longer in the best
interests of EQR to attempt to qualify, or to continue to qualify, as a REIT.
EQR's Declaration exempts from the Ownership Limit certain persons and
entities who would exceed the Ownership Limit as a result of the exchange of the
OP Units for EQR Common, which OP Units were received by them at the time of the
formation of EQR. These persons may also acquire additional EQR Shares through
EQR's Second Amended and Restated 1993 Share Option and Share Award Plan (the
"Option and Award Plan"), but in no event will such persons be entitled to
acquire additional shares of beneficial interest such that the five largest
beneficial owners of EQR's shares of beneficial interest hold more than 50% in
number or value of the total outstanding EQR Shares.
Any EQR Shares the transfer of which would result in a person owning shares
of beneficial interest in excess of the Ownership Limit or cause EQR to become
"closely held" under Section 856(h) of the Code that is not otherwise permitted
as provided above will constitute excess shares ("Excess Shares"), which will be
transferred by operation of law to EQR as trustee for the exclusive benefit of
the person or persons to whom the Excess Shares are ultimately transferred,
until such time as the intended transferee retransfers the Excess Shares. While
these Excess Shares are held in trust, they will not be entitled to vote or to
share in any distributions (except upon liquidation). Subject to the Ownership
Limit, the Excess Shares may be retransferred by the intended transferee to any
person (if the Excess Shares would not be Excess Shares in the hands of such
person) at a price not to exceed the price paid by the intended transferee or,
if the intended transferee did not give value for such Excess Shares (e.g., a
transfer by gift or devise), the fair market value (as described below) at the
time of the purported transfer that resulted in the Excess Shares, at which
point the Excess Shares will automatically be exchanged for the shares of
beneficial interest to which the Excess Shares are attributable. In addition,
such Excess Shares held in trust are subject to purchase by EQR at a purchase
price equal to the lesser of the price paid for the Excess Shares in the
transaction that created such Excess Shares (or, in the case of a devise or
gift, the fair market value at the time of such devise or gift) and the fair
market value of the EQR Preferred or EQR Common to which such Excess Shares
relate on the date EQR exercises its right to purchase. Fair market value will
be the last sales price of such shares of beneficial interest reported on the
NYSE on the trading day immediately preceding the relevant date, or if not then
traded on the NYSE, the last reported sales price of such shares of beneficial
interest on the trading day immediately preceding the relevant date as reported
on any exchange or quotation system over which such
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shares of beneficial interest may be traded, or if not then traded over any
exchange or quotation system, then the fair market value of such shares of
beneficial interest on the relevant date as determined in good faith by the EQR
Board of Trustees. EQR's right to purchase shall be for a period of 90 days
after the later of the date of the purported transfer which resulted in the
Excess Shares and the date the EQR Board of Trustees determines in good faith
that such a transfer has occurred. From and after the intended transfer to the
intended transferee of the Excess Shares, the intended transferee will cease to
be entitled to distributions (except upon liquidation), voting rights and other
benefits with respect to such shares except the right to payment of the purchase
price for the shares or the retransfer of shares as provided above. Any
distribution paid to a proposed transferee on Excess Shares prior to the
discovery by EQR that such shares of beneficial interest have been transferred
in violation of the provisions of EQR's Declaration will be repaid to EQR upon
demand. If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
intended transferee of any Excess Shares may be deemed, at the option of EQR, to
have acted as an agent on behalf of EQR in acquiring such Excess Shares and to
hold such Excess Shares on behalf of EQR.
All certificates representing shares of beneficial interest of EQR shall
bear a legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage between 1/2 of 1% and 5% as
provided in the rules and regulations promulgated under the Code) of the lesser
of the number or value of the outstanding shares of beneficial interest of EQR
must give a written notice to EQR by January 31 of each year. In addition, each
shareholder will upon demand be required to disclose to EQR in writing such
information with respect to the direct, indirect and constructive ownership of
EQR Shares as the EQR Board of Trustees deems reasonably necessary to comply
with the provisions of the Code applicable to a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
The Declaration of the Surviving Trust will contain restrictions on the
ownership, transfer and issuance of Survivor Shares generally similar to those
restrictions contained in the EQR Declaration. The provisions relating to
restrictions on the ownership, transfer or issuance of shares contained in the
Surviving Trust will also be affected by the Additional Provisions, if approved.
See "Proposal Regarding Additional Declaration of Trust Provisions."
PROPOSAL REGARDING ADDITIONAL DECLARATION OF TRUST PROVISIONS
The Wellsford Common Shareholders are being asked to separately approve the
Additional Provisions to the Surviving Trust Declaration (defined herein) to
further conform the Surviving Trust Declaration to the terms of the EQR
Declaration and to update the Surviving Trust Declaration to reflect the current
approaches in the REIT industry regarding share ownership restrictions necessary
to maintain REIT status. The Wellsford Declaration, as amended and restated
to
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include or exclude the Additional Provisions depending on the requisite approval
of the Wellsford Common Shareholders ("Surviving Trust Declaration"), will
constitute the declaration of the Surviving Trust. As described in the following
summary of the Additional Provisions, the Board of Trustees of each of Wellsford
and EQR believe that the Additional Provisions would be in the best interests of
the shareholders of the Surviving Trust. The Wellsford Common Shareholders are
therefore being asked to separately approve modifications to certain sections,
including Sections 2.3, 6.6, 9.1, 9.2 and 9.3 of, and the addition of Article
VII to, the Surviving Trust Declaration.
The following is a summary of the Additional Provisions as to which the
approval of the Wellsford Common Shareholders is being requested.
Removal of Trustees. Section 2.3 of the Wellsford Declaration currently
provides for the removal of trustees, with or without cause, by the affirmative
vote of the holders of not less than two-thirds of the shares of Wellsford
Common then outstanding and entitled to vote on the election of trustees. Upon
approval of the Additional Provisions, the Surviving Trust Declaration will
provide for the removal of trustees only with cause by the same vote previously
required. "Cause" will be defined as (a) material theft, fraud or embezzlement
or active and deliberate dishonesty by a trustee; (b) habitual neglect of duty
by a trustee having a material and adverse significance to the Surviving Trust;
or (c) the conviction of a trustee for a felony or for any crime involving
mortal turpitude. The Board of Trustees of each of Wellsford and EQR believe
that the increased stability of management that would result from this amendment
is in the best interest of the shareholders of the Surviving Trust.
Restrictions on Transfer and Ownership of Shares. In order to maintain its
status as a REIT under the Code and Title 8, Section 6.6 of the Wellsford
Declaration currently imposes a number of restrictions on the transfer and
ownership of Wellsford Shares. See "Comparison of Rights of Shareholders -
Restrictions on the Ownership, Transfer or Issuance of Shares." Since the
adoption of the Wellsford Declaration in 1992, the comparable section of the
declarations of other REITs has evolved into a more detailed provision relating
to the applicable ownership limits and compliance with the Code. Upon approval
of the Additional Provisions, these provisions will be modified to reflect the
effects of the Merger and the Surviving Trust's relationship with ERP Operating
Partnership. Among the specific amendments to be made will be the inclusion of
provisions exempting the exchange of OP Units into Survivor Shares from the
definition of "transfer." In addition, certain persons and entities who would
otherwise exceed the ownership limits placed on Survivor Shares will be exempted
from such ownership restrictions in order to avoid their forced divestment of
such shares or OP Units. Upon approval of the Additional Provisions, any
transfer of shares resulting in a person owning shares in excess of the
ownership limits placed on the Survivor Shares shall be automatically
transferred to a charitable trust for the benefit of a charitable beneficiary.
For the reasons stated above, the Board of Trustees of each of Wellsford and EQR
believe that the Additional Provisions affecting
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the ownership and transfer of Survivor Shares are in the best interest of the
shareholders of the Surviving Trust.
Amendment to Declaration. Section 9.1 of the Wellsford Declaration currently
provides for its amendment by the affirmative vote of the holders of not less
than a majority of the Wellsford Shares outstanding and entitled to vote
thereon, except that amendments related to the removal of trustees, the
restrictions on the ownership of Wellsford Shares, the reorganization of
Wellsford and the merger, consolidation or sale of all or substantially of
Wellsford's property must be approved by the affirmative vote of the holders of
two-thirds of the Wellsford's Shares then outstanding and entitled to vote on
the matter. In addition, the Wellsford Board of Trustees may, by a two-thirds
vote, amend the Wellsford Declaration in order to enable Wellsford to qualify
and remain qualified as a REIT under the Code and Title 8.
Upon approval of the Additional Provisions, Section 9.2 of the Surviving
Trust Declaration will provide that it may be amended by the Board of Trustees
of the Surviving Trust, by a two-thirds vote, to enable the Surviving Trust to
qualify as a REIT. The Surviving Trust Declaration as modified will also
provide for amendment of all its provisions by the affirmative vote of the
holders of not less than two-thirds of the Survivor Shares then outstanding and
entitled to vote thereon. The Board of Trustees of each of Wellsford and EQR
believe that this consistent requirement of approval by not less than two-thirds
of the Survivor Shares to amend all provisions of the Surviving Trust
Declaration is in the best interest of the shareholders of the Surviving Trust.
Mergers, Consolidation, or Sale of Trust Property. Section 9.2 of the Wellsford
Declaration currently states that, upon the affirmative vote of the holders of
not less than two-thirds of the Wellsford Shares then outstanding and entitled
to vote thereon, the trustees of Wellsford may reorganize Wellsford by creating
a separate entity into which Wellsford will merge or sell its assets. In
addition, Section 9.3 of the Wellsford Declaration currently provides that if
Wellsford is not the surviving entity in a merger or consolidation, or in the
event of a sale of all or substantially all of Wellsford's property, that
transaction must be approved by two-thirds of the Wellsford Shares then
outstanding and entitled to vote thereon. In all other cases, such a merger or
consolidation need only be approved by a majority of the Wellsford Shares then
outstanding and entitled to vote thereon. Upon approval of the Additional
Provisions, any merger, consolidation, or sale of all or substantially all of
the Surviving Trust's property will be required to be approved by the holders of
a majority of the Survivor Shares then outstanding and entitled to vote thereon.
The Board of Trustees of each of Wellsford and EQR believe that this threshold
of shareholder approval, which would facilitate the merger, consolidation or
sale of all or substantially all of the Surviving Trust's property, would be in
the best interest of the shareholders of the Surviving Trust.
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THE CONTRIBUTION AND DISTRIBUTION
The following describes certain aspects of the Contribution and the
Distribution. To the extent that they relate to the Contribution and
Distribution Agreement, the following descriptions do not purport to be complete
and are qualified in their entirety by reference to the Contribution and
Distribution Agreement, which is filed as an exhibit to the registration
statement of which this Joint Proxy Statement/Prospectus/Information Statement
is a part.
Background of and Reasons for the Distribution
EQR is in the business of acquiring, owning and operating multifamily
properties. It does not currently engage in any development activities and
generally does not hold debt instruments for investment. In the course of
discussions with respect to the Merger it became clear that EQR did not wish to
acquire all of Wellsford's interest in its development project near Denver,
Colorado, known as Palomino Park or its interests in the Sonterra Assets. If EQR
were to acquire such assets, Wellsford would not be able to receive what it
considered to be adequate value for such assets. Wellsford's management believes
that it can maximize the value of those assets for its shareholders by not
conveying them in the Merger or pursuant to an asset sale to a third party and
by retaining such assets and their long-term value for Wellsford Common
Shareholders by contributing them to WRP Newco and distributing all of the
shares of WRP Newco owned by Wellsford to the Wellsford Common Shareholders pro
rata. It has also been agreed that to provide initial working capital for WRP
Newco, Wellsford would contribute approximately $18 million in cash to WRP
Newco. Pursuant to the Merger, EQR will acquire the remaining assets of
Wellsford, subject to certain liabilities. See "- Contribution and Distribution
Agreement."
Although the Contribution and Distribution will not be effected unless the
Merger is approved and all conditions thereto have been satisfied or waived,
Wellsford Common Shareholders are not being asked to approve the Contribution
and Distribution, which are not subject to shareholder approval under Maryland
law because they do not constitute a sale of all or substantially all of the
assets of Wellsford.
Manner of Effecting the Contribution and Distribution
The Contribution was approved and the Distribution was declared by the
Board of Trustees of Wellsford on January 16, 1997, the date on which it also
approved the Merger. The Contribution will be made immediately prior to the
Distribution, and both the Contribution and the Distribution will occur on the
same date as the Effective Date (the "Distribution Date") and immediately prior
to the Merger. The Distribution will be made to Wellsford Common Shareholders of
record as of the close of business on the Distribution Date. On or prior to the
Distribution Date, a share certificate evidencing all the shares of WRP Newco
Common owned by Wellsford will be delivered to the United States Trust Company
of New York, as Distribution Agent. Commencing on the Distribution Date, the
Distribution Agent will begin mailing to
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Wellsford Common Shareholders as of the close of business on the Distribution
Date one share of WRP Newco Common for every four shares of Wellsford Common
held on the Distribution Date. See "Description of Capital Stock of WRP Newco --
Common Stock." Wellsford Common Shareholders who would be entitled to receive
fractional shares of WRP Newco Common will receive cash in the Distribution in
lieu of such fractional shares. To accomplish this, the Distribution Agent will
determine the number of whole and fractional shares of WRP Newco Common to which
each Wellsford Common Shareholder as of the Distribution Date is entitled. Next,
the Distribution Agent will aggregate these fractional share interests and sell
them on the open market at then-prevailing prices. The Distribution Agent will
distribute to each Wellsford Common Shareholder its ratable share of such
proceeds after deducting appropriate amounts for federal income tax withholding
purposes and any applicable transfer taxes.
No holder of Wellsford Common Shareholder will be required to pay any cash
or other consideration for the shares of WRP Newco Common to be received in the
Distribution or to surrender or exchange shares of Wellsford Common or to take
any other action in order to receive WRP Newco Common.
Listing and Trading of WRP Newco Common
WRP Newco has applied for listing of the WRP Newco Common on the ASE.
Initially, WRP Newco will have approximately 629 stockholders of record and the
outstanding shares of WRP Newco Common will be held on behalf of approximately
13,500 beneficial owners, based on the number of record holders and beneficial
owners of Wellsford Common as of April 18, 1997.
There is currently no trading market for the WRP Newco Common. Prices at
which WRP Newco Common may trade after the Distribution cannot be predicted.
Until the WRP Newco Common is fully distributed and an orderly market develops,
the prices at which trading in such stock occurs may fluctuate significantly.
The prices at which WRP Newco Common 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 WRP Newco Common, investor perception of
WRP Newco and its businesses, WRP Newco's dividend policy, interest rates and
general economic and market conditions.
Shares of WRP Newco Common distributed to Wellsford Common Shareholders in
the Distribution will be freely transferable, except for shares received by
persons who may be deemed to be "affiliates" of WRP Newco under the Securities
Act. Persons who may be deemed to be affiliates of WRP Newco after the
Distribution generally include individuals or entities that control, are
controlled by, or are under common control with, WRP Newco, and may include
certain officers and directors of WRP Newco as well as certain principal
stockholders of WRP Newco, if any. Persons who are affiliates of WRP Newco will
be permitted to sell their shares
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of WRP Newco Common only pursuant to an effective registration statement under
the Securities Act or an exemption from the registration requirements of the
Securities Act.
Conditions; Termination
The Contribution and Distribution are subject to certain conditions as set
forth in the Contribution and Distribution Agreement including, but not limited
to, each condition to the closing of the Merger set forth in the Merger
Agreement shall have been satisfied or waived. The Contribution and Distribution
may be abandoned at any time prior to their occurrence by and in the sole
discretion of the Board of Trustees of Wellsford without the approval of WRP
Newco or the Wellsford Common Shareholders.
Contribution and Distribution Agreement
Wellsford and WRP Newco have entered into a Contribution and Distribution
Agreement providing for, among other things, the principal corporate
transactions required to effect the contribution by Wellsford of certain of its
assets to WRP Newco.
Wellsford will transfer, without representation or warranty, all of its
right, title and interest in and to the following assets, among others (the
"Contributed Assets"):
(a) the Sonterra Assets. See "WRP Newco's Initial Assets";
(b) 80% of the outstanding shares of Wellsford Park Highlands Corp.
("WPHC"), which represents an approximate 80% interest in Palomino Park,
together with certain additional ownership and financing agreements relating to
Palomino Park. See "WRP Newco's Initial Assets";
(c) cash in the amount of approximately $18 million, subject to
adjustment as described in the Merger Agreement and the Transaction and
Termination Costs Agreement attached as an exhibit thereto;
(d) the lease of the premises currently occupied by Wellsford in New York
City, together with the furniture, fixtures, equipment and personalty located at
such premises; and
(e) the name "Wellsford."
Simultaneously with the Contribution, WRP Newco will assume, among others,
the following liabilities:
(i) All liabilities of Wellsford with respect to the Contributed
Assets;
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(ii) the obligations to executive officers and trustees of Wellsford
arising under certain Wellsford share option certificates, which will be
satisfied by (A) amending the option certificates, as described in
"Interests of Certain Persons in the Merger and Distribution -- Benefits of
Key Executives -- Wellsford Options" (as amended, the "Amended WRP Newco
Options") and (B) issuing shares of WRP Newco Common pursuant to the
Amended WRP Newco Options; and
(iii) any other obligation of Wellsford under any agreement relating
to the Sonterra Assets, the bonds relating to Palomino Park, or Palomino
Park except the obligations of ERP Operating Partnership under the Credit
Enhancement Agreement and the Palomino Agreement, each between ERP
Operating Partnership and WRP Newco.
Mutual Indemnities. Pursuant to the Contribution and Distribution
Agreement, Wellsford and WRP Newco will each be responsible for all claims and
liabilities relating to its own business (whether or not such claims and
liabilities arise from activities occurring prior to the Distribution) and will
each indemnify the other against such claims and liabilities, subject to certain
limited exceptions relating to the Credit Enhancement Agreement, Palomino
Agreement and Transaction and Termination Costs Agreement.
Tax Consequences of the Distribution
The following discussion concerns the material United States Federal income
tax consequences of the receipt of shares of WRP Newco Common by Wellsford
Common Shareholders in the Distribution. The discussion is based on current law,
which is subject to change retroactively or prospectively, and is for general
information only. Robinson Silverman Pearce Aronsohn & Berman LLP has reviewed
the discussion set forth herein under the caption "Tax Consequences of the
Distribution" and believes that such discussion, as it pertains to matters of
law, is correct in all material respects. The discussion does not address all
aspects of Federal income taxation and does not address any aspects of state,
local or non-U.S. tax laws, except as set forth below. The discussion does not
consider any specific facts or circumstances that may apply to a particular
Wellsford shareholder. Accordingly, Wellsford Common Shareholders are urged to
consult their tax advisors regarding the United States Federal, state, local and
non-U.S. income and other tax consequences of the Distribution and of holding
and disposing of shares of WRP Newco Common.
General. To the extent the fair market value of the shares of WRP Newco
Common distributed in the Distribution to Wellsford Common Shareholders exceeds
Wellsford's tax basis in such shares, gain will be recognized by Wellsford.
Assuming Wellsford qualifies as a REIT and has a dividends paid deduction for
distributions to its shareholders at least equal to its REIT taxable income (as
computed before taking into account the dividends paid deduction), no REIT level
tax will be incurred on account of the Distribution.
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The distribution of WRP Newco Common will, however, be taxable to Wellsford
Common Shareholders to the same extent as any other distribution made by
Wellsford to its shareholders. Thus, so long as Wellsford qualifies for taxation
as a REIT, distributions with respect to its shares, including the Distribution,
made out of current earnings and profits (computed as of the close of its
taxable year without taking into account any distributions made during such
year) or accumulated earnings and profits allocable thereto (and not designated
as capital gain dividends) will be includible by the shareholders as ordinary
income for Federal income tax purposes. For this purpose, the current and
accumulated earnings and profits of Wellsford will be allocated first to
distributions with respect to shares of Wellsford Preferred and then to
distributions with respect to Common Shares. None of these distributions will
be eligible for the dividends received deduction for corporate shareholders.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gains (to the extent they do not exceed Wellsford's actual net
capital gain for the taxable year) without regard to the period for which the
shareholder has held his share. Corporate shareholders, however, may be required
to treat up to 20% of certain capital gain dividends as ordinary income.
Distributions in excess of current or accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's shares. Shareholders will be required to
reduce the tax basis of their shares by the amount of such distributions until
such basis has been reduced to zero, after which such distributions will be
taxable as capital gain (ordinary income in the case of a shareholder who holds
his shares as a dealer). The tax basis as so reduced will be used in computing
the capital gain or loss, if any, realized upon sale of the shares of Wellsford
Common (or shares of Survivor Common received in exchange therefor in the
Merger). Any loss upon a sale or exchange of shares of Wellsford Common (or
shares of Survivor Common received in exchange therefor in the Merger) by a
shareholder who held such shares of Wellsford Common (or shares of Survivor
Common received in exchange therefor in the Merger) for six months or less
(after applying certain holding period rules) will generally be treated as a
long-term capital loss to the extent such shareholder previously received
capital gain distributions with respect to such shares of Wellsford Common (or
shares of Survivor Common received in exchange therefor in the Merger).
The current earnings and profits of the Surviving Trust will include all
pre-Merger earnings and profits of Wellsford, all pre-Merger undistributed
earnings and profits of EQR and all post-Merger earnings and profits of the
Surviving Trust. The total earnings and profits at the close of the Surviving
Trust's taxable year will be allocated among pre-Merger Wellsford distributions,
including the Distribution, and all post-Merger distributions of the Surviving
Trust. Management estimates that approximately 50% of the value of the shares
of WRP Newco Common received in the Distribution will be taxable as ordinary
income. Because this estimate is based, in part, on future events, there can be
no assurance as to the portion of the value of the Distribution that will be
taxable as ordinary income. The remainder of the value of the shares of WRP
Newco Common received in the Distribution will either constitute a return of
capital (reducing basis in the shares of Wellsford Common that converted in the
Merger into Survivor
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Common) or capital gain. A Wellsford shareholder's tax basis in the WRP Newco
Common received in the Distribution will equal their fair market value on the
date of Distribution. The holding period of the WRP Newco Common received in
the Distribution will begin on the day following the date of the Distribution.
Upon the sale or exchange of WRP Newco Common to or with a person other
than WRP Newco, a holder will recognize capital gain or loss equal to the
difference between the amount realized on such sale or exchange and the holder's
adjusted tax basis in such shares. Any capital gain or loss recognized will
generally be treated as long-term capital gain or loss if the holder held such
shares for more than one year.
Backup Withholding and Information Reporting.
A noncorporate holder of WRP Newco Common who is not otherwise exempt from
backup withholding may be subject to backup withholding at the rate of 31% with
respect to distributions paid on, or the proceeds of a sale, exchange or
redemption of, the WRP Newco Common. Generally, backup withholding applies only
when the taxpayer (i) fails to furnish or certify his correct taxpayer
identification number to the payor in the manner requested, (ii) is notified by
the United States Internal Revenue Service ("IRS") that he has failed to report
payments of interest or dividends properly, or (iii) under certain
circumstances, fails to certify that he has not been notified by the IRS that he
is subject to backup withholding for failure to report interest or dividend
payments. Any amounts withheld under the backup withholding rules from a payment
to a holder will be allowed as a credit against the holder's Federal income tax
liability or as a refund, provided that the required information is furnished to
the IRS. Holders of WRP Newco Common should consult their own tax advisors
regarding their qualification for exemption from backup withholding and the
procedure for obtaining any applicable exemption.
State, Local and Foreign Taxation.
WRP Newco 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 WRP Newco Common should consult their own
tax advisors regarding the effect of state, local and foreign tax laws on the
ownership of WRP Newco Common.
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WELLSFORD REAL PROPERTIES, INC.
General
WRP Newco 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 or equity
securities of entities engaged in such real estate businesses. Management will
concentrate its efforts on defining and building focused operating businesses
with recurring sources of income. WRP Newco intends to maximize shareholder
value over time through growth in cash flow and net asset value per share.
WRP Newco 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,
WRP Newco will initially focus 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, WRP Newco may in the future expand its real estate-related businesses
and activities.
WRP Newco currently does not intend to qualify as a REIT under the Code.
Consequently, WRP Newco will have 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 WRP Newco to distribute each year at least 95% of its net taxable
income, excluding capital gains), WRP Newco will have 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, WRP Newco will differ from
opportunity funds that are typically structured as private partnerships. In
that regard, the business of WRP Newco will be 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, WRP Newco's shareholders are expected to have enhanced
liquidity through their ability to sell or margin their stock. WRP Newco also
hopes to attract a broader range of investors because there will be no
stipulated investment minimum. However, unlike REITs and opportunity funds, WRP
Newco will be subject to corporate level taxation.
WRP Newco's management will include Jeffrey H. Lynford, Chairman, and
Edward Lowenthal, President and Chief Executive Officer, who were co-founders
of, and served in the same capacities at, Wellsford supported by a management
team with experience in real estate acquisitions, development, asset management
and financing. WRP Newco 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 WRP Newco accomplish its business objectives. Since the Wellsford
IPO in November 1992, Messrs. Lynford and Lowenthal, through Wellsford, acquired
69 multifamily properties containing 16,332 units. From calendar year 1992
through calendar year 1996, Wellsford's revenues increased from $26 million to
$131.8 million, representing a compounded annual growth rate of approximately
49%, and WRP Newco EBITDA 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.
WRP Newco is a Maryland corporation which was incorporated in January 1997.
WRP Newco's executive offices are located at 610 Fifth Avenue, New York, New
York 10020 and its telephone number is (212) 333-2300.
Business Strategy
In furtherance of its business strategy, WRP Newco will initially focus on
investments in three distinct aspects of the real estate business. As
opportunities emerge and in response to changes in market, real estate and
general economic conditions, WRP Newco may in the future expand, retract from or
discontinue its real estate related business and activities.
Commercial Properties. WRP Newco 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. WRP Newco
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. WRP Newco also believes
that there are opportunities available to acquire properties that are not
attractive to REITs and institutional investors because the properties have no
or limited cash flow as a result of required rehabilitation and their not being
substantially leased. WRP Newco's acquisitions to date demonstrate that WRP
Newco is able to take advantage of existing opportunities in this area. WRP
Newco 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,
WRP Newco will seek to apply its business strategy to suburban office
properties. In this regard, WRP Newco has acquired five suburban office
properties, consisting of six buildings, all of which are located in Northern
New Jersey. As opportunities arise, WRP Newco may seek to acquire other types
of commercial properties, including industrial properties. See "Business and
Properties".
High Yield Debt Investments. WRP Newco 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. WRP Newco 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,
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secured and unsecured lines of credit, distressed loans, and loans previously
made by foreign and other financial institutions. In some cases WRP Newco may
only acquire a participating interest in the debt instrument. WRP Newco
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. WRP Newco 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 WRP Newco believes that the market has mispriced an
outstanding tranche of debt because of insufficient asset specific information.
WRP Newco's investment in the Sonterra Loan and its expected investment in the
277 Park Loan in April 1997 demonstrate its ability to take advantage of
opportunities in this area. See "Business and Properties".
Property Development. WRP Newco will engage in selective development
activities as opportunities arise and when justified by expected returns. WRP
Newco believes that by pursuing selective development activities it can achieve
returns which are greater than returns which could be achieved by acquiring a
stabilized property. Initially, WRP Newco will continue the development of
Palomino Park, its five-phase residential community begun by Wellsford, taking
advantage of the fixed-price purchase options for the land underlying such
residential community obtained by Wellsford two years ago. This development may
be retained for investment and operated by WRP Newco, sold, or converted to
condominium ownership. WRP Newco 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, WRP Newco may seek to obtain bond
financing from local governmental authorities which generally bear interest at
rates substantially below rates with respect to conventional financing. See
"Business and Properties".
WRP Newco 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 business. Some of the entities in
which WRP Newco may invest may be start-up companies or companies in need of
additional capital. WRP Newco 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.
Initial Capital and Financing
Upon completion of the Distribution and consummation of the Merger and
certain of the other transactions described in this Joint Proxy
Statement/Prospectus/Information Statement, WRP Newco expects to have available
the following sources of capital, financing and credit support:
. $3.5 million of proceeds from the sale to ERP Operating Partnership
of shares of the WRP Newco Class A Common at a price equal to the Issuance
Price.
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. $25 million pursuant to the ERP Preferred Commitment to acquire up
to 1,000,000 shares of the WRP Newco Series A Preferred at the request of
WRP Newco and subject to certain limited conditions. Each share of WRP
Newco Series A Preferred is convertible into shares of WRP Newco Common
Stock at a premium equal to 8% of the Issuance Price. The ERP Preferred
Commitment will be pledged as security for the WRP Newco Line of Credit.
. $50 million under a two-year WRP Newco Line of Credit as to which
Bank of Boston and Morgan Guaranty have issued a commitment. The WRP Newco
Line of Credit will bear interest at an annual rate equal to LIBOR plus 175
basis points and will be extendible for an additional one-year period.
. $36.8 million, pursuant to an agreement with respect to the
construction financing for Phase I of Palomino Park, and approximately $30
million, pursuant to an agreement expected to be entered into 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.
. 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 of WRP Newco" and "Certain
Agreements Between WRP Newco and ERP Operating Partnership".
In addition to the foregoing, WRP Newco will receive from Wellsford at the
time of the Contribution approximately $18 million of cash (subject to
adjustment as provided in the Merger Agreement), substantially all of which will
be applied to the repayment of loans made by Wellsford to WRP Newco to acquire
certain office properties and make its expected investment in the 277 Park Loan.
WRP Newco'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 of WRP Newco".
WRP Newco Line of Credit
WRP Newco has received a commitment for a revolving line of credit in the
amount of up to $50 million from Bank of Boston and Morgan Guaranty as to which
each has agreed to lend up to $25 million. The WRP Newco Line of Credit will
be secured inter alia by WRP Newco's interest in the Sonterra Loan, the 277 Park
Loan and the ERP Preferred Commitment. Under the WRP Newco Line of Credit, WRP
Newco will pay interest only, monthly, at an annual rate equal to, at WRP
Newco's option, either (i) LIBOR plus 175 basis points or (ii) the base rate of
Bank of Boston. The WRP Newco Line of Credit will be for a term of two years
and be extendible by WRP Newco with the consent of Bank of Boston and Morgan
Guaranty for one additional year. It will include 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 1.3 to 1.0, until the earlier
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to occur of (A) 12 months from consummation of the line of credit, (B) WRP Newco
raises at least $50 million of equity, or (C) certain lease up tests are met
with respect to certain of WRP Newco's properties, at which time the required
ratio will be not less that 1.5 to 1, (iii) a prohibition on the payment of
dividends during the first year of the WRP Newco Line of Credit and (iv) a
prohibition of ground-up development (other than Palomino Park).
Management
The management of WRP Newco will be led by substantially all of the current
senior management of Wellsford, including Jeffrey H. Lynford, Chairman, and
Edward Lowenthal, President and Chief Executive Officer, of WRP Newco, who held
the same offices at Wellsford. Joining them are Gregory F. Hughes and David
Strong, who are Chief Financial Officer and Vice President-Development,
respectively, of Wellsford, 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.
At the time of the Wellsford IPO in November 1992, Wellsford was the only
REIT dedicated exclusively to the ownership of multifamily properties.
Wellsford has sought to maximize long term profitability for its shareholders by
acquiring, developing, and operating multifamily properties in target markets,
applying sophisticated management and operating techniques, and maintaining a
conservative capital structure.
Wellsford 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 in 1992, Wellsford 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 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.
Wellsford Management and Development of Properties
During 1995 and 1996 Wellsford 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.
Wellsford currently provides direct management for 84% of its properties. In
addition, Wellsford developed three new properties consisting of 548 multifamily
units during this period, helping to reduce the average age of its portfolio.
Wellsford also commenced development of Palomino Park, a 182-acre master planned
class A multifamily residential community in Highlands
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Ranch, a suburb of Denver, Colorado. See "WRP Newco's Business and Properties--
Palomino Park".
Wellsford Equity and Debt Financings
Wellsford funded its acquisition and development activities with various
sources of capital including public and private debt and equity. In November
1992, Wellsford raised $100 million in the Wellsford IPO. Wellsford 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 in November 1993 of $100 million of
convertible preferred shares. In January 1995 Wellsford became one of the first
REITs to access the unsecured debt markets with a $100 million issuance. In
August 1995 Wellsford'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'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 IPO, Wellsford's line of
credit was secured and bore an annual interest rate of LIBOR plus 3.75%.
Wellsford's line of credit in the amount of $150 million is now unsecured with
an annual interest rate of LIBOR plus 1.50%. Most recently, Wellsford issued 3-
year medium term notes at an annual interest rate of LIBOR plus .32%.
Wellsford Return to Shareholders
As a result of the above accomplishments, Wellsford has raised its dividend
15% since the Wellsford IPO. Assuming the consummation of the Merger investors
who bought their shares of Wellsford Common in the Wellsford IPO would have
received an average annual return of approximately 22.8% on their initial
investment, based upon the April 1, 1997 closing market price of a common share
of beneficial interest of EQR on the New York Stock Exchange, and assuming (i)
all distributions received on such shares of Wellsford Common were immediately
reinvested in Wellsford Common and (ii) a value for each share of WRP Newco
Common Stock distributed in the Distribution equal to the book value (which is
currently estimated to be $10.43 per share).
There can be no assurance that WRP Newco's future performance or average
rate of return achieved by its investors will be similar to Wellsford's past
accomplishments or the average rate of return achieved by its shareholders. WRP
Newco's business strategy differs substantially from that of Wellsford's, which
operated as a REIT and invested only in multifamily properties.
WRP NEWCO PRO FORMA CAPITALIZATION
The following table sets forth the pro forma capitalization of WRP Newco as
of December 31, 1996 on an historical basis and as adjusted to give effect to
the Merger and Distribution, the sale of shares of WRP Newco Class A Common to
ERP Partnership for an aggregate purchase price of $3.5 million and the
application of the net proceeds therefrom, and the funding of a portion of WRP
Newco's $50 million credit facility with Bank of Boston and Morgan Guaranty for
the purchase of five commercial office properties and the origination of a loan.
The information set forth in the table should be read in conjunction with the
WRP Newco financial statements and notes thereto, the WRP Newco pro forma
financial information and notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations-Liquidity and Capital
Resources" of WRP Newco included elsewhere in this Joint Proxy
Statement/Prospectus/ Information Statement.
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<TABLE>
<CAPTION>
December 31, 1996
Actual As Adjusted
------ -----------
(In thousands)
<S> <C> <C>
DEBT:
Tax exempt mortgage note payable............ $14,755 $ 14,755
Credit facility............................. 45,000
------- --------
Total debt.................................. $14,755 $ 59,755
------- --------
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par value per share;
200,000,000 shares authorized - 4,899,965
shares issued and outstanding, as adjusted.. -- 49
Capital in excess of par value................. 51,060
------- --------
Total stockholders' equity............. 30,005 51,109
------- --------
Total capitalization................... $44,760 $110,864
======= ========
</TABLE>
WRP NEWCO DIVIDEND POLICY
WRP Newco does not currently contemplate paying dividends on WRP Newco
Common. Earnings from the investments of WRP Newco are currently expected to be
used by WRP Newco to finance future acquisitions and investments. The Board of
Directors of WRP Newco may determine in its discretion to pay dividends on WRP
Newco Common in the future, and any such determination will be dependent upon
WRP Newco's results of operations, financial condition, contractual restrictions
and other factors deemed relevant at that time by the WRP Newco Board of
Directors.
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WRP NEWCO'S BUSINESS AND PROPERTIES
WRP Newco's initial assets will consist primarily of five office properties
consisting of six buildings; the 277 Park Loan; the Sonterra Loan and the
Sonterra Option; and an approximately 80% interest in Phases I and II of, and in
options to acquire and develop Phases III, IV and V of, Palomino Park. Set
forth below is a brief description of these assets and WRP Newco's plans with
respect thereto.
In the opinion of WRP Newco's management, all of the properties described
below are adequately covered by insurance.
Wellsford Commercial Properties
WRP Newco recently completed the acquisition of four commercial properties
and expects to acquire a fifth commercial property in April 1997 pursuant to an
existing contract. 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 is 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 WRP Newco will invest
approximately $13.7 million (approximately $15 per gross square foot of
building) for renovation and repositioning of the properties, and will pay
approximately $18.5 million (approximately $20 per gross square foot of
building) for tenant improvements and leasing costs, for a total cost to WRP
Newco of approximately $80 million. These acquisitions represent opportunities
which WRP Newco believes are impractical for REITs because they provide little
or no immediate cash return.
Point View Office Complex
WRP Newco acquired the Point View office complex ("Point View") located in
Wayne, N.J. in February 1997. Point View, formerly the international
headquarters for American Cyanamid Company, consists of (i) a main campus
consisting primarily of two office buildings (the "Main Campus"); and (ii) 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 the end of 1997.
The Main Campus
The Main Campus 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 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 the Main Campus (the "Serpentine Building") was constructed
in 1962, is of class B+ quality, four stories high and
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contains 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 of class A quality, six stories high and contains
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, the Main Campus 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 the Main Campus are $1.2 million, subject to pending negotiations with
the municipality of Wayne to reduce such taxes.
WRP Newco 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 $9.1 million. WRP Newco will
finance the renovations from its working capital and its WRP Newco Line of
Credit.
The purchase price for the Main Campus was $15.8 million, or $28.00 per
gross square foot of building area, and together with the cost of planned
renovations, is expected to be $44.00 per gross square foot.
1700 Valley Road
The 1700 Valley Road building consists of 70,600 gross square feet
(approximately 67,000 net rentable square feet), is of class B+ quality, is two
stories high 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. WRP Newco 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 WRP Newco will finance such
renovations from its working capital and its WRP Newco Line of Credit. 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 building consists of 54,800 gross square feet
(approximately 53,000 net rentable square feet), is of class B+ quality, is two
stories high 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. WRP Newco contemplates replacing the roof and upgrading the HVAC
system, and other
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renovations to comply with existing life safety and ADA codes. The estimated
cost of planned renovations is $800,000, and WRP Newco will finance such
renovations from its working capital and its WRP Newco Line of Credit. WRP
Newco currently contemplates marketing this building primarily for sale.
The purchase price for 1800 Valley Road was $2.0 million, or $36.00 per
gross square foot of building area, and together with the cost of planned
renovations, is expected to be $51.00 per gross square foot.
Greenbrook Corporate Center
WRP Newco 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 park and country club which border the rear of the site. WRP Newco intends to
spend approximately $500,000 to renovate the building, and WRP Newco will
finance such renovations from its working capital and its WRP Newco Line of
Credit. The renovations are expected to be completed by October, 1997.
Greenbrook, as WRP Newco's only occupied commercial property, accounted for
50% of WRP Newco's pro forma revenues during the year ended December 31, 1996.
The occupancy rate for Greenbrook as of April 1, 1997 was approximately 85.7%,
and the average annual gross rent per square foot as of such date was
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 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 a lease that expires December 2003. The
annual rent to be paid by IRI increases over the term of the lease to
approximately $1.5 million (or approximately $23.5 per rentable square foot) by
its 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 payable in cash, or
$125.00 per gross square foot of building area, and together with the cost of
planned renovations, is expected to be $127.00 per gross square foot.
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Chatham, New Jersey
In January 1997, WRP Newco 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.
WRP Newco 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. WRP Newco will
finance such renovations from its working capital and the WRP Newco Line of
Credit, and the renovations are expected to be completed by the end of the third
quarter of 1997. WRP Newco is currently marketing the building for rental.
WRP Newco 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 gross square foot for years 1-5
and at approximately $28.00 per gross square foot for years 6-10.
The purchase price for the property was $5.1 million, or $78.00 per gross
square foot of building area, and together with the cost of planned renovations,
is expected to be $126.00 per gross square foot.
Wellsford High Yield Investment Portfolio
277 Park Loan
WRP Newco and Bank of Boston are expected to enter into an $80 million loan
transaction (the "277 Park Loan") in April 1997 with 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"). WRP Newco and Bank of Boston will
lend $20 million and $60 million, respectively, pursuant to the 277 Park Loan.
The 277 Park Loan will be secured primarily by a pledge of the Equity Interests
owned by the borrowers. There will also be a limited guarantee from the
individual who indirectly owns all the Equity Interests. The 277 Park Loan will
be subordinated to a 10-year $345 million first mortgage loan (the "REMIC Loan")
on the 277 Park Property, the proceeds for which will be 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 will
bear interest at different rates which are expected to equate to a weighted
average interest rate of approximately 7 3/4% per annum. The 277 Park Loan will
bear 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 Bank of Boston 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
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is also the due date of the REMIC Loan. The 277 Park Loan will be 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 WRP Newco.
An appraisal is 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
WRP Newco will hold 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
WRP Newco will also own 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 will have a right of first offer to
acquire the Sonterra Option and a right to acquire the option if WRP Newco does
not exercise it. If WRP Newco acquires Sonterra, then WRP Newco 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 WRP Newco 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
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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 wall with a guard at the entry gate.
Wellsford Park Highlands Corp. ("WPHC"), a wholly-owned subsidiary of
Wellsford, acquired fixed-price options in 1995 to purchase the land underlying
each of the phases (hereinafter 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 and II
has been acquired, and WRP Newco intends to acquire the land underlying Phase
III, which is subject to an option which expires in May, 1997. 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 Phase III, Phase IV or
Phase V will be commenced or if commenced, that it will be completed. See "WRP
Newco 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
WRP Newco's exposure to market cycles in Denver while enabling WRP Newco 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, WRP Newco will either operate
and rent apartment units or convert all or a portion of them to condominium
ownership which a REIT also 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 $194 million. WRP
Newco currently has invested $21.3 million in the development of Palomino Park.
Phase I, referred to as Blue Ridge, will consist of 456 units of which 192
are constructed, 175 are leased and 143 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.
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 paid to Feld and
his affiliates. These amounts are included in the cost estimates
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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 both Blue Ridge and Red Canyon, Feld has agreed, subject to certain
conditions, to fund deficits in development and operating 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, 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. Phase II LLC expects to obtain a construction loan for
approximately $30 million to finance construction of Red Canyon.
Wellsford has agreed with the Phase I construction lender (the "Tri-Party
Agreement") to purchase the loan when due, assuming completion of construction,
if it is not paid off by the Phase I LLC or by Feld pursuant to his guaranty,
for the lesser of the loan balance or the final agreed upon budget. Concurrently
with the Merger, ERP Operating Partnership has agreed to substitute itself for
Wellsford under the Tri-Party Agreement, with the consent of the Phase I
construction lender. ERP Operating Partnership has agreed to provide
substantially similar credit support for the Phase II construction loan as it
has agreed to provide for the Phase I construction loan. See "Certain
Agreements Between WRP Newco 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 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 nor Feld has any obligation to
continue the relationship for future Phases.
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Cash
Approximately $18 million of cash will be contributed by Wellsford to WRP
Newco, a substantial portion of which will be applied to repay indebtedness
incurred to acquire WRP Newco's commercial properties.
Legal Proceedings
Neither WRP Newco nor the Properties are presently subject to any material
litigation nor, to WRP Newco's knowledge, is any material litigation threatened
against WRP Newco or the Properties, other than routine litigation arising in
the ordinary course of business and which is expected to be covered by liability
insurance.
CERTAIN AGREEMENTS BETWEEN
WRP NEWCO AND ERP OPERATING PARTNERSHIP
The following describes certain aspects of the agreements to be entered into
by WRP Newco and ERP Operating Partnership on the Effective Date. The following
descriptions do not purport to be complete and are qualified in their entirety
by reference to the full text of the agreements, which are filed as exhibits to
the registration statement on Form 10 filed by WRP Newco.
Common Stock and Preferred Stock Purchase Agreement
Following the Distribution and upon consummation of the Merger, WRP Newco
will enter into the Stock Purchase Agreement with ERP Operating Partnership,
providing for the sale of WRP Newco Class A Common and WRP Newco Series A
Preferred to ERP Operating Partnership on the terms described below.
WRP Newco Class A Common Stock.
Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership will purchase from WRP Newco upon the Closing Date shares of WRP
Newco Class A Common for an aggregate purchase price of $3.5 million at a price
per share equal to the Issuance Price. The "Issuance Price" is defined in the
Stock Purchase Agreement as (a) the average gross purchase price of WRP Newco
Common Stock sold to institutional purchasers on or prior to the Closing Date or
subject to written commitments to purchase WRP Newco Common Stock from
institutional purchasers received on or prior to the Closing Date (collectively
"Institutional Sales") or (b) if there are no Institutional Sales, the net book
value per share of WRP Newco Common Stock on the Closing Date.
For a description of the WRP Newco Class A Common, see "Description of
Capital Stock of WRP Newco -- Class A Common Stock".
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WRP Newco Series A Preferred Stock.
Pursuant to the terms of the Stock Purchase Agreement, ERP Operating
Partnership will agree to purchase from WRP Newco up to 1,000,000 shares of WRP
Newco Series A Preferred at $25.00 per share as requested by WRP Newco over the
three-year period (the "Commitment Period") commencing on the Closing Date.
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 WRP Newco 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.
For a description of the WRP Newco Series A Preferred, see "Description of
Capital Stock of WRP Newco -- Series A 8% Convertible Redeemable Preferred
Stock".
WRP Newco Board Member Elected by ERP Operating Partnership.
On the Closing Date, ERP Operating Partnership, as the holder of WRP Newco
Class A Common, is entitled to elect Douglas Crocker II, President of EQR, to
the WRP Newco Board of Directors. In the event Mr. Crocker (or other person
subsequently elected by ERP Operating Partnership to the WRP Newco 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 WRP Newco
will agree to the election of another member of senior management of ERP
Operating Partnership to the WRP Newco Board of Directors (Crocker or such other
individual elected by WRP Newco Class A Common shareholders, called the
"Purchaser Director").
Voting of WRP Newco Class A Common and WRP Newco Series A Preferred.
For ten years after the Closing Date, WRP Newco has the right to direct the
voting of all shares of WRP Newco Series A Preferred, WRP Newco Class A Common
and WRP Newco Common owned by ERP Operating Partnership or any of its
affiliates, except as to the election of the Purchaser Director or any matter
relating to the rights, preferences and privileges of the WRP Newco Series A
Preferred or the WRP Newco Class A Common.
Sale of Stock.
For ten years after the Closing Date, ERP Operating Partnership shall first
offer, in writing (a "Notice of Proposed Sale"), to sell any shares of WRP Newco
Common, WRP Newco Class A Common, WRP Newco Series A Preferred or warrants to
purchase WRP Newco Common owned by it to WRP Newco prior to selling such shares
to any other entity. If WRP Newco 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 other entity for a period of 90 days provided
any sale is made on terms and conditions no more favorable to such entity than
specified in the Notice of Proposed Sale.
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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 WRP Newco and such judgement remains undischarged for 30 days; (ii) a
change in control of WRP Newco (as defined in the Stock Purchase Agreement);
(iii) WRP Newco fails to pay the dividend on the WRP Newco 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 WRP Newco.
Remedies.
Upon the occurrence of an event of default, all obligations of ERP Operating
Partnership to purchase shares of WRP Newco Series A Preferred automatically
terminate unless WRP Newco delivers a notice to ERP Operating Partnership
requesting the purchase by ERP Operating Partnership of WRP Newco Series A
Preferred, and the proceeds of such sale would cure such event of default. In
addition, in the event of the bankruptcy of WRP Newco or if WRP Newco fails to
pay the dividend on the WRP Newco Series A Preferred on three separate
instances, ERP Operating Partnership has the right to cause WRP Newco to
purchase the WRP Newco Series A Preferred then held by ERP Operating
Partnership.
Registration Rights Agreement
Upon issuance of the WRP Newco Class A Common, WRP Newco and ERP Operating
Partnership will enter into a Registration Rights Agreement providing for
registration rights at WRP Newco's expense with respect to shares of WRP Newco
Class A Common, WRP Newco Series A Preferred and WRP Newco Common.
Demand Registration.
After the Effective Date, upon request (a "Demand Notice") of ERP Operating
Partnership, WRP Newco 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) WRP
Newco Series A Preferred issuable or issued; (ii) WRP Newco Common issuable or
issued upon conversion of shares of WRP Newco Series A Preferred or WRP Newco
Class A Common, or (iii) WRP Newco Common issuable or issued upon the exercise
of warrants issued pursuant to the Articles Supplementary. WRP Newco 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 WRP
Newco determines that such registration and offering would materially interfere
with any proposed material transaction involving WRP Newco.
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 five years from the Effective Date.
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Incidental Registration.
If WRP Newco proposes to register any WRP Newco Common 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, WRP Newco will include Registrable Securities in the
registration statement. WRP Newco will not be required to effect any
registration if WRP Newco is advised by a nationally recognized independent
investment banking firm selected by WRP Newco 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 five years from the Effective Date.
Limit in Aggregate Amount.
WRP Newco 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
three years from the Effective Date ("Initial Period"), or (ii) $7,500,000 at
any time after the Initial Period.
Lockup.
In the event WRP Newco 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 WRP Newco; 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.
Upon consummation of the Merger, WRP Newco and ERP Operating Partnership
will become the shareholders in WPHC. Pursuant to the Contribution and
Distribution Agreement, Wellsford will contribute to WRP Newco 80% of its shares
of WPHC, consisting of voting Class A Shares (the "Class A Shares"). The
remaining 20% of Wellsford's shares in WPHC, consisting of non-voting Class B
Shares (the "Class B Shares"), will be retained by Wellsford and, following the
Merger, will be owned by ERP Operating Partnership. 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. WRP Newco and ERP Operating Partnership will enter 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.
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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.
Wellsford has guaranteed the Phase Contributions, which guarantees, following
the Merger and with the consent of Feld, will be assumed by WRP Newco.
ERP Operating Partnership has no obligation to contribute capital to WPHC.
Issuance of Additional WPHC Shares to WRP Newco; Anti-Dilution Provisions.
If additional shares of WPHC are issued to WRP Newco 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;
WRP Newco'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).
WRP Newco 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 WRP Newco receives an offer to purchase all of the Class A Shares, WRP
Newco 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 WRP Newco
to effectuate a total sale of WPHC to a third party.
If ERP Operating Partnership or WRP Newco shall receive an offer from a bona
fide third party to purchase all (or in the case of WRP Newco 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.
ERP Operating Partnership may exercise its Right of First Refusal as to the
Class A Shares, notwithstanding that WRP Newco may have exercised its Drag Along
Right. In such event and for such purpose, WRP Newco's Class A Shares shall be
valued as if all of the shares of WPHC had been sold, and not only the Class A
Shares alone.
ERP Operating Partnership's Tag Along Right.
ERP Operating Partnership has a right ("Tag Along Right") to compel WRP
Newco to include ERP Operating Partnership's Class B Shares in a sale of the
Class A Shares, in such amount as will
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preserve the 80%-20% ratio between the Class A Shares held by WRP Newco 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 WRP Newco (the Call feature) at the Put/Call
Price.
Pursuant to its Put right, ERP Operating Partnership may compel WRP Newco 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, WRP Newco may compel ERP Operating Partnership
to sell to WRP Newco 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 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 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 WRP Newco, 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.
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WRP Newco and WHPC Loss of Control.
WRP Newco 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 $36.7 million. Wellsford, PPPIC and NationsBank have entered into
an agreement ("Phase I Tri-Party Agreement") under which Wellsford has agreed,
assuming completion of construction, if the loan is not paid when due, to pay
NationsBank the lesser of the loan balance or the final agreed upon budget. Upon
consummation of the Merger, ERP Operating Partnership will, with the consent of
NationsBank, assume Wellsford's obligations under the Phase I Tri-Party
Agreement.
Phase II Tri-Party Agreement. With respect to the development of Phase II,
a construction loan has not yet been obtained. ERP Operating Partnership has
agreed to provide substantially similar credit support for the Phase II
construction loan ("Phase II Tri-Party Agreement") as it has agreed to provide
pursuant to the Phase I Tri-Party Agreement. 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
parties anticipate a construction loan of approximately $30 million.
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 and shall have
no obligation to enter into the Phase II Tri-Party Agreement; provided, however,
ERP Operating Partnership may not disaffirm its obligations under the Phase I
Tri-Party Agreement or, if entered into prior to the event of default, the Phase
II Tri-Party Agreement. An event of default includes, among other things, a
material misrepresentation by WRP Newco, failure to make payments after a
material default by WRP Newco under the Palomino Agreement or any document
entered into pursuant to the Palomino Agreement, an undischarged judgment
against WRP Newco in excess of $250,000 and a change in control of WRP Newco.
Credit Enhancement Agreement
At the time of the Contribution and Distribution, with the consent of
Dresdner Bank, AG, NY Branch ("Dresdner"), WRP Newco will assume Wellsford's
obligations under a certain agreement (the "Bank Reimbursement Agreement")
entered into between PPPIC, Wellsford and Dresdner pursuant to which (i)
Dresdner has issued its letter of credit ("Dresdner Letter of Credit") to insure
the repayment of the Bonds and (ii) Wellsford has undertaken to reimburse
Dresdner if the Dresdner Letter of Credit is drawn upon.
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ERP Operating Partnership has agreed to enter into a Credit Enhancement
Agreement with WRP Newco (the "Credit Enhancement Agreement") under which,
assuming the satisfaction of certain conditions, ERP Operating Partnership will
make its own credit available to Dresdner in the form of a guaranty to Dresdner
of WRP Newco'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.
WRP Newco 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 WRP Newco, 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. WRP Newco has agreed to reimburse ERP Operating Partnership for any
amounts it pays under the ERP Guaranty or any revision thereof, together with
interest on such amount.
POLICIES WITH RESPECT TO CERTAIN ACTIVITIES OF WRP NEWCO
The following is a discussion of WRP Newco's investment policies, financing
policies and policies with respect to certain other activities. WRP Newco's
policies with respect to these activities have been determined by the directors
of WRP Newco and may be amended or revised from time to time at the discretion
of the directors without a vote of the stockholders of WRP Newco.
Investment Policies
WRP Newco 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, WRP Newco may provide credit enhancement or guarantees of the
obligations of others involved in real estate-related activities. WRP Newco may
also invest in participating or convertible mortgages if WRP Newco 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. WRP
Newco 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. WRP Newco intends to
engage in active real estate businesses,
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which may include land subdivisions, condominium conversions, property sales,
and other businesses considered ineligible or impractical investments for REITs.
WRP Newco may also hold real estate or interests therein for investment. WRP
Newco may purchase substantially leased, mostly unleased or vacant properties of
any type or geographic location. WRP Newco 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 WRP Newco.
WRP Newco may offer to exchange its securities for properties and securities
of other entities. Further, it may, from time to time, repurchase its shares.
WRP Newco will seek investments generally with a duration of one to five years.
Financing Policies
WRP Newco 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. WRP Newco 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 WRP Newco may incur.
Also, WRP Newco 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.
WRP Newco has obtained a written commitment from Bank of Boston and Morgan
Guaranty for a $50 million two-year line of credit. This facility is subject to
certain financial and other covenants. In the future, WRP Newco may seek to
extend, expand, reduce or renew such facility, or obtain an additional or a
replacement facility. See "Wellsford Real Properties, Inc. - Initial Capital
and Financing".
Policies with Respect to Other Activities
WRP Newco 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 stockholders, 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. WRP Newco's policies with
respect to its activities may be reviewed and modified from time to time by WRP
Newco's directors without notice to or vote of its stockholders.
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MANAGEMENT OF WRP NEWCO
Directors and Executive Officers
The executive officers and directors of WRP Newco, their ages and their
positions are as follows:
<TABLE>
<CAPTION>
Name Age Position Held
---- --- -------------
<S> <C> <C>
Jeffrey H. Lynford........... 49 Chairman of the Board, Secretary
and Director**
Edward Lowenthal............. 52 President, Chief Executive
Officer and Director*
Gregory F. Hughes............ 33 Chief Financial Officer
David Strong................. 38 Vice President for Development
Rodney F. Du Bois............ 60 Director*
Mark S. Germain.............. 46 Director**
Frank J. Hoenemeyer.......... 77 Director***
Frank J. Sixt................ 45 Director***
Douglas J. Crocker, II(1).... 56 Proposed Director**
- --------------------
</TABLE>
* Term expires 1998
** Term expires 1999
*** Term expires 2000
(1) Mr. Crocker will become a director upon consummation of the Distribution
and Merger and the purchase by ERP Operating Partnership of WRP Newco Class
A Common. Mr. Crocker will remain a director for a minimum of two years,
and thereafter so long as certain conditions are met. See "Description of
Capital Stock of WRP Newco -- Class A Common Stock".
Jeffrey H. Lynford has been the Chairman of the Board, Secretary and
Director of WRP Newco since its formation in January 1997 and has been the
Chairman of the Board and Secretary of Wellsford since its formation in July
1992 and was the Chief Financial Officer of Wellsford from July 1992 until
December 1994. Mr. Lynford was the Chairman of the Board of WGI since its
formation in 1986. 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.
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Edward Lowenthal has been the President, Chief Executive Officer and
Director of WRP Newco since its formation in January 1997 and has been the
President and Chief Executive Officer and a trustee of Wellsford since its
formation in July 1992 and was President of WGI since its formation in 1986.
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 WRP Newco since
its formation in January 1997 and has been a Vice President - Chief Financial
Officer of Wellsford since December 1994. From March 1993 until December 1994
he was a Vice President and Chief Accounting Officer of Wellsford. 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 WRP Newco
since its formation in January 1997 and has been a Vice President of Wellsford
since July 1995. From July 1994 until July 1995 he was Acquisitions and
Development Associate of Wellsford. 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.
Rodney F. Du Bois will become a director of WRP Newco upon consummation of
the Distribution and has been a trustee of Wellsford since November 1992. 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 will become a director of WRP Newco upon consummation of
the Distribution and has been a trustee of Wellsford since November 1992.
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
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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 will become a director of WRP Newco upon consummation
of the Distribution and has been a trustee of Wellsford since November 1992.
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 will become a director of WRP Newco upon consummation of the
Distribution and has been a trustee of Wellsford since November 1992. 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.
For a biographical description of Douglas J. Crocker II, see "Management
and Operation of the Surviving Trust After the Merger - Trustees and Executive
Officers."
Key Employee
Richard R. Previdi has been active in seeking to acquire commercial
properties on behalf of WRP Newco 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
WRP Newco will pay to each of its directors who are not employees of WRP
Newco (i) an annual fee of $16,000, payable quarterly in shares of WRP Newco
Common, 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 will also each receive
options to purchase 42,750 shares of WRP Newco Common and Mr. Crocker will
receive options to purchase 21,375 shares of WRP Newco Common, all under WRP
Newco's 1997 Management Incentive Plan and each will be eligible along with
other present and future directors to receive additional share options.
Directors who are employees of WRP Newco will not be paid any directors' fees.
In addition, WRP Newco will reimburse the directors for travel expenses incurred
in connection with their activities on behalf of WRP Newco.
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WRP Newco also intends to grant options to purchase 85,500 shares of WRP
Newco Common under the 1997 Management Investment Plan to each of Messrs.
Lynford, Lowenthal, Hughes and Strong.
Board Committees
The Board of Directors of WRP Newco will establish, following consummation
of the Distribution, an Audit Committee, a Compensation Committee and an
Executive Committee. The Board will not have a nominating committee or a
committee performing the functions of a nominating committee; the entire Board
will perform the usual functions of such committee.
Executive Committee. The Executive Committee will consist of Messrs.
Lynford, Lowenthal and Hoenemeyer. The Executive Committee has the authority to
acquire, dispose of and finance investments for WRP Newco and execute contracts
and agreements, including those related to the borrowing of money by WRP Newco,
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 WRP Newco or under applicable law.
Compensation Committee. The Compensation Committee will consist of Messrs.
Du Bois, Germain, Hoenemeyer and Sixt, none of whom are employees of WRP Newco.
The Compensation Committee will review WRP Newco's compensation and employee
benefit plans, programs and policies, approve employment agreements and monitor
the performance and compensation of the Executive Officers and other employees.
Audit Committee. The Audit Committee will consist of Messrs. Du Bois,
Germain, Hoenemeyer and Sixt and will make recommendations concerning the
engagement of independent public accountants, review with the independent public
accountants the plans and results of the audit engagement, approve the
professional services provided by the independent public accountants, review the
independence of the independent public accountants, consider the range of audit
and non-audit fees, review the adequacy of WRP Newco's internal accounting
controls and review related party transactions.
Executive Compensation
WRP Newco was organized as a Maryland corporation in January, 1997. Its
executive officers will not be entitled to receive any separate salary or other
cash compensation from WRP Newco for any period prior to the Distribution.
Prior to the Distribution, WRP Newco's executive officers will only receive
compensation from Wellsford for services rendered by them to Wellsford.
The following table sets forth certain information with respect to the
Chief Executive Officer and each of the other executive officers of WRP Newco
(collectively, the "Executive Officers") whose cash compensation from WRP Newco
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.
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<PAGE>
<TABLE>
<CAPTION>
Cash
Name of Individual or Number in Group Capacities in Which Serve Compensation
- ------------------------------------- ------------------------- ------------
<S> <C> <C>
Jeffrey H. Lynford..................... Chairman of the Board and $275,000
Secretary
Edward Lowenthal....................... President and Chief Executive $275,000
Officer
Gregory F. Hughes...................... Chief Financial Officer $175,000
David M. Strong........................ Vice President for Development $125,000
All executive officers as a group
(consisting of the four persons
named above)........................... $850,000
</TABLE>
For information regarding options to purchase shares of WRP Newco Common to
be granted to executive officers and directors, see "-- Compensation of
Directors".
Employment Agreements
WRP Newco will enter 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 WRP Newco and Mr. Lowenthal will serve as its
President and Chief Executive Officer. WRP Newco will also enter 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 will expire two years from
the Effective Time.
Each of the employment agreements is automatically extended for additional
one-year periods unless either the Executive Officer or WRP Newco 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 WRP Newco elects to terminate his employment
agreement as a result of the Senior Executive's total disability, WRP Newco 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.
Following a "change in control of the Company" (as defined in the
agreements), if a Senior Executive's employment agreement is terminated (a) by
WRP Newco, other than for "proper cause" (as defined in the agreements) or death
or disability or (b) by the Senior Executive, then in either case 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. The Senior Executives are also entitled to reimbursement of income
taxes on certain
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non-cash taxable income resulting from a change in control of WRP Newco,
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.
The employment agreements with the Senior Executives will indemnify and
hold harmless the Senior Executives for any income and excise tax liabilities
that arise from any benefits described in this Joint Proxy
Statement/Prospectus/Information Statement and are not otherwise provided for in
the payments to be made to them by the Surviving Trust on the date of the
Merger.
Compensation Committee Interlocks and Insider Participation
The Compensation Committee will consist of five independent directors of
WRP Newco: 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 WRP Newco.
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<PAGE>
PRINCIPAL STOCKHOLDERS OF WRP NEWCO
The following table sets forth information regarding the beneficial
ownership of WRP Newco Common by each person anticipated by WRP Newco to be the
beneficial owner of more than 5% of WRP Newco Common, by each director or
proposed director of WRP Newco, by certain executive officers of WRP Newco and
by all directors, proposed directors and executive officers of WRP Newco as a
group after giving effect to the Distribution, the Merger and certain other
transactions described herein (excluding the Additional Share Offering). Each
person named in the table has sole voting and investment power with respect to
all WRP Newco Common shown as beneficially owned by such person.
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<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner (1) Beneficial Ownership Percent of Class
- ---------------------------------------- -------------------- ----------------
<S> <C> <C>
Jeffrey H. Lynford(2).......................... 622,529 11.50%
Edward Lowenthal(2)............................ 626,605 11.58%
Gregory F. Hughes(3)........................... 202,074 3.99%
David Strong(4)................................ 130,487 2.61%
Rodney F. Du Bois(5)
32 Rip Road
Hanover, New Hampshire 03755................ 44,500 *
Mark S. Germain(6)
Olmsted Road
Scarsdale, New York 10583................... 110,858 2.24%
Frank J. Hoenemeyer(5)
7 Harwood Drive
Madison, New Jersey 07940................... 43,683 *
Frank J. Sixt(6)
c/o Cheung Kung (Holdings), Ltd.
Ching Building, 18-22 Floors
29 Queen's Road Central
Hong Kong.................................... 81,265 1.64%
Douglas J. Crocker II(7)
c/o Equity Residential Properties Trust
Two North Riverside Plaza
Chicago, Illinois 60606..................... 21,375 *
ERP Operating Limited Partnership
Two North Riverside Plaza
Chicago, Illinois 60606...................... 334,062(8) 7.22%
All directors, proposed directors
and executive officers as a group (9 persons).. 1,883,376 28.82%
- --------------------
</TABLE>
* 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) Includes 538,205 shares of WRP Newco Common issuable upon the exercise of
options, all of which will be either issued or amended as of the Effective
Time, and none of which will be exercisable as of the Effective Time.
Options to purchase 452,705 of these shares represent replacement options
for Wellsford share options having exercise prices ranging from $18.94 to
$26.375.
(3) Includes 188,105 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time, and none of which will be exercisable as of the
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Effective Time. Options to purchase 102,605 of these shares represent
replacement options for Wellsford share options having exercise prices
ranging from $18.94 to $29.375.
(4) Includes 126,126 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time, and none of which will be exercisable as of the Effective Time.
Options to purchase 40,626 of these shares represent replacement options
for Wellsford share options having exercise prices ranging from $18.94 to
$22.50.
(5) Includes 42,750 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time and will then be immediately exercisable.
(6) Includes 81,265 shares of WRP Newco Common issuable upon the exercise of
options, all of which will either be issued or amended as of the Effective
Time and will then be immediately exercisable.
(7) Includes 21,375 shares of WRP Newco Common issuable upon exercise of
options, all of which will be issued as of the Effective Time and will then
be immediately exercisable. Excludes 334,062 shares of WRP Newco Common
(estimated) to be 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.
(8) Estimated number of shares of WRP Newco Common to be issued to ERP
Operating Partnership pursuant to the Stock Purchase Agreement.
WRP NEWCO'S CERTAIN TRANSACTIONS
The contracts to purchase Chatham, the Point View office complex and
Greenbrook were transferred to WRP Newco by an entity ("Wellsford Commercial")
of which Messrs. Lynford and Lowenthal, the wife of Mark Germain who will be a
director of WRP Newco, and three unaffiliated parties are owners, for shares of
WRP Newco Common having an aggregate value of approximately $2.25 million and
WRP Newco's agreement to repay a $1.0 million advance used for the down payment
on the Point View office complex. The number of shares of WRP Newco Common
issued to Wellsford Commercial was approximately 225,000, based upon the
Issuance Price. 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 WRP Newco Common 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 WRP Newco is approximately $47.6 million, including the
approximately $2.25 million referred to above. The above transfers to WRP
Newco, along with the Contribution and the purchase of stock by ERP Operating
Partnership under the Stock Purchase Agreement, are being made as part of a
single plan intended to qualify as a tax-free transaction.
197
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
Overview
The following discussion should be read in conjunction with the Wellsford
Real Properties Inc. (Predecessor) (the "Company") financial statements
contained herein.
Results of Operations
The Company's operations during the year ended December 31, 1996 consisted of
owning a mortgage note receivable, upon which the Company earned $757,000 of
interest income, and developing two multifamily communities 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 received a commitment from the Bank of Boston and Morgan
Guaranty that they will provide a $50 million credit facility, subject to
customary conditions, which would be available to fund acquisitions, debt and
equity investments, development, capital expenditures, repayment of indebtedness
and related expenditures. The Company expects to obtain this credit facility
concurrently with the closing of the Merger and Distribution. The commitment
received is subject to customary conditions and documentation.
In December 1995, the Company marketed and sold $14.8 million of tax-exempt
bonds to fund construction at Palomino Park. The bonds have a variable rate of
interest and a term of 40 years. At December 31, 1996, $5.5 million of the bond
proceeds were being held in escrow pending their use for the funding of
development.
In July 1996, the Company originated the Sonterra Loan. The Sonterra
Loan 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 for $21 million during 1998.
198
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees of
Wellsford Residential Property Trust and Subsidiaries
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
199
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Combined Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
December 31, December 31,
1996 1995
---- ----
<S> <C> <C>
ASSETS
Construction in process $21,306 $7,955
Restricted cash 5,520 10,414
Mortgage note and interest receivable 17,934 0
--------------------------------
Total Assets $44,760 $18,369
===============================
LIABILITIES AND EQUITY
Tax exempt mortgage note payable $14,755 $14,755
--------------------------------
Total Liabilities 14,755 14,755
--------------------------------
Commitments and contingencies -- --
Equity 30,005 3,614
--------------------------------
Total Equity 30,005 3,614
--------------------------------
Total Liabilities and Equity $44,760 $18,369
================================
</TABLE>
See accompanying notes.
200
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Combined Statement of Income and Equity
(In thousands)
Year
Ended
December 31,
1996
----
Interest income $757
-----------
Net income 757
-----------
Equity, January 1, 1996 3,614
Contributions 25,634
-----------
Equity, December 31, 1996 $30,005
===========
See accompanying notes.
201
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Combined Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Year Period From
Ended March 22 to
December 31, December 31,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $757 $0
Adjustments to reconcile net income to net cash
provided by operating activities:
Decrease (increase) in assets:
Debt service reserve 4,894 4,341
Interest receivable (134) 0
--------------------------------
Net cash provided by operating activities 5,517 4,341
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in real estate assets (13,351) (7,955)
Investment in mortgage note receivable (17,800) 0
--------------------------------
Net cash (used) in investing activities (31,151) (7,955)
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from tax exempt mortgage note payable 0 14,755
Funding of restricted cash accounts 0 (14,755)
Equity contributions 25,634 3,614
--------------------------------
Net cash provided by financing activities 25,634 3,614
--------------------------------
Net increase (decrease) in cash and cash equivalents 0 0
Cash and cash equivalents, beginning of period 0 0
--------------------------------
Cash and cash equivalents, end of period $0 $0
================================
Cash paid during the period for interest $663 $335
</TABLE>
See accompanying notes.
202
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) Organization and Basis of Presentation
Wellsford Real Properties, Inc. ("WRP Newco"), a C corporation formed on
January 8, 1997, is a wholly owned subsidiary of Wellsford Residential
Property Trust ("Wellsford"). On January 16, 1997 Wellsford announced its
intention to merge with Equity Residential Properties Trust ("EQR").
Immediately prior to the Merger, Wellsford intends to contribute certain
of its assets to WRP Newco and have WRP Newco assume certain liabilities
of Wellsford. Immediately after the contribution of assets to WRP Newco
and immediately prior to the Merger, Wellsford intends to distribute to
its common shareholders all the outstanding shares of WRP Newco owned by
Wellsford. The common shareholders of Wellsford will receive one common
share of WRP Newco for each four common shares of Wellsford owned.
The accompanying combined financial statements of the predecessor to WRP
Newco (the "Company") include the assets and liabilities to be contributed
and assumed by WRP Newco from the time the assets and liabilities were
acquired or incurred, respectively, by Wellsford or the majority owned or
controlled subsidiary of Wellsford. Such financial statements have been
prepared using the historical basis of the assets and liabilities and
historical results of operations related to the Company's assets.
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 statement for the
period ended December 31, 1995 has 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 the majority owned or controlled subsidiaries
relating to the assets and liabilities that are to be contributed or
assumed by WRP Newco 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.
203
<PAGE>
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 December 31, 1996.
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.
204
<PAGE>
(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 Mortgage 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 December 31, 1996 balance. The fair
market value of the Company's mortgage note receivable, estimated by
using a discounted cash flow analysis, approximates the carrying amount.
In connection with the Sonterra Mortgage, a $0.2 million origination fee
was paid to Wellsford by the borrower.
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 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 December 31, 1996
the Company had invested $21 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 $21.8 million was outstanding at December 31,
1996 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 December 31, 1996, and
December 31, 1995, respectively, the Company capitalized $0.7 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).
205
<PAGE>
Subsequent to December 31, 1996, the Company entered into contracts on five
commercial office properties for $47.6 million in aggregate, and has
closed on four of the properties. The purchase prices for these
commercial properties include approximately $2.25 million in value of
shares of WRP Newco Common to be issued to an entity in consideration for
the assignment of the purchase contracts entered into by such entity.
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.
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.
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 price 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 December 31, 1996 and 1995, 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 3.65%) until it
matures in December 2035.
206
<PAGE>
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. Wellsford has guaranteed the reimbursement of the financial
institution in the event that the letter of credit is drawn upon. It is
anticipated that as a result of the Merger, this guaranty will be
replaced by the guarantees of WRP Newco and EQR. These bonds require the
Company to obtain the approval of both the trustee, as defined in the
bond documents, and the above mentioned financial institution for
transactions such as those anticipated in connection with the Merger and
Distribution. The Company expects to receive such approvals.
The fair market value of the variable rate tax exempt mortgage note is
considered to be the carrying amount.
(6) Commitments and Contingencies
WRP Newco will enter into employment agreements with certain of its
officers. Such agreements will be for terms which expire between 1999 and
2002, and will provide for aggregate annual base salaries of $0.8
million, $0.8 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"); upon acquisition of the property, the
Company intends to proceed with the removal of all ACMs in such property
which is anticipated to cost $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 WRP Newco 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 WRP Newco's management.
Employer contributions, if any, will be based upon the amount contributed
by an employee.
The Company will lend $20 million of an $80 million subordinated mezzanine
loan to entities which own the equity interests (the "Equity Interests")
in the owner of a 52-story approximately 1.74 million sq.ft. Class A
office building located at 277 Park Avenue, New York City (the "277 Park
Loan"). The loan will be secured primarily by the pledge of the Equity
Interests. The 277 Park Loan will be due in April 2007 and will bear
interest at the rate of approximately 11.75% per annum.
207
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA COMBINED INCOME STATEMENT
For the Year Ended December 31, 1996
(In Thousands Except Per Share Data)
(Unaudited)
During the period from January 1, 1996 to March 31, 1997, Wellsford Real
Properties, Inc. (Predecessor) (the "Company") acquired a mortgage note
receivable, committed to originate a mortgage receivable, purchased four
commercial office properties, and contracted to purchase one additional
commercial office property. 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 and
Distribution had been consummated on January 1, 1996, as if the mortgage
receivable upon which the Company has committed to originate had been originated
on January 1, 1996, and as if the commercial office properties under contract
were actually purchased as of January 1, 1996. 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. This unaudited
Pro Forma Combined Income Statement should be read in conjunction with, and is
qualified in its entirety by, the respective historical financial statements and
notes thereto of Wellsford and the Company, incorporated by reference into, and
included in, this Joint Proxy Statement/Prospectus/Information Statement,
respectively.
208
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Income Statement
Year Ended December 31, 1996
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
REVENUE
Rental income $3,632 (A) $3,632
Other income 250 (A) 250
Interest income $757 3,195 (B) 3,952
------------------------ --------------------
Total Revenue 757 7,077 7,834
------------------------ --------------------
EXPENSES
Property operating and maintenance 852 (A) 852
Real estate taxes 428 (A) 428
Interest 1,550 (C) 1,550
General and administrative 1,750 (D) 1,750
Depreciation 510 (E) 510
Property management 181 (A) 181
------------------------ --------------------
Total Expenses 0 5,271 5,271
------------------------ --------------------
Income before income taxes $757 $1,806 2,563
========================
Provision for income taxes 1,047 (F)
--------------------
Net income $1,516
====================
Net income per common share $0.31 (G)
====================
Weighted average common shares outstanding 4,900 (G)
====================
</TABLE>
209
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Notes to Unaudited Pro Forma Combined Income Statement
December 31, 1996
(A) Represents historical operating revenues and expenses of Greenbrook
Corporate Center, which was acquired in January 1997, for the year ended
December 31, 1996. The Company's other four commercial properties are
currently vacant.
(B) Represents interest income from the Sonterra Loan for the period from
January 1, 1996 to the date of origination (July 10, 1996), plus interest
on the 277 Park Loan for one year ($20 million at approximately 11.75%).
(C) Represents interest expense on the $20 million credit facility draw used to
fund the 277 Park Loan, at 7.75%.
(D) Represents the estimated general and administrative costs of WRP Newco for
one year.
(E) Represents depreciation on Greenbrook Corporate Center for the year ended
December 31, 1996 utilizing a 40 year estimated useful life.
(F) Represents provision for federal and state income taxes at rates of 35% and
9%, respectively.
(G) Represents the aggregate of the shares of WRP Newco Common issued in
connection with the Distribution (one share for every four shares of
Wellsford Common), the 225,000 shares to be issued in connection with the
acquisition of the commercial properties, and 350,000 shares (estimated) of
WRP Newco Class A Common to be purchased by ERP Operating Partnership for
$3.5 million.
210
<PAGE>
WELLSFORD REAL PROPERTIES, INC. (PREDECESSOR)
PRO FORMA COMBINED BALANCE SHEET
December 31, 1996
(In Thousands)
(Unaudited)
This unaudited Pro Forma Combined Balance Sheet is presented as if the
Merger, Contribution and Distribution and the proposed credit facility agreement
with Bank of Boston and Morgan Guaranty had been consummated on December 31,
1996, the mortgage receivable to be originated had been originated on December
31, 1996 and the commercial office properties purchased by, or under contract
with, Wellsford Real Properties, Inc. (Predecessor) (the "Company") had been
purchased on December 31, 1996, utilizing proceeds from the Merger and
Contribution and a draw from the credit facility. 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
financial position of the Company would have been at December 31, 1996; nor does
it purport to represent the future 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 respective historical financial
statements and notes thereto of Wellsford and the Company, incorporated by
reference into, and included in, this Joint Proxy Statement/Prospectus/
Information Statement, respectively.
211
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Pro Forma Combined Balance Sheet
12/31/96
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Real estate assets, at cost:
Land $0 $6,720 $6,720
Buildings and improvements 38,080 38,080
------------------------ -------------------
0 44,800 44,800
Construction in process 21,306 21,306
------------------------ -------------------
21,306 44,800 66,106
Property held for sale 2,800 2,800
------------------------ -------------------
21,306 47,600 (A) 68,906
Cash and cash equivalents 832 (B) 832
Restricted cash 5,520 5,520
Mortgage notes and interest receivable 17,934 20,000 (C) 37,934
------------------------ -------------------
Total Assets $44,760 $68,432 $113,192
======================== ==================
LIABILITIES AND EQUITY
Liabilities:
Tax exempt mortgage note payable $14,755 $14,755
Credit facility $45,000 (D) 45,000
------------------------ -------------------
Total Liabilities 14,755 45,000 59,755
------------------------ -------------------
Commitments and contingencies -- -- --
Minority Interest 2,328 (E) 2,328
Equity:
Equity 30,005 (30,005) 0
Common stock, $.01 par value per share, 4,899,965
shares issued and outstanding as adjusted 49 49
Paid in capital in excess of par value 51,060 51,060
------------------------ -------------------
Total Equity 30,005 21,104 (F) 51,109
------------------------ -------------------
Total Liabilities and Equity $44,760 $68,432 $113,192
======================== ===================
</TABLE>
212
<PAGE>
Wellsford Real Properties, Inc. (Predecessor)
Notes to Unaudited Pro Forma Combined Balance Sheet
December 31, 1996
(A) Reflects the acquisition of five commercial office properties, previously
acquired or currently under contract for $47.6 million summarized as
follows:
<TABLE>
<CAPTION>
Purchase Purchase Price &
Square Purchase Price Per Planned Planned Impr. Actual/Scheduled
Name Location Footage Price Sq. Ft. Improvements Per Sq. Ft. Closing Date
<S> <C> <C> <C> <C> <C> <C> <C>
Point View Wayne, NJ 560,000 $15.8 million $ 28 $ 9.1 million $ 44 February 1997
Chatham Building Chatham, NJ 65,000 5.1 million 78 3.1 million 126 January 1997
Greenbrook Corp. Ctr Fairfield, NJ 190,000 23.7 million 125 0.5 million 127 April 1997
1700 Valley Road Wayne, NJ 70,600 1.0 million 14 0.2 million 17 February 1997
1800 Valley Road Wayne, NJ 54,800 2.0 million 36 0.8 million 51 February 1997
940,400 47.6 million $13.7 million
</TABLE>
Greenbrook Corporate Center is currently in operation. The Company's other
four commercial properties are currently vacant. The purchase price of
$47.6 million is being funded with $20.4 million of cash-on-hand, $25.0
million of proceeds from the credit facility, and the balance from the
issuance of approximately 225,000 shares of WRP Newco Common, each of which
is described below.
(B) Reflects the net cash effect of the following transactions (in thousands):
.Cash contribution to WRP Newco at Contribution $ 17,732
.ERP Operating Partnership's purchase of WRP Newco Common 3,500
.Acquisition of properties (20,400)
-------
$ 832
========
(C) Represents the 277 Park Loan, a $20 million portion of an $80 million
subordinated mezzanine loan bearing interest at approximately 11.75% per
annum.
(D) Represents draws on the credit facility to fund acquisitions and the 277
Park Loan.
(E) Represents ERP Operating Partnership's 20% minority interest in Palomino
Park, which has been combined in the Company's Pro Forma Combined Balance
Sheet.
(F) Represents the aggregate of the shares of WRP Newco Common issued in
connection with the Distribution (one share for every four shares of
Wellsford Common), the approximately 225,000 shares to be issued in
connection with the acquisition of the commercial properties, and the
350,000 shares (estimated) of WRP Newco Class A Common to be purchased by
ERP Operating Partnership for $3.5 million.
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DESCRIPTION OF CAPITAL STOCK OF WRP NEWCO
The following summary of the terms of WRP Newco's stock does not purport to
be complete and is subject to and qualified in its entirety by reference to
Maryland law, WRP Newco's Charter and Bylaws, copies of which are exhibits to
the registration statement on Form 10 filed by WRP Newco. See "Additional
Information."
General
The Charter of WRP Newco (the "Newco Charter") authorizes up to 200,000,000
shares of Common Stock, par value $.01 per share. The Board of Directors may
reclassify any unissued shares of stock in one or more classes or series of
stock. Upon completion of the Distribution and the other transactions to be
entered into upon consummation of the Merger, there will be 4,899,965 shares of
WRP Newco Common issued and outstanding (excluding the Additional Share
Offering) and 350,000 shares (estimated) of WRP Newco Class A Common issued and
outstanding. The Board of Directors has also authorized the issuance of up to
2,000,000 shares of WRP Newco 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 WRP Newco's right to pay dividends on
the WRP Newco Series A Preferred by the issuance of additional shares of WRP
Newco Series A Preferred. In addition, up to 1,750,000 shares of WRP Newco
Common have been reserved for issuance under WRP Newco's 1997 Management
Incentive Plan, subject to approval of the Wellsford Common Shareholders. See
"Approval of WRP Newco's 1997 Management Incentive Plan."
WRP Newco also intends to issue up to approximately 10,000,000 shares of
WRP Newco Common, excluding any over-allotment option, if any, in connection
with WRP Newco's Additional Share Offering upon which the shareholders of
Wellsford are being asked to vote. See "Approval of WRP Newco Additional Share
Offering."
At present, there is no established trading market for the WRP Newco
Common. WRP Newco has applied for listing of the WRP Newco Common on the ASE
under the symbol "WRP." The United States Trust Company of New York will act as
transfer agent and registrar of the WRP Newco Common.
Under Maryland law, stockholders generally are not liable for the
corporation's debts and obligations.
WRP Newco intends to furnish to its stockholders an annual report
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm.
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Common Stock
All shares of WRP Newco Common to be issued in connection with the
Distribution and the other transactions to be entered into upon consummation of
the Merger have been duly authorized, and will be fully paid, validly issued and
nonassessable. Subject to the preferential rights of any other class or series
of stock, holders of shares of WRP Newco Common are entitled to receive
dividends on such stock if, as and when authorized and declared by the Board of
Directors of WRP Newco out of assets legally available therefor and to share
ratably in the assets of WRP Newco legally available for distribution to its
stockholders in the event of its liquidation, dissolution or winding up after
payment of or adequate provision for all known debts and liabilities of WRP
Newco and payment of liquidation preferences to holders of preferred stock.
Each outstanding share of WRP Newco Common entitles the holder to one vote
on all matters submitted to a vote of stockholders, 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 the WRP Newco Class A Common,
the holders of a majority of the outstanding shares of WRP Newco Common 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 WRP Newco Common have no preference, conversion,
exchange, sinking fund, redemption or appraisal rights and have no preemptive
rights to subscribe for any securities of WRP Newco. Except for the rights of
WRP Newco Class A Common described below, shares of WRP Newco Common will have
equal dividend, liquidation and other rights.
Under the 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 stockholders 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 Newco Charter
provides for approval of consolidations, share exchanges, mergers in which WRP
Newco 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.
Preferred Stock
The Newco Charter authorizes the Board of Directors to issue preferred
stock in one or more series. Thus, the Board of Directors could authorize the
issuance of shares of preferred
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stock with terms and conditions which could have the effect of delaying,
deferring or preventing a transaction or a change in control of WRP Newco that
might involve a premium price for holders of WRP Newco Common or otherwise be in
their best interest.
Classification or Reclassification of Common Stock or Preferred Stock
The Newco Charter authorizes the Board of Directors to classify or
reclassify any unissued stock by setting or changing the numbers, designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications or terms or conditions of
redemption of any of such shares.
Power to Issue Additional Shares of Common Stock and Preferred Stock
WRP Newco believes that the power of the Board of Directors to issue
additional authorized but unissued shares of WRP Newco Common and to reclassify
any unissued shares of WRP Newco Common and thereafter to cause WRP Newco to
issue such reclassified shares of stock will provide WRP Newco 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 WRP Newco Common, will be available for issuance without further
action by WRP Newco's stockholders, unless such action is required by applicable
law or the rules of any stock exchange or automated quotation system on which
WRP Newco'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 WRP Newco
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 WRP
Newco 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 WRP Newco Class A Common entitles its holder to all the
rights of a share of WRP Newco Common in addition to the rights described below.
Holders of WRP Newco Class A Common will not have any preemptive rights to
acquire other securities of WRP Newco.
Voting Rights.
Holders of WRP Newco Class A Common, as a class, may elect one director to
the WRP Newco Board of Directors (the "Class A Director") until the longer of
two years from the Closing Date or so long as (i) ERP Operating Partnership is
obligated to purchase preferred stock in WRP Newco pursuant to the Stock
Purchase Agreement; (ii) ERP Operating Partnership has obligations pursuant to
the Agreement Regarding Palomino Park or pursuant to the Credit
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Enhancement Agreement; or (iii) the aggregate liquidation value of the shares of
WRP Newco Series A Preferred owned by ERP Operating Partnership is greater than
$10 million. The WRP Newco Class A Director may be removed without cause, only
by the affirmative vote of a majority of the WRP Newco Class A Common electing
such director.
For ten years after the Effective Time, WRP Newco has the right to direct
the voting of all shares of WRP Newco Class A Common 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
WRP Newco Class A Common.
Optional and Automatic Conversion.
Holders of WRP Newco Class A Common have the right, exercisable at any time
and from time to time, to convert all or any of such WRP Newco Class A Common
into WRP Newco Common at a conversion rate of one share of WRP Newco Common for
each share of WRP Newco Class A Common so converted, subject to adjustment. Any
outstanding shares of WRP Newco Class A Common will automatically convert, at
the conversion rate, into shares of WRP Newco Common upon the sale, transfer,
pledge or other disposition ("Transfer") of such shares of WRP Newco 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 the WRP Newco Class A Common
is subject to adjustment from time to time as follows:
In case WRP Newco (a) reclassifies the outstanding WRP Newco Common into
shares of some other class or series of shares, (b) subdivides the outstanding
WRP Newco Common into a greater number of shares of WRP Newco Common or (c)
combines the outstanding WRP Newco Common into a smaller number of shares of WRP
Newco Common, the conversion rate immediately prior to such action shall be
adjusted so that the holder of any shares of WRP Newco Class A Common thereafter
surrendered for conversion shall be entitled to receive the number of shares of
WRP Newco Common which he would have owned immediately following such action had
such WRP Newco 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 WRP Newco occurs resulting in
ERP Operating Partnership, EQR or any of their affiliates owning shares of WRP
Newco Class A Common in excess of the REIT ownership limits (initially 9.9% of
the value of the voting stock of WRP Newco), then WRP Newco will purchase such
shares of WRP Newco Class A Common in excess of the REIT ownership limit at the
market price thereof.
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Series A 8% Convertible Redeemable Preferred Stock
General.
The Board of Directors of WRP Newco has established a series of preferred
stock designated Series A 8% Convertible Redeemable Preferred Stock, par value
$25.00 per share. The maximum number of authorized shares of WRP Newco 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 WRP Newco, the WRP Newco Series A Preferred will rank on a parity
with any other preferred stock of WRP Newco, and will rank senior to the WRP
Newco Common and any other class or series of shares of stock of WRP Newco
ranking, as to dividends and upon liquidation, junior to the WRP Newco Series A
Preferred (collectively the "Junior Shares"). Notwithstanding the foregoing, WRP
Newco may make distributions or pay dividends in WRP Newco Common or in any
other shares of WRP Newco ranking junior to the WRP Newco Series A Preferred as
to distribution rights and liquidation preference at any time.
Dividends.
The holders of WRP Newco Series A Preferred are entitled to receive, when
and as declared by the WRP Newco 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, WRP Newco has
the right to pay the dividend in additional shares of WRP Newco Series A
Preferred determined by dividing the total amount of the dividend to be paid in
shares by $25.00.
In the event WRP Newco fails to pay any dividend on the WRP Newco Series A
Preferred on any Quarterly Dividend Date, WRP Newco shall not pay any dividends
on any other class of stock of WRP Newco other than (i) pro rata with other
securities of WRP Newco ranking pari passu with the WRP Newco Series A Preferred
or (ii) with Junior Shares, until such dividend on the WRP Newco Series A
Preferred has been paid.
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Distributions Upon Liquidation, Dissolution or Winding Up.
Upon the voluntary or involuntary dissolution, liquidation or winding up of
WRP Newco, the holders of the WRP Newco Series A Preferred will be entitled to
receive and to be paid out of the assets of WRP Newco 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 WRP Newco Series A Preferred
("Liquidation Value"), plus any accrued and unpaid dividends thereon. If, upon
any dissolution, liquidation, or winding up of WRP Newco, the amounts payable
with respect to the preference value of the WRP Newco Series A Preferred and any
other shares of stock of WRP Newco ranking as to any such distribution on a
parity with the WRP Newco Series A Preferred are not paid in full, the holders
of the WRP Newco Series A Preferred and of such other shares will share ratably
in such distribution of assets of WRP Newco in proportion to the full respective
preference amounts to which they are entitled.
Redemption.
Optional Redemption. On and after the fifth anniversary of the Closing
Date, WRP Newco may, at its option, redeem at any time all or any part of the
outstanding WRP Newco Series A Preferred at a price per share (the "Redemption
Price") equal to $25.00 per share of WRP Newco 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
WRP Newco Series A Preferred may be effected if after giving effect thereto the
aggregate Liquidation Value of the WRP Newco 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 WRP Newco
Series A Preferred desires to convert any of its WRP Newco 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 WRP
Newco 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 WRP Newco in writing prior to the Redemption Date, stating the
number of shares of WRP Newco 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 WRP Newco 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 WRP Newco Common equal to (i) the fair market value of a
share of WRP Newco Common 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 WRP Newco Common 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 WRP Newco
Common 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
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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. WRP Newco 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 WRP Newco 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 WRP Newco 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 the fifteenth anniversary of the Closing Date, whichever comes first, the
holder of any shares of WRP Newco Series A Preferred may, at its option, cause
WRP Newco to redeem at any time all of the WRP Newco 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, WRP Newco 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 WRP Newco 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 WRP Newco Series A
Preferred. The Market Rate shall be determined by mutual agreement of the
holders of WRP Newco Series A Preferred Stock and WRP Newco or, if they cannot
agree, by an investment banking firm under the procedure set forth in the
Articles Supplementary.
Voting Rights. The holders of WRP Newco Series A Preferred are not
entitled to vote on any matter except as provided below; provided, however, the
holders of WRP Newco Series A Preferred are not to have any voting rights to the
extent such rights will cause any holder of WRP Newco Series A Preferred to own
more than 9.9% of the outstanding voting stock of WRP Newco or otherwise cause
any holder of WRP Newco 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 WRP Newco Series A Preferred remain outstanding,
WRP Newco will not, without the affirmative vote of the holders of at least two-
thirds of the shares of WRP Newco 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 capital stock ranking prior to the WRP Newco
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 WRP Newco 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
WRP Newco Charter or the Articles Supplementary classifying the WRP Newco Series
A Preferred, whether by merger, consolidation or otherwise (an "Event"), so as
to materially and adversely affect any right, preference, privilege or voting
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power of the WRP Newco 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 WRP Newco Series A Preferred remain outstanding
with the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event, WRP Newco 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 WRP
Newco Series A Preferred and provided further that (x) any increase in the
amount of the authorized or issued shares of preferred stock of WRP Newco or the
creation or issuance of any other preferred stock of WRP Newco, or (y) any
increase in the amount of authorized or issued shares of WRP Newco Series A
Preferred or any other preferred stock of WRP Newco, in each case ranking on a
parity with or junior to the WRP Newco 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 WRP Newco Series A Preferred shall have the right, exercisable
at any time and from time to time, except in the case of WRP Newco Series A
Preferred called for redemption, to convert all or any of such WRP Newco Series
A Preferred into WRP Newco Common at a conversion price per share of WRP Newco
Common equal to (a) (i) the net book value per share of WRP Newco Common on the
Closing Date or (ii) in the event any sales of WRP Newco Common 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 average per share sale price of WRP Newco Common
sold to institutional purchasers 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, multiplied by (b) 1.08 (the "Conversion Price"). In
the case of WRP Newco 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 WRP Newco Series A
Preferred is subject to adjustment from time to time to protect against certain
dilutive events.
In case WRP Newco (1) pays or makes a distribution in shares of WRP Newco
Common to holders of the WRP Newco Common, (2) reclassifies the outstanding WRP
Newco Common into shares of some other class or series of shares, (3) subdivides
the outstanding WRP Newco Common into a greater number of shares of WRP Newco
Common or (4) combines the outstanding WRP Newco Common into a smaller number of
shares of WRP Newco Common, the conversion rate immediately prior to such action
shall be adjusted so that the holder of any shares of WRP Newco Series A
Preferred thereafter surrendered for conversion will be entitled
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to receive the number of shares of WRP Newco Common which he would have owned
immediately following such action had such WRP Newco Series A Preferred been
converted immediately prior to such event.
In case WRP Newco issues rights, options or warrants to all holders of the
WRP Newco Common entitling them to subscribe for or purchase WRP Newco Common
(or securities convertible into WRP Newco Common) at a price per share less than
the current market price (as determined pursuant to the Articles Supplementary)
of the WRP Newco Common on such record date, the number of shares of WRP Newco
Common into which each share of WRP Newco 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 WRP Newco Common into which such share of
WRP Newco 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 WRP
Newco Common outstanding on such record date plus the number of additional
shares of WRP Newco Common offered (or into which the convertible securities so
offered are convertible), and of which the denominator shall be the number of
shares of WRP Newco Common outstanding on such record date, plus the number of
shares of WRP Newco Common which the aggregate offering price of the additional
shares of WRP Newco Common offered (or into which the convertible securities so
offered are convertible) would purchase at such current market price.
In case WRP Newco distributes to all holders of WRP Newco Common any class
of shares of capital stock other than WRP Newco Common, evidences of
indebtedness or assets of WRP Newco (other than cash distributions out of
current or retained earnings), or distributes to all holders of WRP Newco Common
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
WRP Newco Common into which each share of WRP Newco 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 WRP Newco Common into which such share of
WRP Newco 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 WRP Newco Common on the record date mentioned below, and of
which the denominator shall be such current market price of the WRP Newco
Common, 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 WRP Newco Common.
Notwithstanding the foregoing, in the event that WRP Newco distributes rights or
warrants (other than those referred to in the immediately preceding paragraph)
("Rights") pro rata to holders of the WRP Newco Common, WRP Newco may, in lieu
of making any adjustment pursuant to this paragraph make proper provision so
that each holder of a share of WRP Newco 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 WRP Newco Common 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"),
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the same number of Rights to which a holder of a number of shares of WRP Newco
Common 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 WRP Newco Common
into which a share of WRP Newco 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 WRP Newco Series A Preferred is outstanding, WRP Newco may
not issue any options to purchase shares of WRP Newco ("Employee Stock Options")
to officers, directors or employees of or consultants to, WRP Newco, whether
pursuant to employee stock option or purchase plans of WRP Newco 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 WRP Newco Common subject to Employee Stock Options
(excluding any Employee Stock Options granted in exchange for Wellsford share
options existing at the Effective Time) at any time exceeds, in the aggregate,
10% of the WRP Newco Common 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 WRP Newco Common 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
WRP NEWCO'S CHARTER AND BYLAWS
The following is a summary of certain provisions of Maryland law and WRP
Newco's Charter and Bylaws and is qualified in its entirety by reference to the
Newco Charter and Bylaws, copies of which are attached as exhibits to the
registration statement on Form 10 filed by WRP Newco. See "Additional
Information."
Classification of the Board of Directors
The Bylaws provide that the number of directors of WRP Newco 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.
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Pursuant to the Newco 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 stockholders 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 stockholders. The members of each
such class will hold office until their successors are duly elected and
qualified. WRP Newco believes that classification of the Board of Directors will
help to assure the continuity and stability of WRP Newco's business strategies
and policies as determined by the Board of Directors. Holders of shares of WRP
Newco Common have no right to cumulative voting in the election of directors.
Consequently, at each annual meeting of stockholders, the holders of a majority
of the shares of WRP Newco Common 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 WRP Newco, even though such an attempt might be
beneficial to WRP Newco and its stockholders. At least two annual meetings of
stockholders, 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 Newco 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 WRP Newco Common). The Class
A Director may be removed, without cause, only by the affirmative vote of at
least a majority of the WRP Newco 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 (i) any person who beneficially owns 10% or more of the voting
power of the corporation's shares or (ii) an Interested Stockholder or (iii) an
affiliate of 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 stockholders receive a minimum price
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(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 WRP Newco 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 Newco 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 stockholders 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 WRP Newco 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 WRP Newco or a merger
in which WRP Newco 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 WRP Newco 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 WRP Newco
The dissolution of WRP Newco 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 WRP Newco provide that (a) with respect to an annual meeting
of stockholders, nominations of persons for election to the Board of Directors
and the proposal of business to be considered by stockholders may be made only
(i) pursuant to WRP Newco'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 stockholders, only the
business specified in WRP Newco's notice of meeting may be brought before the
meeting of stockholders and nominations of persons for election to the Board of
Directors may be made only (i) pursuant to WRP Newco's notice of the meeting,
(ii) by or at the direction of the Board
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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 Stockholders
WRP Newco's Bylaws provide that annual meetings of stockholders 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 stockholders may
be called by (i) the Chairman of the Board of WRP Newco, (ii) the President of
WRP Newco, (iii) the Chief Executive Officer of WRP Newco or (iv) the Board of
Directors. As permitted by the MGCL, the Bylaws provide that special meetings
must be called by the Secretary of WRP Newco 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.
WRP Newco'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 WRP Newco proxy materials
pursuant to Rule 14a-8 under the securities Exchange Act of 1934, as amended)
must provide written notice and certain supporting documentation to WRP Newco
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, stockholders 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 stockholders.
The purpose of requiring stockholders to give WRP Newco 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 stockholders and make
recommendations about the qualifications or business, as well as to provide a
more orderly procedure for conducting meetings of stockholders. Although WRP
Newco'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 WRP Newco and its stockholders.
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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 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 Newco Charter
contains such a provision which eliminates such liability to the maximum extent
permitted by Maryland law.
The Newco Charter authorizes WRP Newco, 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 WRP
Newco, and at the request of WRP Newco, 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 WRP Newco 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 WRP Newco and at the
request of WRP Newco, 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 Newco Charter and
Bylaws also permit WRP Newco to indemnify and advance expenses to any person who
served a predecessor of WRP Newco in any of the capacities described above and
to any employee or agent of WRP Newco or a predecessor of WRP Newco.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Newco 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
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the corporation. In addition, the MGCL requires WRP Newco, 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 WRP Newco as authorized by the Bylaws and (b) a
written statement by or on his behalf to repay the amount paid or reimbursed by
WRP Newco if it shall ultimately be determined that the standard of conduct was
not met.
PROPOSAL TO
APPROVE WRP NEWCO ADDITIONAL SHARE OFFERING
The Board of Trustees of Wellsford and the Board of Directors of WRP Newco
have approved the issuance by WRP Newco of up to 12,000,000 shares of WRP Newco
Common (the "Additional Shares"), subject to further approval by the Wellsford
Common Shareholders solely to satisfy the requirements of the ASE. Such
approval would not constitute approval of any other related transactions by
Wellsford, WRP Newco or any of their affiliates. The purchase price for the
Additional Shares will be determined by the Board of Directors of WRP Newco
based upon prevailing market conditions. WRP Newco anticipates that the offering
of the Additional Shares will be made to a limited number of investors in a
private placement or in a registered offering to be filed with the Commission
under the Securities Act.
The Board of Trustees of Wellsford and the Board of Directors of WRP Newco
believe that the WRP Newco Additional Share Offering will provide more capital
available for investment, enhance WRP Newco's capital structure and increase the
liquidity of WRP Newco Common. However, the equity of existing stockholders
would be diluted if the purchase price for the Additional Shares is less than
the book value of WRP Newco Common on the date of the Distribution.
In addition, if all of the Additional Shares are issued and no other shares
have been issued after the Distribution and prior to the WRP Newco Additional
Share Offering, the owners of the Additional Shares will own approximately 70%
of the then outstanding shares of WRP Newco Common. The nature and concentration
of ownership of such Additional Shares could result in a change of control of
the Company.
The proceeds of this offering, after payment of underwriters' commissions
and other offering expenses, will be used to repay loans of up to $50 million to
be made to WRP Newco, and interest thereon, and for investments, other business
activities and working capital. The loans are expected to be made under the WRP
Newco Line of Credit. As of the date hereof, WRP Newco does not have any
agreements, understandings or commitments to make any specific investments with
such proceeds. In the normal course of business, however, WRP Newco is
continually evaluating a number of potential investments and entering into non-
binding letters of intent. In accordance with the Newco Charter, WRP Newco may
make additional investments without the consent of its stockholders.
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WRP Newco anticipates that purchasers of Additional Shares will be able to
sell such shares in the public market immediately or shortly after purchase. The
existence of the Additional Shares in the public market could adversely affect
the market price for shares of WRP Newco Common.
The Additional Shares will have the same terms as all other shares of WRP
Newco Common with respect to dividends, voting, ownership and any other right(s)
and limitation(s) pertaining to shares of WRP Newco Common generally. However,
as would be the case with respect to any issuance of equity voting securities,
the Additional Shares, if issued, will dilute the relative voting power of the
issued and outstanding shares of WRP Newco Common.
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The Board of Trustees of Wellsford and the
Board of Directors of WRP Newco recommend that you
vote FOR the proposal to approve the WRP Newco Additional Share Offering.
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PROPOSAL TO
APPROVE WRP NEWCO'S 1997 MANAGEMENT INCENTIVE PLAN
General. The Board of Directors of WRP Newco has approved, subject to the
approval of the shareholders, the 1997 Management Incentive Plan (the
"Management Incentive Plan"). The purpose of the Management Incentive Plan is to
align the interests of WRP Newco's directors, executive officers and employees
with those of the stockholders and to enable WRP Newco 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 officers, directors and employees of
WRP Newco who receive awards under the Management Incentive Plan may receive a
greater economic benefit to the extent the fair market value of WRP Newco Common
increases. However, the equity of existing stockholders would be diluted if
shares of WRP Newco Common were issued pursuant to the Management Incentive Plan
at prices less than their then current fair market value. In addition, the
issuance of a substantial number of shares of WRP Newco Common under the
Management Incentive Plan or their sale in the public market might adversely
affect prevailing market prices for such shares.
Awards to directors, executive officers and other employees under the
Management Incentive Plan may take the form of share options ("Options"),
including corresponding share appreciation rights ("SARs") and reload options,
restricted share awards and share purchase awards. The maximum number of shares
of WRP Newco Common that may be the subject of awards under the Management
Incentive Plan is 1,750,000 shares.
