SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
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CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported) May 11, 2000 (May 5, 2000)
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Commission file number 1-12917
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WELLSFORD REAL PROPERTIES, INC.
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(Exact name of registrant as specified in its charter)
Maryland 13-3926898
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(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
535 Madison Avenue, New York, NY 10022
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(Address of principal executive offices)
(Zip Code)
(212) 838-3400
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(Registrant's telephone number, including area code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
1
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ITEMS 1. - 4. NOT APPLICABLE.
ITEM 5. OTHER EVENTS.
On May 5, 2000, the Company privately placed with ERP
Operating Limited Partnership ("ERPOLP"), the operating
partnership of Equity Residential Properties Trust (NYSE:
EQR), a real estate investment trust, (the "Private
Placement") 1,000,000 8.25% Convertible Trust Preferred
Securities (liquidation amount $25 per security) representing
undivided beneficial interests in the assets of WRP
Convertible Trust I, a Delaware statutory business trust ("WRP
Trust I"), with an aggregate liquidation amount of $25,000,000
(the "Preferred Securities"). The Preferred Securities were
issued by WRP Trust I, a newly formed consolidated subsidiary
of the Company, concurrently with the related issuance and
sale to WRP Trust I of the Company's 8.25% Convertible Junior
Subordinated Debentures in the aggregate principal amount of
$25,775,000 (the "Convertible Debentures").
The Company sponsored the formation of WRP Trust I, pursuant
to the Declaration of Trust, dated as of May 5, 2000 (the
"Declaration"), by the Trustees (as defined therein), the
Company, as sponsor, and ERPOLP. A Certificate of Trust for
WRP Trust I was filed in the State of Delaware on May 5, 2000.
The Preferred Securities were offered and sold pursuant to the
Declaration and the Preferred Securities Purchase Agreement,
dated as of May 5, 2000 (the "Purchase Agreement"), among the
Company, WRP Trust I, as issuer, and ERPOLP. Pursuant to the
Declaration, the proceeds obtained from the Private Placement,
together with the proceeds obtained from the issuance and sale
by WRP Trust I to the Company of 31,000 8.25% Convertible
Trust Common Securities (liquidation amount $25 per security),
pursuant to a Subscription Agreement, dated as of May 5, 2000,
representing undivided beneficial interests in the assets of
WRP Trust I with an aggregate liquidation amount of $775,000
(the "Common Securities" and together with the Preferred
Securities, the "Securities"), were used to purchase from the
Company $25,775,000 aggregate principal amount of Convertible
Debentures which were issued under an Indenture, dated as of
May 5, 2000, between the Company and Wilmington Trust Company,
as trustee (the "Indenture"). The Convertible Debentures are
the sole assets of WRP Trust I and will mature on May 4, 2022
(the "Maturity Date").
The proceeds from the sale of the Convertible Debentures will
be applied to the Company's general corporate purposes.
Distributions and amounts payable upon liquidation or
redemption and otherwise, with respect to the Securities are
guaranteed by the Company pursuant to the Preferred Securities
Guarantee Agreement, (the "Preferred Securities Guarantee")
and the Common Securities Guarantee Agreement, both dated as
of May 5, 2000, (the "Common Securities Guarantee" and
together with the Preferred Securities Guarantee the
"Guarantees"). Pursuant to the Guarantees, the Company has
agreed, in the event of any distribution of Convertible
Debentures to the holders of Securities in an amount that is
less than the aggregate principal amount of Convertible
Debentures that such holder is entitled to receive, then the
Company shall issue additional Convertible Debentures, so that
the holder receives the aggregate amount of Convertible
Debentures to which he is entitled.
2
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Interest and distributions payable on each Convertible
Debenture and on each Security are fixed at a rate per annum
of 8.25% of the stated liquidation amount of $25 per
Convertible Debenture or Security, as the case may be ($2.2625
per annum or $0.515625 per quarter) from and including May 5,
2000 to and including May 4, 2022. Interest and distributions
on the Convertible Debentures and Securities are cumulative
and are required to be paid quarterly in arrears on the
fifteenth day of July, October, January and April of each
year, commencing on July 17, 2000. For any twelve quarterly
interest periods during the term of the Convertible
Debentures, and whether or not the Company has available cash
to pay interest, the Company shall have the right to pay the
interest due on the Convertible Debentures by the issuance of
additional Convertible Debentures. If interest on the
Convertible Debentures is paid by the issuance of additional
Convertible Debentures, WRP Trust I shall satisfy its
obligation to pay distributions on the Securities by issuing
an equivalent amount of additional Securities. If principal
and interest are not paid on the Convertible Debentures, no
amounts will be paid on the Securities.
The Indenture provides, subject to certain exceptions, that
upon an event of default under the Indenture or under the
Preferred Securities Guarantee, the Company will be prohibited
from (x) declaring or paying dividends or making other
distributions on, or redeeming, purchasing or making
liquidation payments with respect to, its capital stock and
(y) paying interest, principal or premium on, or repaying,
repurchasing, or redeeming any of the Company's debt
securities ranking pari passu with or junior to the
Convertible Debentures or making any guarantee payments with
respect to any guarantee by the Company of the debt securities
or any of the Company's subsidiaries if such guarantee ranks
pari passu with or junior in interest to the Convertible
Debentures.
Under the Indenture, the Company may redeem the Convertible
Debentures in whole or in part (pro rata among the holders) on
or after May 30, 2002 at a price equal to 100% of the
principal amount of the Convertible Debentures plus accrued
and unpaid interest to the redemption date. Upon the repayment
of the Convertible Debentures the proceeds thereof will be
applied to redeem an equivalent amount of Securities;
provided, however, that no partial redemption of the
Convertible Preferred Securities may be effected if after
giving effect thereto the aggregate liquidation amount of the
Convertible Preferred Securities is less than $10,000,000.
Upon the occurrence of a Securities Event of Default, as
hereinafter defined, or on or after May 30, 2012, whichever
comes first, any holder of Securities may, at its option cause
the WRP Trust I to redeem all Securities held by such holder.
A Securities Event of Default means (i) the non-payment of any
distribution either in cash or by the issuance of additional
Securities for any three quarterly distribution periods or
(ii) the failure to comply with any material term, condition
or obligation or failure to provide any material right under
the Securities. Notwithstanding the foregoing, provided a
Securities Event of Default has not occurred, then the date
during which a redemption is not permitted may be extended for
two separate additional five year periods beyond May 30, 2012
if the interest rate on the Securities is changed to the then
market rate for preferred stock comparable to the Preferred
Securities. If the Securities are so redeemed, then the
Company will be required to redeem an equal amount of
Convertible Debentures, the proceeds of which would be applied
to redeem the Securities.
3
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Pursuant to the Declaration, at any time prior to the Maturity
Date (or, in the case of Securities called for redemption,
prior to the redemption date), the Securities will be
convertible into shares of common stock, $.01 par value per
share, of the Company (the "Common Shares"), pursuant to the
direction of the holder of the Securities to the conversion
agent to exchange such Securities for a portion of the
Convertible Debentures theretofore held by WRP Trust I on the
basis of one Security per $25 principal amount of Convertible
Debentures and immediately convert such amount of Convertible
Debentures into Common Shares at an initial rate of 2.2474
Common Shares per $25 principal amount of Convertible
Debentures (which is equivalent to a conversion price of
$11.124 per Common Share), subject to certain adjustments.
The Preferred Securities rank pari passu and payment thereon
shall be made pro rata with the Common Securities except that,
where an event of default under the Declaration occurs and is
continuing, the rights of holders of the Common Securities to
payment in respect of distributions and payments upon
liquidation, redemption and otherwise are subordinated to the
rights to payment of the holders of the Preferred Securities.
In connection with the Private Placement, on May 5, 2000, the
Registrant and ERPOLP also executed the Amendment to
Registration Rights Agreement pursuant to which the Investors
are entitled to certain registration rights with respect to
the Common Shares which are issuable upon conversion of the
Securities and/or the Convertible Debentures.
In connection with the transactions described herein the
Company and ERPOLP have exchanged the 339,806 shares of Class
A Common Stock of the Company held by ERPOLP for an equal
number of the Company's Class A-1 Common Stock issued pursuant
to the Articles Supplementary with respect to the Company's
Class A-1 Common Stock, which were filed with the State of
Maryland on May 5, 2000. The terms and conditions of the Class
A-1 Common Stock are substantially similar to those of the
Class A Common Stock. As was the case with the Class A Common
Stock, each share of Class A-1 Common Stock is convertible
into one Common Share. The Class A-1 Common Stock differs from
the Class A Common Stock primarily in that the Class A-1
Common Stock takes into account the issuance of the Preferred
Securities and Convertible Debentures.
The Securities, Convertible Debentures and shares of Class A-1
Common Stock were issued pursuant to an exemption from the
registration requirements under the Securities Act of 1933, as
amended (the "Act") pursuant to Section 4(2) thereof, and may
not be offered or sold in the United States without
registration under, or an applicable exemption from the
registration requirements of the Act and applicable state
securities laws.
In addition, the Company and ERPOLP have agreed to terminate
the obligations set forth in the Common Stock and Preferred
Stock Purchase Agreement dated as of May 30, 1997 entered into
by them, pursuant to which ERPOLP agreed to acquire
$25,000,000 of the Company's Series A Convertible Redeemable
Preferred Stock (the "Preferred Stock") and the Company agreed
to sell ERPOLP the Preferred Stock.
ITEM 6. NOT APPLICABLE.
4
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements.
None.
(b) Pro forma Financial Information.
None.
(c) Exhibits.
The following exhibits are filed with this Form 8-K:
EXHIBIT NO. EXHIBIT
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10.89 Certificate of Trust of WRP Convertible Trust I, as
filed with the Secretary of State of the State of
Delaware on May 5, 2000;
10.90 Declaration of Trust of WRP Convertible Trust I, dated
as of May 5, 2000, by and among Rodney F. Du Bois and
James J. Burns as Regular Trustees, Wilmington Trust
Company as both Delaware Trustee and Institutional
Trustee and Wellsford Real Properties, Inc., as
Sponsor;
10.91 Indenture for 8.25% Convertible Junior Subordinated
Debentures, dated as of May 5, 2000, by and between
Wellsford Real Properties, Inc. and Wilmington Trust
Company, as Trustee;
10.92 Preferred Securities Purchase Agreement, dated as of
May 5, 2000, by and among Wellsford Real Properties,
Inc., WRP Convertible Trust I and ERP Operating Limited
Partnership;
10.93 Preferred Securities Guarantee, dated as of May 5,
2000, by and between Wellsford Real Properties, Inc.
and Wilmington Trust Company, as Trustee;
10.94 Common Securities Guarantee, dated as of May 5, 2000,
by Wellsford Real Properties, Inc.;
10.95 Amendment to Registration Rights Agreement, dated as
of May 5, 2000, by and between Wellsford Real
Properties, Inc. and ERP Operating Limited Partnership;
10.96 Articles Supplementary reclassifying and designating
350,000 shares of unissued Common Stock as Class A-1
Common Stock, dated as of May 5, 2000; and
99.1 Press release dated May 9, 2000, of Wellsford Real
Properties, Inc.
ITEMS 8 - 9. NOT APPLICABLE.
5
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WELLSFORD REAL PROPERTIES, INC.
By: /s/Edward Lowenthal
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Edward Lowenthal
President
Dated: May 11, 2000
6
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CERTIFICATE OF TRUST
OF
WRP CONVERTIBLE TRUST I
THIS Certificate of Trust of WRP CONVERTIBLE TRUST I (the "Trust") is being
duly executed and filed on behalf of the Trust by the undersigned, as trustees,
to form a business trust under the Delaware Business Trust Act (12 Del. C. `
3801 et -- seq.) (the "Act").
1. Name. The name of the business trust formed by this Certificate of Trust
is WRP CONVERTIBLE TRUST I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust in the State of Delaware are Wilmington Trust Company, Rodney Square
North, 1100 North Market Street, Wilmington, Delaware 19890-00001, Attn:
Corporate Trust Administration.
3. Effective Date. This Certificate of Trust shall be effective upon
filing.
IN WITNESS WHEREOF, the undersigned has duly executed this Certificate of
Trust in accordance with Section 3811(a)(1) of the Act.
WILMINGTON TRUST COMPANY, as trustee
By: /s/ Kathleen A. Pedelini
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Name: Kathleen A. Pedelini
Title: Administrative Account Manager
RODNEY F. DUBOIS, as trustee
By: /s/ Rodney F. Du Bois
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JAMES J. BURNS, as trustee
By: /s/ James J. Burns
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DECLARATION OF TRUST
WRP CONVERTIBLE TRUST I
DATED AS OF MAY 5, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I INTERPRETATION AND DEFINITIONS....................................1
SECTION 1.1. Definitions.........................................1
ARTICLE II TRUST INDENTURE ACT...............................................9
SECTION 2.1. Trust Indenture Act: Application....................9
SECTION 2.2. Lists of Holders of Securities......................9
SECTION 2.3. Reports by the Institutional Trustee...............10
SECTION 2.4. Periodic Reports to Institutional Trustee..........10
SECTION 2.5. Evidence of Compliance with Conditions Precedent...10
SECTION 2.6. Events of Default; Waiver..........................10
SECTION 2.7. Event of Default; Notice...........................12
ARTICLE III ORGANIZATION.....................................................13
SECTION 3.1. Name...............................................13
SECTION 3.2. Office.............................................13
SECTION 3.3. Purpose............................................13
SECTION 3.4. Authority..........................................14
SECTION 3.5. Title to Property of the Trust.....................14
SECTION 3.6. Powers and Duties of the Regular Trustees..........14
SECTION 3.7. Prohibition of Actions by the Trust and
the Trustees ......................................17
SECTION 3.8. Powers and Duties of the Institutional Trustee.....18
SECTION 3.9. Certain Duties and Responsibilities of the
Institutional Trustee .............................21
SECTION 3.10. Certain Rights of Institutional Trustee............23
SECTION 3.11. Delaware Trustee...................................25
SECTION 3.12. Execution of Documents.............................26
SECTION 3.13. Not Responsible for Recitals or Issuance
of Securities .....................................26
SECTION 3.14. Duration of Trust..................................26
SECTION 3.15. Mergers............................................26
ARTICLE IV SPONSOR .........................................................28
SECTION 4.1 Sponsor's Purchase of Common Securities............28
SECTION 4.2. Responsibilities of the Sponsor....................28
ARTICLE V TRUSTEES.........................................................28
SECTION 5.1. Number of Trustees.................................28
SECTION 5.2. Delaware Trustee...................................29
SECTION 5.3. Institutional Trustee; Eligibility.................29
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SECTION 5.4. Certain Qualifications of Regular Trustees and
Delaware Trustee Generally.........................30
SECTION 5.5. Regular Trustees...................................30
SECTION 5.6. Appointment, Removal and Resignation of Trustees...30
SECTION 5.7. Vacancies Among Trustees...........................32
SECTION 5.8. Effect of Vacancies................................32
SECTION 5.9. Meetings...........................................32
SECTION 5.10. Delegation of Power................................33
SECTION 5.11. Merger, Conversion, Consolidation or Succession
to Business .......................................33
ARTICLE VI DISTRIBUTIONS....................................................33
SECTION 6.1. Distributions......................................33
ARTICLE VII ISSUANCE OF SECURITIES...........................................34
SECTION 7.1. General Provisions Regarding Securities............34
SECTION 7.2. Execution and Authentication.......................34
SECTION 7.3. Form and Dating....................................35
SECTION 7.4. Paying Agent.......................................35
ARTICLE VIII TERMINATION OF TRUST.............................................36
SECTION 8.1. Termination of Trust...............................36
ARTICLE IX TRANSFER OF INTERESTS............................................38
SECTION 9.1. Transfer of Securities.............................38
SECTION 9.2. Transfer of Certificates...........................42
SECTION 9.3. Deemed Security Holders............................42
ARTICLE X LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,TRUSTEES
OR OTHERS .......................................................43
SECTION 10.1. Liability..........................................43
SECTION 10.2. Exculpation........................................43
SECTION 10.3. Fiduciary Duty.....................................44
SECTION 10.4. Indemnification....................................45
SECTION 10.5. Outside Business...................................48
ARTICLE XI ACCOUNTING.......................................................49
SECTION 11.1. Fiscal Year........................................49
SECTION 11.2. Certain Accounting Matters.........................49
SECTION 11.3. Banking............................................50
SECTION 11.4. Withholding........................................50
ARTICLE XII AMENDMENTS AND MEETINGS..........................................51
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SECTION 12.1. Amendments.........................................51
SECTION 12.2. Meetings of the Holders of Securities; Action
by Written Consent ................................54
ARTICLE XIII REPRESENTATIONS OF SPONSOR, INSTITUTIONAL TRUSTEE AND
DELAWARE TRUSTEE ................................................55
SECTION 13.1. Representations and Warranties of Institutional
Trustee............................................55
SECTION 13.2. Representations and Warranties of Delaware Trustee.56
SECTION 13.3. Representations and Warranties of Sponsor..........57
ARTICLE XIV MISCELLANEOUS....................................................57
SECTION 14.1. Notices............................................57
SECTION 14.2. Governing Law......................................58
SECTION 14.3. Intention of the Parties...........................59
SECTION 14.4. Headings...........................................59
SECTION 14.5. Successors and Assign..............................59
SECTION 14.6. Partial Enforceability.............................59
SECTION 14.7. Counterparts.......................................59
SECTION 14.8. Signature Guarantee................................59
SECTION 14.9. Acceptable Counsel.................................59
<PAGE>
DECLARATION OF TRUST
OF
WRP CONVERTIBLE TRUST I
May 5, 2000
DECLARATION OF TRUST ("Declaration") dated and effective as of May 5, 2000,
by the Trustees (as defined herein), the Sponsor (as defined herein) and by the
holders, from time to time, of undivided beneficial interests in the Trust to be
issued pursuant to this Declaration;
WHEREAS, the Trustees and the Sponsor established WRP Convertible Trust I
(the "Trust"), a trust under the Business Trust Act (as defined herein),
pursuant to a Certificate of Trust filed with the Secretary of State of the
State of Delaware on May 5, 2000, for the sole purpose of issuing and selling
certain securities representing undivided beneficial interests in the assets of
the Trust and investing the proceeds thereof in certain Debentures (as defined
herein) of the Debenture Issuer (as defined herein);
WHEREAS, as of the date hereof, no interests in the Trust have been issued;
and
WHEREAS, all of the Trustees and the Sponsor desire to adopt this
Declaration;
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act and that this
Declaration constitutes the governing instrument of such business trust, the
Trustees declare that all assets contributed to the Trust will be held in trust
for the benefit of the holders, from time to time, of the securities
representing undivided beneficial interests in the assets of the Trust issued
hereunder, subject to the provisions of this Declaration.
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.1. Definitions.
Unless the context otherwise requires:
(1) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this Section
1.1;
(2) a term defined anywhere in this Declaration has the same meaning
throughout;
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(3) all references to "the Declaration" or "this Declaration" are to this
Declaration as modified, supplemented or amended from time to time; (1)
(4) all references in this Declaration to Articles and Sections and Annexes
and Exhibits are to Articles and Sections of and Annexes and Exhibits of or to
this Declaration unless otherwise specified;
(5) a term defined in the Trust Indenture Act has the same meaning when
used in this Declaration unless otherwise defined in this Declaration or unless
the context otherwise requires; and
(6) a reference to the singular includes the plural and vice versa.
"Administrative Action" has the meaning specified in Annex I.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"Agent" means any Paying Agent or Conversion Agent.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in New York, New York or Wilmington, Delaware are
permitted or required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Codess.3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, units representing interests, participations, rights in or other
equivalents (however designated) of such Person's capital stock, including, with
respect to partnerships, limited liability companies and business trusts,
partnership interests (whether general or limited), membership interests,
beneficial interests and any other interest or participation that confers upon a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership, limited liability company or
business trust, and any rights (other than debt securities convertible into
capital stock), warrants or options exchangeable for or convertible into such
capital stock.
"Certificate" means a Common Security Certificate or a Convertible
Preferred Security Certificate.
<PAGE>
"Closing Date" means May 5, 2000.
"Closing Price" has the meaning specified in Annex I.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, as amended, or if at any time
after the execution and delivery of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Common Securities Guarantee" means the Common Securities Guarantee
Agreement to be dated as of May 5, 2000 of the Sponsor in respect of the Common
Securities.
"Common Securities" has the meaning specified in Section 7.1.
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Exhibit A-2.
"Common Shares" means the shares of common stock, $.01 par value, of
Wellsford Real Properties, Inc., a Maryland corporation, and any other shares of
common stock as may constitute "Common Shares" under the Indenture.
"Company Indemnified Person" means (a) any Regular Trustee; (b) any
Affiliate of any Regular Trustee; (c) any officers, directors, shareholders,
members, partners, employees, representatives or agents of any Regular Trustee;
or (d) any officer, employee or agent of the Trust or its Affiliates.
"Conversion Agent" has the meaning specified in Section 7.4.
"Convertible Preferred Securities" has the meaning specified in Section
7.1.
"Convertible Preferred Securities Guarantee" means the Preferred Securities
Guarantee Agreement to be dated as of May 5, 2000, of the Sponsor in respect of
the Convertible Preferred Securities.
"Convertible Preferred Security Certificate" means a certificate
representing a Convertible Preferred Security substantially in the form of
Exhibit A-1.
<PAGE>
"Corporate Trust Office" means the principal corporate office of the
Institutional Trustee at which the corporate trust business of the Institutional
Trustee shall, at any particular time, be principally administered, which office
at the date of execution of this Declaration is located at 1100 North Market
Street, 9th Floor, Wilmington, Delaware 19890-00001, Attention: Corporate Trust
Administration.
"Coupon Rate" has the meaning specified in Annex I.
"Covered Person" means: (a) any officer, trustee, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Securities.
"Debenture Issuer" means Wellsford Real Properties, Inc., a Maryland
corporation, in its capacity as issuer of the Debentures under the Indenture.
"Debenture Trustee" means Wilmington Trust Company, as trustee under the
Indenture until a successor is appointed thereunder, and thereafter means such
successor trustee.
"Debentures" means the series of debentures in the aggregate principal
amount of $25,775,000 plus any additional debentures issuable pursuant to
Section 2.5(c) of the Indenture and any additional debentures issued pursuant to
the Securities Guarantees, to be issued by the Debenture Issuer under the
Indenture to be held by the Institutional Trustee, a specimen certificate for
such series of debentures being Exhibit B.
"Delaware Trustee" has the meaning set forth in Section 5.1.
"Direct Action" has the meaning set forth in Section 3.8.
"Distribution" means a distribution payable to Holders of Securities in
accordance with Section 6.1.
"EQR" means Equity Residential Properties Trust.
"ERPOLP" means ERP Operating Limited Partnership.
"Event of Default" in respect of the Securities means an Event of Default
(as defined in the Indenture) has occurred and is continuing in respect of the
Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiduciary Indemnified Person" has the meaning set forth in Section
10.4(b).
<PAGE>
"Fiscal Year" has the meaning set forth in Section 11.1.
"Holder" means a Person in whose name a Certificate is registered, such
Person being a beneficial owner within the meaning of the Business Trust Act.
"Indemnified Person" means each Company Indemnified Person and each
Fiduciary Indemnified Person.
"Indenture" means the Indenture dated as of May 5, 2000 between the
Debenture Issuer and the Debenture Trustee.
"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.3.
"Institutional Trustee Account" has the meaning set forth in Section
3.8(c).
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Investment Company Event" has the meaning set forth in Annex I hereto.
"Legal Action" has the meaning set forth in Section 3.6(g).
"Liquidation" has the meaning specified in Annex I.
"Liquidation Distribution" has the meaning specified in Annex I.
"List of Holders" has the meaning set forth in Section 2.2.
"Majority in liquidation amount of the Securities" means, except as
provided in the terms of the Convertible Preferred Securities or by the Trust
Indenture Act, Holder(s) of outstanding Securities voting together as a single
class or, as the context may require, Holders of outstanding Convertible
Preferred Securities or Holders of outstanding Common Securities voting
separately as a class, who are the record owners of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all outstanding
Securities of the relevant class.
<PAGE>
"Ministerial Action" has the meaning set forth in the terms of the
Securities as set forth in Annex I.
"90-Day Period" has the meaning specified in Annex I.
"No Recognition Period" has the meaning specified in Annex I.
"Offeror" has the meaning set forth in Section 9.1(e).
"Officers' Certificate" means, with respect to any Person, a certificate
signed by two Authorized Officers of such Person. Any Officers' Certificate
delivered with respect to compliance with a condition or covenant provided for
in this Declaration shall include:
(a) a statement that each officer signing the Certificate has read the
covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such officer
to express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such officer, such
condition or covenant has been complied with.
"Paying Agent" has the meaning specified in Section 3.8(h).
"Payment Amount" has the meaning set forth in Section 6.1.
"Person" means any individual, corporation, estate, partnership, joint
venture, association, joint stock company, limited liability company, trust,
unincorporated association, or government or any agency or political subdivision
thereof, or any other entity of whatever nature.
"Quorum" means a majority of the Regular Trustees or, if there are only two
Regular Trustees, both of them.
"Redemption Price" has the meaning specified in Annex I.
"Regular Trustee" has the meaning set forth in Section 5.1.
<PAGE>
"Regulation S" means Regulation S under the Securities Act or any successor
provision.
"Related Party" means, with respect to the Sponsor, any direct or indirect
partially or wholly-owned subsidiary of the Sponsor.
"Responsible Officer" means, with respect to the Institutional Trustee, any
officer within the Corporate Trust Office of the Institutional Trustee,
including any vice president, any assistant vice president, any assistant
secretary, the treasurer, any assistant treasurer or other officer of the
Corporate Trust Office of the Institutional Trustee customarily performing
functions similar to those performed by any of the above-designated officers and
also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer's knowledge of
and familiarity with the particular subject.
"Restricted Security" has the meaning specified in Section 9.1(d).
"Rule 144A" means Rule 144A as promulgated under the Securities Act, or any
successor rule.
"Rule 144(k)" means Rule 144(k) as promulgated under the Securities Act, or
any successor rule.
"Sales Notice" has the meaning set forth in Section 9.1(e).
"Securities" means the Common Securities and the Convertible Preferred
Securities.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Securities Guarantees" means the Common Securities Guarantee and the
Convertible Preferred Securities Guarantee.
"Securities Purchase Agreement" means the Preferred Securities Purchase
Agreement, dated as of May 5, 2000, by and among the Sponsor, the Trust and
ERPOLP.
"Special Event" has the meaning set forth in Annex I hereto.
"Sponsor" means Wellsford Real Properties, Inc., a Maryland corporation, or
any successor entity in a merger or consolidation, in its capacity as sponsor of
the Trust.
"Successor Delaware Trustee" has the meaning set forth in Section 5.6(b).
<PAGE>
"Successor Entity" has the meaning set forth in Section 3.15(b)(i).
"Successor Securities" has the meaning set forth in Section 3.15(b)(i)(B).
"Super Majority" has the meaning set forth in Section 2.6(a)(ii).
"Tax Event" has the meaning set forth in Annex I hereto.
"Transfer Restriction Termination Date" means the earlier of the first date
on which (i) the Securities and any Common Shares issued or issuable upon the
conversion or exchange thereof (other than (A) Securities acquired by the Trust
or any Affiliate thereof and (B) Common Shares issued upon the conversion or
exchange of any Security described in clause (A) above) may be sold pursuant to
Rule 144(k) and (ii) all the Securities have been sold pursuant to an effective
registration statement.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury.
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended
from time to time, or any successor legislation.
"Trust Property" means (i) the Debentures, (ii) any cash on deposit in, or
owing to, the Institutional Trustee Account and (iii) all proceeds and rights in
respect of the foregoing to be held by the Institutional Trustee pursuant to the
terms of this Declaration for the benefit of the Holders of Securities.
"25% in liquidation amount of the Securities" means, except as provided in
the terms of the Convertible Preferred Securities or by the Trust Indenture Act,
Holder(s) of outstanding Securities voting together as a single class or, as the
context may require, Holders of outstanding Convertible Preferred Securities or
Holders of outstanding Common Securities voting separately as a class, who are
the record owners of 25% or more of the aggregate liquidation amount (including
the stated amount that would be paid on redemption, liquidation or otherwise,
plus accrued and unpaid Distributions to the date upon which the voting
percentages are determined) of all outstanding Securities of the relevant class.
<PAGE>
ARTICLE II
TRUST INDENTURE ACT
SECTION 1.2. Trust Indenture Act: Application.
(1) This Declaration shall not be subject to the provisions of the Trust
Indenture Act unless and until either: (i) the Securities are registered
pursuant to a registration statement filed with and declared effective by the
Commission or (ii) the Indenture is otherwise required to be qualified under the
Trust Indenture Act. Thereafter, this Declaration shall be subject to the
provisions of the Trust Indenture Act that are required to be part of this
Declaration and shall, to the extent applicable, be governed by such provisions.
Notwithstanding the foregoing, the obligations under Sections 2.1(b), (c) and
(d); 2.2(b); 2.3; 2.6(a), (b) and (c); 3.8 (h); 3.9(v); and 5.3(c) and (d) shall
at all times be governed by the Trust Indenture Act as if the Securities have
been issued pursuant to an effective registration statement or the Indenture has
been qualified under the Trust Indenture Act.
(2) The Institutional Trustee shall be the only Trustee which is a Trustee
for the purposes of the Trust Indenture Act.
(3) Subject to the provisions of Section 2.1(a), if any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by ss.ss. 310
to 317, inclusive, of the Trust Indenture Act, such duties imposed under the
Trust Indenture Act shall control.
(4) The application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Securities as equity securities representing
undivided beneficial interests in the assets of the Trust.
SECTION 1.3. Lists of Holders of Securities.
(1) Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide the Institutional Trustee (i) within 14 days after each record
date for payment of Distributions, a list in such form as the Institutional
Trustee may reasonably require of the names and addresses of the Holders of the
Securities ("List of Holders") as of such record date, provided that, neither
the Sponsor nor the Regular Trustees on behalf of the Trust shall be obligated
to provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Institutional Trustee by the
Sponsor and the Regular Trustees on behalf of the Trust, and (ii) at any other
time, within 30 days of receipt by the Trust of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Institutional Trustee. The Institutional Trustee shall preserve, in as
current a form as is reasonably practicable, all information contained in the
Lists of Holders given to it or
<PAGE>
which it receives in the capacity as Paying Agent (if acting in such capacity),
provided that, the Institutional Trustee may destroy any List of Holders
previously given to it on receipt of a new List of Holders.
(2) The Institutional Trustee shall comply with its obligations under
ss.ss. 311(a), 311(b) and 312(b) of the Trust Indenture Act.
SECTION 1.4. Reports by the Institutional Trustee.
Within 60 days after December 31 of each year, the Institutional Trustee
shall provide to the Holders of the Convertible Preferred Securities such
reports as are required by ss.313 of the Trust Indenture Act, if any, in the
form and in the manner provided by ss.313 of the Trust Indenture Act. The
Institutional Trustee shall also comply with the requirements of ss.313(d) of
the Trust Indenture Act.
SECTION 1.5. Periodic Reports to Institutional Trustee.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Institutional Trustee such documents, reports and information as
required by ss.314 (if any) and the compliance certificate required by ss.314 of
the Trust Indenture Act in the form, in the manner and at the times required by
ss.314 of the Trust Indenture Act.
Delivery of such reports, information and documents to the Institutional
Trustee is for informational purposes only and the Institutional Trustee's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Sponsor's compliance with any of its covenants hereunder (as to which the
Institutional Trustee is entitled to rely exclusively on Officers'
Certificates).
SECTION 1.6. Evidence of Compliance with Conditions Precedent.
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide to the Institutional Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration that relate to
any of the matters set forth in ss.314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given by an officer pursuant to
ss.314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 1.7. Events of Default; Waiver.
(1) The Holders of a Majority in liquidation amount of the Convertible
Preferred Securities may by vote on behalf of the Holders of all of the
Convertible Preferred Securities, waive any past Event of Default in respect of
the Convertible Preferred Securities and its consequences, provided that, if the
underlying Event of Default under the Indenture:
<PAGE>
(1) is not waivable under the Indenture, the Event of Default under
this Declaration shall also not be waivable; or
(2) requires the consent or vote of greater than a majority in
principal amount of the holders of the Debentures (a "Super
Majority") to be waived under the Indenture, the Event of Default
under this Declaration may only be waived by the vote of the
Holders of at least the proportion in liquidation amount of the
Convertible Preferred Securities that the relevant Super Majority
represents of the aggregate principal amount of the Debentures
outstanding.
The foregoing provisions of this Section 2.6(a) shall be in lieu of
ss.316(a)(1)(B) of the Trust Indenture Act and such ss.316(a)(1)(B) of the Trust
Indenture Act is hereby expressly excluded from this Declaration and the
Securities, as permitted by the Trust Indenture Act. Upon such waiver, any such
default shall cease to exist, and any Event of Default with respect to the
Convertible Preferred Securities arising therefrom shall be deemed to have been
cured, for every purpose of this Declaration, but no such waiver shall extend to
any subsequent or other default or an Event of Default with respect to the
Convertible Preferred Securities or impair any right consequent thereon. Any
waiver by the Holders of the Convertible Preferred Securities of an Event of
Default with respect to the Convertible Preferred Securities shall also be
deemed to constitute a waiver by the Holders of the Common Securities of any
such Event of Default with respect to the Common Securities for all purposes of
this Declaration without any further act, vote, or consent of the Holders of the
Common Securities.
(2) The Holders of a Majority in liquidation amount of the Common
Securities may, by vote, on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the underlying Event of
Default under the Indenture:
(1) is not waivable under the Indenture, except where the Holders of
the Common Securities are deemed to have waived such Event of
Default under this Declaration as provided below in this Section
2.6(b), the Event of Default under this Declaration shall also
not be waivable; or
(2) requires the consent or vote of a Super Majority to be waived,
except where the Holders of the Common Securities are deemed to
have waived such Event of Default under this Declaration as
provided below in this Section 2.6(b), the Event of Default under
this Declaration may only be waived by the vote of the Holders of
at least the proportion in liquidation amount of the Common
Securities
<PAGE>
that the relevant Super Majority represents of the aggregate
principal amount of the Debentures outstanding; provided further,
that each Holder of Common Securities will be deemed to have
waived any such Event of Default and all Events of Default with
respect to the Common Securities and its consequences until all
Events of Default with respect to the Convertible Preferred
Securities have been cured, waived or otherwise eliminated, and
until such Events of Default have been so cured, waived or
otherwise eliminated, the Institutional Trustee shall act solely
on behalf of the Holders of the Convertible Preferred Securities
and only the Holders of the Convertible Preferred Securities will
have the right to direct the Institutional Trustee to act in
accordance with the terms of the Securities. The foregoing
provisions of this Section 2.6(b) shall be in lieu
ofss.ss.316(a)(1)(A) and 316(a)(1)(B) of the Trust Indenture Act
and suchss.ss.316(a)(1)(A) and 316(a)(1)(B) of the Trust
Indenture Act are hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
Subject to the foregoing provisions of this Section 2.6(b), upon
such waiver, any such default shall cease to exist and any Event
of Default with respect to the Common Securities arising
therefrom shall be deemed to have been cured for every purpose of
this Declaration, but no such waiver shall extend to any
subsequent or other default or Event of Default with respect to
the Common Securities or impair any right consequent thereon.
(3) A waiver of an Event of Default under the Indenture by the
Institutional Trustee at the direction of the Holders of the Convertible
Preferred Securities, constitutes a waiver of the corresponding Event of Default
under this Declaration. The foregoing provisions of this Section 2.6(c) shall be
in lieu of ss. 316(a)(1)(B) of the Trust Indenture Act and such ss.316(a)(1)(B)
of the Trust Indenture Act is hereby expressly excluded from this Declaration
and the Securities, as permitted by the Trust Indenture Act.
SECTION 1.8. Event of Default; Notice.
(1) The Institutional Trustee shall, within 30 days after the occurrence of
an Event of Default actually known to a Responsible Officer of the Institutional
Trustee, transmit by mail, first class postage prepaid, to the Holders of the
Securities, notices of all such defaults with respect to the Securities unless
such defaults have been cured before the giving of such notice (the term
"defaults" for the purposes of this Section 2.7(a) being hereby defined to be an
Event of Default as defined in the Indenture, not including any periods of grace
provided for therein and irrespective of the giving of any notice provided
therein); provided that, except for a default in
<PAGE>
the payment of principal of (or premium, if any) or interest on any of the
Debentures or in the payment of any sinking fund installment established for the
Debentures, the Institutional Trustee shall be protected in withholding such
notice if and so long as a Responsible Officer of the Institutional Trustee in
good faith determines that the withholding of such notice is in the interests of
the Holders of the Securities. Any such notice given pursuant to this Section
2.7(a) shall state that an Event of Default under the Indenture also constitutes
an Event of Default under this Declaration.
(2) The Institutional Trustee shall not be deemed to have knowledge of any
default except:
(1) a default under Sections 5.1(a), 5.1(b) and 5.1(f) of the
Indenture; or
(2) any default as to which the Institutional Trustee shall have
received written notice or of which a Responsible Officer of the
Institutional Trustee charged with the administration of the
Declaration shall have actual knowledge.
ARTICLE III
ORGANIZATION
SECTION 1.9. Name.
The Trust is named "WRP Convertible Trust I" as such name may be modified
from time to time by the Regular Trustees following written notice to the
Holders of Securities. The Trust's activities may be conducted under the name of
the Trust or any other name deemed advisable by the Regular Trustees.
SECTION 1.10. Office.
The address of the principal office of the Trust is c/o Wellsford Real
Properties, Inc., 535 Madison Avenue, 26th Floor, New York, NY 10022. On at
least ten Business Days written notice to the Holders of Securities, the Regular
Trustees may designate another principal office.
SECTION 1.11. Purpose.
The exclusive purposes and functions of the Trust are (a) to issue and sell
the Securities and use the proceeds from such sale to acquire the Debentures,
and (b) except as
<PAGE>
otherwise limited herein, to engage in only those other activities necessary or
incidental thereto. The Trust shall not borrow money, issue debt or reinvest
proceeds derived from investments, pledge any of its assets, or otherwise
undertake (or permit to be undertaken) any activity that would cause the Trust
not to be classified for United States federal income tax purposes as a grantor
trust.
SECTION 1.12. Authority.
(1) Subject to the limitations provided in this Declaration and to the
specific duties of the Institutional Trustee, the Regular Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Regular Trustees in accordance with their powers shall
constitute the act of and serve to bind the Trust and an action taken by the
Institutional Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
(2) Except as expressly set forth in this Declaration and except if a
meeting of the Regular Trustees is called with respect to any matter over which
the Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee.
(3) Unless otherwise determined by the Regular Trustees, and except as
otherwise required by the Business Trust Act or applicable law, any Regular
Trustee is authorized to execute on behalf of the Trust any documents which the
Regular Trustees have the power and authority to cause the Trust to execute
pursuant to Section 3.6; and
(4) A Regular Trustee may, by power of attorney consistent with applicable
law, delegate to any other natural person over the age of 21 his or her power
for the purposes of executing any documents which the Regular Trustees have
power and authority to cause the Trust to execute pursuant to Section 3.6.
SECTION 1.13. Title to Property of the Trust.
Except as provided in Section 3.8 with respect to the Debentures and the
Institutional Trustee Account or as otherwise provided in this Declaration,
legal title to all assets of the Trust shall be vested in the Trust. The Holders
of Securities shall not have legal title to any part of the assets of the Trust,
but shall have an undivided beneficial interest in the assets of the Trust.
SECTION 1.14. Powers and Duties of the Regular Trustees.
<PAGE>
The Regular Trustees shall have the exclusive power, duty and authority to
cause the Trust to engage in the following activities:
(1) to issue and sell the Securities in accordance with this Declaration;
provided, however, that the Trust may issue no more than one series of
Convertible Preferred Securities and no more than one series of Common
Securities, and provided further, that there shall be no interests in the Trust
other than the Securities, and the issuance of Securities shall be limited to a
simultaneous issuance of both Convertible Preferred Securities and Common
Securities on the Closing Date and the issuance of additional Convertible
Preferred Securities and Common Securities pursuant to Section 2(f) of Annex I
hereof;
(2) in connection with the issue and sale of the Securities:
(1) to execute and enter into the Securities Purchase Agreement, and
other related agreements providing for the sale of the
Securities; and
(2) to take all actions and perform such duties as may be required of
the Regular Trustees to open checking, deposit or similar banking
accounts as may be necessary in connection with the issuance and
sale of the Securities;
(3) to acquire the Debentures with the proceeds of the sale of the
Convertible Preferred Securities and the Common Securities; provided, however,
that the Regular Trustees shall cause legal title to the Debentures to be held
of record in the name of the Institutional Trustee for the benefit of the
Holders of the Convertible Preferred Securities and the Holders of Common
Securities;
(4) to give the Sponsor and the Institutional Trustee prompt written notice
of the occurrence of a Special Event; provided that the Regular Trustees shall
consult with the Sponsor and the Institutional Trustee before taking or
refraining from taking any Ministerial Action in relation to a Special Event;
(5) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of ss. 316(c) of the Trust Indenture Act, Distributions,
voting rights, redemptions and exchanges, and to issue relevant notices to the
Holders of Convertible Preferred Securities and Holders of Common Securities as
to such actions and applicable record dates;
(6) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to the terms of the Securities;
<PAGE>
(7) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.8(e), the Institutional Trustee
has the exclusive power to bring such Legal Action;
(8) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors and
consultants in furtherance of the Trust's purposes, and pay reasonable
compensation for such services;
(9) to cause the Trust to comply with the Trust's obligations, if any,
under the Trust Indenture Act;
(10) to give the certificate required byss. 314(a)(4) of the Trust
Indenture Act to the Institutional Trustee, which certificate may be executed by
any Regular Trustee;
(11) to incur expenses that are necessary or incidental to carry out any of
the purposes of the Trust;
(12) to act as, or appoint another Person to act as, registrar, transfer
agent, Paying Agent and Conversion Agent for the Securities;
(13) to give prompt written notice to the Holders of the Securities of any
notice received from the Debenture Issuer of its election to defer payments of
interest on the Debentures by extending the interest payment period under the
Indenture;
(14) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(15) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of the
State of Delaware and of each other jurisdiction in which such existence is
necessary to protect the limited liability of the Holders of the Convertible
Preferred Securities or to enable the Trust to effect the purposes for which the
Trust was created;
(16) to take any action, not inconsistent with this Declaration or with
applicable law, that the Regular Trustees determine in their discretion to be
necessary or desirable in carrying out the activities of the Trust as set out in
this Section 3.6, including, but not limited to:
(1) causing the Trust not to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
<PAGE>
(2) causing the Trust to be classified for United States federal
income tax purposes as a grantor trust; and
(3) cooperating with the Debenture Issuer to ensure that the
Debentures will be treated as indebtedness of the Debenture
Issuer for United States federal income tax purposes;
provided that such action does not adversely affect the interests of Holders or
vary the terms of the Convertible Preferred Securities;
(17) to take all action necessary to cause all applicable tax returns and
tax information reports that are required to be filed with respect to the Trust
to be duly prepared and timely filed by the Regular Trustees, on behalf of the
Trust, and file all applicable tax returns and applicable information reports
required to be filed in order for the Trust to qualify for any exemption from
any federal, state or local withholding taxes;
(18) to take all actions and perform such duties as may be required of the
Regular Trustees pursuant to Section 11.2 herein; and
(19) to the extent provided in this Declaration, to wind up the affairs of
and liquidate the Trust and to prepare, execute and file the Certificate of
Cancellation with the Secretary of State of the State of Delaware.
The Regular Trustees must exercise the powers set forth in this Section 3.6
in a manner that is consistent with the purposes and functions of the Trust set
out in Section 3.3, and the Regular Trustees shall not take any action that is
inconsistent with the purposes and functions of the Trust set forth in Section
3.3.
Subject to this Section 3.6, the Regular Trustees shall have none of the
powers or the authority of the Institutional Trustee set forth in Section 3.8.
Any expenses incurred by the Regular Trustees on behalf of the Trust or in
their capacities as Regular Trustees pursuant to this Section 3.6 shall be
reimbursed by the Sponsor.
The Trust initially appoints the Institutional Trustee as transfer agent
and registrar for the Convertible Preferred Securities.
SECTION 1.15. Prohibition of Actions by the Trust and the Trustees.
(1) The Trust shall not, and the Trustees (including the Institutional
Trustee) shall cause the Trust not to, engage in any activity other than as
required or authorized by this
Declaration. In particular the Trust shall not and the Trustees (including the
Institutional Trustee) shall cause the Trust not to:
(1) invest any proceeds received by the Trust from holding the
Debentures, but shall distribute all such proceeds to Holders of
Securities pursuant to the terms of this Declaration and of the
Securities;
(2) acquire any assets other than as expressly provided herein;
(3) possess property for other than a Trust purpose;
(4) make any loans or incur any indebtedness other than loans
represented by the Debentures;
(5) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Securities in any way whatsoever
except as permitted by the terms of this Declaration;
(6) issue any securities or other evidences of beneficial ownership
of, or beneficial interest in, the Trust other than the
Securities; or
(7) other than as provided in this Declaration or Annex I hereto, (A)
direct the time, method and place of exercising any trust or
power conferred upon the Debenture Trustee with respect to the
Debentures, (B) waive any past default that is not waivable under
the Indenture, (C) exercise any right to rescind or annul any
declaration that the principal of all the Debentures shall be due
and payable, or (D) consent to any amendment, modification or
termination of the Indenture or the Debentures where such consent
shall be required unless (I) the Trust shall have received an
opinion of counsel to the effect that such modification will not
cause more than an insubstantial risk that (y) the Trust will be
deemed an Investment Company required to be registered under the
Investment Company Act or (z) the Trust will not be classified as
a grantor trust for United States federal income tax purposes,
and (II) if such consent relates to any amendment or modification
which would have a material adverse effect on the Holders of the
Convertible Preferred Securities, the consent of Holders of a
majority in liquidation amount of the Convertible Preferred
Securities is obtained.
<PAGE>
SECTION 1.16. Powers and Duties of the Institutional Trustee.
(1) The legal title to the Debentures shall be owned by and held of record
in the name of the Institutional Trustee in trust for the benefit of the Trust
and the Holders of the Securities. The right, title and interest of the
Institutional Trustee to the Debentures shall vest automatically in each Person
who may hereafter be appointed as Institutional Trustee in accordance with
Section 5.6. Such vesting and cessation of title shall be effective whether or
not conveyancing documents with regard to the Debentures have been executed and
delivered.
(2) The Institutional Trustee shall not transfer its right, title and
interest in the Debentures to the Regular Trustees or to the Delaware Trustee
(if the Institutional Trustee does not also act as Delaware Trustee).
(3) The Institutional Trustee shall:
(1) establish and maintain a segregated non-interest bearing trust
account (the "Institutional Trustee Account") in the name of and
under the exclusive control of the Institutional Trustee on
behalf of the Holders of the Securities and, upon the receipt of
payments of funds made in respect of the Debentures held by the
Institutional Trustee, deposit such funds into the Institutional
Trustee Account and make payments to the Holders of the
Convertible Preferred Securities and Holders of the Common
Securities from the Institutional Trustee Account in accordance
with Section 6.1. Funds in the Institutional Trustee Account
shall be held uninvested until disbursed in accordance with this
Declaration. The Institutional Trustee Account shall be an
account that is maintained with a banking institution the rating
on whose long-term unsecured indebtedness is rated investment
grade by a "nationally recognized statistical rating
organization," as that term is defined for purposes of Rule
436(g)(2) under the Securities Act;
(2) engage in such ministerial activities as shall be necessary or
appropriate to effect the redemption of the Convertible Preferred
Securities and the Common Securities to the extent the Debentures
are redeemed or mature;
(3) engage in such ministerial activities as shall be necessary or
appropriate to effect the distribution of the Trust Property in
accordance with the terms of this Declaration; and
<PAGE>
(4) to the extent provided for in this Declaration, take such
ministerial actions necessary in connection with the winding up
of the affairs of and liquidation of the Trust and the
preparation, execution and filing of the Certificate of
Cancellation with the Secretary of State of the State of
Delaware.
(4) The Institutional Trustee shall take all actions and perform such
duties as may be specifically required of the Institutional Trustee pursuant to
the terms of the Securities.
(5) The Institutional Trustee shall take any Legal Action which arises out
of, or in connection with, an Event of Default of which a Responsible Officer of
the Institutional Trustee has actual knowledge, or the Institutional Trustee's
duties and obligations under this Declaration or the Trust Indenture Act;
provided however, that if an Event of Default has occurred and is continuing and
such event is attributable to the failure of the Debenture Issuer to pay
interest or principal on the Debentures on the date such interest or principal
is otherwise payable (or in the case of redemption, on the redemption date),
then a Holder of Convertible Preferred Securities may directly institute a
proceeding for enforcement of payment to such Holder of the principal of or
interest on the Debentures having a principal amount equal to the aggregate
liquidation amount of the Convertible Preferred Securities of such Holder (a
"Direct Action") on or after the respective due date specified in the Debentures
and provided, further, that if the Institutional Trustee fails to enforce its
rights under the Debentures, any Holder of Convertible Preferred Securities may
institute a legal proceeding against any person to enforce the Institutional
Trustee's rights under the Debentures. In connection with such Direct Action,
the rights of the Holders of the Common Securities will be subrogated to the
rights of such Holder of Convertible Preferred Securities to the extent of any
payment made by the Debenture Issuer to such Holder of Convertible Preferred
Securities in such Direct Action. Except as provided in the preceding sentences,
the Holders of Convertible Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Debentures.
(6) The Institutional Trustee shall continue to serve as a Trustee until
either:
(1) the Trust has been completely liquidated and the proceeds of the
liquidation distributed to the Holders of Securities pursuant to
the terms of the Securities; or
(2) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 5.6.
(7) The Institutional Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Debentures under the Indenture
and, if an Event of Default actually known to a Responsible Officer of the
Institutional Trustee occurs and is continuing, the Institutional Trustee shall,
for the benefit of Holders of the Securities, enforce its
<PAGE>
rights as holder of the Debentures subject to the rights of the Holders pursuant
to the terms of such Securities.
(8) The Institutional Trustee may authorize one or more Persons (each, a
"Paying Agent") to pay Distributions, redemption payments or Liquidation
Distributions (as defined below) on behalf of the Trust with respect to all
Securities and any such Paying Agent shall comply with ss. 317(b) of the Trust
Indenture Act. Any Paying Agent may be removed by the Institutional Trustee at
any time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Institutional Trustee.
(9) Subject to this Section 3.8, the Institutional Trustee shall have none
of the duties, liabilities, powers or the authority of the Regular Trustees set
forth in Section 3.6.
The Institutional Trustee must exercise the powers set forth in this
Section 3.8 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.3, and the Institutional Trustee shall not take
any action that is inconsistent with the purposes and functions of the Trust set
out in Section 3.3.
SECTION 1.17. Certain Duties and Responsibilities of the Institutional
Trustee.
(1) The Institutional Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Declaration and no implied covenants shall be read into this Declaration
against the Institutional Trustee. In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) of which a
Responsible Officer of the Institutional Trustee has actual knowledge, the
Institutional Trustee shall exercise such of the rights and powers vested in it
by this Declaration, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(2) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(1) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred:
(1) the duties and obligations of the Institutional
Trustee shall be determined solely by the express provisions
of this Declaration and the Institutional Trustee shall not
be liable except for the performance of such duties and
obligations as are specifically set forth in this
Declaration, and no implied covenants
<PAGE>
or obligations shall be read into this Declaration against
the Institutional Trustee; and
(2) in the absence of bad faith on the part of the
Institutional Trustee, the Institutional Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Institutional
Trustee and conforming to the requirements of this
Declaration; but in the case of any such certificates or
opinions that by any provision hereof are specifically
required to be furnished to the Institutional Trustee, the
Institutional Trustee shall be under a duty to examine the
same to determine whether or not they conform to the
requirements of this Declaration;
(2) the Institutional Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the
Institutional Trustee, unless it shall be proved that the
Institutional Trustee was negligent in ascertaining the pertinent
facts;
(3) the Institutional Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Securities relating to the
time, method and place of conducting any proceeding for any
remedy available to the Institutional Trustee, or exercising any
trust or power conferred upon the Institutional Trustee under
this Declaration;
(4) no provision of this Declaration shall require the Institutional
Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that the repayment of
such funds or liability is not reasonably assured to it under the
terms of this Declaration or indemnity reasonably satisfactory to
the Institutional Trustee against such risk or liability is not
reasonably assured to it;
(5) the Institutional Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Debentures
and the Institutional Trustee Account shall be to deal with such
property in a similar manner as the Institutional Trustee deals
with similar
<PAGE>
property for its own account, subject to the protections and
limitations on liability afforded to the Institutional Trustee
under this Declaration and the Trust Indenture Act;
(6) the Institutional Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency
of the Debentures or the payment of any taxes or assessments
levied thereon or in connection therewith;
(7) the Institutional Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree in
writing with the Sponsor. Money held by the Institutional Trustee
need not be segregated from other funds held by it except in
relation to the Institutional Trustee Account maintained by the
Institutional Trustee pursuant to Section 3.8(c)(i) and except to
the extent otherwise required by law; and
(8) the Institutional Trustee shall not be responsible for monitoring
the compliance by the Regular Trustees or the Sponsor with their
respective duties under this Declaration, nor shall the
Institutional Trustee be liable for any default or misconduct of
the Regular Trustees or the Sponsor.
SECTION 1.18. Certain Rights of Institutional Trustee.