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Share Authorization. Shares of WRP Newco Common covered by any unexercised
portions of terminated Options, shares of WRP Newco Common forfeited by
participants and shares of WRP Newco Common subject to any awards that are
otherwise surrendered by a participant without receiving any payment or other
benefit with respect thereto may again be subject to new awards under the
Management Incentive Plan. In the event the purchase price of an Option is paid
in whole or in part through the delivery of shares of WRP Newco Common, the
number of shares of WRP Newco Common issuable in connection with the exercise of
the Option shall not again be available for the grant of awards under the
Management Incentive Plan. Shares of WRP Newco Common subject to Options, or
portions thereof, with respect to which SARs are exercised, are not again
available for the grant of awards under the Management Incentive Plan. The
shares of WRP Newco Common to be issued or delivered under the Management
Incentive Plan are authorized and unissued shares, or issued shares of WRP Newco
Common that have been reacquired by WRP Newco.
Management Incentive Plan Administration. The Management Incentive Plan
will be administered by a committee of two or more non-employee directors (the
"Committee"), which will initially consist of Messrs. Du Bois and Germain. The
Committee will determine the directors, executive officers and other employees
who will be eligible for and granted awards, determine the amount and type of
awards, establish rules and guidelines relating to the Management Incentive
Plan, establish, modify and terminate the terms and conditions of awards and
take such other action as may be necessary for the proper administration of the
Management Incentive Plan. All employees and non-employee directors are
currently eligible to participate in the Management Incentive Plan.
Options. "Incentive Options" meeting the requirements of Section 422 of the
Code, and "Nonqualified Options" that do not meet such requirements are both
available for grant under the Management Incentive Plan. The term of each Option
will be determined by the Committee, but no Incentive Option will be exercisable
more than ten years after the date of grant. Options may also be subject to
restrictions on exercise, such as exercise in periodic installments, as
determined by the Committee. The exercise price for Incentive Options must be at
least equal to 100% of the fair market value of the shares of WRP Newco Common
on the date of grant and the exercise price for Nonqualified Options will be
determined by the Committee at the time of grant. The exercise price can be paid
in cash, or if approved by the Committee, by tendering shares (actually or
constructively) of WRP Newco Common owned by a participant.
Incentive Options are not transferable except by will or the laws of
descent and distribution and may be exercised only by the participant (or his
guardian or legal representative) during his or her lifetime, except as provided
below. Nonqualified Options may be transferable to family members and entities
for the benefit of the participant or his family members. If a participant's
employment with WRP Newco or service as a director terminates for any reason
(other than death or disability), any unexercised or unexpired Options held by
the participant (or its permitted transferee) will be deemed cancelled and
terminated on the date of such
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termination, unless the Committee decides to extend the term of such Options for
a period not exceeding three months. In the case of a non-employee director,
however, if such participant's service as a director terminates by reason of
death, disability, or under mutually satisfactory conditions, any unexercised or
unexpired Nonqualified Options held by the participant (or its permitted
transferee) will be exercisable for a period of five years from the date of such
termination or until the expiration of the Option, whichever is shorter. If a
participant dies while employed by WRP Newco, including an employee who is also
a director, any unexercised or unexpired Options will, to the extent exercisable
on the date of death, be exercisable by the holder or by the participant's
estate or by any person who acquired such Options by bequest or inheritance, at
any time generally within one year after such death. If a participant becomes
totally disabled and his employment terminates as a result of such disability,
including an employee who is also a director, the holder or the participant (or
his guardian or legal representative) will have the unqualified right to
exercise any unexercised and unexpired Options held by the participant (or its
permitted transferee) generally for one year after such termination.
Share Appreciation Rights. The Management Incentive Plan provides that SARs
may be granted in connection with a grant of Options. Each SAR must be
associated with a specific Option and must be granted at the time of grant of
such Option. A SAR is exercisable only to the extent the related Option is
exercisable. Upon the exercise of a SAR, the recipient is entitled to receive
from WRP Newco, without the payment of any cash (except for any applicable
withholding taxes), up to, but no more than, an amount in cash or shares of WRP
Newco Common equal to the excess of (A) the fair market value of one Common
Share on the date of such exercise over (B) the exercise price of any related
Option, times the number of shares of WRP Newco Common in respect of which such
SAR shall have been exercised. Upon the exercise of a SAR, the related share
Option, or the portion thereof in respect of which such SAR is exercised, will
terminate. Upon the exercise of an Option granted in tandem with a SAR, such
tandem SAR will terminate.
Reload Options. The Committee may grant, concurrently with the award of any
Option (each an "Underlying Option") to such participants, one or more reload
options (each a "Reload Option") to purchase for cash or, if permissible under
the Underlying Option, shares of WRP Newco Common, a number of shares of WRP
Newco Common equal to the number of shares of WRP Newco Common delivered (or
deemed delivered) by the participant to WRP Newco to exercise the Underlying
Option. Although an Underlying Option may be an Incentive Option, a Reload
Option is not intended to qualify as an Incentive Option. A Reload Option may be
granted in connection with the exercise of an Option that is itself a Reload
Option. Each Reload Option will have the same expiration date as the Underlying
Option and an exercise price equal to the fair market value of the shares of WRP
Newco Common on the date of grant of the Reload Option. A Reload Option is
exercisable immediately.
Reload Options permit a participant to retain, through the term of the
original Option, his or her economic interest in the sum of the shares of WRP
Newco Common covered by such
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Options as well as the already-owned shares of WRP Newco Common that could be
used to exercise such Option, by granting options on the number of shares of WRP
Newco Common used to pay the exercise price of the original Option and
subsequent Reload Options. In this way, Reload Options provide a participant
with the opportunity to build up ownership of shares of WRP Newco Common covered
by an original Option earlier during the Option term rather than through a
single exercise at or near the end of the Option term.
Restricted Shares. WRP Newco may award restricted shares of WRP Newco
Common to a participant. Such a grant gives a participant the right to receive
shares of WRP Newco Common subject to a risk of forfeiture based upon certain
conditions. The forfeiture restrictions on the shares of WRP Newco Common may be
based upon performance standards, length of service or other criteria as the
Committee may determine. Until all restrictions are satisfied, lapsed or waived,
WRP Newco will maintain custody over the restricted shares of WRP Newco Common
but the participant will be able to vote the shares of WRP Newco Common and will
be entitled to an amount equal to all distributions, if any, paid with respect
to the shares of WRP Newco Common, as provided by the Committee. During such
restrictive period, the restricted shares of WRP Newco Common may not be sold,
assigned, transferred, pledged or otherwise encumbered. Upon termination of
employment, the participant generally forfeits the right to the shares of WRP
Newco Common to the extent the applicable performance standards, length of
service requirements, or other measurement criteria have not been met.
Share Purchase Awards. The Management Incentive Plan also permits the grant
of share purchase awards to participants. Participants who are granted a share
purchase award are provided with a share purchase loan to enable them to pay the
purchase price for the shares of WRP Newco Common acquired pursuant to the
award. The terms of each share purchase loan will be determined by the
Committee. The purchase price of shares of WRP Newco Common acquired with a
share purchase loan is the fair market value on the date of the award. The
Management Incentive Plan provides that some or all of a share purchase loan can
be forgiven under terms determined by the Committee. At the end of the loan
term, the remainder of the share purchase loan will be due and payable. The
interest rate, if any, on a share purchase loan will be determined by the
Committee. Share purchase loans may be recourse or nonrecourse under terms
determined by the Committee.
If a participant's employment with WRP Newco is terminated for any reason
other than death, disability or termination without "cause," the balance of the
share purchase loans to such participant will be immediately due and payable. If
a participant's employment terminates by reason of death, disability or
termination without "cause," the balance of such participant's share purchase
loans may be forgiven in full at the discretion of the Committee.
Antidilution Provisions. The number of shares of WRP Newco Common
authorized to be issued under the Management Incentive Plan and subject to
outstanding awards (and the grant or exercise price thereof) may be adjusted to
prevent dilution or enlargement of rights in the
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event of any dividend or other distribution, recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase or exchange of shares of WRP Newco Common or other
securities, or other similar capitalization change.
Certain Federal Income Tax Consequences of the Management Incentive Plan.
The following is a brief summary of the principal federal income tax
consequences of awards under the Management Incentive Plan. The summary is
based upon current federal income tax laws and interpretations thereof, all of
which are subject to change at any time, possibly with retroactive effect. The
summary is not intended to be exhaustive and, among other things, does not
describe state, local or foreign tax consequences.
In general, a participant is not subject to federal income tax either at
the time of grant or at the time of exercise of an Incentive Option. However,
upon exercise, the difference between the fair market value of the shares of WRP
Newco Common and the exercise price is a tax preference item subject to the
possible application of the alternative minimum tax. If a participant does not
dispose of shares of WRP Newco Common acquired through the exercise of an
Incentive Option in a "disqualifying disposition" (i.e., no disposition occurs
within two years from the date of grant of the share option nor within one year
of the transfer of the shares of WRP Newco Common to the participant), then the
participant will be taxed only upon the gain, if any, from the sale of such
shares of WRP Newco Common, and such gain will be taxable as gain from the sale
of a capital asset.
WRP Newco will not receive any tax deduction on the exercise of an
Incentive Option or, if the above holding period requirements are met, on the
sale of the underlying shares of WRP Newco Common. If there is a disqualifying
disposition (i.e., one of the holding period requirements is not met), the
participant will be treated as receiving compensation subject to ordinary income
tax in the year of the disqualifying disposition and WRP Newco will be entitled
to a deduction for compensation expense in an amount equal to the amount
included in income by the participant. The participant generally will be
required to include in income an amount equal to the difference between the fair
market value of the shares of WRP Newco Common at the time of exercise and the
exercise price. Any appreciation in value after the time of exercise will be
taxed as capital gain and will not result in any deduction by WRP Newco.
If Nonqualified Options are granted to a participant, there are no federal
income tax consequences at the time of grant. Upon exercise of the Option, the
participant must report as ordinary income an amount equal to the difference
between the exercise price and the fair market value of the shares of WRP Newco
Common on the date of exercise. WRP Newco will receive a tax deduction in like
amount. Any appreciation in value after the time of exercise will be taxed as
capital gain and will not result in any deduction by WRP Newco.
No income will be realized by a participant in connection with the grant of
any SAR. The participant must include in ordinary income the amount of cash
received and the fair market value on the exercise date of any shares of WRP
Newco Common received upon the exercise
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of a SAR. WRP Newco will be entitled to a deduction equal to the amount
included in such participant's income by reason of the exercise of any SAR.
The receipt of a Reload Option by a holder of an Incentive Option or a
Nonqualified Option (including a Reload Option) who pays the exercise price in
full or in part with previously acquired shares of WRP Newco Common should not
affect the tax treatment of the exercise of such Incentive or Nonqualified
Option (including the amount of ordinary income, if any, recognized upon
exercise). A participant will not be subject to tax at the time a Reload Option
is granted (except for any income recognized upon the exercise of a Nonqualified
Option at the time of grant of the Reload Option). A Reload Option will
constitute a Nonqualified Option for federal income tax purposes and will be
taxed as such in the manner set forth above.
A grant of restricted shares of WRP Newco Common does not constitute a
taxable event for either a participant or WRP Newco. However, the participant
will be subject to tax, at ordinary income rates, when the shares of WRP Newco
Common are no longer subject to a substantial risk of forfeiture or they become
transferable. WRP Newco will be entitled to take a commensurate deduction at
that time.
A participant may elect to recognize taxable ordinary income at the time
restricted shares of WRP Newco Common are awarded in an amount equal to the fair
market value of the shares of WRP Newco Common at the time of grant, determined
without regard to any forfeiture restrictions. If such an election is made, WRP
Newco will be entitled to a deduction at that time in the same amount. Future
appreciation on the shares of WRP Newco Common will be taxed at the capital
gains rate when the shares of WRP Newco Common are sold. However, if, after
making such an election, the shares of WRP Newco Common are forfeited, the
participant will be unable to claim a deduction.
In general, a participant who receives a share purchase award incurs no tax
liability and WRP Newco does not receive any deduction at the time shares of WRP
Newco Common are acquired through a share purchase award. However, as the share
purchase loan is forgiven, the participant will be required to recognize income
in an amount equal to the forgiven portion of the loan. WRP Newco will be
entitled to take a commensurate deduction at such time.
Applicable withholding taxes may be withheld in connection with any award
under the Management Incentive Plan. In that regard, the Committee has the
discretion to allow a participant to satisfy its withholding tax obligations
with shares of WRP Newco Common.
Change in Control. Depending on the terms of a particular award as
determined by the Committee, upon the occurrence of a change in control of WRP
Newco, all options and related SARs may become immediately exercisable, the
restricted shares of WRP Newco Common may fully vest and share purchase loans
may be forgiven in full.
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Termination, Amendment and ERISA Status. The Management Incentive Plan
will terminate by its terms and without any action by the Board on the tenth
anniversary of the date of its effectiveness. No awards may be made after that
date. Awards outstanding on such date will remain valid in accordance with
their terms.
The Committee may amend or alter the terms of awards under the Management
Incentive Plan, including to provide for the forgiveness in whole or in part of
share purchase loans, the release of the shares of WRP Newco Common securing
such loans or the termination or modification of the vesting or performance
provisions of the grants of restricted shares of WRP Newco Common but no such
action shall in any way impair the rights of a participant under any award
without such participant's consent.
The Committee may amend or terminate the Management Incentive Plan. No
such amendments or termination of the Management Incentive Plan shall in any way
impair the rights of a participant under any award previously granted without
such participant's consent. In addition, any amendment or termination will be
subject to shareholder approval if approval is required by Federal or state law
or regulation or rule of any stock exchange or quotation system on which the
shares of WRP Newco Common are listed or quoted.
The Management Incentive Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1976, as amended.
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The Board of Trustees of Wellsford and the Board
of Directors of WRP Newco recommend that you vote
FOR the proposal to approve WRP Newco's 1997 Management Incentive Plan.
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LEGAL MATTERS
Certain legal matters in connection with the Merger will be passed upon for
EQR by Rudnick & Wolfe, Chicago, Illinois and Rosenberg & Liebentritt, P.C.,
Chicago, Illinois. Errol R. Halperin, a partner of Rudnick & Wolfe, is a
trustee of EQR. Attorneys of Rudnick & Wolfe beneficially own less than 1% of
the outstanding EQR Common, either directly or upon the exercise of options.
Sheli Z. Rosenberg, a principal of Rosenberg & Liebentritt, P.C., is a trustee
of EQR. Attorneys of Rosenberg & Liebentritt, P.C. beneficially own less than
1% of the outstanding EQR Common, either directly or upon the exercise of
options. Certain legal matters in connection with the Merger will be passed
upon for Wellsford by Robinson Silverman Pearce Aronsohn & Berman LLP, New York,
New York. Ballard Spahr Andrews & Ingersoll,
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Baltimore, Maryland, will pass upon certain matters of Maryland law relating to
the Merger Agreement and Articles under Maryland law.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder of EQR intends to present at the 1997
Annual Meeting of Shareholders of EQR, if the Merger has not been consummated
prior to the date such meeting is to be held, must have been received by the
Secretary of EQR no later than November 29, 1996 to have been eligible for
inclusion in EQR's proxy statement and proxy form relating to such meeting.
Any proposal which a shareholder of Wellsford intends to present at the
1997 Annual Meeting of Shareholders of Wellsford, if the Merger has not been
consumated prior to the date such meeting is to be held, must have been received
by Wellsford at its principal executive offices on or before November 29, 1996
to have been eligible for inclusion in Wellsford's proxy statement and proxy
form relating to such meeting.
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EXHIBIT INDEX
Exhibit
Number Description of Document**
3.1 Form of Articles of Amendment and Restatement of
the Company.
3.2 Form of Bylaws of the Company.
4.1 Specimen certificate for Common Stock.*
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 Operating Agreement of Park at Highlands LLC,
dated as of April 27, 1995, between Wellsford
Park Highlands Corp. and Al Feld.*
10.4 First Amendment to Operating Agreement of Park at
Highlands LLC, dated as of December 29, 1995,
between Wellsford Park Highlands Corp. and Al
Feld.
10.5 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.
10.6 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.
10.7 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.
10.8 Credit Agreement, dated as of April __, 1997,
between Park Avenue Financing Company LLC, PAMC
Co-Manager Inc., PAMC, 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.*
10.9 Assignment of Member's Interest, dated as of
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April __, 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).*
10.10 Assignment of Member's Interest, dated as of
April __, 1997, by PAMC Co-Manager Inc. and The
First National Bank of Boston, relating to 277
Park Avenue (relating to interests in the
Property Owner).*
10.11 Stock Pledge Agreement, dated as of April __,
1997, by Stanley Stahl to The First National Bank
of Boston, relating to 277 Park Avenue (relating
to stock in Park Avenue Management Corporation).*
10.12 Stock Pledge Agreement, dated as of April __,
1997, by Stanley Stahl to The First National Bank
of Boston, relating to 277 Park Avenue (relating
to stock in PAMC Co-Manager Inc.).*
10.13 Stock Pledge Agreement, dated as of April __,
1997, by Stanley Stahl to The First National Bank
of Boston, relating to 277 Park Avenue (relating
to stock in PAMC, Inc.).*
10.14 Conditional Guaranty of Payment and Performance,
dated as of April __, 1997, by Stanley Stahl,
relating to 277 Park Avenue.*
10.15 Cash Collateral Account Security, Pledge and
Assignment Agreement, dated as of April __, 1997,
between 277 Park Avenue, LLC, Park Avenue
Financing Company LLC, PAMC Co-Manager Inc. and
The First National Bank of Boston, relating to
277 Park Avenue.*
10.16 Recognition Agreement, dated as of April __,
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.*
10.17 Form of Contribution and Distribution Agreement
by and between Wellsford Residential Property
Trust and the Company.
10.18 Form of Common Stock and Preferred Stock Purchase
Agreement by and between the Company and ERP
Operating Limited Partnership.
10.19 Form of Registration Rights Agreement by and
between the Company and ERP Operating Limited
Partnership.
10.20 Form of Agreement Regarding Palomino Park by and
between the Company and ERP Operating Limited
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Partnership.
10.21 Form of Credit Enhancement Agreement by and
between the Company and ERP Operating Limited
Partnership, relating to Palomino Park.
10.22 Form of Sonterra Agreement by and between the
Company and ERP Operating Partnership.
10.23 Form of 1997 Management Incentive Plan of the
Company.*
10.24 Form of Employment Agreement between the Company
and Jeffrey H. Lynford.*
10.25 Form of Employment Agreement between the Company
and Edward Lowenthal.*
10.26 Form of Employment Agreement between the Company
and Gregory F. Hughes.*
10.27 Form of Employment Agreement between the Company
and David M. Strong.*
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 Point View office complex, 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.
______________________________
* To be filed by amendment
** The Company acquired its interest in a number of these
documents by assignment.
<PAGE>
Exhibit 3.1
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
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Corporation initially shall be six, 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 I
Mark S. Germain I
Frank J. Hoenemeyer II
Frank J. Sixt II
Edward Lowenthal III
Rodney F. DuBois III
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, as nearly equal in number as possible, 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 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
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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 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 199,992,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and 8,000 shares of Class A Common Stock, $.01 par value per share
("Class A Common Stock"). The Class A Common Stock shall have the
following rights:
(a) Rights. The holders of shares of Class A Common Stock
shall have all rights, including, but not limited to, dividend,
distribution, liquidation and other rights of holders of shares of
Common Stock; provided, however, that holders of shares of Class A
Common Stock shall not have voting rights.
(b) Automatic Conversion. Provided the merger between
Equity Residential Properties Trust, a Maryland real estate investment
trust ("EQR"), and Wellsford Residential Property Trust, a Maryland
real estate investment trust ("Wellsford"), is approved by the
shareholders of Wellsford and EQR, then immediately prior to the
distribution by Wellsford to its common shareholders of all of the
outstanding shares of the Corporation owned by it, as contemplated by
the Contribution and Distribution Agreement, which is Exhibit B to the
Agreement and Plan of Merger, dated as of January 16, 1997, by and
between EQR and Wellsford, (i) all of the outstanding shares of Class
A Common Stock shall automatically, and without any action on the part
of the holders of shares of Common Stock or Class A Common Stock, be
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<PAGE>
converted into shares of Common Stock at the conversion rate of one
share of Common Stock for each share of Class A Common Stock and (ii)
any authorized but unissued shares of Class A Common Stock shall be
reclassified as authorized but unissued shares of 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
4
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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 2,000 shares of Common Stock, $.01 par value per share, and
8,000 shares of Class A Common Stock, $.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 199,992,000 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
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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.
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
President and attested to by its Secretary on this _____ day of
____________, 1997.
ATTEST: WELLSFORD REAL PROPERTIES, INC.
__________________________ By:_________________________(SEAL)
Secretary President
6
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Exhibit 3.2
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.
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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. 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
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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.
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(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
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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
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rights of stockholders to request inclusion of proposals in 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.
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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
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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 a majority of the 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.
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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.
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
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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
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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
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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
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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
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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.
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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
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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.
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Exhibit 10.1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement"), is made as of the 28th day of
June, 1996, by and between WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland
Real Estate investment trust ("Lender"), whose address is 370 17th Street,
Suite 3100, Denver, Colorado 80202, Attention: Donald D. MacKenzie and
SPECIFIED PROPERTIES VIII, L.P., a Texas limited partnership ("Borrower"),
whose address is 5950 Berkshire Lane, Suite 500, Dallas, Texas 75225,
Attention: John R. Carmichael and Tom Teague.
W I T N E S S E T H:
WHEREAS, Borrower is the owner of a 344-unit apartment project located
in Tucson, Arizona and commonly known as Sonterra at Williams Centre (the
"Project").
WHEREAS, Borrower has applied to Lender for a loan in the amount of
$17,800,000.00 (the "Loan"), the proceeds of which are to be used by Borrower
to repay in full the construction loan for the Project, to repay a portion of
the equity investment in Borrower by its partners, and for the payment of
certain third-party expenses of Borrower as set forth herein; and
WHEREAS, Lender is willing to make the Loan to Borrower on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, and the mutual
covenants and agreements herein contained, the sufficiency of which is hereby
acknowledged, Lender and Borrower hereby covenant and agree as follows:
ARTICLE 1
DEFINITIONS
The following terms shall have the meanings indicated whenever used
herein:
"Affiliate" shall mean, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by, or is under common
control with such Person and, in addition, in the case of the Borrower, each
general partner of the Borrower and each general partner of such general
partner.
"Business Day" shall mean every day except a Saturday, Sunday or public
holiday under the laws of the United States or the State of Arizona.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral" shall have the meaning ascribed to such term in the Deed of
Trust.
"Deed of Trust" shall mean that certain Deed of Trust, Security
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Agreement and Fixture Filing dated as of the date hereof and given by
Borrower to secure the Obligations.
"Default" shall mean any event which if continued uncured would, with
notice or lapse of time or both, constitute an Event of Default.
"Default Interest Rate" shall mean an annual rate equal to the lesser of
fifteen percent (15%) or the highest rate permitted by law.
"Event of Default" shall mean any Event of Default described in Article
6 hereof.
"Fiscal Year" shall mean the annual period on the basis of which
Borrower computes its income in keeping its books. Borrower's Fiscal Year
shall be January 1 through December 31.
"GAAP" shall mean generally accepted accounting principles consistently
applied and maintained throughout the period indicated. Whenever any
accounting term is used herein which is not otherwise defined, it shall be
interpreted in accordance with GAAP.
"Guarantor" shall mean John R. Carmichael.
"Guaranty" shall mean that certain Guaranty Agreement of even date
herewith executed by Guarantor pursuant to which Guarantor has guaranteed
payment and performance of certain of the obligations of Borrower under the
Loan Documents in accordance with the terms and provisions set forth therein.
"Indebtedness" of any Person at any time shall mean: (a) indebtedness
for borrowed money or for the deferred purchase price of property or services
but excluding accounts payable arising in the ordinary course of business;
(b) capitalized lease obligations; (c) obligations under direct or indirect
guaranties of Indebtedness of others; and (d) any Indebtedness secured by any
Security Interest on the property of such Person.
"Loan Documents" shall have the meaning ascribed to such term in the
Deed of Trust.
"Loan Expenses" shall mean all reasonable and actual fees, charges,
costs and expenses incurred by Lender on or before the Closing Date (as
defined in Section 2.2) (including reasonable legal fees and expenses not to
exceed $5,000.00) with respect to preparation and negotiation of this
Agreement and the other Loan Documents and funding the Loan, but only to the
extent set forth on the closing statement to be signed by Borrower.
"Material Adverse Occurrence" shall mean any occurrence of whatsoever
nature (including, without limitation, any adverse determination in any
litigation, arbitration or governmental investigation or proceeding) which
materially adversely affects the present or prospective business, operations,
assets or condition, financial or otherwise, of the Borrower or impairs the
ability of the Borrower to perform its obligations under the Loan Documents
to which it is a party.
"Maturity Date" shall mean the earlier of: (a) the date upon which the
Note, is declared by Lender to be due and payable (or automatically becomes
due and payable) upon the occurrence of an Event of Default as provided in
Article 6 or (b) July 1, 1999.
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"Note" shall mean that certain Promissory Note in the stated principal
amount of $17,800,000.00 evidencing the Loan, executed simultaneously
herewith by Borrower and payable to the order of Lender.
"Obligations" shall mean, collectively, all obligations of Borrower to
Lender under the Loan Documents, whether now existing or hereafter arising.
"Option Agreement" shall mean that certain Option Agreement dated as of
the date hereof between Borrower, as the Seller, and Lender or an Affiliate
of Lender as the Buyer, pursuant to which Borrower has granted an option to
purchase the Project.
"Person" shall mean any natural person, corporation, firm, association,
partnership, government, governmental agency or any other entity, whether
acting in an individual, fiduciary or other capacity.
"Security Interest(s)" shall mean any constitutional, statutory, Uniform
Commercial Code, common-law, real property or other interest, in law or
equity giving one Person a right, for security purposes, in or to the
property of another Person.
ARTICLE 2
THE LOAN; DISBURSEMENT OF THE LOAN
Section 2.1. Agreement to Borrow and Lend. Subject to all of the
terms, provisions, conditions, covenants and agreements contained in this
Agreement and in reliance upon the representations and warranties set forth
herein, Borrower hereby agrees to borrow from Lender, and Lender agrees to
lend to Borrower, the Loan. The Loan shall be repaid by the Borrower in full
on the Maturity Date. The Loan is to be used for the repayment in full by
the Borrower of the outstanding construction loan encumbering the Project,
the repayment of a portion of the equity investment in Borrower by its
partners and the payment of certain other third-party expenses of Borrower as
set forth herein.
Section 2.2. Conditions Precedent to Disbursement. Lender shall have
no obligation to make any disbursement of the proceeds of the Loan unless and
until all of the following conditions precedent are satisfied (unless waived
in writing by Lender as Lender shall, in its sole discretion, determine) and
Loan Expenses incurred to the date of disbursement (the "Closing Date") have
been paid by Borrower:
(a) Opinions of Counsel. Lender shall have received an opinion of
Borrower's and Guarantor's counsels, which opinions shall be satisfactory to
Lender and Lender's counsel, stating, among other things, (A) that each of
Borrower, its general partner, and the general partner of its general partner
is validly formed and in good standing and duly existing under the laws of
the state of its formation; (B) that Borrower has the full partnership power
and authority to execute and deliver the Loan Documents to which it is a
party and to perform all of its obligations thereunder; (C) that Borrower's
general partner and the general partner of such general partner are each duly
authorized and have full partnership or corporate power and authority, as
applicable, to execute and deliver the Loan Documents on behalf of Borrower
or such general partner, as applicable; ; (D) that, to the best of said
counsel's knowledge and except as otherwise noted in said opinion, there are
no judicial proceedings pending or threatened against or affecting Borrower
or the Guarantor which would materially impair either Borrower's or the
Guarantor's ability to perform their respective covenants or obligations
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required to be performed under the Loan Documents; and (E) such other matters
as Lender may require.
(b) Bankruptcy. Neither Borrower nor the Guarantor shall be the
subject of any bankruptcy or insolvency proceeding nor shall Borrower or the
Guarantor have made an assignment for the benefit of their respective
creditors. There shall not have been any adverse change from the date of
Lender's determination to make the Loan in the financial condition of
Borrower or the Guarantor which would materially impair the capacity of
Borrower or the Guarantor to perform their respective obligations under the
Loan Documents.
(c) Lender's Approval. All instruments and documents required
hereby or relating to Borrower's capacity and authority to execute the Loan
Documents to which it is a party and such other documents, instruments,
opinions and assurances as Lender may reasonably request, and all procedures
in connection herewith, shall have been received and approved, as to form and
substance, by Lender and by Lender's counsel.
(d) Evidence of Authority; Governing Documents. Borrower shall
have furnished Lender with evidence satisfactory to Lender that Borrower is
validly formed and existing and in good standing in all relevant
jurisdictions. Furthermore, Borrower shall have submitted to Lender the
documents governing and creating Borrower. Borrower and its general partner
and the general partner of such general partner shall each have delivered to
Lender a grant of authority executed by the appropriate parties and
satisfactory to Lender, authorizing Borrower to enter into the loan
transaction contemplated hereby and authorizing the execution, delivery and
performance under the Loan Documents and authorizing the general partner of
Borrower and the general partner of such general partner to act in such
capacity with respect to such partnerships and to the execution and delivery
of the Loan Documents.
(e) Loan Fee. Borrower shall have paid to Lender on the date of
this Agreement a fee in the amount of $178,000.00 in consideration for Lender
agreeing to make the Loan, which fee is nonrefundable.
(f) Loan Documents; Further Documentation. Borrower and the
Guarantor shall have executed and delivered to Lender the Loan Documents to
which each is a party and shall have provided Lender at Borrower's expense,
with such other documents or instruments as Lender shall reasonably require
in order to make the Loan or to evidence or secure the obligations of
Borrower and the Guarantor under the Loan Documents, including without
limitation the following:
(i) an ALTA Mortgagee's Policy of Title Insurance insuring
the lien of the Deed of Trust as a first and prior lien on the Project,
subject only to liens for taxes, assessments or governmental charges or
levies not yet due and payable and to such other matters as are acceptable to
Lender in its sole discretion and including such endorsements and reinsurance
agreements as Lender may require;
(ii) a survey certified to Lender satisfying all the
requirements set forth in the "Minimum Standard Detail Requirements for
ALTA/ACSM Land Title Surveys" jointly adopted in 1992 by ALTA and ACSM and
including items 1 through 4, 6 through 11 and 13 on Table A thereof and
prepared and certified in accordance with the Accuracy Standards of an Urban
Survey as adopted by ALTA and ACSM at the date of such certification.
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(iii) a UCC lien search acceptable to Lender showing no
prior liens affecting any of the Collateral (except liens securing the
construction loan that are to be discharged from proceeds of the Loan);
(iv) current financial statements of Borrower and the
Guarantor in form and substance acceptable to Lender in its sole discretion;
(v) tax certificates, certificates of insurance, certificates
of occupancy, as-built plans and specifications and such other information
concerning the Project and its operations as Lender may reasonably require;
(vi) a current certified rent roll, current operating
statements and a budget for the current year, each in form and content
acceptable to Lender in its sole discretion;
(vii) evidence satisfactory to Lender that the Project is
in compliance with all applicable laws, ordinances, rules, regulations and
orders of any governmental authority, including, without limitation, safety
and fire codes and the Americans with Disabilities Act;
(viii) copies of any notices, correspondence, licenses or
agreements (including without limitation subdivision and similar agreements)
with, to or from any governmental or quasi-governmental authority having
jurisdiction over the Project;
(ix) any soils reports, environmental studies and building
plans and specifications for the Project which are in the possession of
Borrower or its agents or contractors; and
(x) any and all additional data, plans, geological and
engineering studies or reports, zoning information, water and sewer studies,
topographic maps, platting and other materials, and all other information and
agreements relating to the Project or any portion thereof which are in the
possession of Borrower or its agents.
(g) Representations and Warranties. All representations and
warranties of Borrower made herein or in the Loan Documents or in the Option
Agreement shall be true and complete on the Closing Date, and Borrower shall
be in compliance with all covenants of Borrower under this Agreement, the
Loan Documents and the Option Agreement in all material respects.
(h) Satisfaction of Condition. Borrower shall have satisfied the
condition described in Section 2.6 and shall provide Lender with a written
waiver of such condition.
Section 2.3. Disbursement of Loan Proceeds.
(a) Disbursement. Proceeds of the Loan in the amount of
$17,800,000.00 shall be fully disbursed upon satisfaction of all of the
conditions precedent set forth above, and provided that no Default or Event
of Default has occurred and is continuing on the Closing Date. Out of such
proceeds, the amount of $100,000.00 (the "Improvement Escrow Funds") shall be
deposited into escrow as provided under Section 2.3(d) below.
(b) Note. The Loan shall be evidenced by, and be payable in
accordance with the terms of, this Agreement and the Note.
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(c) Interest on the Note.
(i) Borrower agrees to pay interest on the outstanding
principal amount of the Note from the date of disbursement of the Loan
proceeds until the Maturity Date at the rate of nine percent (9%) per annum.
(ii) Borrower agrees to pay interest on any overdue
installment payment of principal or interest, from the due date thereof until
paid, at the Default Interest Rate.
(iii) Interest accrued on the Note through the Maturity Date
shall be payable on the first day of each calendar month commencing August 1,
1996.
(iv) No provision of this Agreement or the Note shall
require the payment or allow the collection of interest in excess of the rate
permitted by applicable law.
(d) Release of Improvement of Escrow Funds. The Improvement
Escrow Fund shall be deposited with an escrow agent acceptable to both Lender
and Borrower and shall be released to Borrower after the Closing Date upon
satisfaction of the following conditions:
(i) At any time when there is no uncured Event of Default,
Borrower may make written requests, not more often than monthly, for
disbursement of a portion of the Improvement Escrow Funds to be used solely
for the following purposes: replacement or repair of concrete or asphalt
pavement within the Project, replacement or improvement of landscaping,
exterior painting and other improvements or repairs to the exterior of the
improvements in the Project. Each such request shall be made to the escrow
agent, with a copy to Lender, and shall include a detailed description of the
work done, specifications therefor, samples of materials used, photographs of
the areas repaired or improved, and paid invoices for the work.
(ii) Upon receipt by the escrow agent of such evidence,
unless the escrow agent has received from Lender written notice of an uncured
Event of Default, the escrow agent shall disburse the amount of the
Improvement Escrow Funds requested for such work.
Section 2.4. No Prepayment. Except as provided in this Section 2.4,
prepayment of the Loan shall be prohibited and shall be subject to the
prepayment premium set forth in the Note (the "Prepayment Premium").
Notwithstanding the foregoing, a prepayment that occurs solely as the result
of one of the following shall be exempt from the Prepayment Premium:
(a) closing of the transaction contemplated under the Option
Agreement;
(b) prepayment in full after January 1, 1999, if and only if the
option granted under the Option Agreement has not been timely exercised; or
(c) application of casualty insurance proceeds or condemnation
proceeds.
Section 2.5. Payments. Any other provision of this Agreement to the
contrary notwithstanding, the Borrower shall make all payments of interest on
and principal of the Loan and fees due under this Agreement in immediately
available funds to the Lender. If not sooner paid or terminated, full
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payment of the outstanding balance of principal and accrued and unpaid
interest shall be due and payable on the Maturity Date.
Section 2.6. Borrower's Condition. Notwithstanding any
representation, warranty or covenant in this Agreement to the contrary,
Borrower's obligations under this Agreement are conditioned upon approval of
this Agreement by the limited partner of Borrower.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF BORROWER
Borrower hereby represents and warrants to Lender as follows:
Section 3.1. Organization, Etc. Borrower is a limited partnership
validly organized, and existing under the laws of the state of its formation,
has full power and authority to own its property and conduct its business
substantially as presently conducted by it and is duly qualified to do
business and is in good standing as a foreign entity in each jurisdiction
where the nature of its business makes such qualification necessary. Each
Guarantor is an individual residing in the State of Texas.
Section 3.2. Authority and Enforceability. Each of the Borrower and
the Guarantor has full power and authority to enter into and to perform its
obligations under the Loan Documents to which it is a party and in the case
of Borrower, to grant a Security Interest in its property pursuant to the
Loan Documents to which it is a party and to obtain the Loan hereunder. The
execution and delivery of this Agreement and the other Loan Documents and the
performance and observance of the Obligations hereunder and thereunder have
been duly authorized by all necessary action on the part of Borrower and the
Guarantor. This Agreement and the other Loan Documents will constitute, when
executed and delivered to Lender by Borrower or the Guarantor, legal, valid
and binding obligations of Borrower or the Guarantor (whichever is a party
thereto) enforceable in accordance with their respective terms, subject to
bankruptcy, insolvency and similar laws affecting the enforcement of secured
creditors' rights generally.
Section 3.3. No Conflict. The execution and delivery by Borrower and
each of the Guarantor of the Loan Documents to which it is a party and
consummation of all the transactions contemplated hereby and thereby, do not
and will not conflict with, or contravene any law, order, rule or regulation
applicable to Borrower or the Guarantor or any material agreement or
instrument to which Borrower or the Guarantor is a party or by which any of
their respective properties or assets are bound, and will not result in the
creation of any lien, charge or encumbrance of any nature upon the assets or
properties of Borrower or the Guarantor other than those contemplated hereby
and by the other Loan Documents.
Section 3.4. Financial Condition. All balance sheets, income
statements, financial statements, operating statements and other financial
data required pursuant to the terms of the Loan Documents that have been
delivered (or will be delivered) to Lender by Borrower: (a) are (or will be)
accurate and complete in all material respects; and (b) accurately present
(or will present) the financial condition of the person or entity to which
they pertain as of the dates thereof, and the results of its operations for
the periods for which the same have been (or will be) furnished, and all
balance sheets disclose (or will disclose) all liabilities, direct and
contingent, as of their respective dates to the extent such liabilities are
required to be disclosed under GAAP. No additional material liabilities have
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been incurred by Borrower (except for further advances on the construction
loan disclosed in Borrower's financial statements) since the date of its most
recent financial statements delivered to Lender other than as disclosed to
Lender in writing.
Section 3.5. Litigation. There is no action, suit, legal proceeding
or other proceeding pending or threatened against Borrower or the Guarantor
that, if decided adversely to Borrower or the Guarantor, as applicable, would
have a material adverse affect on the properties or assets of Borrower or on
the ability of the Guarantor to perform under the Guarantee, or involving the
validity or enforceability of this Agreement or the other Loan Documents.
Neither Borrower nor any Guarantor is in default with respect to any order of
any court, arbitrator or governmental body and neither Borrower nor any
Guarantor is subject to or a party to any order of any court or governmental
body arising out of any action, suit or proceeding. For the purposes of this
Section, the term "governmental body" includes any federal, state, municipal
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, and the term "order" includes any
order, writ, injunction, decree, judgment, award, determination, direction or
demand.
Section 3.6. No Default. There is no Default on the part of Borrower
or the Guarantor under this Agreement or any of the other Loan Documents to
which it is a party and, to the knowledge of Borrower and the Guarantor, no
event has occurred that with notice or the passage of time or both would
constitute an Event of Default hereunder or thereunder.
Section 3.7. Information Correct. None of the representations and
warranties in this Agreement or the other Loan Documents to which Borrower or
the Guarantor is a party, contains (or will contain) any untrue statement of
a material fact.
Section 3.8. No Other Financing. As of the Closing Date, except for
liens to be paid in full from the proceeds of the Loan, there shall be no
other financing secured by the Collateral.
ARTICLE 4
CERTAIN AFFIRMATIVE COVENANTS
The Borrower agrees with the Lender that, as long as the Loan shall be
outstanding, unless the Lender shall otherwise consent in writing:
Section 4.1. Financial Information, Etc. The Borrower will furnish
to the Lender copies of the following financial statements, reports and
information:
(a) (i) as soon as available and in any event within ninety (90)
calendar days after the end of each Fiscal Year, a copy of the Borrower's
annual financial reports, including balance sheet, related statements of
earnings, partners' equity and cash flow statement, for such Fiscal Year,
with comparative figures for the preceding Fiscal Year, prepared in
accordance with accounting principles consistent with those applied in the
preceding Fiscal Year, certified by Borrower to be in accordance with Section
3.4 of this Agreement; (ii) as soon as available and in any event within
fifteen (15) calendar days after the end of each calendar month: (A) a copy
of the unaudited statement of income and expenses of the Project for such
month with comparative information from the beginning of such Fiscal Year to
the end of such month, (B) a rent roll for such month, and (C) a monthly and
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year-to-date budget variance report, accompanied by a certificate signed by
Borrower stating that, to its knowledge, such unaudited statements and
reports fairly present the results of operations of Borrower and the Project
for the period covered, subject, however, to year-end adjustments which will
not be materially adverse, and have been prepared on the same basis as the
most recent annual statement delivered to the Lender pursuant to Section
4.1(a)(i);
(b) with each annual financial statement or report required by
Section 4.1(a)(i), a compliance certificate of Borrower stating that, to the
best knowledge of Borrower, no Default or Event of Default has occurred and
is continuing, or if a Default or an Event of Default has occurred and is
continuing, a statement of the nature thereof and the action which the
Borrower proposes to take with respect thereto; and
(c) by the last day of each Fiscal Year, Borrower-prepared
financial projections by month for the next Fiscal Year.
Section 4.2. Maintenance of Existence, Etc. Borrower shall cause to
be done at all times all things necessary to maintain and preserve its
existence as a limited partnership in good standing in all relevant
jurisdictions.
Section 4.3. Payment of Taxes, Etc. Unless being contested as
permitted in the Loan Documents, Borrower shall pay and discharge, as the
same may become due and payable, all taxes, assessments and other
governmental charges or levies against or on any of its property, as well as
claims of any kind which, if unpaid, might become a lien upon any of its
properties. If Borrower has any employees, Borrower shall make all required
payroll tax withholding deposits.
Section 4.4. Notices. Borrower shall give prompt written notice to
the Lender of:
(a) any action, suit, proceeding, or investigation instituted by
or against Borrower in any federal or state court or before any arbitrator,
commission or other regulatory body (federal, state or local, domestic or
foreign) or any such act or proceeding threatened against Borrower which, if
determined adversely to Borrower, would constitute a Material Adverse
Occurrence, in a writing that contains the details thereof;
(b) the commencement of any uninsured (except for deductible
amounts) litigation relating to Borrower in which the damages claimed exceed
$100,000 or questioning the validity of the transactions contemplated by this
Agreement;
(c) the filing, recording or assessment of any federal, state or
local tax lien against Borrower or any of its assets, other than ad valorem
taxes not yet due and payable;
(d) the occurrence of any Event of Default under this Agreement;
and
(e) the suspension, revocation or termination of any of
Borrower's material rights, franchises, permits, certificates of compliance
or grants of authority required in the conduct of its business.
Section 4.5. Compliance with Laws. Borrower shall carry on its
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business activities in compliance with all applicable federal or state laws
and all applicable rules, regulations and orders of all governmental bodies
and offices having power to regulate or supervise its business activities.
Borrower shall maintain all material rights, franchises, permits,
certificates of compliance or grants of authority required in the conduct of
its business.
Section 4.6. Books and Records, Periodic Audits. Borrower shall keep
books and records reflecting all of its business affairs and transactions and
permit Lender, and its respective representatives and agents, at reasonable
times and intervals and upon reasonable notice to Borrower, to visit all of
its offices, discuss its financial matters with representatives of Borrower
and its property manager for the Project (and by this provision the Borrower
authorizes its property manager for the Project to participate in such
discussions) and examine any of its books and other records relating to
operation of the Project.
Section 4.7. Conduct of Business. Borrower shall maintain and keep
its assets, property and equipment in good repair, working order and
condition and from time to time make or cause to be made all needed renewals,
replacements and repairs.
Section 4.8. Option Agreement. Borrower shall fully and timely
perform all obligations of the Seller under the Option Agreement.
ARTICLE 5
CERTAIN NEGATIVE COVENANTS
Borrower agrees with Lender that, as long as the Loan shall be
outstanding, unless Lender shall otherwise consent in writing:
Section 5.1. Consolidation, Merger, Sale of Assets, Etc. Without the
prior written consent of Lender, Borrower shall not do any of the following:
(a) consolidate with or merge into or with any other Person or
change its entity structure; or
(b) sell or dispose of or make any other distribution of the
Property (as defined in the Deed of Trust), except as otherwise permitted in
the Loan Documents with respect to eminent domain and replacement of worn,
damaged or obsolete components.
Section 5.2. Security Interest. Borrower will not create, incur,
assume or suffer to exist any Security Interest on any of its property, real
or personal, except: (a) Security Interests in favor of the Lender created
by the Loan Documents; (b) liens or encumbrances permitted under the Loan
Documents or specifically consented to in advance and in writing by Lender.
Section 5.3. Additional Indebtedness. Borrower shall not create,
incur, assume or suffer to exist any Indebtedness except: (a) the
Indebtedness under this Agreement; and (b) current liabilities (other than
for borrowed money) incurred in the ordinary course of business.
Section 5.4. Inconsistent Agreements. Borrower shall not enter into
any agreement containing any provision which would be violated or breached by
Borrower under any Loan Document or the Option Agreement or by the
performance by Borrower of its obligations under any Loan Document or the
Option Agreement.
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Section 5.5. Guaranties. Borrower shall not, without Lender's
consent, incur, assume or enter into any guaranty except endorsements of
negotiable instruments for deposit or collection in the regular course of
business.
Section 5.6. Distributions, Etc. During any period when an Event of
Default exists, Borrower shall not, without the prior written consent of
Lender, declare or make any distributions (whether cash or property),
purchase, redeem, retire, or otherwise acquire for value any of its
partnership interests now or hereafter outstanding, return any capital to its
partners as such, or make any distribution of assets to its partners as such
except for payment of customary salaries and employee benefits.
Section 5.7. Transactions with Affiliates. Without the prior written
consent of Lender, Borrower shall not: (a) permit the direct or indirect
transfer, distribution or payment of any of its funds, assets or property to
any Affiliate, except that Borrower may pay: (i) bona fide compensation to
Affiliates for services actually rendered to Borrower; (ii) expenses incurred
by an Affiliate in rendering services to Borrower in the ordinary course of
Borrower's business; (iii) expenses for services or property allocated or
leased by an Affiliate to Borrower in the ordinary course of Borrower's
business; (iv) distributions to partners if, at the time of the distribution,
no Event of Default exists; and (v) indemnification of Affiliates as required
by the Borrower's partnership agreement; (b) lend or advance money, credit or
property to any Affiliate; (c) invest in (by capital contribution or
otherwise) or purchase or repurchase any stock or indebtedness, or any assets
or properties, of any Affiliate, or (d) guarantee, assume, endorse or
otherwise become responsible for, or enter into any agreement or instrument
for the purpose of discharging or assuming (directly or indirectly, through
the purchase of goods, supplies or services or otherwise) the indebtedness,
performance, obligations, dividends or agreements for the furnishing of funds
of any Affiliate or employee thereof.
Section 5.8. Acquisitions. Borrower shall not acquire the stock or
substantially all the assets of any other entity or Person.
Section 5.9. Changes in Ownership. Except for the partnership
interests of Borrower presently outstanding, Borrower shall not issue any
general partnership interests nor shall it permit the transfer of any of its
outstanding general partnership interests except by operation of law.
Section 5.10. No Other Business. Borrower shall not engage in any
business or activity other than (i) the ownership, management, finance and
maintenance of the Project, and (ii) taking all actions that are reasonably
necessary or desirable in connection with the foregoing.
Section 5.11. Change in Management. Borrower shall not cause or
permit any change in the property manager for the Project without the prior
written consent of Lender. Any management agreement for the Project shall
provide for cancellation by owner on not more than thirty (30) days' notice.
ARTICLE 6
EVENTS OF DEFAULT AND REMEDIES
Section 6.1. Events of Default. The occurrence of any one or more of
the following events or the existence of one or more of the following
conditions shall constitute an event of default ("Event of Default") under
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this Agreement:
(a) There shall occur an Event of Default under the terms of any
of the Loan Documents (unless cured within any applicable cure period as
therein provided); or
(b) Any representation or warranty set forth herein or in any of
the other Loan Documents is materially false in any respect at the time made;
or
(c) Borrower fails to perform any covenant, agreement,
obligation, term or condition set forth herein, and such default is not cured
by Borrower within 30 days after written notice to Borrower from Lender of
such default or, if Borrower is unable to cure such default within said 30
days, Borrower fails to begin or to diligently pursue the cure of such
default or to complete such cure in any event within 60 days after such
written notice; or
(d) Any default shall occur under the terms applicable to any
Indebtedness (other than the Note and the Obligations) of Borrower in an
aggregate principal amount that exceeds $50,000, and such default shall cause
the holder(s) of the Indebtedness to accelerate the maturity thereof or shall
continue unremedied for a period of time sufficient to permit acceleration;
or
(e) Borrower shall become insolvent or generally fail to pay, or
admit in writing its inability to pay, its debts as they become due as such
terms are defined in the United States Bankruptcy Code, as amended; or shall
apply for, consent to, or acquiesce in, the appointment of a trustee,
receiver or other custodian for Borrower or for any of Borrower's property,
or make a general assignment for the benefit of creditors; or, in the absence
of such application, consent or acquiescence, a trustee, receiver or other
custodian shall be appointed for Borrower or for a substantial part of
Borrower's property; or any bankruptcy, reorganization, debt arrangement, or
other case or proceeding under any bankruptcy or insolvency law, or any
dissolution or liquidation proceeding shall be commenced in respect of
Borrower and shall not be dismissed within 90 days, or shall be consented to
or acquiesced in by Borrower; or Borrower shall take any action which
authorizes or in furtherance of any of the foregoing; or
(f) Any judgments, writs, warrants of attachment, executions or
similar process issued or levied against Borrower's assets, in the aggregate
shall constitute a Material Adverse Occurrence upon enforcement; or
(g) The occurrence of a Material Adverse Occurrence; or
(h) Any default by Borrower under the Option Agreement which has
not been cured within 30 days after written notice thereof or, if Borrower is
unable to cure such default within said 30 days, Borrower fails to begin or
to diligently pursue the cure of such default or to complete such cure in any
event within 45 days after such written notice; or
(i) The removal of, or the institution of removal proceedings to
effect the removal of, Westwood Residential No. 9 Limited Partnership as
general partner of Borrower or of Westwood Residential General Partner No. 9,
Inc. as general partner of such general partner.
Section 6.2. Remedies.
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(a) Upon the occurrence of any Event of Default hereunder which
has not been cured within any applicable cure period, the Loan, with all
accrued interest thereon and other amounts payable hereunder, under the Note
and under the other Loan Documents, shall, at the option of Lender, become
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived by Borrower. Lender
may proceed with every remedy available at law or in equity or provided for
herein or in the other Loan Documents, and all reasonable expenses incurred
by Lender in connection with any remedy shall be deemed indebtedness of
Borrower to Lender, shall be added to the outstanding principal balance of
the Note, shall bear interest thereafter at the Default Interest Rate and
shall be secured by the Deed of Trust and any other Loan Documents securing
the Loan. Lender may apply the proceeds from any Collateral for the Loan
against any of the Obligations, as and in the order set forth in the Deed of
Trust.
Subject to the limitations set forth in the Note, this
Agreement and the other Loan Documents, each and every right, remedy and
power granted to Lender hereunder or under the other Loan Documents shall be
cumulative and in addition to any other right, remedy or power herein or in
the other Loan Documents specifically granted or now or hereafter existing in
equity, at law, or by virtue of statute or otherwise and may be exercised by
Lender from time to time concurrently or independently and as often and in
such order as Lender may deem expedient. Any failure or delay on the part of
Lender in exercising any such right, remedy or power, or abandonment or
discontinuance of steps to enforce the same, shall not operate as a waiver
thereof or affect Lender's right thereafter to exercise the same.
ARTICLE 7
MISCELLANEOUS
Section 7.1. Amendments. No provision or term of this Agreement may
be amended, modified, revoked, supplemented, waived or otherwise changed
except by a written instrument duly executed by Borrower and Lender. No
failure or delay on the part of Lender or the holder of the Note in
exercising any power or right under this Agreement, the Note, or any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand
on Borrower in any case shall entitle it to any notice or demand in similar
or other circumstances.
Section 7.2. Notices. All notices, demands and requests or other
communication to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have been validly given or
served by delivery of same in person to the addressee or by depositing same
with a carrier in the business of making guaranteed overnight deliveries for
next business day delivery or by depositing same in the United States mail,
postage prepaid, registered or certified mail, return receipt requested,
addressed as set forth on the first page of this Agreement:
With, If Sent to Wayne H. Hykan, Esq.
Lender, Copy to: Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
With, If Sent to Michael K. Ording, Esq.
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Borrower, Copy to: Jones Day Reavis & Pogue
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
All notices, demands and requests shall be effective upon such personal
delivery or upon being deposited with the above-referenced overnight carrier
or in the United States mail as required above. However, with respect to
notices, demands or requests so deposited with the above-referenced overnight
carrier or in the United States mail, the time period within which a response
to any such notice, demand or request must be given shall commence to run
from the next business day following any such deposit with the above-
referenced overnight carrier or, in the case of a deposit in the United
States mail as provided above, the date on the return receipt of the notice,
demand or request reflecting the date of delivery or rejection of the same by
the addressee thereof. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given as herein
required shall be deemed to be receipt of the notice, demand or request sent.
By giving to the other party hereto at least 15 days' written notice thereof
in accordance with the provisions hereof, the parties hereto shall have the
right from time to time to change their respective addresses and each shall
have the right to specify as its address any other or additional address
within the United States of America.
Section 7.3. Counterparts. This Agreement may be executed in any
number of counterparts and this Agreement shall be deemed effective upon
delivery of all such counterparts. Each counterpart of this Agreement shall
be deemed an original and all such counterparts shall be taken to be one and
the same instrument, for the same effect as if all parties hereto had signed
the same signature page.
Section 7.4. Headings. The article and section headings herein are
for convenience only and shall not affect the construction hereof.
Section 7.5. Payment of Expenses. Borrower agrees to pay, and Lender
shall have no obligation for the payment of, the Loan Expenses and any other
expenses of Lender required to be paid under the other Loan Documents. All
Loan Expenses known as of the Closing Date shall be paid by Borrower at the
Closing Date. Any expenses incurred by Lender after the Closing Date that
Borrower is required to pay under the Loan Documents shall be paid within 30
days after receipt by Borrower of a statement therefor, and, if the same are
not so paid, shall be added to the outstanding principal balance of the Note
and shall thereafter bear interest from the date of expenditure by Lender
until paid at the Default Interest Rate.
Section 7.6. Entire Agreement. This Agreement and the other Loan
Documents constitute and incorporate the entire agreement between Lender and
Borrower concerning the subject matter of this Agreement, and supersede and
cancel any prior understandings and agreements between Lender and Borrower
concerning the subject matter hereof.
Section 7.7. Conflict. If any provision of any other Loan Document
shall conflict with any provision of this Agreement, this Agreement shall
control.
Section 7.8. Severability. If any provision in this Agreement shall
be held invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions of this Agreement
shall not be impaired thereby, nor shall the validity, legality or
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enforceability of any such defective provision be in any way affected or
impaired in any other jurisdiction.
Section 7.9. Time of Essence. Time is of the essence hereof.
Section 7.10. Survival. The representations, warranties and covenants
herein shall survive the disbursement of the Loan and shall remain in full
force and effect.
Section 7.11. No Third Party Benefits. This Agreement is made for the
sole benefit of Borrower and Lender, their successors and assigns, and,
unless otherwise provided by law, no other person or persons shall have any
rights or remedies under or by reason of this Agreement. Borrower shall have
no right to assign this Agreement or any of Borrower's rights or obligations
hereunder and any attempt to make such an assignment shall be a Default
hereunder.
Section 7.12. Governing Law. The terms of the Loan Documents and the
terms and provisions of this Agreement will be governed by and construed in
accordance with the laws of the State of Colorado, except to the extent that
any of such laws may now or hereafter be preempted by Federal law, in which
case such Federal law shall so govern and be controlling, and except with
respect to enforcement of liens and security interests on Collateral located
in the State of Arizona, which shall be governed by the laws of the State of
Arizona.
Section 7.13. Limitation on Personal Liability. Except as hereinafter
provided, Lender's sole recourse shall be to the Collateral and Lender shall
not enforce any deficiency judgment or other amount due under any Loan
Document or any covenant, obligation, undertaking, representation or warranty
contained in any Loan Document (except enforcement against the Guarantor
under the Guaranty) against Borrower or any person who holds a direct or
indirect ownership interest in Borrower (hereinafter together with Borrower
collectively referred to as the "Exculpated Parties"); provided, however,
that nothing contained herein or in any Loan Document shall:
(a) limit Lender's rights and remedies against the Guarantor
under the Guaranty;
(b) limit the enforceability of any lien, security interest or
other right or remedy of Lender against any Collateral consistent with
nonrecourse liability as provided in this Section 7.13, including,
without limitation, the right to name any Exculpated Party in any
proceeding for enforcement thereof; or
(c) relieve the Exculpated Parties from personal liability or
responsibility for:
(i) any casualty or rental insurance proceeds or
condemnation awards received by any of the Exculpated Parties in
respect of the Project and not turned over to Lender or used for
restoration or repair of the Project;
(ii) any rents and other income from the Project received by
any of the Exculpated Parties after an Event of Default under the
Loan Documents and not otherwise applied to the expenses of
operating and maintaining the Project or to the Indebtedness
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evidenced by the Loan Documents;
(iii) any fraud or intentional misrepresentation by any
of the Exculpated Parties in connection with the Project, the Loan
Documents, or any other aspect of the Loan; or
(iv) any default under the Hazardous Substances Remediation
and Indemnification Agreement, unless prior to the expiration of
any cure period relating to such default: (x) such default shall
have been duly and completely cured, and (y) any claims by any
party arising out of or relating to such default, which are
pending, threatened, or reasonably anticipated against Borrower,
Lender, or the Project, shall have been duly paid, settled, or
waived.
7.14. Non-Usurious Loan. It is the intent of Lender and Borrower
in this Agreement and all other Loan Documents now or hereafter securing the
Loan to contract in strict compliance with applicable usury law. In
furtherance thereof, Lender and Borrower stipulate and agree that none of the
terms and provisions contained in this Agreement, the Note, or in any other
instrument executed in connection herewith including but not limited to the
Loan Documents, shall ever be construed to create a contract to pay for the
use, forbearance or detention of money, interest at a rate in excess of the
maximum interest rate permitted to be charged by applicable law. Neither
Borrower nor any guarantors, endorsers or other parties now or hereafter
becoming liable for payment of the Loan shall ever be required to pay
interest on the Loan at a rate in excess of the maximum interest that may be
lawfully charged under applicable law, and the provisions of this paragraph
shall control over all other provisions of the Loan Documents and any other
instruments now or hereafter executed in connection herewith which may be in
apparent conflict herewith. Lender expressly disavows any intention to
charge or collect excessive unearned interest or finance charges in the event
the maturity of the Loan is accelerated. If the maturity of the Loan is
accelerated for any reason or if the principal of the Loan is paid prior to
the end of the term of the Loan, and as a result thereof the interest
received for the actual period of existence of the Loan exceeds the
applicable maximum lawful rate, Lender shall, at its option, either refund
the amount of such excess or credit the amount of such excess against the
principal balance of the Loan then outstanding and thereby shall render
inapplicable any and all penalties of any kind provided by applicable law as
a result of such excess interest. In the event that Lender collects monies
which are deemed to constitute interest which would increase the effective
interest rate on the Loan to a rate in excess of that permitted to be charged
by applicable law, all such sums deemed to constitute interest in excess of
the lawful rate shall, upon such determination, at the option of Lender, be
either immediately returned or credited against the principal balance of the
Loan then outstanding, in which event any and all penalties of any kind under
applicable law as a result of such excess interest shall be inapplicable. By
execution of this Agreement Borrower acknowledges that it believes the Loan
and all interest and fees paid pursuant to the Loan, to be non-usurious. The
term "applicable law" as used in this Section 7.14 shall mean the laws of the
State of Colorado or the laws of the United States, whichever allows the
greater rate of interest, as such laws now exist or may be changed or amended
or come into effect in the future.
7.15. Nonliability of Certain Persons. This Agreement and all
documents, agreements, understandings and arrangements relating to this
transaction have been executed by the undersigned in his/her capacity as an
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officer or trustee of Lender which has been formed as a Maryland real estate
investment trust pursuant to a Declaration of Trust of Lender dated as of
July 10, 1992, and not individually, and neither the trustees, officers or
shareholders of Lender shall be bound or have any personal liability
hereunder or thereunder. Borrower shall look solely to the assets of Lender
for satisfaction of any liability of the Lender 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 trustees, officers or shareholders of Lender 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.
[THIS SPACE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BORROWER:
SPECIFIED PROPERTIES VIII, L.P.,
a Texas limited partnership
By: Westwood Residential No. 9 Limited
Partnership, its general partner
By: Westwood Residential General
Partner No. 9, Inc., its general
partner
By:/s/ John R. Carmichael
________________________________
Name: John R. Carmichael
Title: President
LENDER:
WELLSFORD RESIDENTIAL PROPERTY TRUST, a
Maryland Real Estate investment trust
By:/s/ Donald D. MacKenzie
_________________________________________
Name: Donald D. MacKenzie
Title: Vice President
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Exhibit 10.2
OPTION AGREEMENT
This Option Agreement (this "Agreement") made as of the 28th day of June
1996, by and between SPECIFIED PROPERTIES VIII, L.P., a Texas limited
partnership, having an address at 5950 Berkshire Lane, Suite 500, Dallas,
Texas 75225, Attention: John R. Carmichael or Tom Teague (hereinafter called
"Seller"), and WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate
investment trust, having an address at 370 17th Street, Suite 3100, Denver,
Colorado 80202, Attention: Donald D. MacKenzie (hereinafter called "Buyer").
RECITALS
WHEREAS, Seller is the owner in fee simple of the land (the "Land")
which is more fully described on Exhibit A 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"); and
WHEREAS, Seller desires to grant to Buyer and Buyer desires to obtain an
option to purchase the Premises, for the price and other considerations and
upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants herein contained and of the Option Payment provided for herein, and
respectively expressing the intention to be legally bound hereby, covenant
and agree as follows:
1. Option. In consideration of the payment to Seller of $178,000.00
(the "Option Payment"), the receipt and sufficiency of which is hereby
acknowledged, Seller hereby grants to Buyer the right and option (the
"Option") for a term ending December 31, 1998 (the "Term") to purchase all of
the following (collectively herein referred to as the "Property"), free and
clear of liens and encumbrances except Permitted Exceptions (as hereinafter
defined) and subject to additions and removals in accordance with Paragraph
9(e):
(a) The Land;
(b) The Improvements;
(c) Easements, rights of way, privileges, appurtenances and rights
belonging to and inuring to the benefit of the Premises;
(d) All of Seller's interests in any land lying in the bed of any
street, road or avenue, open or proposed, in front of or adjoining said
Premises to the center line thereof;
(e) All fixtures, machinery, computers, equipment, furnishings,
appliances, supplies, operational records and other tangible personal
property owned by Seller and now or hereafter located on the Premises,
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including without limitation, all fittings, heating, air cooling, air
conditioning, freezing, lighting, laundry, incinerating and power equipment
and apparatus; all engines, pipes, pumps, tanks, motors, conduits, switch
boards, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
refrigerating equipment and apparatus; all furnaces, oil burners or units
thereof; all appliances, vacuum cleaning systems, awnings, signs, screens,
storm doors and windows, cabinets, partitions, ducts and compressors,
furniture and furnishings, hot water heaters, garbage receptacles and
containers above and below ground, janitorial supplies, landscaping
materials, lawn mowers, tools, and articles of a nature similar to the
foregoing; all snow removal equipment; and all future additions to or
substitutions for the foregoing, or any part thereof, between the date hereof
and the date of closing hereunder; and all warranties and guarantees to and
rights of action of Seller therefor, if any. (The property described in this
subparagraph 1(e), when referred to separately from the Premises, is
hereinafter sometimes called "Personalty");
(f) All strips, gores, riparian rights and littoral rights, if
any, belonging to or inuring to the benefit of the Land and/or the
Improvements; and
(g) All of Seller's right, title and interest in and to the
following (collectively, "Other Interests"):
i) Any and all catalogs, booklets, manuals, tenant files,
maintenance and operation logs, files and records, leasing records,
correspondence relating to maintenance, operations or leasing, purchaser
prospect list, tenant lists, tenant prospect lists and other mailing
lists, sales brochures and material, leasing brochures and materials,
advertising materials and, to the extent prepared for Seller by third
parties, title information, soil, engineering and environmental
inspections, studies and reports, market studies, and similar materials
with respect to the sale, management, leasing, promotion, ownership,
maintenance, use, occupancy and operation of the Premises;
ii) The name "Sonterra at Williams Centre" (the "Name");
iii) All tenant security deposits, together with any interest
thereon accrued or deemed accrued as of the Closing Date which the
landlord is required by law or by the Tenant Leases to refund to tenants
(collectively, the "Security Deposits");
iv) Any transferable bond, guaranty, warranty or repair
agreements (the "Warranties") concerning the Premises or any part
thereof, including without limitation, any bond, guaranty or warranty
(including any fidelity bonds) relating to construction, use,
maintenance, occupancy or operation of the Improvements and the
Personalty, but only to the extent such bond, guaranty, warranty or
agreement is an obligation of a person not affiliated with Seller or its
partners, and in all cases subject to any limitation contained in each
such bond, guaranty and warranty;
v) Any transferable licenses, permits, approvals and
certificates issued by any governmental authorities required or used in
or relating to the ownership, use, maintenance, occupancy or operation
of any part of the Premises;
vi) Any surveys of, and plans and specifications relating to,
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the Premises;
vii) Any unrecorded utility agreements including any deposits
made thereunder;
viii) The Service Agreements (as hereinafter defined);
ix) The Tenant Leases listed on the Rent Roll (as both terms
are hereinafter defined);
x) Any unpaid awards for any taking by condemnation or any
damage to the Premises by reason of a change of grade of any street or
highway, or any award paid to Seller and not used or applied by Seller
to the restoration of the Premises or applied to the Loan (as such term
is defined in Section 20);
xi) Any unpaid proceeds for any damage to the Premises by
reason of fire or other casualty, or any proceeds paid to Seller and not
used or applied by Seller to the restoration of the Premises or applied
to the Loan (as such term is defined in Section 20);
xii) Any transferable development rights with respect to the
Land, excluding any cash deposits or letters of credit delivered to any
governmental authority in connection with the past, present or future
development of the Land (it being acknowledged that Seller may withdraw
or cause to be withdrawn any such cash or letters of credit); and
xiii) Any water and water rights of any kind or description
appurtenant to or owned by Seller in connection with the Land or the
Improvements.
2. Option Payment; Exercise of Option; Purchase Price.
(a) The Option Payment is nonrefundable and shall be credited
against the amounts due from Buyer at the Closing.
(b) Buyer may exercise the Option at any time prior to the end of
the Term by written notice (the "Exercise Notice") given to Seller in
accordance with Paragraph 20 below. If Buyer gives the Exercise Notice, the
date of closing of the purchase and sale of the Property (the "Closing Date")
shall be on a date specified by Buyer which shall be not more than ninety
(90) nor less than twenty (20) days after the date of the Exercise Notice or
on such other date as Buyer and Seller may agree.
(c) The purchase price for the Property shall be $20,178,000.00 if
the Closing Date is on or before December 31, 1997, and $20,678,000.00 if the
the Closing Date is January 1, 1998 or later (in either case, the "Purchase
Price"), which Buyer shall pay by wire transfer of immediately available
funds through the Federal Reserve System to Chicago Title Insurance Company,
7616 LBJ Freeway, Dallas, Texas 75230 (the "Title Company") for disbursement
to Seller.
3. Seller's Condition. Notwithstanding any representation, warranty
or covenant in this Agreement to the contrary, Seller's obligations and
exercise of the Option under this Agreement are conditioned on approval of
this Agreement by the limited partner of Seller.
4. Survey. Prior to the date of this Agreement, Seller has delivered
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to Buyer, at Seller's sole cost and expense, a current ALTA/ACSM Land Title
Survey of the Property prepared and certified (i) in accordance with the
"Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys"
jointly established and adopted ALTA and ACSM in 1992, and including Items 1
through 4, 6 through 11, and 13 of Table A thereof, and (ii) pursuant to the
Accuracy Standards (as adopted by the ALTA and ACSM and in effect on the date
of the certification of such survey) of an Urban Survey (the "Initial
Survey"). The Initial Survey contains a certificate from the surveyor to
Buyer and the Title Company in form acceptable to Buyer. Seller shall have
the survey updated and recertified prior to Closing to a date not more than
thirty (30) days before the Closing Date. The updated survey (the "Final
Survey") shall be in a form acceptable to the Title Company for the deletion
of the standard survey exceptions without the addition of further exceptions
to title and shall disclose no title defects, encroachments or other matters
not shown on the Initial Survey, unless the same are acceptable to Buyer in
its sole and absolute discretion. Any matters shown on the Final Survey that
are not on the Initial Survey and are objected to by Buyer shall be corrected
at Seller's sole cost prior to the Closing Date, except that Seller shall not
be obligated to correct survey matters arising solely from changes enacted by
governmental authorities after the date of the Initial Survey (e.g. changes
in setback requirements).
5. Title Insurance and Lien Search.
(a) Prior to the date hereof, a current title insurance commitment
covering the Property issued by the Title Company (the "Initial Title
Commitment"), together with complete and legible copies of all documents
referred to therein, has been delivered to Buyer at Seller's sole cost and
expense. The Initial Title Commitment commits to insure Buyer as owner of
the Property in the amount of $20,178,000.00, and commits the Title Company
to issue its standard ALTA Owner's Policy on the Closing Date, with standard
preprinted exceptions deleted, insuring good and marketable title in fee
simple to the Property in Buyer subject only to (i) current non-delinquent
general real property taxes, and (ii) title exceptions approved by Buyer
prior to the date hereof. If the Initial Title Commitment contains any
exception for mineral rights, Seller shall pay at Closing for an endorsement
to the title insurance coverage insuring against any loss to Improvements as
a result of such exception. Seller shall cause the Initial Title Commitment
to be updated prior to Closing to a date not more than thirty (30) days
before the Closing Date. If such updated title insurance commitment (the
"Closing Title Commitment") contains any exceptions from coverage which Buyer
deems to be unacceptable and which are not on the Initial Title Commitment,
and if Seller does not remove (or, in the case of mechanic's liens, bond
over) such exceptions by Closing, Buyer, at its option, may exercise its
remedies under Paragraph 16 of this Agreement. If Buyer does not deliver
written notice of objection to title to Seller before the end of ten (10)
business days after delivery of the Closing Title Commitment, Buyer shall be
deemed to have accepted the condition of title as shown therein. Any
exceptions on the Closing Title Commitment to which Buyer does not timely
object, or to which Buyer objects but later waives its objection in writing,
shall be deemed to be "Permitted Exceptions."
(b) Seller shall obtain and shall deliver to Buyer within ten (10)
days after the Closing Date, at its sole cost and expense, a standard ALTA
Owner's Policy, covering the Property in the amount of the applicable
Purchase Price, effective as of the date and time of the Closing, subject
only to the Permitted Exceptions, and including the endorsements required
pursuant to the preceding subparagraph (a). The standard preprinted
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exceptions regarding parties in possession, surveys, and mechanic's liens
shall be deleted, at Seller's sole cost and expense. Seller shall deliver to
the Title Company any instruments, documents, payments, indemnities, releases
and agreements as the Title Insurance Company shall require in order to
issue, the title insurance policy as herein provided. At Closing, Seller
shall cause the Title Company to deliver to Buyer such assurances as Buyer
may reasonably request that the Title Company is irrevocably committed and
prepared to issue its ALTA Owner's Policy to Buyer in accordance with the
foregoing requirements.
(c) If the Title Company uses the escrow and closing services of
an agent in connection with this transaction, Seller shall cause Title
Company to issue to Buyer an insured closing letter, in form and substance
reasonably satisfactory to Buyer, which insured closing letter shall, subject
to applicable regulatory restrictions, protect Buyer from fraud or dishonesty
of the Title Company's agent in handling Buyer's funds or documents in
connection with the Closing and against the failure of the Title Company's
agent to comply with written closing instructions of Buyer or its counsel.
(d) Prior to the date of this Agreement, Seller, at its sole
expense, has delivered to Buyer a current certificate from the appropriate
governmental authorities or from a Uniform Commercial Code lien search
service acceptable to Buyer, reporting the results of a Uniform Commercial
Code lien search of all appropriate records for security interests and
financing statements against any personal property constituting a part of the
Property. Seller shall cause such report to be updated and recertified to
Buyer within ten (10) days prior to the Closing Date, and shall make
arrangements on or before the Closing Date to have all liens shown thereon
fully discharged or bonded.
6. Inspection by Buyer; Maintenance.
(a) Subject to the rights of the tenants under the Tenant Leases,
Buyer and Buyer's authorized agents and representatives may, from time to
time during the Term, during regular business hours and on reasonable prior
notice to Buyer and the managing agent of the Property, inspect all areas of
the Premises and conduct such tests and observations as Buyer may deem
appropriate. Any tests involving extraction of samples of materials, soil or
water other than for asbestos shall require prior approval of Seller. No
such inspection, however, shall constitute a waiver or relinquishment on the
part of Buyer of its right to rely upon the covenants, representations,
warranties or agreements made by Seller under this Agreement. Buyer shall
pay when due all fees and expenses incurred in the performance of any such
inspections, tests or observations and shall indemnify, defend, and save
Seller harmless from any loss from mechanic's liens, claims for nonpayment of
such charges or for damages (including damages associated with personal
injury or death or damage to property) arising out of the acts or omissions
of the parties performing such inspections, tests, or observations.
(b) Seller shall permit Buyer's accountants and authorized
representatives to examine Seller's books, financial records and tenant files
pertaining to the operation of the Property, from time to time during the
Term during regular business hours and upon reasonable prior notice. Seller
acknowledges that Buyer may include the Property as a part of a public
offering, and Seller consents to the disclosure of information regarding the
Property, including financial information, in any such public offering so
long as the offering material states that Seller is not a participant in the
offering or responsible for the offering materials. Upon request by Buyer,
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Seller shall provide Buyer with such information as Seller may have with
respect to actual expenditures made on all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, all taxes and
utility payments, within three years prior to the Closing, and dates of
construction, installation and major repairs to the Property.
7. Closing. The closing of the transaction contemplated hereby (the
"Closing") shall take place at the offices of Chicago Title Insurance
Company, 7616 LBJ Freeway, Dallas, Texas 75230, at 10:00 a.m. on the Closing
Date specified in Paragraph 2(b) above.
8. Representations of Seller.
(a) Seller, to induce Buyer to enter into this Agreement and to
purchase the Property, represents to Buyer that the following matters are
true as of the date hereof:
i) Exhibit B hereto (the "Rent Roll") is a true, complete
and correct listing of all existing leases (including all amendments or
side agreements) at the Property in effect as of the date hereof (the
"Tenant Leases") (the form of which leases is attached hereto as Exhibit
C), which Exhibit B correctly sets forth: (i) the total number of
apartments at the Property, (ii) the name of each existing tenant named
in the lease for each apartment, (iii) apartment number designation,
(iv) apartment type, (v) the expiration date or status of the term of
the lease (including all rights or options to renew), (vi) the current
rent (the "Standard Rental") and other payments which the tenant is
obligated to make under the lease, (vii) the current outstanding balance
of all security deposits held thereunder, and (viii) the information
required pursuant to Paragraphs 8(a)(ii) hereof.
ii) There are no leases, tenancies, licenses or other rights
of occupancy or use for any portion of the Property other than as set
forth in Exhibit B or Exhibit F. A true, correct and complete copy of
the form of Tenant Lease has been submitted by Seller to Buyer and is
attached hereto as Exhibit C. Seller represents to Buyer that such form
of Tenant Lease is being used by Seller in all material respects in
connection with Seller's leasing of the Property. Except as otherwise
noted on Exhibit B, (i) each of the Tenant Leases is, to Seller's
knowledge, valid and subsisting and in full force and effect and has not
been amended, modified or supplemented, and the tenant, licensee or
occupant thereunder is in actual possession, (ii) no tenant has asserted
any claim, offset or defense which would in any way affect the
collection of rent from such tenant, (iii) there are no pending summary
proceedings or other legal action for eviction of any tenant, and (iv)
no written notice of default or breach on the part of the landlord under
any of the Tenant Leases has been received by Seller or its agents from
the tenant, licensee or occupant thereunder. No tenant, licensee or
other occupant under any of the Tenant Leases has any right or option to
acquire the Property, or any part thereof or interest therein. The
copies of the Tenant Leases delivered to Buyer, if any, constitute the
sole agreements binding upon the owner of the Property and the
respective tenants of the Property with respect to the Property.
iii) No brokerage or leasing commission or other compensation
is or will be due or payable on or after the Closing to any person,
firm, corporation or other entity (including Seller or any affiliate of
Seller) with respect to or on account of any of the Tenant Leases or any
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extensions or renewals thereof.
iv) To the best knowledge of Seller and except as set forth
in any Exhibit hereto, Seller has performed all obligations (including
the payment of all sums due to third parties) which obligations have
accrued as of the date hereof under the Tenant Leases and under all
other agreements relating to the Property.
v) Within ten (10) business days after Buyer gives the
Exercise Notice, Seller shall deliver to Buyer a complete and correct
list of all existing management, service, equipment, supply,
maintenance, union or collective bargaining agreements with respect to
or affecting the Property to which Seller is a party or which will
affect the Property after Closing (the "Service Agreements"). Subject
to Section 8(c), effective as of the Closing Date, Seller will represent
and warrant to Buyer that no written notice of default or breach by
Seller or its agents in the terms of any such Service Agreements has
been received by Seller or its respective agentsand that Seller has
performed all payment obligations which it has under the Service
Agreements.
vi) Subject to Section 8(c), effective as of the Closing
Date, Seller will represent and warrant to Buyer that to the best
knowledge of Seller, all persons who are employed by Seller or its
agents in connection with the management, operation and maintenance of
the Property (A) are non-union employees and (B) have been paid with
respect to all benefits properly accrued and currently due.
vii) All charges for services or material related to operation
of the Property, including, without limitation, water, sewer, gas and
electric bills, have been paid or will be paid as of the Closing Date,
or appropriate adjustment made therefor in accordance with the terms
hereof.
viii) Seller has not received any notices from any
governmental authority requiring any public improvements or
installations on or in connection with the Property, or asserting any
violation of any applicable law, regulation or other governmental
requirement, and Seller is not otherwise aware of any such violations or
requirements of public improvements or installations. In the event any
such notices are served or received prior to the Closing. Seller shall
promptly forward copies of such notices to Buyer.
ix) With respect to environmental matters:
a) to the best knowledge of Seller: (i) no Hazardous
Substances are present in, on or under the Property, and (ii) there is
no present Release or threatened Release of any Hazardous Substances in
violation of Environmental Laws, from, in, on or under the Property;
b) to the best knowledge of Seller, no written notices,
written complaints or orders of violation or non-compliance with
Environmental Laws addressed to Seller or the owner of the Property have
been received by or are in the possession of Seller and no federal,
state or local environmental investigation is pending or has been
threatened against Seller with regard to (A) the Property or any use
thereof; (B) any alleged violation of Environmental Laws with regard to
the Property; (C) any failure by Seller to have any environmental
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permit, certificate, approval, registration or authorization required
for the conduct of its business; (D) the generation, treatment, storage,
recycling, transportation, disposal or Release (each a "Regulated
Activity") of any Hazardous Substances on, at or under the Property; or
(E) the existence on nearby real property of Hazardous Substances that
could migrate to the Property. For purposes of this Agreement,
"Release" shall have the meaning given to that term in 42 U.S.C. Section
9601(22);
c) the Property has not been used by Seller for the
conduct of any Regulated Activity other than in compliance in all
material respects with Environmental Laws;
d) to the best of Seller's knowledge, there exists no
petroleum contamination to the Property in violation of applicable
Environmental Laws, and to the best of Seller's knowledge, there exist
no underground storage tanks or surface impoundments, active or
abandoned, at, on or under the Property in violation of applicable
Environmental Laws; and
e) to the best of Seller's knowledge, it has not caused
a Release of any Hazardous Substances, nor is there any friable
asbestos, polychlorinated biphenyls, formaldehyde or lead at, on or
under the Property, the removal of which is currently required by any
Environmental Law or the continued existence of which constitutes a
violation of any Environmental Law.
As used in this Agreement, (a) "Environmental Laws" shall mean and include
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et
seq., as amended by the Hazardous and Solid Waste Amendments of 1984, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. Section 9601 et seq., the Hazardous Materials Transportation Act of
1975,
49 U.S.C. Section 1801 et seq., the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., the Clean Air Act, 42 U.S.C. Section 7401 et seq., the
Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 136, et seq., the
Clean Water Act, 33 U.S.C. Section 1251 et seq., the National Environmental
Policy
Act, 42 U.S.C. Section 4321 et seq., and the Occupational Safety and Health
Act,
29 U.S.C. Section 651 et seq., and all similar federal, state and local
environmental laws, ordinances, rules, codes and regulations, as any of the
foregoing may have been from time to time amended, supplemented or
supplanted, which relate to protection of the environment or the regulation
or control of or imposing liability or standards of conduct concerning
Hazardous Substances (as hereinafter defined), and (b) "Hazardous Substances"
shall mean any substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenicor mutagenic or is designated as toxic
or hazardous under any applicable federal, state or local law, and petroleum,
its derivatives, by-products and other hydrocarbons; provided, however, that
Hazardous Substances shall not include material used or stored in reasonable
amounts in the ordinary course of business for the operation or maintenance
of the Property and in compliance in all material respects with all
Environmental Laws.
x) Seller presently causes to be maintained policies of
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insurance with respect to the Property as listed on Exhibit H.
xi) To the knowledge of Seller, there is no action, suit,
investigation or proceeding pending or threatened against or affecting
the Property or any portion thereof by any person or government agency,
board or bureau except as set forth on Exhibit E hereto.
xii) Seller has no knowledge of any pending or threatened
condemnation or eminent domain proceedings against the Property or which
would affect access to the Property, except as set forth on Exhibit E
hereto.
xiii) Seller has delivered to Buyer current tax
certificates with respect to the Property and shall promptly forward to
Buyer copies of all tax bills received during the Term. There are no
proceedings presently pending for the reduction of the assessed value of
the Property. All taxes becoming due during the Term shall be paid by
Seller prior to delinquency.
xiv) The persons signing this Agreement on behalf of Seller
have the requisite power and authority to execute and deliver this
Agreement in the name of Seller and to create thereby a binding
obligation of Seller, and the execution, delivery and performance of
this Agreement will not constitute a default under any material
agreement of Seller, require consent under any such agreement of any
person or give any person any right to terminate any Tenant Lease or
other material agreement relating to the Property.
xv) Except as noted on Exhibit F, Seller has not entered into
any contract for goods and/or services relating to operation of the
Property which may not be cancelled without charge to Buyer upon not
more than thirty (30) days without written notice. Seller has not
entered into any management agreement for the Property which will be in
effect on the Closing Date.
xvi) Utility services to the Property, including but not
limited to water, sewer, telephone, cable TV, electric and gas, are
being provided by the utility suppliers listed on Exhibit G hereto, in
sufficient quantities to permit the use and occupation of the Property
for the intended use.
xvii) To the best of Seller's knowledge the Property is
free from infestation by termites and any damage from previous termite
infestation.
xviii) Seller has delivered to Buyer true, correct and
complete financial statements for the Property for the calendar year
1996 through May 31, including notes, comments, schedules, and
supplemental data therein (collectively, "Financial Statements"), all of
which have been prepared from the books and records of Seller.
xix) Regardless of whether Seller would otherwise be obligated
under Arizona law, Seller has paid, has caused to be paid or will pay
any and all taxes incurred by it as a result of the transactions
contemplated by this Agreement, including, but not limited to transfer
taxes, gains taxes, sales and use taxes and bulk sales taxes.
xx) To the best of Seller's knowledge, the Property, the use
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of the Property and the transfer of the Property pursuant to this
Agreement does not and will not violate any applicable subdivision,
zoning, land-use or other similar law, code, ordinance or regulation
relating to the Property.
xxi) Seller has not received any written notice from the
insurance companies insuring the Property requiring Seller to perform
any work at the Property.
xxii) To Seller's knowledge, no person has objected to
Seller's use of the name "Sonterra at Williams Centre" or any logo or
mark used by Seller in connection with the Property.
(b) The representations contained in this Paragraph 8 shall
survive the Closing hereunder, subject to the provisions of Section 18.
(c) On the Closing Date, Seller shall execute and deliver to Buyer
a certificate stating (i) that to Seller's knowledge each of the warranties
and representations set forth in this Paragraph 8 are true and correct in all
material respects as of the Closing Date except for any specific facts set
forth with particularity in such certificate that constitute exceptions not
known to Seller on the date of this Agreement or required by changed
circumstances, and (ii) that there exists no material non-performance or
breach in respect of any of the agreements, covenants, representations or
warranties on the part of Seller contained in this Agreement.
(d) Seller agrees to indemnify, defend and hold Buyer harmless
from and against any and all loss, cost, expense, damage or liability
suffered or incurred by Buyer as a result of any of the warranties and
representations set forth in this Paragraph 8 or in the certificate to be
delivered by Seller to Buyer pursuant to Paragraph 8(c) above, not being true
and correct in all material respects.
(e) As used in this Agreement, the phrases "to Seller's knowledge"
or "to the best knowledge of Seller" and similar phrases mean the actual
knowledge of John R. Carmichael and Tom Teague, without any investigation and
without any imputation of the knowledge of any other person, even if the
knowledge of such other person would otherwise be imputed to one or both of
them as a matter of law.
(f) BUYER ACKNOWLEDGES THAT, EXCEPT FOR THE REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SELLER SET FORTH IN THIS AGREEMENT, THE PROPERTY IS
BEING PURCHASED ON AN "AS IS" BASIS, AND THAT NO REPRESENTATIONS OR WARRANTIES
HAVE BEEN MADE BY SELLER EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT.
9. Termination by Buyer. Buyer shall have no obligation to consummate
the transaction described herein and upon written notice to Seller stating
Buyer's intention not to proceed with the transaction contemplated by this
Agreement, this Agreement shall terminate and the parties shall have no
further liability hereunder.
10. Operations Prior to Settlement. Between the date of the execution
of this Agreement and the Closing Date:
(a) Seller shall continue to maintain and to make all repairs and
replacements to the Property and the Personalty so as to keep the Property
and the Personalty in substantially its present condition, subject to
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ordinary wear and tear and to the provisions of Paragraphs 13 and 15 hereof,
and Seller shall operate and manage the Property and the Personalty in the
same manner as it has operated the Property prior to the date hereof. All
vacant apartment units shall be made ready for occupancy by Closing;
provided, however, that units becoming vacant fourteen (14) days or less
before Closing shall be made ready by Seller within fifteen (15) days after
Closing. Any carpet installed on or after the date of this Agreement shall
comply with the carpet specifications delivered to Seller by Buyer prior to
the date of this Agreement, and described on Exhibit D attached hereto.
(b) Seller shall use its best efforts from the date hereof to the
date of the Closing to (i) continue to rent the Property and to achieve and
maintain full occupancy thereof and (ii) modify, renew or extend any Tenant
Lease on an as-needed basis.
(c) Seller will not, without the prior written consent of Buyer,
enter into any Service Agreements or amend or extend any current Service
Agreements such that any Service Agreements that survive Closing are not
cancelable on 30 days' notice at no cost to the owner. Seller shall not
cause or permit any change in the property manager without prior written
consent of Buyer.
(d) Seller shall cause all certificates of occupancy to be
observed and to be kept in full force and effect. Seller shall cause all
material obligations of Seller under the Service Agreements to be timely
performed. Seller shall carry on and conduct the operation of the Property
in substantially the same manner as such business is now and has heretofore
been conducted, including (but not limited to) maintenance of and compliance
with the insurance policies. Seller shall operate the Property in accordance
with all applicable laws, rules, regulations, ordinances, licenses and
permits.
(e) Seller shall not remove any Personalty, fixtures or equipment
located on the Property except as may be required for maintenance, repair
and/or replacement or where such removal is commercially reasonable. All
replacements shall be (i) completed free and clear of any liens and
encumbrances, (ii) of quality at least equal to the replaced items and (iii)
deemed included in the sale of the Property, without cost or expense to
Buyer. Items removed in accordance with this subparagraph (e) will cease to
be part of the Property.
(f) Seller will deliver to Buyer, as soon as available to Seller,
any new monthly operating statements and leasing reports with respect to the
Property for each calendar month which elapses between the date of execution
hereof and the Closing Date.
(g) Seller shall cause all debts and liabilities for labor,
material and equipment incurred by Seller prior to the Closing Date, which
could result in a lien against the Property, to be promptly paid in full or
bonded over.
(h) Seller shall cause to be paid before the same become due all
taxes and all installments of assessments levied or assessed against the
Property or any part thereof on or before the Closing Date. If Seller or any
entity affiliated with Seller or with any of Seller's partners shall
undertake any action, including, without limitation, any development on
property that is within the area subject to the instrument recorded in
Docket 7335 at Page 842, as the same may be amended or supplemented, (the
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"Declaration"), then Seller shall be solely liable for payment of any
increase in the assessments against the Property pursuant to the Declaration
resulting from such action and shall indemnify and defend Buyer against such
increase.
(i) Seller shall, immediately upon obtaining knowledge of (i) any
proposed new assessment against the Property by any governmental or quasi-
governmental authority; (ii) the institution of any proceedings for the
condemnation of the Property or any portion thereof; (iii) any material
injury or damage to or upon the Property or any portion thereof; (iv) any
violation of the applicable laws, ordinances, rules or regulations regarding
the Property or any portion thereof; or (v) any proceeding which could affect
or cloud title to or ownership of the Property, or any part thereof, notify
Buyer of the pendency of such proposal, proceeding or violation. Buyer shall
have the right, but no obligation, at Buyer's expense and at its sole
discretion, to join in or participate in any such proceedings or other
matters. No such participation by Buyer shall relieve Seller of any of its
obligations under this Agreement. In the event item (i) in this subparagraph
occurs, Seller shall oppose such assessment in a commercially reasonable
manner unless Buyer approves it in writing.
(j) Between the date of this Agreement and the Closing, Seller
shall not, in violation of any Environmental Laws, intentionally, knowingly
or willfully use, produce, process, manufacture, generate, treat, handle,
store or dispose of any Hazardous Substances in, on or under the Property, or
use the Property for any such purposes, or Release any Hazardous Substances
into any air, soil, surface water or groundwater comprising the Property.
Between the date of this Agreement and the Closing, Seller shall use
reasonable efforts to comply with all Environmental Laws applicable to the
Property, or its use or occupancy thereof. Between the date of this
Agreement and the Closing, Seller shall use reasonable efforts to obtain all
permits, licenses and approvals required by all applicable Environmental Laws
for the use and occupancy of, and all operations and activities in, the
Property, comply and use reasonable efforts to cause the tenants to comply
with all Environmental Laws applicable to the Property and with all such
permits, licenses and approvals, and use reasonable efforts to keep all such
permits, licenses and approvals in full force and effect. Immediately after
Seller obtains any information indicating that any Hazardous Substances may
be present at the Property in violation of any Environmental Law or that any
Release or threatened Release of Hazardous Substances may have occurred in
violation of any Environmental Law between the date of this Agreement and
Closing in, on or under the Property (or any nearby real property which could
migrate to the Property) or that any violation of any Environmental Laws may
have occurred between the date of this Agreement and Closing at the Property,
Seller shall give written notice thereof to Buyer with a reasonably detailed
description of the event, occurrence or condition in question. Seller shall
immediately furnish to Buyer copies of all written communications received
between the date of this Agreement and Closing by Seller from any person
(including notices, complaints, claims or citations that any Release or
threatened Release of any Hazardous Substances or any violation of any
Environmental Laws has actually or allegedly occurred) or given between the
date of this Agreement and Closing by Seller to any person concerning any
past or present Release or threatened Release of any Hazardous Substances in,
on or under the Property (or any nearby real property which could migrate to
the Property) or any past or present violation of any Environmental Laws at
or in connection with the Property.
(k) During the Term, Seller shall not, and shall cause any
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affiliates of Seller that are controlled directly or indirectly by any person
(except Seller's limited partner and its affiliate(s) that directly or
indirectly owns an interest in Seller (hereinafter called "Related Parties")
not to acquire any interest in or develop any multifamily residential
property within a three-mile radius of the Land without first giving written
notice to Buyer of its intent to do so and if Buyer indicates a desire to
participate in such acquisition or development, negotiating in good faith
with Buyer to allow such participation; provided that, if agreement with
Buyer is not reached within 45 days after such good faith negotiations are
commenced by Seller, Seller shall have no further obligation to Buyer under
this Paragraph 10(k).
11. Provisions with Respect to Closing. At the Closing, Seller shall
deliver to Buyer the following:
(a) Deed. Special warranty deed conveying the Land and the
Improvements, subject only to the Permitted Exceptions, duly executed and
acknowledged and in proper form for recording.
(b) Bill of Sale. A valid bill of sale for the Personalty (with
warranties of title against claims by, through or under Seller, but not
otherwise) in form and substance reasonably satisfactory to Buyer, duly
executed and acknowledged by Seller.
(c) Assignment of Leases. A valid assignment of the Tenant
Leases, in form and substance reasonably satisfactory to Buyer, duly executed
and acknowledged by Seller assigning to Buyer the interests of Seller in the
Tenant Leases; together with the original executed copy of each Tenant Lease,
and letters prepared by Buyer (and approved by Seller, which approval shall
not be unreasonably withheld) and addressed to each of the tenants informing
them of the sale and assignment and directing them to make future payments of
rents to Buyer or its nominee or assignee, as Buyer may elect; together with
lease files containing all lease guarantees, notices from tenants, general
correspondence and the like. Buyer shall assume, and indemnify Seller with
respect to, all of the obligations of Seller with respect to the proper
application of any tenant security deposit, and all interest thereon payable
to any tenant, for which Buyer received a credit (or which was transferred to
Buyer) at the Closing and shall assume, and indemnify Seller with respect to,
all of the obligations of the landlord under the Tenant Leases attributable
to the period from and after the Closing Date. Seller shall indemnify Buyer
with respect to all obligations of the landlord under the Tenant Leases
attributable to the period prior to the Closing and with respect to all
obligations of the landlord under any leases affecting the Property that were
terminated prior to the Closing. Seller shall also notify any bank in which
Seller maintains a lockbox account for the receipt of rents from the Property
that all amounts received by such bank after the Closing Date shall be
delivered to Buyer.
(d) Assignment of Name. A valid assignment in recordable form
(without warranty except as set forth in Paragraph 8(xxv) above), duly
executed and acknowledged by Seller, assigning to Buyer all of the right,
title and interest of Seller in and to the name Sonterra at Williams Centre
in connection with the Property, together with such documents as shall be
necessary for proper termination of the use of said name by Seller.
(e) Assignment of Service Agreements and Warranties. A valid
assignment duly executed and acknowledged by Seller, in form and substance
reasonably satisfactory to Buyer, of the rights of Seller under (i) each of
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<PAGE>
the Service Agreements, and (ii) each of the Warranties, together with
original copies or duly executed counterparts thereof; and if any such
agreement requires the approval of the other party thereto prior to
assignment thereof to a third party, then Seller shall use reasonable efforts
to obtain such written approval. If Seller is unable to obtain such approval
after reasonable efforts, Seller shall not be obligated to assign those
agreements for which approval is not obtained. Seller shall perform, and
shall indemnify Buyer with respect to, all of the obligations of Seller
attributable to the period prior to the Closing under the Service Agreements;
Buyer shall assume, and shall indemnify Seller with respect to, all of the
obligations of Seller attributable to the period from and after the Closing
under the Service Agreements.
(f) Assignment of Other Interests. An assignment duly executed
and acknowledged by Seller, in form and substance reasonably satisfactory to
Buyer, of the rights of Seller in and to the Other Interests not transferred
pursuant to subparagraphs (c), (d) or (e) above.
(g) Updated Rent Roll and Tenant Schedule. An updated Rent Roll
and schedule of Tenant Leases supplied by Seller which contains all
information required to be set forth in Exhibit B, which schedule is correct
and complete as of a date not more than five (5) days before the Closing Date.
(h) FIRPTA Affidavit. The affidavit referred to in Section 1445
of the Internal Revenue Code with all pertinent information confirming that
Seller is not a foreign person, trust, estate, corporation or partnership.
(i) Property Records. All records, documents, information and
data in the possession of Seller or its agents concerning operation, leasing
and maintenance of the Property. If the Buyer retains Seller's managing
agent, then delivery of documents herein prescribed need not occur with
respect to those documents already in the possession or control of such
managing agent.
(j) Transfer Tax Return. If required, all transfer and gains tax
returns fully executed and completed by Seller.
(k) Indemnification. An indemnification from Seller for any
brokerage commissions payable or which will become payable in connection with
any Tenant Lease.
(l) Evidence of Payment and Discharge of Liens and Encumbrances.
Evidence satisfactory to the Title Company and sufficient for deletion of any
exceptions that all liens, encumbrances and assessments against the Property,
except the lien of current taxes not yet due, have been paid and discharged
or that either such liens, encumbrances and assessments will be fully paid
and discharged by the Title Company on the Closing Date using Seller's
proceeds of sale or bonded by Buyer so that they do not constitute liens
against the Property.
(m) Possession. Possession of the Property shall be delivered by
Seller to Buyer on the Closing Date, subject to the Tenant Leases and Service
Contracts.
At the Closing, Buyer shall deliver to Seller (i) written indemnity
agreements as contemplated by Paragraphs 11(c) and 11(e), and (ii) if
required to comply with applicable statutes, execution of each letter to
tenants contemplated by Paragraph 11(c).
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<PAGE>
12. Prorations and Credits.
(a) The following items shall be prorated as of 11:59 p.m. of the
day immediately preceding the Closing Date. To the extent that the amounts
of the items to be prorated are ascertainable as of the Closing Date, they
shall be prorated at the Closing. To the extent that the amounts of the
items to be prorated are not reasonably ascertainable as of the Closing Date,
they shall be adjusted as promptly after the Closing as the amounts thereof
are ascertained. Any errors or omissions in computing the prorations at the
Closing shall be promptly corrected and this obligation shall survive the
Closing hereunder for a period of twelve (12) months from the Closing Date.
i) Water, sewer, fire protection, inspection services,
electric, telephone and all other utility charges.
ii) Prepaid rents (including tax and similar participations),
utility deposits, and income from cable television and telephone
providers, vending machines and other sources.
iii) Prepaid service, maintenance and other similar items with
respect to the Service Contracts.
iv) Such other items of income and expenses as are
customarily prorated in real estate transactions.
v) Rents (including furniture, carport, garage and all other
rental amounts payable by tenants of the Property) for the month of
Closing shall be prorated. Unpaid rents from tenants shall not be
prorated at the Closing. In the event that on the Closing Date any
tenant is in arrears in the payment of rent for the month of the Closing
and/or any months prior thereto, Buyer shall hold any rents (net of the
reasonable costs of collection) collected after the Closing Date from
such tenant in trust for the benefit of Seller, and shall promptly remit
such rents (net of reasonable costs of collection) to Seller for
application in reduction of such arrearage; provided, however, that no
sums received by Buyer shall be so held or paid to Seller for
application to rents in arrears unless and until such rent and other
charges due for the periods subsequent to the Closing shall have been
received and retained by Buyer. Buyer agrees to use reasonable efforts
to collect rent arrearages due Seller from tenants, provided that Buyer
shall not be obligated to commence any litigation against such tenants,
incur any expense in collecting such arrearages (other than the expense
of routine billing) or terminate a Tenant Lease.
vi) Real estate taxes, special assessments and assessments
under the Declaration. Notwithstanding anything to the contrary
contained herein, (i) real estate taxes shall be prorated on the basis
of the latest valuations and mill levies and shall be subject to
readjustment as soon as the actual valuation and mill levies for the
year during which Closing takes place are conclusively determined, and
(ii) Seller shall pay in full at or prior to Closing any installments of
special assessments which may be a lien on the Property and that are due
prior to Closing.
(b) Seller shall furnish readings of the water, gas and electric
meters at the Property to the Closing Date. Seller shall cooperate with
Buyer to provide, as of the Closing Date, for a cancellation of electricity
15
<PAGE>
and other utility services in Seller's name and a continuation thereof
without interruption in Buyer's name. To the extent such a timely
cancellation and continuation occurs, there shall be no proration of utility
charges as provided in Paragraph 12(a)i).
(c) All transfer taxes and all sales and use taxes imposed on or
in connection with this transaction shall be paid by Seller, regardless of
whether Seller would otherwise be obligated under Arizona law.
(d) The Security Deposits shall be transferred to Buyer or
credited against the Purchase Price.
(e) Buyer may elect to satisfy a portion of the Purchase Price by
taking title to the Property subject to the outstanding balance of any lien
or encumbrance against the Property, provided that (1) credit shall not be
allowed for any liens that are bonded over by Seller, and (2) if Buyer elects
to take title subject to the Loan, such election shall be conditioned on
Buyer releasing Seller and the Related Parties from all further liability
under the Loan, including all liability under any warranty, guaranty,
indemnity or other agreement given in connection with the Loan.
13. Casualty Loss. Seller shall cause the insurance policies now in
effect with respect to the Property to be maintained until the Closing. If
at any time prior to the Closing Date, any portion of the Property is
destroyed or damaged as a result of fire or any other casualty whatsoever,
Seller shall promptly give written notice thereof to Buyer and, subject to
the rights of the holder of any first priority mortgage on the Property,
Seller shall promptly restore and repair the Property to a condition at least
as good as that existing prior to the damage. If such restoration cannot
reasonably be completed prior to the Closing Date, Buyer shall be entitled to
(i) terminate this Agreement, (ii) postpone the Closing until such
restoration is complete or (iii) close on the Closing Date and receive all
casualty insurance proceeds available to complete such restoration (less the
portion thereof claimed by any first priority mortgage lender or applied
toward restoration or repair of the Property) and, unless all deductible
amounts have been fully paid by Seller with respect to such insurance prior
to Closing, Buyer shall receive a credit for such amounts at Closing.
14. Brokerage. Seller shall pay at closing all amounts due to Steven
Karpf and to Karpf, Zarilli & Co., Inc. (collectively, "Broker") with respect
to the transactions contemplated in this Agreement. Seller and Buyer each
represent and warrant to the other that the party making such representation
has not dealt with any broker or other intermediary other than Broker in
connection with or relating to the transactions that are the subject of this
Agreement. Seller and Buyer shall defend, indemnify and hold the other
harmless from and against any and all liability, claim, charges or damages,
including without limitation, counsel fees and court costs, incurred by the
other as a result of any breach by the indemnitor of the foregoing
representation.
15. Eminent Domain.
(a) If at any time prior to the Closing Date, there shall be a
taking by eminent domain proceedings or the commencement of any such
proceedings, with respect to all or any part of the Property, Seller shall
give written notice thereof to Buyer promptly upon learning of the same, and,
if Buyer elects to close this transaction, the purchase price for the
Property shall be reduced by the total of any awards or other proceeds
16
<PAGE>
received by Seller (directly or indirectly) with respect to any such taking
at or prior to Closing, and at the Closing Seller shall assign to Buyer all
rights of Seller in and to any further awards or other proceeds payable by
reason of any taking.
(b) Until such time as the Closing has occurred, or this Agreement
terminates, any negotiation for or agreement to, and all contests of, any
offers and awards relating to eminent domain proceedings shall be conducted
only with the joint approval and consent of Seller and Buyer.
16. Remedies. If any obligation of Seller hereunder is not fully and
timely performed as herein provided, Buyer shall have the following remedies
(which shall be Buyer's sole and exclusive remedies except where otherwise
provided herein):
(a) Buyer may elect to treat this Agreement as terminated, in
which case all payments and things of value provided by Buyer hereunder shall
be returned to Buyer;
(b) Buyer may elect to treat this Agreement as being in full force
and effect, and Buyer shall have the right to an action for specific
performance, provided, however, that specific performance shall not be
available as to obligations (other than conveyance of title as provided for
in this Agreement) that are not within the reasonable control of Seller; and
(c) Buyer shall be entitled to payment of its reasonable
attorneys' fees and costs of enforcement of its remedies.