(1) Subject to the provisions of Section 3.9:
(1) the Institutional Trustee may conclusively rely and shall be
fully protected in acting or refraining from acting upon any
resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties;
(2) any direction or act of the Sponsor or the Regular Trustees
contemplated by this Declaration shall be sufficiently evidenced
by an Officers' Certificate;
(3) whenever in the administration of this Declaration, the
Institutional Trustee shall deem it desirable that a matter be
proved or established before taking, suffering or omitting any
action hereunder, the Institutional Trustee (unless other
evidence is herein
<PAGE>
specifically prescribed) may, in the absence of bad faith on its
part, request and conclusively rely upon an Officers' Certificate
which, upon receipt of such request, shall be promptly delivered
by the Sponsor or the Regular Trustees;
(4) the Institutional Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including
any financing or continuation statement or any filing under tax
or securities laws) or any rerecording, refiling or registration
thereof;
(5) the Institutional Trustee may consult with counsel of its
selection or other experts and the advice or opinion of such
counsel and experts with respect to legal matters or advice
within the scope of such experts' area of expertise shall be full
and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith
and in accordance with such advice or opinion. Such counsel may
be counsel to the Sponsor or any of its Affiliates, and may
include any of its employees. The Institutional Trustee shall
have the right at any time to seek instructions concerning the
administration of this Declaration from any court of competent
jurisdiction;
(6) the Institutional Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Declaration at the request or direction of any Holder, unless
such Holder shall have provided to the Institutional Trustee
security and indemnity, reasonably satisfactory to the
Institutional Trustee, against the costs, expenses (including
attorneys' fees and expenses and the expenses of the
Institutional Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may
be requested by the Institutional Trustee provided, that, nothing
contained in this Section 3.10(a)(vi) shall be taken to (a)
require the Holders of Convertible Preferred Securities to offer
such indemnity in the event such Holders direct the Institutional
Trustee to take any action it is empowered to take under this
Declaration following an Event of Default or (b) relieve the
Institutional Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers
vested in it by this Declaration;
<PAGE>
(7) the Institutional Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice,
request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document, but the
Institutional Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see
fit;
(8) the Institutional Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by
or through agents, custodians, nominees or attorneys and the
Institutional Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney appointed with
due care by it hereunder;
(9) any action taken by the Institutional Trustee or its agents
hereunder shall bind the Trust and the Holders of the Securities,
and the signature of the Institutional Trustee or its agents
alone shall be sufficient and effective to perform any such
action and no third party shall be required to inquire as to the
authority of the Institutional Trustee to so act or as to its
compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the
Institutional Trustee's or its agent's taking such action; (1)
(10) whenever in the administration of this Declaration the
Institutional Trustee shall deem it desirable to receive written
instructions with respect to enforcing any remedy or right or
taking any other action hereunder, the Institutional Trustee (i)
may request written instructions from the Holders of the
Securities which instructions may only be given by the Holders of
the same proportion in liquidation amount of the Securities as
would be entitled to direct the Institutional Trustee under the
terms of the Securities in respect of such remedy, right or
action, (ii) may refrain from enforcing such remedy or right or
taking such other action until such instructions are received,
and (iii) shall be protected in conclusively relying on or acting
in accordance with such instructions;
(11) except as otherwise expressly provided by this Declaration, the
Institutional Trustee shall not be under any obligation to take
any
<PAGE>
action that is discretionary under the provisions of this
Declaration; and
(12) the Institutional Trustee shall not be liable for any action
taken, suffered, or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this
Declaration.
(2) No provision of this Declaration shall be deemed to impose any duty or
obligation on the Institutional Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent under applicable law, to perform any such
act or acts, or to exercise any such right, power, duty or obligation. No
permissive power or authority available to the Institutional Trustee shall be
construed to be a duty.
SECTION 1.19. Delaware Trustee.
Notwithstanding any other provision of this Declaration other than Section
5.2, the Delaware Trustee shall not be entitled to exercise any powers, nor
shall the Delaware Trustee have any of the duties and responsibilities of the
Regular Trustees, the Institutional Trustee or the Trustees generally (except as
may be required under the Business Trust Act) described in this Declaration.
Except as set forth in Section 5.2, the Delaware Trustee shall be a Trustee for
the sole and limited purpose of fulfilling the requirements of ss. 3807 of the
Business Trust Act.
SECTION 1.20. Execution of Documents.
Except as otherwise required by the Business Trust Act, any Regular Trustee
is authorized to execute on behalf of the Trust any documents that the Regular
Trustees have the power and authority to execute pursuant to Section 3.6.
SECTION 1.21. Not Responsible for Recitals or Issuance of Securities.
The recitals contained in this Declaration and the Securities shall be
taken as the statements of the Sponsor, and the Trustees do not assume any
responsibility for their correctness. The Trustees make no representations as to
the value or condition of the property of the Trust or any part thereof. The
Trustees make no representations as to the validity or sufficiency of this
Declaration or the Securities.
SECTION 1.22. Duration of Trust.
<PAGE>
The Trust, unless terminated pursuant to the provisions of Article VIII
hereof, shall have existence for twenty-two (22) years from May 5, 2000 through
May 5, 2022.
SECTION 1.23. Mergers.
(1) The Trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets as an
entirety or substantially as an entirety to any corporation or other body,
except as described in Section 3.15(b) and (c).
(2) The Trust may, with the consent of the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees and without the consent of
the Holders of the Securities, the Delaware Trustee or the Institutional
Trustee, consolidate, merge with or into, or be replaced by a trust organized as
such under the laws of any State; provided that
(1) such successor entity (the "Successor Entity") either:
(1) expressly assumes all of the obligations of the Trust
under the Securities; or
(2) substitutes for the Convertible Preferred Securities
other securities having substantially the same terms as the
Convertible Preferred Securities (the "Successor Securities") so
long as the Successor Securities rank the same as the Convertible
Preferred Securities rank with respect to Distributions and
payments upon liquidation, redemption and otherwise;
(2) the Debenture Issuer expressly acknowledges a trustee of the
Successor Entity that possesses the same powers and duties as the
Institutional Trustee as the Holder of the Debentures;
(3) such merger, consolidation, or replacement does not adversely
affect the rights, preferences and privileges of the Holders of
the Securities (including any Successor Securities) in any
material respect (other than with respect to any dilution of the
Holders' interest in the Successor Entity);
(4) such Successor Entity has a purpose identical to that of the
Trust;
(5) such Successor Entity has assets identical to that of the Trust;
<PAGE>
(6) prior to such merger, consolidation, replacement, the Sponsor has
received an opinion of nationally recognized independent counsel
to the Trust experienced in such matters to the effect that:
(1) such merger, consolidation, or replacement does not
adversely affect the rights, preferences and privileges of the
Holders of the Securities (including any Successor Securities) in
any material respect (other than with respect to any dilution of
the Holders' interest in the Successor Entity);
(2) following such merger, consolidation, or replacement,
neither the Trust nor the Successor Entity will be required to
register as an Investment Company; and
(3) following such merger, consolidation, or replacement,
the Trust (or such Successor Entity) will continue to be
classified as a grantor trust for United States federal income
tax purposes; and
(7) the Sponsor guarantees the obligations of the Successor Entity
under the Successor Securities at least to the extent provided by
the Securities Guarantees.
(3) Notwithstanding Section 3.15(b), the Trust shall not, except with the
consent of Holders of 100% in liquidation amount of the Securities, consolidate,
merge with or into, or be replaced by any other entity or permit any other
entity to consolidate, merge with or into, or replace it, if such consolidation,
merger or replacement would cause the Trust or the Successor Entity to be
classified as other than a grantor trust for United States federal income tax
purposes.
ARTICLE IV
SPONSOR
SECTION 1.24. Sponsor's Purchase of Common Securities.
On the Closing Date, the Sponsor will purchase all of the Common Securities
issued by the Trust, in an amount at least equal to 3% of the capital of the
Trust, at the same time as the Convertible Preferred Securities are sold.
SECTION 1.25. Responsibilities of the Sponsor.
<PAGE>
In connection with the issue and sale of the Convertible Preferred
Securities, the Sponsor shall have the exclusive right and responsibility to
engage in the following activities:
(1) to determine the States in which to take appropriate action to qualify
or register for sale all or part of the Convertible Preferred Securities and to
do any and all such acts, other than actions which must be taken by the Trust,
and advise the Trust of actions it must take, and prepare for execution and
filing any documents to be executed and filed by the Trust, as the Sponsor deems
necessary or advisable in order to comply with the applicable laws of any such
States; and
(2) to negotiate the terms of the Preferred Securities Purchase Agreement
providing for the purchase of the Convertible Preferred Securities.
ARTICLE V
TRUSTEES
SECTION 1.26. Number of Trustees.
The number of Trustees shall be four (4). One Trustee, in the case of a
natural person, shall be a person who is a resident of the State of Delaware or
that, if not a natural person, is an entity which has its principal place of
business in the State of Delaware (the "Delaware Trustee"); two Trustees shall
be employees or officers of, or affiliated with the Sponsor ("Regular
Trustees"); and one Trustee shall be the Institutional Trustee, and such Trustee
may also serve as Delaware Trustee if it meets the applicable requirements.
SECTION 1.27. Delaware Trustee.
If required by the Business Trust Act, one Trustee shall be:
(1) a natural person who is a resident of the State of Delaware; or
(2) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law; provided that, if the Institutional Trustee has its principal
place of business in the State of Delaware and otherwise meets the requirements
of applicable law, then the Institutional Trustee shall also be the Delaware
Trustee and Section 3.11 shall have no application.
The Initial Delaware Trustee shall be Wilmington Trust Company.
SECTION 1.28. Institutional Trustee; Eligibility.
<PAGE>
(1) There shall at all times be one Trustee which shall act as
Institutional Trustee which shall:
(1) not be an Affiliate of the Sponsor; and
(2) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted
by the Commission to act as an institutional trustee under the
Trust Indenture Act, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of
at least 50 million U.S. dollars ($50,000,000), and subject to
supervision or examination by federal, state, territorial or
District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the
requirements of the supervising or examining authority referred
to above, then for the purposes of this Section 5.3(a)(ii), the
combined capital and surplus of such corporation shall be deemed
to be its combined capital and surplus as set forth in its most
recent report of condition so published.
(2) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 5.3(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 5.6(c).
(3) If the Institutional Trustee has or shall acquire any "conflicting
interest" within the meaning of ss. 310(b) of the Trust Indenture Act, the
Institutional Trustee and the Holder of the Common Securities (as if it were the
obligor referred to in ss. 310(b) of the Trust Indenture Act) shall in all
respects comply with the provisions of ss. 310(b) of the Trust Indenture Act.
(4) The Convertible Preferred Securities Guarantee shall be deemed to be
specifically described in this Declaration for purposes of clause (i) of the
first provision contained in ss. 310(b) of the Trust Indenture Act.
(5) The initial Institutional Trustee shall be Wilmington Trust Company.
SECTION 1.29. Certain Qualifications of Regular Trustees and Delaware
Trustee Generally.
<PAGE>
Each Regular Trustee and the Delaware Trustee (unless the Institutional
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 1.30. Regular Trustees.
The initial Regular Trustees shall be:
Rodney F. Du Bois
James J. Burns
Except as expressly set forth in this Declaration and except if a meeting
of the Regular Trustees is called with respect to any matter over which the
Regular Trustees have power to act, any power of the Regular Trustees may be
exercised by, or with the consent of, any one such Regular Trustee. Unless
otherwise determined by the Regular Trustees, and except as otherwise required
by the Business Trust Act or applicable law, any Regular Trustee is authorized
to execute on behalf of the Trust any documents which the Regular Trustees have
the power and authority to cause the Trust to execute pursuant to Section 3.6.
SECTION 1.31. Appointment, Removal and Resignation of Trustees.
(1) Subject to Section 5.6(b), Trustees may be appointed or removed without
cause at any time:
(1) until the issuance of any Securities, by written instrument
executed by the Sponsor; and
(2) after the issuance of any Securities, by vote of the Holders of a
Majority in liquidation amount of the Common Securities voting as
a class at a meeting of the Holders of the Common Securities.
(2) (10 The Trustee that acts as Institutional Trustee shall not be removed
in accordance with Section 5.6(a) until a Successor Institutional Trustee has
been appointed and has accepted such appointment by written instrument executed
by such Successor Institutional Trustee and delivered to the Regular Trustees
and the Sponsor; and
(1) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.6(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under
Sections 5.2 and 5.4 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed
<PAGE>
by such Successor Delaware Trustee and delivered to the Regular
Trustees and the Sponsor.
(3) A Trustee appointed to office shall hold office until his successor
shall have been appointed or until his death, removal or resignation. Any
Trustee may resign from office (without need for prior or subsequent accounting)
by an instrument in writing signed by the Trustee and delivered to the Sponsor
and the Trust, which resignation shall take effect upon such delivery or upon
such later date as is specified therein; provided, however, that:
(1) No such resignation of the Trustee that acts as the Institutional
Trustee shall be effective:
(1) until a Successor Institutional Trustee has been
appointed and has accepted such appointment by instrument
executed by such Successor Institutional Trustee and delivered to
the Trust, the Sponsor and the resigning Institutional Trustee;
or
(2) until the assets of the Trust have been completely
liquidated and the proceeds thereof distributed to the holders of
the Securities; and
(2) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has
been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the
Trust, the Sponsor and the resigning Delaware Trustee.
(4) the Holders of the Common Securities shall use their best efforts to
promptly appoint a Successor Delaware Trustee or Successor Institutional Trustee
as the case may be if the Institutional Trustee or the Delaware Trustee delivers
an instrument of resignation in accordance with this Section 5.6.
(5) If no Successor Institutional Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.6 within 60 days after delivery of an instrument of resignation, the
Institutional Trustee or Delaware Trustee resigning, may petition any court of
competent jurisdiction for appointment of a Successor Institutional Trustee or
Successor Delaware Trustee. Such court may thereupon, after prescribing such
notice, if any, as it may deem proper and prescribe, appoint a Successor
Institutional Trustee or Successor Delaware Trustee, as the case may be.
<PAGE>
(6) No Institutional Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
SECTION 1.32. Vacancies Among Trustees.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 5.1, or if the number of Trustees is
increased pursuant to Section 5.1, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Regular Trustees or, if there
are more than two, a majority of the Regular Trustees shall be conclusive
evidence of the existence of such vacancy. The vacancy shall be filled with a
Trustee appointed in accordance with Section 5.6.
SECTION 1.33. Effect of Vacancies.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul the Trust. Whenever a vacancy in the number of Regular
Trustees shall occur, until such vacancy is filled by the appointment of a
Regular Trustee in accordance with Section 5.6, the Regular Trustees in office,
regardless of their number, shall have all the powers granted to the Regular
Trustees and shall discharge all the duties imposed upon the Regular Trustees by
this Declaration.
SECTION 1.34. Meetings.
If there is more than one Regular trustee, meetings of the Regular Trustees
shall be held from time to time upon the call of any Regular Trustee. Regular
meetings of the Regular Trustees may be held at a time and place fixed by
resolution of the Regular Trustees. Notice of any in-person meetings of the
Regular Trustees shall be hand-delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 48
hours before such meeting. Notice of any telephonic meetings of the Regular
Trustees or any committee thereof shall be hand-delivered or otherwise delivered
in writing (including by facsimile, with a hard copy by overnight courier) not
less than 24 hours before a meeting. Notices shall contain a brief statement of
the time, place and anticipated purposes of the meeting. The presence (whether
in person or by telephone) of a Regular Trustee at a meeting shall constitute a
waiver of notice of such meeting except where a Regular Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Declaration, any action of the Regular Trustees may
be taken at a meeting by vote of a majority of the Regular Trustees present
(whether in person or by telephone) and eligible to vote with respect to such
matter, provided that a Quorum is present, or without a meeting by the unanimous
written
<PAGE>
consent of the Regular Trustees. In the event there is only one Regular Trustee,
any and all action of such Regular Trustee shall be evidenced by a written
consent of such Regular Trustee.
SECTION 1.35. Delegation of Power.
A Regular Trustee may, by power of attorney consistent with applicable law,
delegate to any other natural person over the age of 21 his or her power for the
purposes of executing any documents contemplated in Section 3.6.
The Regular Trustees shall have power to delegate from time to time to such
of their number or to officers of the Trust the doing of such things and the
execution of such instruments either in the name of the Trust or the names of
the Regular Trustees or otherwise as the Regular Trustees may deem expedient, to
the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
SECTION 1.36. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Institutional Trustee or the Delaware
Trustee, as the case may be, may be merged or converted or with which either may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any corporation succeeding to all or
substantially all the corporate trust business of the Institutional Trustee or
the Delaware Trustee, as the case may be, shall be the successor of the
Institutional Trustee or the Delaware Trustee, as the case may be, hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto.
ARTICLE VI
DISTRIBUTIONS
SECTION 1.37. Distributions.
Holders of Securities shall receive Distributions (as defined herein) in
accordance with the applicable terms of the relevant Holder's Securities.
Distributions shall be made on the Convertible Preferred Securities and the
Common Securities in accordance with the preferences set forth in their
respective terms. If and to the extent that the Debenture Issuer makes a payment
of interest, including Additional Sums (as defined in the Indenture), premium,
if any, and/or principal on the Debentures held by the Institutional Trustee
(the amount of any such payment being a "Payment Amount"), the Institutional
Trustee shall and is directed, to the extent funds
<PAGE>
are available for that purpose, to make a distribution (a "Distribution") of the
Payment Amount to Holders.
ARTICLE VII
ISSUANCE OF SECURITIES
SECTION 1.38. General Provisions Regarding Securities.
(1) The Regular Trustees shall on behalf of the Trust issue one class of
convertible preferred securities representing undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Annex I (the
"Convertible Preferred Securities") and one class of convertible common
securities representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Annex I (the "Common Securities").
The Trust shall issue no securities or other interests in the assets of the
Trust other than the Convertible Preferred Securities and the Common Securities.
(2) The consideration received by the Trust for the issuance of the
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(3) Upon issuance of the Securities as provided in this Declaration, the
Securities so issued shall be deemed to be validly issued, fully paid and
non-assessable.
(4) Every Person, by virtue of having become a Holder in accordance with
the terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of and shall be bound by this Declaration.
SECTION 1.39. Execution and Authentication.
(1) The Certificates shall be signed on behalf of the Trust by a Regular
Trustee. In case any Regular Trustee of the Trust who shall have signed any of
the Securities shall cease to be such Regular Trustee before the Certificates so
signed shall be delivered by the Trust, such Certificates nevertheless may be
delivered as though the person who signed such Certificates had not ceased to be
such Regular Trustee; and any Certificate may be signed on behalf of the Trust
by such persons who, at the actual date of execution of such Security, shall be
the Regular Trustees of the Trust, although at the date of the execution and
delivery of the Declaration any such person was not such a Regular Trustee.
<PAGE>
(2) One Regular Trustee shall sign the Convertible Preferred Securities for
the Trust by manual or facsimile signature. Unless otherwise determined by the
Trust, such signature shall, in the case of Common Securities, be a manual
signature.
A Convertible Preferred Security shall not be valid until authenticated by
the manual signature of an authorized signatory of the Institutional Trustee.
The signature shall be conclusive evidence that the Convertible Preferred
Security has been authenticated under this Declaration.
Upon a written order of the Trust signed by one Regular Trustee, the
Institutional Trustee shall authenticate the Convertible Preferred Securities
for original issue.
The Institutional Trustee may appoint an authenticating agent acceptable to
the Trust to authenticate Convertible Preferred Securities. An authenticating
agent may authenticate Convertible Preferred Securities whenever the
Institutional Trustee may do so. Each reference in this Declaration to
authentication by the Institutional Trustee includes authentication by such
agent. An authenticating agent has the same rights as the Institutional Trustee
to deal with the Company or an Affiliate.
SECTION 1.40. Form and Dating.
The Convertible Preferred Securities and the Institutional Trustee's
certificate of authentication shall be substantially in the form of Exhibit A-1
and the Common Securities shall be substantially in the form of Exhibit A-2,
each of which is hereby incorporated in and expressly made a part of this
Declaration. Certificates may be printed, lithographed or engraved or may be
produced in any other manner as is reasonably acceptable to the Regular
Trustees, as evidenced by their execution thereof. The Securities may have
letters, numbers, notations, other marks of identification or designation or
other changes or additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice and such legends or endorsements required by
law, stock exchange rule and agreements to which the Trust is subject, if any
(provided that any such notation, legend or endorsement is in a form acceptable
to the Trust). The Trust at the direction of the Sponsor shall furnish any such
legend not contained in Exhibit A-1 to the Institutional Trustee in writing.
Each Convertible Preferred Security Certificate shall be dated the date of its
authentication. The terms and provisions of the Securities set forth in Annex I
and the forms of Securities set forth in Exhibits A-1 and A-2 are part of the
terms of this Declaration and, to the extent applicable, the Institutional
Trustee and the Sponsor, by their execution and delivery of this Declaration,
expressly agree to such terms and provisions and to be bound thereby.
SECTION 1.41. Paying Agent.
<PAGE>
The Trust shall maintain in the Borough of Manhattan, City of New York,
State of New York, an office or agency where Convertible Preferred Securities
may be presented for payment ("Paying Agent"). The Trust shall act as, or retain
others to act as, conversion agent to effectuate a conversion of the Securities
("Conversion Agent"). The Trust may appoint the Paying Agent and the Conversion
Agent and may appoint one or more additional paying agents and one or more
additional conversion agents in such other locations as it shall determine. The
term "Paying Agent" includes any additional paying agent and the term
"Conversion Agent" includes any additional conversion agent. The Trust may
change any Paying Agent or Conversion Agent without prior notice to any Holder.
The Trust shall notify the Institutional Trustee in writing of the name and
address of any Agent not a party to this Declaration. If the Trust fails to
appoint or maintain another entity as Paying Agent or Conversion Agent, the
Institutional Trustee shall act as such. The Trust or any of its Affiliates may
act as Paying Agent or Conversion Agent. The Trust shall act as Paying Agent and
Conversion Agent for the Common Securities.
The Trust initially appoints Wilmington Trust Company, c/o Corporate Trust
Administration, 1100 North Market Street, Wilmington, Delaware 19890-0001, as
Paying Agent and Conversion Agent for the Convertible Preferred Securities.
ARTICLE VIII
TERMINATION OF TRUST
SECTION 1.42. Termination of Trust.
(1) The Trust shall terminate:
(1) upon the bankruptcy of the Sponsor or the Holder of the Common
Securities;
(2) upon the filing of a certificate of dissolution or its equivalent
with respect to the Sponsor or the Holder of the Common
Securities; the filing of a certificate of cancellation with
respect to the Trust after having obtained the consent of at
least a Majority in liquidation amount of the Securities voting
together as a single class to file such certificate of
cancellation; or the revocation of the Sponsor's charter or the
charter of the Holder of the Common Securities and the expiration
of 90 days after the date of revocation without a reinstatement
thereof;
<PAGE>
(3) upon the entry of a decree of judicial dissolution of the
Sponsor, the Trust or the Holder of the Common Securities;
(4) when all of the Securities shall have been called for redemption
and the amounts necessary for redemption thereof shall have been
paid to the Holders in accordance with the terms of the
Securities;
(5) upon the occurrence and continuation of a Special Event pursuant
to which the Trust shall have been dissolved in accordance with
the terms of the Securities and all of the Debentures held by the
Institutional Trustee shall have been distributed to the Holders
of Securities in exchange for all of the Securities;
(6) upon the written direction to the Institutional Trustee from the
Sponsor at any time to terminate the Trust and, after
satisfaction of liabilities to creditors of the Trust as provided
by applicable law, the distribution of Debentures to Holders in
exchange for the Securities, subject to the Regular Trustees'
receipt of an opinion of nationally recognized independent
counsel experienced in such matters to the effect that the
holders of the Convertible Preferred Securities will not
recognize any income, gain or loss for United States federal
income tax purposes as a result of the dissolution of the Trust
and such distribution to Holders;
(7) upon the distribution of Sponsor's Common Shares to all Holders
of Convertible Preferred Securities upon conversion of all
outstanding Convertible Preferred Securities;
(8) the expiration of the term of the Trust on May 4, 2022; or
(9) before the issuance of any Securities, with the consent of all of
the Regular Trustees and the Sponsor.
(2) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), the Trustees shall file a certificate of cancellation with
the Secretary of State of the State of Delaware.
(3) The provisions of Sections 3.9 and 3.10 and Article X shall survive the
termination of the Trust.
<PAGE>
ARTICLE IX
TRANSFER OF INTERESTS
SECTION 1.43. Transfer of Securities.
(1) Securities may only be transferred, in whole or in part, in accordance
with the terms and conditions set forth in this Declaration and in the terms of
the Securities. Any transfer or purported transfer of any Security not made in
accordance with this Declaration shall be null and void.
(2) Subject to this Article IX, Convertible Preferred Securities shall be
transferable.
(3) Subject to this Article IX, the Sponsor and any Related Party may only
transfer Common Securities to the Sponsor or a Related Party of the Sponsor;
provided, that, any such transfer is subject to the condition precedent that the
transferor obtain the written opinion of nationally recognized independent
counsel experienced in such matters that such transfer would not cause more than
an insubstantial risk that:
(1) the Trust would not be classified for United States federal
income tax purposes as a grantor trust; and
(2) the Trust would be an Investment Company required to register
under the Investment Company Act or the transferee would become
an Investment Company required to register under the Investment
Company Act.
(4) Each Security that bears or is required to bear the legend set forth in
this Section 9.1(d) (a "Restricted Security") shall be subject to the
restrictions on transfer provided in the legend set forth in this Section
9.1(d), unless such restrictions on transfer shall be waived by the written
consent of the Regular Trustees, and the Holder of each Restricted Security, by
such security holder's acceptance thereof, agrees to be bound by such
restrictions on transfer. As used in this Section 9.1(d) and in Section 9.1(e),
the term "transfer" encompasses any sale, pledge, transfer or other disposition
of any Restricted Security.
Prior to the Transfer Restriction Termination Date, any certificate
evidencing a Security shall bear a legend in substantially the following form,
unless otherwise agreed by the Regular Trustees (with written notice thereof to
the Institutional Trustee):
<PAGE>
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE
144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE
TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON SHARES ISSUABLE UPON
CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO WELLSFORD REAL PROPERTIES,
INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE REGULAR TRUSTEES (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, THE
TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE
SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM SUCH
TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
REGULAR TRUSTEES (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER
MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY OR WRP CONVERTIBLE TRUST I ("THE TRUST") MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING
<PAGE>
MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT
EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE REGULAR TRUSTEES SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT. THIS SECURITY IS ALSO SUBJECT TO THE RESTRICTIONS ON
TRANSFER SET FORTH IN THE DECLARATION.
Following the Transfer Restriction Termination Date, any Security or
security issued in exchange or substitution therefor (other than (i) Securities
acquired by the Sponsor or any Affiliate thereof and (ii) Common Shares issued
upon the conversion or exchange of any Security described in clause (i) above)
may upon surrender of such Security for exchange to any Regular Trustee on
behalf of the Trust in accordance with the provisions of Section 9.2, be
exchanged for a new Security or Securities, of like tenor and aggregate
liquidation amount, which shall not bear the restrictive legend required by this
Section 9.1(d).
Any Convertible Preferred Security or Common Shares issued upon the
conversion or exchange of a Convertible Preferred Security that, prior to the
Transfer Restriction Termination Date, is purchased or owned by the Sponsor or
any Affiliate thereof may not be resold by the Sponsor or such Affiliate unless
registered under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction which results
in such Convertible Preferred Securities or Common Shares, as the case may be,
no longer being "restricted securities" (as defined under Rule 144).
(5) Each Convertible Preferred Security shall be subject to the
restrictions on transfer provided in this Section 9.1(e).
(1) If a Holder of Convertible Preferred Securities (the "Offeror")
desires to sell, assign, transfer, encumber, or otherwise dispose
of any of his Convertible Preferred Securities, other than
pursuant to the exercise of such Holder's conversion rights under
the Convertible Preferred Securities or the sale of any
securities
<PAGE>
received upon such conversion, he shall give written notice to
the Sponsor of his desire to do so and of the price per security
and other terms under which he proposes to dispose of his
Convertible Preferred Securities (the "Sales Notice"), which
Sales Notice shall constitute an offer on the part of the Offeror
to sell to the Sponsor any such Convertible Preferred Securities
upon the terms and conditions set forth in such notice.
(2) Unless, within ten (10) days after the giving of the Sales Notice
by the Offeror pursuant to subparagraph (i) of this Section
9.1(e), the Sponsor shall give written notice to the Offeror that
the Sponsor irrevocably commits to purchase the Convertible
Preferred Securities which are the subject of the Sales Notice at
the price and under the terms specified in the Sales Notice given
by the Offeror, the Sponsor shall be deemed to have rejected the
offer of the Offeror to sell the Convertible Preferred Securities
which are the subject of the Sales Notice and the Offeror shall
be free without restriction under this Section 9.1(e) to sell the
Convertible Preferred Securities which are the subject of the
Sales Notice to any other Person, provided however, if the price
per security is less than the price or the other terms are more
favorable than those, contained in the Sales Notice, the Offeror
shall again offer to sell the Convertible Preferred Securities in
accordance with the provisions of subparagraph (i) of this
Section 9.1(e) before it may complete any such sale and provided
further, that the Convertible Preferred Securities which are the
subject of the Sales Notice shall again be subject to the
provisions of subparagraph (i) of this Section 9.1(e) if within
ninety (90) days after the giving of the Sales Notice, the
Offeror shall not have completed the disposition of such
Convertible Preferred Securities.
(3) If the Sponsor irrevocably commits to purchase the Convertible
Preferred Securities as contemplated by subparagraph (ii) of this
Section 9.1(e), the closing of such purchase shall take place at
the principal place of business of the Sponsor at 10:00 A.M. (New
York City time) on the third (3rd) day following the expiration
of the ten (10) day period referred to subparagraph (ii) of this
Section 9.1(e), or if such day is not a Business Day, then the
next day that is a Business Day.
The provisions of this Section 9.1(e) shall not apply to one or more
transfers of Convertible Preferred Securities among ERPOLP and an Affiliate
thereof, or, to any entity in
<PAGE>
which ERPOLP or EQR holds directly or indirectly an economic interest of greater
than 50%, including, without limitation, any taxable REIT subsidiary of EQR, as
defined in Code ss. 856(l).
SECTION 1.44. Transfer of Certificates.
The Regular Trustees shall provide for the registration of Certificates and
of transfers of Certificates, which will be effected without charge, but only
upon payment in respect of any tax or other government charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Certificate, the Regular Trustees shall cause one or more new Certificates to be
issued in the name of the designated transferee or transferees. Every
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the Regular Trustees,
duly executed by the Holder or such Holder's attorney duly authorized in
writing. Each Certificate surrendered for registration of transfer shall be
canceled by the Regular Trustees. A transferee of a Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder upon
the receipt by such transferee of a Certificate. By acceptance of a Certificate,
each transferee shall be deemed to have agreed to be bound by this Declaration.
SECTION 1.45. Deemed Security Holders.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole holder of such
Certificate and of the Securities represented by such Certificate for purposes
of receiving Distributions and for all other purposes whatsoever and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such Certificate or in the Securities represented by such
Certificate on the part of any Person, whether or not the Trust shall have
actual or other notice thereof.
SECTION 1.46. Mutilated, Destroyed, Lost or Stolen Certificates.
If:
(1) any mutilated Certificates should be surrendered to the Regular
Trustees, or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate; and
(2) there shall be delivered to the Institutional Trustee or the Regular
Trustees such security or indemnity as may be required by them to keep each of
them harmless;
then:
in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, the Institutional Trustee or any Regular Trustee on
behalf of the Trust shall execute
<PAGE>
and deliver, in exchange for, or in lieu of, any such mutilated, destroyed, lost
or stolen Certificate, a new Certificate of like denomination. In connection
with the issuance of any new Certificate under this Section 9.4, the
Institutional Trustee or the Regular Trustees may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection therewith. Any duplicate Certificate issued pursuant to this Section
shall constitute conclusive evidence of an ownership interest in the relevant
Securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
ARTICLE X
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
TRUSTEES OR OTHERS
SECTION 1.47. Liability.
(1) Except as expressly set forth in this Declaration, the Securities
Guarantees and the terms of the Securities, the Sponsor shall not be:
(1) personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders of the
Securities which shall be made solely from assets of the Trust;
or
(2) required to pay to the Trust or to any Holder of Securities any
deficit upon dissolution of the Trust or otherwise.
(2) The Holder of the Common Securities shall be liable for all of the
debts and obligations of the Trust (other than amounts due on the Securities
subject to the Preferred Guarantee) to the extent not satisfied out of the
Trust's assets.
(3) Pursuant to ss. 3803(a) of the Business Trust Act, the Holders of the
Convertible Preferred Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 1.48. Exculpation.
(1) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Trust or any Covered Person for any loss, damage or
claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of the authority
conferred on such Indemnified Person by this Declaration or by law,
<PAGE>
except that an Indemnified Person shall be liable for any such loss, damage or
claim incurred by reason of such Indemnified Person's gross negligence or
willful misconduct with respect to such acts or omissions.
(2) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Securities might properly be paid.
SECTION 1.49. Fiduciary Duty.
(1) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Declaration shall not be liable to the Trust or to any other Covered Person for
its good faith reliance on the provisions of this Declaration. The provisions of
this Declaration, to the extent that they restrict the duties and liabilities of
an Indemnified Person otherwise existing at law or in equity (other than the
duties imposed on the Institutional Trustee under the Trust Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(2) Unless otherwise expressly provided herein:
(1) whenever a conflict of interest exists or arises between any
Covered Persons; or
(2) whenever this Declaration or any other agreement contemplated
herein or therein provides that an Indemnified Person shall act
in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Securities, the
Indemnified Person shall resolve such conflict of interest, take
such action or provide such terms, considering in each case the
relative interest of each party (including its own interest) to
such conflict, agreement, transaction or situation and the
benefits and burdens relating to such interests, any customary or
accepted industry practices, and any applicable generally
accepted accounting practices or principles. In the absence of
bad faith by the Indemnified Person, the resolution, action or
term so made, taken or provided by the Indemnified Person shall
not constitute a breach of this Declaration or any other
<PAGE>
agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.
(3) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(1) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall
have no duty or obligation to give any consideration to any
interest of or factors affecting the Trust or any other Person;
or
(2) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and
shall not be subject to any other or different standard imposed
by this Declaration or by applicable law.
SECTION 1.50. Indemnification.
(1) (1) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of the fact that he is
or was a Company Indemnified Person against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a
presumption that the Company Indemnified Person did not act in
good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had no reasonable
cause to believe that his conduct was unlawful.
(1) The Debenture Issuer shall indemnify, to the full extent
permitted by law, any Company Indemnified Person who was or is a
party or
is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to
procure a judgment in its favor by reason of the fact that he is
or was a Company Indemnified Person against expenses (including
attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit
if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust and
except that no such indemnification shall be made in respect of
any claim, issue or matter as to which such Company Indemnified
Person shall have been adjudged to be liable to the Trust unless
and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such
expenses which such Court of Chancery or such other court shall
deem proper.
(2) To the extent that a Company Indemnified Person shall be
successful on the merits or otherwise (including dismissal of an
action without prejudice or the settlement of an action without
admission of liability) in defense of any action, suit or
proceeding referred to in paragraphs (i) and (ii) of this Section
10.4(a), or in defense of any claim, issue or matter therein, he
shall be indemnified, to the full extent permitted by law,
against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.
(3) Any indemnification under paragraphs (i) and (ii) of this Section
10.4(a) (unless ordered by a court) shall be made by the
Debenture Issuer only as authorized in the specific case upon a
determination that indemnification of the Company Indemnified
Person is proper in the circumstances because he has met the
applicable standard of conduct set forth in paragraphs (i) or
(ii). Such determination shall be made (1) by the Regular
Trustees by a majority vote of a quorum consisting of such
Regular Trustees who were not parties to such action, suit or
proceeding, (2) if such a quorum is not obtainable, or, even if
obtainable, if a quorum of disinterested Regular Trustees so
directs, by independent legal counsel in a written opinion, or
(3) by the Common Security Holder of the Trust.
<PAGE>
(4) Expenses (including attorneys' fees) incurred by a Company
Indemnified Person in defending a civil, criminal, administrative
or investigative action, suit or proceeding referred to in
paragraphs (i) and (ii) of this Section 10.4(a) shall be paid by
the Debenture Issuer in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Company Indemnified Person to repay such amount
if it shall ultimately be determined that he is not entitled to
be indemnified by the Debenture Issuer as authorized in this
Section 10.4(a). Notwithstanding the foregoing, no advance shall
be made by the Debenture Issuer if a determination is reasonably
and promptly made (i) by the Regular Trustees by a majority vote
of a quorum of disinterested Regular Trustees, (ii) if such a
quorum is not obtainable, or, even if obtainable, if a quorum of
disinterested Regular Trustees so directs, by independent legal
counsel in a written opinion or (iii) by the Common Security
Holder of the Trust, that, based upon the facts known to the
Regular Trustees, counsel or the Common Security Holder at the
time such determination is made, such Company Indemnified Person
acted in bad faith or in a manner that such person did not
believe to be in or not opposed to the best interests of the
Trust, or, with respect to any criminal proceeding, that such
Company Indemnified Person believed or had reasonable cause to
believe his conduct was unlawful. In no event shall any advance
be made in instances where the Regular Trustees, independent
legal counsel or Common Security Holder reasonably determine that
such person deliberately breached his duty to the Trust or its
Common or Convertible Preferred Security Holders.
(5) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 10.4(a)
shall not be deemed exclusive of any other rights to which those
seeking indemnification and advancement of expenses may be
entitled under any agreement, vote of stockholders or
disinterested directors of the Debenture Issuer or Convertible
Preferred Security Holders of the Trust or otherwise, both as to
action in his official capacity and as to action in another
capacity while holding such office. All rights to indemnification
under this Section 10.4(a) shall be deemed to be provided by a
contract between the Debenture Issuer and each Company
Indemnified Person who serves in such capacity at any time while
this Section 10.4(a)
<PAGE>
is in effect. Any repeal or modification of this Section 10.4(a)
shall not affect any rights or obligations then existing.
(6) The Debenture Issuer or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company
Indemnified Person against any liability asserted against him and
incurred by him in any such capacity, or arising out of his
status as such, whether or not the Debenture Issuer would have
the power to indemnify him against such liability under the
provisions of this Section 10.4(a)
(7) For purposes of this Section 10.4(a), references to "the Trust"
shall include, in addition to the resulting or surviving entity,
any constituent entity (including any constituent of a
constituent) absorbed in a consolidation or merger, so that any
person who is or was a director, trustee, officer or employee of
such constituent entity, or is or was serving at the request of
such constituent entity as a director, trustee, officer, employee
or agent of another entity, shall stand in the same position
under the provisions of this Section 10.4(a) with respect to the
resulting or surviving entity as he would have with respect to
such constituent entity if its separate existence had continued.
(8) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 10.4(a) shall, unless otherwise
provided when authorized or ratified, continue as to a person who
has ceased to be a Company Indemnified Person and shall inure to
the benefit of the heirs, executors and administrators of such a
person.
(2) The Debenture Issuer agrees to indemnify the (i) Institutional Trustee,
(ii) the Delaware Trustee, (iii) any Affiliate of the Institutional Trustee and
the Delaware Trustee, and (iv) any officers, directors, shareholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Institutional Trustee and the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to
hold each Fiduciary Indemnified Person harmless against, any loss, liability or
expense incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration or the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against or investigating any claim or liability in
connection with the exercise or performance of any of its powers or duties
hereunder. The provisions of this Section 10.4(b) shall survive the satisfaction
and discharge of this Declaration or the resignation or removal of the
Institutional Trustee or the Delaware Trustee, as the case may be.
<PAGE>
SECTION 1.51. Outside Business.
Any Covered Person, the Sponsor, the Delaware Trustee and the Institutional
Trustee may engage in or possess an interest in other business ventures of any
nature or description, independently or with others, similar or dissimilar to
the business of the Trust, and the Trust and the Holders of Securities shall
have no rights by virtue of this Declaration in and to such independent ventures
or the income or profits derived therefrom, and the pursuit of any such venture,
even if competitive with the business of the Trust, shall not be deemed wrongful
or improper. No Covered Person, the Sponsor, the Delaware Trustee, or the
Institutional Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
shall have the right to take for its own account (individually or as a partner
or fiduciary) or to recommend to others any such particular investment or other
opportunity. Any Covered Person, the Delaware Trustee and the Institutional
Trustee may engage or be interested in any financial or other transaction with
the Sponsor or any Affiliate of the Sponsor, or may act as depositary for,
trustee or agent for, or act on any committee or body of holders of, securities
or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
ACCOUNTING
SECTION 1.52. Fiscal Year.
The fiscal year ("Fiscal Year") of the Trust shall be the same as the
fiscal year of the Sponsor.
SECTION 1.53. Certain Accounting Matters.
(1) At all times during the existence of the Trust, the Regular Trustees
shall keep, or cause to be kept, full books, records and supporting documents,
which shall reflect in detail each transaction of the Trust. The books of
account shall be maintained on the accrual method of accounting in compliance
with generally accepted accounting principles, consistently applied. The Trust
shall use the accrual method of accounting for United States federal income tax
purposes. The annual financial statements of the Trust shall be audited or the
Trust shall be included in the consolidated financial statements of the Sponsor
which shall be audited.
(2) The Sponsor shall cause to be prepared and delivered to each of the
Holders of Securities, (1) within 90 days after the end of each Fiscal Year of
the Sponsor, annual consolidated financial statements of the Sponsor, including
a consolidated balance sheet of the
<PAGE>
Sponsor as of the end of such Fiscal Year, and the related consolidated
statements of income or loss and (2) within 45 days after the end of each fiscal
quarter of Sponsor copies of the quarterly financial reports filed by the
Sponsor with the Commission.
(3) The Regular Trustees shall cause to be duly prepared and delivered to
each of the Holders of Securities, any annual United States federal income tax
information statement required by the Code, containing such information with
regard to the Securities held by each Holder as is required by the Code and the
Treasury Regulations. Notwithstanding any right under the Code to deliver any
such statement at a later date, the Regular Trustees shall use reasonable best
efforts to deliver all such statements within 90 days after the end of each
Fiscal Year of the Trust.
(4) The Regular Trustees shall cause to be duly prepared and timely filed
with the appropriate taxing authority an annual United States federal income tax
return, on a Form 1041 or such other form required by United States federal
income tax law, and any other annual income tax returns required to be filed by
the Regular Trustees on behalf of the Trust with any state or local taxing
authority.
(5) Within 90 days after each December 31, and within 45 days after each
March 31, June 30 and September 30, beginning with the June 30 following the
date of this Declaration, the Regular Trustees will provide the Holders of the
Securities with written certification, signed by either of them, stating whether
there have been any changes in the assets or liabilities of the Trust in excess
of $100,000 since the date hereof in the case of the first certification, or
since the most recent certification, in the case of each certification after the
first certification, and if so, setting forth each such change.
SECTION 1.54. Banking.
The Trust shall maintain one or more bank accounts in the name and for the
sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Debentures held by the Institutional Trustee shall be made
directly to the Institutional Trustee Account and no other funds of the Trust
shall be deposited in the Institutional Trustee Account. The sole signatories
for such accounts shall be designated by the Regular Trustees; provided,
however, that the Institutional Trustee shall designate the signatories for the
Institutional Trustee Account.
SECTION 1.55. Withholding.
The Trust and the Regular Trustees shall comply with all withholding
requirements under United States federal, state and local law. The Trust shall
request, and the Holders shall provide to the Trust, such forms or certificates
as are necessary to establish an exemption from withholding with respect to each
Holder, and any representations and forms as shall reasonably be requested by
the Trust to assist it in determining the extent of, and in fulfilling, its
<PAGE>
withholding obligations. The Regular Trustees shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Trust is required to
withhold and pay over any amounts to any authority with respect to distributions
or allocations to any Holder, the amount withheld shall be deemed to be a
distribution in the amount of the withholding to the Holder. If the amount
required to be withheld was not withheld from actual Distributions made, the
Trust may reduce subsequent Distributions by the amount of such withholding.
Furthermore, if withholding is imposed on payments of interest on the
Debentures, to the extent such withholding is attributable to ownership by a
specific Holder, the amount withheld shall be deemed a distribution in the
amount of the withholding to such specific Holder.
ARTICLE XII
AMENDMENTS AND MEETINGS
SECTION 1.56. Amendments.
Except as otherwise provided in this Declaration or by any applicable terms
of the Securities,
(1) this Declaration may only be amended by a written instrument approved
and executed by the Regular Trustees (or, if there are more than two Regular
Trustees, a majority of the Regular Trustees) and:
(1) if the amendment affects the rights, powers, duties, obligations
or immunities of the Institutional Trustee, also by the
Institutional Trustee; and
(2) if the amendment affects the rights, powers, duties, obligations
or immunities of the Delaware Trustee, also by the Delaware
Trustee;
(2) no amendment shall be made, and any such purported amendment shall be
void and ineffective:
(1) unless, in the case of any proposed amendment, the Institutional
Trustee shall have first received an Officers' Certificate from
each of the Trust and the Sponsor that such amendment is
permitted by, and conforms to, the terms of this Declaration
(including the terms of the Securities);
<PAGE>
(2) unless, in the case of any proposed amendment which affects the
rights, powers, duties, obligations or immunities of the
Institutional Trustee, the Institutional Trustee shall have first
received:
(1) an Officers' Certificate from each of the Trust and the
Sponsor that such amendment is permitted by, and conforms to, the
terms of this Declaration (including the terms of the
Securities); and
(2) an opinion of counsel (who may be counsel to the Sponsor
or the Trust) that such amendment is permitted by, and conforms
to, the terms of this Declaration (including the terms of the
Securities); and
(3) to the extent the result of such amendment would be to:
(1) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor
trust;
(2) reduce or otherwise adversely affect the powers of the
Institutional Trustee; or
(3) cause the Trust to be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(3) at such time and after the Trust has issued any securities that remain
outstanding, any amendment that would adversely affect the rights, privileges or
preferences of any Holder of Securities may be effected only with such
additional requirements as may be set forth in the terms of such Securities;
(4) Section 9.1(c) and this Section 12.1 shall not be amended without the
consent of all of the Holders of the Securities;
(5) Article IV shall not be amended without the consent of the Holders of a
Majority in liquidation amount of the Common Securities;
(6) the rights of the holders of the Common Securities under Article V to
appoint and remove Trustees shall not be amended without the consent of the
Holders of a Majority in liquidation amount of the Common Securities; and
<PAGE>
(7) notwithstanding Section 12.1(c), this Declaration may be amended from
time to time by the Holders of a Majority in liquidation amount of the Common
Securities and the Institutional Trustee, without the consent of the Holders of
the Convertible Preferred Securities to:
(1) cure any ambiguity, correct or supplement any provision in this
Declaration that may be inconsistent with any other provision, or
to make any other provisions with respect to matters or questions
arising under this Declaration, which shall not be inconsistent
with the other provisions of this Declaration; or
(2) to modify, eliminate or add to any provisions of this Declaration
to such extent as shall be necessary to ensure that the Trust
will be classified for United States federal income tax purposes
as a grantor trust at all times that any Securities are
outstanding or to ensure that the Trust will not be required to
register as an investment company under the Investment Company
Act;
provided, however, such action shall not adversely affect in any material
respect the interests of any Holder of Securities;
(8) this Declaration may be amended by the Holders of a Majority in
liquidation amount of the Common Securities and the Institutional Trustee if:
(1) the Holders of two-thirds in liquidation amount of the
Convertible Preferred Securities consent to such amendment, which
right to vote they shall only have in connection with an
amendment, alteration or repeal of the Declaration or any of the
terms of the Convertible Preferred Securities which would
materially and adversely affect any right, preference, privilege
or voting power of the Convertible Preferred Securities or the
Holders thereof, including without limitation any changes
whatsoever to the provisions set forth in Section 7.1 or Annex I
to the Declaration, and
(2) the Regular Trustees have received an opinion of nationally
recognized independent counsel experienced in such matters to the
effect that such amendment or the exercise of any power granted
to the Regular Trustees in accordance with such amendment will
not affect the Trust's status as a grantor trust for United
States federal income tax purposes or the Trust's exemption from
status as an "investment company" under the Investment Company
Act,
<PAGE>
provided, that without the consent of each Holder of Securities, this
Declaration may not be amended to:
(1) change the amount or timing of any distribution on the Securities
or otherwise adversely affect the amount of any distribution
required to be made in respect of the Securities as of a
specified date;
(2) restrict the right of a Holder of Securities to institute suit
for the enforcement of any such payment on or after such date; or
(3) change or add a provision that shall result in the realization of
unrelated business income for the Holders of Securities.
(9) Any amendments of this Declaration shall become effective when notice
thereof is given to Holders of Securities.
SECTION 1.57. Meetings of the Holders of Securities; Action by Written
Consent.
(1) Meetings of the Holders of any class of Securities may be called at any
time by the Regular Trustees (or as provided in the terms of the Securities) to
consider and act on any matter on which Holders of such class of Securities are
entitled to act under the terms of this Declaration, the terms of the Securities
or the rules of any stock exchange on which the Convertible Preferred Securities
are listed or admitted for trading. The Regular Trustees shall call a meeting of
the Holders of such class if directed to do so by the Holders of at least 25% in
liquidation amount of such class of Securities. Such direction shall be given by
delivering to the Regular Trustees one or more calls in a writing stating that
the signing Holders of Securities wish to call a meeting and indicating the
general or specific purpose for which the meeting is to be called. Any Holders
of Securities calling a meeting shall specify in writing the Security
Certificates held by the Holders of Securities exercising the right to call a
meeting and only those Securities specified shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(2) Except to the extent otherwise provided in the terms of the Securities,
the following provisions shall apply to meetings of Holders of Securities:
(1) notice of any such meeting shall be given to all the Holders of
Securities having a right to vote thereat at least 7 days and not
more than 60 days before the date of such meeting. Whenever a
vote, consent or approval of the Holders of Securities is
permitted
<PAGE>
or required under this Declaration or the rules of any stock
exchange on which the Convertible Preferred Securities are listed
or admitted for trading, such vote, consent or approval may be
given at a meeting of the Holders of Securities. Any action that
may be taken at a meeting of the Holders of Securities may be
taken without a meeting if a consent in writing setting forth the
action so taken is signed by the Holders of Securities owning not
less than the minimum amount of Securities in liquidation amount
that would be necessary to authorize or take such action at a
meeting at which all Holders of Securities having a right to vote
thereon were present and voting. Prompt notice of the taking of
action without a meeting shall be given to the Holders of
Securities entitled to vote who have not consented in writing.
The Regular Trustees may specify that any written ballot
submitted to Security Holders for the purpose of taking any
action without a meeting shall be returned to the Trust within
the time specified by the Regular Trustees; (1)
(2) each Holder of a Security may authorize any Person to act for it
by proxy on all matters in which a Holder of Securities is
entitled to participate, including waiving notice of any meeting,
or voting or participating at a meeting. No proxy shall be valid
after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Holder of Securities executing it. Except
as otherwise provided herein, all matters relating to the giving,
voting or validity of proxies shall be governed by the General
Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a
Delaware corporation and the Holders of the Securities were
stockholders of a Delaware corporation;
(3) each meeting of the Holders of the Securities shall be conducted
by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
(4) unless the Business Trust Act, this Declaration, the terms of the
Securities, the Trust Indenture Act or the listing rules of any
stock exchange on which the Convertible Preferred Securities are
then listed or trading otherwise provides, the Regular Trustees,
in their sole discretion, shall establish all other provisions
relating to meetings of Holders of Securities, including notice
of the time, place or purpose of any meeting at which any matter
is to be voted
<PAGE>
on by any Holders of Securities, waiver of any such notice,
action by consent without a meeting, the establishment of a
record date, quorum requirements, voting in person or by proxy or
any other matter with respect to the exercise of any such right
to vote.
ARTICLE XIII
REPRESENTATIONS OF SPONSOR, INSTITUTIONAL TRUSTEE AND
DELAWARE TRUSTEE
SECTION 1.58. Representations and Warranties of Institutional Trustee.
The Trustee that acts as initial Institutional Trustee represents and
warrants to the Trust and to the Sponsor at the date of this Declaration, and
each Successor Institutional Trustee represents and warrants, as applicable, to
the Trust and the Sponsor at the time of the Successor Institutional Trustee's
acceptance of its appointment as Institutional Trustee that:
(1) the Institutional Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing, with trust power
and authority to execute and deliver, and to carry out and perform its
obligations under the terms of, the Declaration;
(2) the execution, delivery and performance by the Institutional Trustee of
the Declaration has been duly authorized by all necessary corporate action on
the part of the Institutional Trustee. The Declaration has been duly executed
and delivered by the Institutional Trustee and constitutes a legal, valid and
binding obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(3) the execution, delivery and performance of the Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee; and
(4) no consent, approval or authorization of, or registration with or
notice to, any state or federal banking authority is required for the execution,
delivery or performance by the Institutional Trustee of the Declaration.
SECTION 1.59. Representations and Warranties of Delaware Trustee.
<PAGE>
The Trustee that acts as initial Delaware Trustee represents and warrants
to the Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee that:
(1) the Delaware Trustee is a Delaware corporation, duly organized, validly
existing and in good standing, with corporate power and authority to execute and
deliver, and to carry out and perform its obligations under the terms of, the
Declaration;
(2) the Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and the Declaration. The Declaration under
Delaware law constitutes a legal, valid and binding obligation of the Delaware
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of equity
and the discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law);
(3) no consent, approval or authorization of, or registration with or
notice to, any Delaware or federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee of the Declaration;
and
(4) the Delaware Trustee is a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal place
of business in the State of Delaware.
SECTION 1.60. Representations and Warranties of Sponsor.
The Sponsor represents and Warrants to the Trustees that:
(1) the Sponsor has been duly incorporated and is validly existing as a
corporation under the laws of the State of Maryland, with the trust power to
execute and deliver, and to carry out and perform its obligations under the
terms of, the Declaration; and
(2) the execution, delivery and performance by the Sponsor of the
Declaration has been duly authorized by all necessary trust action on the part
of the Sponsor. The Declaration has been duly executed and delivered by the
Sponsor, and it constitutes a legal, valid and binding obligation of the
Sponsor, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of equity
and the discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
ARTICLE XIV
<PAGE>
MISCELLANEOUS
SECTION 1.61. Notices.
All notices provided for in this Declaration shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by first class mail, as follows:
(1) if given to the Trust, in care of the Regular Trustees at the Trust's
mailing address set forth below (or such other address as the Trust may give
notice of to the Holders of the Securities):
WRP Convertible Trust I
c/o Wellsford Real Properties, Inc.
535 Madison Avenue, 26th Floor
New York, NY 10022
Attention: Jeffrey H. Lynford
(2) if given to the Delaware Trustee, at the mailing address set forth
below (or such other address as Delaware Trustee may give notice of to the
Holders of the Securities):
Wilmington Trust Company
1100 North Market Street
9th Floor
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
(3) if given to the Institutional Trustee, at its Corporate Trust Office's
mailing address set forth below (or such other address as the Institutional
Trustee may give notice of to the Holders of the Securities):
Wilmington Trust Company
1100 North Market Street
9th Floor
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
(4) if given to the Holder of the Common Securities, at the mailing address
of the Sponsor set forth below (or such other address as the Holder of the
Common Securities may give notice to the Trust):
<PAGE>
Wellsford Real Properties, Inc.
535 Madison Avenue, 26th Floor
New York, NY 10022
Attention: Jeffrey H. Lynford
(5) if given to any other Holder, at the address set forth on the books and
records of the Trust.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION 1.62. Governing Law.
This Declaration and the rights of the parties hereunder shall be governed
by and interpreted in accordance with the laws of the State of Delaware and all
rights and remedies shall be governed by such laws without regard to principles
of conflict of laws.
SECTION 1.63. Intention of the Parties.
It is the intention of the parties hereto that the Trust be classified for
United States federal income tax purposes as a grantor trust. The provisions of
this Declaration shall be interpreted to further this intention of the parties.
SECTION 1.64. Headings.
Headings contained in this Declaration are inserted for convenience of
reference only and do not affect the interpretation of this Declaration or any
provision hereof.