17. Entire Agreement. This is the entire agreement between the parties
relating to the subject matter hereof and there are no other terms,
obligations, covenants, representations, statements or conditions, oral or
otherwise, of any kind whatsoever relating to the subject matter hereof. Any
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of this Agreement in whole or in part unless such
agreement is in writing and signed by.the party against whom enforcement of
the change, modification, discharge or abandonment is sought.
18. Survival. Except as otherwise provided herein, all agreements,
warranties and representations contained herein shall survive Closing, and
shall not be deemed to have merged into the deed, but such survival shall
extend for only twelve (12) months, after which no action, claim or other
proceeding may be brought upon or to enforce any such agreement, warranty or
representation.
19. Notices. All notices, demands and requests or other communication
to be sent by one party to the other hereunder or required by law shall be in
writing and shall be deemed to have been validly given or served by delivery
of same in person to the addressee or by depositing same with a carrier in
the business of making guaranteed overnight deliveries for next business day
delivery or by depositing same in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, to the following
addresses:
If intended for Seller:
Specified Properties VIII, L.P.
5950 Berkshire Lane, Suite 500
Dallas, Texas 75225
17
<PAGE>
Attn: John R. Carmichael or Tom Teague
Phone No.: (214)369-9433
Fax No.: (214)369-0908
with a copy to:
Michael K. Ording, Esq.
Jones Day Reavis & Pogue
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
Phone No.: (214)220-3939
Fax No.: (214)969-5100
If intended for Buyer:
Wellsford Residential Property Trust
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Edward Lowenthal
Phone No.: (212)333-2300
Fax No.: (212)333-2323
With a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attn: Wayne H. Hykan, Esq.
Phone No.: (303)534-6335
Fax No.: (303)623-1956
All notices, demands and requests shall be effective upon such personal
delivery or upon being deposited with the above-referenced overnight carrier
or in the United States mail as required above. However, with respect to
notices, demands or requests so deposited with the above-referenced overnight
carrier or in the United States mail, the time period within which a response
to any such notice, demand or request must be given shall commence to run
from the next business day following any such deposit with the above-
referenced overnight carrier or, in the case of a deposit in the United
States mail as provided above, the date on the return receipt of the notice,
demand or request reflecting the date of delivery or rejection of the same by
the addressee thereof. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given as herein
required shall be deemed to be receipt of the notice, demand or request sent.
By giving to the other party hereto at least 15 days' written notice thereof
in accordance with the provisions hereof, the parties hereto shall have the
right from time to time to change their respective addresses and each shall
have the right to specify as its address any other or additional address
within the United States of America.
20. No Joint Venture; No Merger. Seller and Buyer acknowledge that
concurrently with execution of this Agreement Buyer or an affiliate of Buyer
has made a loan to Seller in the principal amount of $17,800,000.00, secured
by the Property (the "Loan"). Notwithstanding anything in this Agreement or
in the documents delivered in connection with the Loan, it is the express
intent of the parties that (i) nothing in the relationship between Seller and
Buyer is intended to or shall constitute Seller and Buyer as partners or
joint venturers with respect to the Property or to any other matter; (ii) the
18
<PAGE>
relationship of the parties hereunder shall be strictly that of optionor and
optionee under the Option granted herein; (iii) the rights of Buyer hereunder
shall survive any foreclosure or other exercise of remedies under the Loan
and shall not be merged therein, nor shall any rights of the holder of the
Loan be merged into any document delivered in connection with the Option.
21. Miscellaneous.
(a) The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
(b) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
(c) This Agreement shall be governed by and shall be construed and
interpreted in accordance with the laws of the State of Arizona.
(d) This Agreement and all documents, agreements, understandings
and arrangements relating to this transaction have been executed by the
undersigned in his/her capacity as an officer or trustee of Buyer which has
been formed as a Maryland real estate investment trust pursuant to a
Declaration of Trust of Buyer dated as of July 10, 1992, and not
individually, and neither the trustees, officers or shareholders of Buyer
shall be bound or have any personal liability hereunder or thereunder.
Seller shall look solely to the assets of Buyer for satisfaction of any
liability of the Buyer 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 trustees,
officers or shareholders of Buyer 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.
(e) The parties hereto acknowledge that the transfer of the
Property must be reported to the Internal Revenue Service as required by
Section 6045(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), unless Section 6045(e) provides an exemption to such reporting
requirement. Accordingly, on or before the Closing Date, Seller, Buyer and
the Title Company shall enter into written "designation agreement" as defined
in and in accordance with Regulation Section 1.6045-4 of the Code, which
designation agreement shall designate the Title Company as the "real estate
reporting person" responsible for reporting the respective transfers to the
Internal Revenue Service.
(f) Subject to the last sentence of this Section, the parties
hereto agree that neither party shall make an announcement of the transaction
contemplated herein to third parties without the prior written consent of the
other party hereto. Buyer shall have the right to approve any public
announcement. Subject to the last sentence of this Section and except as
required by court order or by operation of law, the contents of this
Agreement shall remain confidential and shall only be disclosed to those
third parties necessary to facilitate the consummation of the transaction
contemplated hereby. Notwithstanding the foregoing, Buyer may disclose this
Agreement as it deems necessary or appropriate to comply with securities or
other laws or to fulfill its corporate or fiduciary obligations to its
investors.
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<PAGE>
(g) The Exhibits attached hereto and made a part hereof are:
Exhibit A: Legal Description
Exhibit B: Rent Roll
Exhibit C: Form of Tenant Lease
Exhibit D: Description of Carpet Specifications
Exhibit E: Description of Pending Claims
Exhibit F: List of Nonterminable Contracts
Exhibit G: Utility Suppliers
Exhibit H: Insuranc
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER:
SPECIFIED PROPERTIES VIII, L.P., a Texas
limited partnership
By: Westwood Residential No. 9
Limited Partnership, its general
partner
By: Westwood Residential
General Partner No. 9,
Inc., its general partner
By:/s/ John R. Carmichael
_____________________________
Name: John R. Carmichael
Title: President
BUYER:
WELLSFORD RESIDENTIAL PROPERTY TRUST, a
Maryland real estate investment trust
By:/s/ Donald D. MacKenzie
______________________________________
Name: Donald D. MacKenzie
Title: Vice President
21
<PAGE>
EXHIBIT A
(Legal Description)
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
22
<PAGE>
EXHIBIT B
(Rent Roll)
23
<PAGE>
EXHIBIT C
(Form of Tenant Lease)
24
<PAGE>
EXHIBIT D
(Description of Carpet Specifications)
25
<PAGE>
EXHIBIT E
(Description of Pending Claims)
NONE
26
<PAGE>
EXHIBIT F
(List of Nonterminable Contracts)
Vendor Type Cancellation
Haas Publishing Company Apt. Guide Between 4th &
5th Issue or
2/1/97
Web Service Co. Washers/Dryers 9/1/2005
Interactive Cable Systems, Inc. Cable Television Serv. April, 2010
Interactive Cable Systems, Inc. Telephone Service April, 2010
Interactive Cable Systems, Inc. Alarm Service
April, 2010
27
<PAGE>
EXHIBIT G
(Utility Suppliers)
_________________________________________________________________
| | |
| Telephone | Interactive Cable Systems, Inc. |
|______________________|_______________________________________|
| | |
| Cable Television | Interactive Cable Systems, Inc. |
|______________________|_______________________________________|
| | |
| Electric | Tucson Electric Power Company |
|______________________|_______________________________________|
| | |
| Water | City of Tucson |
|______________________|_______________________________________|
| | |
| Sewer | City of Tucson |
|______________________|_______________________________________|
| | |
| Gas | Southwest Gas Corporation |
|______________________|_______________________________________|
28
<PAGE>
EXHIBIT H
(Insurance)
(See attached two (2) Certificates of Insurance)
29
<PAGE>
EXHIBIT 10.4
FIRST AMENDMENT TO OPERATING AGREEMENT
OF PARK AT HIGHLANDS LLC
THIS FIRST AMENDMENT TO OPERATING AGREEMENT OF PARK AT HIGHLANDS LLC
(this "First Amendment") is made as of the 29th day of December, 1995, 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 Park at Highlands LLC, a Colorado limited liability company
(the "Company"), which is governed by that certain Operating Agreement of
Park at Highlands LLC (the "Operating Agreement") dated as of April 27, 1995.
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:
1. Construction Loan Outside Date. The Construction Loan Outside Date
as defined in Section 5.2.4 of the Operating Agreement is hereby postponed to
January 5, 1996
2. Cost Savings Fee. The first sentence of Section 7.4 of the
Operating Agreement is hereby deleted in its entirety and the following is
substituted therefor:
"The Company shall pay Feld at Final Closing a cost
savings fee equal to twenty-five percent (25%) of cost
savings, if any."
3. Attorneys Fees. The following paragraph is hereby added to the
Operating Agreement as new Section 19.17 thereof:
19.17 Attorneys Fees. Should any party hereto institute any legal
action or proceeding to enforce any provision of the Operating Agreement
or for damages by reason of any alleged breach of any provision of the
Operating Agreement or for any other judicial remedy, the prevailing
1
<PAGE>
party shall be entitled to receive from the non-prevailing party all
reasonable attorneys' fees and all court costs in connection with said
action or proceeding, in addition to any other award.
4. Exhibits to Operating Agreement. The Members hereby agree that the
exhibits listed below, a copy of each of which is attached hereto and
incorporated herein, are hereby attached to and made a part of the Operating
Agreement to the same effect as if each had been fully set forth in the
Operating Agreement at the date it was executed by the Members and that each
of the exhibits attached to this First Amendment is hereby substituted for
and shall supersede the corresponding exhibit attached to the Operating
Agreement, if any:
Exhibit C Deposit and Contract Administration Agreement
Exhibit E Description of Infrastructure
Exhibit F Description of Infrastructure Land
Exhibit J Property Management Agreement
Exhibit L Pledge and Security Agreement - Feld to WPHC
Exhibit M Pledge and Security Agreement - WPHC to Feld
Exhibit N Description of Plans and Specifications
Exhibit O Final Project Budget
Exhibit U Substitution Agreement
5. 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.
6. Counterparts. This 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.
[SIGNATURE PAGE FOLLOWS]
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto, being all of the Members of the
Company, have executed this Amendment as of the date first written above.
By: /s/ Al Feld
____________________________________
Al Feld
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By: /s/ Donald D. MacKenzie
____________________________________
Donald D. MacKenzie, Vice President
3
<PAGE>
EXHIBIT C
DEPOSIT AND CONTRACT ADMINISTRATION AGREEMENT
This Deposit and Contract Administration Agreement ("Agreement") is made
as of the 2nd day of May, 1995, by and between THE FELD COMPANY, a Colorado
corporation, located at 4600 S. Ulster Street, Suite 350, Denver, Colorado
80237, and WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation, located at
370 17th Street, Suite 3100, Denver, Colorado 80202 (hereinafter called
"WPHC").
RECITALS
WHEREAS, The Feld Company and Mission Viejo Company, a California
corporation ("Mission"), previously entered into that certain Second Amended
and Restated Vacant Land Purchase and Sale Agreement on March 23, 1995 (the
"Purchase Agreement") for the purchase of approximately 182 acres of
unimproved real property in Douglas County, Colorado, being more particularly
described as Lots 1 through 5, Highlands Ranch Filing No. 126-A (the
"Property"); and
WHEREAS, by an Assignment and Assumption Agreement of even date
herewith, The Feld Company, in consideration of the sum of $300,000 paid to
it by WPHC, has assigned to WPHC all of its right, title and interest in (i)
the Purchase Agreement, and (ii) that certain earnest money deposit in the
amount of $300,000 (the "Deposit") previously paid to Mission in accordance
with the terms of the Purchase Agreement; and
WHEREAS, by an Assignment and Assumption Agreement of even date
herewith, WPHC has assigned all of its rights and obligations pursuant to the
terms and provisions of the Purchase Agreement with respect to the purchase
of "Phase I," as that term is defined in the Purcha se Agreement, to the Park
at Highlands LLC, a Colorado limited liability company ("PAH"); and
WHEREAS, The Feld Company and WPHC now desire to enter into a new
agreement to document the rights and obligations of The Feld Company and WPHC
with respect to the funds being deposited with WPHC pursuant to the terms of
this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants herein contained, and respectively expressing the intention to be
legally bound hereby, covenant and agree as follows:
1. Receipt and Acknowledgement. WPHC hereby acknowledges the receipt
of the sum of $150,000 from The Feld Company, which will be held by WPHC, and
governed by the terms of this Agreement.
2. Reimbursement.
a. WPHC may sell or assign its interest in the Purchase
Agreement, with respect to the Property, or any part thereof, to an
entity jointly owned by Al Feld and/or The Feld Company and Wellsford
4
<PAGE>
Residential Property Trust ("Wellsford") or an entity owned by Wellsford
("Approved Entity") for any reason whatsoever. If however, WPHC sells or
assigns its interest in the Purchase Agreement, with respect to the
Property or any part thereof, to any person or entity that does not
qualify as an Approved Entity, then WPHC shall, within five business
days from the execution of such sale or assignment, pay The Feld Company
the sum of $150,000.
b. If all or any portion of the Deposit is credited by Mission
towards the purchase price of all or any portion of the Property, then
WPHC shall pay 50% of the amount so credited by Mission, to The Feld
Company within five business days following the receipt of such credit
by WPHC.
c. If all or any portion of the Deposit is returned to WPHC by
Mission, for any reason whatsoever, then WPHC shall pay 50% of the
amount so returned to The Feld Company within five business days
following WPHC's receipt thereof.
d. If the Deposit is not returned or credited by Mission to WPHC,
then neither party shall be liable to the other for reimbursement of the
Deposit or any portion thereof, except as set forth in paragraph 2.a.
hereof.
3. Right of First Offer. If The Feld Company is not in default under
any agreements with WPHC or its affiliates, and if WPHC decides not to
purchase any of Phases II, III, IV or V, as defined in the Purchase
Agreement, WPHC agrees to notify The Feld Company at least 150 days before
the scheduled closing of such Phase, and The Feld Company shall have 90 days
to obtain another source of acquisition and development financing and to
present an offer to WPHC to acquire the subject parcel. If The Feld Company
fails to present an offer acceptable to WPHC in WPHC's sole discretion, WPHC
shall have no obligations to The Feld Company with respect to such parcel.
4. Entire Agreement. This is the entire agreement between the parties
and there are no other terms, obligations, covenants, representations,
statements or conditions, oral or otherwise, of any kind whatsoever. Any
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of this Agreement in whole or in part unless such
agreement is in writing and signed by the party against whom enforcement of
the change, modification, discharge or abandonment is sought.
5. No Further Obligations. The parties have no obligations or
liabilities of any nature or kind to the other party with respect to the
Deposit or the Purchase Agreement, except as expressly set forth in this
Agreement. WPHC shall have exclusive control over the Purchase Agreement, as
it relates to Phases II, III, IV and V, as described therein, and The Feld
Company has no interest whatsoever in the Purchase Agreement with respect to
Phases II, III, IV and V, except for any rights set forth in this Agreement.
None of the provisions of this Agreement constitute or create any agreement
or obligation by either party to (i) enter into a joint venture, partnership,
corporation, limited liability company or any other arrangement with the
other party, or to negotiate in good faith with respect to the same; (ii) to
enter into any agreements, or to negotiate in good faith with respect to the
same; (iii) to purchase or develop the Property, or any portion thereof; or
(iv) to act in any manner whatsoever, unless expressly provided for in this
Agreement or otherwise reduced to a definitive written agreement, executed by
the parties. The parties acknowledge and agree that they have no obligations
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with respect to Phases II, III, IV and V, as described in the Purchase
Agreement.
6. Miscellaneous.
a. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their
respective heirs, executors, administrators, legal representatives,
successors and permitted assigns.
b. Governing Law. This Agreement shall be governed by and shall
be construed and interpreted in accordance with the laws of the State of
Colorado.
c. Notices. All notices, consents, approvals or other
communications which any of the parties to this Agreement may desire or
may be required to give hereunder shall be in writing and shall be given
by registered or certified mail, return receipt requested, postage
prepaid, or by personal delivery, delivery by courier, or by confirmed
telecopy or facsimile transmission, addressed as follows:
If to The Feld Company: The Feld Company
4600 South Ulster Street
Suite 350
Denver, Colorado 80237
Fax: 303-721-9418
and to: __________________________________
__________________________________
__________________________________
__________________________________
Fax: ____________________________
If to WPHC: Wellsford Park Highlands Corp.
370 17th Street, Suite 3100
Denver, Colorado 80202
Fax: 303-595-7799
Attn: Don MacKenzie
and to: Wayne H. Hykan, Esq.
Brownstein Hyatt Farber &
Strickland, P.C.
410 17th Street, Suite 2200
Denver, Colorado 80202
Fax: 303-623-1956
Any such notice to WPHC or The Feld Company shall be deemed to be given,
received, and effective three days after such notice has been deposited in
the United States mail, addressed as aforesaid, or when personally delivered
to and received by the specified parties. All addresses for notices under
this Agreement shall be located within the United States of America.
7. Counterparts. This Agreement may be executed in counterparts.
8. Costs of Legal Proceedings. In the event that either party
institutes legal proceedings with respect to this Agreement or the
transaction contemplated hereby, the prevailing party shall be entitled to
recover its costs and expenses incurred in connection with such legal
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proceedings, including, without limitation, reasonable attorneys' fees. The
terms of this paragraph shall survive the termination of this Agreement.
9. Liability of WPHC. No officer, director or shareholder of WPHC
shall be bound by or have any personal liability hereunder or under any
document, agreement, understanding or arrangement relating to this
transaction. 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 any and all
future documents, agreements, understandings, arrangements and transactions
between the parties hereto.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE FELD COMPANY:
THE FELD COMPANY, a Colorado corporation
By: /s/ Al Feld
___________________________________
Al Feld, President
WPHC:
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation
By: /s/ Donald D. MacKenzie
___________________________________
Donald D. MacKenzie
Vice President
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EXHIBIT E
DESCRIPTION OF INFRASTRUCTURE
The following Description of Infrastructure uses substantially the same
categories as those in the Infrastructure Improvement Agreement. The
Aggregate of these categories comprises the Infrastructure for the Master
Development.
1. Overlot Grading. This includes rough grading for the Infrastructure
Land and some of the fine grading for the park.
2. Willows Water Line. This category includes the engineering and physical
relocation of a 30 inch Willows Water District water line as well Quebec
Street paving associated with the relocation.
3. Main Recreational Center & Grounds. This is the main recreational
facility for the Master Development. All apartment phases will share
its use. The rec center building will contain approximately 30,000
square feet and house a gym with exercise equipment, basketball court,
racquet ball court(s) and leasing offices. The rec center grounds are
expected to feature a pool & spa, volleyball court, tennis court(s),
pond and parking.
4. Water and Sewer Systems, Temporary Access Road. Included here is the
main water and sewer system that will serve the Master Development.
Additional water and sewer systems will be constructed with each
apartment phase and are not part of the Infrastructure. This category
also includes building of a temporary road that will be used as
construction access.
5. Entryway/Guardhouse/Paving. The main access/entry for the Master
Development is from South Quebec Street. At this entry there will be
entry monuments, gates, walls and a guardhouse. Paving for the entry
and loop road (the entry and loop roads collectively comprise Tract A of
the Infrastructure Land) is also included as part of this category.
6. Public Utilities. A telephone distribution system will be installed
around the loop road which will be joint trenched with gas, electric and
cable TV facilities. Some or all of the above facilities may be
installed by parties unrelated to the Company.
7. Park Improvements. Tract B of the Infrastructure Land will be
landscaped and improved with a softball diamond, soccer field, golf
putting area and other similar improvements.
8. Glen Eagles Entry. A future entry for the Master Development may be
needed to provide with ingress/egress. It is contemplated that this
access would be from Glen Eagles Drive at the southern boundary of the
Master Development. This category will include entry monuments, gates
and associated road improvements.
9. Professional Services and Miscellaneous. This category includes various
professional services associated with the development all Infrastructure
components. It includes architectural design, interior design of the
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Main Rec Center, landscape design, civil engineering, soils
engineering/testing, and legal services associated with closing the
Infrastructure Land and any ongoing document review. Field supervision,
general labor and other miscellaneous items, necessary for construction
of all Infrastructure components, are also included in this category.
This category also includes building the construction yard compound
which serves as a staging/storage area for the Master Development.
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EXHIBIT F
DESCRIPTION OF INFRASTRUCTURE LAND
Lot 1B, Tract A and Tract B, Highlands Ranch Filing No. 126-A, 1st Amendment
as recorded at Reception No. 9560621
in the records of the Douglas County Clerk and Recorder's Office,
County of Douglas, State of Colorado
Lot 1B is the land on which the main recreational center will be situated to
service the Master Development.
Tract B is the land on which the main park will be situated to service the
Master Development.
Tract A is the land on which both the main access road and loop road will be
constructed to provide ingress and egress to the Master Development. The
loop road will encircle Lot 1B and Tract B. The main access road will
directly adjoin South Quebec Street.
EXHIBIT J
PARK AT HIGHLANDS, LLC
PROPERTY MANAGEMENT AGREEMENT
This agreement (the "Agreement") is executed on the ____ day of
December, 1995 by and between PARK AT HIGHLANDS, 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, 1996 (the "Commencement
Date") to manage and lease on behalf of Owner the following properties
(individually or collectively the "Property"): Blue Ridge 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 Park at
Highlands, LLC dated as of April 27, 1995 ("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
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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
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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 Marlager;
(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:
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(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 Manager'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
("Owner's 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 apartment units, retain
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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.
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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
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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 Proceeding 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
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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
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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.
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(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.
(e) Any default of Al Feld under the Operating Agreement.
(f) Removal of Al Feld under the Operating Agreement.
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 dale 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, 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.
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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. Upon removal of Feld under the Operating
Agreement this agreement shall terminate.
8.05 Termination Upon Sale of the Property. If the Property is sold,
conveyed or transferred during the term hereof, this Agreement shall
terminate.
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 Park at Highlands. LLC. The termination
of this Agreement shall not affect or impair the rights and remedies of
the parties to the Operating Agreement of Park at Highlands, 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
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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: Park at Highlands, LLC
c/o Wellsford Residential Property Trust
370 17th Street, Suite 3100
Denver, CO 80202
Attention: Gareth Y. Hudson
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.
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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:
PARK AT HIGHLANDS, LLC THE FELD COMPANY
a Colorado corporation
By:_________________________________ By:___________________________________
Name:_________________________________
Title:________________________________
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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.
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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.
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SCHEDULE B
OWNER'S POLICIES AND PROCEDURES TO BE FOLLOWED BY MANAGER
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EXHIBIT L
PLEDGE AND SECURITY AGREEMENT - FELD TO WPHC
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of the
27th day of April, 1995, 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 Park at Highlands LLC, a
Colorado limited liability company (the "Limited Liability Company"), which
Limited Liability Company is governed by its Operating Agreement dated as of
April 27, 1995 (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 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.
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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 the 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
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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 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
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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
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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
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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, may determine.
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
the 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
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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
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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.
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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 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
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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 Wellsford Residential Property
Trust. 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.
[SIGNATURE PAGE FOLLOWS]
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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
__________________, 1995, 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
__________, 199__, by _________________________ as _______________ of
Wellsford Park Highlands Corp., a Colorado corporation.
WITNESS my hand and official seal.
My commission expires: _____________________________________.
Address:
_________________________________________
(SEAL) Notary Public
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EXHIBIT A
CONSENT TO SECURITY INTEREST AND AGREEMENT
OF THE MEMBERS
OF PARK AT HIGHLANDS LLC,
a Colorado Limited Liability Company
The undersigned, being all the members of PARK AT HIGHLANDS 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
Parties; 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 27, 1995.
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.
5. 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
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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
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EXHIBIT M
PLEDGE AND SECURITY AGREEMENT
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is made as of
the 27th day of April, 1995, 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 Park at Highlands LLC, a Colorado limited
liability company (the "Limited Liability Company"), which Limited Liability
Company is governed by its Operating Agreement dated as of April 27, 1995
(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 the Pledgee; and
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(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
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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.
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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: Applied For
. 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,
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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 the Pledgor and Pledgee; 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.
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
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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
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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
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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 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
47
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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 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
48
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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.
[SIGNATURE PAGE FOLLOWS]
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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
_______________, 199__, 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
__________, 199__, by Al Feld.
WITNESS my hand and official seal.
My commission expires: _____________________________________.
Address:
________________________________
(SEAL) Notary Public
50
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SCHEDULE A TO
EXHIBIT H-2
CONSENT TO SECURITY INTEREST AND AGREEMENT
OF THE MEMBERS
OF PARK AT HIGHLANDS LLC,
a Colorado Limited Liability Company
The undersigned, being all the members of PARK AT HIGHLANDS 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"):
(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 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 27, 1995.
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 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
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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
52
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EXHIBIT N
DESCRIPTION OF PLANS/SPECIFICATIONS
53
<PAGE>
EXHIBIT O
FINAL PROJECT BUDGET
54
<PAGE>
EXHIBIT U
SUBSTITUTION AGREEMENT
THIS SUBSTITUTION AGREEMENT (this "Agreement") is made and entered into
as of the ____ day of December 1995, 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 Park at Highlands LLC, a Colorado limited
liability company (the "LLC"), which LLC is governed by its Operating
Agreement dated as of April 27, 1995 (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:
a. 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.
b. 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
55
<PAGE>
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.
c. 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.
d. 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.
e. 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.
f. 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.
g. 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.
h. 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.
i. Capitalized Terms. All capitalized terms not otherwise defined
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<PAGE>
herein shall have the meanings set forth in the Operating Agreement.
j. Amendment. This Agreement may be modified or rescinded only by a
writing expressly relating to this Agreement and signed by all of the
parties.
[SIGNATURE PAGE FOLLOWS]
57
<PAGE>
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:____________________________________
58
<PAGE>
Exhibit 10.5
TRI-PARTY AGREEMENT
THIS TRI-PARTY AGREEMENT ("Agreement") is executed this 29th day of
December, 1995, by and among NATIONSBANK OF TEXAS, N.A., a national banking
association ("Construction Lender" or "NationsBank"), PARK AT HIGHLANDS 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:
I. Feld and WPHC, as members, are parties to that certain Operating
Agreement of Park at Highlands LLC, a Colorado limited liability company, dated
as of April 27, 1995 (the "Operating Agreement") evidencing the organization
and formation of Borrower. The Operating Agreement contemplates the
development of a 456-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.
J. 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 $36,376,700 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."
K. 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
1
<PAGE>
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
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<PAGE>
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 but does not
include any amounts funded by WPHC or from the Bonds to pay for construction
costs in excess of the Final Project Budget ("Cost Overruns"). 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
December 1, 1995 and relating to certain indemnification obligations of
3
<PAGE>
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. (a) 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 (i) cures or causes to
be cured such default (it being agreed that WRPT shall have no obligation to
cure any such default), or (ii) notifies NationsBank of its willingness to pay
and satisfy or purchase the Loan from NationsBank by payment of the appropriate
"Default Payoff" (as hereinafter defined), within ten (10) days after the
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 of the Default Payoff. 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
4
<PAGE>
NationsBank reserving the right to collect the full amount of the Default
Payoff. 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.
(b) The amount of the Default Payoff shall be determined as follows:
(i) If, at the time of delivery of the Default Notice, all of
the conditions and requirements listed in Exhibit B hereto have been satisfied,
then the Default Payoff shall be the same as the Loan Payoff (and shall not
include any Cost Overruns paid by NationsBank or any other costs incurred by
NationsBank as a result of the default). However, NationsBank reserves the
right to recover such Cost Overruns and other costs from the Guarantors.
(ii) If, at the time of delivery of the Default Notice, all of
the conditions and requirements listed in Exhibit B hereto have not been
satisfied, then the Default Payoff shall be equal to the Loan Payoff plus all
costs that have been incurred by NationsBank as a result of the default,
specifically including, without limitation, any Cost Overruns paid by
NationsBank.
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
5
<PAGE>
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: Donald D. MacKenzie
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
6
<PAGE>
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.
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
_______________________________________
Sondra Teilborg
Vice President
BORROWER:
PARK AT HIGHLANDS LLC, a Colorado
limited liability company
By:/s/ Al Feld
_______________________________________
Al Feld, Manager
WPHC:
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By:/s/ Donald D. MacKenzie
_______________________________________
Donald D. MacKenzie
Vice President
7
<PAGE>
WRPT:
WELLSFORD RESIDENTIAL PROPERTY TRUST,
a Maryland real estate investment
trust
By:/s/ Donald D. MacKenzie
_______________________________________
Donald D. MacKenzie
Vice President
GUARANTORS:
/s/ Al Feld
_______________________________________
Al Feld
THE FELD COMPANY, a Colorado corporation
By:/s/ Al Feld
_______________________________________
Al Feld
President
8
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Lot 1A, Highlands Ranch Filing No. 126-A, 1st Amendment, as filed on December
19, 1995 under Reception No. 9560621 in the Office of the Clerk and Recorder of
Douglas County, Colorado.
9
<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 Kirkham, Michael and
Associates dated October 25, 1995, last revised __________ __, 1995, Job
No. M-950504.
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
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<PAGE>
licenses which are required for the operation and use of the Project.
8. 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].
11
<PAGE>
EXHIBIT B-l TO TRI-PARTY AGREEMENT
(EXHIBIT S-1 TO OPERATING AGREEMENT)
Form of Architect's Certificate
(Letterhead of Architect)
CERTIFICATE OF ARCHITECT
____________, 1996
Park at Highlands 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 Park at Highlands
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.
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<PAGE>
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 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
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<PAGE>
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: ___________________________________
14
<PAGE>
EXHIBIT A TO
CERTIFICATE OF ARCHITECT
________________________________________
________________________________________________
_______________________________, Colorado
DRAWING LIST
ARCHITECTURAL: ____________________________________________
____________________________________________
____________________________________________
STRUCTURAL: ____________________________________________
____________________________________________
____________________________________________
FOUNDATION: ____________________________________________
____________________________________________
____________________________________________
MECHANICAL: ____________________________________________
____________________________________________
____________________________________________
PLUMBING: ____________________________________________
____________________________________________
____________________________________________
ELECTRICAL: ____________________________________________
____________________________________________
____________________________________________
LANDSCAPING: ____________________________________________
____________________________________________
____________________________________________
15
<PAGE>
EXHIBIT B TO
CERTIFICATE OF ARCHITECT
LEGAL DESCRIPTION
16
<PAGE>
EXHIBIT C TO
CERTIFICATE OF ARCHITECT
Incomplete Items Cost of Completion
17
<PAGE>
EXHIBIT B-2 TO TRI-PARTY AGREEMENT
(EXHIBIT S-2 TO OPERATING AGREEMENT)
Form of Engineer's Certificate
(Letterhead of Project Engineer)
ENGINEER'S CERTIFICATE
_____________, 1996
Park at Highlands 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 Park at Highlands 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 (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 Wellaford 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 Plant"), 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 Flood
Plain or in an identified "flood prone area," as defined 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
18
<PAGE>
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, rightsof-way, subsurface
rights or 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:_______________________
19
<PAGE>
EXHIBIT A TO
CERTIFICATE OF ENGINEERING
LEGAL DESCRIPTION
20
<PAGE>
EXHIBIT B TO
CERTIFICATE OF ENGINEERING
__________________
_____________________
_____________, Colorado
DRAWING LIST
CIVIL ENGINEERING
DRAWINGS: __________________________________
__________________________________
__________________________________
STRUCTURAL: __________________________________
__________________________________
__________________________________
FOUNDATION: __________________________________
MECHANICAL: __________________________________
__________________________________
__________________________________
PLUMBING: __________________________________
__________________________________
__________________________________
ELECTRICAL: __________________________________
__________________________________
__________________________________
LANDSCAPING: __________________________________
__________________________________
_________________________________
21
<PAGE>
EXHIBIT B-3 TO TRI-PARTY AGREEMENT
(EXHIBIT B-3 TO OPERATING AGREEMENT)
RELEASE AND WAIVER - FINAL CLOSING
THIS RELEASE AND WAIVER is given this ___ day of _________, 19_, by
______________ ("Releasor") to and for the benefit of PARK AT HIGHLANDS LLC, a
Colorado limited liability company (the "Company"), WELLSFORD RESIDENTIAL
PROPERTY TRUST, a Maryland real estate investment trust ("WRPT"), and WELLSFORD
PARK HIGHLANDS CORP., a Colorado corporation ("WPHC"). The Company, WRPT and
WPHC are hereinafter collectively called the "Released Parties."
RECITALS
A. Releasor and one or more of the Released Parties are parties to that
certain [INSERT DESCRIPTION OF RELEVANT AGREEMENT, E.G., ARCHITECT'S AGREEMENT,
CONSTRUCTION MANAGEMENT AGREEMENT, ETC.] (the "Agreement").
B. Releasor has agreed to provide this Release and Waiver as a condition
of final payment under the Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Releasor declares and states to
and for the Released Parties as follows:
1. Releasor has been paid in full all compensation and
consideration payable to Releasor under or with respect to the Agreement.
2. Releasor hereby releases and agrees to defend, indemnify and
hold harmless the Released Parties from and against any and all claims,
demands, losses, costs, damages, suits, causes of action and liabilities of
whatever nature that may have been incurred by Releasor under or with respect
to the Agreement or the transactions described in the Agreement or contemplated
thereby.
3. Releasor hereby waives and releases any and all claims and
demands of any nature whatsoever that Releasor may have or may hereafter claim
or bring against the Released Parties or any of them with respect to the
Agreement or to any transaction described in or contemplated by the Agreement.
4. This Release and Waiver shall be binding upon and inure to the
benefit of Releasor and the Released Parties and their respective heirs,
successors and assigns.
EXECUTED as of the date set forth above.
RELEASOR:
______________________________
STATE OF __________ )
) ss
22
<PAGE>
COUNTY OF__________ )
The foregoing instrument was acknowledged before me this ____ day of 1994,
by _______________________ as _______________________ of
_____________________________.
WITNESS my hand and official seal.
My commission expires:
______________________________
Notary Public
23
<PAGE>
EXHIBIT C
APPROVED BUDGET
24
<PAGE>
EXHIBIT D
SCHEDULE OF LOAN DOCUMENTS
[Unless indicated otherwise, all of the following Loan Documents are dated as
of _________ __, 1995.]
1. Construction Loan Commitment dated December __, 1995.
2. Construction Loan Agreement.
3. Promissory Note.
4. Guaranty Agreement of Al Feld.
5. Guaranty Agreement of The Feld Company.
6. Construction Loan Deed of Trust, Assignment, Security Agreement and
Financing Statement.
7. UCC-1 Financing Statements.
8. Assignment of Rents and Leases.
9. Environmental Indemnity Agreement.
10. Collateral Assignment of Management Agreement.
11. Manager's Agreement, Subordination and Consent to Assignment.
12. Assignment of Construction Contract.
13. Contractor's Subordination, Agreement and Consent to Assignment of
Construction Contract.
14. Assignment of Construction Documents.
15. Architect's Consent to Assignment, Agreement and Subordination of Lien.
16. Certification of Non-Foreign Status.
17. Notice by Disburser.
18. [Add any other documents, as appropriate.]
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Exhibit 10.6
OPERATING AGREEMENT
OF
RED CANYON AT PALOMINO PARK LLC,
A COLORADO LIMITED LIABILITY COMPANY
AS OF APRIL 17, 1996
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TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
ARTICLE 2 FORMATION OF COMPANY. . . . . . . . . . . . . . . . . . . . . . . 13
2.1 Formation . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Name. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.3 Principal Place of Business . . . . . . . . . . . . . . . 13
2.4 Registered Office and Registered Agent. . . . . . . . . . 13
2.5 Articles of Organization. . . . . . . . . . . . . . . . . 14
2.6 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE 3 BUSINESS OF COMPANY . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Permitted Businesses. . . . . . . . . . . . . . . . . . . 14
3.2 Other Activity or Business. . . . . . . . . . . . . . . . 14
ARTICLE 4 CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
AND LOANS TO THE COMPANY . . . . . . . . . . . . . . . . . . . . 14
4.1 Capital Contributions . . . . . . . . . . . . . . . . . . 14
4.2 Withdrawal or Reduction of Members'
Contributions to Capital . . . . . . . . . . . . . . . . 15
4.3 Development Deficit Payments. . . . . . . . . . . . . . . 15
4.4 Operating Deficit Payments. . . . . . . . . . . . . . . . 15
4.5 Additional Capital Contributions. . . . . . . . . . . . . 15
4.6 Miscellaneous . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 5 INITIAL CLOSING; INFRASTRUCTURE LAND CLOSING;
CONSTRUCTION LOAN CLOSING. . . . . . . . . . . . . . . . . . . . 16
5.1 Initial Closing . . . . . . . . . . . . . . . . . . . . . 16
5.2 Construction . . . . . . . . . . . . . . . . . . . . . . 17
5.3 Infrastructure Land Closing and Bond
Financing of Infrastructure. . . . . . . . . . . . . . . 20
5.4 Failure of Initial Closing or
Construction Loan Closing to Occur . . . . . . . . . . . 21
ARTICLE 6 DEVELOPMENT OF PROJECT; OPERATIONS PRIOR
TO THE FINAL CLOSING DATE. . . . . . . . . . . . . . . . . . . . 21
6.1 Duties of Feld. . . . . . . . . . . . . . . . . . . . . . 21
6.2 Construction Completion . . . . . . . . . . . . . . . . . 23
6.3 Development Deficit Guaranty. . . . . . . . . . . . . . . 23
6.4 Operating Deficit Guaranty. . . . . . . . . . . . . . . . 23
6.5 Liabilities of the Company. . . . . . . . . . . . . . . . 24
6.6 Construction Contracts. . . . . . . . . . . . . . . . . . 24
6.7 Administration of the Construction Loan . . . . . . . . . 24
6.8 Change Orders . . . . . . . . . . . . . . . . . . . . . . 24
6.9 Retainage . . . . . . . . . . . . . . . . . . . . . . . . 25
6.10 Agreements with Affiliates. . . . . . . . . . . . . . . . 25
6.11 Warranty by Feld. . . . . . . . . . . . . . . . . . . . . 25
6.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . 26
6.13 Personal Obligation . . . . . . . . . . . . . . . . . . . 27
6.14 Force Majeure . . . . . . . . . . . . . . . . . . . . . . 27
6.15 Limitations of Feld's Authority . . . . . . . . . . . . . 27
6.16 Pre-Existing Environmental Condition. . . . . . . . . . . 28
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ARTICLE 7 COMPENSATION TO FELD. . . . . . . . . . . . . . . . . . . . . . . 28
7.1 Development Management Fee. . . . . . . . . . . . . . . . 28
7.2 Construction Management Fee . . . . . . . . . . . . . . . 28
7.3 Construction Loan Guarantee Fee . . . . . . . . . . . . . 28
7.4 Cost Savings Fee. . . . . . . . . . . . . . . . . . . . . 28
7.5 Incentive Fee . . . . . . . . . . . . . . . . . . . . . . 29
7.6 Conditions to Payment of Fees;
Right of Offset. . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 8 FINAL CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1 Conditions to Final Closing . . . . . . . . . . . . . . . 30
8.2 Initiation of Final Closing . . . . . . . . . . . . . . . 30
8.3 Actions at the Final Closing. . . . . . . . . . . . . . . 30
8.4 Certain Rights of Feld Upon
Satisfaction of Final Closing
Funding Conditions . . . . . . . . . . . . . . . . . . . 30
ARTICLE 9 ALLOCATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
9.1 Profits and Losses. . . . . . . . . . . . . . . . . . . . 31
9.2 General Provisions. . . . . . . . . . . . . . . . . . . . 31
9.3 Special Provisions. . . . . . . . . . . . . . . . . . . . 32
9.4 Code Section 704(c) Allocations . . . . . . . . . . . . . 33
9.5 Allocations Relating to Taxable
Issuance of Interest . . . . . . . . . . . . . . . . . . 33
ARTICLE 10 DISTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 34
10.1 Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . 34
10.2 Division Among Members. . . . . . . . . . . . . . . . . . 34
10.3 Special Distribution to WPHC. . . . . . . . . . . . . . . 34
ARTICLE 11 BOOKS, RECORDS, AND ACCOUNTING. . . . . . . . . . . . . . . . . . 34
11.1 Books and Records . . . . . . . . . . . . . . . . . . . . 34
11.2 Reports . . . . . . . . . . . . . . . . . . . . . . . . . 34
11.3 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . 35
11.4 Special Basis Adjustment. . . . . . . . . . . . . . . . . 35
11.5 Tax Matters Partner . . . . . . . . . . . . . . . . . . . 35
11.6 Bank Accounts . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 12 MANAGEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
12.1 Management. . . . . . . . . . . . . . . . . . . . . . . . 36
12.2 Number, Tenure and Qualifications . . . . . . . . . . . . 36
12.3 Appointment of Feld as Manager. . . . . . . . . . . . . . 36
12.4 Certain Powers of Managers. . . . . . . . . . . . . . . . 36
12.5 Member Approval of Certain Acts . . . . . . . . . . . . . 37
12.6 Liability for Certain Acts. . . . . . . . . . . . . . . . 38
12.7 Indemnity of the Members and the Managers . . . . . . . . 38
12.8 Manner of Acting. . . . . . . . . . . . . . . . . . . . . 38
12.9 Informal Act by Managers. . . . . . . . . . . . . . . . . 38
12.10 Participation by Electronic Means. . . . . . . . . . . . . 39
12.11 Resignation. . . . . . . . . . . . . . . . . . . . . . . . 39
12.12 Removal. . . . . . . . . . . . . . . . . . . . . . . . . . 39
12.13 Death or Disability of Feld. . . . . . . . . . . . . . . . 40
12.14 Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . 41
12.15 Prohibition Against Publicly
Traded Partnership . . . . . . . . . . . . . . . . . . . 41
ARTICLE 13 REPRESENTATIONS, WARRANTIES AND COVENANTS . . . . . . . . . . . . 41
13.1 Representations and Warranties of
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Each Member. . . . . . . . . . . . . . . . . . . . . . . 41
13.2 Representations, Warranties and
Covenants of Feld. . . . . . . . . . . . . . . . . . . . 42
13.3 General Representation. . . . . . . . . . . . . . . . . . 45
13.4 Survival; Indemnity . . . . . . . . . . . . . . . . . . . 45
ARTICLE 14 RIGHTS AND OBLIGATIONS OF MEMBERS . . . . . . . . . . . . . . . . 45
14.1 Limitation of Liability . . . . . . . . . . . . . . . . . 45
14.2 Company Debt Liability. . . . . . . . . . . . . . . . . . 46
14.3 List of Members . . . . . . . . . . . . . . . . . . . . . 46
14.4 Company Books . . . . . . . . . . . . . . . . . . . . . . 46
14.5 Priority and Return of Capital. . . . . . . . . . . . . . 46
14.6 Outside Activity. . . . . . . . . . . . . . . . . . . . . 47
ARTICLE 15 MEETINGS OF MEMBERS . . . . . . . . . . . . . . . . . . . . . . . 48
15.1 Annual Meeting. . . . . . . . . . . . . . . . . . . . . . 48
15.2 Special Meetings. . . . . . . . . . . . . . . . . . . . . 48
15.3 Place of Meetings . . . . . . . . . . . . . . . . . . . . 48
15.4 Notice of Meetings. . . . . . . . . . . . . . . . . . . . 48
15.5 Meeting of all Members. . . . . . . . . . . . . . . . . . 48
15.6 Record Date . . . . . . . . . . . . . . . . . . . . . . . 48
15.7 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . 48
15.8 Manner of Acting. . . . . . . . . . . . . . . . . . . . . 49
15.9 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . 49
15.10 Action by Members Without a Meeting . . . . . . . . . . . 49
15.11 Voting by Ballot. . . . . . . . . . . . . . . . . . . . . 49
15.12 Waiver of Notice. . . . . . . . . . . . . . . . . . . . . 49
ARTICLE 16 TRANSFERABILITY; PUT-CALL PROVISIONS. . . . . . . . . . . . . . . 49
16.1 Restrictions on Transferability . . . . . . . . . . . . . 49
16.2 Put-Call Rights . . . . . . . . . . . . . . . . . . . . . 50
16.3 Calculation of Option Price . . . . . . . . . . . . . . . 50
16.4 Right of Offset . . . . . . . . . . . . . . . . . . . . . 51
16.5 Restrictions on Resignation . . . . . . . . . . . . . . . 51
16.6 Permitted WPHC Transfer . . . . . . . . . . . . . . . . . 51
ARTICLE 17 ADMISSION OF ADDITIONAL MEMBERS . . . . . . . . . . . . . . . . . 52
ARTICLE 18 DISSOLUTION AND TERMINATION . . . . . . . . . . . . . . . . . . . 52
18.1 Dissolution . . . . . . . . . . . . . . . . . . . . . . . 52
18.2 Effect of Filing of Dissolving Statement. . . . . . . . . 53
18.3 Distribution of Assets Upon Dissolution . . . . . . . . . 53
18.4 Articles of Dissolution . . . . . . . . . . . . . . . . . 53
18.5 Filing of Articles of Dissolution . . . . . . . . . . . . 53
18.6 Winding Up. . . . . . . . . . . . . . . . . . . . . . . . 53
18.7 No Restoration of Deficit Capital Accounts. . . . . . . . 54
18.8 Deemed Liquidation. . . . . . . . . . . . . . . . . . . . 54
18.9 Permitted Withdrawal by Feld. . . . . . . . . . . . . . . 54
ARTICLE 19 MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . . . . 54
19.1 Statement of Intent of Parties. . . . . . . . . . . . . . 54
19.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . 55
19.3 Application of Colorado Law . . . . . . . . . . . . . . . 56
19.4 Waiver of Action for Partition. . . . . . . . . . . . . . 56
19.5 Amendments. . . . . . . . . . . . . . . . . . . . . . . . 56
19.6 Construction. . . . . . . . . . . . . . . . . . . . . . . 56
19.7 Headings. . . . . . . . . . . . . . . . . . . . . . . . . 56
19.8 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . 56
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19.9 Time of the Essence . . . . . . . . . . . . . . . . . . . 56
19.10 Remedies for Default. . . . . . . . . . . . . . . . . . . 57
19.11 Rights and Remedies Cumulative. . . . . . . . . . . . . . 57
19.12 Severability. . . . . . . . . . . . . . . . . . . . . . . 57
19.13 Heirs, Successors and Assigns . . . . . . . . . . . . . . 57
19.14 Counterparts. . . . . . . . . . . . . . . . . . . . . . . 57
19.15 Further Assurances. . . . . . . . . . . . . . . . . . . . 57
19.16 Entire Agreement. . . . . . . . . . . . . . . . . . . . . 57
5
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THE SECURITIES REPRESENTED BY THIS INSTRUMENT OR DOCUMENT HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE. WITHOUT SUCH REGISTRATION, SUCH
SECURITIES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED AT ANY TIME, EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE MANAGERS OF
THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR THE
SUBMISSION TO THE MANAGERS OF THE COMPANY OF SUCH OTHER EVIDENCE AS MAY BE
SATISFACTORY TO THE MANAGERS TO THE EFFECT THAT ANY SUCH TRANSFER OR SALE WILL
NOT BE IN VIOLATION OF THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.
OPERATING AGREEMENT OF
RED CANYON AT PALOMINO PARK LLC,
A COLORADO LIMITED LIABILITY COMPANY
THIS OPERATING AGREEMENT is made as of the 17th day of April, 1996 by and
among AL FELD, an individual ("Feld"), and WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation ("WPHC"), as the members of RED CANYON AT PALOMINO PARK
LLC, a Colorado limited liability company (the "Company").
NOW THEREFORE, pursuant to the Act, the following shall constitute the
Operating Agreement of RED CANYON AT PALOMINO PARK LLC, a Colorado limited
liability company.
ARTICLE 1
DEFINITIONS
The following terms used in this Operating Agreement shall have the
following meanings (unless otherwise expressly provided herein):
(a) "Accountants" means Ernst & Young or such other accountant engaged by
the Company with the unanimous consent of the Members.
(b) "Act" means the version of the Colorado Limited Liability Company Act
adopted by the State of Colorado, Colo. Rev. Stat. Section 7-80-101 to 7-80-
913, as amended from time to time.
(c) "Adjusted Capital Account Deficit" with respect to any Member means
the deficit balance, if any, in such Member's Capital Account as of the end of
any Fiscal Year after giving effect to the following adjustments: (i) credit
to such Capital Account the sum of (A) any amount which such Member is
obligated to restore to such Capital Account pursuant to any provision of this
Agreement, plus (B) an amount equal to such Member's share of Partnership
Minimum Gain as determined under Regulation Section 1.704-2(g)(1) and such
Member's share of Partner Nonrecourse Debt Minimum Gain as determined under
Regulation Section 1.704-2(i)(5), plus (C) any amounts which such Member is
deemed to be obligated to restore pursuant to Regulation Section 1.704-
1(b)(2)(ii)(c); and (ii) debit to such Capital Account the items described in
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
(d) "Affiliate" means any Person controlling the outstanding equity
interests or profits interests of any other Person, any Person whose
outstanding equity interests are controlled by any other Person, or any Person
6
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controlling, controlled by, or under common control with any other Person.
(e) "Agreement" shall mean this Operating Agreement as originally
executed and as it may be amended from time to time.
(f) "Approved Affiliate Agreements" shall have the meaning set forth in
Section 5.2.6 hereof.
(g) "Architect's Agreement" means the agreement to be entered into
between the Company and Feld Design, Inc. ("Architect"), an Affiliate of Feld,
at or prior to the Construction Loan Closing.
(h) "Asset Value" with respect to any Company asset means:
(i) The fair market value, when contributed, of any asset
contributed to the Company by any Member;
(ii) The fair market value on the date of distribution of any asset
distributed by the Company to any Member as consideration for an Interest in
the Company;
(iii) The fair market value of all Property at the time of the
happening of any of the following events: (A) the admission of a Member to, or
the increase of an Interest of an existing Member in, the Company in exchange
for a Capital Contribution; or (B) the liquidation of the Company under
Regulation Section 1.704-1(b)(2)(ii)(g); or
(iv) The Basis of the asset in all other circumstances.
(i) "Bankruptcy Event" with respect to the Company or any Member means
any one of:
(A) Filing a voluntary petition in bankruptcy or for reorganization
or for adoption of an arrangement under the Bankruptcy Code;
(B) Making a general assignment for the benefit of creditors;
(C) The appointment by a court of a receiver for all or a portion of
the property of the Company or for all or a portion of a Member's property
having an aggregate value in excess of $500,000;
(D) The entry of an order for relief in the case of an involuntary
petition in bankruptcy; or
(E) The assumption of custody or sequestration by a court of
competent jurisdiction of all or substantially all of the Company's or such
Member's property, as appropriate.
(j) "Basis" with respect to an asset means the adjusted basis from time
to time of such asset for federal income tax purposes.
(k) "Call Option" means the call option of WPHC with respect to the
Interest of Feld as described in Section 16.2.1 hereof.
(l) "Capital Account" means an account maintained for each Member in
accordance with Regulation Sections 1.704-1(b) and 1.704-2 and to which the
following provisions apply to the extent not inconsistent with such
Regulations:
7
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(i) There shall be credited to each Member's Capital Account (A)
such Member's Capital Contributions; (B) such Member's distributive share of
Profits; (C) any items of income or gain specially allocated to such Member
under Section 9.3 of this Agreement; and (D) the amount of any Company
liabilities (determined as provided in Code Section 752(c) and the Regulations
thereunder) assumed by such Member or to which Property distributed to such
Member is subject;
(ii) There shall be debited to each Member's Capital Account (A) the
amount of money and the Asset Value of any Property distributed to such Member
pursuant to this Agreement; (B) such Member's distributive share of Losses; (C)
any items of expense or loss which are specially allocated to such Member under
Section 9.3 of this Agreement, and (D) the amount of liabilities (determined as
provided in Code Section 752(c) and the Regulations thereunder) of such Member
assumed by the Company or to which Property contributed to the Company by such
Member is subject; and
(iii) The Capital Account of any transferee Member shall include the
appropriate portion of the Capital Account of the Member from whom the
transferee Member's Interest was obtained.
(m) "Capital Contribution" means the amount of money and the Asset Value
of any property other than money contributed to the Company by a Member with
respect to such Member's Interest in the Company.
(n) "Capital Contribution Balance" means with respect to any Member the
aggregate Capital Contributions made by such Member, plus an amount
corresponding to interest thereon at an annual rate of twelve percent (12%)
from the date(s) such Capital Contributions are made until the Option Closing
Date. The parties acknowledge that the definition of Capital Contribution
Balance is only used in connection with the determination of Fair Market Value
of Feld's Interest.
(o) "Cash Flow" means the Operating Cash Flow and Sales or Refinancing
Cash Flow for any given period.
(p) "Code" means the Internal Revenue Code of 1986, as amended, or
corresponding provisions of subsequent superseding federal revenue laws.
(q) "Company" means RED CANYON AT PALOMINO PARK LLC, a Colorado limited
liability company.
(r) "Construction Consultant" means the Construction Consultant selected
by WPHC to monitor construction on behalf of WPHC, or such other consultant as
may be selected by WPHC.
(s) "Construction Lender" means the maker of the Construction Loan, or
its successor and assigns in such capacity.
(t) "Construction Loan" means the Construction Loan in the anticipated
principal amount of $27,000,000 to be made to the Company by the Construction
Lender at the Construction Loan Closing.
(u) "Construction Loan Closing" means the closing of the transactions
described in Section 5.2 hereof.
(v) "Construction Loan Closing Date" means the date on which the
8
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Construction Loan Closing occurs.
(w) "Construction Loan Outside Date" has the definition given it in
Section 5.2.4 hereof.
(x) "Construction Procedures" means the requirements regarding
construction procedures set forth on Exhibit B attached hereto.
(y) "Conversion Date" means the later of (A) the date on which
Substantial Completion has occurred, or (B) the date which is the earlier of
(i) nineteen (19) months from the Construction Loan Closing Date, or (ii) the
date upon which the construction period interest line item in the budget for
the Construction Loan has been exhausted.
(y) "Control" means the direct or indirect ownership of at least 50% of
the equity interests or profits interests of any other Person.
(z) "Cost Savings" means the positive amount, if any, by which the Total
Budgeted Development Costs exceed the actual Development Costs incurred through
the Final Closing Date.
(aa) "Deposit Agreement" means the Deposit and Contract Administration
Agreement between WPHC and The Feld Company regarding the Land Contract, which
Deposit and Contract Administration Agreement is attached hereto as Exhibit C.
(ab) "Depreciation" for any Fiscal Year or other period means the cost
recovery deduction with respect to an asset for such year or other period as
determined for federal income tax purposes, provided that if the Asset Value of
such asset differs from its Basis at the beginning of such year or other
period, depreciation shall be determined as provided in Regulation Section
1.704-1(b)(2)(iv)(g)(3).
(ac) "Development Costs" means the direct or indirect costs paid or
accrued by the Company related to the acquisition of the Project Land and the
development of the Project, including without limitation: (i) all costs of
construction and development of the Project; (ii) all costs of causing the
Project and its operations to comply with laws prior to the Conversion Date;
(iii) all real estate taxes, assessments and personal property taxes relating
to the period prior to the Conversion Date; (iv) all costs of insurance
incurred by or charged to the Company relating to the period prior to the
Conversion Date; (v) all fees paid to Feld or its Affiliates (excluding the
property management fee paid to The Feld Company after the Conversion Date);
(vi) all financing costs relating to the period prior to the Conversion Date,
including origination fees, reimbursement of expenses of the Construction
Lender and interest; (vii) all costs of administration of the Company,
including legal and accounting fees prior to or on the Final Closing Date;
(viii) all Operating Expenses incurred prior to the Conversion Date; and (ix)
costs of title insurance endorsements deleting the mechanic's lien exception
from the owner's title policy and bringing the date of the owner's title policy
down to the date of Final Closing.
(ad) "Development Deficits" means the positive amount, if any, by which
(a) Development Costs exceed (b) the sum of the Capital Contributions of the
Members required to be made at the Initial Closing, the Final Closing Capital
Contribution and the Net Operating Income for the period prior to the
Conversion Date.
(ae) "Development Deficit Payments" shall mean the Development Deficit
9
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Payments to be paid by Feld pursuant to Section 6.3 of this Agreement.
(af) "Entity" means any general partnership, limited partnership, limited
liability company, corporation, joint venture, trust, business trust,
cooperative or association, or any governmental or quasi-governmental agency or
body.
(ag) "Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C.A. Section 9601, et. seq.; the
Hazardous Materials Transportation Act, 49 U.S.C.A. Section 1801, et. seq.; the
Resource Conversation and Recovery Act, 42 U.S.C.A. Section 6901, et. seq.; the
Toxic Substances Control Act, 15 U.S.C.A. Section 2601, et. seq.; the Federal
Water Pollution Control Act, 33 U.S.C.A. Section 1251, et. seq.; any Colorado
environmental laws; or any successor to such laws (in existence on the date any
relevant representation is made or updated), or any other federal, state or
local environmental, health or safety statute, ordinance, code, rule,
regulation, order or decree regulating, relating to or imposing liability or
standards concerning or in connection with hazardous or toxic wastes,
substances, material, smoke, gas or particulate matter as now or at any time
hereafter in effect, or any common law theory based on nuisance or strict
liability.
(ah) "Environmental Reports" means the Environmental Site Assessment
prepared by ATEC Associates dated March 16, 1994, concerning the Land.
(ai) "Fair Market Value of Feld's Interest" means the following:
(i) one percent (1.0%) of the following: (A) the fair market value
of the Company's assets as determined by the Accountants based on the books and
records of the Company and on a current appraisal of the Project, minus (B) the
amount of the Company's debts and liabilities, including without limitation,
any debt encumbering the Project, trade payables, accrued expenses and
adjustments for any reasonably foreseeable contingent liabilities as determined
by the Accountants and accrued but unpaid Incentive Fees and any other fees
payable to Feld, minus (C) the Infrastructure Cost allocable to the Project
made on the same basis that such allocation of Infrastructure Cost is made in
connection with the calculation of the Incentive Fee; minus
(ii) the amount determined as of the Option Closing Date by which (A)
one percent (1.0%) of the aggregate Capital Contribution Balances of Feld and
WPHC exceeds (B) the Capital Contribution Balance of Feld.
(aj) "Final Closing" means the closing of the transactions described in
Article 8 hereof.
(ak) "Final Closing Date" means the date on which the Final Closing
occurs.
(al) "Final Closing Capital Contribution" means the Capital Contribution
to be made by WPHC pursuant to Section 4.1.2(b) hereof, when, as and if
required by this Agreement.
(am) "Final Closing Funding Conditions" means the conditions to the
obligations of WPHC to make the Final Closing Capital Contribution, which
conditions are set forth on Exhibit D attached hereto.
(an) "Final Completion" means the lien-free completion of construction of
the improvements in accordance with the Plans and Specifications (subject only
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to minor and inconsequential field changes and other changes consented to by
WPHC), including without limitation, completion or correction of all punchlist
items and seasonal items such as landscaping to the reasonable satisfaction of
WPHC, payment and release of all liens of subcontractors, materialmen, and
other providers of labor, equipment, material and/or services to the Property
and the Project as evidenced by the receipt of all unconditional lien releases
from all such subcontractors, materialmen and all other providers of labor,
equipment, material and/or services to the Property and the Project, or in the
event a lien is being contested, the posting by Feld of collateral in an amount
and form reasonably satisfactory to WPHC, which may include providing a surety
bond to which the lien is transferred and providing title insurance coverage
against such liens.
(ao) "Fiscal Year" means the taxable year of the Company for federal
income tax purposes as determined under Code Section 706 and the Regulations
thereunder.
(ap) "Force Majeure" means acts of God, strikes, shortages of labor or
materials, weather conditions or other matters not reasonably within Feld's
control ("Force Majeure"), except that under no circumstances shall lack of
available funds be considered an event of Force Majeure.
(aq) "Gross Operating Revenues" shall mean, with respect to any given
period of time, all gross operating income and rental revenues actually
received by or paid to or for the account of the Company with respect to the
ownership, operation, leasing and occupancy of the Project, excluding tenant
security deposits paid under Leases but including, but not limited to, any and
all of the following: (i) rentals paid by tenants under leases of space in the
Project ("Leases"); (ii) late charges and interest paid by tenants under
Leases; (iii) rents and receipts from vending machines and similar items; (iv)
fees from parking garages or carports, if applicable; and (v) cable television
and telephone revenues.
(ar) "Hazardous Materials" means without limitation, (i) asbestos or any
material composed of or containing asbestos or urea formaldehyde in any form
and in any type; (ii) polychlorinated biphenyl compounds; (iii) oil
hydrocarbons, petroleum, petroleum products or products containing or derived
from petroleum; (iv) any hazardous or toxic waste, substance, material, smoke,
gas or particulate matter, as presently defined by or for purposes of
Environmental Laws.
(as) "Incentive Fee" has the meaning set forth in Section 7.5 hereof.
(at) "Infrastructure" means the interior street improvements, utilities,
landscaping, a perimeter wall and gate, a guardhouse, a recreational center and
amenities, and a park and recreational amenities to be constructed on the
Infrastructure Land, as more particularly described on Exhibit E attached
hereto.
(au) "Infrastructure Costs" means the actual cost of acquiring,
constructing and developing all of the Infrastructure, including without
limitation the cost of the Infrastructure Land, design and engineering costs,
construction management fees, general contractor fees, property taxes on the
Infrastructure Land prior to completion of the Infrastructure, interest expense
on the Infrastructure Land and the Infrastructure at an assumed nine percent
(9.0%) rate of interest for the period prior to the completion of each
applicable phase of the Infrastructure. Infrastructure shall not include the
cost of issuance of bonds to finance the Infrastructure. If all of the
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Infrastructure has not been finally completed at the time of determination of
Infrastructure Costs due to phasing of the construction of Infrastructure or
for any other reason, then Infrastructure Costs shall include an amount equal
to the expected amount of Infrastructure Costs upon final completion of the
Infrastructure as reasonably determined by WPHC.
(av) "Infrastructure Land" means the parcel of land on which the
Infrastructure improvements shall be constructed, which parcel is described on
Exhibit F attached hereto.
(aw) "Infrastructure Improvements Agreement" has the meaning set forth in
Section 5.3.3 hereof.
(ax) "Initial Closing" means the closing of the transactions described in
Section 5.1 hereof.
(ay) "Initial Closing Date" means the date on which the Initial Closing
occurs.
(az) "Interest" means the ownership interest of a Member in the Company at
any particular time, including the right of such Member to any and all benefits
to which such member may be entitled as provided in this Agreement or the Act,
together with the obligations of such Member to comply with all the terms and
provisions of this Agreement and the Act. Such Interest of each Member shall,
except as specifically provided herein, be the percentage of the aggregate of
such benefits or obligations specified in this Agreement as such Member's
Percentage Interest.
(ba) "Land" means the parcel of land located in Douglas County, Colorado,
which parcel is described on Exhibit G attached hereto.
(bb) "Land Contract" means that certain Second Amended and Restated Vacant
Land Purchase and Sale Agreement dated March 23, 1995, between Mission Viejo
Company, as Seller, and The Feld Company, as Purchaser, as assigned to and
assumed by WPHC by that certain Assignment and Assumption Agreement - Purchase
Agreement dated May 2, 1995, and that portion of which relating to the Land
will be assigned to and assumed by the Company by that certain Assignment and
Assumption Agreement - Phase II dated May 1, 1996.
(bc) "Majority In Interest" shall mean Members holding a majority of the
Percentage Interests.
(bd) "Managers" shall mean one or more managers. Specifically, "Managers"
shall mean Feld or any other Persons that succeed such Manager in that
capacity. Managers need not be residents of the State of Colorado or Members of
the Company. References to the Manager in the singular or as him, her, it,
itself, or other like references shall also, where the context so requires, be
deemed to include the plural or the masculine or feminine reference, as the
case may be.
(be) "Master Development" means a five-phase, gated apartment community to
be constructed on the Master Development Land, including a central 23-acre park
containing a clubhouse, swimming pool and health club. The approximate
anticipated number of units in each phase of the Master Development is as
follows: Phase I - 456; Phase II - 304; Phase III - 332; Phase IV - 436; and
Phase V - 352, for a total of 1,880 units if fully developed.
(bf) "Master Development Land" means the Land described on Exhibit H
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attached hereto, which land is all of the land to be sold and conveyed pursuant
to the Land Contract.
(bg) "Material Default" means a default by Feld in any of its obligations
hereunder which in the reasonable judgment of WPHC has caused or is likely to
cause damages to WPHC of $250,000 or more.
(bh) "Members" shall mean Feld and WPHC and each of the parties who may
hereafter become additional or substituted Members.
(bi) "Minimum Option Price" means $50,000.
(bj) "Multi-Family Project" shall mean an apartment project, condominium
project, town-home project or other multi-family residential project.
(bk) "Net Operating Income" means, with respect to any given period of
time, the aggregate Gross Operating Revenue for such period of time minus the
aggregate Operating Expenses for such period of time. Notwithstanding the
foregoing, in connection with the calculation of the Incentive Fee, Net
Operating Income shall be determined on an accrual basis for the relevant
period with the following additional adjustments: if property taxes do not
fully reflect the completion of the Project, then the property taxes shall be
increased to the amount of property taxes that would have been assessed had the
Project been completed and included in the calculation of the property taxes.
(bl) "Operating Cash Flow" means with respect to any given period the Net
Operating Income of the Company actually received and attributable to such
period reduced by all debt service charges and expenses related to such period
and by expenditures required to be capitalized for federal income tax purposes
incurred during such period (other than Development Costs).
(bm) "Operating Deficits" means, for any specified period beginning no
earlier than (i) six (6) months after the earlier of Substantial Completion of
the multifamily units on Lot 1A, Highlands Ranch Filing No. 126-A First
Amendment ("Phase I"), or (ii) Phase I being 85% leased, the greater of 0 or
the following: (A) the interest payments, accruals and periodic charges and
expenses on the Construction Loan for such period; plus (B) the aggregate
Operating Expenses for such period of time; minus (c) Gross Operating Revenue
for such period of time.
(bn) "Operating Deficit Payments" shall mean the Operating Deficit
Payments to be paid by Feld pursuant to Section 6.4 of this Agreement.
(bo) "Operating Expenses" shall mean with respect to any given period of
time all expenses of the Company in connection with the ownership, operation,
leasing and occupancy of buildings in the Project, which either are rent-ready
or all or any portion of which are occupied by tenants, attributable to such
period of time as determined on an accrual basis, excluding interest payments
and accruals on the Construction Loan but including, but not limited to, any
and all of the following: (i) general real estate taxes; (ii) special
assessments or similar charges; (iii) personal property taxes, if any; (iv)
sales and use taxes applicable to such operating expenses; (v) cost of
utilities for the Project; (vi) maintenance and repair costs of the Project;
(vii) operating and management expenses and fees; (viii) premiums of insurance
carried on or with respect to the Project; (ix) costs, including leasing
commissions, advertisement and promotional costs, to obtain leases and the cost
of work performed to ready space in the Project for occupancy under leases; (x)
accounting and auditing fees and costs, attorneys' fees and other
administrative and general expenses and disbursements of the Company in
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connection with the ownership, operation, leasing and management of the
Project; (xi) expensed improvements in accordance with the accounting practices
of WRPT; (xii) an allocable share of the costs and expenses of operating and
maintaining the Infrastructure, excluding such costs and expenses that are paid
by the owner of any other phase of the Master Development or are paid from
operating reserves of the Infrastructure owner established in connection with
the financing of the Infrastructure (the method of allocation of such costs and
expenses shall be agreed upon by the Members at or prior to the Construction
Loan Closing); and (xiii) any other costs, charges or expenses incurred by the
Company which are not Development Costs.
(bp) "Option Closing Date" means the date on which the Call Option or the
Put Option shall close.
(bq) "Option Price" means the greater of the Fair Market Value of Feld's
Interest and the Minimum Option Price.
(br) "Outside Date" means the date that is twenty-eight (28) months
following the closing of the Construction Loan Closing Date. Such Outside Date
may be extended by Force Majeure, but in no event by more than 120 days.
(bs) "Percentage Interest" shall mean the following: (i) with respect to
Feld, one percent (1.0%); and (ii) with respect to WPHC, ninety-nine percent
(99.0%).
(bt) "Person" shall mean any individual or Entity, and the heirs,
executors, administrators, legal representatives, successors, and assigns of
such Person where the context so admits.
(bu) "Plans and Specifications" means the for-construction plans and
specifications for the construction of the Project, which plans and
specifications are to be prepared and approved by the Members as described in
Section 5.2.2 hereof.
(bv) "Pre-Existing Environmental Condition" means the presence, if any, of
Hazardous Materials on or about the Project Land on the Initial Closing Date
which at any subsequent time constitutes a violation of Environmental Laws or
which subjects or is reasonably expected to subject the Company or its Members
or Managers to liability to any Person.
(bw) "Pre-Existing Environmental Condition Liability" means any liability,
loss, damage or cost incurred by the Company prior to the Final Closing Date
arising from a Pre-Existing Environmental Condition, including without
limitation, any increase in Development Costs or Operating Expenses arising
directly from a Pre-Existing Environmental Condition.
(bx) "Profits" and "Losses" for any Fiscal Year or other period means an
amount equal to the Company's taxable income or loss for such year or period
determined in accordance with Code Section 703(a) and the Regulations
thereunder with the following adjustments:
(i) All items of income, gain, loss and deduction of the Company
required to be stated separately shall be included in taxable income or loss;
(ii) Income of the Company exempt from federal income tax shall be
treated as taxable income;
(iii) Expenditures of the Company described in Code Section
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705(a)(2)(B) or treated as such expenditures under Regulation Section 1.704-
1(b)(2)(iv)(i) shall be subtracted from taxable income;
(iv) The difference between Basis and Asset Value shall be treated as
gain or loss upon the happening of any event described in Article 1(h)(i), (ii)
or (iii);
(v) Gain or loss resulting from the disposition of Property from
which gain or loss is recognized for federal income tax purposes shall be
determined with reference to the Asset Value of such Property;
(vi) Depreciation shall be determined based upon Asset Value instead
of as determined for federal income tax purposes; and
(vii) Items which are specially allocated under Article 9 of this
Agreement shall not be taken into account.
(by) "Project" means the 304-unit apartment complex and related facilities
and amenities to be constructed on the Project Land in accordance with the
Plans and Specifications. Project does not include the Infrastructure.
(bz) "Project Budget" means the budget for construction and development of
the Project by the Company. An "Initial Project Budget is attached hereto as
Exhibit I. As described in Section 5.2.3 hereof, in connection with the
Construction Loan Closing, the Members shall agree upon the "Final Project
Budget."
(ca) "Project Land" means the Land, excluding the Infrastructure Land.
(cb) "Property" means all real and personal property, tangible and
intangible, owned by the Company.
(cc) "Property Management Agreement" means the Property Management
Agreement to be entered into between the Company and The Feld Company, an
Affiliate of Feld, in the form attached hereto as Exhibit J. The Property
Management Agreement provides that it shall terminate on the first to occur of
the following: (i) at the option of either party, upon the Removal of Feld;
and (ii) after the Final Closing Date, upon 30 days' written notice of
termination from one party to the other.
(cd) "Put Option" means the put option of Feld with respect to the
Interest of Feld as described in Section 16.2.2 hereof.
(ce) "Regulations" means the federal income tax regulations, including
temporary (but not proposed) regulations, promulgated under the Code.
(cf) "Removal" means the removal of Feld pursuant to Section 12.12 hereof.
(cg) "Removal Event" has the meaning set forth in Section 12.12 hereof.
(ch) "Restricted Party" has the meaning set forth in Section 14.6.4
hereof.
(ci) "Sales or Refinancing Cash Flow" means, for any given period, the
cash proceeds received from the Company from the sale, other disposition, or
refinancing of any or all of the Property (including payments of principal and
interest on obligations received by the Company in connection with such sale or
other disposition) in excess of amounts necessary to discharge Company
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obligations with respect to such Property.
(cj) "Substantial Completion" means satisfaction of all of the following:
(i) completion of construction of the Project in compliance with the Plans and
Specifications (subject only to minor and inconsequential field changes and
other changes consented to by WPHC, punch list items and seasonal items such as
landscaping which do not interfere with the occupancy and use of the Project,
and liens of subcontractors, materialmen, and other providers of labor,
equipment, material and/or services to the Property and the Project not yet due
and payable or for which either a surety bond or title insurance reasonably
acceptable to WPHC is provided by Feld), as evidenced by temporary or permanent
certificate(s) of occupancy, or the equivalent, issued by the applicable
governmental authority for all buildings which are part of the Project, which
permit the occupancy and use of all the apartment units; and (ii) each unit in
the Project having been made rent-ready, including, without limitation, the
installation of all appliances (including, without limitation, refrigerators
and ranges), light fixtures, floor coverings and window coverings required by
the Plans and Specifications or otherwise required for the use, occupancy, and
operation of the units.
(ck) "Substitute Member" shall mean any Person who or which is admitted to
the Company as a substitute Member pursuant to Colo. Rev. Stat. Section 7-80-
702(2) (1991), as it may be amended.
(cl) "Total Budgeted Development Costs" means the Total Development Costs
as shown on the Final Project Budget.
(cm) "WRPT" means Wellsford Residential Property Trust, a Maryland real
estate investment trust, which is an Affiliate of WPHC.
(cn) "WPHC" means Wellsford Park Highlands Corp., a Colorado corporation.
ARTICLE 2
FORMATION OF COMPANY
2.1 Formation. On April 17, 1996, the parties hereto organized the
Company as a Colorado limited liability company under and pursuant to the Act.
2.2 Name. The name of the Company is Red Canyon at Palomino Park LLC, a
Colorado limited liability company.
2.3 Principal Place of Business. The principal place of business of the
Company within the State of Colorado shall be 370 Seventeenth Street, Suite
3100, Denver, Colorado 80202. The Company may locate its places of business
and registered office at any other place or places as the Managers may from
time to time deem advisable.
2.4 Registered Office and Registered Agent. The Company's registered
office shall be at the office of its registered agent at 370 Seventeenth
Street, Suite 3100, Denver, Colorado 80202 and the name of its initial
registered agent at such address shall be Wellsford Park Highlands Corp., a
Colorado corporation. The registered agent shall provide promptly to the
Managers copies of all written notices, summonses and other documents received
by the registered agent on behalf of the corporation (other than general
advertising and promotional materials) and, in any event, such copies shall be
provided not more than ten (10) business days after receipt thereof by such
registered agent. The Managers shall have no liability for the effects of any
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failure by the registered agent to timely deliver any such items to the
Managers except to the extent the Managers had actual notice of such items
prior to delivery by the registered agent. In any contracts, subcontracts,
loan agreements or other documents entered into by the Company, the Managers
shall provide that the addresses for notice to be given under any such
agreements shall include both the registered agent and the Managers.
2.5 Articles of Organization. The Articles of Organization are hereby
adopted and incorporated by reference into this Agreement. In the event of any
inconsistency between the Articles of Organization and this Agreement, the
terms of the Articles of Organization shall govern.
2.6 Term. The term of the Company shall be thirty (30) years from the
date of filing of Articles of Organization with the Secretary of State of the
State of Colorado, unless the Company is earlier dissolved in accordance with
either the provisions of this Agreement or the Act.
ARTICLE 3
BUSINESS OF COMPANY
3.1 Permitted Businesses. The business of the Company shall be:
3.1.1 To acquire the Land and to construct, develop, own,
operate, manage, lease, finance, improve and sell or otherwise dispose of the
Project; and
3.1.2 To engage in all activities necessary, customary,
convenient, or incidental to any of the foregoing.
3.2 Other Activity or Business. The Company shall not engage in any
other activity or business unless approved by all Members.
ARTICLE 4
CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS
AND LOANS TO THE COMPANY
4.1 Capital Contributions. Subject to the provisions of this Agreement,
the Members shall be obligated to make the following Capital Contributions to
the Company:
4.1.1 Capital Contributions by Feld. At the Initial Closing, Feld
shall make a Capital Contribution of $1,000.
4.1.2 Capital Contributions by WPHC. WPHC shall make the following
Capital Contributions:
(a) At the Initial Closing, WPHC shall make a Capital
Contribution in the amount of approximately $2,123,113, which the Company shall
use to fund the acquisition of the Land.
(b) At the Final Closing and contingent on satisfaction of all
of the Final Closing Funding Conditions, WPHC shall make the Final Closing
Capital Contribution in an amount equal to the following: (i) the Total
Budgeted Development Costs, minus (ii) any Capital Contributions made prior to
the Final Closing Date by WPHC, plus (iii) any distributions made to WPHC
pursuant to Section 10.3 hereof, minus (iv) an amount equal to twenty-five
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percent (25%) of Cost Savings, if any.
WRPT shall guaranty the obligation of WPHC to make the Final Closing Capital
Contribution by executing the Guaranty attached hereto.
4.2 Withdrawal or Reduction of Members' Contributions to Capital.
4.2.1 A Member shall not receive out of the Company's Property any
part of such Member's Capital Contributions in violation of the Act.
4.2.2 A Member, irrespective of the nature of such Member's Capital
Contribution, has the right to demand and receive only cash in return for such
Member's Capital Contribution and then only in accordance with the terms of
this Agreement.
4.3 Development Deficit Payments. Feld shall have the obligation to make
Development Deficit Payments when and as required under Article 6 of this
Agreement.
4.4 Operating Deficit Payments. Feld shall have the obligation to make
Operating Deficit Payments when and as required under Article 6 of this
Agreement.
4.5 Additional Capital Contributions. Except as expressly described in
this Article 4, no Member has an obligation to make any Capital Contributions
or loans or advances to the Company.
4.6 Miscellaneous.
4.6.1 No Interest on Capital Contribution. No Member shall be
entitled to or shall receive interest on such Member's Capital Contribution.
4.6.2 No Withdrawal of Capital Contribution. No Member may withdraw
any capital from the capital of the Company except as expressly provided herein
or under the Act.
4.6.3 No Priority of Return of Capital Contribution. No Member
shall have any priority over any other Member with respect to the return of any
Capital Contribution, except as expressly provided herein.
4.6.4 No Third Party Beneficiaries. The provisions of this Article
4 are not intended to be for the benefit of and shall not confer any rights on
any creditor or other Person (other than a Member in such Member's capacity as
a Member) to whom any debts, liabilities or obligations are owed by the Company
or any of the Members.
ARTICLE 5
INITIAL CLOSING; INFRASTRUCTURE LAND CLOSING;
CONSTRUCTION LOAN CLOSING
5.1 Initial Closing. The Members of the Company shall cooperate to cause
an Initial Closing at which the following shall occur:
5.1.1 Land Closing. The Company shall acquire the Land pursuant to
the Land Contract to be partially assigned to the Company. The Company shall
obtain an Owner's Policy of Title Insurance from a title insurer acceptable to
the Members (the "Title Company") in accordance with the terms of the Land
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Contract.
5.1.2 Reimbursement of Feld Expenses. At the Initial Closing, the
Company shall reimburse Feld and its Affiliates for those costs and expenses
incurred by Feld and its Affiliates as set forth on Exhibit A attached hereto
and for accrued pre-development costs incurred by Feld on or prior to the
Initial Closing for which Feld has not previously been billed ("Reimbursable
Expenses"). Feld represents and warrants that such Exhibit A and additional
invoices and schedules to be provided by Feld with respect to the balance of
the Reimbursable Expenses set forth and shall set forth the costs and expenses
actually incurred by Feld in connection with the Project. Notwithstanding
anything to the contrary herein, only those Reimbursable Expenses which
constitute actual, third party costs of Feld shall be paid at the Initial
Closing. Any Reimbursable Expenses for in-house architectural services or
other services provided by Feld or The Feld Company ("In House Reimbursable
Expenses") shall be paid only if and when a Construction Loan Closing occurs.
In connection with any request for the payment of In House Reimbursable
Expenses, Feld shall submit to WPHC for approval the following: (i) detailed
invoices setting forth the services performed and work delivered by Feld and
its Affiliates; and (ii) receipts, releases and documents of transfer and
conveyance in connection with the work performed and services provided as may
be reasonably requested by WPHC. The payment of any In House Reimbursable
Expenses shall be subject to the approval of WPHC, which approval shall not be
unreasonably withheld. If Feld is removed or withdraws as a Member and a
Construction Loan Closing has not occurred by the date of such removal or
withdrawal, then the Company shall have no obligation to pay Feld, The Feld
Company or their Affiliates for any In House Reimbursable Expenses. Except as
set forth in this Section 5.1.2, neither Feld nor The Feld Company shall have
any right of reimbursement from the Company with respect to any other costs and
expenses incurred in connection with the Project prior to the Initial Closing
Date.
5.1.3 Approval of Land Documents. The Company shall not proceed
with the Initial Closing unless and until the form of documents related to the
closing of the acquisition of the Land have been approved by all the Members.
5.1.4 Pledge of Interest.
5.1.4.1 As collateral for the performance by Feld of its
obligations under this Agreement, at the Initial Closing Feld shall execute a
Pledge and Security Agreement in the form of Exhibit L attached hereto, wherein
Feld grants WPHC a first lien security interest in Feld's Interest in the
Company and in Feld's right to receive all fees, payments and distributions
from the Company. Any uncured default under this Agreement shall constitute an
Event of Default (as such term is defined in said Pledge and Security
Agreement) under said Pledge and Security Agreement, and any Event of Default
under said Pledge and Security Agreement shall be a default under this
Agreement.
5.1.4.2 As collateral for the performance by WPHC of their
obligations to make Capital Contributions as required under this Agreement, at
the Initial Closing WPHC shall execute a Pledge and Security Agreement in the
form of Exhibit M attached hereto, wherein it grants Feld a first lien security
interest in its Interest in the Company and in its right to receive all fees,
payments and distributions from the Company. Any uncured default under this
Agreement shall constitute an Event of Default (as such term is defined in said
Pledge and Security Agreement) under said Pledge and Security Agreement, and
any Event of Default under said Pledge and Security Agreement shall be a
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default under this Agreement.
5.2 Construction Procedures and Closing.
5.2.1 Predevelopment Activities.
5.2.1.1 Feld shall pursue, with reasonable diligence and
subject to the reasonable direction of WPHC, all approvals required to commence
construction of the Project. Subject to the input and approval of WPHC, Feld
shall develop appropriate site plans and other plans as may be required to
obtain such approvals. Feld shall not submit any proposed plans or other
materials to any governmental agency without the prior approval of WPHC. In
addition, Feld shall not incur any third party expense without the prior
approval of WPHC. WPHC agrees to reasonably cooperate with Feld in obtaining
the Approvals, which cooperation shall include, without limitation, prompt
review of any matters submitted to WPHC and prompt response to Feld in
connection with any matters submitted to WPHC. Copies of all reports, studies
and other information and material generated for or on behalf of Feld in
connection with its review and evaluation of the Property shall promptly be
delivered to WPHC, including, without limitation, the full text of all
drawings, reports and memoranda supplied by engineers and other consultants and
any memoranda of discussions with governmental officials and neighborhood
groups.
5.2.1.2 Feld shall prepare and submit to WPHC for a approval a
pre-development budget for the activities of the Company prior to the
Construction Loan Closing Date. If and when WPHC approves in writing a pre-
development budget, Feld shall be authorized to incur costs in accordance with
such pre-development budget and WPHC shall be obligated to fund such approved
pre-development budget.
5.2.2 Plans and Specifications. Prior to the Construction Loan
Closing and after consultation with WPHC, Feld shall cause to be prepared
detailed construction Plans and Specifications for the Project, and shall
submit such Plans and Specifications to WPHC for approval. If and when WPHC
approves the Plans and Specifications, the Members shall initial a description
of the Plans and Specifications and attach the description to this Agreement as
Exhibit N.
5.2.3 Project Budget. Prior to the Construction Loan Closing and
after consultation with WPHC, Feld shall cause to be prepared a revised Project
Budget based on the approved Plans and Specifications, and shall submit such
Project Budget to WPHC for approval. If and when WPHC approves the revised
Project Budget, the Members shall initial such Project Budget and attach it to
this Agreement as Exhibit O. Upon approval, such revised Project Budget shall
for all purposes be the "Final Project Budget."
5.2.4 Obtaining a Construction Loan. Feld shall use its best
efforts to cause the Company to obtain a Construction Loan for construction of
the Project on terms and from a Construction Lender acceptable to the Members,
including, but not limited to, the following: (a) the Construction Loan amount
must be sufficient to reimburse WPHC at the Construction Loan Closing for the
acquisition cost of the Project Land and any advances it made to the Company
for predevelopment activities; (b) the interest rate shall be a variable rate
equal to LIBOR plus a spread reasonably acceptable to the Members; (c) 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, if Feld is diligently pursuing his obligations and if the
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delay is not attributable to a default by Feld (such date as it may be extended
is referred to herein as the "Construction Loan Outside Date"); (d) Feld shall
personally guarantee the Construction Loan if required by the Construction
Lender; (e) the Construction Loan shall have a maturity date of at least
twenty-eight (28) months from the date of the Construction Loan Closing; and
(f) the other terms shall be reasonably acceptable to WPHC.
5.2.5 Construction Loan Documents. The Company shall not proceed
with the Construction Loan Closing unless and until the form of documents
related to the Construction Loan and the Tri-Party Agreement (as defined in
Section 5.2.8 below) have been approved by all the Members. There shall be no
modification to the Construction Loan documents without the prior written
approval of all Members.
5.2.6 Approved Affiliate Agreements. On or prior to the
Construction Loan Closing Date and only with the approval of all of the
Members, the Company shall enter into (a) a construction management agreement
with Tricor Construction Company, an Affiliate of Feld ("Contractor"), (b) a
construction contract with Contractor, and (c) the Architect's Agreement with
Architect. Except for a reasonable fee to be paid pursuant to the Architect's
Agreement with the approval of WPHC, no fees or other compensation, profit or
cost savings shall be paid to Contractor under such agreements except the fees
provided for in Article 7 below. The Company hereby agrees that Contractor may
enter into a landscape design contract and an interior design contract with
Architect, and all subcontracts entered into by Contractor and/or Architect
shall be included in the Final Project Budget, but such subcontracts shall
provide for the subcontractor to look only to Contractor or Architect, as
applicable, for payment under the subcontracts. Fees or other profit,
compensation or sharing of cost savings under such subcontracts shall not
exceed the amount a prudent owner would pay in a bona fide arm's length
transaction after obtaining competitive bids. The agreements described in this
Section 5.2.6, together with the Property Management Agreement, are hereinafter
called the "Approved Affiliate Agreements." Neither Feld nor Contractor nor
Architect shall enter into any other agreements with parties affiliated with
Feld without specific disclosure to all Members in writing of such affiliation
and without prior written consent of all the Members in each instance. In the
event of any conflict between this Agreement and such Approved Affiliate
Agreements, this Agreement shall control. In the event of an uncured default
by Feld under this Agreement, the Approved Affiliate Agreements may be
terminated at the option of WPHC. Any default by Feld under any Approved
Affiliate Agreement which is not timely cured shall be a default hereunder.
There shall be no modification to the Approved Affiliate Agreements without the
prior written approval of all Members. Each Approved Affiliate Agreement shall
provide that the Company shall have the right to terminate such agreement upon
the Removal of Feld without such termination constituting a default.
5.2.7 Feld Guarantee. Feld shall personally guarantee to the
Construction Lender the payment and performance of all obligations of the
Company under the Construction Loan, subject to such limitations on liability
of Feld and guaranty termination provisions as are acceptable to the
Construction Lender.
5.2.8 Tri-Party Agreement. At the Construction Loan Closing, the
Company, the Construction Lender and WRPT shall enter into a Tri-Party
Agreement containing the following principal terms: (a) if the Construction
Loan has not been paid in full by its maturity date, the Construction Lender
shall have the right to require that WRPT purchase the Construction Loan from
the Lender, or at WRPT's option, cause the Construction Loan to be repaid; (b)
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the obligation of WRPT under the Tri-Party Agreement shall be conditioned on
timely satisfaction of all of the Final Closing Funding Conditions; and (c) the
purchase price for the Construction Loan shall equal the lesser of the
outstanding balance of the Construction Loan, including accrued interest,
principal and other amounts due thereunder or the amount of the Final Closing
Capital Contribution.
5.2.9 Property Management Agreement. At the Construction Loan
Closing, the Company shall enter into the Property Management Agreement with
The Feld Company, an Affiliate of Feld.
5.3 Infrastructure Land Closing and Bond Financing of Infrastructure. It
is the intent of the Members that the Infrastructure Land be acquired and
developed by Palomino Park Public Improvements Corporation, a Colorado non-
profit corporation ("PPPIC"), which has financed acquisition and development
and certain land and Infrastructure improvements through the issuance of tax-
exempt bonds (the "Bonds").
5.3.1 Subdivision of the Land; Sale of the Infrastructure Land.
After the date hereof and prior to the Construction Loan Closing, unless WPHC
otherwise agrees, Feld shall cause the Company to use all reasonable efforts to
effect the legal subdivision of the Land into two legally separate parcels.
One parcel shall comprise the Infrastructure Land, and one parcel shall
comprise the Project Land. At or prior to the Construction Loan Closing, the
Company shall sell the Infrastructure Land and any improvements located thereon
to PPPIC for a purchase price designated by WPHC and on terms designated by
WPHC.
5.3.2 Control Over Matters Related to Infrastructure and Bonds.
Notwithstanding anything to the contrary herein, WPHC shall have sole and
exclusive control over all decisions of the Company relating to the Bonds, to
the subdivision and sale of the Infrastructure Land and to the financing,
construction, use and development of the Infrastructure. In order to procure
for the Project the benefits of the use and enjoyment of the Infrastructure to
be constructed by PPPIC, the Company shall enter into such agreements with
PPPIC as WPHC may require, in form and content acceptable to WPHC in its sole
discretion, providing, among other things, for the encumbering of the Land by
liens securing payment of the Bonds, operation and maintenance of the
Infrastructure and satisfaction of certain indemnification obligations
undertaken by PPPIC with respect to the Infrastructure.
5.3.3 Construction of Infrastructure. An Affiliate of Feld, has
entered into one or more agreements and may enter into additional agreements
(collectively, the "Infrastructure Improvements Agreement") with PPPIC (or its
contractor) to construct the Infrastructure for a guaranteed maximum price,
including a fee to Feld not to exceed three percent (3%) of the hard costs of
construction of the Infrastructure. A default by Feld in the performance of
its obligations under that contract not cured within any applicable cure period
shall constitute a default under this Agreement. WPHC may in its discretion
cause the phasing of the construction of the Infrastructure Improvements. An
initial budget for the costs of acquisition and development of the
Infrastructure is attached hereto as Exhibit T.
5.4 Failure of Initial Closing or Construction Loan Closing to Occur.
Feld covenants to cause the Initial Closing to occur by May 2, 1996 and the
Construction Loan Closing to occur by the Construction Loan Outside Date. If
for any reason the Initial Closing has not occurred by May 2, 1996, or the
Construction Loan Closing has not occurred by the Construction Loan Outside
Date, then WPHC shall have the right to remove Feld as a Member and Manager of
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the Company in accordance with the provisions of Section 12.12.
ARTICLE 6
DEVELOPMENT OF PROJECT; OPERATIONS PRIOR TO THE
FINAL CLOSING DATE
6.1 Duties of Feld. Feld shall have the authority, duty and the
obligation to:
6.1.1 act on behalf of the Company in relation with any governmental
agency or authority, the Construction Lender, and all contractors and
subcontractors with respect to all matters relating to the construction and
development of the Project;
6.1.2 use its best efforts to cause the Company to obtain a
commitment for the Construction Loan on terms and conditions acceptable to all
the Members and satisfy the conditions for the Construction Loan Closing;
6.1.3 coordinate with Architect the preparation of the Plans and
Specifications, ensure that the Plans and Specifications are in compliance
with all applicable codes, laws, ordinances, rules and regulations, and
recommend alternative solutions whenever design details affect construction
feasibility or schedules;
6.1.4 negotiate all necessary contracts and subcontracts for the
construction of the Project and monitor disbursement and payment of amounts
owed the Architect, Contractor and subcontractors;
6.1.5 choose the products and materials necessary to equip the
Project in a manner which satisfies all requirements of the Construction Lender
and the Plans and Specifications;
6.1.6 secure all building code approvals and obtain certificates of
occupancy for all of the apartment units of the Project;
6.1.7 cause the Project to be commenced not more than thirty (30)
days after the Construction Loan Closing, or by such earlier date as may be
required under the Construction Loan documents, and completed in a prompt and
expeditious manner, consistent with good workmanship, and in compliance,
without any material deviation, with the following:
(a) the Plans and Specifications as they may be amended in
accordance with the terms of this Agreement;
(b) any and all zoning regulations, county ordinances,
including health, fire and safety regulations, and any other requirements of
federal, state and local laws, rules, regulations and ordinances applicable to
construction of the Project;
6.1.8 cause to be performed in a diligent and efficient manner the
following:
(a) construction of the Project pursuant to and in accordance,
without any material deviation, with the Plans and Specifications, free and
clear (except as otherwise permitted herein) of all mechanics and materialmen's
liens; and
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(b) general administration and supervision of construction of
the Project, including but not limited to activities of subcontractors and
their employees and agents, and others employed as to the Project in a manner
which complies in all material respects with the Construction Loan, the Plans
and Specifications and the Construction Procedures;
6.1.9 keep, or cause to be kept, accounts and cost records as to the
construction of the Project and make available to WPHC, during normal business
hours copies of all material contracts and subcontracts;
6.1.10 provide regular monitoring, and periodically (at least
monthly, or more often if requested by any Member) update the Project
construction time schedule and summarize potential variances between scheduled
and probable completion dates, the schedule for work not started or incomplete;
6.1.11 revise and refine the approved estimate of Development Costs,
incorporate changes as they occur, and develop cash flow reports and forecasts
as needed;
6.1.12 develop and implement a system for review and processing of
change orders as to construction of the Project;
6.1.13 develop and implement a procedure for the review and
processing of applications by subcontractors for progress and final payments;
and
6.1.14 record the progress of the Project and submit written
progress reports to WPHC, including the percentage of completion and the number
and amounts of change orders.
6.2 Construction Completion. Feld hereby unconditionally covenants and
warrants as follows: (i) the Project shall be constructed in a good and
workmanlike manner and all work shall be performed in accordance with the terms
of Section 6.11 hereof; (ii) Feld shall fully and timely perform all of its
other obligations under this Agreement; and (iii) subject to Force Majeure, it
shall cause (a) Substantial Completion of the Project to occur within twenty-
one (21) months after the Construction Loan Closing Date; (b) Final Completion
to occur within twenty-four (24) months after the Construction Loan Closing
Date; and (c) all Final Closing Funding Conditions shall be satisfied prior to
the Outside Date.
6.3 Development Deficit Guaranty. Feld hereby guarantees Feld shall
advance to or for the account of the Company amounts equal to all Development
Deficits at such time as such Development Deficits occur ("Development Deficit
Payments"). Feld shall make Development Deficit Payments required of him by
the earlier of (A) the date required to avoid a default under Company
obligations, including without limitation the Construction Loan, and (B) the
date required to keep all sources of funding for the Project "in balance" as
adequate sources of funds to timely cause Final Completion of the Project and
satisfaction of other obligations of the Company. In any event, all
Development Deficits shall be paid by Feld in full prior to the Final Closing
Date. All Development Deficit Payments made to the Company shall be non-
reimbursable payments, and Feld shall not be entitled to any repayment from the
Company (unless advances of the Construction Loan are later available to
reimburse Feld for the same), and the Capital Account of Feld shall not be
affected by any Deficit Payments made by Feld. Without limiting the generality
of the foregoing, Feld shall not be entitled to reimburse himself for any
Development Deficits.
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6.4 Operating Deficit Guaranty. Feld hereby guarantees Feld shall
advance to or for the account of the Company amounts equal to all Operating
Deficits, at such time as such Operating Deficits occur ("Operating Deficit
Payments"). Feld shall make Operating Deficit Payments required of him by the
date required to avoid a default under Company obligations, including without
limitation the Construction Loan and obligations to trade creditors. In any
event, all Operating Deficits shall be paid by Feld in full prior to the Final
Closing Date. All Operating Deficit Payments made to the Company shall be
non-reimbursable payments, except to the extent that, subsequent to the making
of any such Operating Deficit Payment by Feld, there is sufficient Net
Operating Income prior to the earliest of the Final Closing Date, the Outside
Date or the date of the Removal of Feld by WPHC to reimburse Feld for the same.
In no event, shall the Capital Account of Feld be affected by any Operating
Deficit Payments made by Feld. Notwithstanding anything to the contrary
herein, upon the Removal of Feld, Feld shall not have any obligation hereunder
to fund Operating Deficits incurred after the date of his Removal.
6.5 Liabilities of the Company. Feld covenants that by the earlier of
the Final Closing Date or the Outside Date, provided WPHC has satisfied its
obligation to make the Final Closing Capital Contribution, Feld shall cause the
Company to have no unsatisfied debts or liabilities other than obligations
under service contracts and other agreements relating to the Project permitted
by this Agreement related to the period after the Final Closing, or related to
the period prior to the Final Closing if adequate cash reserves are held by the
Company to pay such liabilities.
6.6 Construction Contracts. Feld shall obtain and the Company shall
enter into such contracts, agreements or obligations, as are necessary to
construct and develop the Project. Feld shall not, without the consent of
WPHC, which consent shall not be unreasonably withheld, do or permit to be done
any of the following:
6.6.1 Enter into or cause the Company to enter into any other
primary contract relating to the construction of the Project; and
6.6.2 Amend or modify any Approved Affiliate Agreements.
6.7 Administration of the Construction Loan. Feld shall administer the
Construction Loan on behalf of the Company and in accordance with the
Construction Procedures. The Company shall engage the Construction Consultant
to monitor the progress of construction of the Project and to review draw
requests on behalf of WPHC. Feld shall cooperate with the Construction
Consultant and shall provide access to the Construction Consultant for
inspection of the construction work of the Project as it progresses. Feld
shall approve and submit Construction Loan draw requests to the Construction
Lender on behalf of the Company, which requests shall be accompanied by those
items of information required by the Construction Lender and the Title Company.
Copies of all draw requests and of the monthly construction ledger shall be
delivered to WPHC simultaneously with delivery to the Construction Lender. If
the Construction Consultant determines that a draw request is not justified on
a percentage of completion basis and the draw would result in construction
funding being out of balance by an amount in excess of $250,000, WPHC shall
have the right to disapprove such draw request in its sole discretion unless
Feld modifies such draw request to correspond to percentage of completion
and/or makes a Development Deficit Payment such that the Construction Loan
shall not be out of balance by more than $250,000. After any such disapproval
of a draw request by WPHC, all subsequent draw requests shall require the prior
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approval of WPHC unless and until such right to prior approval is waived in
writing by WPHC.
6.8 Change Orders. No change orders with respect to the Plans and
Specifications may be made without the prior written consent of WPHC, except
that Feld shall have the right to approve minor change orders which comply with
the Construction Procedures, do not have a material adverse effect on the
Project, do not increase Total Development Costs, do not reduce the amount
available from the Construction Loan for payment of interest on the
Construction Loan, and do not exceed $10,000 as to any one change order or
$250,000 in the aggregate. Unless expressly approved in writing by all
Members, no change order shall be permitted or approved that would cause total
Development Costs to exceed Total Budgeted Development Costs.
6.9 Retainage. Feld shall cause all agreements with contractors and
subcontractors to provide for retainages at levels acceptable to Construction
Lender and the release of retainages as set forth in the Construction Loan
documents as executed at the Construction Loan Closing.
6.10 Agreements with Affiliates. Feld shall cause the Company to enforce
each Approved Affiliate Agreement to which the Company is a party as would a
prudent manager of a limited liability company, and Feld shall cause each other
Approved Affiliate Agreement to be enforced in a prudent manner and for the
benefit of the Company. Feld hereby agrees, for himself and on behalf of each
Person affiliated with Feld that is a party to an Approved Affiliate Agreement:
(i) in the event of any conflict between this Agreement and any Approved
Affiliate Agreement, this Agreement shall control; (ii) in the event of any
uncured material default by Feld under this Agreement, the Company shall have
the right to terminate any or all of the Approved Affiliate Agreements; (iii)
an uncured default by Feld or any person affiliated with Feld under an Approved
Affiliate Agreement shall constitute a default by Feld under this Agreement;
and (iv) Feld shall defend, indemnify and hold the Company harmless with
respect to the effects of any default by any Person affiliated with Feld under
such Approved Affiliate Agreements, including, without limitation, any
mechanics liens with respect to claims under any Approved Affiliate Agreements.
6.11 Warranty by Feld. If, within one (1) year after the date of Final
Completion of the Project, any of the structural or non-structural work
performed to construct the Project is found to be materially defective or not
in accordance in all material respects with the Plans and Specifications and
with all applicable building codes, laws, rules and regulations, Feld shall
correct or shall cause the construction contractor to correct such defect
promptly after receipt of written notice from WPHC to do so, unless WPHC has
previously given Feld specific written acceptance of such defective condition.
With respect to portions of the work first performed after Final Completion,
this period of one (1) year shall be extended by the period of time between
Final Completion and the actual performance of the work. The obligation under
this Section shall survive acceptance of the work performed to construct the
Project. WPHC shall give such notice promptly after discovery of the
condition. In the event a material defect is discovered more than one (1) year
after the date of Final Completion, as such period may be extended under this
Section 6.11, and such defect was known to Feld or a Person affiliated with
Feld and was not disclosed to WPHC or was intentionally concealed by Feld or
such affiliated Person, then Feld shall promptly take such action as may be
necessary at Feld's sole expense to correct such defective work. WPHC shall
report to Feld within thirty (30) days after discovery any such defective
condition discovered more than one (1) year after Final Completion, as such
period may be extended under this Section 6.11. Nothing contained herein shall
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require Feld to correct defective work that is discovered more than three (3)
years following Final Completion, as such period may be extended under this
Section 6.11.
6.12 Insurance. Feld shall at all times keep in force the following
policies of insurance naming the Company as the insured:
6.12.1 During the construction period (which ends on the date a
certificate of occupancy for each building comprising the Project is issued),
"Builder's Risk" insurance as required by the holder(s) of the Construction
Loan;
6.12.2 After issuance of a certificate of occupancy for each
building comprising the Project, all risk property and, if applicable, boiler
and machinery insurance against loss or damage to the Property or the Project
(including contents) including but not limited to fire and extended coverage
perils (but excluding flood and earthquake unless either or both are required
by the Construction Lender) as WPHC may from time to time require, but in no
event less than one hundred percent (100%) of the full replacement cost of the
Property or the Project without deduction for physical depreciation, or the
unpaid balance of any loans secured by the Property or the Project, whichever
is greater;
6.12.3 After issuance of a certificate of occupancy for each
building comprising the Project, insurance against the loss of "rental value"
of the improvements on a "rented or vacant basis" arising out of the perils
insured against pursuant to Section 6.12.2 above, in any reasonable amount
required by WPHC but in no event less than 100% of one year's gross "rental
value" of the improvements with co-insurance waived. "Rental value" as used
herein is defined as the sum of (A) the total anticipated gross rental income
from tenant occupancy of the Project, (B) the amount of all charges which are
the legal obligation of tenants, and (C) the fair rental value of any portion
of the Project occupied by the Company, if any; and
6.12.4 At all times, (i) commercial general liability insurance in
an amount of not less than Five Million Dollars ($5,000,000) against claims for
personal injury, death or property damage occurring on, in or about the
Property or the Project or arising from or connected with use, conduct or
operation of the Company's business in the amount from time to time required by
WPHC; (ii) automobile liability insurance with a combined single limit of One
Million Dollars ($1,000,000); and (iii) workers compensation coverage with
statutory limits and employers liability insurance with limits of One Million
Dollars ($1,000,000). Any workers compensation insurance shall be accompanied
by a waiver of subrogation from the insurer endorsed on the policy.
All insurance policies and renewals thereof shall be in a form and
issued by insurers acceptable to WPHC and shall provide for deductibles not to
exceed $2,500.00. WPHC and Feld (but only as long as Feld is a Manager and a
Member of the Company) shall each be additional named insureds on all such
policies and renewals. Feld hereby irrevocably appoints WPHC as Feld's
attorney in fact for purposes of endorsing payments, submitting claims and
otherwise dealing with all such insurance and the proceeds thereof in the name,
place and stead of Feld, such power of attorney to take effect immediately upon
withdrawal, Removal or resignation of Feld as Manager of the Company and member
of the LLC, and Feld agrees that such power shall be coupled with an interest
and shall survive the disability or death of Feld. Each policy shall provide
that it will not be modified or canceled without thirty (30) days prior written
notice to WPHC. Feld shall promptly furnish to WPHC all renewal notices and
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all receipts of paid premiums. At least thirty (30) days prior to the
expiration date of a policy, Feld shall deliver to WPHC a renewal policy in
form satisfactory to WPHC, together with a receipt showing payment of annual
premiums. Any excess insurance proceeds or refunds of insurance premiums shall
be the property of the Company.
6.13 Personal Obligation. The obligations of Feld under this Agreement
are personal recourse obligations of Feld, as limited by Section 14.1.3 of this
Agreement, for which Feld shall be fully responsible to the Company and WPHC.
6.14 Force Majeure. Feld shall not be liable for delay in performance of
his obligations under this Agreement to the extent such failure or delay
results solely from an event of Force Majeure, and in no event shall any delay
for an event of Force Majeure exceed one hundred twenty (120) days.
6.15 Limitations of Feld's Authority. Anything to the contrary herein
notwithstanding, Feld shall not have the power or authority to do any of the
following without the prior written consent of all the other Members:
6.15.1 to commit any act contrary to the purpose of the Company;
6.15.2 to refinance the Project or incur any indebtedness other than
the Construction Loan;
6.15.3 to enter into any agreements with affiliates of Feld except
as specified above;
6.15.4 to modify the Construction Loan documents or any agreement
with any affiliate of Feld which previously was consented to by the other
Members; or
6.15.5 to sell or dispose of any portion of the Project.
6.16 Pre-Existing Environmental Condition Liability. Feld agrees to
promptly disclose to WPHC in writing if it becomes aware of any Pre-Existing
Environmental Condition Liability. If the Company incurs any Pre-Existing
Environmental Condition Liability, it shall use any available contingency in
the Project Budget or any Cost Savings to satisfy such Pre-Existing
Environmental Condition Liability. If such sources of funds are not adequate
to satisfy the Pre-Existing Environmental Condition Liability, then WPHC shall
make a Capital Contribution to the Company equal to one-half of the amount of
the Pre-Existing Environmental Condition Liability which is then due and Feld
shall make either a Development Deficit Payment or an Operating Deficit Payment
equal to one-half of the amount of such Pre-Existing Environmental Condition
Liability. This provision is solely for the benefit of the members and no
other Person shall have the right to rely on or enforce this provision. A Pre-
Existing Environmental Condition Liability shall not be satisfied from Net
Operating Income.
ARTICLE 7
COMPENSATION TO FELD
In consideration of the performance by Feld of his obligations under
Article 6 of this Agreement, the Company shall pay Feld or his designee the
fees described in this Article 7 at the time, in the manner and subject to the
conditions set forth herein.
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7.1 Development Management Fee. Feld shall receive a development
management fee equal to $1,000 per unit. Such development management fee shall
be payable from monthly draws on the Construction Loan, on a percentage of
completion basis as certified by the Construction Consultant.
7.2 Construction Management Fee. Contractor shall receive a construction
management fee under the construction management agreement to be executed at or
before the Construction Loan Closing equal to $2,000 per unit, payable from
monthly draws on the Construction Loan based on percentage of completion as
certified by the Construction Consultant as certified by the Construction
Consultant, minus $49,000. All amounts paid to Contractor under the
construction management agreement described in Section 5.2.6 above shall be
applied against and reduce the amount due under this Section 7.2.
7.3 Construction Loan Guarantee Fee. Feld shall receive a construction
loan guarantee fee equal to 1.0% of the final committed loan amount of the
Construction Loan, payable at the Construction Loan Closing from a draw on the
Construction Loan.
7.4 Cost Savings Fee. The Company shall pay Feld at Final Closing a cost
savings fee equal to twenty-five percent (25%) of cost savings, if any. Feld
shall submit to WPHC a proposed calculation of the amount of the fee to be paid
under this Section 7.4. WPHC shall be entitled, at its sole discretion, to
submit such calculation to the Company's Accountants for verification or
auditing prior to approving such calculation. For a period of twelve (12)
months after the Final Closing Date, each Member shall have the right to cause
the recalculation of the Cost Savings Fee and the post-closing adjustment of
the amount of the Cost Savings Fee, if such Member pays the costs of the
Company's Accountants in making such recalculation and if the amount of the
adjustment is in excess of $5,000. No post-closing adjustment shall be made
for amounts of $5,000 or less or based on a recalculation made more than twelve
(12) months after the Final Closing Date.
7.5 Incentive Fee. Feld shall receive an incentive fee, to be calculated
and paid in accordance with Exhibit P attached hereto.
7.6 Conditions to Payment of Fees; Right of Offset. Each payment of fees
described in this Article 7 shall be conditioned upon there being no uncured
event of default by Feld under this Agreement or any Approved Affiliate
Agreement. In the event of nonpayment of fees due to an uncured default, if
such default is subsequently cured prior to withdrawal, resignation or removal
of Feld as a Member and Manager, then the unpaid fees shall be payable, subject
to all the terms and provisions of this Agreement. All fees except the
Incentive Fee will be included in the Final Project Budget to be approved by
WPHC. With respect to fees payable prior to Final Closing, if the Construction
Loan does not provide a source of funding for such fees, then payment of such
fees shall be deferred until the later of the date(s) the Construction Loan
permits such funding or until the Final Closing. All fees payable to Feld
shall be subject to a right of offset in favor of the Company and WPHC with
respect to any claims or damages they may have against Feld and for any
Development Deficits and Operating Deficits. In the event of the withdrawal,
resignation or Removal of Feld as a Member and Manager prior to the Final
Closing Date, except in the case of Removal of Feld due to Feld failing to
provide a Construction Loan acceptable to all the Members, in which case no
fees shall have been earned by or be due to Feld, Feld shall be entitled to
fees, except the Incentive Fee, fully earned and accrued through the date of
his Removal when and as such fees are otherwise payable pursuant to this
Agreement, subject to the foregoing right of offset and provided that WPHC has
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been fully compensated for its out of pocket expenses with respect to the
Project. In no event shall the Removal of Feld accelerate the due date for any
fees earned by Feld during the period prior to his Removal.
ARTICLE 8
FINAL CLOSING
8.1 Conditions to Final Closing. The obligation of WPHC to participate
in the Final Closing shall be conditioned on all of the Final Closing Funding
Conditions being satisfied either prior to the Final Closing or concurrently
with the Final Closing. WPHC shall have the right, but not the obligation, to
waive one or more of the Final Closing Funding Conditions. Any Member shall
have the right to require an escrow closing to effect the Final Closing, and
the other Members shall cooperate with regard to such escrow closing.
8.2 Initiation of Final Closing. Upon ten (10) days prior written notice
from WPHC to Feld, the Final Closing shall be held on the date designated by
WPHC. If WPHC has not designated a date for the Final Closing by the Outside
Date, upon ten (10) days prior written notice from Feld to WPHC, the Final
Closing shall be held, the Final Closing shall be held on the date designated
by Feld, provided such date for the Final Closing designated by Feld shall be
not less than twenty-eight (28) months after the Construction Loan Closing
Date.
8.3 Actions at the Final Closing. Once the date for the Final Closing
has been designated as provided herein and provided that the Final Closing
Funding Conditions have been satisfied by Feld, the Members shall cooperate to
cause a Final Closing at which the following shall occur:
8.3.1 WPHC shall fund its Final Closing Capital Contribution.
8.3.2 The Company shall pay the Construction Loan in full or shall
effect a release of Feld from its guaranty of the Construction Loan.
8.3.3 Any accrued and unpaid fees due to Feld shall be paid,
excluding, however the Incentive Fee.
8.3.4 If either WPHC or Feld has exercised its (his) option under
the Put-Call provisions of Article 16 hereof, the closing of the transfer of
the Interest of Feld to WPHC shall occur.
8.3.5 At the election of WPHC, the responsibility for maintaining
insurance coverage on the Project or any portion thereof may be transferred to
WPHC.
8.4 Certain Rights of Feld Upon Satisfaction of Final Closing Funding
Conditions. At any time after Final Completion and satisfaction of all of the
other Final Closing Funding Conditions but prior to the Outside Date, Feld may
provide WPHC notice that all of the Final Closing Funding Conditions have been
satisfied and that it is prepared to proceed with the Final Closing, which
notice shall be accompanied by all documents necessary to verify that the Final
Closing Funding Conditions have been satisfied. Within fifteen (15) days of
its receipt of its notice, WPHC shall notify Feld of the election of WPHC to do
one of the following by the date that is within forty-five (45) days of WPHC's
receipt of notice from Feld: (the "Release Date"): (i) WPHC shall participate
in the Final Closing and make its Final Closing Capital Contribution; (ii) WPHC
shall cause Feld to be released from its guaranty of the Construction Loan; or
(iii) WPHC shall deliver to Feld an indemnity agreement executed by WRPT,
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wherein WRPT agrees to indemnify Feld against any loss or liability it may
suffer as a guarantor of the Construction Loan, provided that such guaranty
shall be subject to a right of offset in favor of WRPT and WPHC with respect to
any liability of WRPT to WPHC arising under this Agreement (the form of such
indemnity agreement shall be reasonably acceptable to Feld). If all of the
Final Closing Funding Conditions have been and remain satisfied on the Release
Date, WPHC shall take the action specified in its notice to Feld.
ARTICLE 9
ALLOCATIONS
9.1 Profits and Losses. Subject to the special allocation provisions in
this Article 9, the Members' distributive shares of the Profits or Losses of
the Company for any Fiscal Year shall be as follows:
9.1.1 Profits. Profits shall be allocated to each Member pro rata
in proportion with such Member's respective Percentage Interest.
9.1.2 Losses. Losses shall be allocated to each Member pro rata in
proportion to such Member's respective Percentage Interest.
9.2 General Provisions.
9.2.1 Except as otherwise provided in this Agreement, the Members'
distributive shares of all items of Company income, gain, loss, and deduction
are the same as their distributive shares of Profits and Losses.
9.2.2 The Managers shall allocate Profits, Losses, and other items
properly allocable to any period using any method permitted by Code Section 706
and the Regulations thereunder.
9.2.3 To the extent permitted by Regulations Section 1.704-2(h) and
Section 1.704-2(i)(6), the Managers shall endeavor to avoid treating
distributions of Operating Cash Flow and of Sales and Refinancing Cash Flow as
being from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt (as defined in Regulation Sections 1.704-2(b)(3) and 1.704-2(b)(4),
respectively).
9.2.4 If there is a change in any Member's Interest in the Company
during a Fiscal Year, each Member's distributive share of Profits or Losses or
any item thereof for such Fiscal Year, shall be determined by any method
prescribed by Code Section 706(d) or the Regulations thereunder that takes into
account the varying Interests of the Members in the Company during such Fiscal
Year.
9.2.5 The Members agree to report their shares of income and loss
for federal income tax purposes in accordance with the provisions of this
Agreement.
9.3 Special Provisions.
9.3.1 Minimum Gain Chargeback. Notwithstanding any other provision
of this Article 9, if there is a net decrease in Partnership Minimum Gain (as
defined in Regulation Section 1.704-2(d)) during any Fiscal Year, then each
Member shall be allocated such amount of income and gain for such year (and
subsequent years, if necessary) determined under and in the manner required by
Regulation Section 1.704-2(f) as is necessary to meet the requirements for a
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minimum gain chargeback as provided in that Regulation.
9.3.2 Partner Nonrecourse Debt Minimum Gain Chargeback.
Notwithstanding any other provision of this Article 9, except Section 9.3.1, if
there is a net decrease in Partner Nonrecourse Debt Minimum Gain (as defined in
accordance with Regulation Section 1.704-2(i)(3)) attributable to a Partner
Nonrecourse Debt (as defined in Regulation Section 1.704-2(b)(4)) during any
Fiscal Year, any Member who has a share of the Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt determined in accordance
with Regulation Section 1.704-2(i)(5), shall be allocated such amount of income
and gain for such year (and subsequent years, if necessary) determined under
and in the manner required by Regulation Section 1.704-2(i)(4) as is necessary
to meet the requirements for a chargeback of Partner Nonrecourse Debt Minimum
Gain as is provided in that Regulation.
9.3.3 Qualified Income Offset. If a Member unexpectedly receives
any adjustment, allocation or distribution described in Regulation Section
1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company income and gain shall be
specifically allocated to such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted Capital
Account Deficit of such Member as quickly as possible, provided that an
allocation pursuant to this Section 9.3.3 shall be made only if and to the
extent that such Member would have an Adjusted Capital Account Deficit after
all other allocations provided for in Section 9.1 and this Section 9.3 of this
Agreement tentatively have been made as if this Section 9.3.3 were not in this
Agreement.
9.3.4 Limitation on Losses. Notwithstanding anything else contained
in this Agreement, Losses allocated to any Member pursuant to Section 9.1 of
this Agreement shall not exceed the maximum amount of Losses that may be
allocated without causing such Member to have an Adjusted Capital Account
Deficit at the end of the Fiscal Year for which the allocation is made.
9.3.5 Code Section 754 Adjustment. To the extent that an adjustment
to the Basis of any asset pursuant to Code Section 734(b) or Code Section
743(b) is required to be taken into account in determining Capital Accounts as
provided in Regulation Section 1.704-1(b)(2)(iv)(m), the adjustment shall be
treated (if an increase) as an item of gain or (if a decrease) as an item of
loss, and such gain or loss shall be allocated to the Members consistent with
the allocation of the adjustment pursuant to such Regulation.
9.3.6 Nonrecourse Deductions. Nonrecourse Deductions (as determined
under Regulation Section 1.704-2(c)) for any Fiscal Year shall be allocated
among the Members in proportion to their Percentage Interests.
9.3.7 Partner Nonrecourse Deductions. Any Partner Nonrecourse
Deductions (as defined under Regulation Section 1.704-2(i)(2)) shall be
allocated pursuant to Regulation Section 1.704-2(i) to the Member who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which it
is attributable.
9.3.8 Purpose and Application. The purpose and the intent of the
special allocations provided for in this Section 9.3 are to comply with the
provisions of Regulation Sections 1.704-1(b) and 1.704-2, and such special
allocations are to be made so as to accomplish that result. However, to the
extent possible, the Managers, in allocating items of income, gain, loss, or
deduction among the Members, shall take into account the special allocations in
such a manner that the net amount of allocations to each Member shall be the
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same as such Member's distributive share of Profits and Losses would have been
had the events requiring the special allocations not taken place. The Managers
shall apply the provisions of this Section 9.3 in whatever order the Managers
reasonably believe will minimize any economic distortion that otherwise might
result from the application of the special allocations.
9.4 Code Section 704(c) Allocations. Solely for federal, state, and
local income tax purposes and not with respect to determining any Member's
Capital Account, distributive shares of Profits, Losses, other items, or
distributions, a Member's distributive share of income, gain, loss, or
deduction with respect to any Property (other than money) contributed to the
Company, or with respect to any Property the Asset Value of which was adjusted
as provided in Article 1(g)(iii) of this Agreement upon the acquisition of an
additional Interest in the Company by a new Member or existing Member in
exchange for a Capital Contribution, shall be determined in accordance with
Code Section 704(c) and the Regulations thereunder or with the principles of
such provisions.
9.5 Allocations Relating to Taxable Issuance of Interest. Any income,
gain, loss or deduction realized by the Company as a direct or indirect result
of the issuance of an Interest by the Company (the "Issuance Items") shall be
allocated among the Members so that, to the extent possible, the net amount of
such Issuance Items, together with all other allocations under this Agreement
to each Member, shall be equal to the net amount that would have been allocated
to each such Member if the Issuance Items had not been realized.
ARTICLE 10
DISTRIBUTIONS
10.1 Cash Flow. Except when the Company is in the process of dissolution
and winding up as provided in Article 18 of this Agreement and except as
otherwise provided in Section 10.3 hereof, the Managers shall determine and
distribute the Cash Flow on a quarterly basis, less reserves determined by the
Managers for future expenditures, to the Members in accordance with their
respective Percentage Interests. Notwithstanding the foregoing, no
distributions shall be made at or prior to the completion of the Final Closing
without the consent of WPHC.
10.2 Division Among Members. If there is a change in a Member's Interest
in the Company during a Fiscal Year, any distributions thereafter shall be made
so as to take into account the varying Interests of the Members during the
period to which the distribution relates in any manner chosen by the Managers
that is provided in Code Section 706(d) and the Regulations thereunder.
10.3 Special Distribution to WPHC.
10.3.1 Immediately after the Construction Loan Closing, the Company
shall make a distribution to WPHC as a return of its capital in the amount
allowed for such purpose under the terms of the Construction Loan.
10.3.2 Immediately after the closing of the sale of the
Infrastructure Land, the Company shall make a distribution to WPHC as a return
of its capital in the amount of the net proceeds from the sale of the
Infrastructure Land and any related improvements or property.
ARTICLE 11
BOOKS, RECORDS, AND ACCOUNTING
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11.1 Books and Records. The Company shall maintain at its principal place
of business books of account that accurately record all items of income and
expenditure relating to the business of the Company and that accurately and
completely disclose the results of the operations of the Company. Such books
of account shall be maintained according to generally accepted accounting
principles consistently applied and, unless otherwise agreed by the Members, on
the basis of the Fiscal Year. Each Member shall have the right to inspect,
copy, and audit the Company's books and records at any time during normal
business hours without notice to any other Member.
11.2 Reports. Within thirty (30) days after the close of each Fiscal
Year, the Managers shall furnish to each Member a copy of the income and loss
statement and of the balance sheet of the Company for such Fiscal Year, and a
statement disclosing all allocations of income, gain, loss, or deduction among
the Members and distributions made by the Company to the Members during such
year. The statements of income and loss and balance sheets to be delivered
hereunder may be unaudited in the sole discretion of WPHC.
11.3 Tax Returns. The Managers shall cause independent certified public
accountants of the Company to prepare and timely file all income tax and other
tax returns of the Company. The Managers shall furnish to each Member a copy
of all such returns together with all schedules thereto and such other
information which each Member may request in connection with such Member's own
tax affairs.
11.4 Special Basis Adjustment. At the request of either the transferor or
transferee in connection with a transfer of an Interest in the Company approved
by the Members pursuant to Article 16 of this Agreement, the Managers shall
cause the Company to make the election provided for in Code Section 754 and
maintain a record of the adjustments to Basis of Property resulting from that
election. Any such transferee shall pay all costs incurred by the Company in
connection with such election and the maintenance of such records.
11.5 Tax Matters Partner.
11.5.1 WPHC is hereby designated the Tax Matters Partner (as defined
in the Code) on behalf of the Company.
11.5.2 Without the unanimous consent of the Members, the Tax Matters
Partner shall have no right to extend the statute of limitations for assessing
or computing any tax liability against the Company or the amount of any Company
tax item.
11.5.3 If the Tax Matters Partner elects to file a petition for
readjustment of any Company tax item (in accordance with Code Section 6226(a))
such petition shall be filed in the United States Tax Court unless the Members
unanimously agree otherwise.
11.5.4 The Tax Matters Partner shall, within ten (10) business days
of receipt thereof, forward to each Member a photocopy of any correspondence
relating to the Company received from the Internal Revenue Service. The Tax
Matters Partner shall, within ten (10) business days thereof, advise each
Member in writing of the substance of any conversation held with any
representative of the Internal Revenue Service and of any petition for
readjustment.
11.5.5 Any reasonable costs incurred by the Tax Matters Partner for
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retaining accountants and/or lawyers on behalf of the Company in connection
with any Internal Revenue Service audit of the Company shall be expenses of the
Company. Any accountants and/or lawyers retained by the Company in connection
with any Internal Revenue Service audit of the Company shall be selected by the
Tax Matters Partner and the fees therefor shall be expenses of the Company.
11.6 Bank Accounts. The Managers shall establish and maintain one or more
separate accounts in the name of the Company in one or more federally insured
banking institutions acceptable to all the Members into which shall be
deposited all funds of the Company and from which all Company expenditures and
other disbursements shall be made. At least one such account shall be
maintained at First Interstate Bank. Unless otherwise decided by the Managers,
funds may be withdrawn from such accounts on the signatures of all of the
Managers, collectively and not individually, or such other Person or Persons
that the Managers shall determine, provided, however, that two signatures shall
be required on all checks.
ARTICLE 12
MANAGEMENT
12.1 Management. The business and affairs of the Company shall be managed
by the designated Managers. Subject to the terms and limitations of this
Agreement, the Managers shall direct, manage and control the business of the
Company to the best of such Managers' ability with reasonable diligence and
prudence and, subject to the terms and limitations of this Agreement, shall
have the authority, power and discretion to make any and all decisions and to
do any and all things which the Managers shall deem to be reasonably required
in light of the Company's business and objectives.
12.2 Number, Tenure and Qualifications. The number of Managers of the
Company and the length of the term of each Manager shall be fixed from time to
time by the Members who hold a Majority In Interest. Each Manager shall hold
office until removed pursuant to Section 12.12 hereof or until such Manager's
successor shall have been selected. Managers need not be residents of the
State of Colorado or Members of the Company.
12.3 Appointment of Feld as Manager. Feld is appointed as the Manager to
serve from the date hereof until the earliest to occur of (i) the Final Closing
Date, (ii) his withdrawal or Removal as a Member and Manager, or (iii) the
Outside Date. Notwithstanding the provisions of Section 12.2, Feld shall serve
as Manager for the duration of his initial term unless and until removed in
accordance with the terms of this Agreement.
12.4 Certain Powers of Managers. Without limiting the generality of
Section 12.1, the Managers shall have the power and authority, upon the
unanimous agreement of all Managers, on behalf of the Company:
12.4.1 To cause the Company to develop the Project in accordance
with the Plans and Specifications without any material deviation therefrom;
12.4.2 To purchase liability and other insurance to protect the
Company's Property and business;
12.4.3 To hold and own any and all Company Property on behalf of
and in the name of the Company;
12.4.4 To invest any Company funds temporarily in time deposits
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with federally insured financial institutions or short-term United States
governmental obligations;
12.4.5 Subject to the provisions of this Agreement, to employ
accountants, legal counsel, managing agents or other experts to perform
services for the Company and to compensate them from Company funds; and
12.4.6 To do and perform all other acts as may be necessary or
appropriate to the conduct of the Company's ordinary course of business.
Unless authorized to do so by this Agreement or by the Managers of the
Company, no Member, agent, or employee of the Company shall have any power or
authority to bind the Company in any way, to pledge its credit or to render it
liable pecuniarily for any purpose. However, the Managers may act by a duly
authorized attorney-in-fact.
12.5 Member Approval of Certain Acts. The Managers shall have the power
and authority, but only upon the unanimous written consent of all Members, on
behalf of the Company:
12.5.1 to amend or modify any of the documents executed in
connection with the Construction Loan at the Construction Loan Closing or to
waive any rights under such documents;
12.5.2 to borrow money or incur any indebtedness (other than the
Construction Loan) or to grant any liens on any assets of the Company;
12.5.3 to enter into any agreements with affiliates of the
Managers other than the Approved Affiliate Agreements;
12.5.4 to amend or modify the Approved Affiliate Agreements or to
waive any rights thereunder;
12.5.5 except for the Management Agreement, to execute any
agreement which will impose any obligations on the Company which will survive
the Final Closing Date; and
12.5.6 to sell or dispose of any portion of the Project or any
other material assets of the Company.
12.6 Liability for Certain Acts. A Manager of the Company shall perform
such Manager's duties, including duties as a member of any committee upon which
such Manager may serve, in good faith, in a manner such Manager reasonably
believes to be in the best interests of the Company, and with such care as an
ordinarily prudent person in a like position would use under similar
circumstances. A Person who so performs such Person's duties shall not have
any liability by reason of being or having been a Manager of the Company except
as otherwise provided in this Agreement. Nothing in this Section 12.6 shall
limit Feld's liability to the other Members to perform its obligations with
respect to the development of the Project, to make Development Deficit Payments
and to perform its other obligations to the other Members arising under this
Agreement.
12.7 Indemnity of the Members and the Managers.
12.7.1 The Company shall indemnify every Member and Manager in
respect to the payments made and personal liabilities reasonably incurred by
that Member or Manager in the ordinary and proper conduct of the Company's
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business or property. No indemnification shall be provided if and to the
extent that such liability was incurred based on the breach of this Agreement
by the Manager, his negligence (to the extent not reimbursed by insurance),
fraud or misconduct.
12.7.2 Provided that Feld has fully and timely performed his
obligations under this Agreement, the Company shall indemnify Feld against any
liability he may incur as a result of his guaranty of the Construction Loan;
the Company shall, nevertheless, have a right of offset with respect to all
damages incurred by the Company or any Member resulting from any breach by Feld
of his obligations hereunder, in addition to all other rights and remedies that
the Company and the other Members may have with respect to such breach by Feld.
12.7.3 The indemnification set forth in this Article 12 shall in no
event cause the Members to incur any liability, or result in any liability of
the Members to any third party, beyond those liabilities specifically
enumerated in the Articles of Organization, the Act or this Agreement.
12.8 Manner of Acting. In all actions to be taken by the Managers
pursuant to this Agreement, the unanimous act of the Managers shall be
required.
12.9 Informal Act by Managers. Any action required or permitted to be
taken at a meeting of the Managers or of any committee designated by said
Managers may be taken without a meeting if the action is evidenced by one or
more written consents describing the action taken, signed by each Manager or
committee member, and delivered to the Person having custody of the Company
records for inclusion in the minutes or for filing with the records. Action
taken under this Section 12.9 is effective when all Managers or committee
members have signed the consent, unless the consent specifies a different
effective date. Such consent has the same force and effect as an unanimous
vote of the Managers or committee members and may be stated as such in any
document.
12.10 Participation by Electronic Means. Any Manager or any committee
designated by the Managers may participate in a meeting of the Managers or
committee by means of telephone conference or similar communications equipment
by which all Persons participating in the meeting can hear each other at the
same time. Such participation shall constitute presence in person at the
meeting.
12.11 Resignation. Feld covenants and agrees to serve as the sole
Manager until the earlier of the Final Closing Date or the Outside Date.
Otherwise, any Manager of the Company may resign at any time by giving written
notice to the Members of the Company. The resignation of any Manager shall
take effect upon receipt of notice thereof or at such later time as shall be
specified in such notice.
12.12 Removal.
12.12.1 Causes for Removal. WPHC shall have the right to remove
Feld as the Manager and as a Member ("Removal") and substitute WPHC as Manager
or appoint a new Manager upon any of the following (a "Removal Event"):
12.12.1.1 If the Initial Closing has not occurred by May 2,
1996;
12.12.1.2 If the Construction Loan Closing has not occurred by
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the Construction Loan Closing Outside Date;
12.12.1.3 Delays in construction not caused by Force Majeure
which result in the Project falling behind schedule by six (6) months or more
based on the Construction Schedule approved by the parties prior to the
Construction Loan Closing, or delays in construction, whether or not caused by
Force Majeure which cause WPHC to reasonably conclude that the Project will not
or cannot be completed by the Outside Date;
12.12.1.4 The Project having incurred Development Deficits in
excess of $250,000 which have not been funded by Development Deficit Payments
from Feld within thirty (30) days of notice from WPHC requiring such funding;
12.12.1.5 The Project having incurred any Operating Deficits
which have not been funded by Operating Deficit Payments from Feld within
thirty (30) days of notice from WPHC requiring such funding;
12.12.1.6 The death or disability of Feld;
12.12.1.7 If the Final Closing has not occurred by the Outside
Date;
12.12.1.8 If Feld shall be in Material Default Feld under this
Agreement, and such Material Default is not cured within thirty (30) days after
written notice thereof from WPHC or, if such Material Default cannot be cured
within such 30-day period, Feld does not commence within such thirty (30) days
and diligently proceed to cure such breach and actually completes such cure in
any event within ninety (90) days after such notice; or
12.12.1.9 If any breach or default under the Construction Loan,
which is not caused solely by the act or omission of WPHC, is not cured within
any applicable cure period provided for under the Construction Loan.
12.12.2 Documentation In Connection With Removal. Upon Removal of
Feld, Feld shall cease to have any interest in the Company and Feld shall cease
to be a Member of the Company. Such removal shall be effective without the
necessity of the execution of any documents by Feld. Nevertheless, Feld shall
promptly execute such assignment and transfer documents as WPHC may reasonably
request to evidence the Removal of Feld.
12.12.3 Effect of Removal on Certain Obligations of Feld.
12.12.3.1 If Feld is removed prior to the Construction Loan
Closing Date, he shall have no continuing obligations for the performance of
his obligations under Article 6 after the date of his Removal and no obligation
to perform any continuing covenants set forth in Article 13. Feld shall be
liable, however, for any breach of any representation or warranty which
occurred prior to his Removal.
12.12.3.2 If Feld is removed after the Construction Loan
Closing Date, Feld shall not be released from his ongoing performance
obligations under Sections 6.3 or 6.10 or Article 13 of this Agreement and Feld
shall be liable to WPHC for damages resulting from any breach by Feld of his
obligations arising under Sections 6.1, 6.2, 6.3, 6.6, 6.7, 6.10 or 6.11 or
Article 13 of this Agreement, including without limitation, damages relating to
the period after Feld's Removal, unless such damages arise solely from acts or
omissions of a party other than Feld. WPHC shall have the obligation to make
reasonable efforts to mitigate its damages following a Removal of Feld after
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the Construction Loan Closing Date.
12.13 Death or Disability of Feld. Prior to the Construction Loan
Closing, Feld, WPHC and The Feld Company shall execute the "Substitution
Agreement" in the form attached hereto as Exhibit U. The Substitution
Agreement shall include the following principle terms: (i) upon the death or
disability of Feld, at the written request of WPHC, The Feld Company shall
acquire from Feld (or his estate) the entire interest of Feld in the Company,
The Feld Company shall be admitted as the Managing Member, and The Feld Company
shall assume in writing all of the obligations of the Managing Member
hereunder; (ii) Feld (or his estate) shall remain obligated for the performance
of all of the obligations of the Managing Member, whether relating to the
period before or after Feld's Removal; and (iii) if WPHC fails to exercise its
option under this Section 12.13 to cause The Feld Company to be substituted as
the Managing Member within ninety (90) days of the date of Removal, then such
option shall lapse and Feld (or his estate) shall be released from any
obligation hereunder related to the period after his withdrawal in connection
with his death or disability.
12.14 Vacancies. Any vacancy occurring for any reason in the number of
Managers of the Company may be filled by WPHC or a Manager appointed by WPHC.
12.15 Prohibition Against Publicly Traded Partnership. The Manager shall
take all action necessary to prevent the Company from qualifying as a publicly
traded partnership within the meaning of Code Section 7704, including, without
limitation, limiting the number of Members to less than 500 in compliance with
the safe harbor under IRS Notice 88-75.
ARTICLE 13
REPRESENTATIONS, WARRANTIES AND COVENANTS
13.1 Representations and Warranties of Each Member. Each Member hereby
represents and warrants as of the date hereof as follows:
13.1.1 Such Member, if other than an individual, is a duly organized
entity under the laws of its state of organization and has the requisite power
and authority to enter into and carry out the terms of this Agreement, and all
required action has been taken to authorize such Member to execute and
consummate this Agreement.
13.1.2 Such Member has been duly authorized to enter into this
Agreement, and such Member is not a foreign person as defined under Code
Section 1445(f)(3).
13.1.3 To the best of such Member's knowledge, neither the execution
of nor the compliance with this Agreement has resulted or will result in a
default under, or will create, any encumbrance on the Property, and there is no
action pending or threatened which questions the validity or enforceability of
this Agreement as to such Member.
13.1.4 The Interests to be acquired hereunder are being acquired by
the Member for investment only and for such Member's own account; no Person
other than the Member has or shall have any beneficial interest in the
Interests; and the Member has no present intention of distributing, reselling
or assigning the Interests.
13.1.5 Such Member understands that the Interests have not been
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registered under the Securities Act of 1933, as amended (the "1933 Act"), or
under the laws of any jurisdiction; that the Company does not intend and is
under no obligation to so register the Interests; that the Interests may not be
sold, assigned, pledged or otherwise transferred except upon delivery to the
Company of an opinion of counsel satisfactory to the Managers that registration
under the 1933 Act is not required for such transfer, or the submission to the
Managers of such other evidence as may be satisfactory to the Managers, to the
effect that any such transfer will not be in violation of the 1933 Act,
applicable state securities laws or any rule or regulation promulgated
thereunder; and that legends to the foregoing effect will be placed on all
documents evidencing the Interests. The Member understands that the foregoing
does not limit other restrictions regarding the transfer of its Interests set
forth in this Agreement or in the Act.
13.1.6 Such Member, either itself or through its shareholders,
partner or advisors, is sophisticated and experienced in investment matters,
and, as a result, is in a position to evaluate the merits and risks of an
investment in the Company.
13.1.7 Such Member is an "Accredited Investor" as defined in
Regulation D promulgated under the 1933 Act.
13.1.8 Except as may be disclosed in the Environmental Report, each
Member represents that it does not have current actual knowledge of any Pre-
existing Environmental Condition.
13.2 Representations, Warranties and Covenants of Feld. In addition to
the warranties provided for in Article 6 of this Agreement, as of the date
hereof and as of the date of Final Closing, Feld hereby represents, warrants
and covenants to the Company and the Members as follows:
13.2.1 To the best of Feld's knowledge, the Master Development Land
is zoned to permit its use as a matter of right for multi-family residential
use, subject to compliance with statutory requirements regarding obtaining
approval of a site development plan. Under the Land Contract and the closing
documents executed in connection therewith, Mission Viejo Company has
irrevocably allocated the right to build 1880 multi-family residential units on
the Master Development Land.
13.2.2 Feld shall use his best efforts to cause the approval by
Douglas County and any other governmental authority whose approval may be
required of a site development plan for the Land (the "Land Use Approval"),
which approval will permit as a matter of right the construction of a multi-
family project having not less than 304 units on the Project Land.
13.2.3 Feld shall use its best efforts to cause by the earlier of
the Construction Loan Closing Date and the Construction Loan Outside Date, the
County of Douglas to approve the Plans and Specifications for issuance of
building permits for construction of the Project (the "Building Permits") and
to issue all of the Building Permits necessary for construction of the Project.
13.2.4 Feld shall use its best efforts to cause the Company to
obtain prior to the earlier of the starting construction of the Project or the
Construction Loan Outside Date, such permits licenses, waivers, consents,
approvals and authorizations, and Feld will make such material registrations,
qualifications, designations, declarations and filings required (collectively,
the "Approvals") as determined or as may be determined necessary by Feld to the
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best of his knowledge so that the Project may be constructed and, subject only
to the issuance of customary temporary or permanent certificates of occupancy
by the County of Douglas and any other necessary operating permits, operated as
a multi-family housing development with related facilities as depicted on the
Plans and Specifications. As of the date hereof, Feld has no reason to believe
such certificates of occupancy will not be issued in the ordinary course of
business following completion of construction of the Project substantially in
accordance with the Plans and Specifications. Feld shall use its best efforts
to cause all of the Approvals at the commencement of construction of the
Project to be in full force and effect. Feld shall, promptly upon receipt of
any Approvals, deliver to WPHC true, correct and complete copies of all such
Approvals.
13.2.5 The Land is, and at the Final Closing shall be, free from
delinquent water charges, sewer rents, taxes and assessments.
13.2.6 To the best knowledge of Feld, all utility services,
including but not limited to storm and sanitary sewer, water, gas, electric
power and telephone service will be prior to the earlier of Substantial
Completion of the Project or the Outside Date, available to the Project Land in
form and capacity sufficient for the useful enjoyment and operation of the
Project and there will be no unpaid assessments, impact fees, development fees,
tap-on fees or recapture costs payable in connection therewith except for
charges shown on the tax certificates and the usual and customary charges
involved in the ordinary course of business and specifically identified in the
Final Project Budget.
13.2.7 To the best of Feld's knowledge, when constructed
substantially in accordance with the Plans and Specifications, the Project
shall not violate in any material respects all applicable covenants, conditions
and restrictions, zoning ordinances and regulations, building codes,
environmental and all other federal, state and local laws, ordinances,
statutes, rules and regulations applicable to the Project. To the best of
Feld's knowledge, as of the date hereof, the Project is not subject to any
laws, rules, regulations, orders or requirements, which require the Company to
designate any of the Project as affordable housing, low income housing or
moderate income housing.
13.2.8 The construction and development of the Project shall be
undertaken and shall be completed in a timely and workmanlike manner in
substantial compliance with (a) all applicable requirements of the Construction
Loan, (b) to the best of Feld's knowledge, all applicable requirements of all
appropriate governmental entities, the violation of which would have, or would
be likely to have, an adverse effect on the Project or the Company, and (c) the
Plans and Specifications for the Project that have been or shall be hereafter
approved by the Construction Lender, WPHC, and if required, any applicable
governmental entities, as such Plans and Specifications may be changed from
time to time with the approval of the Construction Lender, WPHC, and any
applicable governmental entities, if such approval shall be required.
13.2.9 To the best of Feld's knowledge and based on Feld's review of
the Environmental Reports, copies of which have been provided to the, Land is
not designated by any governmental or quasi-governmental authority to be
subject to environmental, wetlands or other regulation that would materially
adversely affect the use of the Land for the Project as contemplated by this
Agreement, and at the Final Closing the Land and the Project shall be in
compliance with all Environmental Laws and free of Hazardous Materials except
for those necessary for and lawfully used in operation and maintenance of the
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Project, and then only in reasonable amounts which shall be labeled, stored and
used in compliance with Environmental Laws.
13.2.10 To the best of Feld's knowledge, the Land is or will be
prior to Final Closing benefitted by such easements of unlimited duration as
are necessary for the operation of the Project. As of the Final Closing, no
additional easements will be required, subsequent to the Final Closing, for the
provision of utilities, access, egress and drainage to or for the benefit of
the Land or the Project in connection with the use and operation of the Land as
the Project contemplated by this Agreement.
13.2.11 Feld shall use his best efforts to cause the Company to
obtain, prior to the earlier of the date of Final Closing or the Outside Date,
all permanent certificates of occupancy and other consents and approvals
required from the County of Douglas and other governmental authorities and
associations and boards with jurisdiction over the Project and such consents,
approvals and certificates shall be in full force and effect without the
presence or existence of any unsatisfied conditions or requirements with
respect thereto, and true, correct and complete copies of such consents,
approvals and certificates of occupancy shall be delivered to WPHC upon
issuance thereof.
13.2.12 For the purpose of this Section 13.2, the terms "to the best
of Feld's knowledge," "to the best of his knowledge" and "to the best knowledge
of Feld" shall mean and include such information as is actually known to Feld
or should have been known to him upon diligent inquiry or of which Feld has
received constructive notice. If, prior to the Final Closing, any of the
foregoing representations, warranties or covenants become incorrect or
misleading in any material respect, Feld shall immediately notify WPHC in
writing and such representation, warranty or covenant shall be deemed remade by
Feld as of the date of such notification based upon such new information.
13.2.13 Feld, all Affiliates of Feld and all other parties related
to or affiliated with Feld or with such Affiliates shall receive no fees,
compensation or other profit or share of cost savings with respect to the
Project except the amounts set forth in Article 7 hereof or in any Approved
Affiliate Agreement. In the event of any breach of this Section 13.2.13, any
amount improperly received by such parties shall be immediately paid over to
the Company, together with interest thereon from the date received at twelve
percent (12%) per annum, compounded monthly.
13.2.14 Feld shall cause the Project to be at least 75% leased on
terms reasonably acceptable to WPHC within thirty-six (36) months after the
Construction Loan Closing. Failure to do so shall be a default under this
Agreement and shall give WPHC the right to cause the Removal of Feld.
13.3 General Representation. No representation, warranty or statement of
Feld in this Agreement or in any document, certificate or schedule furnished or
to be furnished by Feld or its agents or contractors to WPHC pursuant hereto
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.
13.4 Survival; Indemnity. All of the representations, warranties and
covenants of Feld contained in this Article 13 shall survive the resignation or
withdrawal of Feld as Manager and/or Member of the Company and shall survive
the Final Closing Date for a period of one (1) year after the Final Closing
Date except that, in the case of any material matter intentionally concealed or
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intentionally not disclosed by Feld, such period shall be extended to three (3)
years after the Final Closing Date. Feld shall defend, indemnify and hold
harmless WPHC against a breach of any of the foregoing representations,
warranties and covenants and any damage, loss or claim caused thereby,
including reasonable attorneys' fees and costs and expenses of litigation and
collection.
ARTICLE 14
RIGHTS AND OBLIGATIONS OF MEMBERS
14.1 Limitation of Liability.
14.1.1 Each Member's liability to Persons other than the other
Members shall be limited as set forth in the Act and other applicable law.
14.1.2 No officer, director or shareholder of WPHC shall be bound by
or have any personal liability hereunder or under any document, agreement,
understanding or arrangement relating to this transaction. 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 any and all future documents, agreements, understandings, arrangements
and transactions between the parties hereto with respect to the Project or this
Agreement.
14.1.3 The Members acknowledge that Feld has made certain transfers
to the LES Trust and the LF Trust prior to November 4, 1991, and agree that no
Member will assert any right to recover against either of such trusts by reason
of any transfer made prior to November 4, 1991, regardless of the consideration
or lack of consideration for such transfer. Feld shall make no further
transfers to either of such trusts as long as all or any part of Feld's
obligations under this Agreement remain outstanding. In addition to the
foregoing, the Members hereby agree that the personal residence of Feld
located at One Dexter Street, Denver, Colorado is not available to support the
obligations of Feld under this Agreement and agree not to assert any right to
recover against such personal residence, and the Members hereby disclaim,
quitclaim, release and relinquish any right to proceed against such personal
residence for amounts owed by Feld under this Agreement. Upon submission by
Feld and written approval by WPHC of a financial statement of Feld certified by
Feld to be current and accurate, Feld's vacation home at 19 Creekside Drive in
Palm Springs, California shall be treated in the same manner as his residence
at One Dexter Street, Denver, Colorado, for purposes of this Agreement.
14.2 Company Debt Liability. A Member will not personally be liable for
any debts or losses of the Company, except as provided herein or in the Act.
14.3 List of Members. Upon written request of any Member, the Managers
shall provide a list showing the names, addresses and Percentage Interests of
all Members in the Company.
14.4 Company Books. The Managers shall maintain and preserve, during the
term of the Company, and for five (5) years thereafter, all accounts, books,
and other relevant Company documents. Upon reasonable request, each Member
shall have the right, during ordinary business hours, to inspect and copy such
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Company documents at the Member's expense.
14.5 Priority and Return of Capital. Except as specifically provided
herein, no Member shall have priority over any other Member, either as to the
return of Capital Contributions or as to Profits, Losses or distributions;
provided that this Section shall not apply to loans (as distinguished from
Capital Contributions) which a Member may make to the Company.
14.6 Outside Activity.
14.6.1 Except for the limitations on the activities of Feld and
certain Affiliates set forth herein, each Member, including but not limited to
the Manager, may engage in any capacity (as owner, employee, consultant, or
otherwise) in any activity, whether or not such activity competes with or is
benefitted by the business of the Company, without being liable to the Company
or the other Members for any income or profit derived from such activity.
14.6.2 From the date hereof until the earlier of November 1, 1996
or the date that Feld ceases to be a Member of the Company, neither Feld nor
any other Restricted Party shall construct or commence construction of any
Multi-Family Project located in the Denver metropolitan area (including without
limitation Boulder). The restrictions under this Section 14.6.2 shall not
apply to the existing "Breakers" project, which is located in Denver, or to any
subsequent phases of the Breakers, or to the Village at the Bear project, which
is located in Jefferson County, Colorado, and is owned by Village At Bear Creek
LLC.
14.6.3 From the date hereof until the date that Feld ceases to be
a Member of the Company, neither Feld nor any other Restricted Party shall (i)
purchase, construct or commence construction of any Multi-Family Project any
part of which Multi-Family Project is located within three (3) miles of any
portion of the Land, or (ii) purchase, construct or commence construction of
any Multi-Family Project outside said three-mile area without giving prior
written notice to WPHC.
14.6.4 "Restricted Parties" shall mean Feld, The Feld Company and
any entity in which they individually or collectively, directly or indirectly,
have an ownership interest of in excess of 20 percent of any class of security.
Feld covenants that it shall cause each Restricted Party to comply with the
restrictions in this Section 14.6, and a failure of a Restricted Party to
comply with the terms of this Agreement shall constitute a breach of this
Agreement by Feld. Feld shall comply with the restrictions set forth in this
Section 14.6 in good faith and shall not employ any artifice or device to evade
the intent of this provision. The restrictions in Subsections 14.6.2 and
14.6.3 are cumulative, and shall apply to a Restricted Party as an owner for
its own account or as a developer, construction manager, general contractor or
partner of any other Person. This Section 14.6 shall not prohibit any
Restricted Party from conducting pre-development activities in connection with
a Multi-Family Project, provided that construction activity (including any
activity for which a building permit is required) has not commenced on such
Multi-Family Project.
ARTICLE 15
MEETINGS OF MEMBERS
15.1 Annual Meeting. The annual meeting of the Members shall be held on
the first business day of May or at such other time as shall be determined by
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resolution of the Members, commencing with the year 1996, for the purpose of
the transaction of such business as may come before the meeting.
15.2 Special Meetings. Special meetings of the Members, for any purpose
or purposes, unless otherwise prescribed by statute, may be called by any
Manager or by any Member or Members holding at least 1% of the Percentage
Interests.
15.3 Place of Meetings. The Members may designate any place, either
within or outside the State of Colorado, as the place of meeting for any
meeting of the Members. If no designation is made, or if a special meeting be
otherwise called, the place of meeting shall be the principal business office
of the Company in the State of Colorado.
15.4 Notice of Meetings. Except as otherwise provided for herein, written
notice stating the place, day and hour of the meeting and the purpose or
purposes for which the meeting is called shall be delivered not less than ten
(10) nor more than fifty (50) days before the date of the meeting, either
personally or by mail, by or at the direction of the Managers or Person calling
the meeting, to each Member entitled to vote at such meeting.
15.5 Meeting of all Members. If all of the Members shall meet at any time
and place, either within or outside of the State of Colorado, and consent to
the holding of a meeting at such time and place, such meeting shall be valid
without call or notice, and at such meeting lawful action may be taken.
15.6 Record Date. For the purpose of determining Members entitled to
notice of or to vote at any meeting of Members or any adjournment thereof, or
Members entitled to receive payment of any distribution, or in order to make a
determination of Members for any other purpose, the date on which notice of the
meeting is sent or the date on which the resolution declaring such distribution
is adopted, as the case may be, shall be the record date for such determination
of Members. When a determination of Members entitled to vote at any meeting of
Members has been made as provided in this Section, such determination shall
apply to any adjournment thereof.
15.7 Quorum. Members holding at least a Majority In Interest, represented
in person or by proxy, shall constitute a quorum at any meeting of Members. In
the absence of a quorum at any such meeting, a majority of the Percentage
Interests so represented may adjourn the meeting from time to time for a period
not to exceed sixty (60) days without further notice. However, if the
adjournment is for more than sixty (60) days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each Member of record entitled to vote at the
meeting.
At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally noticed. The Members present at a duly organized
meeting may continue to transact business until adjournment, notwithstanding
the withdrawal during such meeting of Members owning that number of Percentage
Interests whose absence would cause less than a quorum.
15.8 Manner of Acting. If a quorum is present, the affirmative vote of
Members holding at least a Majority In Interest and entitled to vote on the
subject matter shall be the act of the Members, unless the vote of a greater or
lesser proportion or number is otherwise required by the Act, by the Articles
of Organization, or by this Agreement.
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15.9 Proxies. At all meetings of Members, a Member may vote in person or
by proxy executed in writing by the Member or by a duly authorized attorney-in-
fact. Such proxy shall be filed with the Managers of the Company 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.
15.10 Action by Members Without a Meeting. Action required or
permitted to be taken at a meeting of Members may be taken without a meeting if
the action is evidenced by one or more written consents describing the action
taken, signed by each Member entitled to vote and delivered to the Managers of
the Company for inclusion in the minutes or for filing with the Company
records. Action taken under this Section 15.10 is effective when all Members
entitled to vote have signed the consent, unless the consent specifies a
different effective date.
The record date for determining Members entitled to take action without a
meeting shall be the date the first Member signs a written consent.
15.11 Voting by Ballot. Voting on any question or in any election may
be by voice vote unless the Managers or any Member shall demand that voting be
by ballot.
15.12 Waiver of Notice. When any notice is required to be given to
any Member, a waiver thereof in writing signed by the Person entitled to such
notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of such notice.
ARTICLE 16
TRANSFERABILITY; PUT-CALL PROVISIONS
16.1 Restrictions on Transferability. Except as provided in Section 16.2
and Section 16.6, no transfer, pledge or assignment of all or any part of a
Member's Interest in the Company (including the transfer of any rights to
receive or share in profits, losses, income or the return of contributions)
shall be effective unless and until written notice (including the name and
address of the proposed purchaser, transferee, or assignee and the date of such
transfer) has been provided to the Company and the non-transferring Members
approve of the proposed sale, pledge or assignment of a selling, pledging or
assigning Member's Interest by unanimous written consent, which may be withheld
in their sole discretion.
16.2 Put-Call Rights.
16.2.1 WPHC shall have the option (the "Call Option") to acquire the
Interest of Feld in the Company, including his right to receive any
distributions related to any periods prior to and including the Option Closing
Date: (i) on and after the Final Closing for the Option Price, or (ii) on or
after the Construction Loan Outside Date, for $100.00 if the Construction Loan
Closing has not occurred by the Construction Loan Outside Date for any reason
whatsoever, or (iii) at any time for $100.00 if Feld fails to timely cure any
default by Feld under this Agreement. The exercise by WPHC of the Call Option
described in item (i) of this Section is conditioned on WPHC performing its
obligation to make the Final Closing Capital Contribution when and as required
under this Agreement. To exercise its Call Option, WPHC shall provide written
notice of exercise to Feld.
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16.2.2 Feld shall have the right to cause WPHC to acquire the
Interest of Feld in the Company, including his right to receive any
distributions related to any periods prior to and including the Option Closing
Date, at Final Closing for the Option Price (the "Put Option") by providing
written notice to WPHC of Feld's intention to exercise the Put Option, provided
that all the Final Closing Funding Conditions have been satisfied.
16.2.3 If the Call Option or Put Option is exercised, Feld shall
forthwith upon request of WPHC execute an Assignment of Interest in the form of
Exhibit Q or Exhibit R, as applicable, attached hereto, wherein Feld shall
assign its Interest in the Company free and clear of all liens, security
interests and competing claims. Feld shall execute such other instruments of
transfer and of due authorization, execution and delivery and of the absence of
any such liens, security interests or competing claims as WPHC may reasonably
request. Feld shall have no duty, obligation or right to continue as Manager
of the Company after such transfer of its Interest.
16.3 Calculation of Option Price.
16.3.Y The Members shall use their respective, good faith efforts to
determine the Option Price prior to the Option Closing Date. For a period of
at least ten (10) business days prior to ordering an appraisal in connection
with the determination of the Option Price, WPHC and Feld shall attempt in good
faith to negotiate the fair market value of the Project to be used in such
determination. Each of WPHC and Feld shall be entitled to submit the
calculation of the Option Price to the Company's Accountants for verification
or auditing. If WPHC and Feld are unable to determine the Option Price by the
Option Closing Date, then WPHC shall pay Feld the Minimum Option Price as
estimated by WPHC in its good faith judgment. The parties shall make a
determination of the Option Price promptly after the Option Closing, and (i) if
the Option Price as so determined exceeds the estimated Minimum Option Price
paid at the Option Closing, then WPHC shall pay Feld such excess within five
(5) business days after the determination of the Option Price, or (ii) if the
Option Price as so determined is less than the estimated Minimum Option Price
paid at the Option Closing, then Feld shall pay the difference to WPHC within
five (5) business days after the determination of the Option Price. In
addition, for a period of twelve (12) months after the Final Closing Date, WPHC
and Feld shall each have the right to cause the recalculation of the Option
Price, if such Member pays the costs of the Company's Accountants in making
such recalculation. If the amount of the adjustment is in excess of $5,000,
then WPHC and Feld shall adjust the Option Price within five (5) business days
after the recalculation of the Option Price. No post-closing adjustment in the
Option Price shall be made for amounts of $5,000 or less or based on a
recalculation made more than twelve (12) months after the Option Closing Date.
Notwithstanding anything to the contrary herein, the appraised value of the
Project as determined shall be final and shall not be subject to challenge or
recalculation by any Member.
16.4 Right of Offset. Payment of the Option Price shall be subject to a
right of offset in favor of the Company and WPHC with respect to any claims or
damages they may have against Feld.
16.5 Restrictions on Resignation. Notwithstanding anything to the
contrary contained herein or under the Act, no Member shall have the right to
resign from the Company. In the event a Member does resign in violation of the
foregoing provision, (i) the Company shall not be obligated to pay any amounts
to the Member, nor to distribute any of the Property to the Member or any
interest therein, (ii) the Member shall be deemed to have forfeited any rights
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to legal or beneficial ownership of its Interest, and (iii) the Company may
recover from the resigning Member damages for breach of this Agreement.
16.6 Permitted WPHC Transfer. WPHC shall have the right to transfer a
portion of WPHC's Interest in the Company (a "WPHC Permitted Transfer") to a
Person (a "WPHC Permitted Transferee"), provided that WPHC at all times during
the term of this Agreement shall retain an Interest in the Company of at least
twenty-one percent (21%) of the total Interests in capital, income, gain, loss,
deduction and credit. WPHC acknowledges that any transfer pursuant to this
Section 16.6 shall be solely from the Interest of WPHC and shall not result in
the dilution of the Interest of Feld. In the event of a Permitted WPHC
Transfer, (I) WPHC shall have the exclusive authority to communicate all
decisions, votes and elections ("Decisions") made by it and by the WPHC
Permitted Transferee with respect to the Interest of WPHC and such transferee
in the Company, (II) Feld shall be entitled to rely exclusively on
communications made by WPHC with respect to all such Decisions, and any
communications by a WPHC Permitted Transferee with respect to a Decision other
than through WPHC shall be invalid, and (III) prior to and as a condition to
the admission of a WPHC Permitted Transferee as a Member, the WPHC Permitted
Transferee shall execute an admission agreement wherein it agrees to be bound
by all the terms of this Agreement, including without limitation, this Section
16.6.
ARTICLE 17
ADMISSION OF ADDITIONAL MEMBERS
From the date of the formation of the Company, with the unanimous written
consent of the Members, any Person acceptable to the Members may, subject to
the terms and conditions of this Agreement: (i) become an additional Member in
this Company by the sale of new Interests for such consideration as the Members
by unanimous vote shall determine, or (ii) become a Substitute Member as a
transferee of a Member's Interest or any portion thereof.
ARTICLE 18
DISSOLUTION AND TERMINATION
18.1 Dissolution.
18.1.1 The Company shall be dissolved upon the occurrence of any of
the following events ("Dissolution Event"):
(a) When the period fixed for the duration of the Company shall
expire;
(b) by the unanimous written agreement of all Members; or
(c) upon the death, retirement, resignation, expulsion,
Removal, bankruptcy, dissolution of a Member or occurrence of any other event
which terminates the continued membership of a Member in the Company (a
"Withdrawal Event"), unless the business of the Company is continued by the
consent of a majority of the Interests of the remaining Members in the capital
and profits of the Company, as determined in accordance with Revenue Procedure
94-46 within ninety (90) days after the termination and there are at least two
remaining Members.
18.1.2 As soon as possible following the occurrence of any of the
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events specified in this Section effecting the dissolution of the Company, the
appropriate representative of the Company shall execute a statement of intent
to dissolve in such form as shall be prescribed by the Colorado Secretary of
State and file duplicate originals of the same with the Colorado Secretary of
State's office.
18.2 Effect of Filing of Dissolving Statement. Upon the filing with the
Colorado Secretary of State of a statement of intent to dissolve, the Company
shall cease to carry on its business, except insofar as may be necessary for
the winding up of its business, but its separate existence shall continue until
articles of dissolution have been filed with the Secretary of State or until a
decree dissolving the Company has been entered by a court of competent
jurisdiction.
18.3 Distribution of Assets Upon Dissolution. In settling accounts after
dissolution, the liabilities of the Company shall be entitled to payment in the
following order:
18.3.1 to creditors, in the order of priority as provided by law
(except to Members on account of their Capital Contributions);
18.3.2 to Members and former Members in satisfaction of liabilities
for distributions under Section 7-80-601 or 7-80-603 of the Act; and
18.3.3 to Members pro rata in accordance with the positive balances
in their Capital Accounts after taking into account all adjustments to the
Capital Accounts for all periods.
18.4 Articles of Dissolution. When all debts, liabilities and obligations
have been paid and discharged or adequate provisions have been made therefor
and all of the remaining Property and assets have been distributed to the
Members, articles of dissolution shall be executed in duplicate and verified by
the Person signing the articles, which articles shall set forth the information
required by the Act.
18.5 Filing of Articles of Dissolution.
18.5.1 Duplicate originals of such articles of dissolution shall be
delivered to the Colorado Secretary of State.
18.5.2 Upon the filing of the articles of dissolution, the existence
of the Company shall cease, except for the purpose of suits, other proceedings
and appropriate action as provided in the Act. The Managers shall thereafter
be trustees for the Members and creditors of the Company and as such shall have
authority to distribute any Property of the Company discovered after
dissolution, convey real estate and take such other action as may be necessary
on behalf of and in the name of the Company.
18.6 Winding Up. If the Property of the Company remaining after the
payment or discharge of the debts and liabilities of the Company is
insufficient to return the Capital Contribution of each Member, such Member
shall have no recourse against any other Member. The winding up of the affairs
of the Company and the distribution of its assets shall be conducted
exclusively by the Managers, who are hereby authorized to take all actions
necessary to accomplish such distribution, including without limitation,
selling the assets of the Company. In the discretion of the Managers, a pro
rata portion of the amounts that otherwise would be distributed to the Members
under this Article 18 may be withheld to provide a reasonable reserve for
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unknown or contingent liabilities of the Company.
18.7 No Restoration of Deficit Capital Accounts. If the Company is deemed
to be liquidated for federal income tax purposes within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g), distributions under Section 14.3(c)
shall be made in compliance with Regulation Section 1.704-1 (b)(2)(ii)(b)(2) to
those Members who have positive Capital Accounts. If the Capital Account of
any Member has a deficit balance after such distributions (after giving effect
to all contributions, distributions, and allocations for all taxable years),
such Member shall have no obligation to make any contribution to the capital of
the Company with respect to such deficit and such deficit shall not be
considered a debt owed to the Company or any other Person for any purpose
whatsoever.
18.8 Deemed Liquidation. If no Dissolution Event has occurred, but the
Company is deemed liquidated for federal income tax purposes within the meaning
of Regulation Section 1.704-1 (b)(2)(ii)(g), the Company shall not be wound up
and dissolved but its assets and liabilities shall be deemed to have been
distributed to the Members and contributed to a new limited liability company
which shall operate and be governed by the terms of this Agreement.
18.9 Permitted Withdrawal by Feld. If the Construction Loan Closing has
not occurred by the Construction Loan Outside Date, upon not less than ten (10)
days prior written notice to WPHC, Feld may withdraw as the Manager and as a
Member without such withdrawal (a "Permitted Withdrawal") constituting a breach
of this Agreement. In the event of a Permitted Withdrawal, Feld shall not have
any obligation under the Development Deficit Guaranty or the Operating Deficit
Guaranty, and Feld shall be released from any obligation hereunder related to
the period after his Withdrawal. Upon a Permitted Withdrawal, Feld shall have
no right to any fees or payments from the Company or any interest in any
property of the Company. Feld shall execute such documents or instruments
evidencing his withdrawal as WPHC may reasonably request. Except for a
Permitted Withdrawal or a withdrawal upon the death or disability of Feld, any
withdrawal by Feld from the Company shall constitute a default by Feld under
this Agreement and WPHC shall be entitled to damages and any other legally
available relief based upon such default.
ARTICLE 19
MISCELLANEOUS PROVISIONS
19.1 Statement of Intent of Parties. It is the present intent of WPHC and
Feld to jointly develop the Project as the second phase leading to the eventual
development of the Master Development. Due to the changes that may take place
in the capital and real estate markets and other events, unknown at this time,
which may alter either WPHC's or Feld's interest in or outlook on future
phases, no specific provision is made in this Agreement in regard to future
phases. It is the present intent of the parties to use the basic economic and
transaction structure of this Operating Agreement on future phases. However,
either party may require changes or elect not to participate in the joint
development of future phases. The Members acknowledge that Feld has diligently
pursued the purchase of the Land and the development plan of the Land for a
significant period and has agreed to WPHC's assumption of the Land Contract due
to and in consideration of WPHC's and WRPT's financial commitment to the
transaction. It is imperative to WPHC that it control the future of this
development in regard to all issues, including timing, cost, design, etc.
While this control is absolute, it is WRPT's and Feld's present intent that
Feld continue as development partner. Notwithstanding the foregoing statement
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of intent, the provisions of this Agreement and related documents governing the
duties and relationships among the parties shall control over the foregoing
statement of intent and neither party shall have any obligation, express or
implied, to jointly develop another phase of the Master Development with the
other party.
19.2 Notices. Any notice or communication required or permitted to be
given by any provision of this Agreement, including but not limited to any
consents, shall be in writing and shall be deemed to have been given and
received by the Person to whom directed (a) when delivered personally to such
Person or to an officer or partner of the Member to which directed, (b) twenty-
four (24) hours after transmitted by facsimile, evidence of transmission
attached, to the facsimile number of such Person who has notified the Company
and all of the Members of its facsimile number, or (c) three (3) business days
after being posted in the United States mails if sent by registered or
certified mail, return receipt requested, postage and charges prepaid, or one
(1) business day after deposited with overnight courier, return receipt
requested, delivery charges prepaid, in either case addressed to the Person to
which directed at the address of such Person as it appears in this Agreement or
such other address of which such Person has notified the Company and all of the
Members.
WPHC: c/o Wellsford Residential Property Trust
370 Seventeenth Street, Suite 3100
Denver, Colorado 80202
Attention: Donald D. MacKenzie
Facsimile No. (303) 595-7799
with copies to:
Wellsford Residential Property Trust
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attention: Jeffrey Lynford
Facsimile No. (212) 333-2323
and to:
Wayne H. Hykan, Esq.
Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Facsimile No. (303) 623-1956
Feld: Mr. Al Feld
The Feld Company
4600 South Ulster Street, Suite 350
Denver, Colorado 80237
Facsimile No. (303) 721-9418
with a copy to:
Alan B. Lottner, Esq.
Haligman & Lottner, P.C.
633 17th Street, Suite 2700, North Tower
Denver, Colorado 80202
Facsimile No. (303) 292-1300
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19.3 Application of Colorado Law. This Agreement, and the application or
interpretation hereof, shall be governed exclusively by its terms and by the
laws of the State of Colorado, and specifically by the Act.
19.4 Waiver of Action for Partition. Each Member irrevocably waives
during the term of the Company any right that such Member may have to maintain
any action for partition with respect to the Property of the Company.
19.5 Amendments. This Agreement may be amended only upon the written
Agreement of all of the Members.
19.6 Construction. Whenever the singular number is used in this Agreement
and when required by the context, the same shall include the plural, and the
masculine gender shall include the feminine and neuter genders, and vice versa.
19.7 Headings. The headings in this Agreement are inserted for
convenience only and are in no way intended to describe, interpret, define, or
limit the scope, extent or intent of this Agreement or any provision hereof.
19.8 Waivers. The failure of any party to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation.
19.9 Time of the Essence. Time is of the essence in regard to the
obligations of the parties set forth in this Agreement.
19.10 Remedies for Default. If any party hereto fails to perform any
of its obligations under this Agreement, at the time and in the manner set
forth herein, and such failure continues uncured after any applicable notice
and cure period, then any other party may assert a claim against the defaulting
party for damages and, to the extent damages are not an adequate remedy, for
specific performance of this Agreement.
19.11 Rights and Remedies Cumulative. The rights and remedies
provided by this Agreement are cumulative and the use of any one right or
remedy by any party shall not preclude or waive the right to use any or all
other remedies. Said rights and remedies are given in addition to any other
rights the parties may have by law, statute, ordinance or otherwise.
19.12 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid, illegal or
unenforceable to any extent, the remainder of this Agreement and the
application thereof shall not be affected and shall be enforceable to the
fullest extent permitted by law.
19.13 Heirs, Successors and Assigns. Each and all of the covenants,
terms, provisions and agreements herein contained shall be binding upon and
inure to the benefit of the parties hereto and, to the extent permitted by this
Agreement, their respective heirs, legal representatives, successors and
assigns.
19.14 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which shall constitute one
and the same instrument.
19.15 Further Assurances. The Members and the Company agree that they
and each of them will take whatever action or actions as are reasonably
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necessary or desirable from time to time to effectuate the provisions or intent
of this Agreement, and to that end, the Members and the Company agree that they
will execute, acknowledge, seal, and deliver any further instruments or
documents which may be necessary to give force and effect to this Agreement or
any of the provisions hereof, or to carry out the intent of this Agreement or
any of the provisions hereof.
19.16 Entire Agreement. This Agreement and each of the exhibits
attached hereto set forth all (and are intended by all parties hereto to be an
integration of all) of the promises, agreements, conditions, understandings,
warranties, and representations among the parties hereto with respect to the
formation and operations of the Company; and there are no promises, agreements,
conditions, understandings, warranties, or representations, oral or written,
express or implied, among them other than as set forth herein. The exhibits
attached hereto are incorporated herein by reference.
19.17 Attorneys Fees. Should any party hereto institute any legal
action or proceeding to enforce any provision of the Operating Agreement or for
damages by reason of any alleged breach of any provision of the Operating
Agreement or for any other judicial remedy, the prevailing party shall be
entitled to receive from the non-prevailing party all reasonable attorneys'
fees and all court costs in connection with said action or proceeding, in
addition to any other award.
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CERTIFICATE
The undersigned hereby agree, acknowledge and certify that the foregoing
Agreement constitutes the Operating Agreement of Red Canyon at Palomino Park
LLC adopted by the Members of the Company effective as of April 17, 1996.
/s/ Al Feld
------------------------------------------
Al Feld
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By: /s/ Donald D. MacKenzie
-------------------------------------
Name:
Title:
54
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GUARANTY
By its execution hereof, WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland
real estate investment trust ("WRPT"), hereby guarantees to Al Feld ("Feld")
that Wellsford Park Highlands Corp., a Colorado corporation, shall timely and
fully satisfy its obligation to fund the Final Closing Capital Contribution
when, as and if required by the foregoing Operating Agreement, as such
Agreement may be amended from time to time (the "Obligation").
This guaranty is a guaranty of payment and performance of the Obligations,
not merely of collection. Any amendment or modification of the Obligations
made by WPHC and Feld shall not release the duties and obligations of WRPT
hereunder, and this Guaranty shall extend to the Obligations as so amended or
modified. This Guaranty shall be continuing and irrevocable until the
Obligations have been satisfied in full. WRPT hereby waives notice of
acceptance of this Guaranty.
WRPT waives and agrees not to assert or take advantage of: (a) any right
to require Feld to proceed against any other person or to proceed against or
exhaust any security held by Feld at any time or to pursue any other remedy in
Feld's power before proceeding against WRPT; (b) any right to require Feld to
proceed against WPHC or any other person or to proceed against or exhaust any
security held by Feld at any time or to pursue any other remedy in Feld's power
before proceeding against WRPT; and (c) any requirement that notice be
provided to WRPT.
This Guaranty and all documents, agreements, understandings and
arrangements relating to this Guaranty have been executed by the undersigned 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 beneficiary of this
Guaranty shall look solely to the assets of WRPT for satisfaction of any
liability of WRPT 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 trustees, officers or
shareholders of WRPT 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 Guaranty
or any matter related thereto.
Should any one or more provisions of this Guaranty Agreement be determined
to be illegal or unenforceable, all other provisions nevertheless shall be
effective.
This Guaranty Agreement shall be governed by and construed in accordance
with the laws of the State of Colorado.
EXECUTED as of April 17, 1996.
WELLSFORD RESIDENTIAL PROPERTY TRUST,
a Maryland real estate investment
trust
55
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By: /s/ Donald D. MacKenzie
-------------------------------------
Name: Donald D. MacKenzie
Title: Vice President
56
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STATE OF ___________________ )
) ss.
COUNTY OF __________________ )
The foregoing operating agreement was acknowledged before me this _____
day of ______________, 1996 by Al Feld.
WITNESS my hand and official seal.
My commission expires:
___________________________________
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing operating agreement was acknowledged before me this _____
day of _____________, 1996 by Donald D. MacKenzie as Vice President of
Wellsford Park Highlands Corp., a Colorado corporation.
WITNESS my hand and official seal.
My commission expires:
-------------------------------------
Notary Public
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
The foregoing guaranty was acknowledged before me this _____ day of
_____________, 1996 by __________________ as _____________ of Wellsford
Residential Property Trust, a Maryland real estate investment trust.
WITNESS my hand and official seal.
My commission expires:
-------------------------------------
Notary Public
57
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EXHIBITS
EXHIBIT A Feld Reimbursable Expenses
EXHIBIT B Construction Procedures
EXHIBIT C Deposit and Contract Administration Agreement
EXHIBIT D Final Closing Funding Conditions
EXHIBIT E Description of Infrastructure
EXHIBIT F Description of Infrastructure Land
EXHIBIT G Description of the Land
EXHIBIT H Description of the Master Development Land
EXHIBIT I Initial Project Budget
EXHIBIT J Property Management Agreement
EXHIBIT K Intentionally Omitted
EXHIBIT L Pledge and Security Agreement -- Feld to WPHC
EXHIBIT M Pledge and Security Agreement -- WPHC to Feld
EXHIBIT N Description of Plans and Specifications
EXHIBIT O Final Project Budget
EXHIBIT P Calculation of the Feld Incentive Fee
EXHIBIT Q Assignment of Interest -- Call Option
EXHIBIT R Assignment of Interest -- Put Option
EXHIBIT S-1 Architect's Certificate
EXHIBIT S-2 Engineer's Certificate
EXHIBIT T Infrastructure Budget
EXHIBIT U Substitution Agreement
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EXHIBIT A
FELD REIMBURSABLE EXPENSES
59
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EXHIBIT B
CONSTRUCTION PROCEDURES
1. Requests for advances by the Construction Lender for payment of costs of
labor, materials, and services supplied for the construction of the
improvements and other items shown in the Project Budget shall be
submitted by Feld, not more frequently then as specified in the
Construction Loan, after actual commencement of construction of the
improvements. WPHC, and the Construction Consultant shall be provided
with copies of the application for advance simultaneously with delivery to
the Construction Lender, except as otherwise provided in Section 6.6 of
the Operating Agreement.
2. WPHC and the Construction Consultant shall have the right and Feld shall
permit them to enter upon the Property and any location where materials
which are intended to be utilized in the construction of the improvements
are stored for purpose of inspection of the Property and such materials at
all reasonable times.
3. Feld shall timely comply with and promptly furnish to WPHC and
Construction Consultant a true and complete copy of any notice or claim by
any governmental authority pertaining to the Property and of any notice or
claim from the Construction Lender or any subcontractor or supplier with
respect to the Project.
4. Feld shall disburse all advances for payment of costs and expenses for
purposes specified in the Project Budget, and for no other purpose.
5. WPHC and Construction Consultant shall be advised, in advance of, and
shall have the right to attend all meetings pertaining to the construction
of the improvements. Feld agrees to use his best efforts to attempt to
notify WPHC and Construction Consultant reasonably in advance of such
meetings in order to allow attendance at such meeting by representatives
of WPHC and the Construction Consultant.
6. Feld shall not reallocate to other line items any portion of the line
items in the Project Budget that relate to Construction Loan interest or
loan fees.
7. Feld shall deliver copies of the monthly construction ledger to WPHC on or
before the 10th day of the following month.
8. Change orders shall be dealt with as provided in Section 6.7 of the
Operating Agreement.
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EXHIBIT C
DEPOSIT AND CONTRACT ADMINISTRATION AGREEMENT
This Deposit and Contract Administration Agreement ("Agreement") is made
as of the 2nd day of May, 1995, by and between THE FELD COMPANY, a Colorado
corporation, located at 4600 S. Ulster Street, Suite 350, Denver, Colorado
80237, and WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation, located at
370 17th Street, Suite 3100, Denver, Colorado 80202 (hereinafter called
"WPHC").
RECITALS
WHEREAS, The Feld Company and Mission Viejo Company, a California
corporation ("Mission") previously entered into that certain Second Amended and
Restated Vacant Land Purchase and Sale Agreement on March 23, 1995 (the
"Purchase Agreement") for the purchase of approximately 182 acres of unimproved
real property in Douglas County, Colorado, being more particularly described as
Lots 1 through 5, Highlands Ranch Filing No. 126-A (the "Property"); and
WHEREAS, by an Assignment and Assumption Agreement of even date herewith,
The Feld Company, in consideration of the sum of $300,000 paid to it by WPHC,
has assigned to WPHC all of its right, title and interest in (i) the Purchase
Agreement, and (ii) that certain earnest money deposit in the amount of
$300,000 (the "Deposit") previously paid to Mission in accordance with the
terms of the Purchase Agreement; and
WHEREAS, by an Assignment and Assumption Agreement of even date herewith,
WPHC has assigned all of its rights and obligation pursuant to the terms and
provisions of the Purchase Agreement with respect to the purchase of "Phase I,"
as that term is defined in the Purchase Agreement, to the Park at Highlands
LLC, a Colorado limited liability company ("PAH"); and
WHEREAS, The Feld Company and WPHC now desire to enter into a new
agreement to document the rights and obligations of The Feld Company and WPHC
with respect to the funds being deposited with WPHC pursuant to the terms of
this Agreement.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants herein contained, and respectively expressing the intention to be
legally bound hereby, covenant and agree as follows:
1. Receipt and Acknowledgement. WPHC hereby acknowledges the receipt of
the sum of $150,000 from The Feld Company, which will be held by WPHC, and
governed by the terms of this Agreement.
2. Reimbursement.
a. WPHC may sell or assign its interest in the Purchase Agreement,
with respect to the Property, or any part thereof, to an entity jointly
owned by A1 Feld and/or The Feld Company and Wellsford Residential
Property Trust ("Wellsford") or an entity owned by Wellsford ("Approved
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Entity") for any reason whatsoever. If however, WPHC sells or assigns its
interest in the Purchase Agreement, with respect to the Property, or any
part thereof, to any person or entity that does not qualify as an Approved
Entity, then WPHC shall, within five business days from the execution of
such sale or assignment, pay The Feld Company the sum of $150,000.
b. If all or any portion of the Deposit is credited by Mission
towards the purchase price of all or any portion of the Property, then
WPHC shall pay 50% of the amount so credited by Mission, to The Feld
Company within five business days following the receipt of such credit by
WPHC.
c. If all or any portion of the Deposit is returned to WPHC by
Mission, for any reason whatsoever, then WPHC shall pay 50% of the amount
so returned to The Feld Company within five business days following WPHC's
receipt thereof.
d. If the Deposit is not returned or credited by Mission to WPHC,
then neither party shall be liable to the other for reimbursement of the
Deposit or any portion thereof, except as set forth in paragraph 2.a.
hereof.
3. Right of First Offer. If The Feld Company is not in default under
any agreements with WPHC or its affiliates, and if WPHC decides not to purchase
any of Phases II, III, IV or V, as defined in the Purchase Agreement, WPHC
agrees to notify The Feld Company at least 150 days before the scheduled
closing of such Phase, and The Feld Company shall have 90 days to obtain
another source of acquisition and development financing and to present an offer
to WPHC to acquire the subject parcel. If The Feld Company fails to present an
offer acceptable to WPHC in WPHC's sole discretion, WPHC shall have no
obligations to The Feld Company with respect to such parcel.
4. Entire Agreement. This is the entire agreement between the parties
and there are no other terms, obligations, covenants, representations,
statements or conditions, oral or otherwise, of any kind whatsoever. Any
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of this Agreement in whole or in part unless such
agreement is in writing and signed by the party against whom enforcement of the
change, modification, discharge or abandonment is sought.
5. No Further Obligations. The parties have no obligations or
liabilities of any nature or kind to the other party with respect to the
Deposit or the Purchase Agreement, except as expressly set forth in this
Agreement. WPHC shall have exclusive control over the Purchase Agreement, as
it relates to Phases II, III, IV and V, as described therein, and The Feld
Company has no interest whatsoever in the Purchase Agreement with respect to
Phases II, III, IV and V, except for any rights set forth in this Agreement.
None of the provisions of this Agreement constitute or create any agreement or
obligation by either party to (i) enter into a joint venture, partnership,
corporation, limited liability company or any other arrangement with the other
party, or to negotiate in good faith with respect to the same; (ii) to enter
into any agreements, or to negotiate in good faith with respect to the same;
(iii) to purchase or develop the Property, or any portion thereof; or (iv) to
act in any manner whatsoever, unless expressly provided for in this Agreement
or otherwise reduced to a definitive written agreement, executed by the
parties. The parties acknowledge and agree that they have no obligations with
respect to Phases II, III, IV and V, as described in the Purchase Agreement.
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6. Miscellaneous.
a. Successors and Assigns. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
heirs, executors, administrators, legal representatives, successors and
permitted assigns.
b. Governing Law. This Agreement shall be governed by and shall be
construed and interpreted in accordance with the laws of the State of
Colorado.
c. Notices. All notices, consents, approvals or other
communications which any of the parties to this Agreement may desire or
may be required to give hereunder shall be in writing and shall be given
by registered or certified mail, return receipt requested, postage
prepaid, or by personal delivery, delivery by courier, or by confirmed
telecopy or facsimile transmission, addressed as follows:
If to The Feld company:
The Feld Company
4600 South Ulster Street
Suite 350
Denver, Colorado 80237
Fax: 303-721-9418
and to:
_________________________
_________________________
_________________________
_________________________
Fax: ____________________
If to WPHC
Wellsford Park Highlands Corp.
370 17th Street, Suite 3100
Denver, Colorado 80202
Fax: 303-595-7799
Attn: Don MacKenzie
and to:
Wayne H. Hykan, Esq.
Brownstein Hyatt Farber &
Strickland, P.C.
410 17th Street, Suite 2200
Denver, Colorado 80202
Fax: 303-623-3956
Any such notice to WPHC or The Feld Company shall be deemed to be given,
received, and effective three days after such notice has been deposited in the
United States mail, addressed as aforesaid, or when personally delivered to and
received by the specified parties. All addresses for notices under this
Agreement shall be located within the United States of America.
7. Counterparts. This Agreement may be executed in counterparts.
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8. Costs of Legal Proceedings. In the event that either party
institutes legal proceedings with respect to this Agreement or the transaction
contemplated hereby, the prevailing party shall be entitled to recover its
costs and expenses incurred in connection with such legal proceedings,
including, without limitation, reasonable attorney's fees. The terms of this
paragraph shall survive the termination of this Agreement.
9. Liability of WPHC. No officer, director or shareholder of WPHC shall
be bound by or have any personal liability hereunder or under any document,
agreement, understanding or arrangement relating to this transaction. 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 any and all future documents, agreements,
understandings, arrangements and transactions between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE FELD COMPANY:
THE FELD COMPANY, a Colorado corporation
By: /s/ Al Feld
---------------------------------------
Al Feld, President
WPHC
WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By: /s/ Donald D. MacKenzie
---------------------------------------
Donald D. MacKenzie
Vice President
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EXHIBIT D
FINAL CLOSING FUNDING CONDITIONS
(a) No Default; Certificate From Feld. There shall be no uncured
default by Feld under this Agreement and no uncured default under the
Construction Loan, and WPHC shall have received a certificate from Feld that
the representations, warranties and covenants of Feld in Articles 6 and 13 are
materially true and accurate as of the date of the proposed Final Closing and
that Feld and the Company are not in default of any of their obligations
hereunder or under any contracts or agreements relating to the Project as of
the date of the proposed Final Closing.
(b) Construction Loan. Feld shall provide evidence satisfactory to
WPHC that the principal amount of the Construction Loan and all accrued
interest thereon have either been paid in full or will be paid in full from the
proceeds of the Final Closing Capital Contribution immediately upon the funding
of the Final Closing Capital Contribution. Such evidence may consist of a
payoff letter in form sufficient to allow the title insurer to insure over the
lien of the Construction Loan.
(c) Physical Inspection. The Construction Consultant shall have
prepared a physical inspection report reasonably satisfactory to WPHC.
(d) Final Completion; Development Deficits. Final Completion of the
Project shall have occurred, and all Development Deficit Payments shall have
been made by Feld.
(e) Lien Waivers. Feld shall obtain and provide copies to WPHC of
unconditional lien releases from all subcontractors, materialmen and providers
of labor, equipment, material and/or services to the Property and the Project,
as to all work performed and materials purchased in connection with the
construction of the Project, 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.
(f) Title Policy. The title insurance company shall have issued the
following endorsements to the Company's title policy: (1) an endorsement
indicating that the Company owns fee simple title to the Project Land and that
the Project Land will be free and clear of the Construction Loan upon payment
of the Final Closing Capital Contribution; (2) a "date down" endorsement to the
title policy extending the effective date of the title policy to the date of
Final Closing and showing no exceptions to title other than the exceptions
reflected on the title policy as of Initial Closing, except as shall be
acceptable to WPHC in its reasonable judgment; (3) an endorsement affording
mechanics lien coverage; (4) an endorsement increasing the amount of insurance
by an amount equal to the Final Closing Capital Contribution; and (5) such
other endorsements as WPHC may reasonably require, including without
limitation, the following: (i) 103.1 and 103.2 (Encroachments) to the extent
required and available; (ii) 103.7 (Property Abuts Open Street); (iii) 107.2
(Increase Policy Amount) for the amount of the Final Closing Capital
Contribution plus the Initial Closing Capital Contribution; (iv) 110.1
(Deleting Standard Exceptions) if not already provided; (v) 110.2 (Special
Exceptions) if any new exceptions appear that are not acceptable to WPHC in its
sole discretion; (vi) 115.2 (PUD); (vii) 116.1 (Survey); (viii) 123.2 (Zoning).
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(g) Survey. WPHC shall have received and approved an updated and
recertified as-built survey reasonably satisfactory to WPHC dated no more than
thirty (30) days prior to the date of Final Closing, showing no encroachments
or other adverse matters affecting title to the Project, except as shall be
reasonably acceptable to or have been previously approved in writing by WPHC.
(h) As-Built Plans and Specifications. Feld shall have submitted to
WPHC a written document executed by Feld, the architect and the general
contractor certifying no material change to the approved "for-construction"
Plans and Specifications except any changes stated therein that have previously
been approved by WPHC.
(i) Permits, Licenses and Certificates of Occupancy. WPHC shall
have received 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.
(j) Architect's and Engineer's Certificates. Feld shall have
delivered to WPHC an architect's certificate in the form attached hereto as
Exhibit S-1 and an Engineer's Certificate in the form attached hereto as
Exhibit S-2.
(k) Payment of Taxes. WPHC shall have received satisfactory evidence
(which may be included in the title policy described in subsection (f) of these
Final Closing Funding Conditions) that all real property taxes and assessments
for the Project due and payable through the date of funding have been timely
and fully paid.
(l) Release and Waiver. Feld and each affiliate of Feld that is a
party to an Approved Affiliate Agreement shall have executed for the benefit of
the Members a Release and Waiver, substantially in the form attached hereto as
Exhibit B-3 with respect to all liabilities incurred by Feld during its period
of membership in the Company, including, without limitation, all liabilities
incurred by Feld under the Architect's Agreement, the construction contract for
the construction of the Project, and any contracts, agreements, or other
instruments entered into by Feld in connection with the construction of the
Project or the business of the Company.
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EXHIBIT E
DESCRIPTION OF INFRASTRUCTURE
The following Description of Infrastructure uses substantially the same
categories as those in the Infrastructure Improvement Agreement. The aggregate
of these categories comprises the Infrastructure for the Master Development.
1. Overlot Grading. This includes rough grading for the Infrastructure Land
and some of the fine grading for the park.
2. Willows Water Line. This category includes the engineering and physical
relocation of a 30 inch Willows Water District water line as well as
Quebec Street paving associated with the relocation.
3. Main Recreational Center & Grounds. This is the main recreational
facility for the Master Development. All apartment phases will share its
use. The rec center building will contain approximately 30,000 square
feet and house a gym with exercise equipment, basketball court, racquet
ball court(s) and leasing offices The rec center grounds are expected to
feature a pool & spa, volleyball court, tennis court(s), pond and parking.
4. Water and Sewer Systems, Temporary Access Road. Included here is the main
water and sewer systems that will serve the Master Development.
Additional water and sewer systems will be constructed with each apartment
phase and are not part of the Infrastructure. This category also includes
building of a temporary road that will be used as construction access.
5. Entryway/Guardhouse/Paving. The main access/entry for the Master
Development is from South Quebec Street. At this entry there will be
entry monuments, gates, wall and a guardhouse. Paving for the entry and
loop road (the entry and loop roads collectively comprise Tract A of the
Infrastructure Land) is also included as part of this category.
6. Public Utilities. A telephone distribution system will be installed
around the loop road which will be joint trenched with gas, electric and
cable TV facilities. Some of all of the above facilities may be installed
by parties unrelated to the Company.
7. Park Improvements. Tract B of the Infrastructure Land will be landscaped
and improved with a softball diamond, soccer field, golf putting area and
other similar improvements.
8. Glen Eagles Entry. A future entry for the Master Development may be
needed to provide with ingress/egress. It is contemplated that this
access would be from Glen Eagles Drive at the southern boundary of the
Master Development. This category will include entry monuments, gates and
associated road improvements.
9. Professional Services and Miscellaneous. This category includes various
professional services associated with the development of all
Infrastructure components. It includes architectural design, interior
design of the Main Rec Center, landscape design, civil engineering, soils
engineering/
testing, and legal services associated with closing the Infrastructure
Land and any ongoing document review. Field supervision, general labor
and other misc. items, necessary for construction of all Infrastructure
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components, are also included in this category. This category also
includes building the construction yard compound which serves as a
staging/storage area for the Master Development.
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EXHIBIT F
DESCRIPTION OF INFRASTRUCTURE LAND
Lot 1B, Tract A and Tract B, Highlands Ranch Filing No. 126-A, 1st Amendment as
recorded at Receipt No. 9560621 in the records of the Douglas County Clerk and
Recorder's Office, County of Douglas, State of Colorado
Lot 1B is the land on which the main recreational center will be situated to
service the Master Development.
Tract B is the land on which the main park will be situated to service the
Master Development.
Tract A is the land on which both the main access road and loop road will be
constructed to provide ingress and egress to the Master Development. The loop
road will encircle Lot 1B and Tract B. The main access road will directly
adjoin South Quebec Street.
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EXHIBIT G
DESCRIPTION OF THE LAND
PARCEL 1
LOT 2-A, HIGHLANDS RANCH FILING NO. 126-A, AS DESCRIBED IN THE LOT LINE
ADJUSTMENT CERTIFICATE, RECORDED APRIL 29, 1996 IN BOOK 1337 AT PAGE 324,
RECEPTION NO. 9622585 IN THE OFFICE OF THE CLERK AND RECORDER OF DOUGLAS
COUNTY, COLORADO.
PARCEL 2
THAT CERTAIN PERPETUAL EASEMENT INTEREST AND ESTATE APPURTENANT TO PARCEL 1 AND
ALL RIGHTS AND PRIVILEGES IN CONNECTION THEREWITH, RESERVED BY PARK AT HIGHLANDS
LLC, A COLORADO LIMITED LIABILITY COMPANY, ITS SUCCESSORS, ASSIGNS AND
DESIGNEES, UNDER AND PURSUANT TO THE TERMS OF THAT CERTAIN SPECIAL WARRANTY
DEED, EXECUTED BY PARK AT HIGHLANDS LLC, GRANTOR, TO PALOMINO PARK PUBLIC
IMPROVEMENTS CORPORATION, A COLORADO NON-PROFIT CORPORATION, GRANTEE, RECORDED
JANUARY 3, 1996, UNDER RECEPTION NO. 9600509 IN THE OFFICE OF THE CLERK AND
RECORDER OF DOUGLAS COUNTY, COLORADO, COVERING THE REAL PROPERTY MORE
PARTICULARLY DESCRIBED AS FOLLOWS:
TRACT A, HIGHLANDS RANCH FILING NO. 126-A, 1ST AMENDMENT, AS FILED ON
DECEMBER 19, 1995 UNDER RECEPTION NO. 9560621 IN THE OFFICE OF THE
CLERK AND RECORDER OF DOUGLAS COUNTY, COLORADO.
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EXHIBIT H
DESCRIPTION OF THE MASTER DEVELOPMENT LAND
LOT 3-A, HIGHLANDS RANCH FILING NO. 126-A, AS DESCRIBED IN THE LOT LINE
ADJUSTMENT CERTIFICATE, RECORDED APRIL 29, 1996 IN BOOK 1337 AT PAGE 324,
RECEPTION NO. 9622585 IN THE OFFICE OF THE CLERK AND RECORDER OF DOUGLAS
COUNTY, COLORADO.
LOTS 4 AND 5, HIGHLANDS RANCH FILING 126-A, DOUGLAS COUNTY, COLORADO
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EXHIBIT I
INITIAL PROJECT BUDGET
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EXHIBIT J
PROPERTY MANAGEMENT AGREEMENT
TO BE AGREED UPON BY PARTIES PRIOR TO CONSTRUCTION LOAN CLOSING
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EXHIBIT K
INTENTIONALLY OMITTED
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EXHIBIT L
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.
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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
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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,
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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).
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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
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(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
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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
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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
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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.
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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.
[SIGNATURE PAGE FOLLOWS]
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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
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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
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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
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EXHIBIT M
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 the
Pledgee; and
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(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
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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
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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
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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
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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
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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
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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
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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
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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 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.
[SIGNATURE PAGE FOLLOWS]
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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
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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"):
(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 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
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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
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EXHIBIT N
PLANS AND SPECIFICATIONS
101
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EXHIBIT O
FINAL PROJECT BUDGET
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EXHIBIT P
CALCULATION AND PAYMENT OF THE INCENTIVE FEE
1. Definitions. The following definitions shall apply for the purpose
of calculation of the Incentive Fee:
a. "Cost Recovery" shall mean that (I) the sum of Disposition
Recovery, Land Recovery, and Ownership Recovery, exceeds (II) Infrastructure
Costs for any an all phases of the Infrastructure, plus interest on
Infrastructure Costs at an annual rate of nine percent, compounded monthly.
Cost Recovery shall be determined on a calendar year basis; such determination
shall be made by March 31 of each year for the preceding calendar year.
b. "Disposition Recovery" shall mean (I) the sale proceeds net of
all costs of closing and brokerage costs received by the Company from a sale of
the Project by the Company, plus (II) the sale proceeds net of all costs of
closing and brokerage costs received from the sale of Future Projects by the
initial owner(s) of such Future Projects, minus (III) Total Development Costs
for the Project (if sold by the Company) and Total Development Costs for all
Future Projects (which have been sold).
c. "Future Project" shall mean any apartment project constructed by
WPHC, WRPT or an Affiliate of them (provided that WPHC or WRPT directly or
indirectly owns 50% or more of such Affiliate), which project is constructed on
the Master Development Land. "Future Project" shall not include, however, the
Project which is the subject of the Operating Agreement.
d. "Incentive Cap" shall mean the lesser of $1,957,447.00 or the
product of $4,255.32 and the number of apartment units actually constructed in
Phase I. If subsequent phases are developed, each will have an Incentive Cap
based on the number of units in such phases and a per unit limit of $4,255,32.
In no event shall the Incentive Cap for all phases exceed an aggregate of
$8,000,000.
e. "Land Recovery" shall mean (I) the amount(s) received by WPHC in
connection with the sale(s) of all or a portion of its interest in the Land
Contract or in the Master Development Land acquired by it pursuant to the Land
Contract, minus (II) the purchase price paid by the WPHC or its Affiliates for
such Master Development Land, plus all closing costs and incidental holding and
carrying costs at an assumed annual interest rate of nine percent (9%), and the
earnest money deposit in connection with the Land Contract unless and until
such earnest money deposit is applied against the purchase price of Master
Development Land. Land Recovery shall not include any amounts received from
the sale of the Project or a Future Project.
f. "Ownership Recovery" shall mean (I) the Project Value for the
Project and any Future Projects, minus (II) Total Development Costs for the
Project and all such Future Projects. If the Project or a Future Project is
sold anytime during the calendar year preceding the date of determination of
Cost Recovery, such Project or Future Project shall not be included in the
calculation of Ownership Recovery for such calendar year.
g. "Project NOI" shall mean the Net Operating Income for the
Project or a Future Project for the calendar year preceding the date of
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determination of Cost Recovery.
h. "Project Value" shall mean with respect to the Project or any
Future Project the Project NOI for such Project or Future Project divided by
ten percent (10.0%).
i. "Stabilized NOI" shall mean the Net Operating Income for Phase I
for the 12 month period following the Stabilization Date.
j. "Stabilization Date" shall mean the first day of the month
following the date on which any one of the following shall have occurred: (i)
93% occupancy in the operations of the Project at any point in time; (ii)
6 months after issuance of a certificate of occupancy for all of the apartments
comprising the Project; or (iii) forty-two (42) months after the Initial
Closing.
k. "Total Development Costs" with respect to the Project shall mean
Total Development Costs as set forth in the Operating Agreement, and with
respect to any Future Phase shall have an equivalent meaning. Total
Development Costs does not include an allocation of Infrastructure Costs.
l. "Target Fee" shall mean an amount equal to 3% of Total
Development Costs (including any Cost Saving Fee paid to Feld).
m. "Yield" shall mean (i) Stabilized NOI, divided by (ii) the sum
of (A) Total Development Costs (including any Cost Saving Fee paid to Feld),
(B) the Incentive Fee, (C) the Infrastructure Costs allocable to the Project
(i.e. for Phase I, 24.26% of total Infrastructure Cost), and (D) interest at
9%, compounded monthly, on the pro rata share of the Infrastructure Cost.
2. Calculation of Incentive Fee. The LLC's accountants shall calculate
the Incentive Fee promptly after they have sufficient information to accurately
calculate Stabilized NOI. The Incentive Fee shall equal the following,
provided that in no event shall the Incentive Fee exceed the Incentive Cap:
a. If the Yield is 9% or less, the Incentive Fee shall equal zero;
b. If the Yield is greater than 9% and less than or equal to 10%,
then the Incentive Fee shall equal (A) the Target Fee, multiplied by (B) the
Yield minus 9%, multiplied by (C) 100.
c. If the Yield is greater than 10% and less than or equal to
11.5%, then the Incentive Fee shall equal the following:
(i) the Target Fee, plus
(ii) (A) the Incentive Cap minus the Target Fee, multiplied by (B)
the Yield minus 10%, divided by (C) 1.5, multiplied by (D) 100.
d. If the Yield is greater than 11.5%, then the Incentive Fee shall
equal the Incentive Cap.
3. Payment of Incentive Fee. The Incentive Fee shall be deemed
earned at the time it is calculated but shall not be due or payable unless and
until Cost Recovery has occurred. The Incentive Fee shall accrue simple
interest at 9% per annum from the date it is deemed earned until paid.
4. Accelerated Payment of Incentive Fee. Notwithstanding anything to
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the contrary in this Exhibit C, if WPHC, in its sole discretion, causes the
Final Closing to occur more than thirty (30) days prior to the Outside Date,
then the Incentive Fee shall equal the Target Fee and the Company shall pay 50
percent of such Incentive Fee at the Final Closing and 50 percent of such
Incentive Fee within two years of the date of Final Closing.
5. Allocation of Infrastructure Costs. The allocation of Infrastructure
Costs for purposes of the calculation of the Incentive Fee is solely for such
purpose and is distinct from and will not be modified by the actual allocation
of Infrastructure Costs per unit.
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EXHIBIT Q
EXERCISE OF CALL OPTION; ASSIGNMENT OF INTEREST
POWER OF ATTORNEY
THIS ASSIGNMENT OF INTEREST (this "Assignment") is made and entered into
as of the ____ day of ______________ 19__, by and between Al Feld, an
individual ("Assignor"), and Wellsford Park Highlands Corp., a Colorado
corporation ("Assignee").
RECITALS
a. Pursuant to that certain Operating Agreement (the "Operating
Agreement") of Red Canyon at Palomino Park LLC, a Colorado limited liability
company (the "Company") dated as of April 17, 1996, by and among Assignor and
Assignee, Assignee is the owner of an option (the "Call Option") to acquire the
ownership interest of Assignor in the Company as of the date hereof (including
the right of Assignor to receive any distributions related to any periods prior
to and including the date hereof), which ownership interest includes the right
of Assignor to any and all benefits to which Assignor may be entitled as a
Member and as a Manager (each as defined in the Operating Agreement), as
provided in the Operating Agreement or the version of the Colorado Limited
Liability Company Act adopted by the State of Colorado, Co. Rev. Stat. Section
7-80-101 to 7-80-913, as amended from time to time (the "Act"), together with
the unaccrued obligations of Assignor, in its capacity as a Member and Manager,
to comply with all the terms and provisions of the Operating Agreement and the
Act (collectively, the "Ownership Interest").
b. In accordance with Section 16.2.1 of the Operating Agreement,
Assignee, by its execution and delivery of this Assignment to Assignor, hereby
desires (i) to exercise the Call Option as contemplated therein and (ii) to
cause Assignor to resign as Member and Manager of the Company.
c. Assignor has agreed, concurrently with the exercise of the Call
Option by Assignee: (i) to assign and sell the Ownership Interest to Assignee
pursuant to the terms and conditions set forth in the Operating Agreement and
(ii) to appoint Assignee as its true and lawful attorney-in-fact, as set forth
herein.
d. Terms not otherwise defined herein shall have the meanings set forth
in the Operating Agreement.
AGREEMENT
In consideration of the receipt of Ten and no/100 Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are hereby acknowledged and confessed by
Assignor, Assignor and Assignee hereby agree as follows:
1. Assignment and Assumption. Concurrently with and conditioned
upon the satisfaction of all of the conditions and covenants of Section 16.2.1
of the Operating Agreement, Assignor hereby assigns, grants and conveys to
Assignee all of Assignor's right, title and interest in and to the Ownership
Interest. Assignee hereby assumes the Ownership Interest and agrees to be
bound by and comply with and perform all of the obligations of Assignor in its
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capacity as a Member and as a Manager arising under the Operating Agreement
which accrue after the date hereof. Assignor shall remain obligated to perform
all of the obligations of Assignor under the Operating Agreement (i) which are
not expressly assumed hereunder or (ii) which have accrued on or prior to the
date hereof. Further, all benefits of the Operating Agreement relating to
Assignor, including, without limitation, the right to receive any distributions
related to any periods prior to and including the date hereof, shall inure to
the benefit of Assignee.
2. Representation and Warranty of Assignor. Assignor represents
and warrants that: (i) Assignor is the sole owner of the entire Ownership
Interest; (ii) Assignor is not in default under or in breach of any of the
terms, covenants or provisions of the Operating Agreement, and Assignor knows
of no event which, but for the passage of time or the giving of notice, or
both, would constitute an event of default under or a breach of the Operating
Agreement by Assignor; (iii) Assignor is duly authorized to execute and deliver
this Assignment; and (iv) the Ownership Interest is free and clear of any and
all liens, security interests, encumbrances, and competing claims.
3. Appointment of Assignee as Attorney-in-Fact. Effective as of
the date hereof, Assignor hereby irrevocably constitutes and appoints Assignee
to be its true and lawful attorney-in-fact to act for Assignor, in the name,
place and stead of Assignor, for the following purposes:
to endorse any check or other instrument payable to Assignor in
connection with the Project, to submit claims and otherwise deal with
all insurance and insurance proceeds with respect to the Project, to
execute and file with the appropriate governmental authority or
office any and all certificates, reports or other evidence of the
withdrawal of Assignor from the Company, and to perform such other
acts as may be necessary to carry out the purpose and intent of the
within assignment or to continue the business of the Company.
Assignor hereby ratifies, acknowledges and confirms all acts taken by Assignee,
as attorney-in-fact, pursuant to this appointment. Assignor hereby revokes,
annuls and cancels any and all powers of attorney, if any, previously executed
by Assignor with respect to such stated purposes, and the same shall be of no
further force or effect. Assignor hereby acknowledges that such power shall be
coupled with an interest and shall survive the disability or death of the
Assignor.
4. Indemnity. Assignor hereby agrees to indemnify and defend
Assignee and hold it harmless against any claim, loss or liability arising from
any of the following: (i) any breach of any representation or warranty
hereunder; or (ii) any assertion that Assignee is liable for any debts or
obligations of Assignor, whether based on any act or omission of Assignor which
occurs prior or subsequent to the date of this Assignment.
5. Governing Law. This Assignment shall be governed by and
construed under the laws of the State of Colorado.
6. Successors and Assigns. This Assignment shall inure to the
benefit and be binding upon the successors and assigns of Assignor and
Assignee.
7. Counterparts. This Assignment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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This Assignment is executed to be effective as of the date first set forth
above.
ASSIGNOR:
_____________________________________
AL FELD, an individual
ASSIGNEE:
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By:__________________________________
Name: __________________________
Title: _________________________
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CONSENT:
Pursuant to Section 18.1.1 of the Operating Agreement and Section 7-80-
801(1)(c) of the Act, Assignee hereby consents to the continuation of the
business of the Company, notwithstanding the withdrawal and resignation of
Assignor as a Member of the Company.
ASSIGNEE:
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By: _____________________________________
Name:________________________________
Title: ______________________________
[NOTE: Continuing Members to execute Unanimous Written Consent per Schedule
A attached hereto.]
STATE OF _____________________}
}ss
COUNTY OF ____________________}
The foregoing instrument was acknowledged before me on __________ __, 19__, by
AL FELD, an individual.
_____________________________ Commission expires: _________________
Notary Public
STATE OF _____________________}
}ss
COUNTY OF ____________________}
The foregoing instrument was acknowledged before me on ____________ __, ____,
by ________________________, as _____________________ of Wellsford Park
Highlands Corp., a Colorado corporation.
_______________________________ Commission expires: ____________
Notary Public
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SCHEDULE A TO
EXHIBIT Q
UNANIMOUS WRITTEN CONSENT
IN LIEU OF MEETING
BY
THE MEMBERS OF
RED CANYON AT PALOMINO PARK LLC,
a Colorado Limited Liability Company
__________________ ___, 19___
Section 7-80-711 of the Colorado Limited Liability Company Act, as amended
(the "Act") provides that any action required or permitted to be taken at a
meeting of the members of a limited liability company may be taken without a
meeting if a written consent, setting forth the action so taken, shall be
signed by all the members entitled to vote with respect to the subject matter
thereof and delivered to the limited liability company in the manner described
in the Act. Section 15.10 of that certain Operating Agreement ("Operating
Agreement") of Red Canyon at Palomino Park LLC (the "Company"), a Colorado
limited liability company, dated as of April 17, 1997, by and between Al Feld
and Wellsford Park Highlands Corp., a Colorado corporation ("WPHC"), provides
that action required or permitted to be taken at a meeting of Members of the
Company, may be taken without a meeting under similar circumstances.
The undersigned, which constitute all of the Remaining Members (defined below)
of the Company, by signing this document, waive any and all notice that may be
required for a meeting of the members of the Company and take the following
action:
WHEREAS, pursuant to Section 16.2.1 of the Operating Agreement, WPHC, by
executing the attached Exercise of Call Option, Assignment of Interest and
Power of Attorney attached hereto as Exhibit L-1, has given notice to the
Company of its desire (i) to exercise the Call Option as contemplated in the
Operating Agreement and (ii) to cause Al Feld to resign as Member and Manager
of the Company; and
WHEREAS, the Members other than Al Feld (the "Remaining Members") desire
(i) to accept the withdrawal and resignation of Al Feld as Member and Manager
of the Company, (ii) to consent to the transfer and assignment of the Ownership
Interest (as defined in the attached exhibit) of Al Feld to WPHC, (iii) to
appoint and elect WPHC as the successor Manager to Al Feld, to hold office
until removed pursuant to Section 12.12 of the Operating Agreement or until its
successor has been elected and qualified; and (iv) to consent to continue the
business of the Company after the resignation and termination of Al Feld as
Member and Manager of the Company;
RESOLVED, that the Remaining Members hereby accept the withdrawal and
resignation of Al Feld as Member and Manager of the Company; and
FURTHER RESOLVED, that the Remaining Members hereby (i) consent to the
transfer and assignment of the Ownership Interest (as defined in the attached
exhibit) of Al Feld to WPHC, (ii) appoint, elect and qualify WPHC as the
successor Manager to Al Feld, to hold office until removed pursuant to Section
12.12 of the Operating Agreement or until its successor has been elected and
qualified; (iii) consent to continue the business of the Company after the
resignation and termination of Al Feld as Member and Manager of the Company;
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and (iv) authorize the Members to execute, deliver and take all action
necessary to effectuate the actions contemplated under the attached Exhibit L-
1.