SECTION 1.65. Successors and Assign.
Whenever in this Declaration any of the parties hereto is named or referred
to, the successors and assigns of such party shall be deemed to be included, and
all covenants and agreements in this Declaration by the Sponsor and the Trustees
shall bind and inure to the benefit of their respective successors and assigns,
whether so expressed.
SECTION 1.66. Partial Enforceability.
If any provision of this Declaration, or the application of such provision
to any Person or circumstance, shall be held invalid, the remainder of this
Declaration, or the
<PAGE>
application of such provision to persons or circumstances other than those to
which it is held invalid, shall not be affected thereby.
SECTION 1.67. Counterparts.
This Declaration may be executed in one or more counterparts with the same
effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
SECTION XIV.8. Signature Guarantee. Notwithstanding the provisions of any
of the Annexes or Exhibits hereto, the signature of ERPOLP and any taxable REIT
subsidiary as defined in Code Section 856(l) of EQR which becomes the holder of
Preferred Securities need not be guaranteed.
SECTION 1.68. Acceptable Counsel. In each instance herein which states that
legal counsel needs to be acceptable to a party (or similar language to that
effect), the law firm of Robinson Silverman Pearce Aronsohn & Berman LLP shall
be deemed to be acceptable legal counsel.
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
/s/ Rodney F. Du Bois
-------------------------------------
Rodney F. Du Bois, as Regular Trustee
Solely as trustee and not in his individual capacity
/s/ James J. Burns
-------------------------------------
James J. Burns, as Regular Trustee
Solely as trustee and not in his individual capacity
WILMINGTON TRUST COMPANY, as
Delaware Trustee
By: /s/ Jennifer Matz
-------------------------------------
Name: Jennifer Matz
Title: Assistant Vice President
WILMINGTON TRUST COMPANY,
as Institutional Trustee
By: /s/ Jennifer Matz
-------------------------------------
Name: Jennifer Matz
Title: Assistant Vice President
WELLSFORD REAL PROPERTIES, INC., as Sponsor
By: /s/ Edward Lowenthal
-------------------------------------
Name: Edward Lowenthal
Title: President
<PAGE>
ANNEX I
TERMS OF
8.25% CONVERTIBLE TRUST PREFERRED SECURITIES
8.25% CONVERTIBLE TRUST COMMON SECURITIES
Pursuant to Section 7.1 of the Declaration of Trust, dated as of May 5,
2000 (as amended from time to time, the "Declaration"), of WRP Convertible Trust
I, the designation, rights, privileges, restrictions, preferences and other
terms and provisions of the Convertible Preferred Securities and the Common
Securities are set out below (each capitalized term used but not defined herein
has the meaning set forth in the Declaration):
1. Designation and Number.
(1) Convertible Preferred Securities. 1,000,000 Convertible Preferred
Securities of the Trust with an aggregate liquidation amount with respect to the
assets of the Trust of Twenty Five Fifty Million Dollars ($25,000,000) plus any
additional Convertible Preferred Securities issuable pursuant to Section 2(f)
hereof, and a liquidation amount with respect to the assets of $25 per
convertible preferred security, are hereby designated for the purposes of
identification only as "8.25% Convertible Trust Preferred Securities" (the
"Convertible Preferred Securities"). The Convertible Preferred Security
Certificates evidencing the Convertible Preferred Securities shall be
substantially in the form of Exhibit A-1 to the Declaration, with such letters,
numbers, notations, other means of identification or designation or other
changes or additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice and such legends or endorsements required by
law, stock exchange rule and agreements to which the Trust is subject, if any
(provided that any such notation, legend or endorsement is in a form acceptable
to the Trust).
(2) Common Securities. 31,000 Common Securities of the Trust with an
aggregate liquidation amount with respect to the assets of the Trust of $775,000
plus any additional Common Securities issuable pursuant to Section 2(f) hereof,
and a liquidation amount with respect to the assets of the Trust of $25 per
common security, are hereby designated for the purposes of identification only
as "8.25% Convertible Trust Common Securities" (the "Common Securities"). The
Common Securities Certificates evidencing the Common Securities shall be in the
form of Exhibit A-2 to the Declaration, with such letters, numbers, notations,
other means of identification or designation or other changes or additions
thereto or deletions therefrom as may be required by ordinary usage, custom or
practice and such legends or endorsements required by law, stock exchange rule
and agreements to which the Trust is subject, if any (provided that any such
notation, legend or endorsement is in a form acceptable to the Trust).
2. Distributions.
<PAGE>
(1) Distributions payable on each Security will be fixed at a rate per
annum of 8.25% ($2.0625 per annum or $0.515625 per quarter) of the stated
liquidation amount of $25 per Security from and including May 5, 2000 (the
"Issuance Date") to and including May 4, 2022 (such rate referred to as the
"Coupon Rate"), and such rate being the rate of interest payable on the
Debentures to be held by the Institutional Trustee. The term "Distributions" as
used herein includes such interest payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds available therefor. The amount of Distributions
payable for the initial Dividend Period (as defined in subparagraph (b) below)
and for any Dividend Period shorter than a full Dividend Period shall be
prorated and be computed on the basis of a 360-day year of twelve 30-day months.
(2) Distributions on the Securities will be cumulative, will accrue from
May 5, 2000 and will be payable in quarterly payments of $0.515625 per Security
in arrears, on the fifteenth day of January, April, July and October in each
year or if such date is not a Business Day the next succeeding Business Day
(each a "Distribution Payment Date"), commencing on July 17, 2000, except as
otherwise described below. Each quarterly period ending on a Distribution
Payment Date is hereinafter referred to as a "Dividend Period".
(3) Distributions on the Securities will be payable to the Holders thereof
as they appear on the books and records of the Trust on the relevant record
dates, which shall be fifteen days prior to the relevant payment dates, which
dates correspond to the record and interest payment dates on the Debentures. The
relevant record dates for the Common Securities shall be the same record dates
as for the Convertible Preferred Securities. Distributions payable on any
Securities that are not punctually paid on any Distribution Payment Date, as a
result of the Debenture Issuer having failed to make a payment under the
Debentures, will cease to be payable to the Person in whose name such Securities
are registered on the relevant record date, and such defaulted Distribution will
instead be payable to the Person in whose name such Securities are registered on
the special record date or other specified date determined in accordance with
the Indenture. If any date on which Distributions are payable on the Securities
is not a Business Day, then payment of the Distributions payable on such date
will be made on the next succeeding day that is a Business Day (and without any
interest or other payment in respect of any such delay) except that, if such
Business Day is in the next succeeding calendar year, such payment shall be made
on the immediately preceding Business Day, in each case with the same force and
effect as if made on such date.
(4) In the event of an election by the Holder to convert its Securities
through the Conversion Agent into Common Shares pursuant to the terms of the
Securities as set forth in this Annex I to the Declaration, no payment,
allowance or adjustment shall be made with respect to accumulated and unpaid
Distributions on such Securities, or be required to be made; provided, however,
that Holders of Securities at the close of business on any record date for the
payment of Distributions will be entitled to receive the Distributions payable
on such Securities on the
<PAGE>
corresponding payment date notwithstanding the conversion of such Securities
into Common Shares following such record date; provided, further that if the
date of any redemption of related Debentures falls between such record date and
such corresponding payment date, the amount of such Distribution shall include
accumulated and unpaid Distributions accrued to but excluding such date of
redemption and such payment shall be made to the converting holder.
(5) In the event that there is any money or other property held by or for
the Trust that is not accounted for hereunder, such property shall be
distributed Pro Rata (as defined herein) among the Holders of the Securities.
(6) The Sponsor may satisfy its obligation to pay interest on the
Debentures by issuing additional Debentures even if it has available cash with
which to pay such interest. In the event that the Sponsor satisfies its
obligation to pay interest on the Debentures by issuing additional Debentures,
then the Trust shall satisfy its obligation to pay distributions on the
Convertible Preferred Securities by issuing an equivalent amount of additional
Convertible Preferred Securities on a Pro Rata basis and shall satisfy the
obligation to pay distributions on the Common Securities by issuing an
equivalent amount of additional Common Securities on a pro rata basis.
Notwithstanding any other provision hereof, no fractional amount of Securities
shall be issued in connection with the payment of any distribution on the
Securities in additional Securities. Instead, any holder of outstanding
Securities who would otherwise be entitled to receive a fractional interest
arising upon the payment of a distribution in additional Convertible Preferred
Securities shall be paid an amount in cash equal to the $25 liquidation amount
of each Security times the fraction of a Security to which such holder would
otherwise be entitled.
3. Liquidation Distribution Upon Dissolution.
In accordance with the provisions of Section 8.1(a) of the Declaration, the
Debenture Issuer will have the right at any time to cause the Trust to be
dissolved with the result that, after satisfaction of creditors of the Trust,
Debentures having an aggregate principal amount equal to the aggregate stated
liquidation amount of the Convertible Preferred Securities, including any
Convertible Preferred Securities issued pursuant to Section 2(f) above, and the
Common Securities will be distributed on a Pro Rata basis to the Holders of the
Convertible Preferred Securities and the Common Securities in liquidation of
such Holders' interests in the Trust, within 90 days following notice given to
the Holders of the Convertible Preferred Securities, subject to the Regular
Trustees' receipt of an opinion of nationally recognized independent counsel
experienced in such matters in a form reasonably acceptable to the Holders to
the effect that the Holders will not recognize any income, gain or loss for
United States federal income tax purposes as a result of the dissolution of the
Trust and such distribution to Holders of Convertible Preferred Securities.
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the Trust (each a "Liquidation"), the Holders of
the Securities on the date of the
<PAGE>
Liquidation will be entitled to receive out of the assets of the Trust available
for distribution to Holders of Securities after satisfaction of liabilities of
creditors an amount equal to the aggregate of the stated liquidation amount of
$25.00 per Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such Liquidation, Debentures in an aggregate stated principal
amount equal to the aggregate stated liquidation amount of such Securities,
including the aggregate stated principal amount of any Securities issued
pursuant to Section 2(f) above, with an interest rate equal to the Coupon Rate
of, and bearing accrued and unpaid interest in an amount equal to the accrued
and unpaid Distributions on, such Securities, shall have been distributed on a
Pro Rata basis to the Holders of the Securities in exchange for such Securities.
If, upon any such Liquidation, the Liquidation Distribution can be paid
only in part because the Trust has insufficient assets available to pay in full
the aggregate Liquidation Distribution, then the amounts payable directly by the
Trust on the Securities shall be paid on a Pro Rata basis.
4. Redemption and Distribution.
(1) The Debentures will mature on May 4, 2022 and may be redeemed, in whole
or in part, by the Debenture Issuer, at its option, at any time on or after May
30, 2002, or, at its option, at any time in certain circumstances upon the
occurrence of a Tax Event (as defined below) or otherwise in accordance with
Sections 10.2(e)(1) or 10.2(e)(3) of the Indenture. Upon the repayment of the
Debentures in whole or in part, whether at maturity, upon redemption (either at
the option of the Debenture Issuer or pursuant to Sections 10.2(e)(1) or
10.2(e)(3) of the Indenture or a Tax Event as described below) or otherwise, in
accordance with the terms of the Indenture, the proceeds from such repayment or
payment shall be simultaneously applied to redeem Securities, including the
aggregate stated principal amount of any Securities issued pursuant to Section
2(f) above, having an aggregate liquidation amount equal to the aggregate
principal amount of the Debentures so repaid or redeemed, at a redemption price
per Security equal to the redemption price of the Debentures, together with
accrued and unpaid Distributions thereon to, but excluding, the date of the
redemption, payable in cash (the "Redemption Price"). Holders will be given not
less than 30 nor more than 60 days' notice of such redemption.
(2) If fewer than all the outstanding Securities are to be so redeemed, the
Common Securities and the Convertible Preferred Securities will be redeemed Pro
Rata and the Convertible Preferred Securities to be redeemed will be as
described in Section 4(f) below.
(3) If, at any time, a Tax Event or an Investment Company Event (each, as
defined below, a "Special Event") shall occur and be continuing, the Regular
Trustees may at their option, with the consent of the Debenture Issuer, except
in certain limited circumstances in relation to a Tax Event described in this
Section 4(c), dissolve the Trust and, after satisfaction of creditors, cause
Debentures held by the Institutional Trustee, having an aggregate principal
<PAGE>
amount equal to the aggregate stated liquidation amount, including the aggregate
stated principal amount of any Securities issued pursuant to Section 2(f) above,
of, with an interest rate identical to the Coupon Rate of, and accrued and
unpaid interest equal to accrued and unpaid Distributions on, and having the
same record date for payment as the Securities, to be distributed to the Holders
of the Securities in liquidation of such Holders' interests in the Trust on a
Pro Rata basis, within 90 days following the occurrence of such Special Event
(the "90 Day Period"); provided, however, that such dissolution and distribution
shall be conditioned on (i) the Regular Trustees' receipt of an opinion of
nationally recognized independent tax counsel experienced in such matters in a
form reasonably acceptable to the Holders (a "No Recognition Opinion"), which
opinion may rely on published revenue rulings of the Internal Revenue Service,
to the effect that the Holders of the Securities will not recognize any gain or
loss for United States federal income tax purposes as a result of the
dissolution of the Trust and the distribution of Debentures, (ii) in the case of
a Tax Event, the Debenture Issuer or the Trust being unable to avoid, within the
90 Day Period, the Tax Event by taking some ministerial action, such as filing a
form or making an election, or pursuing some other similar reasonable measure
that has no adverse effect on the Trust, the Debenture Issuer, the Sponsor or
the Holders of the Securities ("Ministerial Action"), and (iii) the Debenture
Issuer's prior written consent to such dissolution and distribution.
Furthermore, if (i) after receipt of a Dissolution Tax Opinion (as defined
hereinafter) by the Regular Trustees, the Debenture Issuer has received an
opinion of nationally recognized independent tax counsel experienced in such
matters in a form reasonably acceptable to the Holders that, as a result of a
Tax Event, there is more than an insubstantial risk that the Debenture Issuer
would be precluded from deducting the interest on the Debentures for United
States federal income tax purposes even after the Debentures were distributed to
the Holders of Securities in liquidation of such Holders' interests in the Trust
as described in this Section 4(c), or (ii) the Regular Trustees shall have been
informed by such tax counsel that it cannot deliver a No Recognition Opinion to
the Trust, the Debenture Issuer shall have the right, at its option, upon not
less than 30 nor more than 60 days' notice, to redeem the Debentures, in whole
or in part, at a redemption price equal to 100% of the principal amount thereof,
including the aggregate stated principal amount of any Debentures issued
pursuant to Section 2(f) above, plus accrued and unpaid interest thereon, for
cash within 90 days following the occurrence of such Tax Event. Following such
redemption, Securities with an aggregate liquidation amount equal to the
aggregate principal amount of the Debentures so redeemed shall be redeemed by
the Trust at the Redemption Price on a Pro Rata basis; provided, however, that,
if at the time there is available to the Debenture Issuer or the Trust the
opportunity to eliminate, within such 90 day period, the Tax Event by taking
some Ministerial Action, the Trust or the Debenture Issuer will pursue such
Ministerial Action in lieu of redemption.
"Tax Event" means that the Regular Trustees shall have received an opinion
of nationally recognized independent tax counsel experienced in such matters in
a form reasonably acceptable to the Holders (a "Dissolution Tax Opinion") to the
effect that on or after May 5,
<PAGE>
2000, as a result of (a) any amendment to, clarification of, or change
(including any announced prospective change) in the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein affecting taxation, (b) any judicial decision,
official administrative pronouncement, ruling, regulatory procedure, notice or
announcement, including any notice or announcement of intent to adopt such
procedures or regulations (an "Administrative Action") or (c) any amendment to,
clarification of, or change in the official position or the interpretation of
such Administrative Action or judicial decision that differs from the
theretofore generally accepted position, in each case, by any legislative body,
court, governmental authority or regulatory body, irrespective of the manner in
which such amendment, clarification, change or Administrative Action is made
known, which amendment, clarification, change or Administrative Action is
effective or such pronouncement or decision is announced, in each case, on or
after, May 5, 2000, there is the creation by such amendment, clarification,
change or Administrative Action of more than an insubstantial risk that (i) the
Trust is, or will be within 90 days of the date thereof, subject to United
States federal income tax with respect to income accrued or received on the
Debentures, (ii) the Trust is, or will be within 90 days of the date thereof,
subject to more than a de minimis amount of taxes (other than withholding
taxes), duties or other governmental charges, or (iii) interest paid in cash by
the Debenture Issuer to the Trust on the Debentures is not, or within 90 days of
the date thereof will not be, deductible, in whole or in part, by the Debenture
Issuer for United States federal income tax purposes. Notwithstanding the
foregoing, a Tax Event shall not include any change in tax law that requires the
Debenture Issuer for United States federal income tax purposes to defer taking a
deduction for any original issue discount ("OID") that accrues with respect to
the Debentures until the interest payment related to such OID is paid by the
Debenture Issuer in cash; provided, that such change in tax law does not create
more than an insubstantial risk that the Debenture Issuer will be prevented from
taking a deduction for OID accruing with respect to the Debentures at a date
that is no later than the date the interest payment related to such OID is
actually paid by the Debenture Issuer in cash.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of nationally recognized independent counsel experienced in
such matters in a form reasonably acceptable to the Holders to the effect that,
as a result of the occurrence of a change in law or regulation or a written
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority on or after May 5,
2000, there is more than an insubstantial risk that the Trust is or will be
considered an "investment company" that is required to be registered under the
Investment Company Act of 1940, as amended.
After the date fixed by the Regular Trustees for any distribution of
Debentures upon dissolution of the Trust: (i) the Securities will no longer be
deemed to be outstanding and (ii) certificates representing Securities held in
definitive form will be deemed to represent Debentures having an aggregate
principal amount equal to the aggregate stated liquidation amount of, with an
interest rate identical to the Coupon Rate of, and accrued and unpaid interest
<PAGE>
equal to accrued and unpaid Distributions on, such Securities until such
certificates are presented to the Debenture Issuer or its agent for transfer or
reissue.
(4) The Trust may not redeem fewer than all the outstanding Securities
unless all accrued and unpaid Distributions have been paid on all Securities for
all quarterly Distribution periods terminating on or prior to the date of
redemption.
(5) Notice of any redemption of, or notice of distribution of Debentures in
exchange for, the Securities (a "Redemption/Distribution Notice") will be given
by the Trust by mail to each Holder of Securities to be redeemed or exchanged
not fewer than 30 nor more than 90 days before the date fixed for redemption or
exchange thereof which, in the case of a redemption, will be the date fixed for
redemption of the Debentures. For purposes of the calculation of the date of
redemption or exchange and the dates on which notices are given pursuant to this
Section 4(e), a Redemption/Distribution Notice shall be deemed to be given on
the day such notice is first mailed by first-class mail, postage prepaid, or by
such other means suitable to assure delivery of such written notice, to Holders
of Securities. Each Redemption/Distribution Notice shall be addressed to the
Holders of Securities at the address of each such Holder appearing in the books
and records of the Trust. No defect in the Redemption/Distribution Notice or in
the mailing of either thereof with respect to any Holder of Securities shall
affect the validity of the redemption or exchange proceedings with respect to
any other Holder of Securities.
(6) (i) In the event that fewer than all the outstanding Securities are to
be redeemed, the Convertible Preferred Securities to be redeemed shall be
redeemed pro rata from each Holder of Convertible Preferred Securities;
provided, however, that no partial redemption of the Convertible Preferred
Securities may be effected if after giving effect thereto the aggregate
liquidation amount of the Convertible Preferred Securities outstanding is less
than $10,000,000. The Redemption Price for Convertible Preferred Securities
under this Section 4 shall be paid in cash; provided, however, that if (I) a
Holder of Convertible Preferred Securities desires to convert any of its
Convertible Preferred Securities called for redemption into Common Shares
(effectively by converting such Holder's share of the related Convertible
Debentures into Common Shares in accordance with the terms of the Indenture and
this Declaration) but such conversion would cause any direct or indirect holder
of Convertible Preferred Securities which is classified as a real estate
investment trust (a "REIT") under Section 856 of the Code to: (A) own more than
5% of the total outstanding voting securities of the Sponsor, (B) own more than
5% of the value of the total outstanding securities of the Sponsor, (C) violate
Code Section 856(c)(4)(B), or (D) otherwise to lose its status as a REIT under
the Code (such Convertible Preferred Securities which upon conversion into
Common Shares would result in a REIT owning Common Shares in a manner described
in any of subclauses (A), (B), (C) or (D) of this Section 4(f)(i)(I) are
referred to herein as the "Unconvertible Shares"), and (II) such REIT has
delivered to the Sponsor, prior to the date on which the Sponsor would otherwise
have redeemed the Convertible Preferred Securities (the "Redemption Date"), a
written notice signed by each Holder
<PAGE>
who desires to convert any of such Holder's Convertible Preferred Securities
into Common Shares in accordance with the terms of the Indenture and the
Declaration which written notice sets forth both the number of Convertible
Preferred Securities that each such Holder desires to convert and the number of
such Convertible Preferred Securities of such Holder which constitute
Unconvertible Shares; then the Trust shall: (X) cause the Convertible Preferred
Securities which the Holders thereof desire to convert (other than such Holder's
Unconvertible Shares) to be converted into Common Shares in accordance with the
terms of the Indenture and the Declaration, (Y) pay each Holder of Convertible
Preferred Securities so converted in subsection (X) above and each Holder of
Unconvertible Shares an amount of cash equal to the accrued and unpaid
Distributions on such Holder's Convertible Preferred Securities so converted and
such Holder's Unconvertible Shares and (Z) pay each Holder of Unconvertible
Shares an amount of cash equal to the product of (m) the Closing Price of a
Common Share on the trading date immediately prior to the Redemption Date
multiplied by (n) the maximum number of Common Shares into which the
Unconvertible Shares held by such Holder could have been converted in accordance
with the terms of the Indenture and this Declaration on the trading date
immediately prior to the Redemption Date. For purposes of clause (I) of this
Section 4(f)(i), a REIT shall be considered to own directly each of the
securities of the Sponsor that are owned by such REIT directly or indirectly.
The Sponsor shall reasonably and timely cooperate in furnishing the information
necessary to apply the provisions of this Section 4(f)(i) to a Holder of
Convertible Preferred Securities who requests such information in writing.
(ii) If mutually agreed on or after January 1, 2001, by the Company and a
Holder of Convertible Preferred Securities otherwise subject to Section 4(f)(i),
a conversion of the Convertible Debentures having a principal amount equal to
the liquidation amount of the Convertible Preferred Securities held by such
Holder (and such Holder's related Convertible Preferred Securities) into WRP
Common Shares shall occur without regard to Section 4(f)(i) provided the Sponsor
(or any successor thereto) receives an opinion of counsel in a form reasonably
acceptable to the Holders that the Sponsor (or any successor thereto) qualifies
either as a REIT under Code Section 856(a) or as a taxable REIT subsidiary under
Section 856(l) of the Code.
(iii) Provisions similar to those in Sections (f)(i) and (ii) above shall
also apply to Holders of the Common Securities.
(7) If Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued for a redemption
if the Debentures are redeemed as set out in Article X of the Indenture (which
notice will be irrevocable), then, provided that the Debenture Issuer has paid
the Institutional Trustee a sufficient amount of cash in connection with the
related redemption of the Debentures, the Institutional Trustee will pay the
relevant Redemption Price to the Holders of such Securities by check mailed to
the address of the relevant Holder appearing on the books and records of the
Trust on the redemption date. If a Redemption/Distribution Notice shall have
been given in
<PAGE>
connection with a redemption and funds deposited as required, then from and
after the required date of such deposit, distributions will cease to accrue on
the Securities so called for redemption and all rights of the Holders of such
Securities so called for redemption will cease, except the right of the Holders
of such Securities to receive the Redemption Price but without interest on such
Redemption Price. If any date fixed for redemption of Securities is not a
Business Day, then payment of the Redemption Price payable on such date will be
made on the next succeeding Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls in
the next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption Price in respect of any
Securities is improperly withheld or refused and not paid either by the
Institutional Trustee or by the Sponsor as guarantor pursuant to the relevant
Securities Guarantee, Distributions on such Securities will continue to accrue
from the original redemption date to the actual date of payment, in which case
the actual payment date will be considered the date fixed for redemption for
purposes of calculating the Redemption Price.
Neither the Regular Trustees nor the Trust shall be required (i) in the
event of any redemption in part, to issue, register the transfer of or exchange
any Securities during a period beginning at the opening of business 15 days
before any selection for redemption of Securities and ending at the close of
business on the earliest date in which the relevant Redemption/Distribution
Notice is deemed to have been given to all holders of Securities to be so
redeemed or (ii) to register the transfer of or exchange any Securities selected
for redemption, in whole or in part, except for the unredeemed portion of any
Securities being redeemed in part.
(8) Redemption/Distribution Notices shall be sent by the Regular Trustees
on behalf of the Trust to (i) in respect of Convertible Preferred Securities, to
the Holders thereof, and (ii) in respect of the Common Securities, to the
Holders thereof.
(9) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Sponsor or any of its
subsidiaries may at any time and from time to time purchase outstanding
Convertible Securities by tender, in the open market or otherwise.
(10) Required Redemption. Upon the occurrence of an Event of Default, as
hereinafter defined, or on and after May 30, 2012, whichever comes first, the
Holder of any Securities may, at its option, upon written notice to the Trust
cause the Trust to redeem at any time all of the Securities, including
Securities issued pursuant to Section 2(f) hereof, held by such Holder at the
Redemption Price, payable in cash, together with all accrued and unpaid
dividends to and including the Redemption Date. Solely for purposes of this
Section 4(j), an "Event of Default" shall mean (a) the non-payment of any
dividend either in cash or by the issuance of additional Convertible Preferred
Securities pursuant to Section 2(f) hereof on the Distribution Payment Date
applicable to such dividend for three (3) Dividend Periods which
<PAGE>
need not be consecutive; or (b) the failure to comply with any material term,
condition or obligation or failure to provide any material right under the terms
of the Securities. Notwithstanding the provisions of this subsection (j),
provided an Event of Default has not occurred, the Regular Trustees shall have
the right to extend the date during which a required redemption is not permitted
under this subsection (j) for two separate additional five (5) year periods if
the Coupon Rate on the Securities is changed to the then market rate of
preferred stock comparable to the Convertible Preferred Securities (the "Market
Rate") on the first day of each such additional five year period; provided,
however, in no event shall the Coupon Rate be reduced. 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 a Majority in
liquidation amount of the Securities and the Regular Trustees. In the event the
Holders of a Majority in liquidation amount of the Securities and the Regular
Trustees 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) Holders of a Majority in liquidation amount of the Preferred Securities then
outstanding shall choose an investment banking firm of nationally recognized
status and the Regular Trustees shall choose an investment banking firm of
nationally recognized status; (ii) the investment banking firms chosen by the
Holders of a Majority in liquidation amount of the Securities then outstanding
and the Regular Trustees 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 a Majority in liquidation amount of
the Securities and the Regular Trustees 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 Securities and fifty percent (50%)
by the Trust.
(11) Procedures for Required Redemption
(i) Notice of any required redemption shall be mailed by the Holder of the
Securities requesting redemption, postage prepaid, not less than 30 nor more
than 90 days prior to the Redemption Date, addressed to the Trust. Such notice
shall state the Redemption Date and the number of the Securities to be redeemed.
The Regular Trustees shall promptly deliver a copy of any redemption notice
received from Holders of Securities to the Sponsor.
(ii) Upon surrender, in accordance with said notice, of the certificates
for any Securities so redeemed, such Securities shall be redeemed by the Trust
at the Redemption Price.