This Consent, when signed by all of the Remaining Members of the Company
and delivered to the Company in the manner prescribed in the Act, shall have
the same force and effect as a unanimous vote, and may be stated as such in any
document.
IN WITNESS WHEREOF, the undersigned have executed this Consent as of the
date above written.
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado corporation, Member
By: ____________________________
Title:
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EXHIBIT R
EXERCISE OF PUT OPTION; ASSIGNMENT OF INTEREST
POWER OF ATTORNEY
This ASSIGNMENT OF INTEREST (this "Assignment") is made and entered into
as of the ____ day of ___________, 19__ by and between Al Feld, an individual
("Assignor"), and Wellsford Park Highlands Corp., a Colorado corporation
("Assignee").
RECITALS
A. Pursuant to that certain Operating Agreement (the "Operating
Agreement") of Red Canyon at Palomino Park LLC, a Colorado limited liability
company (the "Company") dated as of April 17, 1996, by and between Assignor and
Assignee, Assignor is the owner of an option (the "Put Option") to cause
Assignee to acquire the ownership interest of Assignor in the Company as of the
date hereof (including the right of Assignor to receive any distributions
related to any periods prior to and including the date hereof), which ownership
interest includes the right of Assignor to any and all benefits to which
Assignor may be entitled as a Member and as a Manager (each as defined in the
Operating Agreement), as provided in the Operating Agreement or the version of
the Colorado Limited Liability Company Act adopted by the State of Colorado,
Co. Rev. Stat. Section 7-80-101 to 7-80-913, as amended from time to time (the
"Act"), together with the unaccrued obligations of Assignor, in its capacity as
a Member and Manager, to comply with all the terms and provisions of the
Operating Agreement and the Act (collectively, the "Ownership Interest").
B. In accordance with Section 16.2.2 of the Operating Agreement,
Assignor, by its execution and delivery of this Assignment to Assignee, hereby
desires (i) to exercise the Put Option as contemplated therein and (ii) to
resign as Member and Manager of the Company.
C. At Final Closing (as defined in the Operating Agreement),
concurrently with the above exercise of the Put Option by Assignor, (i)
Assignee has agreed to acquire and buy the Ownership Interest from Assignor
pursuant to the terms and conditions set forth in the Operating Agreement,
provided that all of the Final Closing Funding Conditions have been satisfied
and (ii) Assignor has agreed to appoint Assignee as its true and lawful
attorney-in-fact, as set forth herein.
D. Terms not otherwise defined herein shall have the meanings set forth
in the Operating Agreement.
AGREEMENT
In consideration of the receipt of Ten and no/100 Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignor to Assignee, the
receipt and sufficiency of which are hereby acknowledged and confessed by
Assignee, Assignor and Assignee hereby agree as follows:
1. Assignment and Assumption. At Final Closing (as defined in the
Operating Agreement), concurrently with and conditioned upon the satisfaction
of all of the conditions and covenants of Section 16.2.2 of the Operating
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Agreement, (i) Assignor hereby assigns, grants and conveys to Assignee all of
Assignor's right, title and interest in and to the Ownership Interest and (ii)
Assignee hereby assumes the Ownership Interest and agrees to be bound by and
comply with and perform all of the obligations of Assignor in its capacity as a
Member and as Manager, arising under the Operating Agreement which accrue
after the date hereof. Assignor shall remain obligated to perform all of the
obligations of Assignor under the Operating Agreement (i) which are not
expressly assumed hereunder or (ii) which have accrued on or prior to the date
hereof. Further, all benefits of the Operating Agreement relating to
Assignor, including, without limitation, the right to receive any distributions
related to any periods prior to and including the date hereof, shall inure to
the benefit of Assignee.
2. Representation and Warranty of Assignor. Assignor represents
and warrants that: (i) Assignor is the sole owner of the entire Ownership
Interest; (ii) Assignor is not in default under or in breach of any of the
terms, covenants or provisions of the Operating Agreement, and Assignor knows
of no event which, but for the passage of time or the giving of notice, or
both, would constitute an event of default under or a breach of the Operating
Agreement by Assignor; (iii) Assignor is duly authorized to execute and deliver
this Assignment; and (iv) the Ownership Interest is free and clear of any and
all liens, security interests, encumbrances, and completing claims.
3. Appointment of Assignee as Attorney-in-Fact. Effective as of
the date hereof, Assignor hereby constitutes and appoints Assignee to be its
true and lawful attorney-in-fact to act for Assignor, in the name, place and
stead of Assignor, for the following purposes:
to endorse any check or other instrument payable to Assignor in
connection with the Project, to submit claims and otherwise deal with
all insurance and insurance proceeds with respect to the Project, to
execute and file with the appropriate governmental authority or
office any and all certificates, reports or other evidence of the
withdrawal of Assignor from the Company, and to perform such other
acts as may be necessary to carry out the purpose and intent of the
within assignment or to continue the business of the Company.
Assignor hereby ratifies, acknowledges and confirms all acts taken by Assignee,
as attorney-in-fact, pursuant to this appointment. Assignor hereby revokes,
annuls and cancels any and all powers of attorney, if any, previously executed
by Assignor with respect to such stated purposes, and the same shall be of no
further force or effect. Assignor hereby acknowledges that such power shall be
coupled with an interest and shall survive the disability or death of the
Assignor.
4. Indemnity. Assignor hereby agrees to indemnify and defend
Assignee and hold it harmless against any claim, loss or liability arising from
any of the following: (i) any breach of any representation or warranty
hereunder; or (ii) any assertion that Assignee is liable for any debts or
obligations of Assignor, whether based on any act or omission of Assignor which
occurs prior or subsequent to the date of this Assignment.
5. Governing Law. This Assignment shall be governed by and
construed under the laws of the State of Colorado.
6. Successors and Assigns. This Assignment shall inure to the
benefit and be binding upon the successors and assigns of Assignor and
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Assignee.
7. Counterparts. This Assignment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
This Assignment is executed to be effective as of the date first set forth
above.
ASSIGNOR:
__________________________________________
AL FELD, an individual
ASSIGNEE:
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By:_______________________________________
Name:________________________________
Title: ______________________________
CONSENT:
Pursuant to Section 18.1.1 of the Operating Agreement and Section 7-80-
801(1)(c) of the Act, Assignee hereby consents to the continuation of the
business of the Company, notwithstanding the withdrawal and resignation of
Assignor as a Member of the Company.
ASSIGNEE:
WELLSFORD PARK HIGHLANDS CORP., a
Colorado corporation
By:_______________________________________
Name:________________________________
Title:_______________________________
[NOTE: Continuing Members to execute Unanimous Written Consent per Schedule
A attached hereto.]
STATE OF ________________}
}ss
COUNTY OF _______________}
The foregoing instrument was acknowledged before me on __________ ___, ____, by
AL FELD, an individual.
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___________________________ Commission expires: _________________
Notary Public
STATE OF ________________}
}ss
COUNTY OF _______________}
The foregoing instrument was acknowledged before me on ___________, 199__,
by __________________________, as __________________________________ of
WELLSFORD PARK HIGHLANDS CORP., a Colorado corporation.
___________________________ Commission expires: _________________
Notary Public
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SCHEDULE A
TO EXHIBIT R
UNANIMOUS WRITTEN CONSENT
IN LIEU OF MEETING
BY
THE MEMBERS OF
RED CANYON AT PALOMINO PARK LLC,
a Colorado Limited Liability Company
__________________ ___, 19__
Section 7-80-711 of the Colorado Limited Liability Company Act, as amended
(the "Act") provides that any action required or permitted to be taken at a
meeting of the members of a limited liability company may be taken without a
meeting if a written consent, setting forth the action so taken, shall be
signed by all the members entitled to vote with respect to the subject matter
thereof and delivered to the limited liability company in the manner described
in the Act. Section 15.10 of that certain Operating Agreement ("Operating
Agreement") of Red Canyon at Palomino Park LLC (the "Company"), a Colorado
limited liability company, dated as of __________, 1995 by and between Al Feld
and Wellsford Park Highlands Corp., a Colorado corporation ("WPHC"), provides
that action required or permitted to be taken at a meeting of Members of the
Company, may be taken without a meeting under similar circumstances.
The undersigned, which constitute all of the Remaining Members (defined below)
of the Company, by signing this document, waive any and all notice that may be
required for a meeting of the members of the Company and take the following
action:
WHEREAS, pursuant to Section 16.2.2 of the Operating Agreement, Al Feld,
by executing the attached Exercise of Put Option, Assignment of Interest and
Power of Attorney attached hereto as Exhibit L-2, has given notice to the
Company of its desire (i) to exercise the Put Option as contemplated in the
Operating Agreement and (ii) to resign as Member and Manager of the Company;
and
WHEREAS, the Members other than Al Feld (the "Remaining Members") desire
(i) to accept the withdrawal and resignation of Al Feld as Member and Manager
of the Company, (ii) to consent to the transfer and assignment of the Ownership
Interest (as defined in the attached exhibit) of Al Feld to WPHC, (iii) to
appoint and elect WPHC as the successor Manager to Al Feld, to hold office
until removed pursuant to Section 12.12 of the Operating Agreement or until its
successor has been elected and qualified; and (iv) to consent to continue the
business of the Company after the resignation and termination of Al Feld as
Member and Manager of the Company;
RESOLVED, that the Remaining Members hereby accept the withdrawal and
resignation of Al Feld as Member and Manager of the Company; and
FURTHER RESOLVED, that the Remaining Members hereby (i) consent to the
transfer and assignment of the Ownership Interest (as defined in the attached
exhibit) of Al Feld to WPHC, (ii) appoint, elect and qualify WPHC as the
successor Manager to Al Feld, to hold office until removed pursuant to Section
12.12 of the Operating Agreement or until its successor has been elected and
qualified; (iii) consent to continue the business of the Company after the
resignation and termination of Al Feld as Member and Manager of the Company;
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and (iv) authorize the Members to execute, deliver and take all action
necessary to effectuate the actions contemplated under the attached Exhibit L-
2.
This Consent, when signed by all of the Remaining Members of the Company
and delivered to the Company in the manner prescribed in the Act, shall have
the same force and effect as a unanimous vote, and may be stated as such in any
document.
IN WITNESS WHEREOF, the undersigned have executed this Consent as of the
date above written.
WELLSFORD PARK HIGHLANDS CORP.,
a Colorado Corporation, Member
By:_______________________________________
Title: ______________________________
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EXHIBIT S-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
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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
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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:________________________
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EXHIBIT A TO
CERTIFICATE OF ARCHITECT
______________
_______________________
____________, Colorado
DRAWING LIST
ARCHITECTURAL: ______________________________
______________________________
______________________________
STRUCTURAL: ______________________________
______________________________
______________________________
FOUNDATION: ______________________________
MECHANICAL: ______________________________
______________________________
______________________________
PLUMBING: ______________________________
______________________________
______________________________
ELECTRICAL: ______________________________
______________________________
______________________________
LANDSCAPING: ______________________________
______________________________
______________________________
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EXHIBIT B TO
CERTIFICATE OF ARCHITECT
LEGAL DESCRIPTION
122
<PAGE>
EXHIBIT C TO
CERTIFICATE OF ARCHITECT
Incomplete Items Cost of Completion
123
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EXHIBIT S-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 (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 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
Flood Plain or in an identified "flood prone area," as defined 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,
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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 or 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:________________________
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EXHIBIT A TO
CERTIFICATE OF ENGINEERING
LEGAL DESCRIPTION
126
<PAGE>
EXHIBIT B TO
CERTIFICATE OF ENGINEERING
______________
____________________
______________, Colorado
DRAWING LIST
CIVIL ENGINEERING
DRAWINGS: ______________________________
______________________________
______________________________
STRUCTURAL: ______________________________
______________________________
______________________________
FOUNDATION: ______________________________
MECHANICAL: ______________________________
______________________________
______________________________
PLUMBING: ______________________________
______________________________
______________________________
ELECTRICAL: ______________________________
______________________________
______________________________
LANDSCAPING: ______________________________
______________________________
______________________________
127
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EXHIBIT T
THE PARK at HIGHLANDS RANCH -
PRELIMINARY "TOTAL"INFRASTRUCTURE BUDGET
128
<PAGE>
EXHIBIT U
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
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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
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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:______________________________________
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Exhibit 10.7
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Between
MISSION VIEJO COMPANY,
a California corporation
("Mission")
and
THE FELD COMPANY,
a Colorado corporation
("Buyer")
Date: ____________, 1995
1
<PAGE>
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Table of Contents
(For Convenience Only-Not a Part of Agreement)
Page
1. GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Purpose of Agreement . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Development Guide. . . . . . . . . . . . . . . . . . . . . . . . 1
1.4. Interstate Land Sales Full Disclosures Act and Colorado
Subdivision Developers Act Exemptions. . . . . . . . . . . . . . 1
1.5. Parcel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. PURCHASE AND SALE PROVISIONS. . . . . . . . . . . . . . . . . . . . . . 2
2.1. Agreement for Purchase and Sale. . . . . . . . . . . . . . . . . 2
2.2. Base Purchase Price. . . . . . . . . . . . . . . . . . . . . . . 2
2.3. Computation of Purchase Escalation Amount. . . . . . . . . . . . 3
2.4. Deposit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3. PRE-CLOSING CONDITIONS. . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1. Development and Phasing Plan . . . . . . . . . . . . . . . . . . 3
3.2. Survey . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
3.3. Environmental Assessments. . . . . . . . . . . . . . . . . . . . 4
3.4. Investigation Period . . . . . . . . . . . . . . . . . . . . . . 4
3.5. Entry Limitations. . . . . . . . . . . . . . . . . . . . . . . . 6
3.6. Minor Development Plan Approval. . . . . . . . . . . . . . . . . 6
3.7. Buyer's Site Plans . . . . . . . . . . . . . . . . . . . . . . . 7
3.8. Financial Information of Buyer . . . . . . . . . . . . . . . . . 8
3.9. No Recreation Facilities . . . . . . . . . . . . . . . . . . . . 9
3.10. Acceptance of Buyer's Signs. . . . . . . . . . . . . . . . . . . 9
3.11. Fencing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12. Assignment of Plans. . . . . . . . . . . . . . . . . . . . . . . 9
4. TITLE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.1. Title Insurance. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.2. Permitted Exceptions . . . . . . . . . . . . . . . . . . . . . . 10
4.3. Title Defects. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.4. Deed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.5. Annexation of Property to Community Association. . . . . . . . . 12
4.6. Special District Disclosure. . . . . . . . . . . . . . . . . . . 12
4.7. Special District Formation . . . . . . . . . . . . . . . . . . . 13
4.8. Easements. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5. CLOSING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.1. Closing Dates and Place. . . . . . . . . . . . . . . . . . . . . 16
5.2. Documents at Closing . . . . . . . . . . . . . . . . . . . . . . 17
5.3. Closing Statement Adjustments and Prorations.. . . . . . . . . . 17
5.4. Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.5. Building Permit Moratorium.. . . . . . . . . . . . . . . . . . . 17
6. MISSION'S POST-CLOSING OBLIGATIONS. . . . . . . . . . . . . . . . . . . 19
6.1. Directory Maps . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.2. Directional Signs. . . . . . . . . . . . . . . . . . . . . . . . 19
6.3. Installation of Maps and Signs . . . . . . . . . . . . . . . . . 19
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7. BUYER'S POST-CLOSING OBLIGATIONS. . . . . . . . . . . . . . . . . . . . 20
7.1. Incorporation of Buyer's Obligations in Deed . . . . . . . . . . 20
7.2. Metropolitan District Requirements . . . . . . . . . . . . . . . 20
7.3. Additional Information . . . . . . . . . . . . . . . . . . . . . 20
7.4. Maintenance of Property. . . . . . . . . . . . . . . . . . . . . 20
7.5. Water, Soil, and Energy Conservation Measures. . . . . . . . . . 21
7.6. Compliance with Open Space Requirements. . . . . . . . . . . . . 21
7.7. Density Allocation . . . . . . . . . . . . . . . . . . . . . . . 22
7.8. Installation of Utilities. . . . . . . . . . . . . . . . . . . . 22
7.9. Off-Site Drainage. . . . . . . . . . . . . . . . . . . . . . . . 23
7.10. Willows Water Main . . . . . . . . . . . . . . . . . . . . . . . 24
8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . 26
8.1. Representations and Warranties of Mission. . . . . . . . . . . . 26
8.2. Representations and Warranties of Buyer. . . . . . . . . . . . . 26
9. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.1. Defaults by Mission. . . . . . . . . . . . . . . . . . . . . . . 26
9.2. Defaults by Buyer. . . . . . . . . . . . . . . . . . . . . . . . 27
9.3. Rights to Cure . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.4. Defaults After Closing . . . . . . . . . . . . . . . . . . . . . 28
10. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.1. Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.2. Taking Prior to Closing. . . . . . . . . . . . . . . . . . . . . 28
10.3. Agreement Not to be Recorded . . . . . . . . . . . . . . . . . . 28
10.4. No Representations . . . . . . . . . . . . . . . . . . . . . . . 29
10.5. Indemnification; No Mechanic's Liens . . . . . . . . . . . . . . 29
10.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.7. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8. No Oral Amendment or Modifications . . . . . . . . . . . . . . . 30
10.9. Nonseverability. . . . . . . . . . . . . . . . . . . . . . . . . 30
10.10. Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12. Captions for Convenience . . . . . . . . . . . . . . . . . . . . 31
10.13. Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.14. Exhibits Incorporated. . . . . . . . . . . . . . . . . . . . . . 31
10.15. Time of the Essence. . . . . . . . . . . . . . . . . . . . . . . 31
10.16. Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.17. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 32
10.18. Costs of Legal Proceedings . . . . . . . . . . . . . . . . . . . 32
10.19. Survival of Provisions . . . . . . . . . . . . . . . . . . . . . 32
10.20. General Cooperation. . . . . . . . . . . . . . . . . . . . . . . 32
10.21. Computation of Time. . . . . . . . . . . . . . . . . . . . . . . 32
10.22. Negotiated Provisions. . . . . . . . . . . . . . . . . . . . . . 32
10.23. The Foreign Investment In Real Property Tax Act and Colorado
Department of Revenue Form 1083. . . . . . . . . . . . . . . . . 33
10.24. No Implied Waiver. . . . . . . . . . . . . . . . . . . . . . . . 33
Table of Exhibits
(For Convenience Only-Not a Part of Agreement)
Exhibit A Development and Phasing Plan
Exhibit B First Parcel Site Plan
Exhibit C Fencing Plan
Exhibit D Permitted Exceptions
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Exhibit E Relinquishment of Surface Rights
Exhibit F First Parcel Deed Form
Exhibit G Subsequent Parcels Deed Form
Exhibit H Supplemental Declaration Form
Exhibit I Easement and Development Agreement
Exhibit J Access Easement Agreement
Exhibit K Contiguous Area Report
Exhibit L Willows Water Agreement
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
This Second Amended and Restated Vacant Land Purchase and Sale Agreement
("Agreement") is made as of this 23rd day of March, 1995 ("Execution Date"),
between MISSION VIEJO COMPANY, a California corporation ("Mission"), whose
address is 8822 South Ridgeline Boulevard, Highlands Ranch, Colorado 80126,
Attention: Residential Land Sales and Acquisitions, and THE FELD COMPANY, a
Colorado corporation ("Buyer"), whose address is 4600 S. Ulster St., Suite 350,
Denver, Colorado 80237.
1. GENERAL.
1.1. Purpose of Agreement. The parties desire to enter into this
Agreement to amend and restate, in its entirety, the terms and conditions by
which Mission agrees to sell and Buyer agrees to buy the Property, as
hereinafter defined. Pursuant to that certain Vacant Land Purchase and Sale
Agreement ("Original Agreement") dated as of July 14, 1993 between Mission and
Al Feld, as amended, Mission and Al Feld had contracted for the sale and
purchase of the Property. The Original Agreement was amended and restated in
its entirety by that certain Amended and Restated Vacant Land Purchase and Sale
Agreement ("Restated Agreement") dated as of the 11th day of February, 1994,
between Mission and Al Feld, as amended. Effective as of November 15, 1994, Al
Feld assigned all of Buyer's right, title and interest in and to the Original
Agreement and the Restated Agreement, including the Deposit held by Mission
thereunder, to Buyer and Buyer assumed all obligations of Al Feld thereunder.
This Agreement is intended to and shall amend, restate and supersede, in its
entirety, the terms and provisions of the Restated Agreement.
1.2. Property. The "Property" shall mean the tract of unimproved real
property containing approximately 181.803 acres located in Douglas County,
Colorado, more particularly described as Lots 1-5, Highlands Ranch Filing 126-
A, and which is generally depicted on the Development and Phasing Plan, as
hereinafter defined, attached hereto as Exhibit A.
1.3. Development Guide. The "Development Guide" shall mean the Devel-
opment Guide for the New Town of Highlands Ranch, approved September 17, 1979,
by the Board of County Commissioners of Douglas County, Colorado, recorded
October 25, 1979, in Book 373, beginning at Page 187, in the office of the
Clerk and Recorder of Douglas County, Colorado ("Douglas County Records"), as
the same has been and may be amended from time to time.
1.4. Interstate Land Sales Full Disclosures Act and Colorado Subdivision
Developers Act Exemptions. It is acknowledged and agreed by the parties that
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the sale of the Property will be exempt from the provisions of the federal
Interstate Land Sales Full Disclosures Act under the exemption applicable to
sale or lease of property to any person who acquires such property for the
purpose of engaging in the business of constructing residential, commercial or
industrial buildings or for the purpose of resale of such property to persons
engaged in such business. Buyer hereby represents and warrants to Mission that
Buyer is acquiring the Property for such purposes. It is further acknowledged
by the parties that the sale of the Property will be exempt under the
provisions of the Colorado Subdivision Developers Act under the exemption
applicable to transfers between developers. Buyer represents and warrants to
Mission that Buyer is acquiring the Property for the purpose of participating
as the owner of the Property in the development, promotion, and/or sale of the
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Property and portions thereof.
1.5. Parcel. "Parcel," as used herein, shall mean each portion of the
Property to be purchased by Buyer at a Closing, as hereafter provided. The
general location, approximate acreage and allocated density of each Parcel has
been agreed upon pursuant to the provisions of Section 3.1 hereof.
2. PURCHASE AND SALE PROVISIONS.
2.1. Agreement for Purchase and Sale. For good and valuable consider-
ation, Mission hereby agrees to sell, and Buyer hereby agrees to purchase, the
Property upon the terms and conditions set forth in this Agreement.
2.2. Base Purchase Price. The "Base Purchase Price" for the Property
has been computed based upon the assumption that the Property contains 181.803
acres and is being purchased for a Base Purchase Price of $73,500.00 per gross
acre, as increased in accordance with the provisions of Section 2.3 below. The
total Base Purchase Price shall be $13,362,520.50, subject to adjustment based
on the actual number of gross acres contained therein as set forth on the
Survey. The Property will be purchased in Parcels. The Purchase Price
attributable to each Parcel shall be computed based upon the number of gross
acres contained therein as depicted on the boundary certification of each such
Parcel, to be provided by Buyer to Mission as provided in Section 3.2 below, at
the Base Purchase Price per gross acre provided above, plus the Purchase
Escalation Amount, as hereinafter defined, based upon the date of Closing for
the particular Parcel. The Purchase Price for each Parcel, as so computed,
shall be payable at each Closing in the form of wire transfer of federal funds,
subject to prorations and adjustments in accordance with Section 5.3 below.
The Purchase Price attributable to the last Parcel to be purchased by Buyer
(the "Last Parcel") shall be payable in accordance with the following
provisions: (a) a credit against the purchase price payable by Buyer for the
Last Parcel purchased by Buyer for the amount of the Deposit, as hereinafter
provided; and (b) the remaining balance of the Purchase Price in the form of
wire transfer of federal funds at Closing, subject to prorations and
adjustments in accordance with Section 5.3 below.
2.3. Computation of Purchase Escalation Amount. The "Purchase
Escalation Amount" shall be an amount determined by multiplying the Base
Purchase Price for such Parcel being purchased by six percent (6%) and
multiplying the resulting product by a fraction, the numerator of which is the
number of days from and after November 30, 1994 until the date of Closing, as
hereinafter defined, for the Parcel whose purchase price is being determined,
and the denominator of which is 365.
2.4. Deposit. The "Deposit" shall be a total of $300,000.00. Mission
hereby acknowledges having previously received from Buyer the sum of
$50,000.00. The balance of the Deposit in the amount of $250,000.00 shall be
payable simultaneously with the execution of this Agreement. The Deposit shall
not accrue interest and any interest earned on the $50,000.00 previously paid
by Buyer under the Original Agreement or the Restated Agreement shall be deemed
paid by Buyer to Mission in consideration of the execution of this Agreement by
Mission. Buyer shall have no right to the return of the Deposit, except as
specifically set forth herein; provided, however, that $25,000.00 of the
Deposit shall be non-refundable in the event this Agreement is terminated for
any reason (the "Non-refundable Deposit").
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3. PRE-CLOSING CONDITIONS.
3.1. Development and Phasing Plan. Buyer has prepared, at Buyer's sole
cost and expense, a development and phasing plan package for the Property
which includes: (i) a designation of the Property within Planning Areas 67 and
73 to be acquired by Buyer pursuant to this Agreement; (ii) the anticipated
phasing plan for the Parcels to be acquired by Buyer pursuant to this
Agreement, including the order in which they are to be acquired by Buyer and
the approximate number of Dwelling Units (as that term is defined in the Deed,
as hereinafter defined) allocated to each Parcel; and (iii) a general
conceptual development plan for the Property showing general location of
streets, open space, and recreation amenities, to be constructed on the
Property (collectively the "Development and Phasing Plan"). The Development
and Phasing Plan, as approved by Mission, is attached hereto as Exhibit A.
Buyer may, at Buyer's option ("Early Closing Option"), at any scheduled
Closing, elect to purchase the next Parcel to be acquired by Buyer hereunder as
provided in the Development and Phasing Plan in advance of the time Buyer is
otherwise obligated to purchase such Parcel hereunder. Buyer shall, if at all,
exercise the Early Closing Option by giving written notice of election to
Mission, which notice shall specify which portion of such Parcel Buyer desires
to purchase. Buyer shall be entitled to a credit against the number of
Dwelling Units and acreage of Property which Buyer is otherwise obligated to
purchase hereunder at the subsequent scheduled Closing for the number of
Dwelling Units and acreage of Property which Buyer has theretofore closed the
purchase of from Mission in excess of the cumulative number of Dwelling Units
and acreage of Property which Buyer has at that time been obligated hereunder
to acquire from Mission.
3.2. Survey. A boundary and improvement survey plat of the Property (the
"Survey") dated November 29, 1993 and prepared by Kirkham, Michael and
Associates has been delivered by Mission to Buyer, at Mission's cost and
expense, and Buyer hereby approves the same. Buyer agrees, not later than
fifteen (15) days prior to any Closing on a Parcel, to provide to Mission a
certification by a licensed land surveyor, setting forth the legal description
of such Parcel and the number of gross acres contained therein for the purposes
of computing the purchase price for such Parcel in accordance with the
provisions of Article 2 above ("Certifications"). Any recertification of the
Survey and any additional surveys of the Parcels shall be at Buyer's sole cost
and expense. For the purposes of this Agreement, the term "Survey" shall mean
and include all Certifications to the Survey made in accordance with the
provisions hereof.
3.3. Environmental Assessments. Buyer, at Buyer's sole cost and expense,
has previously engaged Buyer's own environmental engineer to undertake environ-
mental assessments or investigations of the Property ("Assessment"). Buyer
shall treat all information contained in the Assessment as strictly
confidential. The contract which Buyer and the environmental engineer selected
by Buyer have entered into contains confidentiality provisions consistent with
the confidentiality requirement set forth herein.
3.4. Investigation Period. Buyer has had the right pursuant to the
Original Agreement and the Restated Agreement to perform such Investigations,
Tests and Surveys, as hereinafter defined, as Buyer has deemed necessary. The
"Investigations, Tests and Surveys" which Buyer was permitted to make included,
without limitation, the following: (a) inspecting, making engineering,
environmental and architectural studies, including obtaining the Assessment,
testing the soil and otherwise determining the condition of the Property; (b)
reviewing subdivision, zoning and building code ordinances, rules and
7
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regulations of the County of Douglas and the subdivision, zoning and building
code ordinances, rules and regulations of the State of Colorado relating to
construction of any improvements which Buyer intends to construct on the
Property, to determine that such matters do not prevent or unreasonably impair
the ability of Buyer to construct and use other improvements which Buyer
intends to construct; (c) determining that utilities, including, without
limitation, water, sewer, gas, electricity and telephone are adequate to serve
the Property; (d) determining that there is or shall be adequate access to
serve the improvements which Buyer intends to construct on the Property; (e)
determining the nature, magnitude, and times due of all taxes, fees, charges,
system development fees, tap fees, and other costs which are or may be imposed
upon the Property or Buyer by any utility company or government or quasi--
governmental agency; (f) obtaining and reviewing a Uniform Commercial Code
search or searches pertaining to the Property and Mission's interest therein
(the "UCC Searches"); and (g) determining all other matters regarding the
Property and the development thereof which Buyer deems appropriate. Mission
has previously provided to Buyer access to information and/or materials
requested by Buyer, which Mission may have in its files with respect to the
Property and Buyer hereby acknowledges having received such items. Mission
agrees to continue to cooperate with Buyer in providing additional information
and/or materials specifically requested by Buyer from Mission; provided,
however, that Mission may impose such reasonable limitations and conditions on
Buyer's use of such information and materials as it may deem appropriate.
Mission makes no representation or warranty whatsoever with respect to any
information or material so provided. Except as set forth in Section 7.10
hereof, Buyer acknowledges that Buyer is satisfied with the results of Buyer's
review of the Investigations, Tests and Surveys, or is otherwise satisfied to
the extent necessary to purchase the Property. Buyer hereby accepts the
Property and its condition as of the Execution Date on an "AS IS" basis. For
purposes of this Agreement, the term "AS IS" shall mean (without limitation
thereon, but subject to the warranties and representations set forth in Section
8.1 below) "AS IS" with respect to (a) the physical condition of the Property
(including defects seen and unseen and conditions natural and artificial); (b)
title to the Property as disclosed in the Title Commitment and subject to the
Permitted Exceptions, as hereinafter defined; (c) any other documents, agree-
ments or restrictions encumbering the Property and previously disclosed to
Buyer, including the Survey; and (d) all laws, ordinances, rules and regula-
tions to which the Property is subject under any applicable governmental or
regulatory jurisdiction. Mission's sole obligation with respect to the
physical condition of the Property shall be to deliver possession of the
Property to Buyer in substantially the same condition (excluding normal wear
and tear and casualty damage) as existed on the Execution Date and Buyer has
agreed to accept possession of the Property on the Date of Closing on an "AS
IS" basis. MISSION AND BUYER AGREE THAT THE PROPERTY SHALL BE SOLD "AS IS,
WHERE IS, WITH ALL FAULTS" WITH NO RIGHTS OF SET-OFF OR REDUCTION IN THE
PURCHASE PRICE, AND, EXCEPT AS SET FORTH IN SECTION 8.1 HEREOF, SUCH SALE SHALL
BE WITHOUT REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED
(INCLUDING, WITHOUT LIMITATION, WARRANTY OF INCOME POTENTIAL, OPERATING
EXPENSES, USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), AND BUYER
DOES HEREBY WAIVE, DISCLAIM AND RENOUNCE ANY SUCH REPRESENTATION OR WARRANTY.
3.5. Entry Limitations. Buyer, and Buyer's authorized agents, employees
and independent contractors, shall have the right, for Buyer's benefit, to
enter upon the Property for the purpose of making further Investigations, Tests
and Surveys, but only in accordance with the terms and provisions of a License
to Enter Upon Real Property to be entered into between Mission and Buyer (the
"License Agreement"). Any entry by or on behalf of Buyer shall be subject to
such reasonable rules, regulations, standards and conditions as are referred to
8
<PAGE>
within the License Agreement and otherwise as Mission may impose. All such
Investigations, Tests and Surveys shall be at the sole cost and expense of
Buyer and shall not damage, destroy or harm the Property or any improvements
thereon and Buyer shall promptly repair and restore the Property to its origi-
nal condition at Buyer's sole cost and expense. Notwithstanding any other
provisions of this Agreement, the obligations of Buyer under this Section shall
survive any termination of this Agreement by either Buyer or Mission.
3.6. Minor Development Plan Approval. Buyer, for Buyer's sole benefit,
has applied for approval by the Douglas County Commissioners ("County
Commissioners") of a Minor Development Plan for the entire Property and certain
additional real property located east of the Property. The "Minor Development
Plan" consists of and is contained in the plat of Highlands Ranch Filing No.
126-A Planning Area 67 and a Portion of Area 73 A Minor Development of a part
of Section 5, Township 6 South, Range 67 West of the 6th P.M., Douglas County
Colorado 200.72 Acres, 6 Residential Lots, prepared by Kirkham, Michael and
Associates and dated 6/94. Mission and the County Commissioners have
previously accepted the Minor Development Plan prepared by Buyer. Buyer agrees
that no modifications to the Minor Development Plan, as accepted by Mission and
the County Commissioners, which would have a material adverse impact on the
Property or the development and use thereof by Buyer or Mission shall be made
without Mission's prior written acceptance. Any subdivision improvement
agreement(s) to be executed in connection with the Minor Development Plan shall
be subject to the review and acceptance of Mission, and shall be executed by
Buyer, and not by Mission. Buyer shall be required to deliver to Douglas
County, at Buyer's cost and expense, any security required by Douglas County to
secure the performance of Buyer under such subdivision improvements agreement,
including, at Buyer's cost, separate security if required by Douglas County to
secure the completion of the off-site drainage system and utility system as
required by this Agreement. Buyer agrees to indemnify, defend, and hold
Mission harmless from and against any and all liability, claims, loss, damage
or expense, including reasonable attorneys' fees, which may be incurred by or
asserted against Mission in connection with any such subdivision improvements
agreement, including those which relate to Buyer's completion of any off-site
improvements, but such indemnity shall apply only to the extent of any
improvements (on or off-site) required to be completed in connection with any
portion of the Property acquired by Buyer. Mission agrees that all consents,
acceptances, or approvals required of it pursuant to this Section 3.6 shall not
be unreasonably withheld.
3.7. Buyer's Site Plans. Buyer acknowledges that the Parcels shall be
conveyed to Buyer pursuant to a Deed, as hereinafter defined, which requires
Buyer, prior to the commencement of construction on a Parcel, to submit, for
acceptance by Mission, a site plan. Buyer has, for Buyer's sole benefit,
elected to submit the Site Plan, as hereinafter defined, to Mission for Lot 1
as shown on the Minor Development Plan ("First Parcel"). In addition, Buyer
desires for Buyer's sole benefit, to apply for and receive approval by Douglas
County of the site plan for the First Parcel as accepted by Mission, prior to
the First Parcel Closing, to confirm Douglas County's approval of Buyer's
intended use of the First Parcel.
(a) Mission Site Plan Acceptance. Buyer has prepared, at Buyer's sole
cost and expense, a site plan for the First Parcel consisting of those
materials more specifically described of Exhibit B, attached hereto ("First
Parcel Site Plan"). Mission has accepted the First Parcel Site Plan and Buyer
agrees that it shall not revise the First Parcel Site Plan in any material
respect without the prior written consent of Mission; provided, however, that
Buyer shall provide Mission with copies of all proposed changes to the Site
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Plan prior to their submittal to Douglas County. In the event that Buyer
desires to revise the First Parcel Site Plan, Buyer shall submit Buyer's
proposed modifications to Mission. Mission shall give Buyer written notice of
its acceptance or rejection of the proposed modifications to the First Parcel
Site Plan on or before the 5th business day following its receipt of the
proposed modifications. If Mission has not given Buyer notice of Mission's
rejection or conditional acceptance of the proposed modifications by the
expiration of said 5 day period, Mission shall be deemed to have rejected the
proposed modifications to the First Parcel Site Plan as submitted by Buyer.
Acceptance or rejection of the proposed modifications to the First Parcel Site
Plan shall be in the reasonable discretion of Mission. If Mission rejects or
conditionally accepts the proposed modifications to the Site Plan, Buyer may
deliver to Mission additional modifications to Mission from time to time for
Mission's review. In any event, if Mission has not accepted the proposed
modifications to the First Parcel Site Plan on or before the date which is 30
days from the date Buyer initially submitted its proposed modifications to
Mission, Buyer may terminate this Agreement by written notice delivered to
Mission in which event the Deposit shall be retained by Mission and each party
shall be relieved from all further obligations under this Agreement except as
otherwise provided herein. Buyer shall, from time to time, prepare, at Buyer's
sole cost and expense, a site plan package for the remaining portions of the
Property which shall include: (i) a plan showing the location of the buildings
and other improvements to be constructed on the Property, including location of
mechanical equipment; (ii) building exterior elevations, including colors and
materials; (iii) a drainage plan; (iv) a landscape plan; and (v) a signage plan
(a "Site Plan", the "First Parcel Site Plan" or collectively as to Parcels
other than the First Parcel the "Future Parcel Site Plans"). The Future Parcel
Site Plans shall be prepared in accordance with the Development and Phasing
Plan. Mission shall give written notice to Buyer of its acceptance or
rejection of the Future Parcel Site Plans on or before 20 days following the
date of its receipt of the Future Parcel Site Plans. If Mission has not given
notice of rejection or conditional acceptance by the expiration of said 20-day
period, Mission shall be deemed to have rejected the Future Parcel Site Plans
as submitted by Buyer. Acceptance or rejection of the Future Parcel Site Plans
shall be in the reasonable discretion of Mission. If Mission expressly rejects
or conditionally accepts the Future Parcel Site Plans, Buyer may deliver to
Mission revised Future Parcel Site Plans, from time to time, for Mission's
review and approval in the manner and time periods provided above for the
review of proposed modifications to the First Parcel Site Plan.
(b) Douglas County Site Plan Approval. Mission shall provide to Buyer a
letter as required by Douglas County Site Plan processing procedures,
authorizing Buyer to submit the First Parcel Site Plan. If Future Parcel Site
Plans are accepted by Mission in accordance with subsection (a) above, Buyer
may submit the Future Parcel Site Plans to the Douglas County, from time to
time, as Buyer may desire. At such time, Mission shall provide to Buyer a
letter as required by Douglas County Site Plan processing procedures,
authorizing Buyer to submit the Future Parcel Site Plans. Buyer acknowledges
that Buyer shall have the sole responsibility to seek and obtain the approval
of Douglas County of the First Parcel Site Plan and all Future Parcel Site
Plans. Buyer agrees that no modifications requested by Douglas County or
desired by Buyer to the First Parcel Site Plan or the Future Parcel Site Plans
shall be made without Mission's prior written acceptance.
(c) Mission's Consent. Mission agrees that all consents, acceptances,
or approvals required of it pursuant to this Section 3.7 shall not be
unreasonably withheld.
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3.8. Financial Information of Buyer. This Agreement imposes substantial
obligations upon Buyer. In order to evaluate the financial capability of Buyer
to meet Buyer's obligations under this Agreement, Buyer has delivered to
Mission Buyer's most current financial statement, and such other supplemental
information as Mission has requested, certified to be true and correct by
Buyer. Mission hereby acknowledges receipt of the above-referenced financial
information and that it has reviewed and accepted the same.
3.9. No Recreation Facilities. The parties have agreed that none of the
Property shall be a part of the Highlands Ranch Recreation Center, and Section
1.32 of the Deed is consistent with such agreement.
3.10. Acceptance of Buyer's Signs. Buyer agrees that all signs to be
constructed or installed by or on behalf of Buyer (a) upon the Property (the
"Property Signs"), (b) at any other location within Highlands Ranch (the
"Highlands Ranch Signs"), or (c) at any other location if the same relates to
or refers to Mission, the Property, or Highlands Ranch (the "Other Signs"),
shall, in each such case, be subject to the review and acceptance by Mission
prior to the time they are so constructed or installed and, in the case of the
Property Signs and the Highlands Ranch Signs only, shall also be subject to the
standards contained in the Development Guide. Review and acceptance by
Mission, in the case of the Property Signs and Highlands Ranch Signs, shall
include, without limitation, review and consent to the size, design, materials,
color, location, and copy and text of signs, but, in the case of the Other
Signs, shall be limited to review and consent by Mission to the content and
text thereof.
3.11. Fencing. Mission acknowledges and agrees that Buyer, at Buyer's
sole cost and expense, shall be entitled to install fencing within the Property
in accordance with the Fencing Plan attached hereto as Exhibit C upon the
Closing of each respective Parcel hereunder. In accordance with the foregoing,
Buyer, its authorized agents, employees and independent contractors shall have
the right, for Buyer's benefit, to enter upon those portions of the Property
necessary to install, maintain or repair fencing depicted on the Fencing Plan
but only in accordance with the terms and provisions of a License to Enter Upon
Real Property to be executed between Mission and Buyer (the "Fencing License
Agreement"). Any entry by or on behalf of Buyer shall be subject to such
reasonable rules, regulations, standards and conditions as are referred to
within the Fencing License Agreement and otherwise as Mission may impose.
Buyer shall keep in good condition and repair all fencing installed by Buyer on
the Property in accordance with the provisions hereof.
3.12. Assignment of Plans. After the Execution Date, and promptly after
preparation thereof, which shall be at Buyer's sole cost and expense, Buyer
shall submit to Mission a complete set, which may be retained by Mission, of
all plans and specifications prepared by or on behalf of Buyer in connection
with Buyer's development of the Property and the construction of improvements
thereon, including, but not limited to, all architectural plans, site plans,
landscaping plans, utility plans, water and sewer plans, fencing plans, and
street improvement plans ("Development Plans"). The parties hereby acknowledge
that the Development Plans shall be prepared from time to time during the term
of this Agreement, and Buyer hereby assigns to Mission, its successors and
assigns, the non-exclusive right to use the Development Plans in connection
with any development on the Property by Mission or its successors or assigns.
Buyer hereby agrees to execute such documents, from time to time, as Mission
may reasonably require to evidence such assignment. Buyer also agrees to
obtain all necessary consents to such assignments from its engineers, planners,
designers, architects, and similar contractors. Buyer agrees that in the event
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of any default by Buyer hereunder, whether before or after any Closing, Buyer
shall pay for all such Development Plans, and Mission, its successors and
assigns, shall have the right, without any further cost or charge payable by
Mission, or Mission's successors or assigns, to use the Development Plans in
connection with any development on the Property by Mission, its successors or
assigns. MISSION HEREBY ACKNOWLEDGES AND AGREES THAT THE DEVELOPMENT PLANS SHALL
BE DELIVERED TO MISSION BY BUYER, "AS IS, WITH ALL FAULTS" AND WITHOUT
REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR IMPLIED, (INCLUDING, WITHOUT
LIMITATION, WARRANTY OF USES, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE) AND MISSION DOES HEREBY WAIVE, DISCLAIM AND RENOUNCE ANY SUCH
REPRESENTATION OR WARRANTY.
4. TITLE.
4.1. Title Insurance. Mission has previously delivered to Buyer a title
insurance commitment number P1030599-8 and dated February 2, 1995 for Planning
Areas 67 and 73 (the "Title Commitment") with respect to the Property, issued
by Land Title Guarantee Company ("Title Company"), committing to insure title
to the Property in Buyer, subject only to the Permitted Exceptions, as
hereinafter defined, in a face amount equal to the total Base Purchase Price.
The Title Commitment has been amended to reflect the legal description recited
on the Survey. Following the final execution of the Agreement, the Title
Commitment shall be revised to reflect the legal description of the Parcel(s),
as depicted on the Minor Development Plan, and the Purchase Price shall be
allocated between the Parcels based upon the number of gross acres contained
therein. As soon as possible after each Closing, Mission shall cause to be
delivered to Buyer, at Mission's cost and expense, an owner's title insurance
policy insuring the title of Buyer in the Parcel sold at such Closing, in
accordance with the Title Commitment, and the provisions of this Agreement, and
subject only to the Permitted Exceptions, in an amount equal to the Purchase
Price for the Parcel purchased. The Title Commitment shall provide for the
deletion of the standard printed exceptions, at Mission's cost and expense.
4.2. Permitted Exceptions. The "Permitted Exceptions" shall mean (a)
any easements, restrictions and conditions shown on the Survey or any
applicable Minor Development Plan; (b) real property taxes and assessments for
the year of the applicable Closing and subsequent years; (c) building, zoning
and other applicable ordinances and regulations of the County of Douglas, State
of Colorado; (d) any reservations, exceptions, easements, rights-of-way,
restrictive covenants, conditions and other matters set forth on Exhibit D
attached hereto, including, but not limited to, the exceptions of mineral and
water rights set forth on such Exhibit D, subject, however, to Mission's
delivery to Buyer at Closing of a Relinquishment of Surface Rights with respect
to the exceptions of mineral and water rights in the form attached hereto as
Exhibit E; (e) taxes, assessments, fees or charges, if any, resulting from the
inclusion of the Property in the Highlands Ranch Metropolitan District No. 2;
(f) the easements, covenants, conditions and restrictions contained in the Deed
attached hereto as Exhibit F; (g) the terms and provisions contained in the
Supplemental Declaration in the form attached hereto as Exhibit H; (h) the
easements, covenants, conditions and restrictions contained in the Easement and
Development Agreement attached hereto as Exhibit I; (i) the easements,
covenants, conditions and restrictions contained in the Access Easement
Agreement attached hereto as Exhibit J; (j) any defects in or objections to
title to the Property caused by Buyer or anyone claiming by, through or under
Buyer; and (k) any other reservations, exceptions, easements, rights-of-way or
other matters which are waived or deemed waived by Buyer pursuant to the
Section of this Agreement entitled "Title Defects."
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4.3. Title Defects. Buyer hereby approves the Title Commitment and the
exceptions to title contained therein, including the Permitted Exceptions. If
Buyer learns of any lien, encumbrance, defect in or objection to title other
than a Permitted Exception listed in subsections (a) through (j) in the Section
above entitled "Permitted Exceptions" ("Defect"), Buyer shall give immediate
written notice thereof ("Notice of Defect") to Mission unless Buyer is willing
to waive the Defect. Buyer's failure to give Mission written Notice of Defect
within the 10 business days after learning of such Defect (whether by notice
from Mission or otherwise) shall constitute Buyer's waiver of such Defect.
Within 10 business days after Buyer's giving any written Notice of Defect,
Mission shall give notice to Buyer advising Buyer whether Mission intends to
cure any such Defect and, if so, shall thereupon promptly proceed to cure such
Defect. If Mission elects to cure any Defect, Mission may, by written notice
to Buyer, extend the date of the Closing in question for a period of up to 90
days in order to attempt a cure of such Defect in which case (a) the deadlines
and periods for the satisfaction of the performance of Mission's and Buyer's
post-closing obligations, as set forth in Articles 6 and 7 of this Agreement,
shall be extended for like periods, and (b) the calculation of the Purchase
Price Escalation Amount for the Parcel being purchased shall not include the
number of days by which Mission has extended the date of Closing to cure such
Defect. Mission shall give written notice to Buyer when the Defect is cured and
the Closing in question shall occur on the earlier to occur of the 10th
business day following the giving of such notice, the date on which the Closing
for the particular Parcel was otherwise scheduled to occur, or such other date
to which the parties may agree. If Mission declines to cure any such Defect,
or Mission fails to cure such defect within 90 days after the giving of the
original Notice of Defect by Buyer to Mission, Buyer may at Buyer's option, (a)
waive in writing such Defect and close as provided in this Agreement, or (b)
terminate any further effect of this Agreement in which case the Deposit shall
be returned to Buyer and each party shall thereupon be relieved of all further
obligations hereunder. Buyer agrees that any Defect shall be deemed cured if
Mission shall cause the Defect to be deleted from the Title Commitment and the
owner's title insurance policy to be delivered to Buyer or shall obtain
affirmative title insurance protection with respect thereto.
4.4. Deed. Mission shall at the Closing for the First Parcel convey the
First Parcel to Buyer by Special Warranty Deed ("Initial Deed") in the form
attached hereto as Exhibit F, free and clear of all liens, encumbrances,
easements and restrictions except the Permitted Exceptions. At each subsequent
Closing Mission shall convey the Parcel being conveyed at such Closing to Buyer
by Special Warranty Deed ("Subsequent Parcel Deed") in the form attached hereto
as Exhibit G, free and clear of all liens, encumbrances, easements and restric-
tions except the Permitted Exceptions. The Initial Deed and the Subsequent
Parcel Deeds are herein individually referred to as a "Deed." Each Deed shall,
however, contain an allocation of the Permitted Density, as hereafter defined,
to the Parcel being conveyed thereby. As provided in Section 1.31 of the
Initial Deed, the Property, and the owner thereof, shall not be entitled to
use, and shall not be subject to Recreation Function Common Assessments for,
any Recreation Cost Center established pursuant to the Community Declaration or
any Supplemental Declaration, including, but not limited to, the Highlands
Ranch Recreation Center.
4.5. Annexation of Property to Community Association. Mission shall at
each Closing cause the Parcel being purchased thereat to be subjected to the
Highlands Ranch Community Association in accordance with the terms and
provisions of the Supplemental Declaration, a copy of which is attached hereto
as Exhibit H.
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4.6. Special District Disclosure. As required by Section 38-35.7-101,
C.R.S., the following disclosure statement is required to be made in every
contract for the purchase and sale of residential real property:
"Special Taxing Districts may be subject to general obligations
and indebtedness that is paid by revenues produced from annual tax
levies on the taxable property within the district. Property owners
in such districts may be placed at risk for increased mill levies and
excessive tax burdens to support the servicing of such debt where
circumstances arise resulting in the inability of such a district to
discharge such indebtedness without such an increase in mill levies.
Buyers should investigate the debt financing requirements of the
authorized general obligation indebtedness of such districts,
existing mill taxes of such district servicing such indebtedness, and
the potential for an increase in such mill levies."
Buyer agrees to comply with such requirement in all contracts executed by
Buyer, which obligation shall survive Closing.
4.7. Special District Formation.
(a) Description of Special District. Mission acknowledges that Buyer
desires to form a special taxing district to finance some or all of those
infrastructure improvements which Buyer intends to construct upon the Property
including, but not limited to, streets, storm drainage systems, parks and
recreational facilities, and water and sewer facilities (the "Infrastructure
Improvements"). In accordance with the foregoing, Buyer intends to form a
limited purpose C.R.S. Title 32 Special District (the "Development District")
and a companion non-profit corporation (the "Development Corporation"). Buyer
intends that the Development District shall be formed for the limited purpose
of owning, operating and maintaining the Infrastructure Improvements and the
generation of revenue for such purposes. Buyer intends that the Development
Corporation shall be formed for the limited purpose of issuing bonds for the
purpose of funding the installation of the Infrastructure Improvements. In
accordance with the foregoing, Mission agrees to cooperate with Buyer in the
formation of the Development District and the Development Corporation subject
to the following terms and conditions and provided that the formation of such
entities does not adversely affect the Parcels remaining to be acquired by
Buyer under this Agreement, the development of Highlands Ranch generally or
the financial stability of any other special district located within Highlands
Ranch.
(b) Formation of Development District and Development Corporation.
Pursuant to Buyer's request, Mission has entered into that certain Installment
Land Contract dated February 23, 1995 (the "Installment Land Contract") by and
among Mission and Solomon H. Eichenbaum, Daniel B. Levin, Pamela J.L. English,
Linda M. Zonneveld and Eugene W. Richter (collectively, the "First Parcel
Electors") for the acquisition of the real property more particularly described
therein (the "Directors Parcel"). Subject to the terms and provisions of the
Installment Land Contract and this Agreement, Mission agrees that it shall
cooperate with Buyer in keeping the Installment Land Contract in effect for a
period of one year from the date of this Agreement. Buyer agrees that it shall
reimburse Mission for all costs and expenses incurred by Mission in connection
with such Installment Land Contract including, but not limited to, premiums
paid for a title insurance policy for the Directors Parcel. Buyer acknowledges
that the "Directors Parcel" is not located within the First Parcel and that
Mission agreed to enter into and obligate itself to convey the Directors Parcel
to the First Parcel Electors (as opposed to Buyer) as an accommodation to Buyer
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in connection with the formation of the Development District and the
Development Corporation. In accordance with the foregoing and subject to the
terms and provisions hereof, Mission acknowledges and agrees that Buyer, by and
through the First Parcel Electors, shall be entitled to commence the formation
of the Development District and the Development Corporation.
(c) Development District and Development Corporation Documentation.
Mission and Buyer acknowledge that Buyer has (i) initiated preparation of
documentation associated with the formation of the Development District (the
"District Documentation") and documentation related to the formation of the
Development Corporation and the financing of the construction and maintenance
of the Infrastructure Improvements (collectively, the "Corporation
Documentation"); and (ii) submitted portions of the District Documentation and
the Corporation Documentation to various governmental and quasi-governmental
entities for review and comment. Notwithstanding the foregoing, Buyer
acknowledges that Mission has not approved the form of any District
Documentation or Corporation Documentation and Buyer agrees hereafter to submit
to Mission for its review and acceptance: (i) all District Documentation and
Corporation Documentation prior to the time that any such documentation is
submitted to any governmental or quasi-governmental entity for review, comment
or approval; (ii) such supplemental documentation as Mission may reasonably
request which is related to the formation of the Development District and/or
the Development Corporation in accordance with the provisions hereof. In
accordance with the foregoing, Buyer may submit District Documentation and
Corporation Documentation to Mission for its review at anytime and from time to
time subject to the following: Mission shall give written notice to Buyer of
its acceptance or rejection of any District Documentation or Corporation
Documentation submitted to it on or before the date which is 10 business days
following the date of Mission's receipt thereof. If Mission has not given
notice of rejection or conditional acceptance of such documentation by the
expiration of said 10 day period, Mission shall be deemed to have rejected such
documentation as submitted by Buyer. Acceptance or rejection of any District
Documentation or Corporation Documentation, including, but not limited to, the
Service Plan, as hereinafter defined, and the Petition, as hereinafter defined,
shall be in the reasonable discretion of Mission. If Mission rejects or
conditionally accepts the District Documentation or the Corporation
Documentation, Buyer may deliver to Mission revised documentation, from time to
time, for Mission's review. Buyer agrees that it shall not modify any District
Documentation or Corporation Documentation as submitted to and approved by
Mission without the prior written consent of Mission as provided above.
In connection with the formation of the Development District and the
Development Corporation, Buyer agrees that the name of the Development District
or the Development Corporation shall not include the name "Highlands Ranch" or
the "Park at Highlands Ranch." Buyer further acknowledges and agrees that the
District Documentation and the Corporation Documentation shall: (a) apply only
to the First Parcel and the Directors Parcel; provided that such documentation
may contemplate the annexation of the remaining Parcels within the Property to
the Development District subsequent to the time that Buyer has closed the
purchase of such Parcels; (b) that no bonds shall be issued by the Development
District and/or the Development Corporation prior to the date of Closing for
the First Parcel; and (c) provide that no liens or obligations shall be
incurred by the District or attach to any portion of the Property until such
time as Buyer has acquired such Property. Mission and Buyer acknowledge that
the formation of the Development District will require: (a) the submission of a
Service Plan for the Development District (the "Service Plan") to the County
Commissioners of Douglas County for review and approval; (b) assuming approval
of the Service Plan by the County Commissioners, the filing of a petition
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("Petition") to organize the Development District with the District Court of
Douglas County; (c) the appearance before the District Court of Douglas County
regarding the formation of the Development District; and (d) an election
authorizing the formation of the Development District and the election of the
Board of Directors of the Development District. In accordance with the
foregoing and without limiting the generality of the review provisions
contained above, Buyer expressly acknowledges and agrees that Mission shall be
entitled to review and approve the form and content of the Service Plan, the
Petition, and the Order of the District Court forming the Development District
(the "Order"). Buyer agrees that Mission may require that the Order include
specific provisions of the Service Plan designated by Mission, including, but
not limited, provisions which prohibit the Development District from exercising
powers which impact properties outside of the Development District boundaries
(e.g. condemnation of property outside of the Development District or the
construction of improvements on property located outside of the Development
District boundaries).
(d) Termination of Agreement/Special District. In the event that this
Agreement is terminated by either party prior to the recording of the Order,
Buyer shall cooperate with Mission in terminating the Development District and
the Development Corporation. In furtherance of the foregoing, such cooperation
shall include, but shall not be limited to, the termination of the Installment
Land Contract upon demand by Mission. Buyer and all other parties reasonably
required by Mission, including but not limited to counsel for the Development
District, shall execute all documentation reasonably requested by Mission to
facilitate the transfer of control and termination of the Development District
and the Development Corporation (collectively, the "District Termination
Documents"). In addition to the foregoing, Buyer acknowledges and agrees that
it shall have one year from the date of this Agreement to (i) remove the
Directors Parcel from the boundaries of the Development District free and clear
of any Development District liens, obligations or encumbrances; and (ii)
resubdivide the First Parcel to provide for a substitute directors parcel
therein. Buyer agrees to indemnify, hold harmless and defend Mission from any
claim, liability, loss, damage, cost or expense, including attorneys' fees,
which Mission may incur or which may be asserted by reason of the formation
and/or termination of the Development District and the Development Corporation
or the failure of Buyer to remove the Directors Parcel from the Development
District in accordance with the provisions hereof.
4.8. Easements. Mission and Buyer agree that the following documents
pertaining to easements associated with the Property and other real property
shall be executed at the Initial Closing:
(a) Easement and Development Agreement. The Easement and Development
Agreement attached to this Agreement as Exhibit I shall be executed by Mission
and Buyer at the Closing of the First Parcel.
(b) Access Easement Agreement. The Access Easement Agreement attached
to this Agreement as Exhibit J shall be executed by Mission and Buyer at the
Closing of the First Parcel.
5. CLOSING.
5.1. Closing Dates and Place. It is acknowledged that there will be a
series of Closings, one for each Parcel. All references in this Agreement to
"Closing" shall mean and refer to the Closing for a particular Parcel.
"Closing" for each Parcel shall mean payment of the Purchase Price attributable
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to the Parcel in question and delivery of the Deed, and other documents to be
delivered at Closing as hereinafter provided for such Parcel. Unless otherwise
agreed in writing by the parties, the Closing for the First Parcel shall take
place at 10:00 a.m. on May 1, 1995, or such later date to which such Closing
may be extended as provided in the Section of this Agreement entitled "Title
Defects." "Closing Date" or "Date of Closing" shall mean the day on which
Closing is accomplished. The Closing shall take place at the offices of Mis-
sion, or at such other place as the parties may mutually agree. Each
subsequent Closing shall occur not later than 12 months following the Closing
on the First Parcel as to the second Parcel and annually thereafter as to each
subsequent Closing, with the final Closing to occur not later than four (4)
years following the initial Closing. Except as otherwise provided in Section
4.3, each Closing shall occur on a date designated, in writing, by Mission to
Buyer not less than 30 days prior to the scheduled date therefor.
5.2. Documents at Closing. At each Closing, the following documents and
materials shall be delivered by the parties: (a) a Closing Statement, as
hereinafter provided; (b) a duly executed and acknowledged Deed by Mission in
the form attached as Exhibits F or G, as the case may be; (c) a Supplemental
Declaration executed by Mission in the form attached hereto as Exhibit H; (d)
the Purchase Price for the Parcel; (e) a duly executed and acknowledged Relin-
quishment of Surface Rights in the form attached hereto as Exhibit E; (f) a
duly executed and acknowledged Easement and Development Agreement in the form
attached hereto as Exhibit I, at the Initial Closing ; (g) a duly executed and
acknowledged Access Easement Agreement in the form attached hereto as Exhibit
J, at the Initial Closing ; (h) the affidavit referred to in the Section of
this Agreement entitled "The Foreign Investment in Real Property Tax Act"; and
(i) all other instruments and documents contemplated pursuant to this
Agreement.
5.3. Closing Statement Adjustments and Prorations. Each Closing State-
ment to be delivered by the parties at a Closing shall reflect the Purchase
Price for the Parcel, a credit against the Purchase Price for the Deposit for
the Last Parcel purchased only, and, except as provided in Section 4.7 hereof,
adjustment for proration as of the Closing Date of real property taxes and
assessments. The Closing Statement shall reflect the fact that Mission shall
be obligated to pay the premium for the owner's title insurance for the Parcel
pursuant to the Title Commitment; that Buyer shall be responsible for payment
of fees for recording or filing of the Deed, the Supplemental Declaration, any
Easement Agreement and the Relinquishment of Surface Rights, and any docu-
mentary or other fees payable in connection with such recording; and that the
parties shall equally split any closing fee payable to the Title Company.
Proration for real property taxes and assessments shall be based upon the then
most recently available amount of real property taxes and assessments with
respect to the Property, and said proration shall be final. In the event that
the Parcel is assessed or taxed as a part of a larger parcel, the tax for the
Parcel shall be determined by multiplying the assessment and tax for said
larger parcel by a fraction, the numerator of which shall be the land area
contained in the Parcel and the denominator of which shall be the land area
contained in said larger parcel.
5.4. Possession. Possession of a Parcel shall be delivered to Buyer as
of the Closing for such Parcel.
5.5. Building Permit Moratorium. In the event that any governmental or
quasi-governmental authority puts into effect, adopts, imposes or abides by a
moratorium or other similar restriction (a "Moratorium") with respect to
approval of electric, gas, sanitary sewer, water hook-ups or the issuance of a
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building permit and the obtaining of a certificate of occupancy thereto, and
such Moratorium is in effect during the scheduled occurrence of the Closing or
a subsequent Closing or both, then Buyer shall not be required to purchase a
Parcel at such Closing or Closings. The Closing, if any, which has been
delayed due to such Moratorium, shall occur on the 10th business day after the
lifting of the Moratorium upon notice from Mission to Buyer. In the event a
Moratorium affects the dates for acceptance and approval of the Site Plan or
any Future Site Plan by Douglas County, the date of Closing for the Parcel
affected by such Moratorium shall be extended for a period of time equal to the
number of days during which such Moratorium is in effect. In accordance with
the foregoing, in the event that the Closing for any Parcel hereunder is
delayed due to a Moratorium, the date of Closing for all remaining Parcels to
be purchased by Buyer hereunder shall be extended by the period of any and all
such Moratoriums. In the event of the imposition of any Moratorium prior to
the occurrence of the Closing, or any subsequent Closing, the Purchase
Escalation Amount for any Parcel shall abate during the period of such
Moratorium. In addition, should any Moratorium or Moratoriums remain in effect
for more than any consecutive, noncollective, one year period during the term
of this Agreement, either Mission or Buyer shall have the option, in their sole
and absolute discretion, upon prior written notice to the other party, to
terminate this Agreement with respect to all portions of the Property not
previously purchased by Buyer hereunder, in which case one half of the Deposit
previously paid pursuant to this Agreement shall be returned to Buyer, one-half
of the Deposit previously paid pursuant to this Agreement shall be retained by
Mission and each party shall thereupon be relieved of all further obligations
with respect to, but only with respect to, the portions of the Property not
previously purchased under this Agreement.
Notwithstanding the foregoing, in the event that Mission elects to
terminate this Agreement pursuant to the provisions of this Section 5.5, Buyer
shall have the right to purchase any or all of the remaining Parcels not
previously purchased by Buyer hereunder in phase order, in accordance with the
terms and provisions of this Agreement, by delivering written notice to Mission
within thirty (30) days of Buyer's receipt of Mission's termination notice (the
"Option Notice"). In the event that Buyer elects to purchase all such portions
of the Property pursuant to the provisions hereof, the Closing for such
purchase shall occur on the date which is sixty (60) days after Mission's
receipt of the Option Notice, or such other date as the parties may mutually
agree.
6. MISSION'S POST-CLOSING OBLIGATIONS.
6.1. Directory Maps. Certain directory maps (the "Directory Maps") have
been installed by Mission, at its cost and expense, at various entry points
into Highlands Ranch, which are of a size, type, design, number, content and at
such locations as Mission has determined in its sole discretion may determine.
The Directory Maps show the locations of various projects in Highlands Ranch.
Directory Maps showing the location of projects shall include, at Mission's
cost and expense, either the name of Buyer or the name of Buyer's project to be
developed on the Property, whichever Buyer, at Buyer's option to be exercised
by written notice given to Mission prior to Closing (failing which exercise
Mission may make such selection in Buyer's discretion), shall elect.
6.2. Directional Signs. Mission agrees to install, at its cost and
expense, at least three directional signs (the "Directional Signs") at various
locations within Highlands Ranch, which shall be of a size, type, design,
number, content and at such locations as Mission in its sole discretion may
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determine, which shall contain either the name of Buyer or the name of the
project of Buyer to be developed on the Property, whichever Buyer, at Buyer's
option to be exercised by written notice given to Mission prior to Closing
(failing which exercise Mission may make such selection in its discretion),
shall elect and may contain the name of any other project located within
Highlands Ranch and the developer thereof (including, if applicable, Mission).
6.3. Installation of Maps and Signs. Buyer agrees to give Mission
written notice advising Mission of the date anticipated by Buyer upon which
Buyer's leasing office or trailer shall be open for business with the public.
Mission agrees to cause the Directory Maps and Directional Signs (collectively
the "Maps and Signs") to be installed no later than the later of (a) 14 days
after the date upon which Mission receives such written notice, or (b) the date
anticipated by Buyer in such written notice as the date upon which such leasing
office or trailer shall so open, or (c) the actual date upon which such leasing
office or leasing trailer shall so open. The Maps and Signs shall be
maintained and repaired by Mission, at Mission's cost and expense, to a level
of quality as determined by Mission in its sole discretion, until two years
after the last Closing Date, at which time, or at any time thereafter, the Maps
and Signs may be removed. If after Mission initially installs the Maps and
Signs, Buyer desires to make any change with respect to the name of Buyer or
the name of Buyer's project, as the case may be, thereon, the cost of so doing
shall be at Buyer's expense.
7. BUYER'S POST-CLOSING OBLIGATIONS.
7.1. Incorporation of Buyer's Obligations in Deed. The Deeds attached
hereto as Exhibits F and G contain terms and provisions of certain obligations
of Buyer after the Closing. Buyer hereby agrees that Buyer shall be obligated
to comply with terms and provisions set forth in the Deeds.
7.2. Metropolitan District Requirements. The Property is located within
the boundaries of Highlands Ranch Metropolitan District No. 2 ("Metropolitan
District"). Buyer will satisfy himself with regard to the services performed
by, the rules and regulations of, and the systems development fees, tap fees
and other fees charged by the Metropolitan District, all of which shall be paid
by Buyer.
7.3. Additional Information. Buyer acknowledges that Buyer has
received, read and understands the provisions of (a) a Contiguous Area Report
for the Property (the "CAR") in the form attached hereto as Exhibit K, or in
such other form as may be designated by Mission in writing to Buyer from time
to time; (b) the Community Declaration for Highlands Ranch Community
Association, Inc. (the "Community Declaration"), dated September 1, 1981 and
recorded September 17, 1981 in Book 421 beginning at Page 924 of the Douglas
County Records, as it has been, or may be in the future, duly amended, and the
Articles of Incorporation and Bylaws of the Highlands Ranch Community
Association, Inc. ("Community Association"), attached as Exhibits thereto; (c)
the brochure entitled "Some Questions and Answers About the Highlands Ranch
Community Association"; and (d) a form of Supplemental Declaration, which has
been or will be used by Mission to annex the Property to the Community Asso-
ciation Area (the "Supplemental Declaration"). As more fully set forth in the
Initial Deed, Buyer agrees to be bound by and comply with the requirements and
restrictions contained in the Community Declaration, and the CAR in construct-
ing improvements on the Property.
7.4. Maintenance of Property. As is more particularly provided in the
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Initial Deed, after the date of said Deed Buyer shall maintain, or cause to be
maintained, the portion of Property conveyed thereby in good, healthful and
sightly order, condition and repair. Additionally, and without limiting the
generality of the foregoing, Buyer agrees to obtain and maintain any and all
required permits, licenses and approvals from any governmental authority having
jurisdiction concerning stormwater runoff, sediment or erosion control, storm
drainage, or any other water or sediment discharge ("Stormwater Permit") which
relate to that portion of the Property, the Closing hereunder for which has
previously occurred (the "Transferred Portions"), and, with respect to the
Transferred Portions, to comply with any and all requirements, conditions,
restrictions or other terms contained in any such Stormwater Permit, whether it
has been obtained by Buyer or Mission, including, but not limited to, treatment
requirements and discharge limitations. Moreover, for any Stormwater Permit
obtained by Mission which covers all or a portion of the Property, Mission
shall have the option, at any time on or subsequent to the date upon which all
of the Property covered by such Stormwater Permit has been transferred to
Buyer, to require Buyer to accept a transfer of such Stormwater Permit. Buyer
further agrees to indemnify, hold harmless and defend Mission from any claim,
liability, loss, damage, cost or expense, including attorneys' fees, which
Mission may incur or which may be asserted by reason of any failure of Buyer to
comply with, or fulfill Buyer's obligations under, any such Stormwater Permit
required hereunder. Notwithstanding any other provision of this Agreement, the
obligations of Buyer under this Section shall survive each Closing, and any
termination of this Agreement by either Mission or Buyer.
7.5. Water, Soil, and Energy Conservation Measures. The "Development
Guide Preamble Obligations" shall mean the obligations of Mission, its succes-
sors and assigns, as set forth in Subsection C of the Preamble to the Develop-
ment Guide, entitled "Implementation of Water and Soil Conservation Measures,"
and in Subsection D of the Preamble to the Development Guide, entitled "Imple-
mentation of Energy Conservation Programs." Buyer agrees that in developing
the Property and in designing and constructing Dwelling Units and other
improvements thereon, Buyer shall comply with and perform the Development Guide
Preamble Obligations insofar as the same apply to the Property. Buyer agrees
from time to time and within 10 days after Mission shall deliver a written
notice to Buyer requesting Buyer to complete the same, to complete and deliver
to Mission a report on such a form as shall be designated by Mission from time
to time, setting forth what Buyer has done and in the future plans to do to
comply with the Development Guide Preamble Obligations.
7.6. Compliance with Open Space Requirements. Buyer covenants and
agrees that each portion of the Property, if any, which does not constitute a
lot upon which a Dwelling Unit is intended to be constructed shall be desig-
nated on the Minor Development Plan (or other appropriate document) as Open
Space pursuant to the Open Space Agreement, provided that such portion of the
Property otherwise qualifies as Open Space pursuant to the Open Space Agree-
ment. Any portion of the Property so designated on the Minor Development Plan
(or other appropriate document) as Open Space shall be subject to the Open
Space Agreement and Buyer agrees not to change the designation of such property
as Open Space without the prior written consent of Mission which shall be in
Mission's sole and absolute discretion. Buyer covenants and agrees to convey
or dedicate, as such terms are defined in Section 3.6 of the Open Space
Agreement, such Open Space to the Development District contemplated by Section
4.7 hereof, or, in the event that such Development District is not formed by
Buyer, a subassociation formed by Buyer pursuant to the terms and provisions of
the Supplemental Declaration, when and as directed by Mission and approved by
Douglas County; provided that Mission shall be entitled to direct the
conveyance of such Open Space as provided hereunder only if: (a) there is no
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Excess Open Space available for conveyance within Highlands Ranch; and (b) such
conveyance is demanded by Douglas County pursuant to the terms and provisions
of the Open Space Agreement. Such conveyance shall be subject only to such
reservations and exceptions of easements for access, utilities and drainage
purposes as Buyer may deem necessary and desirable and as are accepted in
writing by Mission and Douglas County. Until such time as the Open Space is
conveyed or dedicated to the Development District or subassociation as provided
hereunder, Buyer shall be obligated to care for and maintain the same. Buyer
agrees and acknowledges that Mission shall have the sole right to deal with
Douglas County with respect to such Open Space. Buyer shall co-operate with
Mission in connection with all matters relating to the Open Space contained
within the Property.
7.7. Density Allocation. The parties hereby agree that a maximum of
1884 Dwelling Units shall be allocated to the Property and that each Parcel
shall be allocated the number of Dwelling Units as set forth on the Development
and Phasing Plan. Mission and Buyer acknowledge that Mission is selling the
Property to Buyer in accordance with Mission's overall plan for the development
of Highlands Ranch. In accordance with the foregoing, Mission covenants and
agrees that Mission shall not develop, sell, lease, transfer or otherwise
encumber other real property in Planning Areas 5, 54, 67 and 73 of the
Highlands Ranch or any other areas within Highlands Ranch in such a manner
which would prevent Buyer from obtaining Douglas County's approval of the
construction of the maximum number of Dwelling Units allocated to a Parcel
pursuant to the Minor Development Plan. Notwithstanding the foregoing, in no
event shall the terms and provisions of this paragraph be deemed to create any
rights of approval, or any other rights in Buyer, for the development of any
Parcel, the Property, Highlands Ranch or the development sale, leasing,
transfer or encumbrance of any property located therein except as specifically
set forth herein.
7.8. Installation of Utilities. Water, sanitary sewer, storm sewer,
electric, gas, telephone and cable television lines are currently located
within streets, public rights of way or easements in a location on or adjacent
to the Property. Except as set forth in Sections 7.9(b), with respect to
certain drainage improvements, and Section 7.10, with respect to the Willows
Water Main, as hereinafter defined, Buyer acknowledges that Mission shall have
no obligation whatsoever to install or extend any utility or service lines from
their present location to or within the Property. Subject to the provision of
Sections 7.9 and 7.10, Buyer acknowledges that it shall be Buyer's respon-
sibility, at Buyer's sole cost and expense, to arrange for the installation and
extension of all water, sanitary sewer, storm sewer, gas, electricity, cable
television and telephone facilities from their current locations to the
Property and thereafter within the Property. Buyer shall also be solely
responsible for the payment of the cost of any meters, tap fees, service fees
and other charges of any entities supplying water, sanitary sewer, storm sewer,
gas, electricity, cable television and telephone services. If as a result of
any such installation of utility main lines, Buyer is entitled to reimbursement
from third parties when such third parties connect to or commence using such
lines (in accordance with agreements provided by any utility companies relating
to such entitlement) Buyer shall have the right to such reimbursements.
7.9. Off-Site Drainage.
(a) Big Dry Creek Basin. Mission is the Declarant under that certain
Declaration of Covenants, Conditions and Restrictions for the Links at
Highlands Ranch dated September 29, 1992 recorded September 30, 1992 in Book
1089 at Page 628 in the records of the Clerk and Recorder of Douglas County,
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Colorado (the "Golf Course Declaration"). The Golf Course Declaration
encumbers the property more particularly described therein, which property may
hereinafter be referred to as the Golf Course Property. Portions of the Golf
Course Property are adjacent to the Property. Pursuant to Section 4.2 of the
Golf Course Declaration, Mission, in its capacity as Declarant under the Golf
Course Declaration, has reserved the right to grant governmental authorities or
districts certain easements, licenses, rights and rights-of-way over and across
portions of the Golf Course Property which pertain to drainage and flood
control facilities. In accordance with the foregoing, Mission agrees to obtain
and/or convey such drainage and flood control easements, licenses, rights and
rights-of-way over and across the Golf Course Property which may be reasonably
necessary for Buyer to develop the Property in accordance with the Minor
Development Plan. Buyer acknowledges and agrees that any such easements,
licenses, rights and rights-of-way which relate to Mission's capacity as
Declarant under the Golf Course Declaration shall only be made or conveyed by
Mission in accordance with the terms and provisions of the Golf Course
Declaration. Buyer agrees to indemnify and hold Mission harmless from and
against any and all claims, liabilities, losses, damages, costs or expenses,
including attorneys' fees which Mission may incur as a result of Buyer's
violation of the Golf Course Declaration.
(b) Spring Creek Drainage Basin. Mission and Buyer acknowledge that
the Metropolitan District's currently existing master drainage plan (the
"Drainage Plan") anticipates the construction by the Metropolitan District of
certain drainage and flood control improvements for the Spring Creek Drainage
Basin (the "Drainage Improvements"). Buyer and Mission shall be responsible
for contacting the Metropolitan District to coordinate the construction of the
Drainage Improvements pursuant to the Drainage Plan. Buyer and Mission agree
to use good faith and due diligence in seeking the construction of the Drainage
Improvements by the Metropolitan District. In accordance with the foregoing:
(i) Mission shall cause the Metropolitan District to commence the construction
of the Drainage Improvements within 3 months from date of the Closing of the
First Parcel and complete the construction of the Drainage Improvements within
12 months from date of the Closing of the First Parcel, or (ii) if Mission is
unable to cause the Metropolitan District to commence the construction of the
Drainage Improvements within 3 months from date of the Closing of the First
Parcel and complete the construction of the Drainage Improvements within 12
months from date of the Closing of the First Parcel, Mission shall be obligated
to construct the Drainage Improvements itself, subject to delays resulting from
Force Majeure Causes, as hereinafter defined. Buyer acknowledges that Mission
has made no representation or warranty that Mission will be able to cause the
Metropolitan District to construct such Drainage Improvements. "Force Majeure
Causes" shall mean and refer to delays from causes beyond the reasonable
control of Mission, such as, but not limited to, acts of God, governmental
moratoriums, strikes, work stoppages, unavailability of or delay in receiving
labor or materials, defaults by contractors or subcontractors, weather
conditions, or fire or other casualty. For purposes of this Section 7.9 (b),
the term Drainage Improvements shall mean either temporary drainage
improvements located either on or off-site of the Property or permanent
drainage improvements located off-site of the Property; provided, however, if
temporary on-site drainage improvements are constructed on the Property such
improvements shall not unreasonably interfere with the development of the
Parcels acquired by Buyer hereunder. Buyer hereby acknowledges that Buyer has
received the Drainage Plan. Buyer agrees that the storm drainage discharge
associated with the construction of Dwelling Units on the Property will not
exceed the storm drainage discharge capacity of the Drainage Improvements as
contemplated by the Drainage Plan.
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7.10. Willows Water Main. Buyer and Mission acknowledge that a portion
of the Property is affected by that certain thirty (30) foot wide easement
granted to the Willows Water District ("Willows District") by Easement Deed
dated April 22, 1975 and recorded April 24, 1975 in Book 275 and Page 538 of
the Douglas County Clerk and Recorders records ("Douglas County Records") as
amended by that certain Relinquishment of Easement and Grant of Easement dated
January 15, 1987 and recorded January 19, 1987 in Book 694 at Page 914 of the
Douglas County Records (collectively "Willows Water Easement"). Located within
the Willows Water Easement is a thirty (30) inch pressurized water main owned
and used by the Willows Water District (the "Willows Water Main"). In addition
to the terms and provisions of the Willows Water Easement, the Willows Water
Easement is affected by that certain Agreement dated April 3, 1981 between
Mission, Highlands Ranch Development Corporation, a Colorado Corporation and
the Willows District, a copy of which is attached hereto as Exhibit L (the
"Willows Water Agreement"). Missions acknowledges that in several areas along
the Willows Water Easement the earthen cover over the Willows Water Main is in
excess of the maximum cover limitations set forth in the Willows Water Easement
and that the correction of this problem must be remedied ("Water Main Cover
Correction"). In accordance with the foregoing, Mission and Buyer agree that
they shall jointly cooperate in obtaining from the Willows Water District the
specific documentation set forth below which provides for the relocation of the
Willows Water Main so as to permit Buyer to develop the Property in accordance
with the Development and Phasing Plan, the First Parcel Site Plan and the
Future Site Plans (collectively, the "Willows District Documentation"). The
Willows District Documentation shall be limited to: (a) approval of the plans
and specifications for the relocation of the Willows Water Main by the Willows
District engineer; (b) a document which terminates the existing Willows Water
Easement with respect to the Property; (c) a document which provides the
Willows District with an easement for the relocation of the existing Willows
Water Easement to a location jointly determined by Mission and the Willows
District; and (d) the approval of the Board of Directors of the Willows Water
District of (a), (b) and (c) above. The form and content of the Willows
District Documentation shall be subject to the prior written approval of both
Mission and Buyer prior to execution. In the event that the Willows District
Document is not approved by Mission and Buyer, and executed by the appropriate
parties, on or before the date which is fifteen (15) days prior to the Closing
for the First Parcel, then either party shall be entitled to terminate this
Agreement by delivery of written notice to the other party on or before such
date. In the event that the Agreement is terminated by either party in
accordance with the provisions hereof, the Deposit, other than the Non-
refundable Deposit, shall be returned to Buyer by Mission and each party shall
be relieved of all further obligations hereunder except as otherwise provided
herein. In the event that the Willows District Documentation is obtained from
the Willows District and Buyer closes the purchase of the First Parcel as
provided herein, Buyer shall be responsible for performing the relocation of
the Willows Water Line in accordance with the terms and provisions of the
Willows District Documentation. Mission agrees to provide Buyer with such
licenses and other documentation as is reasonably necessary for Buyer to
complete the Relocation of the Willows Water Line in accordance with the
Willows District Documentation. Mission agrees to reimburse Buyer for a
portion of the actual costs and expenses incurred by Buyer for the relocation
of the Willows Water Line in accordance with the provisions hereof, exclusive
of administrative costs and legal fees (the "Water Main Reimbursement Amount");
provided, however, that in no event shall Mission's reimbursement obligation
hereunder exceed $220,995.00. After completion of the relocation of the Willows
Water Main by Buyer in accordance with the provisions hereof, Mission shall pay
to Buyer the Water Main Reimbursement Amount within 30 days after Mission's
receipt of Buyer's invoice for such work, which invoice shall include such
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backup documentation as Mission may reasonably require.
8. REPRESENTATIONS AND WARRANTIES.
8.1. Representations and Warranties of Mission. As an inducement to
Buyer to enter into this Agreement, Mission represents and warrants to, and
covenants with, Buyer as follows:
(a) This Agreement constitutes a legal, valid, and binding obligation of
Mission and (together with all documents contemplated hereby when executed and
delivered) is enforceable against Mission in accordance with its terms.
(b) Mission Viejo Company is a California corporation duly organized,
validly existing, and in good standing under the laws of the State of
California and qualified to transact business in the State of Colorado, and
individuals executing this Agreement and the documents contemplated by this
Agreement on its behalf are duly elected or appointed and validly authorized to
execute and deliver the same.
Should Mission learn of any fact, condition, development, or proposal
which is contrary to or inconsistent with the above, it will immediately so
advise Buyer in writing.
8.2. Representations and Warranties of Buyer. As an inducement to Mis-
sion to enter into this Agreement, Buyer represents and warrants to, and cove-
nants with, Mission as follows:
(a) That this Agreement constitutes a legal, valid, and binding obli-
gation of Buyer and (together with all documents contemplated hereby when
executed and delivered) is enforceable against Buyer in accordance with its
terms.
(b) Buyer is a Colorado corporation duly organized, validly existing and
in good standing under the laws of the State of Colorado and the individuals
executing this Agreement and the documents contemplated by this Agreement are
or will be duly authorized to do so.
Should Buyer learn of any fact, condition, development, or proposal which
is contrary to or inconsistent with the above, he will immediately so advise
Mission in writing.
9. DEFAULTS.
9.1. Defaults by Mission. If there is any default by Mission under this
Agreement prior to the Last Closing, Buyer may at Buyer's option, (a) declare
this Agreement terminated in which case the Deposit shall be returned to Buyer
and each party shall thereupon be relieved of all further obligations
hereunder, (b) bring an action against Mission for damages, or (c) if the
default arises after the Closing for the First Parcel, elect to treat this
Agreement as being in full force and effect and Buyer shall have the right to
seek specific performance of this Agreement. These shall be the sole remedies
of Buyer and Buyer shall not be entitled to, and hereby waives all other rights
to seek, specific performance of this Agreement, to file any notice of lis
pendens, attachment, lien or encumbrance or to take any other action which
could impair the ability of Mission to sell, transfer and freely deal with any
portion of the Property not theretofore transferred to Buyer, except as
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otherwise provided in the first sentence of this Section 9.1.
9.2. Defaults by Buyer. If there is any default by Buyer under this
Agreement prior to the last Closing or if Buyer fails to timely construct the
Access Improvements contemplated by the Access Easement Agreement in accordance
with the provisions of Section 4 thereof, then Mission may, at Mission's
option, (a) since damages may be difficult to ascertain, retain the Deposit as
liquidated damages, and declare this Agreement terminated in which case each
party shall be relieved of all further obligations hereunder, or (b) if such
default is the failure of Buyer to comply with any obligations of Buyer
hereunder (other than the obligation of Buyer to close hereunder, or the
obligations set forth in Section 3.6 with respect to submittal of documents or
obtaining approvals by set deadlines), including, without limitation, Buyer's
failure to comply with any of its obligations which survive the termination of
this Agreement, bring an action against Buyer for damages. In addition to any
default by Buyer hereunder resulting from any failure by Buyer to comply with
any of Buyer's obligations hereunder, Buyer shall be in default hereunder if
Buyer shall file a petition in bankruptcy or insolvency or for reorganization
or arrangement under the bankruptcy laws of the United States or under any
similar act of any state, or shall voluntarily take advantage of any such law
or act by answer or otherwise, or shall be dissolved or shall make an assign-
ment for the benefit of creditors or if involuntary proceedings under any such
bankruptcy or insolvency law or for the dissolution of Buyer shall be
instituted against Buyer or a receiver or trustee shall be appointed for the
interest of Buyer under this Agreement or for all or substantially all of the
property of Buyer, and such proceedings shall not be dismissed or such
receivership or trusteeship vacated within 60 days after such institution or
appointment. The foregoing shall be the sole remedies of Mission, and Mission
shall not be entitled to, and hereby waives all rights to seek, specific
performance of this Agreement.
9.3. Rights to Cure. Notwithstanding anything to the contrary hereunder
and prior to the commencement of any action on any default, the nondefaulting
party shall provide to the defaulting party written notice of such default.
The defaulting party shall have 5 business days after receipt of such notice to
cure the alleged default, or if said default cannot reasonably be cured within
said 5-day period, the defaulting party shall in good faith commence to cure
such failure within such 5-day period and shall diligently proceed therewith to
completion.
9.4. Defaults After Closing. Each of Mission and Buyer shall be enti-
tled to pursue any and all legal and equitable remedies available to it in the
event of a default by the other party after any Closing under this Agreement as
to the Parcel(s) theretofore acquired.
10. MISCELLANEOUS.
10.1. Press Releases. Buyer and Mission agree that neither party shall
make any statement or release to the media regarding this Agreement or the
terms and provisions hereof unless the content and timing of said statement or
release shall have been approved by the other party in writing, which approval
shall not be unreasonably withheld.
10.2. Taking Prior to Closing. Other than with respect to an "Immaterial
Taking," as hereinafter defined, if any of the Property is taken by the right
of, or is included in any pending action to exercise the right of, eminent
domain, prior to the date of the applicable Closing hereunder, at Buyer's
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option: (a) this Agreement shall remain in effect, such Closing shall never-
theless occur and Buyer shall thereupon become entitled to the entire award or
proceeds received or receivable for the portion of the Property taken and Mis-
sion shall be entitled to any award or proceeds for severance or other damages
relating to other property owned by Mission; or (b) Buyer may terminate this
Agreement by written notice to Mission, in which case the Deposit shall be
returned to Buyer and each party shall be relieved of all further obligations
hereunder. If an Immaterial Taking occurs, Mission shall be relieved of its
duty to convey title to the portion of the Property so taken or condemned, and
Mission will be entitled to receive all proceeds of any such taking or
condemnation. Any taking or condemnation for any public or quasi-public
purpose or use which does not affect access, reduce the permitted number of
Dwelling Units, reduce the value of the Property, in Buyer's reasonable
opinion, shall be deemed an "Immaterial Taking."
10.3. Agreement Not to be Recorded. Each party agrees that it shall not
cause or permit this Agreement to be recorded; provided, however, that at the
Closing of the First Parcel, the parties agree to cause a memorandum of this
Agreement to be recorded in the land records of the Clerk and Recorder of the
County of Douglas, State of Colorado, which memorandum shall be in form and
substance mutually acceptable to the parties. Concurrently with the
recordation of such memorandum, Buyer shall deliver to Mission, a quitclaim
deed for each of Lots 2 through 5, Highlands Ranch Filing No. 126-A, Douglas
County, Colorado which deeds shall be held by Mission pursuant to mutually
agreeable instructions. Said instructions shall provide, among other
provisions, that (i) upon Buyer's purchase of each of Lots 2 through 5,
Highlands Ranch Filing No. 126-A, Douglas County, Colorado, the quitclaim deed
with respect to the applicable Lot being held by Mission shall be returned to
the Buyer at the Closing at which the applicable Lot is purchased; and (ii)
upon Mission delivering to Buyer written notice stating that (x) Buyer is in
default under this Agreement, and (y) Buyer has failed to cure such default
within the time period provided by Section 9.3 of this Agreement, Mission may
record the quitclaim deeds then being held by it pursuant to the terms of the
instructions.
10.4. No Representations. Mission and Buyer acknowledge and agree that,
except as provided in the Sections of this Agreement entitled "Interstate Land
Sales Act and Colorado Subdivision Developers Act Exemptions" and Article 8 and
as otherwise expressly provided for elsewhere in this Agreement, neither party
has made any representations, warranties, or agreements to or on behalf of the
other party as to any matter concerning the Property, the present use thereof
or the suitability for Buyer's intended use of the Property, including, without
limitation, any representations, warranties or agreements relating to
topography, climate, air, water, water rights, utilities, present and future
zoning, soil, subsoil, environmental conditions, the purposes to which the
Property is suited, the use of adjoining or nearby properties, drainage, access
to public roads, or proposed routes of roads, or extensions thereof, or the
effect of any state or federal environmental protection laws or regulations.
Buyer represents and warrants to Mission that Buyer has made or will make
Buyer's own independent inspection and investigation of the Property and, in
entering into this Agreement, Buyer intends to rely solely on such inspection
and investigation of the Property. No patent or latent physical condition of
the Property, whether or not now known or discovered, shall affect the rights
of either party hereto. No agreement, warranty or representation, unless
expressly contained or provided for herein, shall bind Mission. Buyer expressly
waives any right of rescission and all claims for damages by reason of any
statement, representation, warranty, promise, or agreement, if any, unless
contained in this Agreement.
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10.5. Indemnification; No Mechanic's Liens. Buyer hereby acknowledges
that the making of Investigations, Tests and Surveys prior to Closing
hereunder, are for the benefit of and at the instance of Buyer. Buyer
expressly acknowledges that nothing in this Agreement shall authorize Buyer, or
any person dealing with, through or under Buyer to subject Mission's interest
in any portion of the Property to mechanic's liens prior to Closing for the
Property. Buyer agrees to indemnify, hold harmless and defend Mission from any
claim, liability, loss, damage, cost or expense, including attorneys' fees,
which Mission may incur or which may be asserted by reason of (a) any entry on
the Property through or under Buyer prior to Closing; (b) the making of
Investigations, Tests and Surveys ordered or conducted by Buyer; or (c) any
fencing installed on the Property by Buyer pursuant to the provisions of
Section 3.11 thereof. Buyer agrees not to permit or suffer and, to the extent
so permitted or suffered, to cause to be removed and released, any mechanic's,
materialman's or other lien on account of supplies, machinery, tools,
equipment, labor or materials furnished or used in connection with the
planning, design, inspection, construction, alteration, repair or surveying of
the Property as aforesaid through or under Buyer prior to Closing hereunder.
Mission may at its option, at Buyer's cost and expense, with the assistance of
attorneys of Mission's choosing, enter into, defend, prosecute or pursue any
effort or action (whether or not litigation is involved) which Mission deems
reasonably necessary to defend itself and the Property from and against all
claims or liability arising by, through or under Buyer as set forth herein.
Buyer acknowledges and agrees that Mission may, but shall not be required to,
post or serve a notice that Mission's interest in the Property shall not be
subject to any mechanics' liens pursuant to the provisions of C.R.S. Section
38-22-105, and to take such other actions as Mission deems necessary to comply
with the provisions of said statute. Notwithstanding any other provisions of
this Agreement, the obligations of Buyer under this Section shall survive any
termination of this Agreement by either Buyer or Mission.
10.6. Notices. All notices, consents or other instruments or communica-
tions provided for under this Agreement shall be in writing, signed by the
party giving the same, and shall be deemed properly given and received when
actually delivered and received or three business days after mailed, if sent by
registered or certified mail, postage prepaid, to the address for a party set
forth at the beginning of this Agreement, or as such party may designate by
written notice to the other party, with a copy, in the case of notices to
Mission, to Legal Department, Colorado Division, Mission Viejo Company, 8822
South Ridgeline Boulevard, Highlands Ranch, Colorado 80126.
10.7. Entire Agreement. This Agreement constitutes the entire under-
standing between the parties with respect to the subject matter hereof, and all
prior agreements or understandings shall be deemed merged in this Agreement and
therein.
10.8. No Oral Amendment or Modifications. No amendments, waivers or
modifications hereof shall be made or deemed to have been made unless in writ-
ing executed by the party to be bound thereby.
10.9. Nonseverability. If any provision of this Agreement shall be
invalid, illegal or unenforceable, and any such provision is significant and
material, either party may, at any time prior to a Closing hereunder, at its
option, declare this Agreement null and void and of no effect, in which case
the Deposit shall be returned to Buyer and each party shall be relieved of all
further obligations hereunder. If any other provision of this Agreement shall
be invalid, illegal or unenforceable, it shall not affect or impair the valid-
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ity, legality or enforceability of any other provision of this Agreement, and
there shall be substituted for the affected provision a valid and enforceable
provision as similar as possible to the affected provision.
10.10. Assignability. Buyer may not assign Buyer's rights or obligations
under this Agreement without the prior written consent of Mission, except to
Wellsford Residential Property Trust ("Wellsford"), an entity jointly owned by
Al Feld and/or The Feld Company with Wellsford (the Feld-Wellsford Entity") or
an entity owned by Wellsford (the "Wellsford Entity") and any such attempted
assignment shall be null and void. Prior to considering consent to any
assignment, except as specifically authorized above Mission shall be entitled
to receive and review financial and other information pertaining to the
prospective assignee's real property development capabilities, as reasonably
requested by Mission. Notwithstanding the foregoing, Mission hereby agrees
that Buyer shall have the right to assign Buyer's rights hereunder with respect
to the Property or any Parcel of the property, with the consent of Mission,
which consent shall not be unreasonably withheld or delayed to any corporation,
joint venture, general partnership, limited partnership, limited liability
company, trust or other legal entity in which (i) Buyer, Wellsford, the Feld-
Wellsford Entity or the Wellsford Entity has an ownership equity, beneficial or
financial interest, and/or (ii) Buyer, Wellsford, the Feld-Wellsford Entity or
the Wellsford Entity or an entity controlled by one of them acts as manager,
contractor or developer.
10.11. Binding Effect. Subject to the Section of this Agreement entitled
"Assignability," this Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective successors and assigns.
10.12. Captions for Convenience. All headings and captions used herein
are for convenience only and are of no meaning in the interpretation or effect
of this Agreement.
10.13. Applicable Law. This Agreement shall be interpreted and enforced
according to the laws of the State of Colorado.
10.14. Exhibits Incorporated. All exhibits to this Agreement are
incorporated herein and made a part hereof as if fully set forth herein.
10.15. Time of the Essence. Time is of the essence with respect to
performance required under this Agreement.
28
<PAGE>
10.16. Brokers. Except as may be provided by separate written agreement,
each party warrants and certifies to the other party that such party has not
engaged or utilized the services of any broker in connection with this
transaction who shall be entitled to any com-mission as a result of this Agree-
ment or the transaction contemplated hereby. Each party agrees to defend,
indemnify and hold harmless the other from and against any claims for broker's
or finder's fees or commissions made by any party claiming to have dealt with
it. Not-withstanding any other provision of this Agreement, the obligations of
Buyer under this Section shall survive any termination of this Agreement by
either Mission or Buyer.
10.17. Counterparts. This Agreement may be executed in counterparts,
each of which shall constitute an original, but all of which, when taken
together, shall constitute but one agreement.
10.18. Costs of Legal Proceedings. In the event that either party
institutes legal proceedings with respect to this Agreement or the transaction
contemplated hereby, including, but not limited to, appearing and participating
in any action initiated by or against the other party under the bankruptcy laws
of the United States, or similar laws of any state, the prevailing party shall
(or in the case of such a bankruptcy action by a party, the other party shall)
be entitled to recover, in addition to any other relief to which it is
entitled, its costs and expenses incurred in connection with such legal pro-
ceedings, including, without limitation, reasonable attorneys' fees. The
obligations of Buyer under this Section shall survive any termination of this
Agreement by either Mission or Buyer.
10.19. Survival of Provisions. Any provisions of this Agree-ment which
require observance or performance subsequent to the date of Closing shall con-
tinue in force and effect following the date of Closing.
10.20. General Cooperation. Notwithstanding any other provi-sion of this
Agreement to the contrary, and notwithstanding the Closing of the sale of the
Property to Buyer, Buyer and Mission agree in good faith before and after
Closing to execute such further or additional documents, and to take such other
actions, as may be reasonably necessary or appropriate to fully carry out the
intent and purposes of the parties as set forth in this Agreement.
10.21. Computation of Time. In computing any period of time under this
Agreement, the date of the act or event from which the designated period of
time begins to run shall not be included. The last day of the period so com-
puted shall be included unless it is a Saturday, Sunday, or federal legal hol-
iday, in which event the period shall run until the end of the next day which
is not a Saturday, Sunday, or federal legal holiday.
10.22. Negotiated Provisions. This Agreement shall not be construed more
strictly against one party than against the other merely by virtue of the fact
that it may have been prepared by counsel for one of the parties, it being
recognized that both Mission and Buyer have contributed substantially and
materially to the preparation of this Agreement.
10.23. The Foreign Investment In Real Property Tax Act and Colorado
Department of Revenue Form 1083. Mission shall deliver or cause to be
delivered to Buyer at Closing an affidavit executed by Mission under penalty of
perjury stating Mission's United States taxpayer identification number and that
Mission is not a foreign person in accordance with Internal Revenue Code
Section 1445(b)(2). Mission shall also deliver or cause to be delivered to
29
<PAGE>
Buyer at Closing an affidavit executed by Mission under penalty of perjury
stating that Mission is a corporation qualified to do business in the State of
Colorado and that it maintains a permanent place of business in the State of
Colorado
10.24. No Implied Waiver. No failure by Mission to insist upon the
strict performance of any term, covenant, or provision contained in this
Agreement, no failure by Mission to exercise any right or remedy under this
Agreement, and no acceptance of full or partial payment owed to Mission during
the continuance of any default by Buyer, shall constitute a waiver of any such
term, covenant, or provision, or a waiver of any such right or remedy, or a
waiver of any such default unless such waiver is made in writing by Mission.
Any waiver of a breach of a term or a condition of this Agreement shall not
prevent a subsequent act, which would have originally constituted a default
under this Agreement, from having all the force and effect of a default.
IN WITNESS WHEREOF, the parties hereto have executed this Vacant Land
Purchase and Sale Agreement as of the day and year first above written.
MISSION:
MISSION VIEJO COMPANY, a
Attest: California corporation
By:______________________ By: /s/ F. Mark Reilly
Assistant Secretary ___________________________
Name: F. Mark Reilly
Title: Senior Vice President,
Colorado Division
ATTEST: BUYER:
By:/s/ Solomon H. Eichenbaum THE FELD COMPANY, a Colorado
____________________ corporation
__________ Secretary
By: /s/ Al Feld
______________________________
Name: Al Feld
Title: President
30
<PAGE>
EXHIBIT A
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Development and Phasing Plan
[Depiction of Property Phases]
31
<PAGE>
EXHIBIT B
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
First Parcel Site Plan
Site Improvement Plan as prepared by Kirkham, Michael and Associates for The
Feld Company, Highlands Ranch Filing 126-A, Planning Area 67 and a Portion of
Planning Area 73, dated June 14, 1994, consisting of the following eleven
sheets:
SHEET 1: Legal Description with Vicinity Map and Subdivision Map
SHEET 2: Key Map
SHEETS 3 - 10
inclusive: Site Plan
SHEET 11: Details
Site Improvement Plan as prepared by Feld Design, Inc. for Highlands Ranch
Filing 126-A, Planning Area 67 and a Portion of Planning Area 73, dated June
14, 1994, as amended July 18, 1994, consisting of the following eighteen
sheets:
SHEET L1: Key Plan, General Notes, Plan List, Index
SHEET L2: Irrigation Master Tap Plan
SHEET L3 - L10
inclusive: Landscape Plan
SHEET L11 and
L12: Fencing/Landscape Detail
SHEET L13 and
L14: Signage/Landscape Detail
SHEET L15: Landscape Details
SHEET L16: Parcel One Lighting Plan
SHEET L17: Park and Loop Drive Lighting Plan
SHEET L18: Architectural Elevations
32
<PAGE>
EXHIBIT C
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Fencing Plan
[Depictions of Fencing]
33
<PAGE>
EXHIBIT D
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Permitted Exceptions
1. Exception of water rights and ground water granted to Highlands Ranch De-
velopment Corporation by Mission Viejo Company in Quit Claim Deed and As-
signment dated September 26, 1980, recorded October 20, 1980, in Book 396
at Page 520, in Quit Claim Deed, Assignment and Bill of Sale dated Decem-
ber 27, 1988, recorded December 27, 1988, in Book 834 at Page 63, in Quit
Claim Deed and Assignment dated February 17, 1989, and recorded March 14,
1989, in Book 844 at Page 1139, and in Quit Claim Deed and Assignment
dated April 11, 1990, recorded April 25, 1990, in Book 908 at Page 1205, a
portion of which water rights and ground water were granted to Centennial
Water and Sanitation District by Highlands Ranch Development Corporation
in Special Warranty Deed, Assignment and Bill of Sale dated December 27,
1988, recorded December 27, 1988, in Book 834 at Page 84, Special Warranty
Deed and Assignment dated February 17, 1989, and recorded March 14, 1989,
in Book 844 at Page 1142, and Special Warranty Deed and Assignment dated
April 11, 1990, recorded May 18, 1990, in Book 912 at Page 613, and
subject to Relinquishment of Surface Rights dated December 27, 1988, by
Centennial Water and Sanitation District, recorded December 27, 1988, in
Book 834 at Page 119.
2. Minerals and mineral rights granted to Highlands Ranch Development Cor-
poration by Mission Viejo Company in Mineral Deed dated September 26,
1980, and recorded October 20, 1980, in Book 396 at Page 514 and mineral
substances in the "full mineral rights land" and coal in the "coal lands"
as granted to Highlands Ranch Development Corporation by Union Pacific
Land Resources Corporation in Mineral Deed dated May 1, 1981, recorded May
20, 1981, in Book 412 at Page 465, reserving to Union Pacific Land
Resources Corporation a 25 percent non- executory interest in and to such
mineral substances and coal.
3. The Planned Community District Development Guide for the New Town of
Highlands Ranch, as adopted by the Board of County Commissioners of
Douglas County, Colorado, on September 17, 1979, recorded October 25,
1979, in Book 373 at Page 187 as the same has been or may be amended from
time to time.
4. Community Declaration for Highlands Ranch Community Association, Inc.,
dated September 1, 1981, and recorded September 17, 1981, in Book 421 at
Page 924.
5. Supplemental Declaration for Annexed Property No. ________ dated
__________________, to be recorded immediately prior to the recording of
the Deed.
6. Right of Way Agreement as recorded March 12, 1985 in Book 565 at Page 119.
7. Grant of Easement(s) as recorded June 18, 1985 in Book 647 at page 181;
recorded January 4, 1988 in Book 769 at Page 272; recorded January 4, 1988
in Book 769 at Page 296; and recorded December 30, 1988 in Book 834 at
34
<PAGE>
Page 765.
8. Easement Deed as recorded April 24, 1975 in Book 275 at Page 538 and
Modification recorded January 19, 1987 in Book 694 at Page 914.
9. Easement Deed as recorded May 23, 1975 in Book 276 at Page 453.
10. Easement Deed as recorded November 18, 1975 in Book 282 at Page 589 and
Page 594.