(iii) If the Redemption Date is after a Record Date and before the related
quarterly Distribution Payment Date, the distribution payable on such quarterly
Distribution Payment Date shall be paid to the holder in whose name the
Securities to be redeemed are registered at the close of business on such record
date notwithstanding the
<PAGE>
redemption thereof between such relevant record date and the related quarterly
Distribution Payment Date or the Trust's default in the payment of the
distribution due.
(12) The Securities redeemed, pursuant to the provisions of this Section 6
or surrendered to the Trust upon conversion shall thereupon be retired and may
not be reissued as Securities but shall thereafter have the status of authorized
but unissued Securities of the Trust.
(13) Notwithstanding anything in this Annex I to the Declaration to the
contrary:
(i) If (A) the Sponsor enters into an agreement for a business combination
with another entity, whether by merger or other reorganization, and the
resulting or surviving entity (the "Survivor") wants to either (i) revoke a
prior election to be a taxable REIT subsidiary ("TRS") under Section 856(1) of
the Code, or (ii) desires to not become a TRS or a REIT in the future, and (B)
following such business combination, on an as converted pro forma basis (without
duplication), the aggregate outstanding Convertible Preferred Securities,
Debentures held in exchange for Convertible Preferred Securities, and Common
Shares held by reason of converting any of the foregoing held by any REIT have
an aggregate vote or value in excess of 5% of the total voting power or total
value of the outstanding securities of the Survivor, then the Sponsor shall give
written notice of the foregoing (at least 45 days prior to consummating such
business combination) to each Holder of Convertible Preferred Securities. If
within thirty (30) days after receipt of such notice, such Holder fails to (i)
notify the Sponsor in writing of its desire to not have the Convertible
Preferred Securities redeemed, (ii) furnish to the Sponsor its written consent
and election to revoke any prior TRS election jointly made by the Sponsor (or
any successor) and any direct or indirect Holder that is a REIT, and (iii) waive
in writing any future obligation of the Sponsor (or any successor) to become a
TRS or a REIT, then, immediately prior to and in connection with the
consummation of the business combination described in subsection (m)(i)(A)
above, the Company shall redeem all of the Unconvertible Shares (as determined
by such Holder pursuant to Section 4(f)(i)(II) above) held by such direct or
indirect Holder that is a REIT and its Affiliates (including prior to May 30,
2002) in the manner and in the amounts provided in Sections 4(f)(i)(II)(Y) and
(Z) of this Annex I to the Declaration; provided however, if the amount of
payment calculated in accordance with Section 4(f)(i)(II)(Z) above with respect
to the Unconvertible Shares is less than the Redemption Price (for purposes of
this calculation only, less accrued and unpaid Distributions) with respect to
the Unconvertible Shares, in lieu of paying such amount calculated in accordance
with Section 4(f)(i)(II(Z), the Sponsor shall pay the Redemption Price (for
purposes of this calculation only, less accrued and unpaid Distributions) with
respect to the Unconvertible Shares. Upon consummation of the foregoing, any and
all obligations of the Sponsor to become or remain a TRS or a REIT or to deliver
opinions to that effect shall be terminated. All other Convertible Preferred
Securities shall remain outstanding unless the liquidation amount of such
outstanding Convertible Preferred Securities is less than $10,000,000, in which
event the Company shall redeem for cash all of such Convertible Preferred
Securities in accordance with Section 4(a) above. For purposes of calculating
the 5% limitation described above, the Sponsor shall reasonably and timely
cooperate
<PAGE>
in furnishing relevant information to a Preferred Holder that requests such
information in writing. For purposes of this Section 4(m) a direct or indirect
holder of Convertible Preferred Securities that is a REIT shall be considered to
hold directly all securities it owns directly and indirectly.
(ii) If the events described in subsection (m)(i) above have occurred, the
Sponsor gives written notice thereof to each Holder of Convertible Preferred
Securities, and the pro forma computation described in subsection (m)(i)(B)
results in a Holder otherwise subject to Section 4(f)(i) and its Affiliates
owing 5% or less of both the total voting power (on an as converted basis) or
total value of the outstanding securities of the Sponsor, then the Convertible
Debentures need not be redeemed and any and all obligations of the Sponsor to
become or remain a TRS or a REIT or to deliver opinions to that effect shall
terminated.
(iii) If the Sponsor desires to take any action that would violate the
terms of Section 5.1(h), (i) or (j) of the Indenture, then the Sponsor can take
such action provided the Sponsor redeems all outstanding Common Securities,
Debentures, Convertible Preferred Securities and any Common Shares acquired in
conversion thereof, by paying to the respective holders thereof in cash an
amount equal to (i) the Closing Price on the trading date immediately prior to
the Redemption Date of each such Common Share acquired in the aforementioned
conversion, and (ii) with respect to outstanding Debentures, Common Securities
and Convertible Preferred Securities the greater of, without duplication (x) the
Optional Redemption Price (as defined in the Indenture) for all outstanding
Debentures (together with any required interest payment under Section 10.2(a) of
the Indenture) plus the Redemption Price for the Common Securities and
Convertible Preferred Securities and (y) the Closing Price of the Common Shares
into which such Debentures, Common Securities and Convertible Preferred
Securities, without duplication, are convertible on the trading date immediately
prior to the Redemption Date.
5. Conversion Rights.
The Holders of Securities shall have the right at any time through the
close of business on the last Business Day prior to the Maturity Date (as
defined in the Indenture) (or, in the case of Securities called for redemption,
prior to the close of business on the Business Day prior to the Redemption
Date), at their option, to cause the Conversion Agent to convert Securities, on
behalf of the converting Holders, into Common Shares in the manner described
herein on and subject to the following terms and conditions:
(1) The Securities will be convertible at the office of the Conversion
Agent into fully paid and nonassessable Common Shares pursuant to the Holder's
direction to the Conversion Agent to exchange such Securities for a portion of
the Debentures theretofore held by the Trust on the basis of one Security per
$25.00 principal amount of Debentures, and immediately convert such amount of
Debentures into fully paid and nonassessable Common Shares at an initial rate of
2.2474 Common Shares per $25.00 principal amount of Debentures (which is
equivalent to a conversion price of $11.124 per Common Share, subject to certain
<PAGE>
adjustments set forth in Article XI of the Indenture. The Institutional Trustee
shall send to each Holder of a Security a copy of any notice sent to Holders of
Convertible Debentures which it receives on behalf of the Trust pursuant to
Section 11.3 of the Indenture.
(2) In order to convert Securities into Common Shares, the Holder shall
submit to the Conversion Agent at its office an irrevocable request to convert
Securities on behalf of such Holder (the "Conversion Request"), together with
the certificates representing such Securities. The Conversion Request shall (i)
set forth the number of Securities to be converted and the name or names, if
other than the Holder, in which the Common Shares should be issued and (ii)
direct the Conversion Agent (a) to exchange such Securities for a portion of the
Debentures held by the Trust (at the rate of exchange specified in the preceding
paragraph) and (b) to immediately convert such Debentures on behalf of such
Holder, into Common Shares (at the conversion rate specified in the preceding
paragraph). The Conversion Agent shall notify the Trust of the Holder's election
to exchange Securities for a portion of the Debentures held by the Trust and the
Trust shall, upon receipt of such notice, deliver to the Conversion Agent the
appropriate principal amount of Debentures for exchange in accordance with this
Section. The Conversion Agent shall thereupon notify the Sponsor of the Holder's
election to convert such Debentures into Common Shares. Holders of Securities at
the close of business on a Distribution record date will be entitled to receive
the Distribution payable on such securities on the corresponding Distribution
Payment Date notwithstanding the conversion of such Securities following such
record date but prior to such Distribution Payment Date; provided, however, that
if the date of any redemption of the related Debentures falls between such
record date and the related Distribution Payment Date, the amount of such
Distribution shall include accumulated and unpaid Distributions accrued to but
excluding such date of redemption, and such payment shall be made to the
converting Holder. Except as provided above, neither the Trust nor the Sponsor
will make, or be required to make, any payment, allowance or adjustment upon any
conversion on account of any accumulated and unpaid Distributions accrued on the
Securities (including any Additional Amounts accrued thereon) surrendered for
conversion, or on account of any accumulated and unpaid dividends on the Common
Shares issued upon such conversion, except to the extent that such shares are
held of record on the record date for any such distributions. Securities shall
be deemed to have been converted immediately prior to the close of business on
the day on which a Notice of Conversion relating to such Securities is received
by the Trust in accordance with the foregoing provision (the "Conversion Date").
The Person or Persons entitled to receive Common Shares issuable upon conversion
of the Debentures shall be treated for all purposes as the record holder or
holders of such Common Shares at such time. As promptly as practicable on or
after the Conversion Date, the Sponsor shall issue and deliver at the office of
the Conversion Agent a certificate or certificates for the number of full Common
Shares issuable upon such conversion, together with the cash payment, if any, in
lieu of any fraction of any share to the Person or Persons entitled to receive
the same, unless otherwise directed by the Holder in the notice of conversion
and the Conversion Agent shall distribute such certificate or certificates to
such Person or Persons.
<PAGE>
(3) Each Holder of a Security by his acceptance thereof appoints Wilmington
Trust Company as "Conversion Agent" for the purpose of effecting the conversion
of Securities in accordance with this Section. In effecting the conversion and
transactions described in this Section, the Conversion Agent shall be acting as
agent of the Holders of Securities directing it to effect such conversion
transactions. The Conversion Agent is hereby authorized (i) to exchange
Securities from time to time for Debentures held by the Trust in connection with
the conversion of such Securities in accordance with this Section and (ii) to
convert all or a portion of the Debentures into Common Shares and thereupon to
deliver such Common Shares in accordance with the provisions of this Section and
to deliver to the Trust a new Debenture or Debentures for any resulting
unconverted principal amount.
(4) No fractional Common Shares will be issued as a result of conversion of
Securities, but in lieu thereof such fractional interest will be paid in cash by
Sponsor, in an amount based on the Closing Price of the Common Shares on the
date such Securities are surrendered for conversion, to the Conversion Agent,
which in turn will make such payment to the Holder or Holders of Securities so
converted.
(5) Sponsor shall at all times reserve and keep available out of its
authorized and unissued Common Shares, solely for issuance upon the conversion
of the Debentures, free from any preemptive or other similar rights, such number
of Common Shares as shall from time to time be issuable upon the conversion of
all the Debentures then outstanding. Notwithstanding the foregoing, Sponsor
shall be entitled to deliver upon conversion of Debentures, Common Shares
reacquired and held in the treasury of Sponsor (in lieu of the issuance of
authorized and unissued Common Shares), so long as any such treasury shares are
free and clear of all liens, charges, security interests or encumbrances. Any
Common Shares issued upon conversion of the Debentures shall be duly authorized,
validly issued and fully paid and nonassessable. The Trust shall deliver the
Common Shares received upon conversion of the Debentures to the converting
Holder free and clear of all liens, charges, security interests and
encumbrances, except for United States withholding taxes. Each of Sponsor and
the Trust shall prepare and shall use its best efforts to obtain and keep in
force such governmental or regulatory permits or other authorizations as may be
required by law, and shall comply with all applicable requirements as to
registration or qualification of Common Shares (and all requirements to list
Common Shares issuable upon conversion of Debentures that are at the time
applicable), in order to enable Sponsor to lawfully issue Common Shares to the
Trust upon conversion of the Debentures and the Trust to lawfully deliver Common
Shares to each Holder upon conversion of the Securities.
(6) Sponsor will pay any and all taxes (other than income taxes) that may
be payable in respect of the issue or delivery of Common Shares on conversion of
Debentures and the delivery of the Common Shares by the Trust upon conversion of
the Securities. Sponsor shall not, however, be required to pay any tax which may
be payable in respect of any transfer involved in the issue and delivery of
Common Shares in a name other than that in which the Securities so converted
were registered, and no such issue or delivery shall be made unless and
<PAGE>
until the person requesting such issue has paid to the Trust the amount of any
such tax, or has established to the satisfaction of the Trust that such tax has
been paid.
(7) Nothing in the preceding Paragraph (f) shall limit the requirement of
the Trust to withhold taxes pursuant to the terms of the Securities or as set
forth in this Annex I to the Declaration or to the Declaration itself or
otherwise require the Institutional Trustee or the Trust to pay any amounts on
account of such withholdings.
(8) The term "Closing Price" with respect to any security on any day means
the last reported sale price, regular way on such day, or, if no sale takes
place on such day, the average of the reported closing bid and asked prices on
such day, regular way, in either case as reported on the American Stock
Exchange, or, if such security is not listed or admitted to trading on the
American Stock Exchange, on the principal national securities exchange on which
such security is listed or admitted to trading, or, if such security is not
listed or admitted to trading on a national securities exchange, on the National
Market System of the National Association of Securities Dealers, Inc., or, if
such security is not quoted or admitted to trading on such quotation system, on
the principal quotation system on which such security is listed or admitted to
trading or quoted, or, if not listed or admitted to trading or quoted on any
national securities exchange or quotation system, the average of the closing bid
and asked prices of such security in the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if not so available in such manner, as
furnished by any American Stock Exchange member firm selected from time to time
by the Board of Directors (or any committee duly authorized by the Board of
Directors) of the Debenture Issuer for that purpose or, if not so available in
such manner, as otherwise determined in good faith by the Board of Directors (or
any committee duly authorized by the Board of Directors) of the Debenture
Issuer.
6. Voting and Other Rights - Convertible Preferred Securities.
(1) Except as provided under Sections 6(b) and 8 of this Annex I to the
Declaration and as otherwise required by law and the Declaration, the Holders of
the Convertible Preferred Securities will not have voting rights, provided
however, that notwithstanding Section 6(b) and 8 of this Annex I to the
Declaration, the Holders of Convertible Preferred Securities shall not have any
voting rights to the extent such rights will cause any holder of Convertible
Preferred Securities to own more than 9.9% of the outstanding voting stock of
the Trust or otherwise cause any direct or indirect holder of Convertible
Preferred Securities that is classified as a real estate investment trust under
Section 856 of the Internal Revenue Code of 1986, as amended, to lose its status
as a real estate investment trust under said Code. Wherever in the Declaration,
including, this Annex I thereto, or the Indenture Debentures Securities
Guarantees or Securities Purchase Agreement the vote of the Holders of
Convertible Preferred Securities is required and as a result of the application
of this Section 6(a) of all of such Convertible Preferred Securities shall not
be able to vote, then notwithstanding anything to the contrary set forth in the
<PAGE>
foregoing documents the applicable percentage of Convertible Preferred
Securities whose vote is needed shall be the applicable percentage of those
Convertible Preferred Securities which shall have the right to vote after any
reduction in voting rights pursuant to Section 6(a).
(2) Subject to the requirements set forth in this paragraph, the Holders of
a Majority in liquidation amount of the Securities then outstanding, voting
separately as a class, may direct the time, method, and place of conducting any
proceeding for any remedy available to the Institutional Trustee, or may direct
the exercise of any trust or power conferred upon the Institutional Trustee
under the Declaration, including the right to direct the Institutional Trustee,
as holder of the Debentures, to (i) exercise the remedies available under the
Indenture with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 5.9 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable, provided, however, that if an Event of
Default under the Indenture has occurred and is continuing then the holders of
25% of the aggregate liquidation amount of the Convertible Preferred Securities
then outstanding may direct the Institutional Trustee to declare the principal
of and interest on the Debentures immediately due and payable; and provided,
further, that, where a consent under the Indenture would require the consent or
act of the Holders of greater than a majority of the Holders in principal amount
of Debentures then outstanding (a "Super Majority") affected thereby, the
Institutional Trustee may only give such consent or take such action at the
written direction of the Holders of at least the proportion in liquidation
amount of the Convertible Preferred Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures then outstanding.
The Institutional Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Convertible Preferred Securities. Other
than with respect to directing the time, method and place of conducting any
remedy available to the Institutional Trustee as set forth above, the
Institutional Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this paragraph unless the
Institutional Trustee has obtained an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust as a result of such action. If the Institutional
Trustee fails to enforce its rights under the Debentures, any Holder of
Securities may institute a legal proceeding against any person to enforce the
Institutional Trustee's rights under the Debentures. If an Event of Default
under the Declaration has occurred and is continuing and such event is
attributable to the failure of the Debenture Issuer to pay interest or principal
on the Debentures on the date such interest or principal is otherwise payable
(or in the case of redemption, on the Redemption Date), then a Holder of
Convertible Preferred Securities may directly institute a proceeding for
enforcement of payment to such Holder of the principal of or interest on the
Debentures having a principal amount equal to the aggregate liquidation amount
of the Convertible Preferred Securities of such Holder (a "Direct Action") on or
after the respective due date specified in the Debentures. In connection with
such Direct Action, the rights of the Holders of Common Securities will be
subrogated to the rights of such Holder of Convertible Preferred Securities to
the extent of any payment made by the Issuer to such Holder of Convertible
Preferred Securities
<PAGE>
in such Direct Action. Except as provided in the preceding sentences, the
Holders of Convertible Preferred Securities will not be able to exercise
directly any other remedy available to the holders of the Debentures.
Any approval or direction of Holders of Convertible Preferred Securities
may be given at a separate meeting of Holders of Convertible Preferred
Securities convened for such purpose, at a meeting of all of the Holders of
Securities in the Trust or pursuant to written consent. The Regular Trustees
will cause a notice of any meeting at which Holders of Convertible Preferred
Securities are entitled to vote, or of any matter upon which action by written
consent of such Holders is to be taken, to be mailed to each Holder of record of
Convertible Preferred Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Convertible Preferred Securities
will be required for the Trust to redeem and cancel Convertible Preferred
Securities or to distribute the Debentures in accordance with the Declaration
and the terms of the Securities.
Notwithstanding that Holders of Convertible Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Convertible Preferred Securities that are owned by the Sponsor or any
Affiliate of the Sponsor shall not be entitled to vote or consent and shall, for
purposes of such vote or consent, be treated as if they were not outstanding.
7. Voting Rights - Common Securities.
(1) Except as provided under Sections 7(b), 7(c) and 8 of this Annex I of
the Declaration and as otherwise required by law and the Declaration, the
Holders of the Common Securities will not have voting rights.
(2) The Holders of the Common Securities are entitled, in accordance with
Article V of the Declaration, to vote to appoint, remove or replace any Trustee
or to increase or decrease the number of Trustees.
(3) Subject to Section 2.6 of the Declaration and only after any Event of
Default with respect to the Convertible Preferred Securities has been cured,
waived, or otherwise eliminated and subject to the requirements of the second to
last sentence of this paragraph, the Holders of a Majority in liquidation amount
of the Common Securities, voting separately as a class, may direct the time,
method, and place of conducting any proceeding for any remedy available to the
Institutional Trustee, or exercising any trust or power conferred upon the
<PAGE>
Institutional Trustee under the Declaration, including (i) directing the time,
method, place of conducting any proceeding for any remedy available to the
Debenture Trustee, or exercising any trust or power conferred on the Debenture
Trustee with respect to the Debentures, (ii) waive any past default and its
consequences that is waivable under Section 5.9 of the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Debentures shall be due and payable, provided that, where a consent or
action under the Indenture would require the consent or act of the relevant
Super Majority, the Institutional Trustee may only give such consent or take
such action at the written direction of the Holders of at least the proportion
in liquidation amount of the Common Securities which the relevant Super Majority
represents of the aggregate principal amount of the Debentures outstanding. The
Institutional Trustee shall not revoke any action previously authorized or
approved by a vote of the Holders of the Convertible Preferred Securities. Other
than with respect to directing the time, method and place of conducting any
remedy available to the Institutional Trustee or the Debenture Trustee as set
forth above, the Institutional Trustee shall not take any action in accordance
with the directions of the Holders of the Common Securities under this paragraph
unless the Institutional Trustee has obtained an opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that for the purposes of United States federal income tax the Trust will not be
classified as other than a grantor trust on account of such action. If the
Institutional Trustee fails to enforce its rights under the Declaration, any
Holder of Common Securities may institute a legal proceeding directly against
any Person to enforce the Institutional Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Institutional Trustee
or any other Person.
Any approval or direction of Holders of Common Securities may be given at a
separate meeting of Holders of Common Securities convened for such purpose, at a
meeting of all of the Holders of Securities in the Trust or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or of any matter upon which
action by written consent of such Holders is to be taken, to be mailed to each
Holder of record of Common Securities. Each such notice will include a statement
setting forth (i) the date of such meeting or the date by which such action is
to be taken, (ii) a description of any resolution proposed for adoption at such
meeting on which such Holders are entitled to vote or of such matter upon which
written consent is sought and (iii) instructions for the delivery of proxies or
consents.
No vote or consent of the Holders of the Common Securities will be required
for the Trust to redeem and cancel Common Securities or to distribute the
Debentures in accordance with the Declaration and the terms of the Securities.
8. Amendments to Declaration and Indenture.
(1) In addition to any requirements under Section 12.1 of the Declaration,
if any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose
<PAGE>
to effect, (i) any action that would materially adversely affect the powers,
preferences or special rights of the Securities, including, without limitation,
increasing the number of authorized and outstanding Securities (other than
pursuant to Section 2(f) above or as a result of the issuance of additional
Securities pursuant to the terms of the Securities Guarantees) or creating
additional classes of securities of the Trust, whether by way of amendment to
the Declaration or otherwise, or (ii) the dissolution, winding-up or termination
of the Trust, other than as described in Section 8.1 of the Declaration, then
the Holders of outstanding Securities voting together as a single class, will be
entitled to vote on such amendment or proposal (but not on any other amendment
or proposal) and such amendment or proposal shall not be effective except with
the approval of the Holders of at least a Majority in liquidation amount of the
Securities then outstanding affected thereby; provided, however, if any
amendment or proposal referred to in clause (i) above would adversely affect
only the Convertible Preferred Securities or only the Common Securities, then
only the affected class will be entitled to vote on such amendment or proposal
and such amendment or proposal shall not be effective except with the approval
of a Majority in liquidation amount of such class of Securities then
outstanding.
(2) In the event the consent of the Institutional Trustee as the holder of
the Debentures is required under the Indenture with respect to any amendment,
modification or termination of the Indenture or the Debentures, the
Institutional Trustee shall request the written direction of the Holders of the
Securities with respect to such amendment, modification or termination and shall
vote with respect to such amendment, modification or termination as directed by
a Majority in liquidation amount of the Securities then outstanding, voting
together as a single class; provided, however, that where a consent under the
Indenture would require the consent of the relevant Super Majority, the
Institutional Trustee may only give such consent at the direction of the Holders
of at least the proportion in liquidation amount of the Securities then
outstanding which the relevant Super Majority represents of the aggregate
principal amount of the Debentures then outstanding; provided, further, that the
Institutional Trustee shall not take any action in accordance with the
directions of the Holders of the Securities under this Section 8(b) unless the
Institutional Trustee has obtained an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that for the
purposes of United States federal income tax the Trust will not be classified as
other than a grantor trust as a result of such action.
9. Pro Rata.
A reference in the terms of the Securities to any distribution or treatment
as being "Pro Rata" shall mean pro rata to each Holder of Securities according
to the aggregate liquidation amount of the Securities held by the relevant
Holder in relation to the aggregate liquidation amount of all Securities
outstanding unless, in relation to a payment, an Event of Default under the
Declaration has occurred and is continuing, in which case any funds available to
make such payment shall be paid first in cash to each Holder of the Convertible
Preferred Securities pro rata according to the aggregate liquidation amount of
Convertible Preferred Securities held by the relevant Holder relative to the
aggregate liquidation amount of all Convertible Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Convertible Preferred Securities, to each Holder of Common Securities pro
rata according to the aggregate liquidation amount of Common Securities held by
the
<PAGE>
relevant Holder relative to the aggregate liquidation amount of all Common
Securities outstanding.
10. Ranking.
The Convertible Preferred Securities rank pari passu and payment thereon
shall be made Pro Rata with the Common Securities except that, where an Event of
Default under the Declaration occurs and is continuing, the rights of Holders of
the Common Securities to payment in respect of Distributions and payments upon
liquidation, redemption and otherwise are subordinated to the rights to payment
of the Holders of the Convertible Preferred Securities.
11. Acceptance of Securities Guarantee and Indenture.
Each Holder of Convertible Preferred Securities and Common Securities, by
the acceptance thereof, agrees to the provisions of the Convertible Preferred
Securities Guarantee and the Common Securities Guarantee, respectively,
including the subordination provisions therein and to the provisions of the
Indenture.
12. No Preemptive Rights.
The Holders of the Securities shall have no preemptive rights to subscribe
for any additional securities.
13. Miscellaneous.
These terms constitute a part of the Declaration. The Sponsor will provide
a copy of the Declaration, the Convertible Preferred Securities Guarantee or the
Common Securities Guarantee (as may be appropriate), and the Indenture to a
Holder without charge on written request to the Sponsor at its principal place
of business.
14. Acceptable Counsel.
In each instance herein which states that legal counsel needs to be
acceptable to a party (or similar language to that effect), the law firm of
Robinson Silverman Pearce Aronsohn & Berman LLP shall be deemed to be acceptable
legal counsel.
<PAGE>
EXHIBIT A-1
FORM OF CONVERTIBLE PREFERRED SECURITY CERTIFICATE
CERTIFICATE NUMBER: P-1
NUMBER OF PREFERRED SECURITIES: 1,000,000
ISIN NO.: USU126651020 - - ONLY IF REGULATION S
<PAGE>
Certificate Evidencing Convertible Preferred Securities
of
WRP CONVERTIBLE TRUST I
PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE, ANY CERTIFICATE
EVIDENCING A CONVERTIBLE PREFERRED SECURITY SHALL BEAR A LEGEND IN SUBSTANTIALLY
THE FOLLOWING FORM, UNLESS OTHERWISE AGREED BY THE REGULAR TRUSTEES (WITH
WRITTEN NOTICE TO THE INSTITUTIONAL TRUSTEE): THE SECURITY EVIDENCED HEREBY HAS
NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS
SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE
144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES
ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES
THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO
SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES
ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR, IF THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES THE
COMMON SHARES ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A)
TO WELLSFORD REAL PROPERTIES, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF,
(B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
(C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (D) TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE REGULAR TRUSTEES UNDER THE DECLARATION (OR, IF THIS
CERTIFICATE EVIDENCES COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES),
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH
LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE
UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
SECURITIES ACT (IF AVAILABLE) AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THE SECURITY EVIDENCED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
<PAGE>
TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE HOLDER MUST CHECK THE
APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE REGULAR TRUSTEES UNDER THE
DECLARATION (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES, SUCH HOLDER MUST
FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY OR WRP CONVERTIBLE TRUST I (THE "TRUST") MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT EVIDENCE
COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE UNDER THE DECLARATION, SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE 144(K)
UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION
S UNDER THE SECURITIES ACT.
THIS SECURITY IS ALSO SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
DECLARATION.
8.25% Convertible Preferred Securities
(liquidation amount $25 per Convertible Preferred Security)
WRP Convertible Trust I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby certifies that ERP Operating
Limited Partnership (the "Holder") is the registered owner of convertible
preferred securities of the Trust, representing undivided beneficial interests
in the assets of the Trust, designated as the 8.25% Convertible Preferred
Securities (liquidation amount $25 per Convertible Preferred Security) (the
"Convertible Preferred Securities"). The Convertible Preferred Securities are
transferable on the books and records of the Trust, in person or by a duly
authorized attorney, upon surrender of this certificate duly endorsed and in
proper form for transfer.
<PAGE>
The designation, rights, privileges, restrictions, preferences and other
terms and provisions of the Convertible Preferred Securities represented hereby
are issued and shall in all respects be subject to the provisions of the
Declaration of Trust of the Trust dated as of May 5, 2000, as the same may be
amended from time to time (the "Declaration"), including the designation of the
terms of the Convertible Preferred Securities as set forth in Annex I to the
Declaration.