11. Easement Deed as granted to the Mountain States Telephone and Telegraph
Company as recorded October 1, 1975 in Book 280 at Page 829.
12. Barbed wire fence traversing throughout subject property; buried electric
and telephone and CATV lines and gas easements; water line with valve and
fire hydrants; and encroachment of improvements onto subject property all
as shown on survey plat by Kirkham, Michael and Associates, Job No.
M930805.
13. Notes as shown on survey by Kirkham, Michael and Associates, Job No.
M930805.
35
<PAGE>
EXHIBIT E
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Relinquishment of Surface Rights
(Note-See separate document attached)
36
<PAGE>
RELINQUISHMENT OF SURFACE RIGHTS
THIS RELINQUISHMENT OF SURFACE RIGHTS ("Relinquishment") is made this
_____ day of _______________, 19__, by HIGHLANDS RANCH DEVELOPMENT CORPORATION,
a Colorado corporation ("Development Corp.") whose address is 8822 South Ridge-
line Boulevard, Highlands Ranch, Colorado 80126, to THE FELD COMPANY, a
Colorado corporation ("Surface Owner") 4600 S. Ulster Street, Suite 350,
Denver, Colorado 80237.
1. Purpose. The purpose of this Relinquishment is to relinquish rights
of Development Corp. to enter upon and use the surface of the Property, as
hereinafter defined, in connection with the development of mineral or water
resources.
2. Property. The "Property" shall mean that certain real property
located in Highlands Ranch more particularly described on Exhibit A [INSERT
LEGAL DESCRIPTION OF PARCEL BEING CONVEYED] hereto.
3. Highlands Ranch. "Highlands Ranch" shall mean the real property
located in Douglas County, Colorado, described on Exhibit A attached to the
Mineral Deed, as hereinafter defined, and also described in Exhibit A to the
Initial Water Deed, as hereinafter defined.
4. Mineral Deed. "Mineral Deed" shall mean the Mineral Deed dated
September 26, 1980, from Mission Viejo Company, a California corporation
("Mission") to Development Corp. recorded October 20, 1980, in Book 396 begin-
ning at Page 514 of the records in the office of the Clerk and Recorder of
Douglas County, Colorado ("Douglas County Records").
5. Initial Water Deed. "Initial Water Deed" shall mean the Quit Claim
Deed and Assignment dated September 26, 1980, from Mission to Development Corp.
recorded October 20, 1980, in Book 396 at Page 520 of the Douglas County
Records.
6. UP Mineral Deed. "UP Mineral Deed" shall mean the Mineral Deed
dated May 1, 1981, from Union Pacific Land Resources Corporation ("Union
Pacific") to Development Corp. recorded May 20, 1981, in Book 412 at Page 465
of the Douglas County Records.
7. Subsequent Water Deeds. "Subsequent Water Deeds" shall mean the
Quit Claim Deed, Assignment and Bill of Sale dated December 27, 1988, from
Mission to Development Corp. recorded December 27, 1988, in Book 834 at Page 63
of the Douglas County Records, the Quit Claim Deed and Assignment, dated
February 17, 1989, recorded March 14, 1989, in Book 844 at Page 1139 of the
Douglas County Records, and the Quit Claim Deed and Assignment, dated April 11,
1990, recorded April 25, 1990, in Book 908 at Page 1205.
8. Centennial Water Deeds. "Centennial Water Deeds" shall mean that
Special Warranty Deed, Assignment and Bill of Sale dated December 27, 1988,
from Development Corp. to Centennial Water and Sanitation District, a Colorado
quasi-municipal corporation ("Centennial"), recorded December 27, 1988, in Book
834 at Page 84 of the Douglas County Records, the Special Warranty Deed and
Assignment, dated February 17, 1989, and recorded March 14, 1989, in Book 844
at Page 1142 in the Douglas County Records, and the Special Warranty Deed and
Assignment, dated April 11, 1990, and recorded May 18, 1990, in Book 912 at
Page 613 in the Douglas County Records, and subject to Relinquishment of
37
<PAGE>
Surface Rights dated December 27, 1988, by Centennial Water and Sanitation
District, recorded December 27, 1988, in Book 834 at Page 119.
9. Water Rights and Ground Water. "Water Rights and Ground Water"
shall mean all of the water rights and ground water acquired by Development
Corp. under the Initial Water Deed and Subsequent Water Deeds but excluding
those portions of such water rights and ground water which were granted to
Centennial by Development Corp. in the Centennial Water Deeds.
10. Relinquishment of Surface Rights. Development Corp., for itself,
its successors and assigns, hereby relinquishes and quit claims to Surface
Owner, its successors and assigns, for the period of time as hereinafter spec-
ified, all rights of Development Corp. to enter upon the surface of all or any
portion of the Property for any purpose in connection with the development or
utilization of any minerals or mineral rights or mineral substances or coal
acquired by Development Corp. under the Mineral Deed or the UP Mineral Deed or
for any purpose in connection with the development or utilization of any of the
Water Rights and Ground Water. Nothing herein contained shall limit the right
of Surface Owner or any subsequent owner of the Property, to at any time in the
future, authorize Development Corp., its successors and assigns, to utilize all
or any portion of the Property for the development and utilization of minerals
or mineral rights, mineral substances or coal, or Water Rights or Ground Water.
11. Continued Title to Minerals and Water. Development Corp.'s under-
lying title to minerals and mineral rights, mineral substances and coal and
Water Rights and Ground Water in connection with the Property shall in no way
be affected by this instrument. In addition, the Development Corp., for
itself, its successors and assigns, excepts and reserves and shall retain the
right to develop and remove any such minerals or mineral rights, mineral sub-
stances or coal, and Water Rights or Ground Water by slant drilling, subterra-
nean entry or other means or operations conducted on the surface of any parcel
as to which Development Corp. may then have rights of surface use or by any
other suitable means or methods, provided, however, that any such slant drill-
ing, subterranean entry or other operations conducted on the surface of any
such parcel or such other suitable means or methods can be employed without
entering upon or using the surface of all or any portion of the Property and
without impairing structures, improvements or appurtenances, or the use or
support thereof, located or to be located on the Property.
12. Term of Relinquishment. The relinquishment and quit claim of sur-
face rights by Development Corp. as contained in Section 10 hereof shall be
permanent.
IN WITNESS WHEREOF, Highlands Ranch Development Corporation has executed
this Relinquishment of Surface Rights as of the day and year first above
written.
HIGHLANDS RANCH DEVELOPMENT
CORPORATION, a Colorado corporation
By:________________________________
Vice President
STATE OF COLORADO )
) ss.
COUNTY OF DOUGLAS )
38
<PAGE>
The foregoing instrument was acknowledged before me this _____ day of
_________________, 19__, by Kevin P. Murphy, as Vice President of Highlands
Ranch Development Corporation, a Colorado corporation.
WITNESS my hand and official seal.
My commission expires: _____________________.
___________________________________
(SEAL) Notary Public
39
<PAGE>
EXHIBIT F
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
First Parcel Deed Form
40
<PAGE>
EXHIBIT G
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Subsequent Parcels Deed Form
41
<PAGE>
EXHIBIT H
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Supplemental Declaration Form
42
<PAGE>
EXHIBIT I
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Easement and Development Agreement
43
<PAGE>
EXHIBIT J
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Access Easement Agreement
44
<PAGE>
EXHIBIT K
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Contiguous Area Report
45
<PAGE>
EXHIBIT L
TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(The Feld Company - PA 67 and PA 73)
Willows Water Agreement
46
<PAGE>
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED VACANT LAND
PURCHASE AND SALE AGREEMENT
(Feld/Wellsford - Lots 1-5, Filing No. 126-A)
THIS FIRST AMENDMENT TO SECOND AMENDED AND RESTATED VACANT LAND PURCHASE
AND SALE AGREEMENT (this "Amendment") is made as of the 1st day of May, 1996,
between MISSION VIEJO COMPANY, a California corporation ("Mission"), whose
address is 8822 South Ridgeline Boulevard, Highlands Ranch, Colorado 80126,
Attn: Land Sales Department, and WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation, whose address is 370 17th Street, Suite 3100, Denver, Colorado,
80202 ("Buyer").
1. GENERAL.
1.1 Purchase Agreement. The "Purchase Agreement" shall mean that
certain Second Amended and Restated Vacant Land Purchase and Sale Agreement
dated March 23, 1995, whereby Mission agreed to sell, and The Feld Company, a
Colorado corporation ("The Feld Company") agreed to buy, certain property
located in Douglas County, Colorado more particularly described therein, on the
terms and conditions more particularly set forth therein. The Feld Company
assigned its interest as "Buyer" under the Purchase Agreement to Buyer pursuant
to the terms and provisions of that Assignment and Assumption of Amended and
Restated Vacant Land Purchase and Sale Agreement dated May 2, 1995. Terms
defined in the Purchase Agreement shall have the same meaning in this Amendment
unless otherwise provided herein, or the context otherwise requires.
1.2 Purpose of Amendment. The parties desire to amend certain
provisions of the Purchase Agreement in conjunction with Buyer's or its
assignee's acquisition of Lot 2A, Highlands Ranch Filing 126-A, as described in
the Lot Line Adjustment Certificate recorded April 29, 1996 at Reception No.
9622585, in Book 1337 on Pages 324-326 in the records of the Clerk and Recorder
of Douglas County, Colorado ("Lot 2A"). The parties enter into this Amendment
to reflect their agreement with regard to the matters set forth herein.
1.3 Consideration. The parties enter into this Amendment in
consideration of the mutual covenants contained herein and of other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged.
1.4 Incorporation. The terms and provisions of this Amendment are
hereby incorporated into the Agreement, and, except for the amendments herein
contained, all of the terms and provisions of the Agreement shall remain in
full force and effect, unaltered and unchanged by this Amendment. To the
extent that the terms and provisions of this Amendment conflict with the terms
and provisions of the Purchase Agreement, the terms and provisions of this
Amendment shall control.
2. AMENDMENTS TO AGREEMENT.
2.1 Density Allocation. The Development and Phasing Plan attached to
the Purchase Agreement provides for the allocation of 316 Dwelling Units to Lot
2A. Mission and Buyer hereby amend the Development and Phasing Plan to provide
for the allocation of 304 Dwelling Units to Lot 2A. The remaining 12 Dwelling
Units previously allocated to Lot 2A pursuant to the Purchase Agreement may be
allocated by Buyer to the remaining three Parcels in the Property in any manner
47
<PAGE>
Buyer deems fit in Buyer's reasonable discretion subject to Mission's right to
review the Site Plan for a particular Parcel under the Purchase Agreement and
the Deed applicable to such Parcel.
2.2 Amendments to Development Guide. Mission acknowledges and
agrees that Mission will provide Buyer with written notice of any proposed
amendment ("Amendment") to the Development Guide affecting the Property which
is initiated by Mission. Such notice shall be delivered to Pamela H. English,
Feld Design Group, Inc, 4600 S. Ulster Street, Suite 350, Denver, Co. 80237, or
to such other person or address as Buyer may direct. Buyer shall have the
right to comment upon, and object to, the proposed Amendment provided that such
comments and objections are received by Mission within fifteen (15) business
days of Buyer's receipt of the proposed Amendment. If Buyer reasonably
believes that the proposed Amendment will adversely affect the Property,
Mission shall use its best efforts to exclude the Property from the effect of
the proposed Amendment. Buyer acknowledges that Mission shall be entitled to
submit the proposed Amendment to Douglas County for its review during Buyer's
fifteen (15) day review period. Notwithstanding anything to the contrary
contained herein, in no event shall the terms and provisions of this paragraph
be deemed to: (a) create any rights of approval, or any other rights in Buyer,
for the development of any other property within Highlands Ranch other than the
Property, or the development, sale, leasing, transfer or encumbrance of any
property located therein except as specifically set forth herein; or (b)
prevent Mission from finalizing the proposed Amendment with respect to property
within Highlands Ranch other than the Property.
2.3 Boundary - Access Easement. Mission and Buyer have amended the
configuration of Lot 2A in accordance with the Subdivision Boundary (Lot Line)
Adjustment Map (the "Boundary Adjustment Map"), recorded April 29, 1996 at
Reception No. 9622585 in Book 1337, on Pages 324-326. In accordance with the
foregoing, the Base Purchase Price for Lot 2A shall be adjusted to reflect the
increased acreage of Lot 2A. In consideration of the foregoing, Buyer agrees
to grant to Mission an access easement over and across a portion of Lot 2A (the
"Access Easement"). The Access Easement granted to Mission hereunder shall be
in the form of the Access Easement Agreement attached hereto as Exhibit A (the
"Access Easement Agreement") and the location of the Access Easement shall be
as described on Exhibit A to the Access Easement Agreement.
IN WITNESS WHEREOF, this Amendment has been executed by the parties as of
the day and year first above written.
MISSION VIEJO COMPANY, a California corporation
By: /s/ Jeffrey F. Kappes
___________________________________
Jeffrey F. Kappes, Vice President,
Sales and Marketing
WELLSFORD PARK HIGHLANDS CORP., a Colorado
corporation
By: /s/ Donald D. MacKenzie
___________________________________
Donald D. MacKenzie,
48
<PAGE>
___________________________________
Vice President
49
<PAGE>
Exhibit A
Form of Access Easement Agreement
<PAGE>
EXHIBIT 10.17
CONTRIBUTION AND DISTRIBUTION AGREEMENT
CONTRIBUTION AND DISTRIBUTION AGREEMENT, dated as of _____________,
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
<PAGE>
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 one 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,
2
<PAGE>
board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state
or local, domestic or foreign.
"Headquarter Lease" has the meaning set forth in Section 2.1.
"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.
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"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) to be 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 to be 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 the Tri-Party Agreement executed by
Wellsford Parent in favor of NationsBank, N.A., as lender under the
construction loan financing for Phase I 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
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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 $_______________;
(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 Special Non-Qualified Deferred Compensation
Plan adopted by Wellsford Parent;
(h) 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;
(i) any rights of Wellsford Parent under the Reimbursement Agreement
dated December 1, 1995 between PPPIC and Wellsford Parent;
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(j) the Palomino Park Promissory Note dated December 20, 1993 from
PPPIC to Roger, delivered pursuant to the Reimbursement Agreement described
in clause (i) of this definition;
(k) the opinion of Ballard Spahr Andrews & Ingersoll dated
December 20, 1995, addressed, inter alia, to Roger, with respect to the
Bonds;
(l) 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;
(m) the Letter of Credit Reimbursement Agreement dated December 1,
1995 among PPPIC, Wellsford Parent and Dresdner Bank AG, New York Branch;
(n) any agreements executed by Dresdner Bank AG, New York Branch in
favor of Wellsford Parent;
(o) any rights of Wellsford Parent under the Bond Pledge and Security
Agreement dated December 1, 1995 among PPPIC, Wellsford Parent and Dresdner
Bank AG, New York Branch;
(p) 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);
(q) the lease described on Schedule 2.1(h) hereto (the "Headquarter
Lease") [sublease of the premises subject to the Headquarter Lease] [to be
revised pursuant to Section 5.23 of the Merger Agreement];
(r) furniture, fixtures, equipment and personalty located in the
office premises demised pursuant to the Headquarter Lease; and
(s) 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
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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:
(i) Assignment of the Note without recourse;
(ii) Assignment of Deed of Trust (as defined on Schedule 2.1(a)
hereto), in form suitable for recording;
(iii) Assignment of Loan Agreement (as defined on Schedule
2.1(a) hereto);
(iv) Assignment of Assignment of Leases and Rents (as defined on
Schedule 2.1(a) hereto), in form suitable for recording;
(v) Assignment of Security Agreement (as defined on Schedule
2.1(a) hereto), in form suitable for recording;
(vi) Memorandum of Assignment of Option Agreement (as defined on
Schedule 2.1(a) hereto), in form suitable for recording;
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(vii) UCC-3 Assignments, in form suitable for filing or
recording, as the case may be;
(viii) Assignment of Lender's Title Policy;
(ix) Omnibus Assignment of Mortgage Documents relating to the
Sonterra Documents not otherwise covered by the documents listed in
this Section 2.3(b);
(x) Assignment of Seller's Waiver (as defined in Schedule 2.1(a)
hereto);
(xi) 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.
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
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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
one Newco Common Stock for each Wellsford Parent Common Share held by such
Holder.
3.3 Unclaimed Stock. Any 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, 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.
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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
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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
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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
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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
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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
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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
15
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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:_________________________________
Name:
Title:
WELLSFORD REAL PROPERTIES, INC.
By:_________________________________
Name:
Title:
16
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SCHEDULE 2.1(a)
SONTERRA AGREEMENTS
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").
17
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16. Owner's Title Policy No. 512169 issued by Chicago Title Insurance
Company, dated September 20, 1996.
18
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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.
19
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SCHEDULE 2.1(h)
HEADQUARTER LEASE
Lease between Rockefeller Center Properties and Wellsford Residential
Property Trust, dated June 29, 1994.
20
<PAGE>
SCHEDULE 2.2(a)
OPTION AGREEMENTS
21
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EXHIBIT 10.18
$28,500,000
COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT
Dated as of ________________, 1997
between
ERP OPERATING LIMITED PARTNERSHIP
as Purchaser,
and
WELLSFORD REAL PROPERTIES, INC.
as Company
1
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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
3 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . 10
3.1 Organization; Powers. . . . . . . . . . . . . . . . . . . . . 10
3.2 Authorization . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 The Capital Stock . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Governmental Approvals. . . . . . . . . . . . . . . . . . . . 11
3.6 Financial Statements. . . . . . . . . . . . . . . . . . . . . 11
3.7 Title to Properties; Default Under Agreements . . . . . . . . 11
3.8 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Litigation; Compliance with Laws. . . . . . . . . . . . . . . 12
3.10 Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.11 Investment Company Act; Public Utility Holding Company Act. . 12
3.12 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.13 No Material Misstatements . . . . . . . . . . . . . . . . . . 12
3.14 Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . 12
3.15 Environmental and Safety Matters. . . . . . . . . . . . . . . 13
4 CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 13
4.1 First Purchase. . . . . . . . . . . . . . . . . . . . . . . . 13
4.2 All Purchases . . . . . . . . . . . . . . . . . . . . . . . . 14
5 AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . 15
5.1 Existence: Businesses and Properties. . . . . . . . . . . . . 15
5.2 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Obligations and Taxes . . . . . . . . . . . . . . . . . . . . 15
5.4 Financial Statements, Reports, etc. . . . . . . . . . . . . . 16
5.5 Litigation and Other Notices. . . . . . . . . . . . . . . . . 17
5.6 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.7 Maintaining Records; Access to Properties and Inspections . . 17
5.8 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 17
5.9 Issuance of Preferred Stock and Class A Common Stock. . . . . 17
5.10 Election as Director. . . . . . . . . . . . . . . . . . . . . 17
5.11 Voting of Stock . . . . . . . . . . . . . . . . . . . . . . . 18
5.12 Sale of Common Stock or Preferred Stock . . . . . . . . . . . 18
5.13 Confidentiality.. . . . . . . . . . . . . . . . . . . . . . . 19
6 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . 19
7 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . 21
7.1 Termination of the Agreement. . . . . . . . . . . . . . . . . 21
7.2 Securities Law Matters. . . . . . . . . . . . . . . . . . . . 21
7.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
2
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7.4 Survival of Agreement . . . . . . . . . . . . . . . . . . . . 23
7.5 Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . 23
7.6 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.7 Applicable Law. . . . . . . . . . . . . . . . . . . . . . . . 24
7.8 Waivers; Amendment. . . . . . . . . . . . . . . . . . . . . . 24
7.9 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . 24
7.10 Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . 24
7.11 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 24
7.12 Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
7.13 Jurisdiction; Consent to Service of Process.. . . . . . . . . 25
3
<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A - Articles Supplementary Classifying Preferred Stock
Exhibit B - Purchase Notice
Exhibit C - Articles of Incorporation and Bylaws of the Company
Exhibit D - Opinion of Counsel
Exhibit E - Securities Information
Exhibit F - Registration Rights Agreement
Exhibit G - Class A Common Stock Terms
SCHEDULES
Schedule 3.3 -
Options
Schedule 3.4 -
Governmental Approvals
Schedule 3.8 -
Subsidiaries
Schedule 3.9 -
Litigation
Schedule 3.15 -
Environmental and Safety Matters
4
<PAGE>
COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT
This COMMON STOCK AND PREFERRED STOCK PURCHASE AGREEMENT dated as of
___________, 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.
5
<PAGE>
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
______________________________________.
"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,
6
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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
7
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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
8
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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 Articles of Incorporation 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.
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,
9
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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 1,400,000, based upon an
estimated Issuance Price of $2.50 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 Roger'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
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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 1,400,000
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 1,400,000 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 1,400,000 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
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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 1,400,000 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.
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 Articles of
Incorporation 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 G.
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
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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 Articles of Incorporation of
the Company, the Company is authorized to issue 2,000,000 shares of
Preferred Stock, _____ of which have been issued as of the date hereof,
_____ shares of Class A Common Stock, _____ of which have been issued as of
the date hereof, and ___ shares of Common Stock, _____ 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.
3.4 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,
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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
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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) Articles of Incorporation of the Company, and all
amendments and supplements thereto, certified by the Maryland
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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 Robinson
Silverman Pearce Aronsohn & Berman LLP or other counsel to the Company
reasonably satisfactory to Purchaser 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.
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
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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
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(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
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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 Election as Director. On the Closing Date, 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.
5.11 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
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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.
5.12 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.
5.13 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
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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
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<PAGE>
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 documents and information set forth on Exhibit E attached
hereto (the "Information").
(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.
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(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
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<PAGE>
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, to it at
_________________________________, Attention:________________________,
Telecopy No. ______________; and
(b) if to the Purchaser, to it at
_____________________________________, Attention:
_____________________, Telecopy No. ______________.
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
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<PAGE>
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
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<PAGE>
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
26
<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:_______________________________
Name:_________________________
Title:________________________
WELLSFORD REAL PROPERTIES, INC.
By:_______________________________
Name:_________________________
Title:________________________
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<PAGE>
EXHIBIT A
ARTICLES SUPPLEMENTARY CLASSIFYING
2,000,000 SHARES OF SERIES A
8% CONVERTIBLE REDEEMABLE
PREFERRED STOCK OF
WELLSFORD REAL PROPERTIES, INC.
Pursuant to Section ___ of the Corporations and Associations Article
of the Annotated Code of Maryland.
8 The name of the corporation (the "Corporation") is Wellsford Real
Properties, Inc..
9 Pursuant to authority granted under Section ___ of the Corporation's
Articles of Incorporation , the Board of Directors of the Corporation
hereby establishes a series of preferred stock designated Series A 8%
Convertible Redeemable Preferred Stock ($25.00 Par Value Per Share)
(Liquidation Value $25.00 Per Share) (the "Series A Preferred Stock") on
the following terms:
9.1 Certain Definitions.
Unless the context otherwise requires, the terms defined in this
subparagraph A of paragraph 2 shall have, for all purpose of these
Articles Supplementary, 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 ___________________.
"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
subparagraph (3) of paragraph B.
"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 these Articles Supplementary.
"Gross Sales Price of a Share of Common Stock" shall mean (a) the
gross proceeds from all sales of Common Stock to institutional
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<PAGE>
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 subparagraph
(2) of paragraph B.
"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
subparagraph (4) of paragraph B 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 ______________, 1997 between
ERP Operating Limited Partnership and the Corporation.
"Preferred Stock" shall mean all shares of capital 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
subparagraph (3) of paragraph B below.
"Record Date" shall have the meaning set forth in subparagraph
(3) of paragraph B below.
"Redemption Date" shall have the meaning set forth in
subparagraph (5) of paragraph B below.
"Redemption Price" shall have the meaning set forth in
subparagraph (5) of paragraph B 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 these Articles Supplementary.
"Series A Preferred Stock" shall have the meaning set forth in
the preamble.
9.2 Series A Preferred Stock
(a) Number. The maximum number of shares of the Series A
Preferred Stock shall be 2,000,000.
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<PAGE>
(b) 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 pari passu with any other
Preferred Stock of the Corporation, and will rank senior to the Common
Stock and any other class or series of shares of capital 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.
(c) 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 ______________, 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
declaration 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 (12) 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 subparagraph (3) 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.
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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 these Articles Supplementary, the Series A
Preferred Stock shall not be entitled to participate in the earnings
or assets of the Corporation.
(d) Liquidation Rights.
(i) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Corporation, the holders 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.
(ii) After the payment to the holders of the Series A
Preferred Stock of the full preferential amounts provided for in
this paragraph B(4), the holders of the Series A Preferred Stock
as such shall have no right or claim to any of the remaining
assets of the Corporation.
(iii) If, upon any voluntary or involuntary dissolution,
liquidation, or winding up the Corporation, the amounts payable
with respect to the preference value of the Series A Preferred
Stock and any other shares of capital 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.
(iv) 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 this paragraph B.
(v) 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
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<PAGE>
preferential rights on dissolution are superior to those
receiving the distribution.
(e) Redemption.
(i) Optional Redemption. On and after _____________, 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 capital
stock of the Corporation or would otherwise cause any direct or
indirect holder of such outstanding voting capital 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 thirty (30) consecutive trading days commencing
forty-five (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
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<PAGE>
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.
(ii) Procedures for Redemption.
(A) 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.
(B) If notice has been mailed in accordance with
subparagraph (5)(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
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unredeemed Series A Preferred Stock without cost to the holder
thereof.
(C) 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:
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;
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
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.
(D) No Series A Preferred Stock may be redeemed except with
funds legally available for the payment of the Redemption Price.
(E) 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
capital 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.
(F) 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.
(G) 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
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holders (with adjustments to avoid redemption of fractional
shares) or by any other equitable method determined by the
Corporation.
(iii) Required Redemption. Upon the occurrence of an
Event of Default or on and after _____________, 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.
(iv) Procedures for Required Redemption.
(A) 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.
(B) If notice has been mailed in accordance with
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subparagraph (5)(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.
(C) 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:
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
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.
(D) No Series A Preferred Stock may be redeemed except with
funds legally available for the payment of the Redemption Price.
(E) 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.
(v) The Series A Preferred Stock redeemed, repurchased or
retired pursuant to the provisions of this Subparagraph 5(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.
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(f) 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 capital 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.
(i) 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 capital 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
capital 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 Corporation's Certificate
of Incorporation or the Articles Supplementary classifying 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, taking
into account that 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
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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.
(g) Conversion.
(i) 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 subparagraph (5) 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 subparagraph (5)(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).
(ii) 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
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<PAGE>
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.
(iii) 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.
(iv) 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 subparagraph (7)(a) hereof.
(v) 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.
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(vi) The conversion rate in effect at any time shall be
subject to adjustment from time to time as follows:
(A) 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 subparagraph (7)(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.
(B) 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 subparagraph (7)(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.
(C) In case the Corporation shall distribute to all
holders of the Common Stock any class of shares of capital
stock other than Common Stock, evidences of indebtedness or
assets of the Corporation (other than cash distributions out
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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 subparagraph
(7)(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 subparagraph (7)(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 subparagraph (7)(f)(ii)) ("Rights") pro
rata to holders of the Common Stock, the Corporation may, in
lieu of making any adjustment pursuant to this subparagraph
(7)(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.
(D) 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 thirty consecutive trading days
commencing forty-five (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
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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.
(E) In any case in which this subparagraph (7) 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 subparagraph (7)(j)) issuing to the holder of
any Series A Preferred Stock converted after such record
date the Common Stock and other shares of capital stock of
the Corporation issuable upon such conversion over and above
the Common Stock and other shares of capital 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.
(vii) 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 subparagraph (7)(g) is not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
subparagraph (7) 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.
(viii) In the event that, as a result of an adjustment
made pursuant to subparagraph (7)(f), the holder of any Series A
Preferred Stock thereafter surrendered for conversion shall
become entitled to receive any shares of capital 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
subparagraph (7).
(ix) The Corporation may make such increases in the
conversion rate, in addition to those required by subparagraphs
(7)(f)(i), (ii) and (iii), as is considered to be advisable in
order that any event treated for federal income tax purposes as a
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distribution of shares or share rights shall not be taxable to
the recipients thereof.
(x) 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.
(xi) In the event that:
(A) the Corporation takes any action which would
require an adjustment in the conversion rate,
(B) 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
(C) 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 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), (ii) or
(iii) of this subparagraph (7)(k).
(xii) 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
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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 subparagraph (7). 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 subparagraph (7)(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 subparagraph (7)(1)
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.
(h) 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
[reload/rollover], 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 subparagraph (7) 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%.
3. Exclusion of Other Rights.
Except as may otherwise be required by law, 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 these Articles Supplementary (as such Articles
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Supplementary may be amended from time to time) and in the Articles of
Incorporation. The Series A Preferred Stock shall have no preemptive or
subscription rights.
4. 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.
5. 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 these
Articles Supplementary (as such Articles Supplementary may be amended from
time to time) is 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 these Articles Supplementary (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.
6. These Articles Supplementary were duly adopted by the Board of
Directors of the Corporation on _________________. Stockholder action is
not required.
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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:________________________
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EXHIBIT C
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 six, which number may be increased or
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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 I
Mark S. Germain I
Frank J. Hoenemeyer II
Frank J. Sixt II
Edward Lowenthal III
Rodney F. DuBois III
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, as nearly equal in number as possible, 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 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
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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 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 199,992,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and 8,000 shares of Class A Common Stock, $.01 par value per share
("Class A Common Stock"). The Class A Common Stock shall have the
following rights:
(a) Rights. The holders of shares of Class A Common Stock
shall have all rights, including, but not limited to, dividend,
distribution, liquidation and other rights of holders of shares of
Common Stock; provided, however, that holders of shares of Class A
Common Stock shall not have voting rights.
(b) Automatic Conversion. Provided the merger between
Equity Residential Properties Trust, a Maryland real estate investment
trust ("EQR"), and Wellsford Residential Property Trust, a Maryland
real estate investment trust ("Wellsford"), is approved by the
shareholders of Wellsford and EQR, then immediately prior to the
distribution by Wellsford to its common shareholders of all of the
outstanding shares of the Corporation owned by it, as contemplated by
the Contribution and Distribution Agreement, which is Exhibit B to the
Agreement and Plan of Merger, dated as of January 16, 1997, by and
between EQR and Wellsford, (i) all of the outstanding shares of Class
A Common Stock shall automatically, and without any action on the part
of the holders of shares of Common Stock or Class A Common Stock, be
converted into shares of Common Stock at the conversion rate of one
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share of Common Stock for each share of Class A Common Stock and (ii)
any authorized but unissued shares of Class A Common Stock shall be
reclassified as authorized but unissued shares of 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
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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 2,000 shares of Common Stock, $.01 par value per share, and
8,000 shares of Class A Common Stock, $.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 199,992,000 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
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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.
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
President and attested to by its Secretary on this _____ day of
____________, 1997.
ATTEST: WELLSFORD REAL PROPERTIES, INC.
__________________________ By:_________________________(SEAL)
Secretary President
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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.
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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. 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
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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.
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(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
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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
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rights of stockholders to request inclusion of proposals in 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.
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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
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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 a majority of the 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.
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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.
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
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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
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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
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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
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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
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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.
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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
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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.
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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
Articles of Incorporation 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 Articles of Incorporation and the Articles
Supplementary, shall be duly and validly issued, fully paid and
nonassessable.
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EXHIBIT E
To be completed upon filing of the Company's Registration Statement
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EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the ____ day of
____________, 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 of Incorporation of the Company, 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.
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"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
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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
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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
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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
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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
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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
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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,
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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.
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(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
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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.
(iii) 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.
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(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,
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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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
WELLSFORD REAL PROPERTIES, INC.
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By:________________________________
Name:______________________________
Title:_____________________________
ERP OPERATING LIMITED PARTNERSHIP
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT G
A. Certain Definitions.
"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.
"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 ____________.
"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
trust, joint venture, association, company, partnership, or
government, or any agency or political subdivision thereof.
"Preferred Stock" shall mean all shares of capital stock having a
preference in any manner 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
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thereof responsible for the administration of the obligations of such
corporation in respect of these Articles.
"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 shares of the outstanding Class A Common Stock in
excess of the REIT Ownership Limit.
"Voting Stock" shall mean the Class A Common Stock and any other
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors.
B. Terms.
(1) 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.
(2) Voting Rights. 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 _____________, 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 __________, 1997 between ERP Operating Partnership and the
Corporation; (iii) ERP Operating Partnership has obligations pursuant
to that certain Credit Enhancement Agreement dated as of ___________,
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 elect the Class A Director be less than
two (2) years from the Closing Date. The Class A Director may be
removed without cause, only by the affirmative vote of a majority of
the Class A Common Stock electing such director and with "cause" (as
defined herein) only by the vote of 75% of the Directors (including
the Class A Director) then in office. For purposes of these Articles,
"cause" shall mean (i) the conviction of the Class A Director of any
felony involving moral turpitude, fraud or misrepresentation or (ii) a
material fraud by the Class A Director or a material breach of
fiduciary duty by the Class A Director in the performance of his
duties as a director of the Corporation.
(3) Optional Conversion.
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(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 of such Class A Common Stock into Common Stock at a
conversion rate of one share of Common Stock for each share of
Class A Common Stock so converted, 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 subparagraph (3)(a) hereof.
(d) 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 Class A Common Stock. All
Common Stock which may be issued upon conversion 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 Common Stock upon
conversion 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
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is listed.
(e) 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) reclassify the
outstanding Common Stock into shares of some other class or
series of shares, (2) subdivide the outstanding Common Stock
into a greater number of shares of Common Stock or (3)
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 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 Class A Common Stock been
converted immediately prior thereto. An adjustment made
pursuant to this subparagraph (3)(e)(i) shall become
effective immediately after the effective date in the case
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 thirty consecutive trading days
commencing forty-five (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 subparagraph (3)
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 subparagraph (3)(j)) issuing to the
holder of any Class A Common Stock converted after such
record date the Common Stock and other shares of capital
stock of the Corporation issuable upon such conversion over
and above the Common Stock and other shares of capital 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
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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 subparagraph (3)(f) is not required to be made
shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this subparagraph (3) shall be
made to the nearest cent ($.01) or the nearest one-hundredth
(1/100) of a share, as the case may be.
(g) In the event that, as a result of an adjustment made
pursuant to subparagraph (3)(e), the holder of any Class A Common
Stock thereafter surrendered for conversion shall become entitled
to receive any shares of capital 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 subparagraph (3).
(h) The Corporation may make such increases in the
Conversion Rate, in addition to those required by subparagraphs
(3)(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 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 Class A Common Stock.
(j) In the event that:
(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,
a holder of Class A Common 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 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
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referred to in clauses (i) or (ii) of this subparagraph (3)(j).
(k) If any of the following shall occur, namely: (i) any
reclassification or change of outstanding 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 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
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 charter document shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this subparagraph (3). 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 Class A Common Stock as the Board
of Directors shall reasonably consider necessary by reason of the
foregoing. The provisions of this subparagraph (3)(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 the Corporation.
(4) 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.
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(5) Purchase of Shares of Voting Stock in Excess of REIT
Ownership Limit. If, notwithstanding the other provisions contained
in these Articles, 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 Class A Common Stock in excess of the
REIT Ownership Limit.
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EXHIBIT 10.19
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT is made as of the ____ day of
____________, 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 of Incorporation of the Company, 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
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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
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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
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<PAGE>
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
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<PAGE>
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
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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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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
10
<PAGE>
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.
(iii) 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.
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(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
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<PAGE>
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.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
WELLSFORD REAL PROPERTIES, INC.
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By:________________________________
Name:______________________________
Title:_____________________________
ERP OPERATING LIMITED PARTNERSHIP
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT 10.20
===========================================================================
Agreement Regarding Palomino Park
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of ___, 1997
===========================================================================
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AGREEMENT REGARDING PALOMINO PARK
THIS AGREEMENT REGARDING PALOMINO PARK (this "Agreement") is made and
entered into as of __________, 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 _____________, 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 ________________, 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 - 316 units; Phase III -
304 units; Phase IV - 316 units; and Phase V - 452 units.
D. Park at Highlands LLC, a Colorado limited liability company
("Park at Highlands"), has been formed and continued 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
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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 continued 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
____________, 1996 by and between WPHC and Al Feld (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. The portions of the Overall Property other than Lots 1A, 1B, and
2A and Tracts A and B are sometimes referred to herein collectively as the
"Remaining Overall Property".
L. Palomino Park Public Improvements Corporation, a Colorado
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nonprofit corporation ("PPPIC"), has issued $14,750,000 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.
M. 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.
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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 (i) if ERP Operating Partnership
exercises its right of first refusal to purchase all of the capital stock
of WPHC owned by Newco in connection with an Offer made to Newco with
respect to which Newco had exercised a Drag Along Right (as hereinafter
defined) (a "Drag Along Transaction"), then the per share price to ERP
Operating Partnership for each share of WPHC stock owned by Newco shall be
equal to the per share price which would have been paid in connection with
the Drag Along Transaction had all shares subject to sale in the Drag Along
Transaction been sold pursuant to the terms of the Drag Along Transaction
offer, and (ii) 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
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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.
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.
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1.7 If (after the expiration of the Lock-Up Period and after
affording ERP Operating Partnership its right of first refusal in
accordance with Section 1.5 above) 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
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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
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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.
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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
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:
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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
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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
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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 3
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
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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"
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(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).
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(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
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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 [the date of the most recent environmental report with respect
to each phase, as delivered to ERP Operating Partnership prior to the
execution of the Merger Agreement] 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.
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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.
3.5 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
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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
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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
______________ 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
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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;
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(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.
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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
TAX SHARING AGREEMENT
Notwithstanding anything to the contrary contained in this Agreement,
Newco shall not cause or permit to occur any transactions or series of
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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, to it at _________________________________,
Attention:________________________, Telecopy No. _____________, with a
copy concurrently sent to: Brownstein Hyatt, Attn: Wayne Hykan,
Esq.; and
(b) if to ERP Operating Partnership, to it at
_____________________________________, Attention:
_____________________, Telecopy No. ______________.
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.
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(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
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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:___________________________
Name:_________________________
Title:________________________
WELLSFORD REAL PROPERTIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT A
FORM OF TAX SHARING AGREEMENT
THIS TAX SHARING AGREEMENT is made as of the ____ day of ________,
1997, by and between Wellsford Real Properties, Inc., a Maryland
corporation ("Newco"), Wellsford Park Highlands Corp., a Colorado
corporation ("Sub"), and ERP Operating Limited Partnership, an Illinois
limited partnership ("ERP").
W I T N E S S E T H:
WHEREAS, Newco is the common parent corporation of an affiliated group
of corporations (within the meaning of Section 1504(a) of the Internal
Revenue Code of 1986, as amended), including Sub (the "Affiliated Group");
WHEREAS, ERP owns 100% of the outstanding nonvoting stock of Sub, and
Newco owns 100% of the outstanding voting stock of Sub;
WHEREAS, Newco, ERP and Sub have agreed that the Affiliated Group will
file a consolidated federal income tax return for the taxable year ended
December 31, 1997, and will continue filing such consolidated returns for
all taxable periods thereafter unless otherwise required by law; and
WHEREAS, it is the intent of the parties hereto that a method be
established for allocating the consolidated "federal income tax liability"
(as determined under Treasury Regulation Section 1.1502-2) of the
Affiliated Group and any similar consolidated or unitary state income tax
among the members of the Affiliated Group.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties agree as follows:
1. Definitions. For purposes of this Agreement, the terms set forth
below shall be defined as follows:
(a) "Affiliated Group" shall mean Newco, Sub and all
corporations (whether now existing or hereafter formed or acquired)
that at the time would be entitled to or required to join with Newco
in filing a consolidated federal income tax return.
(b) "Member" shall mean any corporation that is included in the
Affiliated Group, whether for all or only a part of the taxable year
in question.
(c) "Group Tax Liability" means the consolidated federal income
tax liability reported on the consolidated federal income tax return
filed for the taxable year.
(d) "Separate Tax Amount" means the federal income tax liability
or refund, as the case may be, of each Member determined at the end of
the taxable year, computed as if the Member was filing separate
federal and state returns on an unconsolidated or nonunitary basis
without regard to the income or loss of any other Member.
2. Consolidated Federal Income Tax Return. Newco and Sub agree to
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join in the filing of a consolidated federal income tax return with respect
to the Affiliated Group for the taxable year ended December 31, 1997 and
all subsequent taxable periods. Newco and Sub shall file such consents,
elections and other documents as may be necessary or appropriate for the
filing of such return.
3. Payment of Consolidated Federal Income Tax Liability. The Group
Tax Liability for the taxable year beginning December 31, 1997 and all
periods thereafter shall be paid, in full, by Newco.
4. Allocation of Consolidated Federal Income Tax Liability. In lieu
of making tax payments, the Members shall make payments to and receive
payments from Newco as follows:
(a) Each Member whose Separate Tax Amount would have resulted in
a Federal income tax liability shall pay to Newco its Separate Tax
Amount no later than five (5) days before the Affiliated Group's
consolidated federal income tax return is required to be filed
(including any period for extension).
(b) In the event that the Group Tax liability is reduced as a
result of the carryforward of a net operating loss or capital loss or
a credit attributable to a Member, Newco shall pay to such Member the
amount, if any, by which the Group Tax Liability is decreased by
reason of the inclusion of that Member in the Affiliated Group. Such
payment shall be made on the date the Affiliated Group's consolidated
federal income tax return is required to be filed (including any
period for extension). Newco shall also pay each Member whose
Separate Tax Amount would have resulted in a refund of federal income
taxes previously paid the amount of such refund no later than five (5)
days after receipt of the refund.
5. Estimated Federal Income Tax Payments. If the Affiliated Group
is required to make estimated Federal income tax payments on a consolidated
basis, each Member shall pay to Newco, not later than five (5) days before
the date such estimated payment is required to be made by Newco, that
percentage of the payment that equals the percentage which its allocated
share of the Group Tax Liability for the preceding taxable year bears to
the Group Tax Liability for that year. Any estimated tax payments made by
a Member to Newco under this Paragraph 5 for any taxable year shall be
applied to reduce the amounts, if any, owing by the member under Paragraph
4(a) above for such year. Any excess of such estimated tax payments over
the amounts determined under Paragraph 4(a) above for such year shall be
repaid to the Member by Newco not later than the date that the Affiliated
group's federal income tax return is filed.
6. Changes in Tax Liability. If (i) the Group Tax Liability is
changed and either of such changes is part of a settlement agreement with
the Internal Revenue Service or a final "determination" (as that term is
defined in Section 1313(a) of the Code), or (ii) the Affiliated Group
otherwise pays tax in excess of the Group Tax Liability, then the amount of
the payments that each Member shall make to Newco under paragraph 4(a) or
the amount of the payment required from Newco to the Member under paragraph
4(b), as the case may be, shall be recomputed by substituting in place of
the Group Tax Liability and each Member's Separate Tax Amount the amount of
the Group's recomputed tax liability ("Group's Recomputed Tax Liability")
or the Member's recomputed tax liability ("Member's Recomputed Tax
Liability") after making the adjustments described above. Not later than
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(i) five (5) days before the due date for any additional payment of tax by
the Affiliated Group, or (ii) five (5) days after the receipt of a refund
or (iii) five (5) days after the event giving rise to the recomputation if
such event will not result in the payment of additional tax or the receipt
of a refund, each Member shall pay to Newco, or Newco shall pay to the
Member, as the case may be, the difference between the Member's Recomputed
Tax Liability and the amount previously paid.
7. Termination of Affiliation.
(a) The parties recognize that at some future date a Member may
cease to be included in the Group, but continue to be a corporation
subject to federal income tax ("Former Member"). In such event, Newco
and Former Member shall consult and furnish each other with
information required to prepare accurately the consolidated federal
income tax return of the Group for the last taxable year in which the
Former Member was included in the Group, and the federal income tax
returns for all taxable years thereafter of the Former Member and the
Newco, respectively, in which the tax liability of either may be
affected by their former affiliation (including, for example, the
apportionment of any consolidated net operating loss, capital loss, or
investment or foreign tax credit carryover to the Former Member). In
addition, the Former Member shall furnish Newco with information and
assistance required to apply for and obtain the benefit of any
carryback of a net operating loss, capital loss or any investment,
foreign tax or other credit of the Former Member to a taxable year in
which the Former Member was included in the Group and a consolidated
federal income tax return was filed.
(b) Newco and Former Member shall consult and furnish each other
with information concerning the status of any tax audit or tax refund
claim relating to a taxable year in which the Former Member was
included in the Group and a consolidated federal income tax return was
filed.
(c) Any payments which would have been required under paragraph
3, 4, 5 or 6 to or by a Former Member, if the Former Member were still
a Member, and with respect to any taxable year in which the Former
Member was a Member, shall be so made in accordance with principles
analogous to those set forth in such paragraphs and at the times set
forth therein.
8. State and Local Taxes. Newco and Sub agree that Newco shall
cause the Group to file combined or consolidated income or franchise tax
returns or reports in any state or local jurisdiction which permits such
returns or reports. The provisions of Section 1 through 7 shall apply, with
respect to income or franchise taxes imposed by any such jurisdiction.
9. Determinations. All determinations required hereunder for each
taxable year shall be made by the independent public accountants regularly
employed by the Affiliated Group at the time the return is filed for such
year. If any dispute, controversy or claim between the parties hereto
arises, then the dispute shall be settled by arbitration at a mutually
acceptable location in Chicago, Illinois in accordance with the Commercial
Arbitration Rules of the American Arbitration Association then in effect.
The award of the arbitrator shall be binding upon the parties and each
party hereby consents to the entry of judgment by any court of competent
jurisdiction in accordance with the decision of the arbitrator. The
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arbitrator shall be a certified public accountant. Such determination
shall be binding and conclusive upon the parties for the purposes hereof.
10. New Members. If sufficient stock of any corporation is acquired
hereafter by Newco or any Member so that the acquired corporation becomes a
Member of the Group ("New Member"), Newco shall cause the New Member to
execute and deliver Form 1122, Authorization and Consent of Subsidiary
Corporation to be Included in a Consolidated Income Tax Return, and to make
any payments required under paragraph 3, 4, 5 or 6.
11. Miscellaneous Provisions.
(a) This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter contained herein. No
alteration, amendment or modification of any of the terms of this
Agreement shall be valid unless made by an instrument signed in
writing by an authorized officer of each party hereto.
(b) This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois.
(c) This Agreement shall be binding upon and inure to the
benefit of each party hereto and its respective successors and
assigns.
(d) All notices and other communications required or permitted
to be given if delivered in person or by United States mail, certified
or registered, with postage prepaid, to the party at the following
addresses:
Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
Wellsford Park Highland Corp.
c/o Wellsford Real Properties, Inc.
610 Fifth Avenue, 7th Floor
New York, New York 10020
ERP Operating Limited Partnership
Two North Riverside Plaza, Suite 400
Chicago, Illinois 60606
or such other address as the parties may furnish to each other from
time to time in writing.
(e) Paragraphs, titles or captions contained in this Agreement
have been included only for reference and convenience and in no way
define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof. Whenever the context so requires, the
singular tense shall be deemed to include the plural, the masculine
gender shall be deemed to include the feminine and neuter, and vice
versa.
(f) In the event that any provision of this Agreement shall be
held invalid or unenforceable, the remainder of this Agreement, or the
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application of such provision in circumstances other than those as to
which it is held invalid or unenforceable, shall remain in full force
and effect.
(g) This Agreement may be executed simultaneously in one or more
counterparts, each of which shall be deemed an original, but all of
which shall constitute one and the same instrument.
12. Termination. This agreement shall apply to the taxable year
ending December 31, 1997, and all subsequent years unless the parties
hereto agree, in writing, to terminate this Agreement.
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IN WITNESS WHEREOF, the parties have executed this agreement with
shareholder approval on the dates stated below their signatures.
WELLSFORD REAL PROPERTIES, INC.
By:________________________________
Its President
Attest:
By:____________________________
Its Secretary
WELLSFORD PARK HIGHLAND CORP., a
Colorado corporation
By:________________________________
Its President
Attest:
By:____________________________
Its Secretary
ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership
By: Equity Residential Properties
Trust, a Maryland real estate
investment trust
By:________________________________
Its
Attest:
By:____________________________
Its Secretary
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SCHEDULE I
PRELIMINARY PLANS
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EXHIBIT 10.21
===========================================================================
Credit Enhancement Agreement
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of ________________________, 1997
===========================================================================
1
<PAGE>
CREDIT ENHANCEMENT AGREEMENT
THIS CREDIT ENHANCEMENT AGREEMENT (this "Agreement") is made and
entered into as of _____________, 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.
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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 ___, 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
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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
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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
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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
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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 (as defined in
_______________). 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
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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
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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;
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(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"
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(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
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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 Sections __ and __. 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 Sections __ and __ 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),
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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
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<PAGE>
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
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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
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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
16
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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, to it at _________________________________,
Attention:________________________, Telecopy No. ______________, with
a copy concurrently sent to: Brownstein, Hyatt, Farber &
Strichland P.C., 410 Seventeenth St., Suite 2200, Denver,
Colorado 80202;
(b) if to ERP Operating Partnership, to it at
_____________________________________, Attention:
_____________________, Telecopy No. ______________.
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.
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(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
18
<PAGE>
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:___________________________
Name:_________________________
Title:________________________
WELLSFORD REAL PROPERTIES, INC.
By:________________________________
Name:______________________________
Title:_____________________________
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EXHIBIT 10.22
===========================================================================
Sonterra Agreement
between
ERP OPERATING LIMITED PARTNERSHIP
and
WELLSFORD REAL PROPERTIES, INC.
Dated as of ___, 1997
===========================================================================
1
<PAGE>
SONTERRA AGREEMENT
THIS AGREEMENT (this "Agreement") is made and entered into as of
________, 1997 by and between ERP OPERATING LIMITED PARTNERSHIP, an
Illinois limited partnership ("ERQ OP"), and WELLSFORD REAL PROPERTIES,
INC., a Maryland corporation ("Newco").
9.11 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
________________, 1997 (the "Contribution Agreement") referred to in that
certain Agreement and Plan of Merger dated as of January __, 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.
9.12 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.
9.13 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.
9.14 Pursuant to the Contribution Agreement, WRPT has assigned to
Newco, among other things, all of WRPT's rights and obligations under the
Option Agreement.
9.15 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:
(a) 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
2
<PAGE>
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.
(b) 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).
(c) 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.
(d) 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.
(e) 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.
(f) Notices. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier
3
<PAGE>
service, mailed or sent by telecopy, as follows:
A. if to Newco, to it at _________________________________,
Attention:________________________, Telecopy No. ______________; and
B. if to EQR OP, to it at
_____________________________________, Attention:
_____________________, Telecopy No. ______________.
(g) 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.
(h) Applicable Law. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF ILLINOIS.
(i) Waivers; Amendment.
A. 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.
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 EQR OP.
(j) 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.
(k) 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.
(l) 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
4
<PAGE>
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.
(m) 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.
(n) Time is of the essence of this Agreement.
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.
(p) 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, 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
5
<PAGE>
By:___________________________
Name:_________________________
Title:________________________
NEWCO:
WELLSFORD REAL PROPERTIES, INC., a
Maryland corporation
By:________________________________
Name:______________________________
Title:_____________________________
6
<PAGE>
EXHIBIT A
OPTION AGREEMENT
This Option Agreement (this "Agreement") made as of the 28th day of June
1996, by and between SPECIFIED PROPERTIES VIII, L.P., a Texas limited
partnership, having an address at 5950 Berkshire Lane, Suite 500, Dallas,
Texas 75225, Attention: John R. Carmichael or Tom Teague (hereinafter called
"Seller"), and WELLSFORD RESIDENTIAL PROPERTY TRUST, a Maryland real estate
investment trust, having an address at 370 17th Street, Suite 3100, Denver,
Colorado 80202, Attention: Donald D. MacKenzie (hereinafter called "Buyer").
RECITALS
WHEREAS, Seller is the owner in fee simple of the land (the "Land")
which is more fully described on Exhibit A 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"); and
WHEREAS, Seller desires to grant to Buyer and Buyer desires to obtain an
option to purchase the Premises, for the price and other considerations and
upon the terms and conditions hereinafter set forth.
AGREEMENT
NOW, THEREFORE, the parties hereto, in consideration of the mutual
covenants herein contained and of the Option Payment provided for herein, and
respectively expressing the intention to be legally bound hereby, covenant
and agree as follows:
1. Option. In consideration of the payment to Seller of $178,000.00
(the "Option Payment"), the receipt and sufficiency of which is hereby
acknowledged, Seller hereby grants to Buyer the right and option (the
"Option") for a term ending December 31, 1998 (the "Term") to purchase all of
the following (collectively herein referred to as the "Property"), free and
clear of liens and encumbrances except Permitted Exceptions (as hereinafter
defined) and subject to additions and removals in accordance with Paragraph
9(e):
(a) The Land;
(b) The Improvements;
(c) Easements, rights of way, privileges, appurtenances and rights
belonging to and inuring to the benefit of the Premises;
(d) All of Seller's interests in any land lying in the bed of any
street, road or avenue, open or proposed, in front of or adjoining said
Premises to the center line thereof;
(e) All fixtures, machinery, computers, equipment, furnishings,
appliances, supplies, operational records and other tangible personal
property owned by Seller and now or hereafter located on the Premises,
including without limitation, all fittings, heating, air cooling, air
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conditioning, freezing, lighting, laundry, incinerating and power equipment
and apparatus; all engines, pipes, pumps, tanks, motors, conduits, switch
boards, plumbing, lifting, cleaning, fire prevention, fire extinguishing and
refrigerating equipment and apparatus; all furnaces, oil burners or units
thereof; all appliances, vacuum cleaning systems, awnings, signs, screens,
storm doors and windows, cabinets, partitions, ducts and compressors,
furniture and furnishings, hot water heaters, garbage receptacles and
containers above and below ground, janitorial supplies, landscaping
materials, lawn mowers, tools, and articles of a nature similar to the
foregoing; all snow removal equipment; and all future additions to or
substitutions for the foregoing, or any part thereof, between the date hereof
and the date of closing hereunder; and all warranties and guarantees to and
rights of action of Seller therefor, if any. (The property described in this
subparagraph 1(e), when referred to separately from the Premises, is
hereinafter sometimes called "Personalty");
(f) All strips, gores, riparian rights and littoral rights, if
any, belonging to or inuring to the benefit of the Land and/or the
Improvements; and
(g) All of Seller's right, title and interest in and to the
following (collectively, "Other Interests"):
i) Any and all catalogs, booklets, manuals, tenant files,
maintenance and operation logs, files and records, leasing records,
correspondence relating to maintenance, operations or leasing, purchaser
prospect list, tenant lists, tenant prospect lists and other mailing
lists, sales brochures and material, leasing brochures and materials,
advertising materials and, to the extent prepared for Seller by third
parties, title information, soil, engineering and environmental
inspections, studies and reports, market studies, and similar materials
with respect to the sale, management, leasing, promotion, ownership,
maintenance, use, occupancy and operation of the Premises;
ii) The name "Sonterra at Williams Centre" (the "Name");
iii) All tenant security deposits, together with any interest
thereon accrued or deemed accrued as of the Closing Date which the
landlord is required by law or by the Tenant Leases to refund to tenants
(collectively, the "Security Deposits");
iv) Any transferable bond, guaranty, warranty or repair
agreements (the "Warranties") concerning the Premises or any part
thereof, including without limitation, any bond, guaranty or warranty
(including any fidelity bonds) relating to construction, use,
maintenance, occupancy or operation of the Improvements and the
Personalty, but only to the extent such bond, guaranty, warranty or
agreement is an obligation of a person not affiliated with Seller or its
partners, and in all cases subject to any limitation contained in each
such bond, guaranty and warranty;
v) Any transferable licenses, permits, approvals and
certificates issued by any governmental authorities required or used in
or relating to the ownership, use, maintenance, occupancy or operation
of any part of the Premises;
vi) Any surveys of, and plans and specifications relating to,
the Premises;
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vii) Any unrecorded utility agreements including any deposits
made thereunder;
viii) The Service Agreements (as hereinafter defined);
ix) The Tenant Leases listed on the Rent Roll (as both terms
are hereinafter defined);
x) Any unpaid awards for any taking by condemnation or any
damage to the Premises by reason of a change of grade of any street or
highway, or any award paid to Seller and not used or applied by Seller
to the restoration of the Premises or applied to the Loan (as such term
is defined in Section 20);
xi) Any unpaid proceeds for any damage to the Premises by
reason of fire or other casualty, or any proceeds paid to Seller and not
used or applied by Seller to the restoration of the Premises or applied
to the Loan (as such term is defined in Section 20);
xii) Any transferable development rights with respect to the
Land, excluding any cash deposits or letters of credit delivered to any
governmental authority in connection with the past, present or future
development of the Land (it being acknowledged that Seller may withdraw
or cause to be withdrawn any such cash or letters of credit); and
xiii) Any water and water rights of any kind or description
appurtenant to or owned by Seller in connection with the Land or the
Improvements.
2. Option Payment; Exercise of Option; Purchase Price.
(a) The Option Payment is nonrefundable and shall be credited
against the amounts due from Buyer at the Closing.
(b) Buyer may exercise the Option at any time prior to the end of
the Term by written notice (the "Exercise Notice") given to Seller in
accordance with Paragraph 20 below. If Buyer gives the Exercise Notice, the
date of closing of the purchase and sale of the Property (the "Closing Date")
shall be on a date specified by Buyer which shall be not more than ninety
(90) nor less than twenty (20) days after the date of the Exercise Notice or
on such other date as Buyer and Seller may agree.
(c) The purchase price for the Property shall be $20,178,000.00 if
the Closing Date is on or before December 31, 1997, and $20,678,000.00 if the
the Closing Date is January 1, 1998 or later (in either case, the "Purchase
Price"), which Buyer shall pay by wire transfer of immediately available
funds through the Federal Reserve System to Chicago Title Insurance Company,
7616 LBJ Freeway, Dallas, Texas 75230 (the "Title Company") for disbursement
to Seller.
3. Seller's Condition. Notwithstanding any representation, warranty
or covenant in this Agreement to the contrary, Seller's obligations and
exercise of the Option under this Agreement are conditioned on approval of
this Agreement by the limited partner of Seller.
4. Survey. Prior to the date of this Agreement, Seller has delivered
to Buyer, at Seller's sole cost and expense, a current ALTA/ACSM Land Title
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Survey of the Property prepared and certified (i) in accordance with the
"Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys"
jointly established and adopted ALTA and ACSM in 1992, and including Items 1
through 4, 6 through 11, and 13 of Table A thereof, and (ii) pursuant to the
Accuracy Standards (as adopted by the ALTA and ACSM and in effect on the date
of the certification of such survey) of an Urban Survey (the "Initial
Survey"). The Initial Survey contains a certificate from the surveyor to
Buyer and the Title Company in form acceptable to Buyer. Seller shall have
the survey updated and recertified prior to Closing to a date not more than
thirty (30) days before the Closing Date. The updated survey (the "Final
Survey") shall be in a form acceptable to the Title Company for the deletion
of the standard survey exceptions without the addition of further exceptions
to title and shall disclose no title defects, encroachments or other matters
not shown on the Initial Survey, unless the same are acceptable to Buyer in
its sole and absolute discretion. Any matters shown on the Final Survey that
are not on the Initial Survey and are objected to by Buyer shall be corrected
at Seller's sole cost prior to the Closing Date, except that Seller shall not
be obligated to correct survey matters arising solely from changes enacted by
governmental authorities after the date of the Initial Survey (e.g. changes
in setback requirements).
5. Title Insurance and Lien Search.
(a) Prior to the date hereof, a current title insurance commitment
covering the Property issued by the Title Company (the "Initial Title
Commitment"), together with complete and legible copies of all documents
referred to therein, has been delivered to Buyer at Seller's sole cost and
expense. The Initial Title Commitment commits to insure Buyer as owner of
the Property in the amount of $20,178,000.00, and commits the Title Company
to issue its standard ALTA Owner's Policy on the Closing Date, with standard
preprinted exceptions deleted, insuring good and marketable title in fee
simple to the Property in Buyer subject only to (i) current non-delinquent
general real property taxes, and (ii) title exceptions approved by Buyer
prior to the date hereof. If the Initial Title Commitment contains any
exception for mineral rights, Seller shall pay at Closing for an endorsement
to the title insurance coverage insuring against any loss to Improvements as
a result of such exception. Seller shall cause the Initial Title Commitment
to be updated prior to Closing to a date not more than thirty (30) days
before the Closing Date. If such updated title insurance commitment (the
"Closing Title Commitment") contains any exceptions from coverage which Buyer
deems to be unacceptable and which are not on the Initial Title Commitment,
and if Seller does not remove (or, in the case of mechanic's liens, bond
over) such exceptions by Closing, Buyer, at its option, may exercise its
remedies under Paragraph 16 of this Agreement. If Buyer does not deliver
written notice of objection to title to Seller before the end of ten (10)
business days after delivery of the Closing Title Commitment, Buyer shall be
deemed to have accepted the condition of title as shown therein. Any
exceptions on the Closing Title Commitment to which Buyer does not timely
object, or to which Buyer objects but later waives its objection in writing,
shall be deemed to be "Permitted Exceptions."
(b) Seller shall obtain and shall deliver to Buyer within ten (10)
days after the Closing Date, at its sole cost and expense, a standard ALTA
Owner's Policy, covering the Property in the amount of the applicable
Purchase Price, effective as of the date and time of the Closing, subject
only to the Permitted Exceptions, and including the endorsements required
pursuant to the preceding subparagraph (a). The standard preprinted
exceptions regarding parties in possession, surveys, and mechanic's liens
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shall be deleted, at Seller's sole cost and expense. Seller shall deliver to
the Title Company any instruments, documents, payments, indemnities, releases
and agreements as the Title Insurance Company shall require in order to
issue, the title insurance policy as herein provided. At Closing, Seller
shall cause the Title Company to deliver to Buyer such assurances as Buyer
may reasonably request that the Title Company is irrevocably committed and
prepared to issue its ALTA Owner's Policy to Buyer in accordance with the
foregoing requirements.
(c) If the Title Company uses the escrow and closing services of
an agent in connection with this transaction, Seller shall cause Title
Company to issue to Buyer an insured closing letter, in form and substance
reasonably satisfactory to Buyer, which insured closing letter shall, subject
to applicable regulatory restrictions, protect Buyer from fraud or dishonesty
of the Title Company's agent in handling Buyer's funds or documents in
connection with the Closing and against the failure of the Title Company's
agent to comply with written closing instructions of Buyer or its counsel.
(d) Prior to the date of this Agreement, Seller, at its sole
expense, has delivered to Buyer a current certificate from the appropriate
governmental authorities or from a Uniform Commercial Code lien search
service acceptable to Buyer, reporting the results of a Uniform Commercial
Code lien search of all appropriate records for security interests and
financing statements against any personal property constituting a part of the
Property. Seller shall cause such report to be updated and recertified to
Buyer within ten (10) days prior to the Closing Date, and shall make
arrangements on or before the Closing Date to have all liens shown thereon
fully discharged or bonded.
6. Inspection by Buyer; Maintenance.
(a) Subject to the rights of the tenants under the Tenant Leases,
Buyer and Buyer's authorized agents and representatives may, from time to
time during the Term, during regular business hours and on reasonable prior
notice to Buyer and the managing agent of the Property, inspect all areas of
the Premises and conduct such tests and observations as Buyer may deem
appropriate. Any tests involving extraction of samples of materials, soil or
water other than for asbestos shall require prior approval of Seller. No
such inspection, however, shall constitute a waiver or relinquishment on the
part of Buyer of its right to rely upon the covenants, representations,
warranties or agreements made by Seller under this Agreement. Buyer shall
pay when due all fees and expenses incurred in the performance of any such
inspections, tests or observations and shall indemnify, defend, and save
Seller harmless from any loss from mechanic's liens, claims for nonpayment of
such charges or for damages (including damages associated with personal
injury or death or damage to property) arising out of the acts or omissions
of the parties performing such inspections, tests, or observations.
(b) Seller shall permit Buyer's accountants and authorized
representatives to examine Seller's books, financial records and tenant files
pertaining to the operation of the Property, from time to time during the
Term during regular business hours and upon reasonable prior notice. Seller
acknowledges that Buyer may include the Property as a part of a public
offering, and Seller consents to the disclosure of information regarding the
Property, including financial information, in any such public offering so
long as the offering material states that Seller is not a participant in the
offering or responsible for the offering materials. Upon request by Buyer,
Seller shall provide Buyer with such information as Seller may have with
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respect to actual expenditures made on all repairs, maintenance, operation
and upkeep of the Property, including, without limitation, all taxes and
utility payments, within three years prior to the Closing, and dates of
construction, installation and major repairs to the Property.
7. Closing. The closing of the transaction contemplated hereby (the
"Closing") shall take place at the offices of Chicago Title Insurance
Company, 7616 LBJ Freeway, Dallas, Texas 75230, at 10:00 a.m. on the Closing
Date specified in Paragraph 2(b) above.
8. Representations of Seller.
(a) Seller, to induce Buyer to enter into this Agreement and to
purchase the Property, represents to Buyer that the following matters are
true as of the date hereof:
i) Exhibit B hereto (the "Rent Roll") is a true, complete
and correct listing of all existing leases (including all amendments or
side agreements) at the Property in effect as of the date hereof (the
"Tenant Leases") (the form of which leases is attached hereto as Exhibit
C), which Exhibit B correctly sets forth: (i) the total number of
apartments at the Property, (ii) the name of each existing tenant named
in the lease for each apartment, (iii) apartment number designation,
(iv) apartment type, (v) the expiration date or status of the term of
the lease (including all rights or options to renew), (vi) the current
rent (the "Standard Rental") and other payments which the tenant is
obligated to make under the lease, (vii) the current outstanding balance
of all security deposits held thereunder, and (viii) the information
required pursuant to Paragraphs 8(a)(ii) hereof.
ii) There are no leases, tenancies, licenses or other rights
of occupancy or use for any portion of the Property other than as set
forth in Exhibit B or Exhibit F. A true, correct and complete copy of
the form of Tenant Lease has been submitted by Seller to Buyer and is
attached hereto as Exhibit C. Seller represents to Buyer that such form
of Tenant Lease is being used by Seller in all material respects in
connection with Seller's leasing of the Property. Except as otherwise
noted on Exhibit B, (i) each of the Tenant Leases is, to Seller's
knowledge, valid and subsisting and in full force and effect and has not
been amended, modified or supplemented, and the tenant, licensee or
occupant thereunder is in actual possession, (ii) no tenant has asserted
any claim, offset or defense which would in any way affect the
collection of rent from such tenant, (iii) there are no pending summary
proceedings or other legal action for eviction of any tenant, and (iv)
no written notice of default or breach on the part of the landlord under
any of the Tenant Leases has been received by Seller or its agents from
the tenant, licensee or occupant thereunder. No tenant, licensee or
other occupant under any of the Tenant Leases has any right or option to
acquire the Property, or any part thereof or interest therein. The
copies of the Tenant Leases delivered to Buyer, if any, constitute the
sole agreements binding upon the owner of the Property and the
respective tenants of the Property with respect to the Property.
iii) No brokerage or leasing commission or other compensation
is or will be due or payable on or after the Closing to any person,
firm, corporation or other entity (including Seller or any affiliate of
Seller) with respect to or on account of any of the Tenant Leases or any
extensions or renewals thereof.
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iv) To the best knowledge of Seller and except as set forth
in any Exhibit hereto, Seller has performed all obligations (including
the payment of all sums due to third parties) which obligations have
accrued as of the date hereof under the Tenant Leases and under all
other agreements relating to the Property.
v) Within ten (10) business days after Buyer gives the
Exercise Notice, Seller shall deliver to Buyer a complete and correct
list of all existing management, service, equipment, supply,
maintenance, union or collective bargaining agreements with respect to
or affecting the Property to which Seller is a party or which will
affect the Property after Closing (the "Service Agreements"). Subject
to Section 8(c), effective as of the Closing Date, Seller will represent
and warrant to Buyer that no written notice of default or breach by
Seller or its agents in the terms of any such Service Agreements has
been received by Seller or its respective agentsand that Seller has
performed all payment obligations which it has under the Service
Agreements.
vi) Subject to Section 8(c), effective as of the Closing
Date, Seller will represent and warrant to Buyer that to the best
knowledge of Seller, all persons who are employed by Seller or its
agents in connection with the management, operation and maintenance of
the Property (A) are non-union employees and (B) have been paid with
respect to all benefits properly accrued and currently due.
vii) All charges for services or material related to operation
of the Property, including, without limitation, water, sewer, gas and
electric bills, have been paid or will be paid as of the Closing Date,
or appropriate adjustment made therefor in accordance with the terms
hereof.
viii) Seller has not received any notices from any
governmental authority requiring any public improvements or
installations on or in connection with the Property, or asserting any
violation of any applicable law, regulation or other governmental
requirement, and Seller is not otherwise aware of any such violations or
requirements of public improvements or installations. In the event any
such notices are served or received prior to the Closing. Seller shall
promptly forward copies of such notices to Buyer.
ix) With respect to environmental matters:
a) to the best knowledge of Seller: (i) no Hazardous
Substances are present in, on or under the Property, and (ii) there is
no present Release or threatened Release of any Hazardous Substances in
violation of Environmental Laws, from, in, on or under the Property;
b) to the best knowledge of Seller, no written notices,
written complaints or orders of violation or non-compliance with
Environmental Laws addressed to Seller or the owner of the Property have
been received by or are in the possession of Seller and no federal,
state or local environmental investigation is pending or has been
threatened against Seller with regard to (A) the Property or any use
thereof; (B) any alleged violation of Environmental Laws with regard to
the Property; (C) any failure by Seller to have any environmental
permit, certificate, approval, registration or authorization required
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for the conduct of its business; (D) the generation, treatment, storage,
recycling, transportation, disposal or Release (each a "Regulated
Activity") of any Hazardous Substances on, at or under the Property; or
(E) the existence on nearby real property of Hazardous Substances that
could migrate to the Property. For purposes of this Agreement,
"Release" shall have the meaning given to that term in 42 U.S.C. (S)
9601(22);
c) the Property has not been used by Seller for the
conduct of any Regulated Activity other than in compliance in all
material respects with Environmental Laws;
d) to the best of Seller's knowledge, there exists no
petroleum contamination to the Property in violation of applicable
Environmental Laws, and to the best of Seller's knowledge, there exist
no underground storage tanks or surface impoundments, active or
abandoned, at, on or under the Property in violation of applicable
Environmental Laws; and
e) to the best of Seller's knowledge, it has not caused
a Release of any Hazardous Substances, nor is there any friable
asbestos, polychlorinated biphenyls, formaldehyde or lead at, on or
under the Property, the removal of which is currently required by any
Environmental Law or the continued existence of which constitutes a
violation of any Environmental Law.
As used in this Agreement, (a) "Environmental Laws" shall mean and include
the Resource Conservation and Recovery Act of 1976, 42 U.S.C. (S)(S) 6901 et
seq., as amended by the Hazardous and Solid Waste Amendments of 1984, the
Comprehensive Environmental Response, Compensation and Liability Act, as
amended by the Superfund Amendments and Reauthorization Act of 1986, 42
U.S.C. (S)(S) 9601 et seq., the Hazardous Materials Transportation Act of 1975,
49 U.S.C. (S)(S) 1801 et seq., the Toxic Substances Control Act, 15 U.S.C.
(S)(S) 2601 et seq., the Clean Air Act, 42 U.S.C. (S)(S) 7401 et seq., the
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 136, et seq., the
Clean Water Act, 33 U.S.C. 1251 et seq., the National Environmental Policy
Act, 42 U.S.C. (S)(S) 4321 et seq., and the Occupational Safety and Health Act,
29 U.S.C. (S)(S) 651 et seq., and all similar federal, state and local
environmental laws, ordinances, rules, codes and regulations, as any of the
foregoing may have been from time to time amended, supplemented or
supplanted, which relate to protection of the environment or the regulation
or control of or imposing liability or standards of conduct concerning
Hazardous Substances (as hereinafter defined), and (b) "Hazardous Substances"
shall mean any substance which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenicor mutagenic or is designated as toxic
or hazardous under any applicable federal, state or local law, and petroleum,
its derivatives, by-products and other hydrocarbons; provided, however, that
Hazardous Substances shall not include material used or stored in reasonable
amounts in the ordinary course of business for the operation or maintenance
of the Property and in compliance in all material respects with all
Environmental Laws.
x) Seller presently causes to be maintained policies of
insurance with respect to the Property as listed on Exhibit H.
xi) To the knowledge of Seller, there is no action, suit,
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investigation or proceeding pending or threatened against or affecting
the Property or any portion thereof by any person or government agency,
board or bureau except as set forth on Exhibit E hereto.
xii) Seller has no knowledge of any pending or threatened
condemnation or eminent domain proceedings against the Property or which
would affect access to the Property, except as set forth on Exhibit E
hereto.
xiii) Seller has delivered to Buyer current tax
certificates with respect to the Property and shall promptly forward to
Buyer copies of all tax bills received during the Term. There are no
proceedings presently pending for the reduction of the assessed value of
the Property. All taxes becoming due during the Term shall be paid by
Seller prior to delinquency.
xiv) The persons signing this Agreement on behalf of Seller
have the requisite power and authority to execute and deliver this
Agreement in the name of Seller and to create thereby a binding
obligation of Seller, and the execution, delivery and performance of
this Agreement will not constitute a default under any material
agreement of Seller, require consent under any such agreement of any
person or give any person any right to terminate any Tenant Lease or
other material agreement relating to the Property.
xv) Except as noted on Exhibit F, Seller has not entered into
any contract for goods and/or services relating to operation of the
Property which may not be cancelled without charge to Buyer upon not
more than thirty (30) days without written notice. Seller has not
entered into any management agreement for the Property which will be in
effect on the Closing Date.
xvi) Utility services to the Property, including but not
limited to water, sewer, telephone, cable TV, electric and gas, are
being provided by the utility suppliers listed on Exhibit G hereto, in
sufficient quantities to permit the use and occupation of the Property
for the intended use.
xvii) To the best of Seller's knowledge the Property is
free from infestation by termites and any damage from previous termite
infestation.
xviii) Seller has delivered to Buyer true, correct and
complete financial statements for the Property for the calendar year
1996 through May 31, including notes, comments, schedules, and
supplemental data therein (collectively, "Financial Statements"), all of
which have been prepared from the books and records of Seller.
xix) Regardless of whether Seller would otherwise be obligated
under Arizona law, Seller has paid, has caused to be paid or will pay
any and all taxes incurred by it as a result of the transactions
contemplated by this Agreement, including, but not limited to transfer
taxes, gains taxes, sales and use taxes and bulk sales taxes.
xx) To the best of Seller's knowledge, the Property, the use
of the Property and the transfer of the Property pursuant to this
Agreement does not and will not violate any applicable subdivision,
zoning, land-use or other similar law, code, ordinance or regulation
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relating to the Property.
xxi) Seller has not received any written notice from the
insurance companies insuring the Property requiring Seller to perform
any work at the Property.
xxii) To Seller's knowledge, no person has objected to
Seller's use of the name "Sonterra at Williams Centre" or any logo or
mark used by Seller in connection with the Property.
(b) The representations contained in this Paragraph 8 shall
survive the Closing hereunder, subject to the provisions of Section 18.
(c) On the Closing Date, Seller shall execute and deliver to Buyer
a certificate stating (i) that to Seller's knowledge each of the warranties
and representations set forth in this Paragraph 8 are true and correct in all
material respects as of the Closing Date except for any specific facts set
forth with particularity in such certificate that constitute exceptions not
known to Seller on the date of this Agreement or required by changed
circumstances, and (ii) that there exists no material non-performance or
breach in respect of any of the agreements, covenants, representations or
warranties on the part of Seller contained in this Agreement.
(d) Seller agrees to indemnify, defend and hold Buyer harmless
from and against any and all loss, cost, expense, damage or liability
suffered or incurred by Buyer as a result of any of the warranties and
representations set forth in this Paragraph 8 or in the certificate to be
delivered by Seller to Buyer pursuant to Paragraph 8(c) above, not being true
and correct in all material respects.
(e) As used in this Agreement, the phrases "to Seller's knowledge"
or "to the best knowledge of Seller" and similar phrases mean the actual
knowledge of John R. Carmichael and Tom Teague, without any investigation and
without any imputation of the knowledge of any other person, even if the
knowledge of such other person would otherwise be imputed to one or both of
them as a matter of law.
(f) BUYER ACKNOWLEDGES THAT, EXCEPT FOR THE REPRESENTATIONS,
WARRANTIES AND COVENANTS OF SELLER SET FORTH IN THIS AGREEMENT, THE PROPERTY IS
BEING PURCHASED ON AN "AS IS" BASIS, AND THAT NO REPRESENTATIONS OR WARRANTIES
HAVE BEEN MADE BY SELLER EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT.
9. Termination by Buyer. Buyer shall have no obligation to consummate
the transaction described herein and upon written notice to Seller stating
Buyer's intention not to proceed with the transaction contemplated by this
Agreement, this Agreement shall terminate and the parties shall have no
further liability hereunder.
10. Operations Prior to Settlement. Between the date of the execution
of this Agreement and the Closing Date:
(a) Seller shall continue to maintain and to make all repairs and
replacements to the Property and the Personalty so as to keep the Property
and the Personalty in substantially its present condition, subject to
ordinary wear and tear and to the provisions of Paragraphs 13 and 15 hereof,
and Seller shall operate and manage the Property and the Personalty in the
same manner as it has operated the Property prior to the date hereof. All
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vacant apartment units shall be made ready for occupancy by Closing;
provided, however, that units becoming vacant fourteen (14) days or less
before Closing shall be made ready by Seller within fifteen (15) days after
Closing. Any carpet installed on or after the date of this Agreement shall
comply with the carpet specifications delivered to Seller by Buyer prior to
the date of this Agreement, and described on Exhibit D attached hereto.
(b) Seller shall use its best efforts from the date hereof to the
date of the Closing to (i) continue to rent the Property and to achieve and
maintain full occupancy thereof and (ii) modify, renew or extend any Tenant
Lease on an as-needed basis.
(c) Seller will not, without the prior written consent of Buyer,
enter into any Service Agreements or amend or extend any current Service
Agreements such that any Service Agreements that survive Closing are not
cancelable on 30 days' notice at no cost to the owner. Seller shall not
cause or permit any change in the property manager without prior written
consent of Buyer.
(d) Seller shall cause all certificates of occupancy to be
observed and to be kept in full force and effect. Seller shall cause all
material obligations of Seller under the Service Agreements to be timely
performed. Seller shall carry on and conduct the operation of the Property
in substantially the same manner as such business is now and has heretofore
been conducted, including (but not limited to) maintenance of and compliance
with the insurance policies. Seller shall operate the Property in accordance
with all applicable laws, rules, regulations, ordinances, licenses and
permits.
(e) Seller shall not remove any Personalty, fixtures or equipment
located on the Property except as may be required for maintenance, repair
and/or replacement or where such removal is commercially reasonable. All
replacements shall be (i) completed free and clear of any liens and
encumbrances, (ii) of quality at least equal to the replaced items and (iii)
deemed included in the sale of the Property, without cost or expense to
Buyer. Items removed in accordance with this subparagraph (e) will cease to
be part of the Property.
(f) Seller will deliver to Buyer, as soon as available to Seller,
any new monthly operating statements and leasing reports with respect to the
Property for each calendar month which elapses between the date of execution
hereof and the Closing Date.
(g) Seller shall cause all debts and liabilities for labor,
material and equipment incurred by Seller prior to the Closing Date, which
could result in a lien against the Property, to be promptly paid in full or
bonded over.
(h) Seller shall cause to be paid before the same become due all
taxes and all installments of assessments levied or assessed against the
Property or any part thereof on or before the Closing Date. If Seller or any
entity affiliated with Seller or with any of Seller's partners shall
undertake any action, including, without limitation, any development on
property that is within the area subject to the instrument recorded in
Docket 7335 at Page 842, as the same may be amended or supplemented, (the
"Declaration"), then Seller shall be solely liable for payment of any
increase in the assessments against the Property pursuant to the Declaration
resulting from such action and shall indemnify and defend Buyer against such
17
<PAGE>
increase.
(i) Seller shall, immediately upon obtaining knowledge of (i) any
proposed new assessment against the Property by any governmental or quasi-
governmental authority; (ii) the institution of any proceedings for the
condemnation of the Property or any portion thereof; (iii) any material
injury or damage to or upon the Property or any portion thereof; (iv) any
violation of the applicable laws, ordinances, rules or regulations regarding
the Property or any portion thereof; or (v) any proceeding which could affect
or cloud title to or ownership of the Property, or any part thereof, notify
Buyer of the pendency of such proposal, proceeding or violation. Buyer shall
have the right, but no obligation, at Buyer's expense and at its sole
discretion, to join in or participate in any such proceedings or other
matters. No such participation by Buyer shall relieve Seller of any of its
obligations under this Agreement. In the event item (i) in this subparagraph
occurs, Seller shall oppose such assessment in a commercially reasonable
manner unless Buyer approves it in writing.
(j) Between the date of this Agreement and the Closing, Seller
shall not, in violation of any Environmental Laws, intentionally, knowingly
or willfully use, produce, process, manufacture, generate, treat, handle,
store or dispose of any Hazardous Substances in, on or under the Property, or
use the Property for any such purposes, or Release any Hazardous Substances
into any air, soil, surface water or groundwater comprising the Property.
Between the date of this Agreement and the Closing, Seller shall use
reasonable efforts to comply with all Environmental Laws applicable to the
Property, or its use or occupancy thereof. Between the date of this
Agreement and the Closing, Seller shall use reasonable efforts to obtain all
permits, licenses and approvals required by all applicable Environmental Laws
for the use and occupancy of, and all operations and activities in, the
Property, comply and use reasonable efforts to cause the tenants to comply
with all Environmental Laws applicable to the Property and with all such
permits, licenses and approvals, and use reasonable efforts to keep all such
permits, licenses and approvals in full force and effect. Immediately after
Seller obtains any information indicating that any Hazardous Substances may
be present at the Property in violation of any Environmental Law or that any
Release or threatened Release of Hazardous Substances may have occurred in
violation of any Environmental Law between the date of this Agreement and
Closing in, on or under the Property (or any nearby real property which could
migrate to the Property) or that any violation of any Environmental Laws may
have occurred between the date of this Agreement and Closing at the Property,
Seller shall give written notice thereof to Buyer with a reasonably detailed
description of the event, occurrence or condition in question. Seller shall
immediately furnish to Buyer copies of all written communications received
between the date of this Agreement and Closing by Seller from any person
(including notices, complaints, claims or citations that any Release or
threatened Release of any Hazardous Substances or any violation of any
Environmental Laws has actually or allegedly occurred) or given between the
date of this Agreement and Closing by Seller to any person concerning any
past or present Release or threatened Release of any Hazardous Substances in,
on or under the Property (or any nearby real property which could migrate to
the Property) or any past or present violation of any Environmental Laws at
or in connection with the Property.
(k) During the Term, Seller shall not, and shall cause any
affiliates of Seller that are controlled directly or indirectly by any person
(except Seller's limited partner and its affiliate(s) that directly or
indirectly owns an interest in Seller (hereinafter called "Related Parties")
18
<PAGE>
not to acquire any interest in or develop any multifamily residential
property within a three-mile radius of the Land without first giving written
notice to Buyer of its intent to do so and if Buyer indicates a desire to
participate in such acquisition or development, negotiating in good faith
with Buyer to allow such participation; provided that, if agreement with
Buyer is not reached within 45 days after such good faith negotiations are
commenced by Seller, Seller shall have no further obligation to Buyer under
this Paragraph 10(k).
11. Provisions with Respect to Closing. At the Closing, Seller shall
deliver to Buyer the following:
(a) Deed. Special warranty deed conveying the Land and the
Improvements, subject only to the Permitted Exceptions, duly executed and
acknowledged and in proper form for recording.
(b) Bill of Sale. A valid bill of sale for the Personalty (with
warranties of title against claims by, through or under Seller, but not
otherwise) in form and substance reasonably satisfactory to Buyer, duly
executed and acknowledged by Seller.
(c) Assignment of Leases. A valid assignment of the Tenant
Leases, in form and substance reasonably satisfactory to Buyer, duly executed
and acknowledged by Seller assigning to Buyer the interests of Seller in the
Tenant Leases; together with the original executed copy of each Tenant Lease,
and letters prepared by Buyer (and approved by Seller, which approval shall
not be unreasonably withheld) and addressed to each of the tenants informing
them of the sale and assignment and directing them to make future payments of
rents to Buyer or its nominee or assignee, as Buyer may elect; together with
lease files containing all lease guarantees, notices from tenants, general
correspondence and the like. Buyer shall assume, and indemnify Seller with
respect to, all of the obligations of Seller with respect to the proper
application of any tenant security deposit, and all interest thereon payable
to any tenant, for which Buyer received a credit (or which was transferred to
Buyer) at the Closing and shall assume, and indemnify Seller with respect to,
all of the obligations of the landlord under the Tenant Leases attributable
to the period from and after the Closing Date. Seller shall indemnify Buyer
with respect to all obligations of the landlord under the Tenant Leases
attributable to the period prior to the Closing and with respect to all
obligations of the landlord under any leases affecting the Property that were
terminated prior to the Closing. Seller shall also notify any bank in which
Seller maintains a lockbox account for the receipt of rents from the Property
that all amounts received by such bank after the Closing Date shall be
delivered to Buyer.
(d) Assignment of Name. A valid assignment in recordable form
(without warranty except as set forth in Paragraph 8(xxv) above), duly
executed and acknowledged by Seller, assigning to Buyer all of the right,
title and interest of Seller in and to the name Sonterra at Williams Centre
in connection with the Property, together with such documents as shall be
necessary for proper termination of the use of said name by Seller.
(e) Assignment of Service Agreements and Warranties. A valid
assignment duly executed and acknowledged by Seller, in form and substance
reasonably satisfactory to Buyer, of the rights of Seller under (i) each of
the Service Agreements, and (ii) each of the Warranties, together with
original copies or duly executed counterparts thereof; and if any such
agreement requires the approval of the other party thereto prior to
19
<PAGE>
assignment thereof to a third party, then Seller shall use reasonable efforts
to obtain such written approval. If Seller is unable to obtain such approval
after reasonable efforts, Seller shall not be obligated to assign those
agreements for which approval is not obtained. Seller shall perform, and
shall indemnify Buyer with respect to, all of the obligations of Seller
attributable to the period prior to the Closing under the Service Agreements;
Buyer shall assume, and shall indemnify Seller with respect to, all of the
obligations of Seller attributable to the period from and after the Closing
under the Service Agreements.
(f) Assignment of Other Interests. An assignment duly executed
and acknowledged by Seller, in form and substance reasonably satisfactory to
Buyer, of the rights of Seller in and to the Other Interests not transferred
pursuant to subparagraphs (c), (d) or (e) above.
(g) Updated Rent Roll and Tenant Schedule. An updated Rent Roll
and schedule of Tenant Leases supplied by Seller which contains all
information required to be set forth in Exhibit B, which schedule is correct
and complete as of a date not more than five (5) days before the Closing
Date.
(h) FIRPTA Affidavit. The affidavit referred to in Section 1445
of the Internal Revenue Code with all pertinent information confirming that
Seller is not a foreign person, trust, estate, corporation or partnership.
(i) Property Records. All records, documents, information and
data in the possession of Seller or its agents concerning operation, leasing
and maintenance of the Property. If the Buyer retains Seller's managing
agent, then delivery of documents herein prescribed need not occur with
respect to those documents already in the possession or control of such
managing agent.
(j) Transfer Tax Return. If required, all transfer and gains tax
returns fully executed and completed by Seller.
(k) Indemnification. An indemnification from Seller for any
brokerage commissions payable or which will become payable in connection with
any Tenant Lease.
(l) Evidence of Payment and Discharge of Liens and Encumbrances.
Evidence satisfactory to the Title Company and sufficient for deletion of any
exceptions that all liens, encumbrances and assessments against the Property,
except the lien of current taxes not yet due, have been paid and discharged
or that either such liens, encumbrances and assessments will be fully paid
and discharged by the Title Company on the Closing Date using Seller's
proceeds of sale or bonded by Buyer so that they do not constitute liens
against the Property.
(m) Possession. Possession of the Property shall be delivered by
Seller to Buyer on the Closing Date, subject to the Tenant Leases and Service
Contracts.
At the Closing, Buyer shall deliver to Seller (i) written indemnity
agreements as contemplated by Paragraphs 11(c) and 11(e), and (ii) if
required to comply with applicable statutes, execution of each letter to
tenants contemplated by Paragraph 11(c).
12. Prorations and Credits.
20
<PAGE>
(a) The following items shall be prorated as of 11:59 p.m. of the
day immediately preceding the Closing Date. To the extent that the amounts
of the items to be prorated are ascertainable as of the Closing Date, they
shall be prorated at the Closing. To the extent that the amounts of the
items to be prorated are not reasonably ascertainable as of the Closing Date,
they shall be adjusted as promptly after the Closing as the amounts thereof
are ascertained. Any errors or omissions in computing the prorations at the
Closing shall be promptly corrected and this obligation shall survive the
Closing hereunder for a period of twelve (12) months from the Closing Date.
i) Water, sewer, fire protection, inspection services,
electric, telephone and all other utility charges.
ii) Prepaid rents (including tax and similar participations),
utility deposits, and income from cable television and telephone
providers, vending machines and other sources.
iii) Prepaid service, maintenance and other similar items with
respect to the Service Contracts.
iv) Such other items of income and expenses as are
customarily prorated in real estate transactions.
v) Rents (including furniture, carport, garage and all other
rental amounts payable by tenants of the Property) for the month of
Closing shall be prorated. Unpaid rents from tenants shall not be
prorated at the Closing. In the event that on the Closing Date any
tenant is in arrears in the payment of rent for the month of the Closing
and/or any months prior thereto, Buyer shall hold any rents (net of the
reasonable costs of collection) collected after the Closing Date from
such tenant in trust for the benefit of Seller, and shall promptly remit
such rents (net of reasonable costs of collection) to Seller for
application in reduction of such arrearage; provided, however, that no
sums received by Buyer shall be so held or paid to Seller for
application to rents in arrears unless and until such rent and other
charges due for the periods subsequent to the Closing shall have been
received and retained by Buyer. Buyer agrees to use reasonable efforts
to collect rent arrearages due Seller from tenants, provided that Buyer
shall not be obligated to commence any litigation against such tenants,
incur any expense in collecting such arrearages (other than the expense
of routine billing) or terminate a Tenant Lease.
vi) Real estate taxes, special assessments and assessments
under the Declaration. Notwithstanding anything to the contrary
contained herein, (i) real estate taxes shall be prorated on the basis
of the latest valuations and mill levies and shall be subject to
readjustment as soon as the actual valuation and mill levies for the
year during which Closing takes place are conclusively determined, and
(ii) Seller shall pay in full at or prior to Closing any installments of
special assessments which may be a lien on the Property and that are due
prior to Closing.
(b) Seller shall furnish readings of the water, gas and electric
meters at the Property to the Closing Date. Seller shall cooperate with
Buyer to provide, as of the Closing Date, for a cancellation of electricity
and other utility services in Seller's name and a continuation thereof
without interruption in Buyer's name. To the extent such a timely
21
<PAGE>
cancellation and continuation occurs, there shall be no proration of utility
charges as provided in Paragraph 12(a)i).
(c) All transfer taxes and all sales and use taxes imposed on or
in connection with this transaction shall be paid by Seller, regardless of
whether Seller would otherwise be obligated under Arizona law.
(d) The Security Deposits shall be transferred to Buyer or
credited against the Purchase Price.
(e) Buyer may elect to satisfy a portion of the Purchase Price by
taking title to the Property subject to the outstanding balance of any lien
or encumbrance against the Property, provided that (1) credit shall not be
allowed for any liens that are bonded over by Seller, and (2) if Buyer elects
to take title subject to the Loan, such election shall be conditioned on
Buyer releasing Seller and the Related Parties from all further liability
under the Loan, including all liability under any warranty, guaranty,
indemnity or other agreement given in connection with the Loan.
13. Casualty Loss. Seller shall cause the insurance policies now in
effect with respect to the Property to be maintained until the Closing. If
at any time prior to the Closing Date, any portion of the Property is
destroyed or damaged as a result of fire or any other casualty whatsoever,
Seller shall promptly give written notice thereof to Buyer and, subject to
the rights of the holder of any first priority mortgage on the Property,
Seller shall promptly restore and repair the Property to a condition at least
as good as that existing prior to the damage. If such restoration cannot
reasonably be completed prior to the Closing Date, Buyer shall be entitled to
(i) terminate this Agreement, (ii) postpone the Closing until such
restoration is complete or (iii) close on the Closing Date and receive all
casualty insurance proceeds available to complete such restoration (less the
portion thereof claimed by any first priority mortgage lender or applied
toward restoration or repair of the Property) and, unless all deductible
amounts have been fully paid by Seller with respect to such insurance prior
to Closing, Buyer shall receive a credit for such amounts at Closing.
14. Brokerage. Seller shall pay at closing all amounts due to Steven
Karpf and to Karpf, Zarilli & Co., Inc. (collectively, "Broker") with respect
to the transactions contemplated in this Agreement. Seller and Buyer each
represent and warrant to the other that the party making such representation
has not dealt with any broker or other intermediary other than Broker in
connection with or relating to the transactions that are the subject of this
Agreement. Seller and Buyer shall defend, indemnify and hold the other
harmless from and against any and all liability, claim, charges or damages,
including without limitation, counsel fees and court costs, incurred by the
other as a result of any breach by the indemnitor of the foregoing
representation.
15. Eminent Domain.
(a) If at any time prior to the Closing Date, there shall be a
taking by eminent domain proceedings or the commencement of any such
proceedings, with respect to all or any part of the Property, Seller shall
give written notice thereof to Buyer promptly upon learning of the same, and,
if Buyer elects to close this transaction, the purchase price for the
Property shall be reduced by the total of any awards or other proceeds
received by Seller (directly or indirectly) with respect to any such taking
at or prior to Closing, and at the Closing Seller shall assign to Buyer all
22
<PAGE>
rights of Seller in and to any further awards or other proceeds payable by
reason of any taking.
(b) Until such time as the Closing has occurred, or this Agreement
terminates, any negotiation for or agreement to, and all contests of, any
offers and awards relating to eminent domain proceedings shall be conducted
only with the joint approval and consent of Seller and Buyer.
16. Remedies. If any obligation of Seller hereunder is not fully and
timely performed as herein provided, Buyer shall have the following remedies
(which shall be Buyer's sole and exclusive remedies except where otherwise
provided herein):
(a) Buyer may elect to treat this Agreement as terminated, in
which case all payments and things of value provided by Buyer hereunder shall
be returned to Buyer;
(b) Buyer may elect to treat this Agreement as being in full force
and effect, and Buyer shall have the right to an action for specific
performance, provided, however, that specific performance shall not be
available as to obligations (other than conveyance of title as provided for
in this Agreement) that are not within the reasonable control of Seller; and
(c) Buyer shall be entitled to payment of its reasonable
attorneys' fees and costs of enforcement of its remedies.
17. Entire Agreement. This is the entire agreement between the parties
relating to the subject matter hereof and there are no other terms,
obligations, covenants, representations, statements or conditions, oral or
otherwise, of any kind whatsoever relating to the subject matter hereof. Any
agreement hereafter made shall be ineffective to change, modify, discharge or
effect an abandonment of this Agreement in whole or in part unless such
agreement is in writing and signed by.the party against whom enforcement of
the change, modification, discharge or abandonment is sought.
18. Survival. Except as otherwise provided herein, all agreements,
warranties and representations contained herein shall survive Closing, and
shall not be deemed to have merged into the deed, but such survival shall
extend for only twelve (12) months, after which no action, claim or other
proceeding may be brought upon or to enforce any such agreement, warranty or
representation.
19. Notices. All notices, demands and requests or other communication
to be sent by one party to the other hereunder or required by law shall be in
writing and shall be deemed to have been validly given or served by delivery
of same in person to the addressee or by depositing same with a carrier in
the business of making guaranteed overnight deliveries for next business day
delivery or by depositing same in the United States mail, postage prepaid,
registered or certified mail, return receipt requested, to the following
addresses:
If intended for Seller:
Specified Properties VIII, L.P.
5950 Berkshire Lane, Suite 500
Dallas, Texas 75225
Attn: John R. Carmichael or Tom Teague
Phone No.: (214)369-9433
23
<PAGE>
Fax No.: (214)369-0908
with a copy to:
Michael K. Ording, Esq.
Jones Day Reavis & Pogue
2001 Ross Avenue, Suite 2300
Dallas, Texas 75201
Phone No.: (214)220-3939
Fax No.: (214)969-5100
If intended for Buyer:
Wellsford Residential Property Trust
610 Fifth Avenue, 7th Floor
New York, New York 10020
Attn: Edward Lowenthal
Phone No.: (212)333-2300
Fax No.: (212)333-2323
With a copy to:
Brownstein Hyatt Farber & Strickland, P.C.
410 17th Street, 22nd Floor
Denver, Colorado 80202
Attn: Wayne H. Hykan, Esq.
Phone No.: (303)534-6335
Fax No.: (303)623-1956
All notices, demands and requests shall be effective upon such personal
delivery or upon being deposited with the above-referenced overnight carrier
or in the United States mail as required above. However, with respect to
notices, demands or requests so deposited with the above-referenced overnight
carrier or in the United States mail, the time period within which a response
to any such notice, demand or request must be given shall commence to run
from the next business day following any such deposit with the above-
referenced overnight carrier or, in the case of a deposit in the United
States mail as provided above, the date on the return receipt of the notice,
demand or request reflecting the date of delivery or rejection of the same by
the addressee thereof. Rejection or other refusal to accept or the inability
to deliver because of changed address of which no notice was given as herein
required shall be deemed to be receipt of the notice, demand or request sent.
By giving to the other party hereto at least 15 days' written notice thereof
in accordance with the provisions hereof, the parties hereto shall have the
right from time to time to change their respective addresses and each shall
have the right to specify as its address any other or additional address
within the United States of America.
20. No Joint Venture; No Merger. Seller and Buyer acknowledge that
concurrently with execution of this Agreement Buyer or an affiliate of Buyer
has made a loan to Seller in the principal amount of $17,800,000.00, secured
by the Property (the "Loan"). Notwithstanding anything in this Agreement or
in the documents delivered in connection with the Loan, it is the express
intent of the parties that (i) nothing in the relationship between Seller and
Buyer is intended to or shall constitute Seller and Buyer as partners or
joint venturers with respect to the Property or to any other matter; (ii) the
relationship of the parties hereunder shall be strictly that of optionor and
24
<PAGE>
optionee under the Option granted herein; (iii) the rights of Buyer hereunder
shall survive any foreclosure or other exercise of remedies under the Loan
and shall not be merged therein, nor shall any rights of the holder of the
Loan be merged into any document delivered in connection with the Option.
21. Miscellaneous.
(a) The captions in this Agreement are inserted for convenience of
reference only and in no way define, describe or limit the scope or intent of
this Agreement or any of the provisions hereof.
(b) This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, legal representatives, successors and assigns.
(c) This Agreement shall be governed by and shall be construed and
interpreted in accordance with the laws of the State of Arizona.
(d) This Agreement and all documents, agreements, understandings
and arrangements relating to this transaction have been executed by the
undersigned in his/her capacity as an officer or trustee of Buyer which has
been formed as a Maryland real estate investment trust pursuant to a
Declaration of Trust of Buyer dated as of July 10, 1992, and not
individually, and neither the trustees, officers or shareholders of Buyer
shall be bound or have any personal liability hereunder or thereunder.
Seller shall look solely to the assets of Buyer for satisfaction of any
liability of the Buyer 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 trustees,
officers or shareholders of Buyer 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.
(e) The parties hereto acknowledge that the transfer of the
Property must be reported to the Internal Revenue Service as required by
Section 6045(e) of the Internal Revenue Code of 1986, as amended (the
"Code"), unless Section 6045(e) provides an exemption to such reporting
requirement. Accordingly, on or before the Closing Date, Seller, Buyer and
the Title Company shall enter into written "designation agreement" as defined
in and in accordance with Regulation Section 1.6045-4 of the Code, which
designation agreement shall designate the Title Company as the "real estate
reporting person" responsible for reporting the respective transfers to the
Internal Revenue Service.
(f) Subject to the last sentence of this Section, the parties
hereto agree that neither party shall make an announcement of the transaction
contemplated herein to third parties without the prior written consent of the
other party hereto. Buyer shall have the right to approve any public
announcement. Subject to the last sentence of this Section and except as
required by court order or by operation of law, the contents of this
Agreement shall remain confidential and shall only be disclosed to those
third parties necessary to facilitate the consummation of the transaction
contemplated hereby. Notwithstanding the foregoing, Buyer may disclose this
Agreement as it deems necessary or appropriate to comply with securities or
other laws or to fulfill its corporate or fiduciary obligations to its
investors.
25
<PAGE>
(g) The Exhibits attached hereto and made a part hereof are:
Exhibit A: Legal Description
Exhibit B: Rent Roll
Exhibit C: Form of Tenant Lease
Exhibit D: Description of Carpet Specifications
Exhibit E: Description of Pending Claims
Exhibit F: List of Nonterminable Contracts
Exhibit G: Utility Suppliers
Exhibit H: Insuranc
26
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SELLER:
SPECIFIED PROPERTIES VIII, L.P., a Texas
limited partnership
By: Westwood Residential No. 9
Limited Partnership, its general
partner
By: Westwood Residential
General Partner No. 9,
Inc., its general partner
By:/s/ John R. Carmichael
_____________________________
Name: John R. Carmichael
Title: President
BUYER:
WELLSFORD RESIDENTIAL PROPERTY TRUST, a
Maryland real estate investment trust
By:/s/ Donald D. MacKenzie
______________________________________
Name: Donald D. MacKenzie
Title: Vice President
27
<PAGE>
EXHIBIT A
(Legal Description)
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
28
<PAGE>
EXHIBIT B
(Rent Roll)
29
<PAGE>
EXHIBIT C
(Form of Tenant Lease)
30
<PAGE>
EXHIBIT D
(Description of Carpet Specifications)
31
<PAGE>
EXHIBIT E
(Description of Pending Claims)
NONE
32
<PAGE>
EXHIBIT F
(List of Nonterminable Contracts)
Vendor Type Cancellation
Haas Publishing Company Apt. Guide Between 4th &
5th Issue or
2/1/97
Web Service Co. Washers/Dryers 9/1/2005
Interactive Cable Systems, Inc. Cable Television Serv. April, 2010
Interactive Cable Systems, Inc. Telephone Service April, 2010
Interactive Cable Systems, Inc. Alarm Service
April, 2010
33
<PAGE>
EXHIBIT G
(Utility Suppliers)
_________________________________________________________________
| | |
| Telephone | Interactive Cable Systems, Inc. |
|______________________|_______________________________________|
| | |
| Cable Television | Interactive Cable Systems, Inc. |
|______________________|_______________________________________|
| | |
| Electric | Tucson Electric Power Company |
|______________________|_______________________________________|
| | |
| Water | City of Tucson |
|______________________|_______________________________________|
| | |
| Sewer | City of Tucson |
|______________________|_______________________________________|
| | |
| Gas | Southwest Gas Corporation |
|______________________|_______________________________________|
34
<PAGE>
EXHIBIT H
(Insurance)
(See attached two (2) Certificates of Insurance)
35
<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.
36
<PAGE>
EXHIBIT 10.28
PURCHASE AND SALE AGREEMENT
AMERICAN CYANAMID COMPANY,
Seller
TO
WELLSFORD COMMERCIAL PROPERTIES, L.L.C.
Buyer
DATED: November __, 1996
1
<PAGE>
* * * *
The mailing, delivery or negotiation of this Agreement by Seller or
its agent or attorney shall not be deemed an offer by Seller to enter into
any transaction or to enter into any other relationship, whether on the
terms contained herein or on any other terms. This Agreement shall not be
binding upon Seller, nor shall Seller have any obligations or liabilities
or Buyer any rights with respect thereto, or with respect to the Property,
unless and until Seller has executed and delivered this Agreement. Until
such execution and delivery of this Agreement, Seller may terminate all
negotiation and discussion of the subject matter hereof, without cause and
for any reason, without recourse or liability.
* * * *
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PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
Page
RECITALS
ARTICLE 1. DEFINITIONS
Section 1.1. Agreement. . . . . . . . . . . . . . . . 2
Section 1.2. Assumed Permits. . . . . . . . . . . . . 2
Section 1.3. Award. . . . . . . . . . . . . . . . . . 2
Section 1.4. Broker . . . . . . . . . . . . . . . . . 2
Section 1.5. Casualty . . . . . . . . . . . . . . . . 2
Section 1.6. Casualty Insurance . . . . . . . . . . . 2
Section 1.7. Closing. . . . . . . . . . . . . . . . . 2
Section 1.8. Closing Date . . . . . . . . . . . . . . 3
Section 1.9. Complex. . . . . . . . . . . . . . . . . 3
Section 1.10. Complex Records. . . . . . . . . . . . . 3
Section 1.11. Down Payment . . . . . . . . . . . . . . 3
Section 1.12. 1800 Complex . . . . . . . . . . . . . . 3
Section 1.13. Escrow Agent . . . . . . . . . . . . . . 3
Section 1.14 Evaluation Period. . . . . . . . . . . . 3
Section 1.15. Hazardous Substances . . . . . . . . . . 4
Section 1.16. Headquarters Complex . . . . . . . . . . 4
Section 1.17. Indemnify. . . . . . . . . . . . . . . . 4
Section 1.18. Land . . . . . . . . . . . . . . . . . . 5
Section 1.19. Maximum Amount . . . . . . . . . . . . . 5
Section 1.20. Permits. . . . . . . . . . . . . . . . . 5
Section 1.21. Purchase Price . . . . . . . . . . . . . 5
Section 1.22. Purchase Transactions. . . . . . . . . . 5
Section 1.23. Repair . . . . . . . . . . . . . . . . . 5
Section 1.24. Seller's Knowledge . . . . . . . . . . . 5
Section 1.25 1700 Complex . . . . . . . . . . . . . . 6
Section 1.26. Survey . . . . . . . . . . . . . . . . . 6
Section 1.27. Taking . . . . . . . . . . . . . . . . . 6
Section 1.28. Tangible Personal Property . . . . . . . 6
Section 1.29. Title Exceptions . . . . . . . . . . . . 7
Section 1.30. Transferred Assets . . . . . . . . . . . 7
Section 1.31. Violations . . . . . . . . . . . . . . . 7
Section 1.32. Wiring Instructions. . . . . . . . . . . 7
ARTICLE 2. AGREEMENT TO SELL AND PURCHASE
Section 2.1. Agreement to Sell
and Purchase . . . . . . . . . . . . . . 8
ARTICLE 3. PURCHASE PRICE AND ASSUMPTION OF PERMITS
Section 3.1. Purchase Price . . . . . . . . . . . . . 8
Section 3.2. Assumption of Permits. . . . . . . . . .13
ARTICLE 4. CLOSING; CLOSING OBLIGATIONS; CONDITIONS
TO CLOSING
Section 4.1. Closing. . . . . . . . . . . . . . . . 13
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Section 4.2. Seller's Closing Obligations . . . . . .14
Section 4.3. Buyer's Closing Obligations. . . . . . 16
Section 4.4. Conditions to Buyer's
Obligation to Close. . . . . . . . . . .17
Section 4.5. Conditions to Seller's . . . . . . . . . .
Obligation to Close. . . . . . . . . . 18
Section 4.6. Seller Default . . . . . . . . . . . . .19
ARTICLE 5. [INTENTIONALLY OMITTED]
ARTICLE 6. CONTINGENCIES
Section 6.1. ISRA . . . . . . . . . . . . . . . . . 20
Section 6.2 Due Diligence. . . . . . . . . . . . . .20
Section 6.3 Waiver . . . . . . . . . . . . . . . . 21
ARTICLE 7. TITLE
Section 7.1. Title Report and Survey. . . . . . . . .22
Section 7.2. Seller's Right to Extend . . . . . . . . .
Closing. . . . . . . . . . . . . . . . 23
Section 7.3. Limitation on Seller's . . . . . . . . . .
Title Obligations. . . . . . . . . . . 24
Section 7.4. Buyer's Right to Accept Title. . . . . 24
Section 7.5. Severability . . . . . . . . . . . . . .26
ARTICLE 8. BUYER'S RIGHT OF ACCESS
Section 8.1. Buyer's Access . . . . . . . . . . . . 26
Section 8.2. Buyer's Access to Records. . . . . . . 27
Section 8.3. Buyer's Indemnity. . . . . . . . . . . 28
Section 8.4. Buyer's Insurance. . . . . . . . . . . 28
Section 8.5. Survival of Buyer's Obligations. . . . 29
ARTICLE 9. ENVIRONMENTAL MATTERS
Section 9.1. Fuel Storage Tank. . . . . . . . . . . 29
Section 9.2. Asbestos . . . . . . . . . . . . . . . 30
Section 9.3. Environmental Matters. . . . . . . . . 32
ARTICLE 10. REPRESENTATIONS AND WARRANTIES
Section 10.1. Seller's Representations . . . . . . . 34
Section 10.2. Complex to be Sold "As Is" . . . . . . 39
Section 10.3. Buyer's Representations. . . . . . . . 41
Section 10.4. Survival of Representations. . . . . . . .
and Warranties and No Third
Party Beneficiaries. . . . . . . . . . 42
ARTICLE 11. ADJUSTMENTS AND EXPENSES
Section 11.1. Buyer's Expenses . . . . . . . . . . . .42
Section 11.2. Seller's Expenses. . . . . . . . . . . 43
Section 11.3. Proration Adjustments. . . . . . . . . 43
Section 11.4. Assessments; Tax Adjustment. . . . . . 44
ARTICLE 12. COVENANTS PENDING CLOSING
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Section 12.1. Covenants Pending Closing. . . . . . . 46
ARTICLE 13. FIRE AND OTHER CASUALTY
Section 13.1. Seller's Obligation to Insure. . . . . .48
Section 13.2. Procedure Upon Casualty. . . . . . . . .48
Section 13.3. Provisions of Article 13 . . . . . . . 51
ARTICLE 14. CONDEMNATION
Section 14.1. Notice to Buyer. . . . . . . . . . . . 51
Section 14.2. Taking and Termination . . . . . . . . .51
Section 14.3. Taking Without Termination . . . . . . 52
ARTICLE 15. BROKER
Section 15.1. Broker . . . . . . . . . . . . . . . . 53
ARTICLE 16. MISCELLANEOUS PROVISIONS
Section 16.1. Access to Books and Records. . . . . . .54
Section 16.2. Time Periods . . . . . . . . . . . . . 55
Section 16.3. Recordation and Assignment . . . . . . 55
Section 16.4. Applicable Law . . . . . . . . . . . . 56
Section 16.5. Entire Agreement . . . . . . . . . . . 56
Section 16.6. All Amendments in Writing. . . . . . . 56
Section 16.7. Invalidity . . . . . . . . . . . . . . 56
Section 16.8. Notices. . . . . . . . . . . . . . . . 57
Section 16.9. Calendar Days. . . . . . . . . . . . . 58
Section 16.10. Like Kind Exchange . . . . . . . . . . .58
Section 16.11. Right of Partial Termination/
Severability . . . . . . . . . . . . . .59
Section 16.12. Seller Indemnity . . . . . . . . . . . .62
EXHIBIT A The Land
EXHIBIT B [Intentionally Left Blank]
EXHIBIT C Permits
EXHIBIT D [Intentionally Left Blank]
EXHIBIT E Bill of Sale to the Tangible Property
EXHIBIT F Assignment of Permits
EXHIBIT G Tax Bills
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PURCHASE AND SALE AGREEMENT
THIS AGREEMENT is made as of November ___, 1996, by and between
AMERICAN CYANAMID COMPANY, a Maine corporation having an office at Five
Giralda Farms, Madison, New Jersey 07940 ("Seller"), and WELLSFORD
COMMERCIAL PROPERTIES, L.L.C., a Delaware limited liability company, having
an office at 610 Fifth Avenue, New York, New York 10020 ("Buyer").
WHEREAS, Seller owns the land and improvements commonly known as (i)
the American Cyanamid Headquarters Facility, located at One Cyanamid Plaza,
Wayne, New Jersey and (ii) the office buildings located at 1700 and
1800 Valley Road, Wayne, New Jersey, each consisting of certain lands with
the improvements thereon, as more particularly described in the legal
descriptions attached as Exhibits A-1; A-2 and A-3; and
WHEREAS, Seller desires to sell such land, improvements and other
related assets to Buyer, and Buyer desires to purchase such property and
assets from Seller, on and subject to the terms and conditions of this
Agreement.
ARTICLE 1
DEFINITIONS
In this Agreement, the following terms have the meanings set forth
below:
Section 1.1. "Agreement" means this Purchase and Sale Agreement, as
it may be amended pursuant to the terms hereof.
Section 1.2. "Assumed Permits" has the meaning set forth in Section
3.2 of this Agreement.
Section 1.3. "Award" has the meaning set forth in Section 14.2 of
this Agreement.
Section 1.4. "Broker" shall mean The Garibaldi Group.
Section 1.5. "Casualty" has the meaning set forth in Section 13.2 of
this Agreement.
Section 1.6. "Casualty Insurance" has the meaning set forth in
Section 13.1. of this Agreement.
Section 1.7. "Closing" means the closing of the purchase and sale of
the Transferred Assets contemplated by this Agreement.
Section 1.8. "Closing Date" has the meaning set forth in Section 4.1
of this Agreement.
Section 1.9. "Complex" means the Land and all of the improvements
located thereon including (i) the Headquarters Complex (as defined below),
(ii) the 1700 Complex (as defined below) and (iii) the 1800 Complex (as
defined below).
Section 1.10. "Complex Records" has the meaning set forth in Section
8.2(a) of this Agreement.
Section 1.11. "Down Payment" has the meaning set forth in Section
3.1(a) of this Agreement.
Section 1.12. "1800 Complex" means the Land and improvements known as
1800 Valley Road, as described in Exhibit A-3.
Section 1.13. "Escrow Agent" means Chicago Title Insurance Company or
such other entity as may be designated as such by the parties.
Section 1.14. "Evaluation Period" has the meaning set forth in
Section 6.2 of this Agreement.
Section 1.15. "Hazardous Substances" means those substances
identified as "toxic substances", "hazardous substances", or "hazardous
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wastes" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C., Sec. 9601, et seq.; the
Resource Conservation and Recovery Act, as amended, 42 U.S.C., Sec. 6901,
et seq., and the Toxic Substance Control Act of 1976, as amended, 15
U.S.C., Sec. 2601, et seq., and all other applicable federal, state and
local laws and ordinances governing similar matters; and any regulations
adopted and publications promulgated pursuant thereto.
Section 1.16. "Headquarters Complex" means the Land and improvements
located at One Cyanamid Plaza, Wayne, New Jersey, as described in Exhibit
A-1.
Section 1.17. "Indemnify" means to defend, indemnify and save
harmless against the particular referenced claims, liabilities,
obligations, losses, damages and penalties, and to pay all costs and
expenses (including reasonable attorneys' fees, reasonable expert witness
fees and consultants' fees and other reasonable costs of defense) incurred
by the particular referenced indemnitee(s).
Section 1.18. "Land" means those certain parcels of land described on
Exhibits A-1; A-2 and A-3 (including all rights, development rights,
privileges, easements and appurtenances thereunto).
Section 1.19 "Maximum Amount" means $1,000,000.
Section 1.20 "Permits" means the licenses, franchises,
certifications, authorizations, approvals and permits used in or relating
to the ownership or operation of the Complex as listed in Exhibit C annexed
hereto, or any other such permit which is assignable by Seller to Buyer.
Section 1.21. "Purchase Price" has the meaning set forth in Section
3.1 of this Agreement.
Section 1.22. "Purchase Transactions" has the meaning set forth in
Section 15.1 of this Agreement.
Section 1.23. "Repair" has the meaning set forth in Section 13.2 of
this Agreement.
Section 1.24. "Seller's Knowledge" means the actual knowledge without
independent inquiry of the following employees of Seller or its parent
corporation, American Home Products Corporation, who Seller represents are
all of the persons having direct responsibility for the Complex and the
subject matter of this Agreement: James Parr, Steven Meszaros, Brian
Sullivan, Thomas Gortych and Kenneth Koneval.
Section 1.25. "1700 Complex" means the Land and improvements known as
1700 Valley Road, as described in Exhibit A-2.
Section 1.26. "Survey" means the current survey of the Property
delivered by Buyer to Seller pursuant to the provisions of Section 7.1.
Section 1.27. "Taking" means any taking by condemnation or by
exercise of the power of eminent domain.
Section 1.28. "Tangible Personal Property" means all carpeting, wall
coverings, kitchen equipment, furniture, fixtures, machinery and other
equipment affixed to or located on the Complex on the date of this
Agreement, but excluding, however, any furniture, furnishings, trade
fixtures, equipment, apparatus, appliances and other articles of personal
property designated by Seller or Buyer by written notice given within
thirty (30) days after the date of this Agreement to be retained by Seller,
which items of personal property shall be removed by Seller from the
Complex prior to Closing. The foregoing notwithstanding, Seller agrees not
to designate for retention any auditorium seats, lighting and audio system,
kitchen equipment, cafeteria furniture, built-in reception desks, floor-to-
ceiling modular walls, light fixtures and bulbs, electrical outlets, tools,
hand carts, spare parts, extra doors or lock sets, duct work, elevator
mats, or other similar parts, supplies or personal property used in the
operation of the Complex, including, but not limited to the items contained
in the marketing materials for the Complex delivered to Buyer by Broker,
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which shall be conveyed to Buyer as part of the Transferred Assets.
Section 1.29. "Title Exceptions" has the meaning set forth in Section
7.1 of this Agreement.
Section 1.30. "Transferred Assets" has the meaning set forth in
Section 2.1 of this Agreement.
Section 1.31. "Violations" has the meaning set forth in Section
10.1(c)(ii) of this Agreement.
Section 1.32. "Wiring Instructions" shall mean a wire transfer of
federal funds to an account to be designated by Seller at or prior to
Closing.
ARTICLE 2
AGREEMENT TO SELL AND PURCHASE
Section 2.1. Agreement to Sell and Purchase. On the terms and
subject to the conditions set forth in this Agreement, Seller hereby agrees
to sell, assign and convey to Buyer, and Buyer hereby agrees to purchase
from Seller, the following assets (the "Transferred Assets"):
(a) the Complex.
(b) the Tangible Personal Property.
(c) subject to the provisions of Section 3.2, all right, title
and interest of Seller under the Permits.
ARTICLE 3
PURCHASE PRICE AND ASSUMPTION OF PERMITS
Section 3.1. Purchase Price. In consideration of the sale of the
Transferred Assets to Buyer, Buyer shall pay to Seller, subject to the
proration adjustments provided for in Section 11.3, the sum of SIXTEEN
MILLION DOLLARS ($16,000,000.00) (the "Purchase Price"). The Purchase
Price shall be payable as follows:
(a) To secure the performance of Buyer's obligations under this
Agreement, Buyer shall deposit with the Escrow Agent, within ten (10) days
after the execution of this Agreement by both parties, a down payment
against the Purchase Price in the amount of ONE MILLION DOLLARS
($1,000,000.00) (such sum, together with accrued interest thereon is
hereafter referred to as the "Down Payment"). The Down Payment shall be
held by the Escrow Agent in an interest bearing account with a federally
insured banking institution reasonably acceptable to Seller and Buyer.
(b) If, after having failed to terminate this Agreement pursuant
to the provisions of Article 6, and after all of the other preconditions to
Closing have been satisfied or waived, Buyer fails to close title as
required under this Agreement and Seller is not itself in default under
this Agreement, the Escrow Agent shall, upon the written request of Seller
with a copy thereof delivered to Buyer, deliver to Seller the full amount
of the Down Payment made by Buyer. The parties agree that if Buyer fails
to perform this Agreement, Seller's damages would be difficult to estimate.
Therefore, the parties agree that the forfeiture of the Down Payment shall
constitute liquidated damages for Buyer's failure and Buyer shall have no
further liability to Seller beyond such forfeiture, except with respect to
its indemnity and other obligations under Articles 8, 9 and 15; provided,
however, that, if the Down Payment is forfeited to Seller hereunder by
reason of a breach of this Agreement by Buyer, the liability of Buyer under
Articles 8, 9 and 15 shall be limited to the portion of claims or damages
in excess of the amount of the forfeited Down Payment. To the extent not
theretofore applied pursuant to this Section 3.1, the Down Payment will be
(i) credited against the Purchase Price at Closing, or (ii) returned to
Buyer if title fails to close for any reason other than Buyer's failure to
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perform, as provided above. If Buyer fails to pay the Down Payment to
Escrow Agent within the time period provided in subsection (a) above,
Seller shall have the right to terminate this Agreement on five (5) days
written notice to Buyer, unless Buyer makes such payment within such five
(5) day period. Upon such termination, all rights and obligations
hereunder shall terminate.
(c) An amount at Closing equal to FIFTEEN MILLION DOLLARS
($15,000,000.00), minus the accrued interest on the Down Payment, plus or
minus the net proration adjustment provided for in Section 11.3, to be made
in accordance with the Wiring Instructions.
(d) The parties agree to execute all federal, state and local
transfer declarations consistent with the foregoing. Seller shall apply
such portion of the proceeds of the Purchase Price at Closing as is
necessary to fulfill any obligation of Seller to discharge liens and
charges against any of the Transferred Assets.
(e) The Escrow Agent shall not be liable to any party for any
act or omission, except for bad faith or gross negligence, and the parties
agree to Indemnify the Escrow Agent with respect to its activities under
this Agreement. The parties acknowledge that the Escrow Agent is acting
solely as a stake holder for their mutual convenience. If the Escrow Agent
receives a written notice of a dispute between the parties with respect to
the Down Payment, the Escrow Agent shall not be bound to release and
deliver the Down Payment to either party, but may either (i) continue to
hold the Down Payment until otherwise directed in a writing signed by both
of the parties hereto, or (ii) deposit the Down Payment with the clerk of
any court of competent jurisdiction. Upon such deposit, the Escrow Agent
will be released from all duties and responsibilities hereunder.
(f) The Escrow Agent shall not be required to defend any legal
proceedings which may be instituted against it with respect to the Down
Payment, the Complex or the subject matter of this Agreement, unless
requested to do so by Seller or Buyer and indemnified by the requesting
party to its satisfaction against the cost and expense of such defense.
The Escrow Agent shall not be required to institute legal proceedings of
any kind and shall have no responsibility for the genuineness or validity
of any document or other item deposited with it or the collectibility of
any check delivered in connection with this Agreement. The Escrow Agent
shall be fully protected in acting in accordance with any written
instructions given to it hereunder and believed by it to have been signed
by the proper parties. The fees of the Escrow Agent shall be paid by
Buyer.
Section 3.2. Assumption of Permits. At the Closing, Buyer shall
determine which of the Permits it desires to maintain with respect to the
Complex (the "Assumed Permits"). Seller and Buyer shall thereupon execute
an assignment of such Permits in the form annexed hereto as Exhibit F.
Seller shall Indemnify Buyer against all obligations and liabilities with
respect to the Permits arising prior to the Closing, and Buyer agrees to
Indemnify Seller against all obligations and liabilities with respect to
the Assumed Permits arising on and after Closing. Also, Buyer shall be
responsible at its expense for the transfer of the Assumed Permits to it
and Seller shall cooperate with such transfer, such cooperation to include
the execution of any necessary documentation.
ARTICLE 4
CLOSING; CLOSING OBLIGATIONS; CONDITIONS TO CLOSING
Section 4.1. Closing. The Closing shall take place on the first
business day succeeding the thirtieth (30th) day after the expiration of
the Evaluation Period (the "Closing Date"), or as the same may be extended
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in accordance with Section 7.2, at 9:30 a.m. at the office of the Seller s
attorneys, Pitney, Hardin, Kipp & Szuch, 200 Campus Drive, Florham Park,
New Jersey, or at such other place as Seller and Buyer may mutually agree
upon in writing. Either party may make TIME OF THE ESSENCE for the Closing
by written notice given at least twenty (20) days prior to the stipulated
date in the notice, such notice to be given on or after the Closing Date
specified above, as such Closing Date may have been extended as provided
above.
Section 4.2. Seller's Closing Obligations. At the Closing, and as a
condition to Buyer's payment of the Purchase Price, Seller shall deliver or
cause to be delivered the following:
(a) A bargain and sale deed with covenant against grantor's acts
in the proper form for recording, duly executed by Seller and acknowledged,
so as to convey fee simple absolute title to the Complex to Buyer free and
clear of all liens and encumbrances, except as otherwise provided in
Article 7, below;
(b) such affidavit of title and other customary documents and
instruments as the Buyer's title insurance company may reasonably require
in accordance with customary practice in order to remove preprinted
exceptions from the Buyer's title insurance policy, including a duly
executed affidavit that Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended;
(c) A bill of sale to the Tangible Personal Property and the
Complex Records in the form of Exhibit E;
(d) if applicable, an assignment of Seller's right, title and
interest in and to the Permits in the form of Exhibit F;
(e) originals or certified true copies of all documents in the
possession of Seller relating to Permits being assigned to Buyer;
(f) such other documents or instruments as are required by this
Agreement or reasonably requested by Buyer to be delivered by Seller at
Closing;
(g) evidence of Seller's authority to convey the Complex to
Buyer, including a current certified resolution of Seller evidencing its
authority to execute, perform and discharge its obligations under this
Agreement and incumbency certificates with respect to the officers of
Seller executing any document or instrument delivered in connection with
the transaction evidenced by this Agreement; and
(h) possession of the Complex (together with any and all keys
and security codes to the Complex), free and clear of any occupants, with
the improvements in the same condition as existed at the end of the
Evaluation Period, reasonable wear and tear and (to the extent provided in
Article 13, below) casualty damage excepted.
Section 4.3. Buyer's Closing Obligations. At the Closing, as a
condition to the delivery of the deed and the other documents to be
delivered by Seller, Buyer shall deliver or cause to be delivered to Seller
the following:
(a) the Purchase Price, as set forth in Section 3.1;
(b) if applicable, an assignment of Seller's right, title and
interest in and to the Permits, duly executed by Buyer, in the form of
Exhibit F; and
(c) such other documents or instruments as are required by this
Agreement or reasonably requested by Seller to be delivered by Buyer at
Closing.
Section 4.4. Conditions to Buyer's Obligation to Close. Except as
otherwise specifically set forth in this Agreement, the obligation of Buyer
under Section 4.1 to close the transactions contemplated by this Agreement
(including the Exhibits hereto) are subject to the fulfillment, prior to or
at the Closing, of each of the following conditions, any one or more of
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which may be waived by Buyer either in writing or by Closing:
(a) The representations and warranties of Seller contained in
Section 10.1 of this Agreement shall be reiterated by Seller to the effect
that the same are true at and as of the Closing Date.
(b) Each of the obligations of Seller to be performed on or
before the Closing Date pursuant to the terms of this Agreement shall have
been performed in all material respects.
(c) Title to the Transferred Assets shall be in the condition
required by Article 7 of this Agreement.
(d) The absence of Hazardous Substances on the Complex, in
amounts sufficient to require reporting and remediation in accordance with
applicable laws, and/or to prevent mortgage financing of the Complex on
reasonable and customary terms, unless the existence of such Hazardous
Substances was disclosed to or was otherwise within the actual knowledge of
Buyer by the end of the Evaluation Period.
(e) The absence of any governmental improvement assessments
levied against the Headquarters Complex in the amount of $1,000,000. or
more (or $100,000. or more in any one year), or levied against the 1700
Complex and/or the 1800 Complex in the amount of $500,000. or more (or
$50,000. or more in any one year).
(f) The failure of either Seller or Buyer to have terminated
this Agreement in accordance with its terms.
Section 4.5. Conditions to Seller's Obligation to Close. Except as
otherwise specifically set forth in this Agreement, the obligation of
Seller under Section 4.1 to close the transactions contemplated by this
Agreement (including the Exhibits hereto) are subject to the fulfillment,
prior to or at the Closing, of each of the following conditions, any one or
more of which may be waived by Seller either in writing or by Closing:
(a) The representations and warranties of Buyer contained in
Section 10.3 of this Agreement shall be reiterated by Buyer to the effect
that the same are true in all material respects at and as of the Closing
Date.
(b) Each of the obligations of Buyer to be performed on or
before the Closing Date pursuant to the terms of this Agreement shall have
been performed in all material respects.
(c) The failure of either Seller or Buyer to have terminated
this Agreement in accordance with its terms.
Section 4.6. Seller Default. If, after all applicable preconditions
to Closing have been satisfied or waived, Seller shall refuse to convey
title to Buyer, or if Seller otherwise defaults under this Agreement (and
notwithstanding any permitted termination of this Agreement by Purchaser or
Seller), Buyer shall have the right to terminate this Agreement, receive a
refund of the Down Payment and/or pursue all rights and remedies against
Seller available at law or in equity, including the right of specific
performance.
ARTICLE 5
[INTENTIONALLY OMITTED]
ARTICLE 6
CONTINGENCIES
Section 6.1. ISRA. This Agreement is contingent upon Seller
obtaining and delivering to Buyer, within forty-five (45) days from the
date of execution and delivery of copies of this Agreement to each party ,
at Seller's expense, a letter of non-applicability, a no-further-action
letter, a letter of full compliance, or the equivalent of any of the
foregoing, from the New Jersey Department of Environmental Protection in
compliance with the Industrial Site Recovery Act, and the regulations
promulgated thereunder. If Seller fails to secure same within such period,
Buyer shall have the right to terminate this Agreement by notice to Seller,
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provided that such right of termination is exercised within thirty (30)
days after the expiration of the Evaluation Period. Upon such termination,
the Down Payment shall be returned to Buyer and all rights and obligations
hereunder shall terminate.
Section 6.2. Due Diligence. Buyer shall have a period of forty-five
(45) days from the date of execution and delivery of copies of this
Agreement to each party (the "Evaluation Period"), within which to conduct
environmental and other physical inspections of the Complex, seek
governmental approvals for its proposed use of the Complex, and otherwise
evaluate the suitability of the Complex for its intended uses. If, on or
before the expiration of the Evaluation Period, Buyer determines in its
sole judgment that the results of its efforts and investigations have not
been favorable, then Buyer shall have the right to terminate this Agreement
by serving written notice thereof upon Seller. Seller agrees to cooperate
with Buyer in any of its applications to governmental authorities and
otherwise to facilitate Buyer's due diligence efforts. Upon a termination
hereunder, the Down Payment shall be refunded to Buyer and all rights and
obligations hereunder shall terminate.
Section 6.3. Waiver. If Buyer fails to terminate this Agreement by
reason of the failure of any of the contingencies described in this Article
prior to the expiration of the Evaluation Period, such contingencies shall
be deemed waived by Buyer and Buyer, subject to the other conditions of
this Agreement, shall be obligated to proceed to the closing of title in
accordance with the provisions of this Agreement.
ARTICLE 7
TITLE
Section 7.1 Title Report and Survey. Buyer agrees to procure at its
own expense within forty-five (45) days of the date hereof a title
commitment for an owner's title insurance policy at regular rates issued by
a title insurance company licensed to transact business in the State of New
Jersey in an amount not greater than the contemplated Purchase Price,
insuring fee simple absolute title to the Complex, and to use reasonable
efforts also to procure within such period a Survey of the Complex. Buyer
shall give written notice to Seller of any objection to title within forty-
five (45) days from the date of this Agreement. Buyer shall not object to
liens for real estate taxes and assessments not due on or before the
Closing Date, and, subject to Section 6.2, zoning ordinances and
regulations of record. Except with regard to liens of an ascertainable
amount which will be paid by Seller at Closing, Buyer shall be deemed to
have waived any liens, encumbrances or survey or title defects ("Title
Exceptions") as to which it does not notify Seller within forty-five (45)
days from the date hereof. This waiver shall not apply to any Title
Exception which first becomes of record (whether or not it relates back to
an earlier date) after the date of Buyer's title report and prior to the
Closing.
Section 7.2. Seller's Right to Extend Closing. In the event of any
Title Exception raised by Buyer, subject to which Buyer is not obligated to
accept title, Seller shall, at its option, be entitled to a period not to
exceed forty-five (45) days to enable Seller to attempt to cure same by
providing to Buyer evidence reasonably satisfactory to Buyer of the removal
of the Title Exception (without charge to Buyer), or, at Buyer's option, by
the procurement of title insurance endorsements, at Seller's expense,
providing coverage to Buyer against loss or damage as a result of such
Title Exception. If such forty-five (45) day period extends beyond the
Closing Date, the Closing Date shall be extended accordingly; provided,
however, that, unless Buyer agrees otherwise, in no event shall the Closing
Date be earlier than thirty (30) days after Seller has notified Buyer that
it has cured the Title Exception. Seller's sole obligation to satisfy any
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title company closing requirement with respect to a general exception
regarding unspecific mechanic's, materialmen's or similar liens shall be to
execute and deliver to the title company an affidavit or mechanic's lien
undertaking in form and substance customarily required by the title company
to cause it to delete such exception.
Section 7.3. Limitation on Seller's Title Obligations. Seller shall
not be required to (i) commence any litigation or (ii) incur any costs or
expenses in excess of the Maximum Amount, to cure or remove any Title
Exception, except that Seller shall be obligated (x) to cure, remove or
provide for the satisfaction of any Title Exception which arises after the
date of this Agreement, and (y) to pay and remove any liens on the Complex
which may be removed or satisfied by the payment of a liquidated sum of
money; provided, however, that in lieu of satisfying a judgment lien,
Seller may deliver to the title company an indemnity bond or other security
or undertaking, covering the amount of the judgment, plus interest, on the
basis of which the title company agrees to remove such lien as an exception
in Buyer's title insurance policy or affirmatively insures Buyer against
collection of such lien out of the Complex.
Section 7.4. Buyer's Right to Accept Title. If Seller advises Buyer
that Seller, consistent with its rights and obligations under this Article
7, is unable or unwilling to remove any title exception which Buyer is not
required to accept under the terms of this Agreement, Buyer as its sole and
exclusive remedy shall have the right and option, exercisable by notice to
Seller given within fifteen (15) days after Buyer's receipt of Seller's
notice that Seller will not or cannot cure, to (i) elect to accept such
title as Seller may be able to convey, and Buyer shall not be entitled to
any abatement, reduction of or any credit or allowance against the Purchase
Price or otherwise by reason thereof, except that Buyer shall be entitled
to a credit equal to the reasonably estimated cost of removing the defect,
but not to exceed the Maximum Amount, and Seller shall have no further
liability with respect thereto, or (ii) to terminate this Agreement. If
Buyer fails to notify Seller of its intention within the time provided,
Buyer shall be deemed to have elected alternative (ii). If Buyer elects
alternative (ii), Seller shall direct the Escrow Agent to return the Down
Payment to Buyer, and Seller shall reimburse Buyer for any reasonable and
documented out-of-pocket expenses which Buyer has incurred in connection
with this transaction in an amount not to exceed $25,000, this Agreement
shall terminate, and neither party hereto shall have any further rights or
obligations under this Agreement as to the other, except with respect to
the reimbursement of expenses and as otherwise expressly reserved in this
Agreement.
Section 7.5. Severability. The provisions of this Article 7 shall be
subject to the severability provisions of Section 16.11, below.
ARTICLE 8
BUYER'S RIGHT OF ACCESS
Section 8.1. Buyer's Access. Subject to Seller's reasonable
requirements for security and the protection of its confidential
information, Buyer and its representatives shall be permitted access to the
Complex upon prior reasonable notice and at mutually convenient times
during normal business hours in order to inspect the Complex and the
Complex Records, as more particularly described in Section 8.2. During
such access, Buyer and its representatives shall not cause any substantial
interference with Seller's operations at the Complex. Seller may require
that persons having such access be accompanied by Seller's representatives
while inside the Complex. Buyer's inspections may include test borings and
other invasive methods, provided that Buyer promptly repairs any resulting
damage and restores the applicable surface to substantially its prior
condition.
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Section 8.2. Buyer's Access to Records.
(a) Seller shall permit Buyer to review and make, at Buyer's
expense, photocopies or other reproductions of, plans and specifications
for the Complex and Complex systems (including any available "as built"
drawings), maintenance records, licenses, reports, certificates, contracts
and such other items relating to the construction or operation of the
Complex as may be in the possession of or readily accessible to Seller at
the time such request is received ("Complex Records").
(b) Except as otherwise provided in this Agreement, Seller makes
no representation or warranty and assumes no liability for the accuracy,
availability, or completeness of any of the Complex Records and Buyer
assumes all risk in connection with the use thereof and releases Seller
from any liability in connection with the use of any of the Complex Records
by Buyer or by any other person acting on behalf of or through Buyer. If
for any reason whatsoever title to the Complex does not pass to Buyer and
no litigation is pending between the parties with respect to this
Agreement, Buyer shall immediately return to Seller all Complex Records,
including any photocopies, reproductions or summaries thereof, which Buyer
or any of its representatives have obtained, without retaining any copies
thereof.
Section 8.3. Buyer's Indemnity. The rights of access granted under
this Agreement shall be at Buyer's sole risk. Buyer shall Indemnify Seller
against any and all claims and liability for injury, including death, to
any person, or damage or loss of any kind to property, including the
Complex and other property of Seller, Buyer or of any third party, that may
occur as a result of Buyer's exercise of any of such rights of access,
including but not limited to the use of the Complex Records, excluding,
however, claims or liability arising from the sole negligence or
intentional acts of Seller.
Section 8.4. Buyer's Insurance. Buyer shall, at all times that it
may be at or upon the Complex pursuant to this Agreement, keep in force
public liability insurance in good and solvent insurance companies with
limits of at least $1,000,000/ $2,000,000 for bodily injury and $1,000,000
for property damage, or a combined single limit of not less than
$2,000,000., covering its liability under this Article 8, including its
contractual liability under Section 8.3. Certificates of such insurance
shall be delivered to Seller prior to such entry. Such certificates shall
provide that they may not be cancelled or modified unless Seller is given
at least thirty (30) days' prior written notice.
Section 8.5. Survival of Buyer's Obligations. Buyer's obligations
under this Article 8 shall survive the Closing or any termination of this
Agreement.
ARTICLE 9
ENVIRONMENTAL MATTERS
Section 9.1. Fuel Storage Tank. Seller has disclosed to Buyer and
Buyer acknowledges that it is aware of a certain subground level storage
tank which is located at the Complex and which is currently in use to store
and supply fuel. To Seller's Knowledge, without independent inquiry, there
are no leaks from such tank. Buyer shall inspect the same and assure
itself that such tank is in a condition which complies with the
requirements of applicable federal, state or local law. Buyer agrees to
file after the Closing, with such federal, state, and local agencies as may
have jurisdiction thereof, such documents as may be necessary to show the
change of ownership of such tank.
Section 9.2. Asbestos.
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(a) Seller has disclosed to Buyer that asbestos containing materials
(ACMs) were used in connection with the construction of buildings and
improvements in the Complex. Except as hereafter provided, Seller shall
have no obligation or liability for any removal, encapsulation or other
remedial action with respect to ACMs at the Complex or otherwise relating
to the presence of any ACMs in or at the Complex. Seller covenants and
represents that any ACMs which were removed by it from the Complex were
removed and disposed of in accordance with all applicable legal
requirements. Seller agrees to Indemnify Buyer with respect to the lack
of compliance by Seller with applicable laws in connection with its removal
and disposal of any ACMs from the Complex, and for asbestos exposure claims
made by any third parties arising out of any alleged contact with ACMs
during the period prior to Buyer's ownership of the Complex. The foregoing
agreements shall survive the Closing.
(b) Prior to the expiration of the Evaluation Period, Buyer shall
enter into a contract (which may be contingent upon the occurrence of the
Closing) in form and with a licensed ACM contractor reasonably approved by
Seller (such contractor to carry insurance coverage for the benefit of
Seller and Buyer in amounts reasonably acceptable to Seller) for the
removal of all ACMs from the main headquarters building at the One Cyanamid
Plaza location (the so-called Serpentine Building containing approximately
370,000 square feet). Buyer agrees to proceed with the performance of such
contract after Closing and subject to force majeure (i.e., causes beyond
Buyer's control), to complete the removal of such ACMs within eighteen (18)
months after the Closing, such Agreement to survive the Closing.
Completion of the contract shall be evidenced by the issuance by the
contractor of a certification to Seller and Buyer that the ACMs have been
disposed of in accordance with applicable laws. If Buyer fails to enter
into such contract during the Evaluation Period, Seller shall have the
right to terminate this Agreement by notice to Buyer, whereupon the Down
Payment shall be refunded to Buyer and all rights and obligations hereunder
shall terminate, except those which by their terms would survive such
termination. This Agreement by Buyer is a material inducement to Seller in
entering into this Agreement. Therefore, if Buyer fails to diligently
pursue to completion the removal of the ACMs from the main headquarters
building after the Closing, and subject to force majeure as aforesaid, to
complete such removal within 18 months thereafter, Seller shall be entitled
to pursue all available legal remedies for such failure against Buyer,
including suits for damages and/or specific performance.
Section 9.3. Environmental Matters.
(a) Buyer understands, agrees and acknowledges that it is purchasing
the Complex in AS IS WHERE IS condition and that Seller has not, except as
specifically contained in this Agreement, made and will not make, either
expressly or impliedly, any other representations or warranties concerning
the environmental condition of the site, and that if Buyer accepts title to
the Complex, it is relying solely upon its own due diligence investigation,
and the specific representations and warranties of Seller in this
Agreement.
(b) Neither Buyer nor any of its employees, contractors, agents,
successors and assigns may, prior to Closing, voluntarily report or
disclose any environmental condition or Hazardous Substances existing at
the Complex to any third party, including, without limitation, any
governmental agency, except with the consent of Seller or as may be
required by law. Notwithstanding the above, (i) Buyer may disclose
environmental conditions or the presence of Hazardous Substances to its
attorneys, engineers, contractors, environmental consultants, insurers,
lenders and business partners, provided that such parties are made aware of
the nondisclosure obligation included herein and agree to be bound by such
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obligation of nondisclosure, (ii) Buyer may disclose information which is
already public knowledge on the date of this Agreement, and (iii) Buyer
shall not be responsible for the disclosure by any of its agents or
contractors of information which was possessed by such agent or contractor
on the date of this Agreement.
ARTICLE 10
REPRESENTATIONS AND WARRANTIES
Section 10.1. Seller's Representations. Seller represents and
warrants that the following are true and correct on the date hereof, and
will be true and correct at Closing:
(a) Corporate Organization and Authority. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Maine, is qualified to do business in the state where
the Complex is located and has all necessary corporate power to execute and
deliver this Agreement, and any other document required by this Agreement
and to perform all of its obligations thereunder, that this Agreement and
any other document required by this Agreement have been duly authorized by
all requisite corporate action on Seller's part, that the consent of no
other party is required for the execution and delivery of same by Seller,
and that each of this Agreement and any other document required by this
Agreement, when such agreement has been executed and delivered by all
parties thereto, will constitute the valid and legally binding obligation
of Seller.
(b) Litigation. There is no litigation or proceeding pending
or, to Seller's Knowledge, threatened which would in Buyer's reasonable
judgment materially adversely affect the Complex or Buyer's intended use
thereof, or prevent Seller from complying with any of its obligations under
this Agreement.
(c) Violations.
(i) No notes or notices of violation of law or municipal
ordinances or of federal, state, county or municipal or governmental agency
regulations, orders or requirements relating to the Land or Complex have
been received by Seller, other than notices which have been fully complied
with and satisfied, and, to Seller's Knowledge, it has no reason to believe
that any such note or notice may or will be entered.
(ii) Except as otherwise provided in Article 9, above, any
written notice of violations of any law, code, ordinance, regulation, rule,
requirement, order or restriction, issued by any municipal, county, state
or federal department or authority having jurisdiction over the Complex
("Violations") received by Seller prior to the Closing Date shall be
disclosed to Buyer and shall be removed or complied with by Seller.
(iii) Seller shall use commercially reasonable efforts to
remove any such Violations prior to Closing, including, if necessary, the
expenditure of funds up to the Maximum Amount. If such removal or
compliance has not been completed prior to Closing, the Closing shall be
adjourned for such period up to forty-five (45) days as is reasonably
necessary in order to secure the removal of the Violation, unless the
parties agree to the contrary.
(iv) Notwithstanding Section 10.1(c)(ii) above, if the
reasonably estimated aggregate cost to remove or comply with any Violations
which Seller is required to remove or comply with pursuant to the
provisions of Section 10.2(c)(iii), based upon a quotation from an
independent third-party contractor in the particular field involved, shall
exceed the Maximum Amount, Seller shall have the right exercisable by
Seller by notice to Buyer prior to Closing to terminate this Agreement,
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unless Buyer elects to accept title to the Transferred Assets subject to
such Violations, in which event Buyer shall be entitled to a credit against
the Purchase Price equal to the Maximum Amount and Buyer shall Indemnify
Seller against all claims, liabilities, obligations, loss and damages that
may arise as a result of such Violations. All notices of Violations issued
or received after the Closing shall be the sole responsibility of the
Buyer.
(d) Employees. No employees of Seller are being transferred to
Buyer as part of this transaction.
(e) Personal Property. Seller has good and marketable title to
the Tangible Personal Property, and all items of such property have been
fully paid for to the date of this Agreement.
(f) Permits. Seller has not received any notice of default
under any Permit, nor has Seller received any notice from any source to the
effect that there is lacking any Permit needed in connection with the
operation of the Complex, or that any Permit may (or should, based on
factual information known to Seller) be revoked or suspended.
(g) Condemnation. There are no threatened, or to Seller's
Knowledge, pending, condemnation or eminent domain proceedings which would
affect the Complex or any part thereof.
(h) Insurance. There are no outstanding mandatory requirements
for work by the insurance companies which insure the Complex, or by any
board of fire underwriters or body exercising similar functions.
(i) Tax Bills. The tax bills, copies of which are annexed
hereto as Exhibit G, are true and correct copies of all of the current tax
bills for the Land and the Complex.
(j) Disclosure. Seller has disclosed or will disclose to Buyer
prior to the expiration of the Evaluation Period (or thereafter when first
discovered prior to the Closing) all material information with respect to
the environmental condition of the Complex which is within Seller's
Knowledge.
(k) Records. The Complex Records made available to Buyer are
and will be, to Seller's Knowledge, true, complete and unmodified.
(l) Contracts. There are no contracts, service agreements,
leases or other occupancy agreements with respect to the Complex with any
third parties, including governmental authorities, which are not terminable
on notice of thirty (30) days or less.
Section 10.2. Complex to be Sold "As Is". Other than those
representations and warranties which are expressly set forth in this
Agreement, Buyer has not been induced by and has not relied upon any
representations, warranties or statements, whether express or implied,
written or oral, made by Seller or any agent, employee, attorney or other
representative of Seller or by any broker or any other person representing
or purporting to represent Seller, including, without limitation, with
respect to the following: (i) the condition or state of repair of any of
the Transferred Assets or the compliance thereof with any laws, ordinances
or governmental regulations, or the suitability of any of the Transferred
Assets for any intended use or operation by Buyer; (ii) zoning, building
department or environmental requirements which may be applicable to any of
the Transferred Assets or any use or operation thereof, or the impact, if
any, of such requirements on any intended use by Buyer; (iii) the
assignability of licenses or contractual or other rights or permits now
held by or for the benefit of Seller; or (iv) any other matter or thing
affecting the Transferred Assets or any part thereof or any operation or
use thereof. Subject to the rights of Buyer to terminate this Agreement
pursuant to the provisions of Article 6, Buyer will be afforded sufficient
opportunity to conduct inspections of the Transferred Assets and Buyer has
and will be given the opportunity to inspect and fully satisfy itself as to
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the condition of the Transferred Assets (including, without limitation, the
environmental, structural and engineering condition) and that all such
Transferred Assets are being sold by Seller and purchased by Buyer strictly
"AS IS" and "WHERE IS" as of the date of this Agreement, and that, on the
Closing Date, Buyer shall accept the same so long as the then physical
condition thereof is substantially the same as on the date of the
expiration of the Evaluation Period (ordinary wear and tear excepted and,
subject to the provisions of Article 13, damage due to casualty loss
excepted). Without limiting any of the foregoing provisions of this
Section 10.2, Buyer expressly acknowledges and agrees that Buyer's entering
into this Agreement shall be conclusive evidence that it has not relied
upon any representations or warranties except as are expressly set forth in
this Agreement AND THAT ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, WITH
RESPECT TO ANY OF THE TRANSFERRED ASSETS ARE EXPRESSLY DISCLAIMED AND
WAIVED BY BUYER, INCLUDING, WITHOUT LIMITATION, ANY AND ALL WARRANTIES OF
MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR PURPOSE. Nothing contained
in this Section shall affect Seller's liability, if any, arising out of the
breach of, or inaccuracy of, its specific representations and warranties
contained in this Agreement.
Section 10.3. Buyer's Representations. Buyer represents and warrants
that the following are true and correct on the date of this Agreement:
(a) Organization and Authority. Buyer is a limited liability
company duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all necessary power to execute and
deliver this Agreement, and any other document required by this Agreement
and to perform all of its obligations thereunder, that this Agreement and
any other document required by this Agreement have been duly authorized by
all requisite action on Buyer's part, that the consent of no other party is
required for the execution and delivery of same by Buyer, and that each of
this Agreement and any other document required by this Agreement, when such
agreement has been executed and delivered by all parties thereto, will
constitute the valid and legally binding obligation of Buyer.
(b) Litigation. There is no litigation or proceeding pending
which would prevent Buyer from complying with any of its obligations under
this Agreement or any other agreement contemplated herein.
Section 10.4. Survival of Representations and Warranties and No Third
Party Beneficiaries. The representations and warranties of Buyer and
Seller under this Article 10 shall survive the Closing and are personal to
the parties to this Agreement. None of such representations and
warranties, nor any other provisions of this Agreement, shall confer any
rights or remedies on any third parties, nor discharge any obligations of
any third parties nor give any third party any right of subrogation or
action over or against any party to this Agreement.
ARTICLE 11
ADJUSTMENTS AND EXPENSES
Section 11.1. Buyer's Expenses. Buyer shall pay at or prior to
Closing (i) all charges, fees, expenses, taxes, and all other taxes and
fees relating to any Buyer financing for this purchase and sale; (ii) the
cost of any appraisal of the Complex and any inspections of the Complex,
(iii) the cost of the Survey (iv) all of its attorneys' legal expenses in
connection with the purchase and sale, and (v) the cost of title insurance
and deed recording fees.
Section 11.2. Seller's Expenses. Seller shall pay at or prior to
Closing (i) all sales and use taxes incident to this purchase and sale;
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(ii) the brokerage commission of the Broker; (iii) all of its attorneys'
legal expenses in connection with the purchase and sale, and (iv) the cost
of real estate transfer taxes.
Section 11.3. Proration Adjustments. The following items of expense
relating to the Transferred Assets shall be prorated as of the Closing
Date:
(a) Subject to Section 11.4 below, current real estate taxes
shall be determined preliminarily as of the Closing on the basis of the
most recent available tax bill, and appropriate adjustments shall be made
between the parties when the amount of such taxes are finally determined.
(b) Assessments, water and sewer charges, any other applicable
public utility charges, and Assumed Permit charges and fees shall be
appropriately adjusted between the parties. Metered utility charges shall
be adjusted on the basis of meter readings made no more than five (5) days
prior to Closing.
(c) Such other items as are provided for in this Agreement or as
are normally prorated or adjusted on the sale of real estate such as the
Complex.
The provisions of this Section shall survive the Closing. The parties
agree to cooperate in good faith after the Closing to correct any errors
which are made in the calculation and computation of the adjustments
described above.
Section 11.4. Assessments; Tax Adjustment.
(a) If, as of the Closing, the Complex or any part thereof shall
be affected by any improvement assessments that are or may become payable
in installments, then for the purposes of this Agreement, Seller shall be
required to pay only those installments that are due and payable on or
prior to Closing. Seller represents that it is not now paying any such
assessments with respect to the Complex.
(b) Seller has filed a real estate tax appeal for 1996 with
respect to the Headquarters Complex. Seller shall be entitled to the
benefit of any refunds for any full tax years prior to Closing. Seller
shall pay all expenses for any administrative or judicial proceedings which
Seller at any time brings to secure such refunds. Buyer shall execute all
necessary documents and consents required by Seller in any such proceedings
without cost or expense to Seller. After Closing, Buyer shall cooperate
with Seller by allowing reasonable access to the Headquarters Complex and
Complex Records by agents of Seller or Wayne Township, as is required by
the pending tax appeal. If Buyer files a tax appeal for the Headquarters
Complex for 1997, it agrees to consolidate such appeal with Seller's 1996
appeal, if required by law. Each party shall reasonably cooperate with the
other in such consolidated appeal and no settlement shall be effected
without the concurrence of both Seller and Buyer.
(c) Any refund, net of the associated expenses of recovering
same, relating to the tax year during which the Closing occurs shall be
apportioned between Buyer and Seller on the basis of the number of days in
such tax year up through the Closing. If a tax appeal is filed for the
year in which the Closing occurs, such appeal shall be controlled by the
party who will own the Complex for the longer period of time during such
tax year. Neither party shall settle any such proceedings without the
consent of the other party, which consent shall not be unreasonably
withheld or delayed. The provisions of this Section shall survive Closing.
ARTICLE 12
COVENANTS PENDING CLOSING
Section 12.1. Covenants Pending Closing. Between the date of this
Agreement and the Closing and except as otherwise consented to or approved
by Buyer in writing or required or permitted by the terms of this
Agreement, Seller agrees that:
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(a) Seller shall not mortgage, pledge, or create any contractual
lien, charge or any other encumbrance (or agree so to do) in respect to any
of the Transferred Assets;
(b) Seller shall not sell or transfer, or agree to sell or
transfer, any of the property constituting the Transferred Assets;
(c) Seller shall not, without Buyer's consent, which shall not
be unreasonably withheld or delayed, (i) enter into any new contract or
lease with respect to the Complex which is not terminable at or prior to
the Closing, or (ii) allow any Permit to expire or be otherwise terminated;
(d) Seller will maintain in full force and effect all Casualty
Insurance which is in effect as of the date of this Agreement with respect
to the Transferred Assets;
(e) All contracts with respect to the maintenance and operation
of the Complex, and any rights of third parties to possession thereof,
shall be terminated as of the Closing, except as otherwise agreed by the
parties or as permitted by the provisions of Article 7 of this Agreement.
(f) Seller shall continue its normal preventative maintenance on
the improvements of the Complex to avoid deterioration beyond ordinary wear
and tear. Seller shall also continue to pay all accruing operating
expenses of the Complex. The provisions of this Section 12.1 shall survive
Closing.
(g) Seller shall not use, dispose of or store any Hazardous
Substances on the Complex, except those which are customarily used in the
operation and maintenance of properties such as the Complex, but any such
materials must be used and maintained in accordance with all applicable
laws.
ARTICLE 13
FIRE AND OTHER CASUALTY
Section 13.1. Seller's Obligation to Insure. From the date hereof
until Closing, Seller shall maintain fire and extended coverage insurance
upon the Complex in an amount not less than the full replacement value (the
"Casualty Insurance").
Section 13.2. Procedure Upon Casualty. In the event of any damage to
the Complex by reason of fire or other casualty occurring prior to the
Closing (a "Casualty"), Seller shall, within thirty (30) days after the
Casualty, obtain from a building contractor of its choice an estimate of
the cost necessary to repair, restore, or replace any such damage in a
manner which is in accordance with the requirements of applicable law (a
"Repair") and the estimated time period to complete such Repair. If the
estimated cost of the Repair is less than $100,000.00 and the estimated
time of completion is less than 120 days, Seller shall so notify Buyer and
Seller shall promptly undertake to complete the Repair. In such case,
Seller shall have the right to adjourn the Closing for a period not to
exceed 120 days to enable Seller to complete the Repair. At Buyer's
option, as more fully set forth in Section 16.11, below, the Closing may be
adjourned as to the entire Complex, or as to the portion of the Complex
affected by such casualty only, or the Closing may take place prior to the
Repair, whereupon Seller's Repair obligation shall survive Closing. If the
estimated cost of the Repair is $100,000.00 or more, or if the estimated
time to complete the Repair is 120 days or more, Seller shall so notify
Buyer, such notice to also indicate whether or not Seller is willing to
make the Repair, and, if Seller is not willing to Repair, Seller's best
estimate of the amount of insurance proceeds which will be available from
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the Casualty. Buyer shall have the right, within ten (10) business days
after its receipt of Seller's notice, to terminate this Agreement as to the
portion of the Complex affected by such Casualty, as more fully set forth
in Section 16.11 of this Agreement, or as to the entire Complex, by notice
to Seller. Upon such termination, the applicable portion of the Down
Payment shall be refunded to Buyer and all rights and obligations hereunder
with respect to the applicable portion of the Complex shall terminate,
except those which explicitly survive such termination. If Buyer does not
terminate this Agreement within said ten (10) business day period as to the
damaged portion of the Complex, and Seller has indicated that it will not
make the Repair, the Closing shall take place without abatement of the
Purchase Price, but Seller shall at Closing (a) deliver to Buyer the
proceeds of its Casualty Insurance resulting from such Casualty which
Seller may have collected, (b) pay to Buyer any applicable deductible under
the Casualty Insurance maintained by Seller with respect to such Casualty
and (c) guaranty to Buyer the payment of any additional proceeds of its
Casualty Insurance to which it may be entitled. If Buyer does not
terminate this Agreement as to the damaged portion of the Complex, as
aforesaid and Seller does elect to Repair, it shall be obligated to
complete the Repair regardless of whether or not the proceeds of the
Casualty Insurance are adequate to cover the cost of such Repair and Seller
may use any proceeds of its Casualty Insurance for the purpose of the
Repair. After completion of the Repair to Buyer's reasonable satisfaction,
any excess proceeds of the Casualty Insurance shall belong to Seller.
Subject to Section 16.11, Seller shall also have the right to adjourn the
Closing for a period equal to the estimated time to complete the Repair,
unless Buyer elects to close title prior to completion of the Repair,
whereupon Seller's obligation to Repair shall survive the Closing.
Section 13.3. Provisions of this Article 13 Supersede any Allocation
of Rights Established by Applicable State Law. This Article 13 is intended
as an express provision with respect to allocation of risk in the event of
any Casualty and supersedes any law of the state in which the Complex is
located which by its terms allocates such risk in any different manner.
ARTICLE 14
CONDEMNATION
Section 14.1. Notice to Buyer. In the event that prior to the
Closing Seller has Knowledge of any actual or threatened Taking of all or
any part of the Complex, Seller shall give Buyer prompt notice of such
event. Seller represents that it presently has no such Knowledge.
Section 14.2. Taking and Termination. If prior to the Closing a
Taking of all or any part of the Complex shall occur or be threatened in
writing by the applicable governmental authority, Buyer may terminate this
Agreement as to the portion of the Complex affected by such Taking, as more
fully set forth in Section 16.11 of this Agreement, or as to the entire
Complex, by notice to the Seller given prior to the Closing and in any
event not later than ten (10) business days after the date on which Buyer
receives notice of such Taking or threatened Taking. If Buyer so elects to
wholly or partially terminate this Agreement, Seller shall cause the Escrow
Agent to return the applicable portion of Down Payment to Buyer, Seller
shall be entitled to the entire condemnation award (the "Award") and
neither party shall have any further right or liability under this
Agreement as to the applicable portion of the Complex except as expressly
reserved in this Agreement. If the Taking or threatened Taking affects the
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entire Complex, Seller shall also have the right to terminate this
Agreement as provided in the previous sentence.
Section 14.3. Taking Without Termination. If prior to the Closing a
Taking which does not involve a termination of this Agreement shall occur
or be threatened in writing by the applicable governmental authority, the
Closing shall take place without any abatement of the Purchase Price. At
the Closing, Seller shall assign to the Buyer all of Seller's right to the
Award. In such case, Seller agrees that it will not settle or compromise
any Award without the consent of Buyer, which consent shall not be
unreasonably withheld or delayed.
ARTICLE 15
BROKER
Section 15.1. Broker. Buyer represents and warrants to Seller that
neither Buyer nor any of its affiliates or agents has retained or dealt
with any unaffiliated broker, finder or similar party in connection with
any of the transactions contemplated by this Agreement (collectively, the
"Purchase Transactions"), except for the Broker, whose commission Seller
has agreed to pay pursuant to a separate agreement. Buyer agrees to
Indemnify Seller against any claim or liability for broker's commissions or
against any similar compensation or related damages asserted by or due to
any person or entity claiming to have dealt with Buyer or Buyer's
affiliates or agents in connection with any of the Purchase Transactions,
except for the Broker. Seller represents and warrants that neither Seller
nor any agent of Seller has retained any broker or finder in connection
with any of the Purchase Transactions, except for the Broker. Seller
agrees to Indemnify Buyer against any claim or liability for broker's
commissions or similar compensation or related damages asserted by or due
to any person or entity (including the Broker) claiming to have dealt with
Seller or its agents in connection with any of the Purchase Transactions.
The representations, warranties and covenants set forth in this Article 15
shall survive the Closing or any termination of this Agreement prior to
Closing.
ARTICLE 16
MISCELLANEOUS PROVISIONS
Section 16.1. Access to Books and Records. This sale does not
include the books and records of Seller, but Seller and Buyer agree that
all books, records, files and correspondence pertaining strictly to the
business of the management and operation of the Complex which are in the
possession or control of Seller, including supplier files and other
operating records, will remain available for use by the Buyer at the
Complex for such time as Buyer may desire, provided, however, that (i) the
above shall not include general ledgers, general journals, vouchers,
voucher registers, and other accounting records not pertaining strictly to
the business of the operation and management of the Complex, all of which
may be removed by Seller prior to the Closing Date and (ii) Buyer agrees to
preserve all Complex Records and not to destroy or dispose of the same for
at least two (2) years after Closing, or until Seller's 1996 tax appeal is
concluded (notice of the occurrence of which shall be promptly given by
Seller to Buyer), and representatives of Seller shall have access to such
books, records, files and correspondence at all reasonable times upon
reasonable advance notice.
Section 16.2. Time Periods. All time limits and periods stated in
this Agreement are OF THE ESSENCE, except the Closing Date which may be
made OF THE ESSENCE in accordance with the provisions of Section 4.1.
Section 16.3. Recordation and Assignment. This Agreement shall not
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<PAGE>
be recorded. This Agreement shall not be assigned by Buyer until the
contingencies of Article 6 have been satisfied or waived, and until all
Title Exceptions have been resolved to Buyer's satisfaction under Article
7, except that Buyer may assign this Agreement at any time to an entity
which is controlled by and affiliated by ownership with Buyer. Any
recordation or prohibited assignment of this Agreement shall be null and
void and shall give Seller the option to terminate this Agreement and
retain the Down Payment. If Buyer lawfully assigns this Agreement, Buyer
shall remain liable for the indemnification obligations of Buyer which
arise under this Agreement prior to Closing.
Section 16.4. Applicable Law. This Agreement shall be governed by
the laws of the State of New Jersey.
Section 16.5. Entire Agreement. This Agreement constitute the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior written or oral understandings of the parties, all of
which are merged herein.
Section 16.6. All Amendments in Writing. This Agreement may not be
modified or changed in any respect except in the event of a written
amendment executed by both parties.
Section 16.7. Invalidity. If any of the terms or conditions of this
Agreement are determined to be invalid, void or illegal, such determination
shall in no way affect or invalidate any of the other provisions of this
Agreement.
Section 16.8. Notices. Except as otherwise specified herein, all
notices, demands, requests, consents, approvals and other communications
(collectively, "Notices") required or permitted to be given hereunder must
be in writing, and must be given or made by personal delivery or by mailing
the same by certified, registered or express mail, or express delivery
service, postage prepaid, return receipt requested, addressed to the party
to be so notified, as follows:
If to Seller: c/o AMERICAN HOME PRODUCTS CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
Attn: John R. Considine
Vice President
with a copy to:
c/o AMERICAN HOME PRODUCTS CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
Attn: William P. Kelly, Esq.
Senior Corporate Counsel
If to Buyer: 610 Fifth Avenue
New York, New York 10020
Attn: Richard R. Previdi, Managing Member
with a copy to:
Tenenbaum & Saas, PC
4330 East West Highway
Bethesda, Maryland 20814
Attn: Mark Tenenbaum, Esq.
If to Escrow Agent:
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_______________________
_______________________
_______________________
________________________
Any Notice shall be deemed given on receipt or refusal of delivery. Either
party may change the addresses for Notices to such party by giving a Notice
thereof to the other party, which change shall be deemed effective on
receipt by the other party.
Section 16.9. Calendar Days. Any time frame designated in this
Agreement which refers to "days" shall be deemed to refer to calendar days
and not business days.
Section 16.10. Like Kind Exchange. Buyer acknowledges that Seller
may seek to implement a Like-Kind Exchange of the Complex under Section
1031 of the Internal Revenue Code. Buyer agrees to cooperate with Seller
in effecting such an exchange, including executing and delivering documents
to and in the name of, and delivering the Purchase Price to such other
persons or entities as Seller may designate. Seller shall Indemnify Buyer
with respect to any additional out-of-pocket costs incurred in connection
with such cooperation.
Section 16.11. Right of Partial Termination/ Severability.
Notwithstanding any other provision of this Agreement to the contrary, in
the event of any Casualties, Takings, title defects, environmental
conditions, defaults by Seller or failure of any other precondition to
Buyer's obligation to close title (except under Section 6.2) which give
rise to termination rights pursuant to this Agreement and which affect less
than all of the three portions of the Complex, the provisions of this
Section 16.11 shall apply, as follows:
(a) For purposes of this Section 16.11, (i) the portion of the
Purchase Price allocable to the Headquarters Complex shall be Eleven
Million Dollars ($11,000,000.), the portion of the Purchase Price allocable
to the 1700 Complex shall be Two Million Five Hundred Thousand Dollars
($2,500,000.), and the portion of the Purchase Price allocable to the 1800
Complex shall be Two Million Five Hundred Thousand Dollars ($2,500,000.),
and (ii) the portion of the Down Payment allocable to the Headquarters
Complex shall be Six Hundred Eighty Seven Thousand Five Hundred Dollars
($687,500.), the portion of the Down Payment allocable to the 1700 Complex
shall be One Hundred Fifty Six Thousand Two Hundred Fifty Dollars
($156,250.), and the portion of the Down Payment allocable to the 1800
Complex shall be One Hundred Fifty Six Thousand Two Hundred Fifty Dollars
($156,250.).
(b) Notwithstanding any other provision of this Agreement to the
contrary, to the extent either party is granted a right to terminate this
Agreement by virtue of any Casualty, Taking, title problem, environmental
condition, Seller default or failure of any other precondition to Buyer's
obligation to close title (except under Section 6.2)(any and all of the
foregoing being hereinafter referred to as a "Termination Event"), and such
Termination Event affects less than all three of the portions of the
Complex, Buyer shall have the right, to be exercised at Buyer's sole option
by sending a written notice to Seller within the time period afforded to
Buyer within which to exercise its termination right due to such
Termination Event (or, if applicable, for a period of ten (10) days after
Seller exercises its termination right due to such Termination Event by
written notice to Buyer), to require that this Agreement be terminated only
as to the portion of the Complex so affected (but not less than the
entirety of such portion), or as to the entire Complex; and in the event
Buyer elects to require that this Agreement be terminated only as to the
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portion of the Complex so affected, then (i) the Purchase Price and Down
Payment shall be reduced by the portion thereof which is allocable to that
portion of the Complex as to which Buyer exercised such partial termination
election, as set forth in Section 16.11(a), above, with the reduced portion
of the Down Payment to be refunded to Purchaser (together with the
allocable portion of interest accrued thereon) within five (5) days after
Buyer's notice of partial termination is delivered to Seller, (ii) this
Agreement shall be terminated with regard to the applicable portion of the
Complex, and all obligations hereunder related to such portion of the
Complex shall terminate, subject to any default remedies or survival rights
set forth herein which may otherwise be applicable, and (iii) this
Agreement shall remain in full force and effect as to the balance of the
Complex, and shall be deemed amended mutatis mutandis to account for such
partial termination.
(c) By way of example, and not of limitation, if a Termination
Event affects only the 1700 Complex, and does not affect either the
Headquarters Complex or the 1800 Complex, then Buyer may elect to terminate
this Agreement in its entirety, or only as the 1700 Complex; and if Buyer
elects to terminate this Agreement only as to the 1700 Complex, the
Purchase Price shall be reduced to $13,500,000. and the Down Payment shall
be reduced to $843,750.
Section 16.12. Seller Indemnity. Seller agrees to Indemnify Buyer
with respect to (a) any claim for personal injury arising out of an
occurrence at or from the Complex which took place prior to Closing, and
(b) any claim under a contract entered into by Seller with respect to the
Complex (except this Agreement) which accrues prior to Closing, unless such
obligations under such contract are assumed by Buyer. This indemnification
shall survive the Closing.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as
of the date first above written.
ATTEST: AMERICAN CYANAMID COMPANY
_____________________________ By____________________________
Secretary Name:
Title:
Dated:____________, 1996
WITNESS: WELLSFORD COMMERCIAL
PROPERTIES, L.L.C.
_____________________________ By____________________________
Name: Richard R. Previdi
Title: Managing Member
Dated:____________, 1996
The undersigned joins in this Agreement for the purpose of agreeing to
convey to the Buyer in accordance with the terms of this Agreement the
property known as 1700 Valley Road, Wayne, New Jersey (including joinder as
to all representations, warranties and covenants of Seller with respect
thereto).
25
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ATTEST: NORTH AMERICAN MEDICAL
RESEARCH CORPORATION
_____________________________ By____________________________
Secretary Name:
Title:
Dated:____________, 1996
26
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EXHIBIT A
The Land
27
<PAGE>
EXHIBIT B
[Intentionally Left Blank]
28
<PAGE>
EXHIBIT C
Permits
29
<PAGE>
EXHIBIT D
[Intentionally Left Blank]
30
<PAGE>
EXHIBIT E
Bill of Sale to the Tangible Property
See attached document.
31
<PAGE>
BILL OF SALE
AMERICAN CYANAMID COMPANY, a Maine corporation, having an office at
5 Giralda Farms, Madison, New Jersey 07940 ("Seller"), in consideration of
the premises and the consideration of the amount expressed in the Purchase
and Sale Agreement (the "Agreement), dated , 1996, by and
between Seller and , a
having a principal place of business located at
("Buyer"), does hereby sell, transfer,
convey, assign, and set over to Buyer all of Seller's right, title and
interest in and to the Tangible Personal Property and Complex Records (in
their then "as is" condition, WITH BUYER HEREBY EXPRESSLY DISCLAIMING AND
WAIVING ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, AND ALL WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE), described on
Schedule A annexed hereto;
TO HAVE AND TO HOLD unto Buyer and its successors and assigns forever.
Seller hereby represents and warrants to Buyer that said property is
free and clear of all liens, charges, and encumbrances, and that Seller has
the full right, power and authority to sell said property and to make the
Bill of Sale.
IN WITNESS THEREOF, Seller has signed and sealed this Bill of Sale at
, this day of , 1996.
AMERICAN CYANAMID COMPANY
BY:
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EXHIBIT F
Assignment of Permits
See attached document.
33
<PAGE>
ASSIGNMENT OF SELLER
THIS AGREEMENT, is made as of the day of , 1996 by and
between AMERICAN CYANAMID COMPANY, a Maine corporation, having an office at
5 Giralda Farms, Madison, New Jersey 07940 ("ACC") and
, a having its principal place of business
located at
("Buyer").
WHEREAS, ACC and Buyer are parties to a certain Purchase and Sale
Agreement (the "Agreement"), providing for the sale to Buyer of the land
and improvements commonly known as the ACC Headquarters Facility located at
One Cyanamid Plaza, Wayne, New Jersey (the "Property"); and
WHEREAS, under the terms of the Agreement, Buyer has agreed to assume
certain liabilities of ACC; and
WHEREAS, concurrently with the execution and delivery hereof, ACC is
selling, transferring, assigning and delivering all of the Transferred
Assets to Buyer under the terms of the Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings set forth, the parties agree as follows:
1. Each term used but not defined herein shall have the meaning
assigned to such term in the Agreement.
2. ACC hereby sells, assigns, and sets over to Buyer all of its
right, title and interest in the assignable Permits outstanding on the
Closing Date relating to the Property.
3. Buyer agrees to indemnify, defend and hold harmless ACC from and
against any and all claims, liabilities, losses, damages, costs and
expenses (including, without limitation, reasonable attorney's fees and
other costs of defense of an attorney of ACC's choosing) arising out of or
in any way connected with the assignable Permits and accruing on and after
the Closing Date, but not relating to events occurring prior to Closing.
4. ACC agrees to indemnify, defend and hold harmless Buyer from and
against any and all claims, liabilities, losses, damages, costs and
expenses (including, without limitation, reasonable attorney's fees and
other costs of defense of an attorney of Buyer's choosing) arising out of
or in any way connected with the assignable Permits and accruing prior to
the Closing Date.
5. Nothing contained herein shall be deemed to waive any of the
rights of either party under the Agreement or to relieve either party of
any of their respective obligations, duties or liabilities described in or
arising under any provision or the Agreement.
6. This Assignment Agreement shall be binding upon and inure to the
benefit of the parties hereto and their successors and assigns.
7. This Assignment Agreement may not be amended, modified or changed
except by an instrument in writing signed by all of the parties hereto.
8. This Assignment Agreement shall be construed under and in
accordance with the laws of the State of New Jersey without giving effect
to principles of conflict of laws.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Assignment
Agreement to be duly executed as of the day and year first above written.
AMERICAN CYANAMID COMPANY
BY:_____________________________
[ ]
BY:____________________________
35
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EXHIBIT G
Tax Bills
36
<PAGE>
AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "Amendment") is
entered into as of the 13th day of January, 1997 between AMERICAN CYANAMID
COMPANY ("Seller") and WELLSFORD COMMERCIAL PROPERTIES, L.L.C. ("Buyer").
INTRODUCTORY STATEMENTS:
A. By Purchase and Sale Agreement dated November 21, 1996 (the
"Agreement"), Seller agreed to sell and Buyer agreed to by certain land and
premises in Wayne, New Jersey.
B. The parties desire to amend the Agreement in certain respects.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree that the Agreement is amended as follows:
1. Section 6.2 is amended to provide that the Evaluation Period
shall expire at 5:00 p.m. on Monday, January 13, 1997. Buyer hereby
confirms that it is not electing to terminate the Agreement pursuant to
Section 6.2 of the Agreement.
2. Section 4.l is amended to provide that the Closing Date shall be
February 28, 1997, provided all prorations to be made pursuant to Section
11.3 of the Agreement shall be calculated as if the Closing Date had been
February 5, 1997.
3. Section 9.2(b) is amended to provide that Buyer must enter into
the ACM removal contract no later than February 14, 1997 and that a copy of
such contract shall be delivered to Seller immediately upon its execution.
4. Pursuant to Section 1.28, the following items of Tangible
Personal Property shall be removed by Seller from the Complex prior to
Closing:
a. The orange carpeting in the cafeteria area of the so-called
Serpentine Building of the Headquarters Complex;
b. All loose furniture, office and computer equipment and
office supples, but specially excluding any millwork;
c. All low wall movable partitions in the Serpentine Building;
d. All signage, except signage required by code;
e. All display cases and retail-type tenant improvements and
furnishings;
f. All cafeteria furniture;
g. All open shelving, including, without limitation, the
shelving system in the basement of the Serpentine Building and the West
Building, except as Buyer may otherwise designate prior to removal;
h. All planters;
i. All modular furniture;
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<PAGE>
j. All rotary file systems;
k. All carpeting in the fifth and sixth floor lobbies of the
West Building;
l. All carpeting in the sixth floor conference room of the West
Building; and
m. All art work.
5. Section 7.1 of the Agreement is amended to provide that Buyer's
notice of objections to title shall be due no later than January 13, 1997,
and Seller acknowledges its receipt of such notice in a timely fashion.
6. This Amendment may be executed in counterparts, each of which
shall be deemed an original and all of which, when assembled, shall
constitute but one and the same original. This Amendment may be executed
and delivered by facsimile transmission, and each party shall accept such
facsimile as a duly executed counterpart original.
7. Except and as amended hereby, the Agreement remains in full force
and effect.
IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment as
of the date first above written.
ATTEST: AMERICAN CYANAMID COMPANY
__________________________ By:___________________________
, Secretary
ATTEST: WELLSFORD COMMERCIAL
PROPERTIES, L.L.C.
___________________________ By: _________________________
Richard R. Previdi,
Managing Member
[Signatures Continue on the Following Page]
38
<PAGE>
The undersigned hereby agrees to the foregoing Amendment:
ATTEST: NORTH AMERICAN MEDICAL
RESEARCH CORPORATION
__________________________ By: _________________________
, Secretary
39
<PAGE>
SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS SECOND AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "Second
Amendment") is entered into as of the 13th day of February 1997 between
AMERICAN CYANAMID COMPANY ("Seller") and WELLSFORD COMMERCIAL PROPERTIES,
L.L.C. ("Buyer").
INTRODUCTORY STATEMENTS:
A. By Purchase and Sale Agreement dated November 21, 1996, and
amended by Amendment to Purchase and Sale Agreement dated January 13, 1997
(as amended, the "Agreement"), Seller agreed to sell and Buyer agreed to
buy certain property in Wayne, New Jersey.
B. The parties desire to further amend the Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree that the Agreement is amended as follows:
1. Section 9.2(b) is amended to provide that Buyer must enter into
the ACM removal contract no later than February 21, 1997 and that a copy of
such contract shall be delivered to Seller immediately upon its execution.
In addition, if Seller has any objections to the ACM removal contract, it
will promptly notify Buyer of such objections in writing, and Seller shall
not have the right to terminate the Agreement if Buyer addresses such
objections to Seller's reasonable satisfaction within five (5) business
days after its receipt thereof from Seller.
2. This Second Amendment may be executed in counterparts, each of
which shall be deemed an original and all of which, when assembled, shall
constitute but one and the same original. This Second Amendment may be
executed and delivered by facsimile transmission, and each party shall
accept such facsimile as a duly executed counterpart original.
3. Except as amended hereby, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment as
of the date first above written.
ATTEST: AMERICAN CYANAMID COMPANY
__________________________ By: _______________________
, Secretary
ATTEST: WELLSFORD COMMERCIAL
PROPERTIES, L.L.C.
__________________________ By: _________________________
Richard R. Previdi, Managing
Member
The undersigned hereby agrees to the foregoing Amendment:
40
<PAGE>
ATTEST: NORTH AMERICAN MEDICAL
RESEARCH CORPORATION
____________________________ By: ____________________________
, Secretary
41
<PAGE>
THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT
THIS THIRD AMENDMENT TO PURCHASE AND SALE AGREEMENT (the "Third
Amendment") is entered into as of the 28th day of February 1997 between
AMERICAN CYANAMID COMPANY ("Seller") and WELLSFORD WAYNE CORP., (as
"Buyer") as assignee of WELLSFORD COMMERCIAL PROPERTIES, L.L.C.
("Wellsford").
INTRODUCTORY STATEMENTS
10 By Purchase and Sale Agreement dated November 21, 1996, and
amended by Amendment to Purchase and Sale Agreement dated January 13, 1997
and by Second Amendment to Purchase and Sale Agreement dated February 13,
1997 (as amended, the "Agreement"), Seller agreed to sell and Wellsford
agreed to buy certain property in Wayne, New Jersey.
11 By Assignment and Assumption of Purchase and Sale Agreement,
Wellsford assigned to Buyer all of its right, title and interest in and to
the Agreement.
12 The parties desire to further amend the Agreement.
13 Capitalized terms not defined herein shall have the meanings given
to them in the Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree that the Agreement is amended as follows:
14 The Purchase Price shall be increased to $16,320,000. In lieu of
Buyer accepting a conveyance of the 1700 Complex from North American
Medical Research Corporation ("North American"), Seller agrees to transfer
and Buyer agrees to accept all of the issued and outstanding capital stock
of North American. Such transfer shall be for a consideration of
$1,000,000. In consideration of this transaction, Seller shall execute and
deliver to Buyer at Closing the Indemnification and Stock Transfer
Agreement which is annexed hereto as Schedule A.
15 In accordance with Section 4.2 of the Agreement, Seller shall
convey the remainder of the Complex (the "Headquarters Complex and the 1800
Complex") to Buyer for a consideration of $15,320,000. All of the other
Transferred Assets not owned by North American shall be conveyed to Buyer
in accordance with the terms of the Agreement. Buyer agrees to be
responsible for the portion of the Realty Transfer Tax attributable to the
$320,000. increase in the Purchase Price.
16 Section 11.3 of the Agreement is amended to provide that the
proration of real estate taxes with respect to the Headquarters Complex
shall be calculated as if the Closing Date had been December 31, 1996. All
other prorations shall be made as of February 5, 1997, in accordance with
the terms of the Agreement.
17 Seller agrees to pay at Closing an additional brokerage commission
of $80,000. to Richard Ripps and a closing fee of $240,000. to Wellsford
Groups, Inc.
18 This Third Amendment may be executed in counterparts, each of
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<PAGE>
which shall be deemed an original and all of which, when assembled, shall
constitute but one and the same original. This Third Amendment may be
executed and delivered by facsimile transmission, and each party shall
accept such facsimile as a duly executed counterpart original.
19 Except as amended hereby, the Agreement remains in full force and
effect.
IN WITNESS WHEREOF, Seller and Buyer have executed this Amendment as
of the date first above written.
ATTEST: AMERICAN CYANAMID COMPANY
_______________________________ By____________________________
William P. Kelly, Assistant John R. Considine, Vice
Secretary President
WITNESS: WELLSFORD WAYNE CORP.
_______________________________ By____________________________
Richard R. Previdi, Vice
President
The undersigned hereby agrees to the foregoing Amendment:
ATTEST: NORTH AMERICAN MEDICAL
RESEARCH CORPORATION
_______________________________ By____________________________
William P. Kelly, Assistant John R. Considine, Vice
Secretary President
43
<PAGE>
INDEMNIFICATION AND STOCK TRANSFER AGREEMENT
THIS INDEMNIFICATION AND STOCK TRANSFER AGREEMENT (this "Agreement")
is made as of the 28th day of February 1997 between AMERICAN CYANAMID
COMPANY, a Maine corporation ("Seller") and WELLSFORD WAYNE CORP., a New
Jersey corporation as permitted assignee of WELLSFORD COMMERCIAL
PROPERTIES, L.L.C. ("Buyer").
INTRODUCTORY STATEMENTS:
A. By Purchase and Sale Agreement dated November 21, 1996, and
amended by Amendment to Purchase and Sale Agreement dated January 13, 1997,
Second Amendment to Purchase and Sale Agreement dated February 13, 1997 and
Third Amendment to Purchase and Sale Agreement ("Third Amendment") of even
date herewith (as amended, the "Sale Contract"), Seller agreed to sell to
Wellsford Commercial Properties, L.L.C. ("Wellsford") and Wellsford agreed
to buy from Seller certain property in Wayne, New Jersey. All capitalized
terms herein shall have the same meaning as was ascribed to such terms in
the Sale Contract, unless otherwise indicated.
B. North American Medical Research Corporation, a wholly owned
subsidiary of Seller (hereinafter, "NAMRC"), owns one of the three
properties to be conveyed by Seller to Buyer pursuant to the Sale Contract,
to wit, that certain parcel of real property together with improvements
constructed thereupon known as 1700 Valley Road, Wayne, New Jersey, and
more particularly described in Exhibit A attached hereto and made a part
hereof (collectively, the "1700 Property").
C. Pursuant to an Assignment of Purchase and Sale Agreement dated as
of February 27, 1997, the rights of Wellsford under the Sale Contract were
assigned to Buyer. Pursuant to the Third Amendment, Buyer agreed to
acquire title to the 1700 Property by accepting a transfer of all of the
ownership interests of NAMRC, in lieu of the acceptance of a Deed to the
1700 Property by NAMRC or Seller, provided, inter alia, Seller delivers
this Agreement to Buyer at settlement under the Sale Contract.
NOW, THEREFORE, in consideration of the matters set forth in the
foregoing recitals, which shall constitute a substantive part of this
Agreement, the parties hereby agree as follows:
1. Representations and Warranties. Seller hereby makes the
following representations and warranties to Buyer, each of which (i) is
true, correct and complete in all material respects as of the date hereof,
(ii) is material to Buyer, (iii) will be relied upon by Buyer in acquiring
the ownership of NAMRC in lieu of a deed to the 1700 Property, and (iv)
will survive the transfer of ownership of NAMRC from Seller to Buyer at
Closing on the Closing Date to the extent (and subject to the limitations)
set forth in Section 3.D, below:
A. Due Organization.. NAMRC is a corporation duly organized,
validly existing and in good standing under the laws of the State of New
Jersey. NAMRC owns the entire fee simple title to the 1700 Property (legal
and equitable). NAMRC has all necessary power and authority to own its
properties and other assets and to carry on its business as it is now being
conducted.
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B. Organizational Documents. Attached hereto as Exhibit B
hereto are true, correct and complete copies of the Certificate of
Incorporation and Bylaws of NAMRC, as each has been amended to date. Such
Certificate of Incorporation and Bylaws, as so amended, are in full force
and effect as of the date hereof, without further amendment.
C. Capitalization. NAMRC has an authorized capitalization
consisting solely of _____________ shares of Common Stock, $_____ par
value. As of the date hereof there are issued and outstanding
____________ shares of such Common Stock (the "Subject Stock"), which
represents and constitutes 100% of the issued and outstanding capital stock
of NAMRC. Each issued and outstanding share of NAMRC's Common Stock has
been duly authorized, validly issued, is fully paid and non-assessable and
is not subject to preemptive rights of any kind. Seller owns unrestricted
title to 100% of the Subject Stock, free and clear from all claims, liens,
demands and encumbrances of any kind. Seller has not pledged,
hypothecated, assigned or otherwise transferred the Subject Stock, or any
part of Seller's right, title and interest therein, to any person or entity
for any purpose.
D. Options, Warrants, Etc. No person or entity has any right,
subscription, warrant, call, option or other agreement of any kind to
purchase or otherwise receive or to be issued any of the outstanding or
authorized but unissued shares of NAMRC's capital stock or any securities
or obligations of any kind convertible into shares of NAMRC's capital
stock.
E. Dividends and Distributions. NAMRC has not declared any
dividend, distribution or other payment to the holders of its equity that
has not been paid, nor is NAMRC obligated to make any such dividend,
distribution or payment. NAMRC has not entered into any agreement or
commitment pursuant to which it is required to redeem, repurchase or
otherwise acquire its equity.
F. Title to 1700 Property. NAMRC is the owner of good and
indefeasible fee simple title to the 1700 Property, and the 1700 Property
is held free and clear of all deeds of trust, liens, encumbrances and other
claims of any kind except as set forth in Exhibit D attached hereto. The
Company owns no real property or real property interests other than the
1700 Property (and the rights, hereditaments, appurtenances and benefits
pertaining thereto).
G. Other Property Owned and Business Conducted by NAMRC. Other
than the 1700 Property, and any personal property owned by the Company
which is physically located within the 1700 Property, NAMRC owns no other
real or personal property of any kind. NAMRC has no employees, and is not
engaged in any business other than the ownership and operation of the 1700
Property.
H. Taxes.
(i) NAMRC has properly made all material filings, reports
and returns (collectively "Returns") required to be filed by it with
respect to all federal, state, local and foreign taxes of any kind or
nature whatever, including without limitation any and all interest and
penalties relating thereto and any estimated taxes (collectively "Taxes"),
and has paid all Taxes shown or required to be shown on such Returns as
well as all other Taxes which have become due since the filing thereof
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through and including December 31, 1996. NAMRC shall have no liability for
any Taxes of any member of an affiliated group of which NAMRC is a member
pursuant to Treasury Regulation 1.1502-6 or any analogous state or local
tax provision. All material Taxes which NAMRC is required by law to
withhold and collect have been duly withheld and collected, and have been
paid over, in a timely manner, to the proper governmental authorities to
the extent required. There are no transactions or matters, or any other
basis, which might or could result in additional taxes of any nature to
NAMRC.
(ii) The information shown on the federal and state income
tax returns of NAMRC for calendar years 1993, 1994 and 1995 (true, correct
and complete copies of which have been furnished by Seller to Buyer) and
the tax basis and other tax attribute information of NAMRC provided to the
Buyer by Seller or its accountants or other agents contemporaneous with the
execution of this Agreement, are true, correct and complete, and fairly and
accurately reflect the information purported to be shown.
(iii) As of January 1, 1997, NAMRC's "book basis" in the
1700 Valley Property was $9,606,759.00 and NAMRC's "tax basis" in the 1700
Valley Property was $9,767,876.89.
(iv) NAMRC had no income between January 1, 1997 and the
date upon which Closing occurs. NAMRC shall provide Buyer, within thirty
(30) days after Closing, a true, correct and complete schedule of all
expenses incurred by NAMRC between January 1, 1997 and the date of Closing,
and shall, upon Buyer's request, provide all backup documentation for such
expenses in order to facilitate the preparation of NAMRC's 1997 federal,
state. and local tax returns.
I. No Material Adverse Change. There has been no material
adverse change in the financial condition of NAMRC, or the 1700 Property,
since the date of NAMRC's most recent financial statement, a true, correct
and complete copy of which is attached hereto as Exhibit E.
J. Litigation; Defaults.
(i) Except as set forth on Exhibit F attached hereto, there
is no action, suit, proceeding or investigation involving NAMRC pending
before any court, governmental commission, agency or instrumentality or
before any arbitration board or tribunal, and, to Seller's knowledge, no
such action, suit, proceeding or investigation has been threatened against
Seller by any person, entity or governmental authority.
(ii) NAMRC is not subject to any judgment, order, injunction
or ruling of any court or governmental commission, agency, authority or
instrumentality.
K. Agreement in Compliance. The execution and delivery of this
Agreement and any documents transferring ownership of NAMRC from Seller to
Buyer (the "Transfer Documents"), and the consummation of the transactions
contemplated herein and therein, will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default under,
any agreements to which Seller or NAMRC is bound, or result in the creation
or imposition of, any lien, charge or encumbrance upon any of the property
or assets of NAMRC, nor will such action result in a violation of the
provisions of the charter or the by-laws of the NAMRC or any other
agreements by which it is now governed or any statute or any order, rule or
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regulation of any court or governmental agency or body having jurisdiction
over NAMRC.
L. Contractual Obligations and Liabilities. Except as set
forth in Exhibit G, there is no bond, debenture, note or other evidence of
indebtedness, nor any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument under or pursuant to which any evidence of
indebtedness has been issued to NAMRC, nor is there any other agreement or
instrument of any kind to which NAMRC is currently a party or by which
NAMRC is bound or affected, and other than the liabilities specifically
referenced in Exhibit G attached hereto, NAMRC has no liabilities of any
kind, contingent or non-contingent.
M. Present Compliance with Laws. NAMRC is not in violation
of any laws, ordinances or governmental rules or regulations to which it is
subject, the violation of which would in any way affect the business,
prospects, profits, or condition (financial or other) of NAMRC, or which
would in any way affect the ability of NAMRC to perform its obligations
under this Agreement and the Transfer Documents, provided that with respect
to the conformity of the 1700 Property with laws, ordinances or
governmental rules or regulations to which it is subject, the provisions of
Section 10.1(c) of the Sale Contract shall supersede the foregoing
representation.
N. ERISA. There is no "employee benefit plan," "employee
pension benefit plan," "defined benefit plan," or "multiemployer plan,"
which NAMRC has established or maintained or to which NAMRC is required to
contribute. As used in this Section 1.N., the terms "employee benefit
plan," "employee pension benefit plan," "defined benefit plan," and
"multiemployer plan" shall have the respective meanings assigned to such
terms in Section 3 of ERISA. In addition, there are no collective
bargaining agreements or union contracts to which NAMRC is a party, or to
which it is bound.
O. FIRPTA. Seller is not a "foreign person" within the
meaning of the Foreign Investment in Real Property Act, as amended (the
"Act"). At the time of Closing, Seller shall execute such instruments,
certifications, and/or affidavits as Buyer or its title insurance company
may deem necessary in order to comply with the Act (including a FIRPTA
affidavit).
2. Stock Transfer. Seller shall deliver to the Buyer, simultaneous
with the execution and delivery of this Agreement, stock certificates
representing all of the capital stock of NAMRC (the "Subject Stock"),
accompanied by duly executed stock assignments, bills of sale, assignments
and other instruments of transfer in accordance with the provisions hereof,
transferring to Buyer all of Seller's right, title and interest in and to
the Subject Stock and NAMRC. In addition, Seller shall deliver to Buyer
such other documents and instruments as Buyer may reasonably require in
order to evidence the stock transfer contemplated hereby.
3. Indemnity; Survival of Representations and Warranties.
A. Except as hereafter provided, Seller shall, and hereby does,
indemnify and hold harmless the Buyer and its successors and assigns, from
and against any and all damages, claims, losses, liabilities and expenses,
including without limitation reasonable legal expenses incurred by Buyer in
connection therewith (collectively, "Losses"), which may arise out of (i)
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any breach of or the inaccuracy of any of the representations, warranties
or covenants made in this Agreement by Seller; (ii) any claim or action
asserted by any third party against NAMRC or Buyer after Closing to the
extent arising out of or in connection with any event, occurrence, act or
omission occurring in connection with the business and activities of NAMRC
prior to the Closing Date; and (iii) any and all liability of NAMRC for
Taxes accruing, or otherwise attributable to periods ending, on or before
December 31, 1996. It is the intent of the parties that this
indemnification place Buyer in the same (but no better) position viz a viz
liability to third parties for the obligations of NAMRC arising in
connection with the period prior to the Closing Date that Buyer would have
been in had it acquired title to the 1700 Property by deed from NAMRC or
Seller pursuant to the terms of the Sale Contract. Seller shall not be
entitled to seek contribution from NAMRC in connection with its obligations
under this Section 3.
B. Within thirty (30) days after obtaining knowledge thereof,
Buyer shall notify (or cause NAMRC to notify) Seller in writing of any
claim which has been asserted in writing against Buyer or NAMRC which is
within the scope of this indemnity. Such notice shall specify in reasonable
detail the nature and estimated amount of such claim, to the extent the
same can be estimated, the basis on which such claim purports to have been
asserted, whether it appears such claim is covered by insurance, and
whether any rights of indemnification may exist against any third party
with respect to such claim. Within thirty (30) days after the receipt by
Seller of such notice, Seller shall satisfy its obligations under this
Section 3 or shall advise Buyer that, in good faith, Seller disputes the
claim.
C. The failure of Buyer to notify Seller in accordance with
Section 3.B, above, shall not preclude Buyer from seeking indemnification
hereunder unless (and solely to the extent) such failure has materially
prejudiced the ability of Seller to defend such claim. Seller shall
promptly defend such claim by counsel of its own choosing and reasonably
acceptable to Buyer, and Buyer shall cooperate reasonably with Seller in
the defense of such claim, including the settlement of the matter on any
basis proposed by Seller and consented to by Buyer, which consent shall not
be unreasonably withheld (provided that Seller shall in all events be
responsible for all costs and expenses of any such settlement), and
including full access, at any reasonable time, to such information relating
to NAMRC possessed by Buyer (and its successors) as shall reasonably be
necessary for Seller to conduct such defense. If Seller fails, within a
reasonable time after receiving notice of such a claim, to defend Buyer,
Buyer shall be entitled to undertake the defense, compromise or settlement
of such claim at the expense and risk of, and for the account of, the
Seller.
D. Other than the Seller's representations in Section 2.H,
above, which shall survive the execution and delivery of this Agreement and
the Transfer Documents on the Closing Date without limitation other than
the applicable statute of limitations, the warranties and representations
of Seller contained in this Agreement, or in any certificate, document,
instrument or agreement delivered pursuant to this Agreement, shall survive
the execution and delivery of this Agreement and the Transfer Documents on
the Closing Date for a period of one (1) year, and shall, subject to such
limitation, inure to the benefit of Buyer and its legal representatives,
heirs, successors or assigns; provided, however, that any intentional
misrepresentation by Seller contained herein shall not be subject to such
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one (1) year limitation on survival. Any claim brought by Buyer against
Seller for breach or inaccuracy of any warranties and representations which
are subject to the foregoing one (1) year survival limitation shall be
valid if Buyer notifies Seller thereof in writing prior to the expiration
of such one (1) year period, and a formal legal action is brought by Buyer
in connection therewith no later than ninety (90) days after the expiration
of such one (1) year period. The foregoing survival limitation shall not
apply to the Seller's indemnification under Section 3.A above, except and
solely to the extent such indemnification arises pursuant to clause (i) of
Section 3.A. In addition, to the extent any warranty or representation
set forth herein corresponds to a representation of Seller set forth in the
Sale Contract with regard to the 1700 Property and/or NAMRC which survives
closing under the Sale Contract without limitation, the applicable survival
provisions of the Sale Contract shall supersede the foregoing one (1) year
survival limitation.
E. The indemnification set forth in this Section 3 shall
constitute Buyer's exclusive remedy against Seller in connection with (i)
any breach of this Agreement, (ii) the inaccuracy of any warranty or
representation set forth herein, (iii) any claim or action asserted by any
third party against NAMRC or Buyer after Closing to the extent arising out
of or in connection with any event, occurrence, act or omission occurring
in connection with the business and activities of NAMRC prior to the
Closing Date, and (iv) any liability of NAMRC for Taxes accruing, or
otherwise attributable to periods ending, on or before December 31, 1996,
except and solely to the extent that the Sale Contract provides for any
additional or more expansive remedy in connection with the same matter.
4. Miscellaneous Provisions.
A. Taxes, Fees and Expenses. Seller shall be responsible for
all sales, transfer, gains or income taxes due or payable by Seller in
connection with the stock transfer transaction contemplated hereby. Seller
shall cooperate with Buyer with regard to the filing of NAMRC's federal,
state and local tax returns for the period ending on the Closing Date.
B. Amendment, Modification and Severability. No term,
condition or provision of this Agreement may be amended, modified or waived
except by a written agreement signed by all of the parties hereto. A
waiver of any term or condition of this Agreement shall not be deemed to be
a further or continuing waiver of any other breach of such term or
condition. If any provision of this Agreement shall be invalid,
inoperative or unenforceable, this Agreement shall be reformed and
construed as if such invalid, inoperative or unenforceable provision had
never been contained herein and such provision were reformed so that it
would be valid, operative and enforceable to the maximum extent permitted.
C. Notices. All notices, requests or other communications
required or permitted hereunder shall be given in the same manner as is
prescribed for the giving of notices in the Sale Contract, as if Section
16.8 of the Sale Contract were fully restated herein.
D. Miscellaneous. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and permitted assigns. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement,
including the Exhibits hereto and other documents referred to herein which
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form a part hereof, embody the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein.
E. Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without
giving effect to principles of conflicts of laws.
IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement as
of the date first above written.
WITNESS/ATTEST: AMERICAN CYANAMID COMPANY
__________________________ By: _________________________
Name:_________________________
Title:________________________
WITNESS/ATTEST: WELLSFORD WAYNE CORP.
__________________________ By: _________________________
Name:_________________________
Title:________________________
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EXHIBIT 10.29
AGREEMENT OF SALE
THIS AGREEMENT OF SALE (hereinafter referred to as the "Agreement"),
is made this ____ day of December, 1996, by and between BARLAX, a New
Jersey general partnership, having an address of 40 Main Street, Chatham,
New Jersey, 07928 (hereinafter referred to as "Seller") and WELLSFORD
COMMERCIAL PROPERTIES, L.L.C. a Delaware limited liability company, having
an address at 610 Fifth Avenue, New York City, New York, 10020 (hereinafter
referred to as "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is the owner of certain real property located in the
Borough of Chatham, County of Morris, State of New Jersey, commonly known
as 26 Main Street, Chatham, New Jersey 07928, as more particularly
identified and described on Exhibit A, attached hereto and made a part
hereof (the "Land"), together with all right, title and interest of Seller
in and to all easements, rights, privileges, rights-of-way, hereditaments,
tenements and appurtenances belonging to the Land, all right, title and
interest in and to all open or proposed highways, streets, roads, avenues,
alleys, easements, strips, gores and rights of way, in, on, across, in
front of, contiguous to, abutting or adjoining the Land (hereinafter
collectively with the Land referred to as the "Real Property"), and
together with all buildings and improvements situated thereon (the
"Improvements"); and
WHEREAS, Seller is the owner of certain personal property used in
conjunction with the Real Property and Improvements, an inventory of which
will be prepared by Purchaser and acknowledged by Seller prior to the
expiration of the Feasibility Study Period, including all right, title or
interest of Seller in any on-site inventory and stockpiled materials, in
quantities and types as may be located on the Real Property as of the date
hereof, ordinary use excepted, and including Seller's right, if any, in and
to any plans and specifications in Seller's possession prepared in
connection with the Improvements (hereinafter referred to as the "Personal
Property"); and
WHEREAS, Seller is the owner of certain intangible property used in
connection with the Real Property and Improvements, including, but not
limited to Seller's rights, if any, in and to all operating expense and tax
records, promotional material, leasing prospects, plans, drawings, designs,
surveys, environmental studies and other studies used or generated in
connection with any part of the Real Property and Improvements
(collectively, the "Intangible Property") (the Real Property, Improvements,
Personal Property, and Intangible Property, are sometimes collectively
referred to herein as the "Property"); and
WHEREAS, Purchaser desires to purchase from Seller and Seller desires
to sell to Purchaser, all of Seller's rights in and to the Property, in
accordance with the terms and conditions hereinafter set forth, in "AS-IS,
WHERE-IS" "WITH ALL FAULTS" condition, except as set forth herein.
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NOW, THEREFORE, in consideration of the mutual promises of the parties
hereto, made one to another, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto agree as follows:
1. Agreement of Purchase and Sale. Seller hereby agrees to sell and
convey the Real Property and Seller's rights in and to the Property to
Purchaser and Purchaser hereby agrees to purchase such rights from Seller,
in accordance with the terms and provisions hereof.
2. Title. Title to the Real Property shall be good and marketable,
free and clear of all liens, encumbrances and encroachments and subject
only to the operation and effect of the Permitted Exceptions (as hereafter
defined). Permitted Exceptions shall be deemed to mean all instruments and
matters of record among the Public Records of Morris County, New Jersey on
the date hereof, other than any instrument or matter which is set forth as
an exception to coverage in a commitment for title insurance from a title
insurer selected by Purchaser (the "Title Company") covering the Property,
to which Purchaser has expressly objected. Such objection shall be set
forth in a written notice to Seller given within ten (10) business days of
receipt of (i) the commitment for title insurance, (ii) legible copies of
all documents listed as exceptions to coverage, and (iii) an ALTA survey of
the Real Property and the Improvements (all of which shall be at the
expense of Purchaser), but in no event later than the expiration of the
Feasibility Study Period, as such term is defined below (such matters to
which Buyer does not object are herein referred to as "Permitted
Exceptions").
Title to the Real Property shall be deemed good and marketable if
a nationally recognized title insurance company acceptable to Purchaser
agrees to insure fee simple title to the Real Property and issue to
Purchaser, at standard premium rates, an extended coverage owner's title
insurance policy with an ALTA Form 9 Endorsement (in the form applicable to
the jurisdiction in which the Land is located), subject only to the
Permitted Exceptions. If there are title defects other than the Permitted
Exceptions, Purchaser shall notify Seller of such title defects during the
Feasibility Study Period and Seller shall have the right, within ten (10)
days from receiving notice, to elect: (i) to cure the title defect at
Seller's cost and expense, which election shall be deemed made if no notice
of election is received by Purchaser within such 10-day period, or (ii) not
to cure such defect, provided that Seller shall not have the right to
decline to cure any monetary encumbrances and/or other monetary obligations
affecting title to the Real Property. If Seller elects not to cure the
title defect in accordance with the preceding sentence, then Purchaser,
within seven (7) days from receipt of Seller's written notice of such
election, shall elect by written notice to Seller to either (1) waive the
title defect and proceed under this Agreement with no abatement of the
Purchase Price, or (2) terminate this Agreement, in which event Purchaser
shall be entitled to the immediate return of the Deposit. Upon such
termination, each party's rights and liabilities hereunder shall cease
except for Purchaser's indemnification pursuant to Section 10 hereof.
3. Purchase Price and Independent Consideration.
(a) The purchase price ("Purchase Price") for the Property shall be
Five Million, Nineteen Thousand, One Hundred Thirty Three and 00/100
Dollars ($5,019,133.00), of which $1,019,133.00 shall be paid through
Seller financing (to be secured by a purchase money promissory note and
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mortgage in form and substance reasonably satisfactory to Seller and
Purchaser), and the balance of which ($4,000,000.00) shall be paid at
Settlement in cash or other immediately available funds.
(b) The Seller financed portion of the Purchase Price, equal to
$1,019,133.00, shall be evidenced by a purchase money promissory note,
bearing interest at a rate of nine percent (9%) per annum, and maturing on
that date (the "Maturity Date") which is eighteen (18) months after the
Settlement Date (as defined below). Such financing obligation shall be
payable in quarterly installments of interest only, in arrears, with the
first such quarterly payment to be due and payable on the 91st day after
the Settlement Date, and with each subsequent quarterly payment to be due
and payable 91 days after the date of the previous quarterly payment. If
not sooner paid , the outstanding principal balance and all accrued but
unpaid interest shall be payable in full on the Maturity Date. Such loan
shall be prepayable in full or in part, without penalty, at any time, and
from time-to-time, prior to the Maturity Date.
4. Deposit.
(i) On or before 5:00 p.m., Eastern Standard Time on
December 10, 1996, Purchaser shall deliver to the David J. Haber, Esquire,
of 328 Newman Springs Road, Red Bank, New Jersey 07701, as escrow agent
("Escrow Agent"), the sum of One Hundred Thousand Dollars ($100,000.00)
(the "Initial Deposit"), in cash or check, to be held by Escrow Agent, in
escrow, in an interest-bearing account (the "Escrow Account") at Core
States Bank or such other mutually acceptable financial institution with
which the Escrow Agent currently maintains an account (the "Escrow
Account"). If Purchaser fails to deliver the Initial Deposit within the
foregoing time frame, time being of the essence, this Agreement shall be
null and void, ab initio. Within one (1) business day following the
expiration of the Feasibility Study Period (as hereinafter defined), if
this Agreement has not been terminated prior to such date, Purchaser shall
deliver to the Escrow Agent an additional sum of One Hundred Fifty Thousand
Dollars ($150,000.00) (the "Second Deposit") in cash or by check, to be
added by Escrow Agent to the Initial Deposit, and to be held by the Escrow
Agent, together with the Initial Deposit, in escrow, in the Escrow Account.
As used herein, the term "Deposit" shall mean and include the Initial
Deposit, the Second Deposit and any accrued interest in the Escrow Account.
In the absence of a default hereunder by Seller, Purchaser agrees that a
portion of the Deposit equal to the lesser of (i) $5,000.00, or (ii) the
total legal costs incurred by Seller in the preparation and negotiation of
this Agreement, shall be deemed non-refundable and may be retained by
Seller in the event this Agreement is terminated for any reason other than
Seller's default. Such non-refundable portion of the Deposit shall be
delivered by Escrow Agent to Seller within five (5) days after the delivery
by Seller to the Escrow Agent and Purchaser of reasonable evidence of
Seller's having incurred such costs.
(ii) The Escrow Agent shall deliver the Deposit held
hereunder (a) to Purchaser concurrent with Settlement, as set forth in
Section 5 below, provided Purchaser shall pay the full cash portion of the
Purchase Price to Seller (or, at Purchaser's election, shall apply the
Deposit toward the Purchase Price), or (b) at such other time, before or
after Settlement, as Purchaser or Seller becomes entitled to the Deposit,
as provided in this Agreement.
(iii) If Seller shall become entitled to receive the
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Deposit, the Escrow Agent shall pay the same to Seller. If Purchaser so
directs, the Deposit shall be paid to Seller as part of the Purchase Price.
(iv) If this escrow shall be involved in any litigation or
controversy, the parties hereto shall severally hold the Escrow Agent free
and harmless against any cost or expense that may be suffered by it by
reason of such litigation or controversy, other than due to its gross
negligence or willful misconduct. All such costs and expenses shall be paid
by the party who does not prevail in such litigation. In addition, the
party who prevails shall be indemnified against any cost or expense,
including reasonable attorneys' fees (both at trial and on appeal), and
replacement of any depletion in the escrow funds, if such funds are
ultimately to be paid to the prevailing party.