Capitalized terms used herein but not defined shall have the meanings given
them in the Declaration. The Holder is entitled to the benefits of the
Convertible Preferred Securities Guarantee to the extent provided therein. The
Sponsor will provide a copy of the Declaration, the Convertible Preferred
Securities Guarantee and the Indenture to the Holder without charge upon written
request to the Trust at its principal place of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Debentures as indebtedness and the Convertible Preferred
Securities as evidence of indirect beneficial ownership in the Debentures.
Unless the Institutional Trustee's Certificate of Authentication hereon has
been properly executed, these Convertible Preferred Securities shall not be
entitled to any benefit under the Declaration or be valid or obligatory for any
purpose.
<PAGE>
IN WITNESS WHEREOF, the Trust has executed this certificate this 5th day of
May, 2000.
WRP Convertible Trust I
By: /s/ James J. Burns
--------------------
Name: James J. Burns
Title: Regular Trustee
Solely as trustee and not in his individual capacity
<PAGE>
FORM OF CERTIFICATE OF AUTHENTICATION
INSTITUTIONAL TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Preferred Securities referred to in the
within-mentioned Declaration.
Dated: May 5, 2000
Wilmington Trust Company,
as Institutional Trustee or as Authentication Agent
By: By:
-------------------- --------------------
Authorized Signatory Authorized Signatory
<PAGE>
FORM OF REVERSE OF SECURITY
Distributions payable on each Convertible Preferred Security will be fixed
at a rate per annum of 8.25% ($2.0625 per annum, $0.515625 per quarter) of the
stated liquidation amount of $25 per Preferred Security from and including May
5, 2000 (the "Issuance Date") to and including May 4, 2022 (such rate is
hereinafter referred to as the "Coupon Rate"), such rate being the rate of
interest payable on the Debentures to be held by the Institutional Trustee. The
term "Distributions" as used herein includes such cash distributions and any
such interest payable unless otherwise stated. A Distribution is payable only to
the extent that payments are made in respect of the Debentures held by the
Institutional Trustee and to the extent the Institutional Trustee has funds
available therefor. The amount of Distributions payable for the initial dividend
period (as defined in the Declaration) and for any Dividend Period shorter than
a full dividend period shall be prorated and will be computed on the basis of a
360-day year of twelve 30-day months. Under circumstances set forth in Annex I
to the Declaration, distributions may be paid by issuance of additional
Convertible Preferred Securities
Distributions on the Convertible Preferred Securities will be cumulative,
will accrue from May 5, 2000 and will be payable in quarterly payments of
$0.515625 per Convertible Preferred Security in arrears, on the fifteenth day of
January, April, July and October in each year, commencing on July 17, 2000,
which payment dates shall correspond to the interest payment dates on the
Debentures, to Holders of record at the close of business on the regular record
date for such Distribution which shall be the close of business 15 days prior to
such Distribution Payment Date unless otherwise provided in the Declaration.
The Convertible Preferred Securities shall be redeemable as provided in the
Declaration.
The Convertible Preferred Securities shall be convertible into Common
Shares, through (i) the exchange of Convertible Preferred Securities for a
portion of the Debentures and (ii) the immediate conversion of such Debentures
into Debenture Issuer Common Shares, in the manner and according to the terms
set forth in the Declaration.
<PAGE>
CONVERSION REQUEST
To: Wilmington Trust Company,
as Institutional Trustee of WRP Convertible Trust I
The undersigned owner of these Convertible Preferred Securities hereby
irrevocably exercises the option to convert these Convertible Preferred
Securities, or the portion below designated, into Common Shares of Wellsford
Real Properties, Inc. (the "Common Shares") in accordance with the terms of the
Declaration of Trust (the "Declaration"), dated as of May 5, 2000, by Rodney F.
Du Bois and James J. Burns, as Regular Trustees, Wilmington Trust Company, as
Delaware Trustee, Wilmington Trust Company, as Institutional Trustee, Wellsford,
as Sponsor, and by the Holders, from time to time, of individual beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to the
aforementioned exercise of the option to convert these Convertible Preferred
Securities, the undersigned hereby directs the Conversion Agent (as that term is
defined in the Declaration) to (i) exchange such Convertible Preferred
Securities for a portion of the Debentures (as that term is defined in the
Declaration) held by the Trust (at the rate of exchange specified in the terms
of the Convertible Preferred Securities set forth as Annex I to the Declaration)
and (ii) immediately convert such Debentures on behalf of the undersigned, into
Common Shares (at the conversion rate specified in the terms of the Convertible
Preferred Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: _______________, ____
in whole _____ ______ in part
_____ Number of Convertible
Preferred Securities to be
converted: ____________________
If a name or names other than the
undersigned, please indicate in
the spaces below the name or
names in which the Common Shares
are to be issued, along with the
address or addresses of such
person or persons.
---------------------------------
---------------------------------
---------------------------------
<PAGE>
Signature (for conversion only)
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other Identifying Number
<PAGE>
FORM OF ASSIGNMENT FOR DEFINITIVE CONVERTIBLE
PREFERRED SECURITY
For value received ________________ _________ hereby sell(s), assign(s) and
transfer(s) unto
__________________________________________________________________ (Please
insert social security or other taxpayer identification number of assignee.) the
within security and hereby irrevocably constitutes and appoints ____________
attorney to transfer the said security on the books of the Company, with full
power of substitution in the premises.
In connection with any transfer of the within security occurring prior to the
Transfer Restriction Termination Date, the undersigned confirms that such
security is being transferred:
/ / To Wellsford Real Properties, Inc. or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the Securities
Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended;
/ / Pursuant to an effective registration statement; or
/ / To a taxable REIT subsidiary, as defined in Code ss. 856(l), of Equity
Residential Properties Trust or any successor thereto.
and unless the box below is checked, the undersigned confirms that such security
is not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Dated: ___________________________
Signature(s)
<PAGE>
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of this Security in every particular without
alteration or enlargement or any change whatever.
EXHIBIT A-2
FORM OF COMMON SECURITY CERTIFICATE
CERTIFICATE NUMBER: C-1
NUMBER OF COMMON SECURITIES: 31,000
Certificate Evidencing Common Securities
of
WRP CONVERTIBLE TRUST I
8.25% Convertible Common Securities
(liquidation amount $25.00 per Common Security)
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD UNLESS SUCH OFFER AND SALE ARE
REGISTERED UNDER OR ARE EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT.
THE TRANSFER OF THE SECURITY EVIDENCED HEREBY IS ALSO SUBJECT TO THE
RESTRICTIONS SET FORTH IN THE DECLARATION REFERRED TO BELOW.
WRP Convertible Trust I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby certifies that Wellsford Real
Properties, Inc. (the "Holder") is the registered owner of common securities of
the Trust representing undivided beneficial interests in the assets of the Trust
designated the 8.25% Common Securities (liquidation amount $25.00 per Common
Security) (the "Common Securities"). The Common Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for
transfer.
The designation, rights, privileges, restrictions, preferences and other
terms and provisions of the Common Securities represented hereby are issued and
shall in all respects be
<PAGE>
subject to the provisions of the Declaration of Trust of the Trust dated as of
May 5, 2000, as the same may be amended from time to time (the "Declaration"),
including the designation of the terms of the Common Securities as set forth in
Annex I to the Declaration.
Capitalized terms used herein but not defined shall have the meanings given
them in the Declaration. The Holder is entitled to the benefits of the Common
Securities Guarantee to the extent provided therein. The Sponsor will provide a
copy of the Declaration, the Common Securities Guarantee and the Indenture to a
Holder without charge upon written request to the Trust at its principal place
of business.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
By acceptance, the Holder agrees to treat, for United States federal income
tax purposes, the Debentures as indebtedness and the Common Securities as
evidence of indirect beneficial ownership in the Debentures.
IN WITNESS WHEREOF, the Trust has executed this certificate this 5th day of
May, 2000.
WRP Convertible Trust I
By: /s/ James J. Burns
--------------------
Name: James J. Burns
Title: Regular Trustee
Solely as trustee and not in his
individual capacity
<PAGE>
FORM OF REVERSE OF SECURITY
Distributions payable on each Common Security will be fixed at a rate per
annum, of 8.25% ($2.0625 per annum, $0.515625 per quarter) of the stated
liquidation amount of $25 per Common Security, from and including May 5, 2000 to
but excluding May 4, 2022 (such rate is hereinafter referred to as the "Coupon
Rate") such rate being the rate of interest payable on the Debentures to be held
by the Institutional Trustee. The term "Distributions" as used herein includes
such cash distributions and any such interest payable unless otherwise stated. A
Distribution is payable only to the extent that payments are made in respect of
the Debentures held by the Institutional Trustee and to the extent the
Institutional Trustee has funds available therefor. The amount of Distributions
payable for the initial dividend period (as defined in the Declaration) and for
any Dividend Period shorter than a ful dividend period shall be prorated and
will be computed on the basis of a 360-day year of twelve 30-day months. Under
circumstances set forth in Annex I to the Declaration, distribution may be paid
by issuance of additional Common Securities.
Distributions on the Common Securities will be cumulative, will accrue from
May 5, 2000 and will be payable in quarterly payments of $0.515625 per Common
Security in arrears, on the fifteenth day of January, April, July and October in
each year, commencing on July 17, 2000, which payment dates shall correspond to
the interest payment dates on the Debentures, to Holders of record at the close
of business on the regular record date for such Distribution which shall be the
close of business 15 days prior to such Distribution Payment Date unless
otherwise provided in the Declaration.
The Common Securities shall be redeemable as provided in the Declaration.
The Common Securities shall be convertible into Common Shares, through (i)
the exchange of Common Securities for a portion of the Debentures and (ii) the
immediate conversion of such Debentures into Debenture Issuer Common Shares, in
the manner and according to the terms set forth in the Declaration.
<PAGE>
CONVERSION REQUEST
To: Wilmington Trust Company,
as Institutional Trustee of WRP Convertible Trust I
The undersigned owner of these Common Securities hereby irrevocably
exercises the option to convert these Common Securities, or the portion below
designated, into Common Shares of Wellsford Real Properties, Inc. (the "Common
Shares") in accordance with the terms of the Declaration of Trust (the
"Declaration"), dated as of May 5, 2000 by Rodney F. Du Bois and James J. Burns,
as Regular Trustees, Wilmington Trust Company, as Delaware Trustee, Wilmington
Trust Company, as Institutional Trustee, Wellsford Real Properties, Inc., as
Sponsor, and by the Holders, from time to time, of individual beneficial
interests in the Trust to be issued pursuant to the Declaration. Pursuant to the
aforementioned exercise of the option to convert these Common Securities, the
undersigned hereby directs the Conversion Agent (as that term is defined in the
Declaration) to (i) exchange such Common Securities for a portion of the
Debentures (as that term is defined in the Declaration) held by the Trust (at
the rate of exchange specified in the terms of the Common Securities set forth
as Annex I to the Declaration) and (ii) immediately convert such Debentures on
behalf of the undersigned, into Common Shares (at the conversion rate specified
in the terms of the Common Securities set forth as Annex I to the Declaration).
The undersigned does also hereby direct the Conversion Agent that the
shares issuable and deliverable upon conversion, together with any check in
payment for fractional shares, be issued in the name of and delivered to the
undersigned, unless a different name has been indicated in the assignment below.
If shares are to be issued in the name of a person other than the undersigned,
the undersigned will pay all transfer taxes payable with respect thereto.
Date: _______________, ____
in whole _____ ______ in part
_____ Number of Convertible
Preferred Securities to be
converted: ____________________
If a name or names other than the
undersigned, please indicate in
the spaces below the name or
names in which the Common Shares
are to be issued, along with the
address or addresses of such
person or persons.
---------------------------------
---------------------------------
---------------------------------
Signature (for conversion only)
<PAGE>
Please Print or Typewrite Name and Address,
Including Zip Code, and Social Security or Other Identifying Number
---------------------------------
---------------------------------
<PAGE>
FORM OF ASSIGNMENT FOR SECURITY OR
COMMON SHARES ISSUABLE UPON CONVERSION THEREOF
For value received ________________________________________hereby sell(s),
assign(s) and transfer(s) unto
______________________________________________________(Please insert social
security or other taxpayer identification number of assignee.) the within
security and hereby irrevocably constitutes and appoints ____________ attorney
to transfer the said security on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the within security occurring prior to the
Transfer Restriction Termination Date, the undersigned confirms that such
security is being transferred:
/ / To Wellsford Real Properties, Inc. or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the Securities Act
of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in compliance
with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the Securities
Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the Securities Act of
1933, as amended; or
/ / Pursuant to an effective registration statement.
and unless the box below is checked, the undersigned confirms that such security
is not being transferred to an "affiliate" of the Company as defined in Rule 144
under the Securities Act of 1933, as amended (an "Affiliate"):
/ / The transferee is an Affiliate of the Company.
Dated: ____________________________
Signature(s)
<PAGE>
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of this Security in every particular without
alteration or enlargement or any change whatever.
<PAGE>
EXHIBIT B
SPECIMEN OF DEBENTURE
<PAGE>
- --------------------------------------------------------------------------------
WELLSFORD REAL PROPERTIES, INC.
and
WILMINGTON TRUST COMPANY,
as Trustee
8.25% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURES
INDENTURE
Dated as of May 5, 2000
- --------------------------------------------------------------------------------
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture dated as of May 5, 2000
Trust Indenture
Act Section Indenture Section
----------- -----------------
310 (a) (1)....................................... 6.10
(a) (2)....................................... 6.10
(a) (3)....................................... Not Applicable
(a) (4)....................................... Not Applicable
(a) (5)....................................... 6.10
(b) .......................................... 6.8, 6.10
311 (a) .......................................... 6.11
(b) .......................................... 6.11
312 (a) .......................................... 4.1, 4.2
(b) .......................................... 4.2
(c) .......................................... 4.2
313(a)(1) - (5) & (7) (8)............................. 6.6
(a) (6)....................................... Not Applicable
(b) (1)....................................... Not Applicable
(b) (2)....................................... 6.6
(c) .......................................... 6.6
(d) .......................................... 6.6
314(a) (1) - (3)....................................... 4.3
(a(4) .......................................... 3.4
(b) .......................................... Not Applicable
(c(1) .......................................... 2.6
(c(2) .......................................... 2.6
(c(3) .......................................... Not Applicable
(d) .......................................... Not Applicable
(e) .......................................... 14.5
(f) .......................................... Not Applicable
315(a) .......................................... 6.1
(b) .......................................... 6.5
(c) .......................................... 6.1
(d) .......................................... 6.1
(d)(1) .......................................... 6.1
(d)(2) .......................................... 6.1
(d)(3) .......................................... 6.1
<PAGE>
Trust Indenture
Act Section Indenture Section
----------- -----------------
(e) .......................................... 5.10
316(a) .......................................... 7.4
(a(1)(A).......................................... 5.8
(a(1)(B).......................................... 5.1, 5.9
(a)(2) .......................................... Not Applicable
(b) .......................................... 5.6
(c) .......................................... 7.1
317(a)(1) .......................................... 5.2
(a)(2) .......................................... 5.2
(b) .......................................... 3.3
318(a) .......................................... 14.7
- ----------
Note:This reconciliation and tie shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS..................................................1
Section 1.1 Certain Terms Defined........................................1
ARTICLE II THE CONVERTIBLE DEBENTURES..................................10
Section 2.1 Designation and Principal Amount............................10
Section 2.2 Maturity....................................................10
Section 2.3 Form and Payment............................................11
Section 2.4 Exchange and Registration of Transfer of Convertible
Debentures; Restrictions on Transfers; Depositary...........11
Section 2.5 Interest....................................................15
Section 2.6 Authentication and Delivery of Convertible Debentures.......16
Section 2.7 Execution of Convertible Debentures.........................17
Section 2.8 Certificate of Authentication...............................17
Section 2.9 Denomination and Date of Convertible Debentures;
Payments of Interest........................................18
Section 2.10 Registration, Transfer and Exchange.........................19
Section 2.11 Mutilated, Defaced, Destroyed, Lost and Stolen Convertible
Debentures..................................................21
Section 2.12 Cancellation of Convertible Debentures......................22
Section 2.13 Temporary Convertible Debentures............................22
ARTICLE III COVENANTS OF THE COMPANY....................................23
Section 3.1 Payment of Principal and Interest...........................23
Section 3.2 Offices for Payment, etc....................................23
Section 3.3 Paying Agents...............................................23
Section 3.4 Written Statement to Trustee................................24
Section 3.5 Limitation on Dividends. ..................................24
Section 3.6 Covenants as to WRP Trust...................................25
Section 3.7 Existence...................................................25
ARTICLE IV HOLDERS OF CONVERTIBLE DEBENTURES LISTS AND
REPORTS BY THE COMPANY AND THE TRUSTEE......................25
Section 4.1 Company to Furnish Trustee Information as to Names and
Addresses of Holders of Convertible Debentures..............25
Section 4.2 Preservation and Disclosure of Holders of Convertible
Debentures Lists............................................26
Section 4.3 Reports by the Company......................................27
<PAGE>
Page
----
ARTICLE V REMEDIES OF THE TRUSTEE AND HOLDERS OF
CONVERTIBLE DEBENTURES ON EVENT OF DEFAULT .................28
Section 5.1 Event of Default Defined; Acceleration of Maturity;
Waiver of Default...........................................28
Section 5.2 Collection of Indebtedness by Trustee; Trustee May
Prove Debt .................................................31
Section 5.3 Application of Proceeds.....................................33
Section 5.4 Restoration of Rights on Abandonment of Proceedings.........33
Section 5.5 Limitations on Suits by Holders of Convertible Debentures...34
Section 5.6 Unconditional Right of Holders of Convertible Debentures
to Institute Certain Suits..................................34
Section 5.7 Powers and Remedies Cumulative; Delay or Omission Not
Waiver of Default...........................................34
Section 5.8 Control by Holders of Convertible Debentures................35
Section 5.9 Waiver of Past Defaults.....................................35
Section 5.10 Right of Court to Require Filing of Undertaking to Pay
Costs ......................................................36
Section 5.11 Suits for Enforcement.......................................36
Section 5.12 Unconditional Right of Holders to Receive Principal
and Interest and to Convert.................................36
ARTICLE VI CONCERNING THE TRUSTEE......................................37
Section 6.1 Duties of the Trustee.......................................37
Section 6.2 Rights of Trustee...........................................38
Section 6.3 Individual Rights of Trustee................................39
Section 6.4 Trustee's Disclaimer........................................39
Section 6.5 Notice of Defaults..........................................39
Section 6.6 Reports by Trustee to Holders...............................39
Section 6.7 Compensation and Indemnity..................................40
Section 6.8 Replacement of Trustee......................................40
Section 6.9 Successor Trustee by Merger.................................41
Section 6.10 Eligibility; Disqualification...............................41
Section 6.11 Preferential Collection of Claims Against Company...........41
ARTICLE VII CONCERNING THE HOLDERS OF CONVERTIBLE DEBENTURES............42
Section 7.1 Evidence of Action Taken by Holders of Convertible
Debentures .................................................42
Section 7.2 Proof of Execution of Instruments...........................42
Section 7.3 Holders to be Treated as Owners.............................42
Section 7.4 Convertible Debentures Owned by Company Deemed Not
Outstanding.................................................42
Section 7.5 Right of Revocation of Action Taken.........................43
ARTICLE VIII SUPPLEMENTAL INDENTURES.....................................43
<PAGE>
Page
----
Section 8.1 Supplemental Indentures Without Consent of Holders of
Convertible Debentures......................................43
Section 8.2 Supplemental Indentures With Consent of Holders of
Convertible Debentures......................................44
Section 8.3 Effect of Supplemental Indenture............................45
Section 8.4 Documents to Be Given to Trustee............................46
Section 8.5 Notation on Convertible Debentures in Respect of
Supplemental Indentures.....................................46
ARTICLE IX CONSOLIDATION, MERGER, SALE OR CONVEYANCE ..................46
Section 9.1 Company May Consolidate, etc., on Certain Terms.............46
Section 9.2 Successor or Substituted....................................47
Section 9.3 Opinion of Counsel to Trustee...............................47
ARTICLE X REDEMPTION OF THE CONVERTIBLE DEBENTURES ...................47
Section 10.1 Tax Event Redemption........................................47
Section 10.2 Optional Redemption by Company..............................48
Section 10.3 No Sinking Fund.............................................52
Section 10.4 Election to Redeem; Notice of Redemption; Partial
Redemptions ................................................52
Section 10.5 Payment of Convertible Debentures Called for Redemption.....53
Section 10.6 Exclusion of Certain Convertible Debentures from
Eligibility for Selection for Redemption....................54
Section 10.7 Required Redemption.........................................54
ARTICLE XI CONVERSION OF CONVERTIBLE DEBENTURES........................55
Section 11.1 Conversion Rights...........................................55
Section 11.2 Conversion Procedures.......................................55
Section 11.3 Conversion Price Adjustments................................57
Section 11.4..............................................................61
Section 11.5 Trustee Not Responsible for Determining Conversion Price or
Adjustments.................................................61
Section 11.6 Reservation of Common Shares................................62
Section 11.7 Payment of Certain Taxes upon Conversion....................62
Section 11.8 Nonassessability............................................62
ARTICLE XII SUBORDINATION OF CONVERTIBLE DEBENTURES.....................62
Section 12.1 Convertible Debentures Subordinate to Senior Indebtedness...62
Section 12.2 Payment Over of Proceeds upon Dissolution, Etc..............62
Section 12.3 Prior Payment to Senior Indebtedness upon Acceleration
of Convertible Debentures...................................64
Section 12.4 No Payment When Senior Indebtedness in Default..............64
Section 12.5 Payment Permitted in Certain Situations.....................64
<PAGE>
Page
----
Section 12.6 Subrogation to Rights of Holders of Senior Indebtedness.....65
Section 12.7 Provisions Solely to Define Relative Rights.................65
Section 12.8 Trustee to Effectuate Subordination.........................66
Section 12.9 No Waiver of Subordination Provisions.......................66
Section 12.10 Notice to Trustee...........................................66
Section 12.11 Reliance on Judicial Order or Certificate of
Liquidating Agent ..........................................67
Section 12.12 Trustee Not Fiduciary for Holders of Senior Indebtedness....67
Section 12.13 Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights............................67
Section 12.14 Article Applicable to Paying Agents.........................68
Section 12.15 Certain Conversions Deemed Payment..........................68
Section 12.16 Further Subrogation.........................................68
ARTICLE XIII EXPENSES....................................................69
Section 13.1 Payment of Expenses.........................................69
Section 13.2 Payment Upon Resignation or Removal.........................69
ARTICLE XIV MISCELLANEOUS PROVISIONS....................................70
Section 14.1 Incorporators, Shareholders, Officers and Directors of
Company Exempt from Individual Liability....................70
Section 14.2 Provisions of Indenture for the Sole Benefit of Parties
and Holders of Convertible Debentures.......................70
Section 14.3 Right to Assign; Successors and Assigns Bound by Indenture..70
Section 14.4 Notices and Demands on Company, Trustee and Holders of
Convertible Debentures......................................70
Section 14.5 Officers' Certificates and Opinions of Counsel;
Statements to Be Contained Therein..........................71
Section 14.6 Payments Due on Saturdays, Sundays and Holidays.............72
Section 14.7 Conflict of Any Provision of Indenture with Trust
Indenture Act ..............................................72
Section 14.8 Delaware Law to Govern......................................72
Section 14.9 Counterparts................................................73
Section 14.10 Effect of Headings; Gender..................................73
Section 14.11 Acceptable Counsel..........................................73
<PAGE>
Page
----
EXHIBITS
Exhibit A Specimen Copy of 8.25% Convertible Junior Subordinated Debentures
<PAGE>
THIS INDENTURE, dated as of May 5, 2000, between WELLSFORD REAL PROPERTIES,
INC., a Maryland corporation (the"Company"), and WILMINGTON TRUST COMPANY (the
"Trustee").
W I T N E S S E T H:
-------------------
WHEREAS, the Company desires and has requested the Trustee to join it in
the execution and delivery of this Indenture in order to establish and provide
for the issuance by the Company of convertible debentures designated as its
8.25% Convertible Junior Subordinated Debentures (the "Convertible Debentures"),
a specimen copy of which is attached hereto as Exhibit A, on the terms set forth
herein;
WHEREAS, WRP Convertible Trust I, a Delaware statutory business trust ("WRP
Trust" or the "Trust"), has offered to ERP Operating Limited Partnership, an
Illinois limited partnership, in a private placement of $25,000,000 aggregate
liquidation amount of its 8.25% Convertible Trust Preferred Securities (the
"Convertible Preferred Securities"), representing undivided beneficial interests
in the assets of the Trust, and proposes to invest the proceeds from such
offering, together with the proceeds of the issuance and sale by the Trust to
the Company of $775,000 aggregate liquidation amount of its 8.25% Convertible
Trust Common Securities, in $25,775,000 aggregate principal amount of the
Convertible Debentures; and
WHEREAS, all things necessary to make this Indenture a valid agreement of
the Company and the Trustee, in accordance with its terms, have been done.
NOW, THEREFORE:
There is hereby established the terms of the Convertible Debentures to be
issued under this Indenture, which shall be as set forth herein and in the form
of Convertible Debentures attached hereto as Exhibit A, and in consideration of
the premises and the purchase and acceptance of the Convertible Debentures by
the holders thereof, the Company mutually covenants and agrees with the Trustee,
for the equal and proportionate benefit of all holders of the Convertible
Debentures, as follows:
ARTICLE I
DEFINITIONS
<PAGE>
Section 1.1 Certain Terms Defined. The following terms (except as otherwise
expressly provided or unless the context otherwise clearly requires) for all
purposes of this Indenture and of any indenture supplemental hereto shall have
the respective meanings specified in this Section. All other terms used in this
Indenture that are defined in the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), or the definitions of which in the Securities Act of
1933, as amended (the "Securities Act"), are referred to in the Trust Indenture
Act, including terms defined therein by reference to the Securities Act (except
as herein otherwise expressly provided or unless the context otherwise clearly
requires), shall have the meanings assigned to such terms in the Trust Indenture
Act and in the Securities Act as in force at the date of this Indenture. All
accounting terms used herein and not expressly defined shall have the meanings
assigned to such terms in accordance with generally accepted accounting
principles, and the term "generally accepted accounting principles" means such
accounting principles as are generally accepted at the time of any computation.
The words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole, as supplemented and amended from time to
time, and not to any particular Article, Section or other subdivision. The terms
defined in this Article have the meanings assigned to them in this Article and
include the plural as well as the singular.
"Additional Sums" shall have the meaning set forth in Section 2.5(d).
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor rule thereunder.
"Applicants" has the meaning specified in Section 4.2(b).
"Board of Directors" means either the Board of Directors of the Company or
any duly authorized committee of that Board.
"Business Day" means any day other than a Saturday, Sunday, or any other
day on which banking institutions in New York, New York or Wilmington, Delaware
are permitted or required by any applicable law to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, units representing interests, participations, rights in or other
equivalents (however designated) of such Person's capital stock, including, with
respect to partnerships, limited liability companies and business trusts,
partnership interests (whether general or limited), membership interests,
beneficial interests and any other interest or participation that confers upon a
Person the right to receive a share of the profits and losses of, or
distributions of assets of, such partnership, limited liability company or
business trust, and any rights (other than debt securities convertible into
capital stock), warrants or options exchangeable for or convertible into such
capital stock.