(v) In the event conflicting demands are made, or notices
served, upon the Escrow Agent with respect to this escrow, the Escrow Agent
shall have, without limitation, the following rights and obligations:
(A) Withhold and stop all further proceedings in, and
performance of this escrow for a reasonable period of time to permit
resolution; or
(B) File a suit in interpleader and obtain an order
from a court of competent jurisdiction requiring the parties to interplead
and litigate in such court their several claims and rights amongst
themselves. In the event such interpleader suit is brought, and the escrow
funds paid and/or delivered into court, the Escrow Agent shall ipso facto
be fully released and discharged from all obligations to perform any and
all duties or obligations relative to such funds which are imposed upon it
by this Agreement.
(vi) The Escrow Agent, in its capacity as escrow agent, is
not to be held liable for the sufficiency or correctness of the form,
manner of execution or validity of any instrument that might be deposited
into the escrow, nor as to the identity, authority or rights of any person
executing the same, nor the failure of any other party to comply with any
provisions of any agreement, contract or other instrument filed herein, and
its duties hereunder shall be limited to the safekeeping of the money,
instruments, or other documents received by it, and for the disposition of
the same in accordance with the provisions of this Agreement, and for the
discharge of its obligations specified in this Section.
(vii) Prior to the earlier of the Settlement or the
termination of this Agreement in accordance with its terms, neither party
shall have the right to withdraw any instruments or monies deposited by
them with the Escrow Agent, except as herein specifically provided.
5. Settlement. Settlement shall take place on or before January 22,
1997, time being of the essence (the exact date to be selected by
Purchaser) at Seller's offices at 40 Main Street, Chatham, New Jersey (the
"Settlement").
6. Settlement Deliveries/Conditions to Closing:
(a) At (or, if required below, before) Settlement, Seller shall:
(i) Deliver to Purchaser a good and sufficient Bargain and
Sale Deed with Covenants against Grantor's Acts, conveying the Property in
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fee simple to Purchaser in accordance with the terms hereof, subject to no
liens or encumbrances other than the Permitted Exceptions;
(ii) Furnish Purchaser, at Seller's expense, with a letter
of non-applicability, a no-further-action letter, a letter of full
compliance, or the equivalent thereof, from the New Jersey Department of
Environmental Protection in compliance with the Industrial Site Recovery
Act, and the regulations promulgated thereunder (such letter shall be
furnished to Purchaser on or before January 10, 1997);
(iii) Provide an affidavit of seller certifying that
Seller is not a "foreign person" as defined in the Federal Foreign
Investment in Real Property Tax Act of 1990; as amended;
(iv) Provide a bill of sale executed by Seller assigning to
Purchaser the Personal Property and the Intangible Property, to the extent
the same is owned by Seller, together with physical delivery thereof to
Purchaser;
(v) Give full, complete and exclusive possession of the
Property to Purchaser, including all keys and security codes thereto, free
from any right of possession by any person or entity;
(vi) Provide evidence of authority of Seller to sell the
Property and due authorization and execution of the documents required from
Seller at Settlement;
(vii) Execute and deliver to Purchaser or to the Escrow
Agent all other documents reasonably required of Seller to consummate the
transaction contemplated hereby, including but not limited to any Title
Company affidavits or indemnities which are customary and necessary to
remove pre-printed exceptions from the Purchaser's title policy, including
a customary "gap undertaking" agreement and a "no debt or lien" affidavit.
(b) The obligation of Purchaser to make Settlement on the
purchase the Property shall be also subject to the satisfaction of the
following conditions precedent (the "Conditions") as of the time of
Settlement:
(i) The representations and warranties made by Seller
herein shall continue to be true and accurate and Seller shall have
performed all of its covenants and obligations herein.
(ii) Title shall be in the condition contemplated in
Paragraph 2 of this Agreement.
(iii) No Hazardous Materials (as defined herein) shall
be in, on or under the Property, other than de minimis amounts of Hazardous
Materials used in the ordinary course of operating the Building, provided
the same are stored, used and disposed of by Seller in accordance with all
applicable legal requirements.
(c) In the event any of the Conditions set forth in
Paragraph 6(b) are not satisfied as of the date of Settlement, Purchaser
shall have the right (i) to terminate this Agreement by giving written
notice to Seller, (ii) to waive such Condition in writing and proceed to
Settlement, or (iii) to adjourn the Settlement for a reasonable period (not
to exceed 120 days) in order for Seller to bring about the satisfaction of
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<PAGE>
such Condition. In the event Purchaser elects to terminate this Agreement,
the Deposit shall be promptly refunded to Purchaser and thereafter the
parties shall be relieved of all liability under this Contract, at law or
in equity; provided, however, that if any condition is not satisfied as the
result of a breach or default by Seller of its obligations herein, Seller
shall not be relieved of liability and Purchaser's right to receive a
refund of the Deposit shall be in addition to, and not in limitation of,
any other rights and remedies which Purchaser may have under applicable
law.
7. Adjustments. (a) All items of income and expense relating to the
Property, including, without limitation, real estate taxes, all utilities,
water and sewer rents, annual front-foot benefit charges applicable to the
Property, other operating charges, and any other matters customarily
adjusted at settlement are to be adjusted between the parties as of the
date of Settlement. Seller shall make arrangements for the reading on or
about the date of Settlement or all meters for utilities that Seller is
responsible to pay. If such meter readings take place on a date other than
the date of Settlement, then a pro rata adjustment will be made when the
bills are received, on a day-to-day basis.
(b) If Settlement shall occur before the tax rate or the assessed
valuation of the Property is fixed for the then current year, the
apportionment of taxes shall be upon the basis of the tax rate for the
preceding year applied to the latest assessed valuation. Subsequent to
Settlement, when the tax rate and the assessed valuation of the Property is
fixed for the year in which Settlement occurs, the parties agree to adjust
the proration of taxes and, if necessary, to refund or repay such sums as
shall be necessary to effect such adjustment.
(c) The agreements of Seller and Purchaser set forth in this Section
7 shall survive Settlement.
8. Costs. Examination of title, title insurance, settlement fees,
tax certificates, survey costs and notary fees shall be paid by Purchaser.
Seller shall pay the New Jersey realty transfer tax applicable to the
conveyance of the Property and all other customary Seller's expenses
incurred in connection with this transaction. Each party shall be
responsible for its own attorneys' and other consultants' fees and
expenses.
9. Feasibility Study Period. Purchaser shall have the right from
the date hereof through 5:00 p.m. Eastern Time on January 2, 1997 (the
"Feasibility Study Period") to make such investigations, studies and tests
with respect to the Property as Purchaser deems necessary or appropriate to
determine the feasibility of purchasing the Property. If, during the
Feasibility Study Period, Purchaser determines, in its sole discretion,
that the Property is not acceptable to Purchaser or the purchase thereof is
not feasible, then Purchaser may, at any time prior to 5:00 p.m. Eastern
Time on January 2, 1997, terminate this Agreement by written notice to
Seller (such notice to be received by Seller prior to the final day of the
Feasibility Study Period).
Prior to Settlement, Purchaser will, pursuant to the terms
hereof, have made such examination of the Property and all matters relating
to this transaction as Purchaser deems necessary. In entering into this
Agreement, Purchaser has not been induced by and has not relied upon any
representation, warranty or statement whether express or implied, made by
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Seller or any agent, employee or other representative of Seller, or by any
broker or any other person representing or purporting to represent Seller,
which are not expressly set forth in this Agreement, whether or not any
such representations, warranties or statements were made orally or in
writing. On the date of Settlement, Purchaser shall reaffirm the
acknowledgment made in this section.
10. Inspection. At the time of execution of this Agreement, Seller
shall deliver or make available to Purchaser for inspection and copying all
property management and construction files, test borings and geotechnical
information, plats, surveys, plans, construction drawings, title materials,
environmental studies, marketing materials, engineering and architectural
data, and other tests, studies, reports and other information in the
possession or control of Seller (or its agents) relating to the Property,
at no cost to Purchaser. If this Agreement terminates for any reason other
than Seller's default, Purchaser shall return all of these materials to
Seller and deliver to Seller any similar information and materials related
to the Property generated by third parties for Purchaser (excluding
architectural materials). In addition, Purchaser shall have the right from
time to time to enter upon the Property prior to Settlement for the purpose
of making any inspection, investigations, studies or tests. Purchaser
shall repair any damage to the Property resulting from any inspections,
studies or tests performed by Purchaser. In connection with such entry
onto the Property, Purchaser agrees that it shall be responsible for any
damages to the same resulting from such operations and shall indemnify and
hold Seller harmless from all claims of any type arising out of or incident
to Purchaser's entry onto the Property for the purposes set forth herein.
11. Representations, Warranties and Covenants By Seller; Acceptance
of Property.
11.1 Seller's Representations, Warranties and Covenants. Seller makes
(i) the following representations and warranties as of the date hereof,
each and all of which shall also be true as if made on the date of
Settlement, and (ii) the following covenants:
(a) Seller is a general partnership, duly formed and existing
under the laws of the State of New Jersey. Seller has full and absolute
power and authority to enter into this Agreement and all ancillary
documents delivered pursuant hereto, and to perform all of its obligations
hereunder. The execution and delivery of this Agreement and the
performance by Seller of its obligations hereunder have been duly
authorized by all requisite action and no further action or approval is
required (except as may be set forth herein) in order to constitute this
Agreement as a binding and enforceable obligation of Seller, including, but
not limited to, the authority to sell, assign and transfer the Property
subject to the limitations and qualifications set forth herein.
(b) That until Settlement Seller will (i) continue the operation
of the Property in the manner in which currently operated and will not
defer any necessary maintenance thereto (including continued ordinary
maintenance of mechanical, electrical, plumbing and HVAC systems), (ii) not
commit or knowingly permit to be committed any waste to the Property, (iii)
not remove any item of Personal Property from the Property or Improvements,
(iv) not enter into any lease, occupancy agreement or service contract
without the prior written consent of Purchaser, except as otherwise allowed
in Section 12, (v) not enter into any agreement or instrument or take any
affirmative action which would constitute an encumbrance on the Property or
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<PAGE>
which would bind Purchaser or the Property after Settlement, without the
prior written consent of Purchaser, except as otherwise allowed in Section
12, (vi) not sell or enter into any contract to sell, or market for sale,
the Property or any portion thereof, and (vii) continue the insurance
currently carried by Seller, or such replacements thereof, on the Property,
in amounts and in such form as Seller may determine using commercially
reasonable judgement.
(c) Other than the Permitted Encumbrances, there are no
management, maintenance or service contracts or other agreements of any
kind affecting the Property executed by Seller or otherwise, nor are there
any warranties, licenses permits or authorizations affecting the Property.
(d) There are no leases, subleases, occupancies or tenancies in
effect pertaining to the Property.
(e) Seller is not currently undertaking to modify the zoning
classification of the Property.
(f) There are no condemnation proceedings, written notices of
code or legal violations, or litigation of any kind, which are pending or
outstanding, or to the best of Seller's knowledge, threatened against
Seller or the Property and which affects (or would affect) the Property or
Seller's ability to perform its obligations under this Agreement. The
foregoing does not constitute a representation by Seller that the Property
is in compliance with all current applicable code and legal requirements.
(g) The execution and delivery of this Agreement, and the
performance by Seller of its obligations under this Agreement, is not
prohibited by, and will not violate, any agreement, judicial order or other
undertaking to which the Seller or the Property is subject or bound.
(h) To Seller's knowledge, there are no underground storage
tanks under, nor any asbestos or asbestos-containing materials which are
incorporated within any improvements upon, or otherwise located in, on, or
under the Property. Seller has provided to Purchaser full and complete
disclosure of all studies and information in Seller's possession (or which
are readily available to Seller) regarding the environmental condition of
the Property, and the presence of any hazardous substances and materials
which are regulated under any federal, state or local environmental laws,
regulations or ordinances (collectively, such materials are referred to as
"Hazardous Materials").
The representations and warranties contained herein shall continue for a
period of nine (9) months following Settlement. Purchaser shall not be
entitled to pursue any claim against Seller after closing in connection
with the breach of any representation or warranty of Seller set forth
herein if and to the extent Purchaser had actual knowledge of the existence
of such breach or inaccuracy prior to making Settlement hereunder.
11.2 Disclaimer. Purchaser acknowledges and agrees that, except for
the specific representations made by Seller to Purchaser under the other
provisions of Section 11.1 above or elsewhere in this Agreement, Seller has
not made, does not make and specifically negates and disclaims any
representations, warranties, promises, covenants, agreements or guaranties
of any kind or character whatsoever, whether express or implied, oral or
written, past, present, or future, of, as to, concerning or with respect to
(a) the value, nature, quality or condition of the Property, including,
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without limitation, the water, soil and geology, (b) the income to be
derived from the Property, (c) the suitability of the Property for any and
all activities and uses which Purchaser may conduct thereon, (d) the
compliance of or by the Property or its operation with any laws, rules,
ordinances or regulations of any applicable governmental authority or body,
(e) the habitability, merchantability, marketability, profitability or
fitness for a particular purpose of the Property, (f) the manner or quality
of the construction or materials, if any, incorporated into the Property,
(g) the manner, quality, state of repair or lack of repair of the Property,
or (h) any other matter with respect to the Property. Purchaser further
acknowledges and agrees that having been given the opportunity to inspect
the Property, Purchaser is relying on its own investigation of the Property
and not on any information provided or to be provided by Seller (other than
the representations and warranties of Seller elsewhere set forth in this
Agreement) and at the Settlement agrees to accept the Property and waive
all objections or claims against Seller (including, but not limited to, any
right or claim or contribution) arising from or related to the Property or
to any Hazardous Materials on the Property, other than the representations
and warranties of Seller elsewhere set forth in this Agreement. Purchaser
further acknowledges and agrees that to the maximum extent permitted by
law, the sale of the Property as provided for herein is made on an "as is"
condition and basis, with all faults. It is agreed that the Purchase Price
has been adjusted by prior negotiation to reflect that all of the Property
is sold by Seller and purchased by Purchaser subject to the foregoing. The
provisions of this Section 11 shall survive the Settlement.
12. Leasing. All obligations for tenant improvements and commissions
for any leases of the Property existing prior to Closing shall be the
responsibility of Seller. So long as this Agreement remains in effect,
Seller shall not enter into any new leases of the Property, or any portion
thereof, without Purchaser's prior written consent, which may be withheld
in Purchaser's sole and absolute discretion.
13. Condemnation. In the event Seller receives notice of any
condemnation proceedings or notice of the intention of any governmental or
quasi-governmental authority to initiate condemnation proceedings, or if
any such proceedings commence, or an actual condemnation or taking of the
Property or any portion thereof occurs, Seller will promptly notify
Purchaser and Purchaser may, within fifteen (15) days thereafter (i) elect
to terminate this Agreement, in which event, the Deposit shall be returned
to Purchaser and the parties shall be relieved of all further liability
hereunder; or (ii) if Purchaser does not elect to terminate this Agreement
the condemnation award as well as any unpaid claims or rights in connection
with such condemnation shall be assigned to Purchaser at Settlement, or, if
paid to Seller prior to Settlement, shall be credited at Settlement against
the Purchase Price.
14. Casualty Loss. In the event that subsequent to the date hereof
the Property or any part thereof is damaged or destroyed by fire or other
casualty and the cost of restoring the Property to its original condition
is in excess of One Hundred Thousand Dollars ($100,000.00), Purchaser may,
at its option, by giving written notice to Seller within ten (10) days
after receipt from Seller of notice of Seller's estimate of restoration of
the Property caused by such casualty, terminate this Agreement. In such
event Purchaser shall be entitled to the return of the Deposit and
thereafter neither Purchaser nor Seller shall have any further liability to
the other hereunder. In the event Purchaser does not elect to terminate
this Agreement or the Property or any part thereof is damaged by fire or
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other casualty and the cost of repair is less than One Hundred Thousand
Dollars ($100,000.00), Purchaser shall be obligated to proceed to
Settlement in accordance with this Agreement and all insurance proceeds in
connection with such casualty not expended (or associated costs incurred)
in connection with repair of the Property shall be assigned to Purchaser at
Settlement or, if paid to Seller prior thereto, shall be credited against
the unpaid Purchase Price due at Settlement, and the amount of the
insurance deductible shall be credited against the unpaid Purchase Price
due at Settlement.
15. Default. If Purchaser without cause shall fail or refuse to make
Settlement hereunder for any reason other than a termination of this
Agreement by either party as provided herein or a default by Seller under
the terms of this Agreement, the amount of damages not being ascertainable,
the Deposit provided in Section 4 above shall be forfeited and the same
shall forthwith be delivered by the Escrow Agent to Seller as liquidated
damages. In the event of such default by Purchaser, Seller's sole remedy
shall be restricted to retention of said Deposit, and Purchaser shall have
no other responsibility or liability of any kind to Seller by virtue of
such default. If Seller, through no fault of Purchaser, shall fail to
perform its obligations hereunder to make full settlement in accordance
with the terms hereof, Purchaser shall have the right to terminate this
Agreement and have the Deposit promptly returned to Purchaser, to seek
specific performance of the terms hereof, and/or to exercise any other
rights and remedies available to Purchaser at law or in equity, provided
Purchaser shall in no event be entitled to an award of consequential
damages from Seller.
16. Broker. Each party, by the execution hereof, represents and
warrants that neither party has engaged the services of any broker, finder,
agent or other similar person or entity in connection with this transaction
other than Associated Realty, Inc. of Parsippany, New Jersey, which will be
paid a fee by Seller upon consummation of Settlement pursuant to separate
agreement. Each party shall indemnify and hold harmless the other against
and from any loss, cost, damage or fee (including attorneys' fees)
resulting from any inaccuracy of such representation and warranty.
17. Definition of "business day". For purposes of this Agreement,
the term "business day" as used herein shall mean all days of the week
except for Saturday, Sunday and any other days which are declared federal
bank holidays in Newark, New Jersey. If any period of time ends, or if any
act is required to be performed, on a day other than a business day, then
the applicable period of time shall be deemed to expire, or the date
required for the performance of the appropriate obligation shall be deemed
to be extended, on the next business day following the applicable date of
performance.
18. Miscellaneous.
A. Notices. Any and all notices, requests or other
communications hereunder shall be deemed to have been duly given on the day
of actual delivery thereof (as evidenced by receipt therefore) if in
writing and if transmitted by hand delivery with receipt therefor, by
recognized overnight courier, or by registered or certified mail, return
receipt requested (or, as to a notice pursuant to Section 9 hereof, via
facsimile transmission with a confirmation by the sending machine of
receipt by the receiving machine) addressed as follows (or to such new
address as the addressee of such a communication may have notified the
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sender thereof):
To Seller: BARLAX
Attention: Philip Lax, General Managing Partner
40 Main Street
Chatham, N.J. 07928
Telephone (201) 635-7700
Facsimile (201) 635-9111
With Copy to: David J. Haber, Esq.
328 Newman Springs Road
Red Bank, N.J. 07701
Telephone (908) 530-3322
Facsimile (908) 576-1682
To Purchaser: WELLSFORD COMMERCIAL PROPERTIES, L.L.C.
Attention: Richard R. Previdi, Managing Member
610 Fifth Avenue
New York, N.Y. 10020
Telephone (212) 333-2300
Facsimile (212) 333-2323
With a copy to: Mark S. Tenenbaum, Esq.
Tenenbaum & Saas, P.C.
4330 East-West Highway, Suite 1150
Bethesda, MD 20814
Telephone (301) 961-5300
Facsimile (301) 961-5305
To Escrow Agent: David J. Haber, Esq.
328 Newman Springs Road
Red Bank, N.J. 07701
Telephone (908) 530-3322
Facsimile (908) 576-1682
B. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of New Jersey.
C. Headings. The captions and headings herein are for convenience
and reference only and in no way define or limit the scope or content of
this Agreement or in any way affect its provisions.
D. Effective Date. This Agreement shall be effective as of the date
of full and final execution and delivery hereof by Purchaser and Seller.
E. Counterpart Copies. This Agreement may be executed in two or
more counterpart copies, all of which counterparts shall have the same
force and effect as if all parties hereto had executed a single copy of
this Agreement.
F. Binding Effect; Assignment. This Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective
successors and assigns; provided, however, that Purchaser shall not be
entitled to assign this Agreement without the prior written consent of
Seller, which consent shall be given or withheld at Seller's reasonable
discretion, provided however that Seller's consent shall not be required
for any assignment of this Agreement to an entity in which Purchaser (or
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any member of Purchaser) is a general partner, controlling shareholder,
managing member or otherwise has a substantial affiliation or owns a
substantial economic interest.
G. Entire Agreement. This Agreement and the Exhibits attached
hereto contain the final and entire agreement between the parties hereto
with respect to the sale and purchase of the Property and are intended to
be an integration of all prior negotiations and understandings. Purchaser
and its agents, and Seller and its agents, shall not be bound by any terms,
conditions statements, warranties or representations, oral or written, not
contained herein. No change or modifications to this Agreement shall be
valid unless the same is in writing and signed by the parties hereto. No
waiver of any of the provisions of this Agreement shall be valid unless the
same is in writing and is signed by the party against with which it is
sought to be enforced.
H. Risk of Loss. The risk of loss to the Property shall remain with
Seller and shall pass to Purchaser simultaneously with Seller's delivery of
a deed to the Property to Purchaser or Purchaser's agent at Settlement.
I. Survival. The terms and provisions of this Agreement shall
survive Settlement and delivery of a deed, and shall not be merged therein,
provided that the representations and warranties shall expire nine (9)
months after the date of Settlement unless Purchaser notifies Seller in
writing of the existence of such a claim, with reasonable specificity, on
or before such date.
J. Recordation. Neither this Agreement nor any memorandum or other
summary of this Agreement shall be placed of public record under any
circumstances except with the prior written consent of the Seller and the
Purchaser.
K. Exhibits
A - Description of Real Property
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal on the date or dates set forth below.
WITNESS: SELLER:
BARLAX, a New Jersey partnership
___________________________ By: /s/ Philip Lax
----------------------------
Name: Philip Lax
Title: General Managing Partner
Date: December 2, 1996
PURCHASER:
WELLSFORD COMMERCIAL PROPERTIES, L.L.C., a
Delaware limited liability company
__________________________ By: /s/ Richard R. Previdi
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--------------------------------
Name: Richard R. Previdi
Title: Managing Member
Date: December 2, 1996
ESCROW AGENT:
/s/ David J. Haber
--------------------------
David J. Haber, Esquire
Date: December 2, 1996
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December 23, 1996
VIA TELECOPIER
Barlax
Attn: Mr. Philip Lax
General Managing Partner
40 Main Street
Chatham, New Jersey 07928
Re: Agreement of Sale, dated December 2, 1996, by and between Barlax, a
New Jersey General Partnership, as "Seller" and Wellsford Commercial
Properties, L.L.C., as "Purchaser" (the "Agreement")
Dear Mr. Lax:
Reference is hereby made to the above-captioned Agreement. This letter is
intended to constitute an amendment to the Agreement, and capitalized terms
used herein shall have the same meaning as were ascribed to such terms in
the Agreement.
Section 9 of the Agreement shall be, and the same hereby is, amended by
substituting the date "January 7, 1997" for the date "January 2, 1997", in
each place where such date appears within Section 9.
Except as modified hereby, the Agreement shall remain in full force and
effect, unmodified. Please indicate your agreement to the foregoing by
countersigning this letter where indicated below, and returning it to me.
Thank you.
Very truly yours,
WELLSFORD COMMERCIAL PROPERTIES, L.L.C.
By: /s/ Richard R. Previdi
--------------------------
Richard R. Previdi, Managing Member
AGREED:
BARLAX, a New Jersey General Partnership
By: /s/ Phillip Lax
---------------------------
Phillip Lax, General Managing Partner
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April 1, 1997
Barlax, a New Jersey General Partnership
Attn: Mr. Philip Lax
General Managing Partner
40 Main Street
Letter Amendment #2
Chatham, New Jersey 07928
Fax No. (201) 625-9111
Re: Agreement of Sale, dated December 2, 1996, by and between Barlax, a
New Jersey General Partnership, as "Seller" and Wellsford Commercial
Properties, L.L.C., as "Purchaser" (the "Agreement")
Dear Mr. Lax:
Reference is hereby made to the above-captioned Agreement. This letter is
intended to constitute an amendment to the Agreement, and capitalized terms
used herein shall have the same meaning as were ascribed to such terms in
the Agreement.
This will confirm that the Purchaser will not be terminating the Agreement
pursuant to Section 9 thereof. In accordance with Section 4 of the
Agreement, we are wire transferring the Second Deposit to the Escrow
Agent's escrow account. In consideration of the Purchaser's decision not
to exercise its termination right set forth in Section 9 of the Agreement,
the Purchaser and Seller hereby agree that, notwithstanding Section 5 of
the Agreement to the contrary, Settlement shall take place on Januray 29,
1997. Except as modified hereby, the Agreement shall continue in full
force and effect, unmodified. This Letter Amendment may be executed in
couterparts.
By our signatures below, we each indicate our acceptance of the foregoing
modifications as of this date. Thank you.
Very truly yours,
WELLSFORD COMMERCIAL BARLAX, a New Jersey General
PROPERTIES, L.L.C. Partnership
By: ______________________ By:__________________________
Richard R. Previdi, Philip Lax, General
Managing Partner Managing Member
15
<PAGE>
Exhibit 10.30
AGREEMENT OF SALE
N.J. GREENBROOK PARTNERS, L.P.,
Seller
and
WELLSFORD COMMERCIAL PROPERTIES, L.L.C.,
Buyer
Dated: December __, 1996
Premises: Greenbrook Corporate Center
90 and 100 Passaic Avenue
Fairfield, New Jersey 07004
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AGREEMENT OF SALE
AGREEMENT made as of the day of December, 1996
(this Agreement of Sale, as the same may be modified or amended
by the parties hereto pursuant to the terms hereof, being herein
called the "Agreement"), between N.J. GREENBROOK PARTNERS, L.P.,
a New Jersey Limited Partnership, having an office at 24 Field
Point Road, Greenwich, Connecticut 06830 ("Seller"), and
WELLSFORD COMMERCIAL PROPERTIES, L.L.C, a Delaware limited
liability company, having an office at 610 Fifth Avenue, New
York, New York 10020 ("Buyer").
W I T N E S S E T H:
1. Subject of Sale. Upon and subject to the terms and
conditions herein contained, Seller agrees to sell and convey to
Buyer, and Buyer agrees to purchase from Seller, free and clear
of all liens and encumbrances other than the Permitted
Encumbrances (as hereinafter defined) (a) that certain parcel of
land described in Schedule 1 annexed hereto (the "Land"), (b) the
buildings and other improvements located on the Land (the
"Building"), and (c) all of the other tangible and intangible
property owned by Seller in, on, attached to, appurtenant to, or
used in the operation or maintenance of the Land or the Building,
including, without limitation, the following (all of such
tangible and intangible property, together with the Land and the
Building, being herein collectively called the "Property"):
(i) all leases of space in the Building (the
"Leases") as listed and described in Schedule 2 annexed
hereto, together with all Leases entered into by Seller
after the date hereof in accordance with the provisions of
subparagraph 8.1 hereof;
(ii) all deposits and advance payments made
by tenants (the "Tenants") under the Leases;
(iii) all transferable licenses, permits,
certificates (including, without limitation, certificates of
occupancy), approvals, authorizations, variances and
consents (collectively, the "Permits") issued or granted by
governmental and quasi-governmental bodies, officers and
authorities in respect of the ownership, occupancy, use and
operation of the Property;
(iv) all architectural, mechanical,
engineering and other plans, specifications and surveys
relating to the Property and in Seller's possession, custody
or control (the "Plans");
(v) Seller's right, title and interest in
and to, and all deposits made under, all service, utility,
brokerage, maintenance and other contracts and agreements
(collectively, the "Service Contracts") affecting the
Property;
(vi) all right, title and interest of Seller,
if any, in and to any land lying in the bed of any street,
road or avenue opened or proposed, in front of or adjoining
the Land, to the center line thereof and to any unpaid award
for any taking by condemnation or any damage to the Property
2
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by reason of a change of grade of any street, road or
avenue; and upon the Closing (as hereinafter defined), or
thereafter on demand, Seller shall execute and deliver to
Buyer all proper instruments for the conveyance of such
title and the assignment and collection of any such award,
and the provisions of this subparagraph l(vi) shall survive
the Closing;
(vii) all right, title and interest of Seller
in and to all warranties, guaranties, contract rights and
miscellaneous rights (all, if any) with respect to the
Property (the "Warranties");
(viii) all supplies, machinery, tools,
equipment, furniture, fixtures and other tangible property
in, on, attached to, appurtenant to, or used in the
operation or maintenance of the Land or the Building and
owned by Seller (the "Personal Property");
(ix) Seller's rights under the contracts
identified on Schedule 3 annexed hereto;
(x) all right, title and interest of Seller,
if any, in and to (A) any strips and gores adjacent to or
abutting the Land or any part thereof, and (B) any rights,
easements and appurtenances pertaining to the Land or the
Building or any part thereof;
(xi) to the extent assignable, all trade
names and general intangibles used in connection with the
ownership and operation of the Property or any part thereof,
including, without limitation, all rights of Seller to use
the name "Greenbrook Corporate Center" and the like (the
"General Intangibles");
(xii) subject to the provisions of Paragraph
10 below, any insurance proceeds that are payable after the
date of this Agreement on account of any damage to the
Property that results from fire or other casualty that
occurs after the date of this Agreement;
(xiii) all development rights, if any, with
respect to the Property; and
(xiv) all rights of Seller under that certain
exclusive access easement for ingress and egress as
described in Deed Book 4929, Page 156, Fairfield County, New
Jersey.
2. Purchase Price. The purchase price (the "Purchase
Price") shall be Twenty-Three Million Five Hundred Thousand
($23,500,000) Dollars, which Purchase Price shall be paid by
Buyer as follows (subject, however, to adjustment pursuant to
provisions of Paragraph 3 hereof):
(a) One Hundred Thousand ($100,000) Dollars (the
"Initial Deposit") by delivery from Buyer to Gold & Wachtel, LLP
(the "Escrow Agent"), simultaneously with the execution and
delivery of this Agreement by Buyer and Seller, of a check in
such amount, subject to collection, which Initial Deposit shall
be held, invested and disbursed by Escrow Agent in accordance
with Paragraph 18 and subject to the rights granted Buyer in
Paragraph 32 hereof.
(b) Six Hundred Fifty Thousand ($650,000) Dollars
(the "Additional Deposit") shall be paid immediately upon the
expiration of the Study Period (as defined in Paragraph 32
hereof), provided this Agreement remains in full force and
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effect, by delivery from Buyer to Escrow Agent of a check in such
amount, subject to collection, which Additional Deposit shall be
held, invested and disbursed by Escrow Agent in accordance with
Paragraph 18 hereof; and
(c) Two Hundred Fifty Thousand ($250,000) Dollars
(the "Final Deposit") shall be paid not later than thirty (30)
days after the expiration of the Study Period, by delivery from
Buyer to Escrow Agent of a check in such amount, subject to
collection, which Final Deposit shall be held, invested and
disbursed by Escrow Agent in accordance with Paragraph 18 hereof;
and
(d) Twenty-Two Million Five Hundred Thousand
($22,500,000) Dollars (the "Cash Balance"), as adjusted pursuant
to Paragraph 3 (and after accounting for any credits or
adjustments pursuant to any other provisions of this Agreement),
shall be paid to Seller at the Closing by wire transfer of
immediately available federal funds transferred to a bank account
designated by Seller; provided, however, that Seller shall have
the right, to be exercised by notice given to Buyer at least five
(5) Business Days prior to the Closing, to require Buyer to pay a
portion of the Cash Balance by one or more separate official bank
checks, each to be drawn on a member bank of the New York
Clearinghouse Association, and each to be payable to the
unendorsed order of Seller or Seller's designee. If Seller
elects to cause Buyer to pay a portion of the Cash Balance by
official bank check(s) as aforesaid, then Seller's exercise
notice shall set forth (i) the portion of the Cash Balance to be
so paid, (ii) the number of official bank checks to be drawn and
(iii) the payee(s) thereof. With respect to the portion of the
Cash Balance to be paid by wire transfer, Seller, at least five
(5) Business Days prior to the Closing, shall notify Buyer of the
designated bank account and the wiring instructions therefor.
For purposes of this Agreement, the term "Business Day" means any
day other than a Saturday, Sunday or day on which the banks in
New York, New York are authorized or obligated by law to be
closed.
(e) In the event the day for payment of the
Additional Deposit or Final Deposit is not a Business Day,
payment shall then be made on the first Business Day immediately
following the day for payment provided in this Agreement.
3. Closing Adjustments. The following are to be adjusted
and prorated between Seller and Buyer as of 11:59 P.M. on the day
preceding the Closing Date (as hereinafter defined), based upon a
365 day year, and except as provided in subparagraph 3.7, the net
amount thereof shall be added to (if such net amount is in
Seller's favor) or deducted from (if such net amount is in
Buyer's favor) the Cash Balance of the Purchase Price:
3.1. Rents. Rents and other sums and charges
(collectively, "Rents") paid or payable by Tenants in connection
with their occupancy of the Building and in payment for services
furnished to them in connection therewith shall be adjusted and
prorated on and if, as and when collected basis. Any amount
collected by Buyer or Seller after the Closing from Tenants who
owe Rents for periods prior to the Closing, shall be applied (i)
first, in payment of Rents for the month in which the payment
occurs; (ii) second, in payment of Rents for the month in which
the Closing Date occurs, (iii) third, in payment of Rents for the
month next preceding the month in which the Closing Date occurs;
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and (iv) fourth, after Rents for all current periods have been
paid in full, then in payment of Rents for the period prior to
the month preceding the month in which the Closing Date occurs.
Each such amount, less any costs of collection (including
reasonable counsel fees) reasonably allocable thereto, shall be
adjusted and prorated as provided above, and the party who
receives such amount shall promptly pay over to the other party
the portion thereof to which it is so entitled. In furtherance
and not in limitation of the preceding sentence, with respect to
any Tenant which has paid all Rents for periods through the
Closing, if, prior to the Closing, Seller shall receive any
prepaid Rents from such Tenant attributable to a period following
the Closing, at the Closing Seller shall pay over to Buyer the
amount of such prepaid Rents. Buyer shall bill Tenants, who owe
Rents for periods prior to the Closing, on a monthly basis for a
period of six consecutive months following the Closing Date, at
the same time and in the same manner as Buyer bills tenants for
Rent due after the Closing and otherwise in accordance with
Buyer's standard practice in the management and operation of the
Property; provided, however, that Buyer shall not have any
obligation to commence any actions or proceedings to collect any
such past due Rents. Thereafter, Seller shall have the right to
sue Tenants to collect such delinquencies, but Seller shall not
be entitled to evict (by summary proceedings or otherwise) any
such Tenants.
3.2. Taxes and Utilities. Real estate taxes, water
and sewer rents and charges, vault taxes and utility fees and
charges (including gas, steam, electricity and other public
utility charges) payable in connection with the Property shall be
adjusted and prorated on the basis of the fiscal year for which
assessed, or the fiscal period covered by the appropriate
invoice, bill or statement, or based on the most recently
available meter reading therefor; provided that no apportionment
shall be made with respect to any of the foregoing that are
payable directly by Tenants pursuant to their Leases. Seller
shall use all reasonable efforts to have the meters for all
metered utility services read to a date not more than five (5)
Business Days prior to the Closing Date. Seller agrees to pay,
at or prior to the Closing, the bills rendered to it as a result
of such readings. Metered utility charges for the period from
the last reading date prior to the Closing through the day before
the Closing Date shall be apportioned on the basis of such last
reading, but shall be reapportioned according to actual charges
promptly after the first reading following the Closing Date.
Unmetered water charges shall be apportioned on the basis of the
charges therefor for the same period in the preceding calendar
year, but applying the current rate thereto. If the Closing
shall occur before the tax rate or assessed valuation is fixed,
the apportionment of real estate taxes shall be upon the basis of
the tax rate for the preceding year applied to the most recently
applicable assessed valuation of the Land and Building, subject
to further and final adjustment when the tax rate and/or assessed
valuation is fixed for the year in which the Closing takes place.
3.3. Fuel. Fuel, if any shall be adjusted and
prorated on the basis of the written estimate of the quantity and
current price therefor (including sales tax, if any) by Seller's
fuel supplier on or about the day preceding the Closing.
3.4. Service Contract Deposits. Charges and
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transferable deposits under transferable Service Contracts, and
transferable utility deposits, if any.
3.5. Permit Fees. Prepaid or current fees and charges
for transferable Permits.
3.6. Security DePosits. Any deposits then held by
Seller under Leases, together with accrued interest thereon
wherever interest is provided for in such Leases or by law, are
to be turned over by Seller to Buyer at the Closing, by good
certified or official bank check or at Seller's option, by
crediting Buyer against the Purchase Price for the full amount
thereof. Any non-cash security deposits made by Tenants shall be
delivered to Buyer at the Closing, together with such instruments
of transfer as may be necessary to enable Buyer to succeed to
Seller's rights thereunder.
3.7. Survival. The provisions of this Paragraph 3
shall survive the Closing. Except as otherwise provided herein,
adjustments shall be made in accordance with the customs in
respect to title closing in Essex County, New Jersey. If any of
the foregoing cannot be apportioned at the Closing because of the
unavailability of the amounts which are to be apportioned, such
items shall be apportioned as soon as practicable after the
Closing. Five (5) Business Days prior to the Closing, Seller
shall furnish to Buyer a tentative statement of proposed
apportionments.
4. Title Executions.
4.1. Seller covenants and agrees that as of the
Closing Date, (a) the Land and the Building shall be free and
clear of all liens and encumbrances, except for those liens,
encumbrances and title exceptions set forth on Schedule 4 annexed
hereto (the "Permitted Encumbrances"), and (b) a title insurance
company selected by, and reasonably satisfactory to, Buyer (the
"Title Company") shall be willing to approve and insure, at
regular premium rates, such state of title under the standard
form ALTA owner's policy of title insurance, subject only to the
Permitted Encumbrances and the standard printed exclusions
contained in such form. Buyer will order a report of title to
the Land the Building from the Title Company and will furnish to
Seller's attorneys a copy thereof within 30 days after the date
hereof, together with a statement identifying the title
exceptions noted therein that do not constitute Permitted
Encumbrances. Seller shall cooperate with the Title Company in
connection with Buyer's obtaining title insurance for the
Property, insuring (at regular rates) that fee simple title to
the Property is vested in Buyer, subject only to the Permitted
Encumbrances. In furtherance and not in limitation of the
foregoing, at or prior to the Closing Seller shall deliver to the
Title Company such affidavits, certificates and other instruments
as are reasonably requested by the Title Company and customarily
furnished in connection with a transaction of a nature
contemplated by this Agreement.
4.2. Seller shall be entitled to reasonable
adjournments of the Closing, not to exceed 30 days in the
aggregate, for the purpose of eliminating any objections to
title, but (subject to the provisions of subparagraph 4.3 below),
nothing herein contained shall require Seller to bring any action
or proceeding, or incur any expense (except to the extent
provided in the next succeeding sentence) in order to render the
title to be in accordance with this Agreement. In the case of
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any exceptions to title which can be removed or insured against
by the Title Company solely by the payment of a liquidated sum of
money, provided such liquidated sum does not, in the aggregate,
exceed $750,000, Seller shall be obligated to pay, or deposit
with the Title Company, such liquidated sum for the removal of
such title exceptions and for the Title Company to omit same as
an exception to the title insurance policy, and Seller shall not
be entitled to an adjournment of the Closing for such purpose.
4.3. Notwithstanding anything contained in this
Paragraph 4 to the contrary, if, from time to time prior to the
Closing, either Seller or Buyer shall become aware of any
Voluntary Title Exceptions (as hereinafter defined), then Seller
or Buyer shall promptly notify the other party thereof, which
notice shall describe in reasonable detail the Voluntary Title
Exceptions(s) at issue. Seller shall discharge of record all
Voluntary Title Exceptions on or prior to Closing. For purposes
hereof, "Voluntary Title Exceptions" shall mean (i) title
exceptions that are knowingly created by any act or failure to
act by Seller, including, without limitation, any mortgage lien,
mechanic's lien, tax lien (except for any lien for real estate
taxes which are subject to adjustment pursuant to the provisions
of this Agreement), judgment lien, security interest,
reservation, easement, right of way and restrictive covenant;
provided, however, that the term "Voluntary Title Exceptions" as
used in this Agreement shall not include any Permitted Encum-
brances and any title exceptions that are expressly approved by
Buyer in writing.
4.4. If, as of the Closing Date, title to the Land and
the Building shall not be as provided in this Agreement, Buyer
shall have the option of either (a) terminating this Agreement,
in which event the Escrow Agent shall pay the Initial Deposit,
the Additional Deposit and the Final Deposit (hereinafter
collectively called the "Deposit") to Buyer and Seller shall
reimburse Buyer for Buyer's net cost of title examination,
whereupon neither party shall have any further rights or
obligations hereunder, or (b) accepting such title as Seller
shall be able to convey, without any reduction of the Purchase
Price or any credit or allowance against the same, except that if
there shall be an encumbrance which is not a Permitted
Encumbrance and which can be removed by the payment of a
liquidated sum of money, Buyer shall (subject to the limit
specified in the fourth sentence of subparagraph 4.1) be entitled
to an offset against the Purchase Price in an amount that does
not exceed such sum. The foregoing shall not, however, be deemed
to limit the unconditional obligation of Seller to discharge and
remove of record all Voluntary Title Exceptions at or prior to
Closing pursuant to the provisions of subparagraph 4.3 above.
The term "net cost of title examination" shall mean the expense
actually incurred by Buyer for (i) the amount, if any, charged by
the Title Company for the examination of title without the
issuance of a policy, (ii) updating the survey referred to on
Schedule 5 and (iii) obtaining violation search reports from
municipal departments of the governmental bodies having
jurisdiction.
4.5. If a search of the title to the Property
discloses judgments, bankruptcies or other returns against other
persons or entities having names the same as or similar to that
of Seller, Seller will at the Closing deliver to Buyer and the
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Title Company an affidavit that such judgments, bankruptcies or
other returns are not against Seller, and/or take such other
actions in respect of any of the foregoing as the Title Company
may reasonably require in order to omit such Title Exceptions
from the Title Policy.
5. Violations.
5.1. If at any time prior to the Closing the Land or
the Building is subject to any notes or notices of violation of
law or municipal ordinances, orders or requirements, that have
been noted in or issued by any federal, state or municipal
department having jurisdiction, and which have not been fully
remedied and discharged of record (the "Violations"), other than
(a) the Violations described in Schedule 5 hereto and (b) any
Violation that a Tenant is required to cure pursuant to its Lease
(any such Violation, other than a Violation of the type described
in the foregoing clause (a) and (b), being hereinafter called an
"Unpermitted Violation"), then, subject to the further provisions
of this Paragraph 5, Seller, at its expense, shall cure and
discharge each Unpermitted Violation prior to the Closing.
5.2. Notwithstanding anything contained in
subparagraph 5.1 above to the contrary, if the cost of curing the
Unpermitted Violations shall exceed $235,000 in the aggregate
(based upon a written estimate prepared by a registered architect
or licensed engineer selected by Seller and approved by Buyer,
which approval shall not be unreasonably withheld), then Seller
shall have the right to terminate this Agreement by written
notice delivered to Buyer not less than five (5) Business Days
prior to the date on which the Closing is scheduled to occur.
Any such notice of termination shall be accompanied by a copy of
the estimate of the aggregate repair costs for the Violations in
question. If Seller shall elect to so terminate this Agreement,
Buyer shall have the right, by written notice delivered to Seller
at or prior to the date on which the Closing is scheduled to
occur, to elect to accept title subject to such Unpermitted
Violations. In such event, (i) Seller's termination of this
Agreement shall be null and void and (ii) at the Closing Buyer
shall be entitled to a credit against the Purchase Price in the
amount of $235,000 (less any reasonable amounts expended by
Seller to cure any Unpermitted Violations). If this Agreement is
terminated pursuant to this subparagraph 5.2, then Escrow Agent
shall pay the Deposit to Buyer and Seller shall reimburse Buyer
for Buyer's net cost of title examination, whereupon neither
party shall have any further rights or obligations hereunder.
Buyer agrees to accept the Property subject to all Violations
other than Unpermitted Violations.
5.3. If either (i) Seller has not elected to terminate
this Agreement pursuant to Section 5.2 above or (ii) the
aggregate cost estimated to cure the Unpermitted Violations and
discharge the same of record does not exceed $235,000, and the
cure and discharge of one or more Unpermitted Violations has not
been completed prior to Closing, then at Closing Buyer shall
receive a credit against the Purchase Price in an amount
reasonably estimated to effect or complete such cure and
discharge. Upon written request of Buyer, Seller shall promptly
furnish to Buyer written authorization as may be necessary for
Buyer to make any necessary searches for purposes of determining
whether any notices of Violations have been issued with respect
to the Property and whether the same have been discharged of
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record.
6. Representations and Warranties of Seller. Seller
represents and warrants to Buyer as follows, and, unless
otherwise expressly provided herein, such representations and
warranties shall be true and correct in all material respects as
of the date hereof and shall be true and correct in all material
respects as of the Closing Date (except for changes in facts
expressly permitted hereunder):
6.1. Leases.
(a) Schedule 2 hereto is a correct and complete list
of all Leases affecting any portion of the Building, setting
forth with respect to each (i) the name of the Tenant, (ii) the
date of the Lease and any modifications or supplements thereto
(and any separate written guaranties of the Lease, if any), (iii)
the basic annual rent currently payable by the Tenant, (iv) the
escalations payable by the Tenant, (v) the space demised, (vi)
the expiration date, (vii) all renewal options, (viii) all
termination and/or contraction options exercisable by a Tenant,
(ix) the amount of the deposit held by Seller thereunder, if any,
and the form thereof (i.e. cash, letter of credit, or other form
of security), (x) any work allowances payable under the Lease
which have not been totally disbursed, (xi) any free rent period
which has not yet expired, and (xii) any other concessions or
monetary obligations of the landlord to a Tenant which have not
yet expired or been paid in full, as the case may be.
(b) There are no leases, tenancies, licenses or other
occupancy agreements to which Seller is a party or by which
Seller may be bound for any portion of the Land or Building other
than the Leases identified on Schedule 2; and Seller has
delivered or made available to Buyer (or will, during the Study
Period pursuant to Paragraph 32 hereof, deliver and make
available to Buyer) true and complete copies of all of the Leases
and related agreements listed on Schedule 2.
(c) Except as otherwise specifically set forth in
Schedule 2:
(i) All of the Leases are in full force and
effect in accordance with their respective terms, and none
of the Leases has been modified, amended, renewed or
extended;
(ii) All tenant improvement and build out work
required to be performed by the landlord under the Leases
has been done or will be performed prior to the Closing;
(iii) All construction allowances or other sums
to be paid to any of the Tenants have been or will be paid
in full prior to the Closing or funds sufficient to satisfy
any allowance delivered to Buyer;
(iv) The term of each of the Leases has
commenced and each Tenant thereunder is occupying the space
demised to it and has commenced the payment of rent, except
that S.B. Thomas, Inc. is paying its rent but is not
occupying its space;
(v) There is no outstanding and uncured claim
of default made under any of the Leases on the part of any
party thereto;
(vi) None of the Tenants has asserted, prior to
the date hereof, any defense, setoff or counterclaim with
regard to its tenancy or its Lease; and no action,
proceeding or arbitration is pending on the date hereof with
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any Tenant in respect of its tenancy or its Lease;
(vii) There are no written or oral promises,
understandings or commitments between Seller and any Tenant
other than those contained in the Leases and the other
instruments listed on Schedule 2;
(viii) All rents are current except as may
otherwise be set forth in Schedule 2;
(ix) No Tenant has prepaid its rent beyond the
current rent period;
(x) there are no "take-over" agreements or
similar agreements whereby Seller has agreed to assume or
pay the obligations of any Tenant under a lease in another
building;
(xi) Seller has not applied any security held
under any Lease to the obligations of the Tenant thereunder
which security has not heretofore been restored;
(xii) Seller has not received a notice from any
Tenant objecting to Seller's computation of additional rents
or escalation charges which remains outstanding;
(xiii) all leasing commissions payable in respect
of any Lease (except those which may be payable by Buyer in
connection with any Lease entered into after the date hereof
pursuant to subparagraph 8.2 below) have been fully paid or
will be paid prior to the Closing Date. Except as set forth
in Schedule 2 annexed hereto (and except with respect to any
new Lease entered into after the date hereof pursuant to
subparagraph 8.2 below), no brokerage commission or
compensation of any kind is due or will be due in connection
with the initial term of any Leases; and
(xiv) no Tenant has any right of first refusal,
option or other preferential right to purchase the Property
or any portion thereof or any ownership interest therein.
(d) Schedule 2-A annexed hereto sets forth (i) all of
the Leases which contain renewal options and/or expansion options
which have not yet been exercised (or which have been exercised
but with respect to which all of the brokerage commissions and
fees relating thereto have not been paid in full) and (ii) the
brokerage commissions now or hereafter payable by the landlord in
connection with each such expansion option and/or renewal option.
6.2. Service Contracts. Schedule 3 hereto is a
correct and complete list of all Service Contracts affecting the
Property. The Service Contracts have not been modified or
amended except as set forth on Schedule 3; and Seller has
delivered to Buyer (or will, during the Study Period pursuant to
Paragraph 32 hereof, deliver and make available to Buyer) true
and complete copies of all Service Contracts and all modifica-
tions thereof. Except as set forth on Schedule 3 hereto, each of
the Service Contracts is cancelable upon not more than 30 days
notice. Each of the Service Contracts is in full force and
effect in accordance with its terms. No written notice of
material default on the part of the other party to any of the
Service Contracts has been sent by Seller, other than a default
notice setting forth a material default which, as of the date
hereof, has been cured, and no written notice of material default
or breach on the part of Seller under any of the Service
Contracts has been received by Seller, other than a default
notice setting forth a default which, as of the date hereof, has
been cured. Seller shall perform all of Seller's obligations to
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be performed under the Service Contracts to the Closing Date.
6.3. No Employees. With the exception of Henry Miller
who will not remain with the Building after Closing, there are no
persons employed by Seller in connection with the operation and
maintenance of the Property, and Seller is not a party to any
union contract or collective bargaining agreement with respect to
the Property or the operation thereof.
6.4. Violations. Schedule 5 is a correct and complete
list of all Violations of record existing as of the date hereof.
6.5. Litigation. Except as set forth in Schedule 6
annexed hereto, there are no actions, suits or proceedings
pending or, to the best knowledge of Seller, threatened against
Seller or the Property, at law or in equity, before any
governmental authority, court or arbitration panel.
6.6. Condemnation and Zoning. Seller has not received
any written notice, and has no knowledge of, (i) any pending or
contemplated annexation or condemnation proceedings, or private
purchase in lieu thereof, affecting or which may affect the
Property or any part thereof, (ii) any proposed or pending
proceeding to change or redefine the zoning classification of all
or any part of the Property, (iii) any proposed or pending
special assessments which affect the Property or any portion
thereof, or (iv) any proposed change(s) in any road patters or
grades with respect to the roads providing a means of ingress and
egress to the Property. Seller agrees to furnish Buyer with a
copy of any such notice received within five (5) days after
receipt.
6.7. No Public Assessments. Seller has not received
any notice indicating that the Property is currently being or
will hereafter be assessed for public improvements which are to
be undertaken in the future, are now in progress or are already
completed.
6.8. Insurance Coverages. Schedule 7 annexed hereto
accurately sets forth all insurance policies covering the
Property, the limits of coverage, the deductible amounts, and the
expiration dates of such policies. Seller shall keep such
insurance in full force and effect through the Closing Date.
Seller has not received any written notice from any insurance
company or agent thereof which has issued a policy with respect
to the Property, or any portion thereof, or by any board of fire
underwriters (or other body exercising similar functions) which
notice has claimed any defect or deficiency or requested
performance of any repairs, alterations or other work to the
Property as a condition of maintaining any policy of insurance in
effect.
6.9. Permits. Schedule 8 annexed hereto sets forth
(i) all of the Permits for the Property and (ii) all of the
Warranties which are still in effect and which have been given by
any contractor or manufacturer in favor of Seller in connection
with the construction, repair or renovation of the Building or
any part thereof. The Permits and Warranties are in full force
and effect, shall not be modified, amended or rescinded prior to
the Closing Date, and are fully assignable to Buyer. All
applicable charges and fees for the Permits have been paid in
full.
6.10. No Assessment Reduction Proceedings. There are
no proceedings pending for the reduction of the assessed
valuation of the Property or any portion thereof.
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6.11. No Hazardous Substances. To the best knowledge
of Seller, (i) no Hazardous Substances and Waste (as hereinafter
defined) are present, or were installed, exposed, released or
discharged in, on or under the Property, and (ii) the Property
has been used and operated in compliance with all Environmental
Laws (as hereinafter defined). Seller has not received any
written notice from any governmental authority claiming any
violation of any federal, state or local statute, ordinance,
regulation, administrative order or court order or decree
pertaining to any Hazardous Substance on, under or over the
Property or demanding clean-up or any other remedial action, or
payment or contribution for any environmental contamination or
any damages attributable thereto. The existing underground
storage tank at the Property (which tank supplies fuel oil to the
emergency generator) (i) has been duly registered with all
applicable governmental authorities (including the New Jersey
Department of Environmental Protection and Energy), (ii) complies
with all applicable Environmental Laws and (iii) has, since
February, 1993, been upgraded to contain appropriate leak
detection and spill and overfill control systems as required by
applicable Environmental Laws. Until the Closing Seller shall
(x) maintain and operate the Property in compliance with all
Environmental Laws, (y) make all disclosures required by Seller
under all applicable Environmental Laws, and (z) comply (or cause
compliance) with all orders issued thereunder.
6.12. Representations Regarding Seller.
(a) Seller is a limited partnership duly organized
and validly existing under the laws of the State of New Jersey,
and has the full power and authority to execute and deliver this
Agreement and all documents now or hereafter to be executed and
delivered by it pursuant to this Agreement (the "Seller's
Documents") and to perform all obligations arising under the
Seller's Documents. This Agreement constitutes, and the Seller's
Documents will each constitute, the legal, valid, and binding
obligation of Seller, enforceable in accordance with their
respective terms, covenants, and conditions.
(b) This Agreement and the Seller's Documents (and
the transactions contemplated hereby and thereby) do not and will
not contravene any provision of the partnership agreement of
Seller, any judgment, order, decree, writ or injunction, any
provision of any existing law or regulation or any other docu-
ments affecting Seller. No authorization, consent or approval of
any partner, creditor or governmental authority for the
consummation of the transactions contemplated by this Agreement
by Seller is necessary (or all such authorizations, approvals and
consents have already been obtained).
(c) (A) The general partner of Seller executing this
Agreement is a corporation duly organized, authorized and
qualified to do business in its state of incorporation and has
the power to enter into and consummate the transactions
contemplated by this Agreement as the general partner of Seller,
and to execute any and all documents to effectuate same on behalf
of Seller, (B) the transactions contemplated by this Agreement do
not violate any applicable provisions of the charter, by-laws, or
other documents affecting said corporation, (C) shareholder
approval of the transactions contemplated by this Agreement has
either been obtained by such corporate general partner or is not
required, and (D) no authorization, consent or approval of any
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shareholder, officer, director, creditor or governmental
authority for the execution of this Agreement by said corpo-
ration, in its capacity as the general partner of Seller, is
necessary (or all such authorizations, approvals and consents
have already been obtained).
(d) Seller is not a "foreign person" within the
meaning of Section 1445 of the Internal Revenue Code of 1986, as
amended, and the regulations promulgated thereunder.
(e) No attachments, execution proceedings,
assignments for the benefit of creditors, insolvency, bankruptcy,
or other proceedings are pending or, to the best of Seller's
knowledge, threatened against Seller, nor is Seller contemplating
commencing any such proceedings. Seller has not been a debtor
under any case commenced under the United States Bankruptcy Code.
6.13. Survival. The representations and warranties set
forth in this Paragraph 6 shall survive the Closing.
7. Representations and Warranties of Buyer. Buyer
represents and warrants to Seller as follows, and such
representations and warranties shall be true and correct in all
material respects on the date hereof and shall be true and
correct in all material respects as of the Closing Date:
7.1. Organization and Authority. Buyer is a limited
liability company duly organized and validly existing under the
laws of the State of Delaware, and has full power and authority
to execute and deliver this Agreement and all other documents now
or hereafter to be executed and delivered by it pursuant to this
Agreement (the "Buyer's Documents") and to perform all obliga-
tions of Buyer arising under Buyer's Documents. This Agreement
constitutes, and the Buyer's Documents will each constitute, the
legal, valid and binding obligations of Buyer, enforceable in
accordance with their respective terms, covenants and conditions.
7.2. No Violation; No Consents Necessary. This
Agreement and the Buyer's Documents (and the transactions
contemplated hereby and thereby) do not and will not contravene
any provision of the operating agreement or articles of formation
of Buyer, any judgment, order, decree, writ or injunction, or any
provision of any existing law or regulation or any other docu-
ments affecting Buyer. No authorization, consent or approval of
any member, creditor or governmental authority for the
consummation of the transactions contemplated by this Agreement
by Buyer is necessary (or all such authorizations, approvals and
consents have already been obtained).
7.3. Survival. The representations and warranties set
forth in this Paragraph 7 shall survive the Closing.
8. Covenants of Seller.
8.1. Operation of the Property. Seller shall, between
the date hereof and the Closing, continue to operate and maintain
the Property in the ordinary course in accordance with its normal
practices and procedures customarily followed by Seller in the
operation, maintenance and repair of the Property prior to the
date hereof. In furtherance (and not in limitation) of the
foregoing, Seller shall cause to be made all repairs and
replacements to the Property so as to keep the same in
substantially its present condition, except for (i) reasonable
wear and tear, natural deterioration and damage from the elements
and (ii) damage or destruction resulting from fire or other
casualty (which shall be governed by the provisions of Paragraph
10 below). Seller agrees that it shall not remove any Personal
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Property from the Building unless the items so removed are
immediately replaced with other items of Personal Property of
equal or greater value and utility.
8.2. Leases. Except as hereinafter provided, Seller
shall not cancel, modify or extend (except pursuant to existing
renewal options in favor of Tenants) any Lease or enter into any
new Lease, without Buyer's prior written consent in each
instance. During the Study Period, Buyer agrees that it shall
not unreasonably withhold its consent to a new Lease, provided
that the proposed new Lease satisfies the leasing criteria set
forth on Schedule 9 annexed hereto and made a part hereof. After
the Study Period has expired, Seller shall not enter into any new
Lease without the prior written consent of Buyer, which consent
may be withheld in Buyer's sole and absolute discretion.
Notwithstanding the foregoing, Seller may, without Buyer's
consent, terminate any Lease under which the Tenant has defaulted
beyond the applicable notice and grace period. If Buyer's
consent to a new Lease or other transaction is required under
this subparagraph 8.2, but Buyer does not object thereto in
writing within ten (10) days after Buyer has received Seller's
request for such consent, then Buyer will be deemed to have given
such consent and will confirm such consent in writing upon
demand. Any leasing commissions payable in connection with any
Lease or extension entered into by Seller in accordance with this
subparagraph 8.2, and the cost of any improvements required to be
made by the landlord in the space to which such Lease or
extension relates, shall be apportioned at Closing between Seller
and Buyer according to the relative portions of the initial term
of such Lease or extension that fall before and after the
Closing. If, in any instance described in the preceding
sentence, Seller, as of the Closing Date, shall not have
theretofore paid the portion of the leasing commissions or cost
of improvements for which Seller is responsible, then Buyer shall
be entitled to a credit against the Cash Portion of the Purchase
Price in an amount equal to such unpaid portion for which Seller
is responsible, and to the extent that the same is so credited,
Buyer shall make payment of such portion of such leasing
commissions and costs of improvements. Within five (5) Business
Days after receipt of a request from Buyer given from time to
time, Seller shall deliver to Buyer an updated rent roll for the
Building and a then current list of rent arrearages with respect
to all of the Tenants.
8.3. Insurance. Between the date hereof and the
Closing Date, Seller shall keep in full force and effect with
respect to the Property the existing policies of insurance
providing coverage, as described on Schedule 7 annexed hereto.
8.4. Service Contracts. Seller shall not, without
Buyer's consent, which shall not be unreasonably withheld, (i)
enter into any new Service Contract with respect to the Property
which is not terminable at or prior to the Closing or (ii) allow
any Permit to expire or otherwise be terminated.
8.5. No Mortgages or Transfers. Seller shall not
mortgage, pledge or create any contractual lien, charge or any
other encumbrance (or agree to do so) in respect of the Property
or any part thereof. Seller shall not sell or transfer any
portion of the Property.
8.6. Access to the Property. Subject to Paragraph 32,
Seller will allow Buyer and its agents and representatives to
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inspect and examine the Property, and all books, records and
accounts relating to the operation thereof, at all reasonable
times upon reasonable notice.
8.7. Estoppel Certificates. Seller shall use all
reasonable efforts to obtain an estoppel certificate from each
Tenant substantially in the form of Exhibit A annexed hereto (the
"Estoppel Certificates"), which Estoppel Certificates shall be
dated not earlier than 30 days prior to the Closing Date.
9. Assessments. Seller represents and warrants to Buyer
that it has received no notice, and has no knowledge, of any
unconfirmed or pending assessments against the Property. If on
the Closing Date the Property or any part thereof shall be or
shall have been affected by an assessment or assessments which
are or may become payable in annual installments, of which the
first installment is then a charge or lien, or has been paid or
is due and payable, then for the purposes of this Agreement all
the unpaid installments of any such assessment, including those
which are to become due and payable after the Closing, shall be
deemed to be due and payable and to be liens upon the Property
and shall be paid and discharged by Seller upon the Closing.
10. Casualty and Condemnation.
10.1. Procedure Upon Casualty. (a) For purposes of
this Paragraph 10, the following terms shall have the following
meanings:
"Casualty" means a fire, vandalism, act of God, or
other casualty or cause which causes damage or injury to the
Property.
"Major Casualty" means a Casualty which (x) results in
Restoration Costs in excess of $235,000 and (y) will require (as
reasonably determined by an architect or engineer selected by
Seller and reasonably approved by Buyer (the "Estimator")) more
than 120 days from the occurrence of the Casualty to fully repair
and restore the Property.
"Restoration Costs" means, as of any date with respect
to any Casualty, the cost to be incurred, from and after such
date, to repair or restore (as reasonably determined by the
Estimator) the damage to the Property.
(b) If a Casualty shall occur prior to the Closing,
then within ten (10) Business Days after such occurrence, Seller
shall deliver to Buyer a written notice (the "Casualty Notice")
describing the Casualty in question. The Casualty Notice shall
be accompanied by a statement from the Estimator setting forth
the estimated Restoration Costs and the estimated time necessary
to repair the Property to its condition immediately prior to such
Casualty.
(c) If the Casualty is not a Major Casualty, then
Buyer shall have the right, exercisable by written notice given
to Seller within ten (10) Business Days after Buyer has received
the Casualty Notice, to either (i) require that Seller complete
the necessary repairs and restoration of the Property at Seller's
cost or (ii) accept the Property subject to such Casualty. If
Buyer does not elect to accept title to the Property subject to
such Casualty as aforesaid, then Seller promptly shall undertake
to complete the necessary repairs and restoration.
(d) If the Casualty is a Major Casualty, then Buyer
shall have the right to terminate this Agreement by giving
written notice to Seller within ten (10) Business Days after
Buyer's receipt of the Casualty Notice. If Buyer so elects to
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terminate this Agreement, then the Deposit shall be refunded to
Buyer and thereafter this Agreement shall be of no further force
or effect.
(e) If either (x) there is a Major Casualty and Buyer
does not elect to terminate this Agreement within ten (10)
Business Days after receipt of the Casualty Notice as set forth
in subparagraph 10.1(d) above, or (y) there is a Casualty which
is not a Major Casualty and Buyer elects to accept the Property
subject to such Casualty as set forth in subparagraph 10.1(c)
above, then the following shall apply:
(i) the Closing shall take place without any
abatement of the Purchase Price;
(ii) at the Closing Seller shall (x) deliver to
Buyer all insurance proceeds which Seller has collected, (y)
pay to Buyer any applicable deductible under the "all risk"
insurance coverage maintained by Seller with respect to such
Casualty and (z) assign to Buyer all of Seller's rights to
such insurance proceeds; and
(iii) Seller shall cooperate with Buyer in any
loss adjustment negotiations, legal actions and agreements
with the applicable insurance company, and Seller will not
settle any insurance claims or legal actions relating
thereto without Buyer's prior written consent.
10.2. Eminent Domain. If, prior to the Closing, the
entire Property is taken by eminent domain, this Agreement shall
be deemed terminated. If only part of the Property is so taken,
Buyer shall have the option of (a) proceeding with the Closing
and accepting the Property as affected by such taking, together
with all compensation and damages awarded and the right to
receive the same, or (b) terminating this Agreement, except that
in the event of a partial taking of part of the parking area that
does not materially and adversely affect the number of spaces
and/or the ingress and egress from the streets upon which the
Property fronts, Buyer shall not have the right to terminate. If
Buyer elects option (a) above, Seller agrees to assign to Buyer
at Closing its rights to such compensation and damages (and pay
over to Buyer any such compensation and damages already
received), and will not settle any proceedings relating to such
taking without Buyer's prior written consent. If Buyer elects
option (b) above, then Escrow Agent shall pay the Deposit to
Buyer, this Agreement shall terminate and be of no further force
or effect, and the parties shall have no further rights or
obligations hereunder.
10.3. Express Agreement. The provisions of this
Paragraph 10 shall be considered an express agreement governing
any case of damage, destruction or taking of the Property or any
part thereof by fire or other casualty, or by eminent domain, and
(to the extent permitted by applicable law) any law now or
hereafter in effect which is inconsistent with the provisions of
this Paragraph 10 shall have no application to this Agreement.
11. Brokers.
11.1. Seller represents that Sonnenblick-Goldman
Company, 445 Park Avenue, New York, New York 10022 (the
"Broker"), is the only broker, finder, agent or similar entity
with whom Seller negotiated or dealt in connection with this
Agreement and the conveyance of the Property to Buyer pursuant
hereto. Seller agrees to pay Broker its fee, commission and/or
compensation for the value of services rendered (collectively
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"Compensation") pursuant to separate agreement with Broker. From
the Compensation it receives, Broker shall pay cooperating broker
(below named) its fee, commission and/or compensation for the
value of services rendered in accordance with agreement between
Broker and Cooperating Broker, neither Seller nor Buyer being a
party thereto.
11.2. Buyer represents that Richard Ripps (the
"Cooperating Broker") and Cushman & Wakefield of New Jersey, Inc.
("C&W") are the only brokers, finders, agents or similar entities
with whom Buyer negotiated or dealt in connection with this
Agreement and the conveyance of the Property by Seller pursuant
hereto. Buyer further represents to Seller that (i) Buyer has
engaged C&W as a consultant only in connection with this
transaction (and not as a broker) and (ii) Buyer shall pay all
sums due to C&W in connection with this transaction pursuant to a
separate agreement between Buyer and C&W.
11.3. Seller agrees to defend, indemnify and hold
harmless Buyer from and against any loss, cost, damage,
liability, and expense (including, without limitation, reasonable
counsel fees) suffered, paid or incurred by Buyer arising out of
or in connection with (i) any breach of the representations of
Seller set forth in subparagraph 11.1 above and (ii) any claim
for a fee, commission and/or compensation for the value of
services rendered made against Buyer by Broker or by any broker,
finder, agent or similar entity alleging to have acted for or
dealt with Seller in the transaction contemplated hereby.
11.4. Buyer agrees to defend, indemnify and hold
harmless Seller from and against any loss, cost, damage,
liability and expense (including, without limitation, reasonable
counsel fees) suffered, paid or incurred by Seller arising out of
or in connection with (i) any breach of the representations of
Buyer set forth in subparagraph 11.2 above and (ii) any claim for
fee, commission and/or compensation for the value of services
rendered made against Seller by any broker, finder, agent or
similar entity (other than Broker or Cooperating Broker) alleging
to have acted for or dealt with Buyer in connection with the
transaction contemplated hereby (including, without limitation,
C&W).
11.5. The provisions of this Paragraph 11 shall
survive the Closing or the termination of this Agreement.
12. The Closing. The Closing (the "Closing") of the
transactions contemplated hereby shall take place at 10:00 a.m.
on the date which is forty five (45) days after the expiration of
the Study Period; provided, however, that if such date is not a
Business Day, then the Closing shall take place on the first
Business Day that is a Tuesday, Wednesday or Thursday immediately
succeeding such date (said date, or any date to which the Closing
shall be accelerated or adjourned, is herein called the "Closing
Date"). The Closing shall occur at the offices of Gold &
Wachtel, LLP, 110 East 59th Street, New York, New York 10022, or,
at the option of Buyer, at the offices of the attorneys for
Buyer's lender (if any).
13. Deliveries at Closing. The following deliveries shall
be made at the Closing:
13.1. Seller shall execute, acknowledge and deliver a
bargain and sale deed with covenants against Grantor's Acts (or
the New Jersey equivalent thereof) in proper form for recording,
pursuant to which Seller shall convey the Land and the Building
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to Buyer.
13.2. Seller and Buyer shall execute, acknowledge and
deliver counterparts of an assignment of the landlord's interest
in the Leases and the security deposits thereunder, which
assignment shall be in the form attached hereto as Exhibit C.
13.3. Seller shall execute, acknowledge and deliver a
bill of sale, in the form attached hereto as Exhibit D,
transferring all of the Personal Property to Buyer.
13.4. Seller shall execute, acknowledge and deliver an
assignment, in the form attached hereto as Exhibit E, assigning
to Buyer (i) all of the Assigned Service Contracts that Buyer has
elected to accept pursuant to the provisions of subparagraph 32.3
below and (ii) the Warranties.
13.5. To the extent applicable, Seller shall execute,
acknowledge and deliver the form attached hereto as Exhibit E,
transferring to Buyer all of Seller's right, title and interest
in and to the Permits.
13.6. Seller and Buyer shall execute and deliver joint
notices to all Tenants advising them of the sale of the Building,
the assignment of the Leases, the transfer to Buyer of all
deposits thereunder (less any valid deductions therefrom),
Buyer's address and where future rent payments are to be made,
and such other matters as are required by applicable laws or
pursuant to the terms of the Leases or which either party may
reasonably request, as set forth on Exhibit G hereof.
13.7. Seller shall deliver to the Title Company such
evidence as may be reasonably required by the Title Company, of
the due authorization, execution and delivery of this Agreement
and the Seller's Documents.
13.8. Seller shall deliver to Buyer original Tenant
files, employee records, unexpired Warranties, the Permits, the
Service Contracts, the Leases, the Plans, and such other
instruments and documents affecting the Property as may be in
Seller's possession. Seller may retain copies of such
instruments and documents as Seller may reasonably require for
its own use following the Closing. To the extent executed
originals of such instruments and documents are not in Seller's
possession and are not otherwise readily obtainable by Seller,
Seller shall deliver copies of all such instruments and
documents; any such copies required to be delivered to Buyer
hereunder shall have attached thereto a certificate duly executed
by Seller certifying that said copy is, to Seller's best
knowledge, a true and complete copy of the same and that the
original thereof cannot be located after a diligent search.
13.9. Seller and Buyer shall execute and deliver
notices to the contractors under the Assigned Service Contracts,
advising them of the sale of the Property and the assignment to
Buyer of the Assigned Service Contracts and any deposits
thereunder. With respect to those Service Contracts that are not
Assigned Service Contracts, Seller shall deliver true copies of
its letters terminating such Service Contracts.
13.10. Seller shall deliver to the Title Company
certified or official bank checks to the order of the appropriate
governmental officials in payment of all applicable real property
transfer taxes and documentary stamps, and Seller and Buyer shall
execute, acknowledge and deliver to the Title Company the tax
return(s) required in connection therewith. By notice to Buyer
given at least five (5) Business Days before the Closing, Seller
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may require Buyer to deliver any or all of such checks, in which
case Buyer will receive a credit against the Purchase Price in
the amount of the check(s) so delivered.
13.11. Seller shall execute (or cause one or more of
its officers or partners to execute), acknowledge and deliver an
affidavit of title in form customarily used by Title Companies
for similar properties in Essex County, New Jersey, and such
other affidavits as the Title Company shall reasonably require,
in order to omit from its title insurance policy all exceptions
for judgments, bankruptcies or other returns against other
persons or entities whose names are the same as or similar to
Seller's name.
13.12. Seller shall deliver to Buyer the real estate
tax bills for the tax year in which the Closing occurs.
13.13. Seller shall deliver to Buyer an updated
schedule of Leases, similar in form to Schedule 2, and certified
by Seller as correct and complete as of the Closing Date.
13.14. Seller shall deliver to Buyer (a) Estoppel
Certificates received by Seller prior to the Closing from Tenants
in response to Seller's requests for such certificates pursuant
to subparagraph 8.7, and (b) with respect to the Tenants who do
not deliver Estoppel Certificates prior to the Closing, a
certificate of Seller with respect to the matters such Tenants
were requested to certify (to the extent not already covered in
the certification delivered pursuant to subparagraph 13.13).
13.15. Seller shall deliver to Buyer (a) a certifi-
cation in the form of Exhibit B attached hereto (the "FIRPTA
Certification"), verified as true and signed and sworn to under
penalties of perjury by a general partner of Seller. Seller
understands that the FIRPTA Certification will be retained by
Buyer, and will be made available by Buyer to the Internal
Revenue Service on request.
13.16. Seller and Buyer shall execute a notice to the
Escrow Agent that the Closing has been consummated.
13.17. Seller shall deliver to Buyer all keys to all
doors and locks in the Building and all combinations to all safes
in the Building which are owned by Seller.
13.18. Seller shall deliver to Buyer an assignment of
all tenant proceedings, if any, in form reasonably satisfactory
to Buyer, assigning to Buyer all of Seller's right, title and
interest in and to all pending actions brought by Seller against
any of the then existing Tenants, including, without limitation,
all summary proceedings for the eviction of then existing Tenants
under any of the Leases.
13.19. Seller shall execute and deliver to Buyer an
assignment, in the form attached hereto as Exhibit H, of all
General Intangibles.
13.20. Seller shall deliver to Buyer the original of
the ISRA letter from the New Jersey Department of Environmental
Protection, as more particularly set forth in Section 31.2 below.
13.21. Seller and Buyer shall execute and deliver to
each other such other instruments and documents, and shall pay or
cause to be paid such sums of money, to which the other party may
be entitled pursuant to any of the other provisions of this
Agreement. Each instrument and document to be delivered at the
Closing, the form of which is not attached to this Agreement,
shall otherwise be reasonably satisfactory in form and substance
to Seller and Buyer.
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14. Expenses. Seller shall pay all New Jersey real estate
transfer taxes and fees payable with respect to the sale of the
Property to Buyer. Buyer shall pay all fees, charges, and
expenses incurred or payable for the issuance of the title report
and Buyer's title insurance policy pursuant thereto, the cost of
obtaining searches for violations, the cost of obtaining and/or
redating any survey of the Property, and the cost of recording
any document contemplated hereby; except that Seller shall pay
the cost of recording any instrument required pursuant to
Paragraph 4 to cure title defects, and Seller shall pay for the
net cost of title examination if this Agreement is terminated by
Buyer pursuant to any of the provisions hereof entitling Buyer to
so terminate. Each party shall pay its own attorneys' and
accountants' fees. The provisions of this Paragraph 14 shall
survive the Closing or the termination of this Agreement.
15. Indemnities.
15.1. Seller shall defend, indemnify, and hold
harmless Buyer from all loss, expense (including reasonable
counsel fees), damage, and liability resulting from (a) claims of
mechanics and materialmen based on work performed on or at the
Property, and materials supplied to Seller or the Property, prior
to the Closing, (b) claims of whatever nature (including, without
limitation, for bodily injury, wrongful death, or property
damage) against Buyer or the Property based on causes of action
which arose or accrued prior to the Closing, and (c) claims by
Tenants, employees, contractors under Service Contracts, or
utility companies, with respect to matters that occurred or
obligations which accrued prior to the Closing.
15.2. Buyer shall defend, indemnify and hold Seller
harmless from all loss, expense (including reasonable counsel
fees), damage and liability resulting from (a) claims of
mechanics and materialmen based on work performed on or at the
Property, and materials supplied to Buyer or the Property, after
the Closing, (b) claims of whatever nature (including, without
limitation, for bodily injury, wrongful death or property damage)
against Seller based on causes of action that arise or accrue
after the Closing, and (c) claims by Tenants, employees,
contractors under Service Contracts or utility companies with
respect to matters that occur or obligations that accrue after
the Closing.
15.3. Each party hereto (each, an "indemnified party")
agrees that if and to the extent that a claim covered by the
indemnities provided in this Paragraph 15 is also covered by
insurance maintained by the indemnified party, then the
indemnified party shall first seek recovery from its insurer
before seeking indemnification recovery against the indemnifying
party under the indemnities provided in this Paragraph 15.
15.4. The provisions of this Paragraph 15 shall
survive the Closing or any termination of this Agreement.
16. Conditions to Closing.
16.1. Buyer's Conditions to Closing. Buyer's
obligation to purchase the Property is subject to the
satisfaction of the following conditions precedent, any or all of
which may be waived by Buyer (all of which waivers shall be
expressly and specifically made in writing to be enforceable
against Buyer):
(a) This Agreement shall be in full force and effect
and there shall not then exist any event which would allow Buyer
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to terminate this Agreement pursuant to the express terms hereof;
(b) Seller shall have executed and/or delivered each
of the documents and items to be executed and/or delivered by
Seller pursuant to this Agreement, including, without limitation,
the documents enumerated in Paragraph 13 above;
(c) title to the Property shall be as required by
Paragraph 4 above, and the Title Company shall have issued a
title policy to Buyer (the "Title Policy") following the payment
by Buyer of the insurance premium, insuring that title to the
Property has vested in Buyer, subject only to the Permitted
Encumbrances and/or such matters which Buyer has waived or agreed
to take title subject to without any abatement to or credit
against the Purchase Price;
(d) Seller shall have delivered to Buyer Estoppel
Certificates from Tenants leasing, in the aggregate, not less
than eighty percent (80%) of the rented square feet in the
Building, which Estoppel Certificates shall confirm the
information set forth on Schedule 2 and shall be dated not
earlier than 30 days prior to the Closing Date;
(e) The representations and warranties of Seller
contained in this Agreement (including, without limitation, the
representations and warranties of Seller set forth in Paragraph 6
above) shall be true and correct in all material respects as of
the Closing Date, and shall be reiterated by Seller to the effect
that the same are true and correct in all material respects as of
the Closing Date;
(f) Seller shall have paid all sums that are to be
paid at or prior to Closing by Seller under this Agreement; and
(g) Seller shall have performed and complied with all
of the other material covenants and material obligations of
Seller set forth in this Agreement.
16.2. Seller's Conditions to Closing. Seller's
obligation to sell the Property is subject to the satisfaction of
the following conditions precedent, any or all of which may be
waived by Seller (all of which waivers shall be expressly and
specifically made in writing to be enforceable against Seller):
(a) This Agreement shall be in full force and effect
and there shall not then exist any event which would allow Seller
to terminate this Agreement pursuant to the express terms hereof;
(b) Buyer shall have paid to Seller (or as Seller
shall direct in writing, as the case may be), the Cash Balance of
the Purchase Price due to Seller as herein provided, and shall
have paid all other sums that are to be paid at or prior to
Closing by Buyer under this Agreement;
(c) Buyer shall have executed, acknowledged (where
appropriate) and delivered to Seller counterpart originals of the
instruments referred to in Paragraph 13 above which are to be
executed by Buyer;
(d) The representations and warranties of Buyer
contained in Paragraph 6 above shall be true and correct in all
material respects as of the Closing Date;
(e) Buyer shall have performed and complied with all
of the other material covenants and material obligations of Buyer
set forth in this Agreement.
17. As Is. Buyer has examined and inspected the physical
nature and condition of the Property and it is purchasing the
same "as is" on the date hereof, subject to reasonable wear and
tear and the provisions of Paragraphs 5, 10 and 32 hereof.
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Neither Seller nor any agent, partner, employee, or
representative of Seller has made any representation whatsoever
regarding the Property or any part thereof, or anything relating
to the subject matter of this Agreement, except as expressly set
forth in this Agreement. Buyer, in executing, delivering and
performing this Agreement, has not and does not rely upon any
statement, information, or representation to whomsoever made or
given, whether to Buyer or others, and whether directly or
indirectly, verbally or in writing, made by any person, firm or
corporation, except as expressly set forth in this Agreement or
the Seller's Documents. Nothing contained in this Paragraph 17
shall (i) be deemed to limit the rights of Buyer, and the
obligations of Seller, under the provisions of Paragraphs 5, 7
and 32 of this Agreement or (ii) affect Seller's liability, if
any, arising from any breach of, or inaccuracy of, its specific
representations and warranties contained in this Agreement.
18. Escrow Provisions. The Deposit shall be held in escrow
by Escrow Agent on the following terms and conditions:
18.1. The Deposit shall be invested in either the
certificates of deposit of a commercial bank which is a member of
the New York Clearing House Association or in United States
Treasury bills or notes. In either case, the maturity of the
investment shall not exceed thirty (30) days or the Closing Date,
whichever is earlier. If such maturity shall occur prior to the
Closing, the Deposit (which, for the purposes of this Agreement,
shall include any interest collected thereon so that whichever
party is entitled to the Deposit will also receive the interest
collected thereon) shall be reinvested under the same terms and
conditions.
18.2. Escrow Agent shall deliver the Deposit to Seller
or Buyer, as the case may be, on the following conditions:
(a) To Seller upon receipt of a notice signed by both
Seller and Buyer stating that the Closing has been consummated;
(b) To Seller, upon receipt of demand therefor signed
by Seller stating that Buyer has defaulted (after the receipt of
any applicable notice and the expiration of any applicable grace
period) in the performance of its obligations under this
Agreement; provided, however, that Escrow Agent shall not honor
such demand until at least ten (10) days after the date on which
Buyer shall have received a copy of such demand from Escrow
Agent, nor thereafter following such ten (10) day period if
Escrow Agent shall have received a notice of objection from Buyer
given in accordance with the provisions of subparagraphs 18.3 or
18.4; or
(c) To Buyer, upon receipt of demand therefor signed
by Buyer stating that either Seller has defaulted (after the
receipt of any applicable notice and the expiration of any
applicable grace period) in the performance of its obligations
under this Agreement or that Buyer is otherwise entitled to the
refund of the Deposit pursuant to the terms of this Agreement;
provided, however, that Escrow Agent shall not honor such demand
until at least ten (10) days after the date on which Seller shall
have received a copy of such demand from Escrow Agent, nor
thereafter following such ten (10) day period if Escrow Agent
shall have received a notice of objection from Seller given in
accordance with the provisions of subparagraphs 18.3 or 18.4.
18.3. Any notice to, or demand upon, Escrow Agent
shall be in writing and shall be sufficient only if received by
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Escrow Agent within the applicable time periods set forth herein,
if any. Notices to or demands upon Escrow Agent shall be mailed
to it at 110 East 59th Street, New York, New York 10022,
Attention: Robert Stone, Esq., or served personally upon Escrow
Agent, with receipt acknowledged in writing by a partner of
Escrow Agent. Notices from Escrow Agent to Seller or Buyer shall
be delivered to their respective addresses set forth in Paragraph
19, or at such other address as the party in question shall have
last designated by notice to Escrow Agent. All such deliveries
shall be by (i) registered or certified mail, return receipt
requested, (ii) overnight special handling, such as Federal
Express or (iii) personal delivery by messenger.
18.4. Upon receipt of a demand for the Deposit, made
by Seller or Buyer pursuant to subparagraph 18.2, Escrow Agent
shall promptly deliver a copy thereof to the other party. The
other party shall have the right to object to the delivery of the
Deposit by delivering to Escrow Agent notice of objection within
ten (10) days after the date Escrow Agent delivers such copy to
the other party, but not thereafter. Upon receipt of such notice
of objection, Escrow Agent shall promptly deliver a copy thereof
to the party who made the written demand.
18.5. If (a) Escrow Agent shall have received a notice
of objection as provided for in subparagraph 18.4 within the time
therein prescribed or (b) any other disagreement or dispute shall
arise between the parties or any other persons resulting in
adverse claims and demands being made for the Deposit, whether or
not litigation has been instituted, then and in any such event,
Escrow Agent shall refuse to comply with any claims or demands on
it, and shall continue to hold the Deposit until Escrow Agent
receives either (x) a written notice signed by both parties
directing the disbursement of the Deposit, or (y) a final order
of a court of competent jurisdiction, entered in an action, suit
or preceding in which Seller and Buyer are parties, directing the
disbursement of the Deposit, in either of which events Escrow
Agent shall then disburse the Deposit in accordance with such
direction. Escrow Agent shall not be or became liable in any way
or to any person for its refusal to comply with any such claims
and demands unless and until it has received such direction.
Upon compliance with such direction, Escrow Agent shall be
released of and from all liability hereunder.
18.6. Notwithstanding the foregoing, Escrow Agent
shall have the following rights in the circumstances described in
clause (a) or (b) of subparagraph 18.5.
(a) If Escrow Agent shall have received a notice
signed by either party advising that a litigation between the
parties over entitlement to the Deposit has been commenced,
Escrow Agent may, on notice to the parties, deposit the Deposit
with the clerk of the court in which such litigation is pending;
or
(b) Escrow Agent may, on notice to the parties, take
such affirmative steps as it may, at its option, elect in order
to terminate its duties as Escrow Agent, including, but not
limited to, the deposit of the Deposit with a court of competent
jurisdiction and the commencement of an action for interpleader,
the reasonable costs of which shall be borne by whichever of the
parties is the losing party. Upon the taking by Escrow Agent of
the action described in clause (a) or (b) of this subparagraph
18.6, Escrow Agent shall be released of and from all liability
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hereunder.
18.7. Except as otherwise provided herein, in the
event of any dispute between the parties hereto with respect to
this Agreement which causes the Escrow Agent to incur costs and
expenses in performing its duties hereunder as escrow agent, then
the parties shall equally reimburse Escrow Agent for all such
reasonable costs and expenses, including, but not limited to,
reasonable attorney's fees, either paid to retain attorneys or in
an amount representing the fair value of legal services rendered
to itself. The foregoing shall not be deemed to require the
Buyer to reimburse the Escrow Agent for any costs and expenses
incurred by the Escrow Agent either (i) in its capacity as the
attorney for Seller hereunder or (ii) in connection with simply
acting as the depository with respect to holding the Deposit in
escrow pursuant to the terms hereof. Notwithstanding the
foregoing, the party to whom the Deposit is delivered shall be
responsible for and indemnify and save harmless Escrow Agent from
any income taxes arising from any interest earned on the Deposit
which is paid over to that party. Escrow Agent is acting
hereunder as a depository only and is not responsible or liable
in any manner whatsoever for the sufficiency, correctness,
genuineness or validity of any instrument deposited with or any
notice or demand given to it or for the form of execution of such
instrument, notice or demand, or for the identification,
authority or rights of any person executing, depositing or giving
the same or for the terms and conditions of any instrument,
pursuant to which the parties may act.
18.8. Escrow Agent shall not have any duties or
responsibilities, except those set forth in this Paragraph 18 and
shall not incur any liability (a) in acting upon any signature,
notice, demand, request, waiver, consent, receipt or other paper
or document believed by Escrow Agent to be genuine, and Escrow
Agent may assume that any person purporting to give it any notice
on behalf of any party in accordance with the provisions hereof
has been duly authorized to do so, or (b) in otherwise acting or
failing to act under this Paragraph 18, except in the case of
Escrow Agent's gross negligence or willful misconduct.
18.9. Escrow Agent has executed this Agreement for the
sole purpose of agreeing to act as such in accordance with the
terms of this Paragraph 18. The provision of this Paragraph 18
shall survive the termination of this Agreement.
18.10. Buyer acknowledges that it is aware that Escrow
Agent is the attorney for Seller and represents Seller in
connection with this transaction, as well as others. Buyer
agrees that Escrow Agent, acting as escrow agent herein, shall in
no way disqualify, restrict or preclude Escrow Agent in and from
its duties as attorney for Seller in this transaction, or in any
other, and that in the absence of this agreement and
understanding, Escrow Agent would not have agreed to act in that
capacity.
19. Notice. All notices, demands, requests, consents,
approvals or other communications (collectively called "Notices")
required or permitted to be given hereunder to Seller or Buyer or
which are given to Seller or Buyer with respect to this Agreement
shall be in writing and shall be deemed to have been given: (a)
upon delivery, if personally delivered; (b) three (3) days after
deposit in the United States Mail when delivered, postage
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prepaid, by certified or registered mail; or (c) one (1) business
day after deposit with a nationally recognized overnight delivery
service marked for delivery on the next Business Day, addressed
to the party for whom it is intended at its address hereinafter
set forth, or to such other address as such party shall have
specified most recently by like Notice:
If to Seller, to:
N.J. Greenbrook Partners, L.P.
24 Field Point Road
Greenwich, Connecticut 06830
Attention: Andrew B. Hascoe
With a copy thereof to:
Gold & Wachtel, LLP
110 East 59th Street
New York, New York 10022
Attention: Robert Stone, Esq.
- and -
If to Buyer, to:
Wellsford Commercial Properties L.L.C.
610 Fifth Avenue
New York, New York 10020
Attention: Richard R. Previdi
With a copy thereof to each of:
Richard R. Previdi
50 Rotary Drive
Summit, New Jersey 07901
- and -
Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Alan Pearce, Esq.
The attorney for any party may send notices on that party's
behalf.
20. Assignment. Until the Study Period has expired, Buyer
shall not assign this Agreement or any of its rights hereunder to
any person or entity which is not an Affiliate, without Seller's
prior consent. For purposes hereof, an "Affiliate" shall mean
any other person or entity that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is
under common control with, Buyer. For purposes of this
definition, the term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the
management and policies of an entity, whether through ownership
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of voting stock, by contract, agency or nominee agreement or
relationship, or otherwise. After having made the Additional
Deposit, Buyer may assign this Agreement or any of its rights
hereunder to any person or entity who shall assume all of Buyer's
obligations hereunder.
21. Default.
21.1. If Buyer shall default in the payment or
performance of its obligations hereunder, and such default is not
cured by the earlier of (x) the Closing Date or (y) the date
which is ten (10) days after a notice of such default (specifying
the default in question) is given from Seller to Buyer, then
Seller's sole remedy shall be to receive the Deposit from Escrow
Agent as liquidated damages and to terminate this Agreement.
Upon any such termination and the receipt of the Deposit by
Seller, then thereafter neither party shall have any further
rights or obligations hereunder other than those which expressly
survive the termination of this Agreement. Seller waives any
other right or remedy, at law or in equity, which Seller may have
or entitled to in such event, including, without limitation, the
right to sue for damages or for specific performance.
21.2. If, prior to Closing, Seller (i) breaches any
covenant contained herein or otherwise defaults in its
obligations hereunder, and such breach or default is not cured by
the earlier of (x) the Closing Date or (y) the date which is ten
(10) Business Days after a notice of such default (specifying the
default in question) is given from Buyer to Seller, or (ii) Buyer
shall become aware of any material and adverse inaccuracy in any
representation or warranty made by Seller hereunder, then,
(except as set forth in the next succeeding sentence), Buyer may,
as its sole remedy for such breach or misrepresentation, either
(1) seek specific performance of Seller's obligations hereunder
or (2) terminate this Agreement. Notwithstanding the foregoing,
if (i) Seller willfully or intentionally breaches any of its
obligations or covenants hereunder or (ii) Seller knew, or
reasonably should have known, that a representation or warranty
made by Seller hereunder was materially and adversely inaccurate
when made, then in addition to the remedies of specific
performance and termination set forth above, Buyer shall have the
right to seek any and all remedies available at law or in equity,
including, without limitation, an action for damages. Upon
receipt of any notice of termination as aforesaid, Seller shall
promptly (i) instruct Escrow Agent to refund the Deposit to Buyer
and (ii) reimburse Buyer for its net cost of title examination
and reasonable attorneys' fees.
(a) If Buyer, with actual knowledge of a default in
any of the covenants, agreements or obligations to be performed
by Seller under this Agreement or an inaccuracy in any
representation or warranty of Seller, elects to proceed to
Closing, then, upon the consummation of the Closing, Buyer shall
be deemed to have waived any such default or inaccuracy and shall
have no claim against Seller on account thereof.
(b) If, after the Closing, Buyer shall first learn of
(i) an inaccuracy in any representation or warranty of Seller
made hereunder which has a material adverse effect on Buyer or
(ii) a default in any of the covenants, agreements or obligations
to be performed by Seller under this Agreement which has a
material adverse effect on Buyer, then Buyer shall have a claim
for damages or other remedies at law or in equity on account
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thereof.
22. Merger Clause. All understandings and agreements
heretofore had among the parties hereto are merged in this
Agreement, which alone fully and completely expresses their
agreement.
23. Successors and Assigns. This Agreement shall apply to
and bind the successors and permitted assigns of the respective
parties.
24. Modification. This Agreement may not be changed or
terminated orally.
25. Construction. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State
of New Jersey and without the aid of any canon, custom or rule of
law requiring construction against the draftsman.
26. Schedules. All of the schedules and exhibits annexed
hereto shall be deemed to be and the same are hereby made a part
hereof.
27. Survival of Provisions. The acceptance by Buyer of the
deed from Seller shall be deemed to be an acknowledgment, for all
purposes, of the full performance and discharge of every
representation, agreement and obligation on the part of Seller to
be performed by it pursuant to the provisions of this Agreement,
except those which are herein specifically stated to survive the
Closing.
28. Miscellaneous.
28.1. Further Assurances. In addition to the
obligations required to be performed hereunder by Seller and
Buyer at or prior to the Closing, each party, from and after the
Closing, shall execute, acknowledge and/or deliver such other
instruments as may reasonably be requested in order to effectuate
the purposes of this Agreement; provided, however, that the
foregoing provisions of this subparagraph 28.1 shall not obligate
either party to execute, acknowledge or deliver any instrument
which would or might impose upon such party any additional
liability or obligation (beyond that imposed upon on it under the
documents delivered by such party at the Closing and the other
provisions of this Agreement which survive the Closing).
28.2. No Third Party Beneficiary. This Agreement and
each of the provisions hereof are solely for the benefit of Buyer
and Seller and their permitted assigns. No provisions of this
Agreement, or of any of the documents and instruments executed in
connection herewith, shall be construed as creating in any person
or entity other than Buyer and Seller and their permitted assigns
any rights of any nature whatsoever.
28.3. Severability. If any provision in this
Agreement is found by a court of competent jurisdiction to be in
violation of any applicable law, and if such court should declare
such provision of this Agreement to be unlawful, void, illegal or
unenforceable in any respect, the remainder of this Agreement
shall be construed as if such unlawful, void, illegal or
unenforceable provision were not contained herein, and the
rights, obligations and interests of the parties hereto under the
remainder of this Agreement shall continue in full force and
effect undisturbed and unmodified in any way.
28.4. Waiver of Trial by Jury. EACH PARTY HEREBY
WAIVES, IRREVOCABLY AND UNCONDITIONALLY, TRIAL BY JURY IN ANY
ACTION BROUGHT ON, UNDER OR BY VIRTUE OF OR RELATING IN ANY WAY
TO THIS AGREEMENT OR ANY OF THE DOCUMENTS EXECUTED IN CONNECTION
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HEREWITH, THE PROPERTY, OR ANY CLAIMS, DEFENSES, RIGHTS OF
SET-OFF OR OTHER ACTIONS PERTAINING HERETO OR TO ANY OF THE
FOREGOING.
28.5. Captions; Interpretation. The captions,
headings, table of contents and index in this Agreement are
inserted for convenience of reference only and in no way define,
describe or limit the scope or intent of this Agreement or any of
the provisions hereof. As used in this Agreement, the masculine
shall include the feminine and neuter, the singular shall include
the plural and the plural shall include the singular, as the con-
text may require.
28.6. Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one and the same original, and the execution of
separate counterparts by Buyer and Seller shall bind Buyer and
Seller as if they had each executed the same counterpart.
28.7. No Waiver. Neither the failure of either party
to exercise any power given such party hereunder or to insist
upon strict compliance by the other party with its obligations
hereunder, nor any custom or practice of the parties at variance
with the terms hereof shall constitute a waiver of either party's
right to demand exact compliance with the terms hereof.
29. Intentionally Deleted.
30. Like-Kind Exchange. Seller shall have the right to
sell the Property as part of a tax-free like-kind exchange
through a qualified intermediary or otherwise under section 1031
of the Internal Revenue Code of 1986, as amended. If Seller so
elects, Buyer will cooperate with Seller in effecting such
like-kind exchange, including allowing Seller to assign this
contract to a title company or other qualified intermediary and
such other action as may be reasonably required in connection
therewith, provided however, any such action does not delay
Closing, increase any of Buyer's obligations or decrease any of
Buyer's rights under this Agreement. Seller shall reimburse
Buyer for all additional out-of-pocket costs (including, without
limitation, reasonably attorneys' fees) incurred by Buyer in
connection with such cooperation.
31. Hazardous Substances and Waste.
31.1. As used in this Agreement, "Hazardous"
Substances and Waste" are those materials defined by
Environmental Laws as such. "Environmental Laws" shall include,
but not be limited to, each and every federal, state and local
law, statute, code, ordinance. regulation, rule, or other
requirement of governmental authorities ("Governmental
Authorities") having jurisdiction over the Property (including
but not limited to, consent decrees, and judicial or
administrative orders) relating to the environment, including but
not limited to, those applicable for the storage, treatment,
disposal, handling and release of any Hazardous Substances and
Waste, all as amended or modified from time to time. Hazardous
Substances and Waste shall not include hazardous substances of
the kind ordinarily used in connection with office equipment and
furnishings or in connection with the ordinary cleaning or
maintenance of office buildings similar to the uses for which the
Property is used, including, but not limited to, office supplies
and cleaning fluids, provided that such substances are stored,
used and disposed of in accordance with all applicable
Environmental Laws.
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31.2. Seller agrees to comply with the requirements of
the Industrial Site Recovery Act (N.J.S.A. 13: lk-6, et seq. -
"ISRA"). As a condition precedent to Buyer's obligation to
purchase the Property, within ten (10) Business Days after the
expiration of the Study Period, Seller shall obtain and deliver
to Buyer, from the New Jersey Department of Environmental
Protection, in compliance with ISRA and the regulations
promulgated thereunder, either: (i) a nonapplicability letter;
(ii) a de minimus quantity exception; or (iii) approval of
Seller's negative declaration. If this condition precedent to
Closing shall not have been satisfied on or before the tenth
(1Oth) Business Day after the expiration of the Study Period,
then Buyer shall have the right for ten (10) Business Days
thereafter, to (x) terminate this Agreement by written notice to
Seller, and receive back the Deposit plus the net cost of title
examination and its reasonable attorneys' fees, unless Seller
shall have complied with the foregoing ISRA requirement prior to
Buyer's notice of termination, in which event, Buyer shall no
longer have a termination right, or (y) accept the Property
without such condition precedent being satisfied, and without
reduction of the Purchase Price or credit or allowance against
same. If Buyer fails to so terminate this Agreement within such
ten (10) day period, then Buyer shall be deemed to have waived
such termination right.
31.3. Seller agrees to indemnify and hold harmless
Buyer from and against any and all liabilities, damages, claims,
losses, judgments, causes of action, costs and expenses
(including reasonable attorney's fees and reasonable
environmental clean-up costs) which may be incurred by Buyer,
relating to or arising out of the breach by Seller of its
obligations under this Paragraph 31. However, this
indemnification and hold harmless shall survive the Closing Date
for a period of only one (1) year, and shall not be applicable to
the extent of any and all liabilities, damages, claims, losses,
judgments, causes of action, costs and expenses (including
reasonable attorney's fees) in any way arising out of the acts or
omissions of Buyer or any of Buyer's tenants, occupants,
employees, agents or permittees arising after the Closing Date.
32. Study Period.
32.1. Buyer shall have a period of thirty-seven (37)
consecutive calendar days following the date of the execution and
delivery of this Agreement by the parties to each other, to
inspect and review the Property and all of the books and records
relating thereto (the "Study Period"). Prior to 5:00 P.M.,
Eastern Standard Time, on the last day of the Study Period,
Buyer, in its sole discretion for any reason whatsoever, or for
no reason, shall have the right to terminate this Agreement by
giving Seller written notice of that election, as provided in
Paragraph 19 hereof. Failure by Buyer to give such notice in a
timely manner shall be deemed an irrevocable waiver by Buyer of
this right to terminate. If Buyer shall timely notify Seller of
Buyer's election to terminate this Agreement, then the Escrow
Agent promptly shall deliver the Initial Deposit (together with
all interest accrued thereon) to Buyer. Upon Buyer's receipt of
the Initial Deposit, this Agreement shall terminate and neither
party shall have any further obligations hereunder. Upon the
request of either party after the commencement of the Study
Period, Seller and Buyer shall execute an agreement confirming
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the commencement date and the expiration date of the Study
Period, but the failure of either party hereto to execute such an
agreement shall not defer the commencement of the Study Period,
extend the expiration date thereof or otherwise invalidate all or
any part of this Agreement.
32.2. During the Study Period and upon request
therefor, Seller shall promptly deliver to Buyer true and correct
copies of all Leases, Service Contracts, management records,
surveys, Plans, title contracts, management records, surveys,
title documents, environmental studies, material and reports,
brokerage agreements, rent rolls, real estate tax statements,
insurance statements, accounting records and other similar or
related studies and documents that are in Seller's possession,
custody or control or that are reasonable obtainable by Seller
(the "Property Document"). Seller represents and covenants to
Buyer that all of the Property Documents delivered or to be
delivered to Buyer pursuant to this Paragraph 32 are true,
correct and complete and constitute all of the material documents
and agreements with respect to the ownership and operation of the
Property.
32.3. If Buyer does not elect to terminate this
Agreement pursuant to subparagraph 32.1 above, then within ten
(10) Business Days after the expiration of the Study Period,
Buyer shall deliver to Seller a written list of the Service
Contracts that Buyer desires to be assigned and transferred to it
at Closing (the "Assigned Service Contracts"). Seller shall
cause all Service Contracts which are not Assigned Service
Contracts to be terminated as of (or prior to) the Closing.
32.4. Subject to the rights of the Tenants, and upon
reasonable prior notice to Seller so that Seller can arrange to
accompany Buyer, Seller hereby grants Buyer and its duly
authorized agents and representatives the right to enter upon the
Property for the purpose of undertaking testing and inspections
(which may include inspections and testing as to, among other
things, the availability of access, utility services, zoning,
environmental conditions and engineering). Buyer hereby agrees
to promptly repair any damage to the Property caused by such
testing and inspections, and to indemnify and defend Seller and
hold Seller harmless against any injury, loss or damage suffered
upon the Property and to the Property as a result of such testing
and inspections. If requested, Buyer shall provide comprehensive
general liability insurance to Seller in reasonable amounts to
insure the foregoing.
32.5. Seller hereby agrees to remove the Property from
the real estate sales market during the Study Period. Buyer
agrees to keep confidential all information gained in connection
with its testing and inspections during the Study Period.
Notwithstanding the foregoing, Buyer may disclose such
information to its officers, directors, members, managers,
employees and consultants, as well as its attorneys, accountants,
financial advisors, investors, and financial institutions who
need to know such information in order to assist Buyer in
connection with its acquisition of the Property. Buyer promptly
shall return all Property Documents to Seller if Buyer elects to
terminate this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
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SELLER: N.J. GREENBROOK PARTNERS, L.P.
By: Greenbrook Land Inc., a
General Partner
By:/s/ Andrew B. Hascoe
---------------------------
Andrew B. Hascoe, President
BUYER: WELLSFORD COMMERCIAL PROPERTIES, L.L.C.
By: /s/ Richard R. Previdi
--------------------------
Name: Richard R. Previdi
Title: Managing Member
The undersigned has executed this Agreement for the sole
purpose of agreeing to act as Escrow Agent in accordance with
Paragraph 18.
GOLD & WACHTEL, LLP
By: /s/ Robert Stone
--------------------------
Robert Stone
31