<PAGE>
"Closing Price" with respect to any security on any day means the last
reported sale price, regular way on such day, or, if no sale takes place on such
day, the average of the reported closing bid and asked prices on such day,
regular way, in either case as reported on the American Stock Exchange, or, if
such security is not listed or admitted to trading on the American Stock
Exchange, on the principal national securities exchange on which such security
is listed or admitted to trading, or, if such security is not listed or admitted
to trading on a national securities exchange, on the National Market System of
the National Association of Securities Dealers, Inc., or, if such security is
not quoted or admitted to trading on such quotation system, on the principal
quotation system on which such security is listed or admitted to trading or
quoted, or, if not listed or admitted to trading or quoted on any national
securities exchange or quotation system, the average of the closing bid and
asked prices of such security in the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated, or a similar
generally accepted reporting service, or, if not so available in such manner, as
furnished by any American Stock Exchange member firm selected from time to time
by the Board of Directors (or any committee duly authorized by the Board of
Directors) of the Company for that purpose or, if not so available in such
manner, as otherwise determined in good faith by the Board of Directors (or any
committee duly authorized by the Board of Directors) of the Company.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Exchange Act, as amended, or if at any time
after the execution and delivery of this Indenture such Commission is not
existing and performing the duties now assigned to it under the Trust Indenture
Act, then the body performing such duties on such date.
"Common Securities" means undivided beneficial interests in the assets of
the WRP Trust which rank pari passu with the Convertible Preferred Securities
issued by the WRP Trust; provided, however, that upon the occurrence of an Event
of Default, the rights of holders of the Common Securities to payment in respect
of distributions and payments upon liquidation, redemption and otherwise are
subordinated to the rights to payment of holders of the Convertible Preferred
Securities.
"Common Securities Guarantee" means the Common Securities Guarantee
Agreement dated as of May 5, 2000 by the Guarantor.
"Common Shares" includes shares of common stock, $.01 par value per share,
of the Company.
"Company" means Wellsford Real Properties, Inc., a Maryland corporation,
until a successor corporation shall have become such pursuant to the applicable
provisions of this Indenture, and thereafter "Company" shall mean such successor
corporation.
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"Convertible Debenture" or "Convertible Debentures" has the meaning stated
in the first recital of this Indenture and more particularly means any
Convertible Debentures authenticated and delivered under this Indenture.
"Convertible Preferred Securities" has the meaning specified in the
recitals to this Indenture.
"Conversion Agent" has the meaning assigned thereto in the Declaration.
"Conversion Date" has the meaning specified in Section 11.2(a).
"Conversion Price" has the meaning set forth in Section 11.1.
"Conversion Shares" has the meaning set forth in Section 11.3(c).
"Corporate Trust Office" means the principal corporate trust office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which office at the date of execution of this Indenture is located
at 1100 North Market Street, 9th Floor, Wilmington, Delaware 19890-0001,
Attention: Corporate Trust Administration.
"Coupon Rate" has the meaning specified in Section 2.5(a).
"Declaration" means the Declaration of Trust of WRP Convertible Trust I, a
Delaware statutory business trust, dated as of May 5, 2000.
"Debt" of a Person means, all indebtedness of such Person which is for
money borrowed.
"defaulted interest" has the meaning specified in Section 2.9.
"Delaware Trustee" has the meaning specified in the Declaration.
"Distribution Date" has the meaning set forth in Section 11.3(c).
"Dollar" means the coin or currency of the United States of America which
as of the time of payment is legal tender for the payment of public and private
debts.
"ERPLP" means ERP Operating Limited Partnership, an Illinois limited
partnership.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
"Guarantor" means the Company in its capacity as guarantor under any Trust
Securities Guarantees.
"Holder" or "Holder of Convertible Debentures" or other similar terms mean
the person in whose name such Convertible Debenture is registered in the
Security Register.
"incur" means to issue, incur, assume, guarantee, become liable,
contingently or otherwise, with respect to, or otherwise become responsible for
the payment of, any Debt.
"Indenture" means this instrument as originally executed and delivered or
as it may from time to time be amended or supplemented as herein provided, as so
amended or supplemented or both, and shall include the forms and terms of the
Convertible Debentures appearing as Exhibit A to this instrument.
"Institutional Trustee" has the meaning specified in the Declaration.
"Interest Payment Date," when used with respect to any Convertible
Debenture, means the Stated Maturity of an installment of interest on such
Convertible Debenture, which date shall fall on the fifteenth day of January,
April, July and October of each year.
"Interest Period" has the meaning set forth in Section 2.5(a).
"Issuance Date" has the meaning set forth in Section 2.5(a).
"Lien" means any mortgage or deed of trust, pledge, assignment, security
interest, lien, charge, or other encumbrance or preferential arrangement
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Maturity" when used with respect to any Convertible Debenture means the
date on which the principal of such Convertible Debenture or an installment of
principal becomes due and payable as therein or herein provided, whether at
Stated Maturity or by declaration of acceleration, call for redemption or
otherwise.
"Maturity Date" means the date on which the Convertible Debentures mature
and on which the principal shall be due and payable together with all accrued
and unpaid interest thereon including Additional Sums, if any.
"Ministerial Action" has the meaning specified in Section 10.1(a).
"90-Day Period" has the meaning specified in Section 10.1(a).
"Notice of Conversion" has the meaning specified in Section 11.2(a).
<PAGE>
"Offeror" has the meaning specified in Section 2.4(c).
"Officers' Certificate" means a certificate signed on behalf of the Company
by the Chairman of the Board of Trustees or any vice chairman or the president
or any vice president and by the chief financial officer, the treasurer, the
controller, any assistant treasurer, the secretary or any assistant secretary of
the Company and delivered to the Trustee. Each such certificate shall include
the statements provided for in Section 14.5.
"Opinion of Counsel" means a written opinion of legal counsel, who may be
an employee of or counsel to the Company, and who shall be reasonably acceptable
to the Trustee. Each Opinion of Counsel shall include the statements provided
for in Section 14.5, if and to the extent required hereby.
"Optional Redemption Price" has the meaning specified in Section 10.2.
"Outstanding" when used with reference to Convertible Debentures, subject
to the provisions of Section 7.4, means, as of any particular time, all
Convertible Debentures authenticated and delivered under this Indenture, except:
(a) Convertible Debentures theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Convertible Debentures, or portions thereof, for the payment or
redemption of which moneys in the necessary amount and in the required
currency shall have been deposited in trust with the Trustee or with any
Paying Agent (other than the Company) or shall have been set aside,
segregated and held in trust by the Company for the Holders of such
Convertible Debentures (if the Company shall act as its own Paying Agent),
provided that if such Convertible Debentures, or portions thereof, are to
be redeemed prior to the Maturity thereof, notice of such redemption shall
have been given as herein provided, or provision satisfactory to the
Trustee shall have been made for giving such notice; and
(c) Convertible Debentures that have been paid pursuant to Section
2.11, converted into Common Shares pursuant to Article XI, or in exchange
for or in lieu of which other Convertible Debentures have been
authenticated and delivered pursuant to the Indenture (except with respect
to any such Convertible Debenture as to which proof satisfactory to the
Trustee and the Company is presented that such Convertible Debenture is
held by a person in whose hands such Convertible Debenture is a legal,
valid and binding obligation of the Company).
<PAGE>
"Paying Agent" means any Person (which may include the Company) authorized
by the Company to pay the principal of or interest, if any, on any Convertible
Debenture on behalf of the Company.
"Persons" or "Person" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Place of Payment", when used with respect to the Convertible Debentures,
means the place or places where the principal of and interest, if any, on the
Convertible Debentures are payable as specified pursuant to Section 3.2.
"Predecessor Convertible Debenture" of a Convertible Debenture means every
previous Convertible Debenture evidencing all or a portion of the same debt as
that evidenced by such Convertible Debenture; and, for the purposes of this
definition, a Convertible Debenture authenticated and delivered under Section
2.11 in exchange for or in lieu of a mutilated, destroyed, lost or stolen
Convertible Debenture shall be deemed to evidence the same debt as the
mutilated, destroyed, lost or stolen Convertible Debenture.
"Preferred Securities Guarantee" means the Preferred Securities Guarantee
Agreement dated as of May 5, 2000 between the Guarantor and Wilmington Trust
Company, as Preferred Guarantee Trustee.
"Preferred Stock", as applied to the Capital Stock of any Person, means
Capital Stock of such Person of any class or classes (however designated) that
ranks prior, as to the payment of dividends or as to the distribution of assets
upon any voluntary or involuntary liquidation, dissolution or winding up of such
Person, to shares of Capital Stock of any other class of such Person.
"principal" whenever used with reference to the Convertible Debentures or
any Convertible Debenture or any portion thereof, shall be deemed to include
"and premium, if any."
"QIB" or "Qualified Institutional Buyer" shall mean "Qualified
Institutional Buyer" as such term is defined in Rule 144A under the Securities
Act.
"record date" has the meaning specified in Section 2.9.
"Redemption Price" has the meaning specified in Section 10.1(a).
"Registrar" has the meaning specified in Section 2.10.
"Regular Trustees" has the meaning specified in the Declaration.
<PAGE>
"Regulation S" means Regulation S under the Securities Act.
"Representative" means (a) the indenture trustee or other trustee, agent or
representative for any Senior Indebtedness or (b) with respect to any Senior
Indebtedness that does not have any such trustee, agent or other representative
(i) in the case of such Senior Indebtedness issued pursuant to an agreement
providing for voting arrangements as among the holders or owners of such Senior
Indebtedness, any holder or owner of such Senior Indebtedness acting with the
consent of the required persons necessary to bind such holders or owners of such
Senior Indebtedness and (ii) in the case of all other such Senior Indebtedness,
the holder or owner of such Senior Indebtedness.
"Responsible Officer" when used with respect to the Trustee means any
officer within the corporate trust department (or any successor department) of
the Trustee including any vice president, assistant vice president, assistant
secretary, senior trust officer, trust officer or any other officer or assistant
officer of the Trustee customarily performing functions similar to those
performed by the persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred at the Corporate Trust Office
because of his or her knowledge of and familiarity with the particular subject.
"Restricted Convertible Debenture" has the meaning specified in Section
2.4(a).
"Rights" has the meaning specified in Section 11.3(c).
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
"Sales Notice" has the meaning specified in Section 2.4(c).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Register" has the meaning specified in Section 2.10.
"Senior Indebtedness" means, with respect to the Company, (i) the
principal, premium, if any, and interest in respect of (a) indebtedness of the
Company for money borrowed (but excluding trade accounts payable arising in the
ordinary course of business) under any credit agreements, notes, guarantees or
similar documents and (b) indebtedness evidenced by securities, debentures,
bonds or other similar instruments issued by the Company; (ii) all capital lease
obligations of the Company; (iii) all obligations of the Company issued or
assumed as the deferred purchase price of property, all conditional sale
obligations of the Company and all obligations of the Company under any title
retention agreement (but excluding trade accounts
<PAGE>
payable arising in the ordinary course of business); (iv) all obligations of the
Company for reimbursement on any letter of credit, banker's acceptance, security
purchase facility or similar credit transaction; (v) all obligations of the
Company (contingent or otherwise) with respect to an interest rate or other
swap, cap or collar agreements or other similar instruments or agreements or
foreign currency hedge, exchange, purchase or similar instruments or agreements;
(vi) all obligations of the types referred to in clauses (i) through (v) of
other Persons for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise; and (vii) all obligations of the types referred
to in clauses (i) through (vi) above of other Persons secured by any lien on any
property or asset of the Company (whether or not such obligation is assumed by
the Company), whether outstanding on the date of this Indenture or thereafter
created, incurred, assumed, guaranteed or in effect guaranteed by the Company,
except for any such indebtedness that is by its terms subordinated to or pari
passu with the Convertible Debentures. Such Senior Indebtedness shall continue
to be Senior Indebtedness irrespective of any deferrals, renewals, extensions or
refundings of, or amendments, modifications, supplements or waivers of any term
of such Senior Indebtedness.
"Stated Maturity" when used with respect to any Convertible Debenture or
any installment of principal thereof or interest thereon, means the date on
which the principal of such Convertible Debenture or such installment of
principal or interest is due and payable in accordance with the terms thereof,
including, with respect to interest, each Interest Payment Date.
"Subsidiary" means any corporation, association, partnership or other
business entity of which more than 50% of the total voting power of the
outstanding Capital Stock (or other interests) entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, general
partners, managers, managing members, managing partners or trustees thereof or,
if such persons are not elected, to vote on any matter that is submitted to the
vote of all persons holding ownership interests in such entity, is at the time
owned or controlled, directly or indirectly, by (i) the Company, (ii) the
Company and one or more Subsidiaries or (iii) one or more Subsidiaries.
"Trading Day" shall mean a day on which any securities are traded on the
national securities exchange or quotation system used to determine the Closing
Price.
"Transfer Restriction Termination Date" means the earlier of the first date
on which (i) the Convertible Preferred Securities, the Convertible Debentures
and any Common Shares issued or issuable upon the conversion or exchange thereof
(other than (A) such securities acquired by the Company or any Affiliate thereof
since the Issue Date of the Convertible Preferred Securities and (B) Common
Shares issued upon the conversion or exchange of any such security described in
clause (A) above) may be sold pursuant to Rule 144(k) (or any successor
provision) and (ii) all of such Convertible Preferred Securities, Convertible
Debentures and/or Common Shares shall have been sold pursuant to an effective
registration statement.
<PAGE>
"Trust" or "WRP Trust" means WRP Convertible Trust I, a Delaware statutory
business trust.
"Trust Indenture Act" or "TIA" (except as otherwise provided in Sections
8.1 and 8.2) means the Trust Indenture Act of 1939, as amended, as in force at
the date as of which this Indenture was originally executed.
"Trust Securities" means the Common Securities and the Convertible
Preferred Securities of WRP Trust.
"Trust Securities Guarantees" means the Common Securities Guarantee and the
Preferred Securities Guarantee.
"Trustee" means the Person identified as "Trustee" in the first paragraph
hereof until a successor Trustee shall have become such pursuant to the
provisions hereof, and thereafter, "Trustee" shall mean or include each Person
who is then a Trustee hereunder.
"United States of America" or "United States" means the United States of
America (including the states and the District of Columbia), its territories,
possessions, the Commonwealth of Puerto Rico and other areas subject to its
jurisdiction.
"U.S. Person" means (i) a citizen or resident of the United States, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the United States or any state or political subdivision thereof, (iii)
an estate the income of which is subject to United States federal income
taxation regardless of its sources or (iv) a trust whose administration is
subject to the primary supervision of a United States court and which has one or
more United States fiduciaries who have the authority to control all substantial
decisions of the Trust.
"vice president" when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title of "vice president."
<PAGE>
ARTICLE II
THE CONVERTIBLE DEBENTURES
Section 2.1 Designation and Principal Amount. There are hereby authorized
Convertible Debentures designated the "8.25% Convertible Junior Subordinated
Debentures," in aggregate principal amount of at least $25,775,000 plus any
additional Convertible Debentures issuable pursuant to Section 2.5(c) hereof and
any additional Convertible Debentures issuable pursuant to the Trust Securities
Guarantees, which amount shall be as set forth in any written order of the
Company for the authentication and delivery of Convertible Debentures pursuant
to Section 2.6 of this Indenture. In the event that additional Convertible
Debentures are issued pursuant to the Trust Securities Guarantees, such
additional Convertible Debentures will be issued in replacement of the initially
issued Convertible Debentures not distributed as provided for in the Trust
Securities Guarantees, and such initially issued Debentures shall be deemed
automatically canceled and retired. The Trustee agrees to promptly deliver to
the Company and cancel any of the Convertible Debentures originally issued
hereunder or any replacements or substitutions therefor (which come into the
possession of the Trustee) the failure of which to not distribute to the Holders
of Preferred Securities or Common Securities resulted in the issuance of
additional Convertible Debentures pursuant to the aforesaid Trust Securities
Guarantees.
Section 2.2 Maturity. The Maturity Date is May 4, 2022.
Section 2.3 Form and Payment.
(a) Except as provided in Section 2.6, the Convertible Debentures shall be
issued in fully registered certificated form, without coupons, in denominations
of $25.00 in principal amount and integral multiples thereof. Principal and
interest on the Convertible Debentures issued in certificated form will be
payable, the transfer of such Convertible Debentures will be registrable and
such Convertible Debentures will be exchangeable for Convertible Debentures
bearing identical terms and provisions at the office or agency of the Trustee;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the Holder at such address as shall appear in the
Security Register. Notwithstanding the foregoing, so long as the Holder of any
Convertible Debentures is the Institutional Trustee, the payment of the
principal of and interest (including Additional Sums, if any) on such
Convertible Debentures held by the Institutional Trustee will be made in
immediately available funds at such place and to such account as may be
designated by the Institutional Trustee.
<PAGE>
(b) The Convertible Debentures are subject to the terms set forth in this
Indenture including, without limitation, Exhibit A hereto, the terms of which
are hereby incorporated in their entirety by reference.
(c) The Convertible Debentures and the Trustee's Certificate of
Authentication to be endorsed thereon are to be substantially in the form of
Exhibit A to this Indenture.
(d) The definitive Convertible Debentures shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the officers executing such Convertible Debentures, as
evidenced by their execution of such Convertible Debentures.
Section 2.4 Exchange and Registration of Transfer of Convertible
Debentures; Restrictions on Transfers; Depositary.
(a) Each Convertible Debenture that bears or is required to bear the legend
set forth in this Section 2.4(a) (a "Restricted Convertible Debenture") shall be
subject to the restrictions on transfer provided in the legend set forth in this
Section 2.4(a), unless such restrictions on transfer shall be waived by the
written consent of the Company, and the Holder of each Restricted Convertible
Debenture, by such Holder's acceptance thereof, agrees to be bound by such
restrictions on transfer. As used in this Section 2.4(a) and in Section 2.4(b),
the term "transfer" encompasses any sale, pledge, transfer or other disposition
of any Restricted Convertible Debenture.
Prior to the Transfer Restriction Termination Date, any certificate
evidencing a Convertible Debenture shall bear a legend in substantially the
following form, unless otherwise agreed by the Company (with written notice
thereof to the Trustee):
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR
TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH
IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1),
(2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS
<PAGE>
ACQUIRING THE SECURITY REPRESENTED HEREBY IN AN OFFSHORE TRANSACTION,
(2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE HOLDING
PERIOD APPLICABLE TO SALES OF THE SECURITY REPRESENTED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION)
RESELL OR OTHERWISE TRANSFER THE SECURITY REPRESENTED HEREBY OR, IF
THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES, THE COMMON SHARES
ISSUABLE UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO
WELLSFORD REAL PROPERTIES, INC. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, (C) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (D) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRUSTEE UNDER THE INDENTURE (OR, IF THIS CERTIFICATE REPRESENTS COMMON
SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE SECURITY REPRESENTED HEREBY (THE FORM
OF WHICH LETTER CAN BE OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT),
(E) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM REGISTRATION
PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE), AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY
REPRESENTED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY
REPRESENTED HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE SECURITY REPRESENTED HEREBY UNDER RULE
144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION), THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO
THE TRUSTEE UNDER THE INDENTURE (OR, IF THIS CERTIFICATE REPRESENTS
COMMON SHARES, SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR
WRP CONVERTIBLE TRUST I (THE "TRUST") MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT
REPRESENT COMMON SHARES AND IF THE
<PAGE>
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR OR A
PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE TRUSTEE UNDER THE INDENTURE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR
THE TRUST MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS
BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THIS
LEGEND WILL BE REMOVED AFTER THE EXPIRATION OF THE HOLDING PERIOD
APPLICABLE TO SALES OF THE SECURITY REPRESENTED HEREBY UNDER RULE
144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS SECURITY
IS ALSO SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE
INDENTURE.
Following the Transfer Restriction Termination Date, any Convertible
Debenture or security issued in exchange or substitution therefor (other than
(i) Convertible Debentures acquired by the Company or any Affiliate thereof
since the issue date of the Convertible Preferred Securities and (ii) Common
Shares issued upon the conversion or exchange of any Convertible Debenture
described in clause (i) above) may upon surrender of such Convertible Debenture
or security for exchange to the Registrar in accordance with the provisions of
this Section 2.4, be exchanged for a new Convertible Debenture or Convertible
Debentures or security or securities, of like tenor and aggregate principal
amount, which shall not bear the restrictive legend required by this Section
2.4(a).
(b) Any Convertible Debenture or Common Shares issued upon the conversion
or exchange of a Convertible Debenture that, prior to the Transfer Restriction
Termination Date, is purchased or owned by the Company or any Affiliate thereof
may not be resold by the Company or such Affiliate unless registered under the
Securities Act or resold pursuant to an exemption from the registration
requirements of the Securities Act in a transaction which results in such
Convertible Debentures or Common Shares, as the case may be, no longer being
"restricted securities" (as defined under Rule 144).
(c) Each Convertible Debenture shall be subject to the restrictions on
transfer provided in this Section 2.4(c).
(i) If a holder of a Convertible Debenture (the "Offeror") desires to sell,
assign, transfer, encumber, or otherwise dispose of any of his Convertible
Debentures, he shall give written notice to the Company of his desire to do so
and of the price per debenture and other terms under which he proposes to
dispose of his Convertible Debentures (the "Sales Notice"), which Sales Notice
shall constitute an offer
<PAGE>
on the part of the Offeror to sell to the Company any such Convertible
Debentures upon the terms and conditions set forth in such notice.
(ii) Unless, within ten (10) Business Days after the giving of the Sales
Notice by the Offeror pursuant to subparagraph (i) of this Section 2.4(c), the
Company shall give written notice to the Offeror that the Company irrevocably
commits to purchase the Convertible Debentures subject of the Sales Notice at
the price and under the terms specified in the Sales Notice given by the
Offeror, the Company shall be deemed to have rejected the offer of the Offeror
to sell the Convertible Debentures subject of the Sales Notice and the Offeror
shall be free without restriction under this Section 2.4(c) to sell the
Convertible Debentures subject of the Sales Notice to any other Person, provided
however, if the price per debenture is less than the price, or the other terms
are more favorable than those, contained in the Sales Notice, the Offeror shall
again offer to sell the Convertible Debentures in accordance with the provisions
of subparagraph (i) of this Section 2.4(c) before it may complete any such sale
and provided further, that the Convertible Debentures subject of the Sales
Notice shall again be subject to the provisions of subparagraph (i) of this
Section 2.4(c) if within ninety (90) days after the giving of the Sales Notice,
the Offeror shall not have completed the disposition of such Convertible
Debentures.
(iii) If the Company irrevocably commits to purchase the Convertible
Debentures as contemplated by subparagraph (ii) of this Section 2.4(c), the
closing of such purchase shall take place at the principal place of business of
the Company at 10:00 A.M. (New York City time) on the third (3rd) day following
the expiration of the ten (10) day period referred to in subparagraph (ii) of
this Section 2.4(c), or if such day is not a Business Day, then the next day
that is a Business Day.
(iv) The provisions of this Section 2.4(c) shall not apply to one or more
transfers of the Convertible Debentures by ERPLP to any Affiliate of ERPLP.
(v) The Convertible Debentures are not transferable by the Trustee, except
as specifically permitted pursuant to the terms of this Indenture.
Section 2.5 Interest.
(a) Each Convertible Debenture will bear interest at the rate of 8.25% per
annum of the principal amount of $25.00 ($2.0625 per annum, $0.515625 per
quarter), from and including May 5, 2000 (the "Issuance Date") to and including
the Maturity Date (the rate of interest is hereinafter referred to as the
"Coupon Rate"), until the principal thereof becomes due and payable, which
interest will be payable in equal quarterly payments in arrears of $0.515625 per
Convertible Debenture on the fifteenth day of January, April, July and October
of each year (each, an "Interest Payment Date"), commencing on July 17, 2000, to
the Person in whose name
<PAGE>
such Convertible Debenture is registered, at the close of business on the record
date for such interest installment, which shall be the close of business on the
fifteenth day prior to that Interest Payment Date. Each quarterly period ending
on an Interest Payment Date is hereinafter referred to as an "Interest Period."
(b) The amount of interest payable for the initial Interest Period and for
any Interest Period shorter than a full Interest Period shall be prorated and be
computed on the basis of a 360-day year of twelve 30-day months. In the event
that any date on which interest is payable on the Convertible Debentures is not
a Business Day, then payment of interest payable on such date will be made on
the next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date.
(c) For any twelve quarterly interest periods during the term of the
Convertible Debentures, whether or not consecutive, and whether or not the
Company has available cash to pay interest, the Company shall have the right to
pay the interest due on the Convertible Debentures by the issuance of additional
Convertible Debentures, the number of which shall be determined by dividing the
total amount of interest to be paid by the issuance of additional Convertible
Debentures by $25.00. Any such additional Convertible Debentures issued pursuant
to this Section 2.5(c) shall be governed by and subject to all of the terms and
conditions of this Indenture. Notwithstanding any other provision hereof, no
fractional interests in Convertible Debentures shall be issued in connection
with the payment of any interest on Convertible Debentures in additional
Convertible Debentures. Instead, any Holder of Outstanding Convertible
Debentures having a fractional interest arising upon the payment of interest in
additional Convertible Debentures shall, on the related Interest Payment Date,
be paid an amount in cash equal to $25.00 times the fraction of a Convertible
Debenture to which such Holder would otherwise be entitled.
(d) If at any time the Trust is required to pay any taxes, duties,
assessments or governmental charges of whatever nature (other than withholding
taxes) imposed by the United States, or any other taxing authority, then, in any
such case, the Company will pay as additional sums ("Additional Sums") such
additional amounts as shall be required so that the net amounts received and
retained by the Trust after paying any such taxes, duties, assessments or other
governmental charges will not be less than the amounts the Trust would have
received had no such taxes, duties, assessments or other government charges been
imposed so long as the Trust is the holder of the Convertible Debentures.
Section 2.6 Authentication and Delivery of Convertible Debentures. At any
time and from time to time after the execution and delivery of this Indenture,
the Company may deliver Convertible Debentures in the aggregate principal amount
of $25,775,000 plus any additional Convertible Debentures
<PAGE>
issuable pursuant to Section 2.5(c) hereof and any additional Convertible
Debentures issuable pursuant to the Preferred Securities Guarantee and the
Common Securities Guarantee executed by the Company to the Trustee for
authentication, and the Trustee shall thereupon authenticate and make available
for delivery such Convertible Debentures to or upon the written order of the
Company, signed by both (i) the chairman of its Board of Directors, or any vice
chairman of its Board of Directors, or its president or any vice president and
(ii) its chief financial officer, chief accounting officer, treasurer or any
assistant treasurer or its secretary or any assistant secretary, without any
further action by the Company. In authenticating such Convertible Debentures and
accepting the additional responsibilities under this Indenture in relation to
such Convertible Debentures, the Trustee shall be entitled to receive and
(subject to Section 6.1) shall be fully protected in relying upon:
(a) a copy of any resolution or resolutions of the Board of Directors
relating to the issuance of such Convertible Debentures, in each case certified
by the secretary or an assistant secretary of the Company;
(b) a supplemental indenture, if any;
(c) an Opinion of Counsel, prepared in accordance with Section 14.5, which
shall state that the Convertible Debentures have been duly authorized, and, when
authenticated and delivered by the Trustee and issued by the Company in the
manner and subject to any conditions specified in such Opinion of Counsel, will
constitute valid and binding obligations of the Company enforceable in
accordance with their terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization or other laws relating to or affecting the
enforcement of creditors' rights generally and by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
Notwithstanding the provisions of the preceding paragraph, if the
Convertible Debentures are not to be originally issued at one time, it shall not
be necessary to deliver the resolution of the Board of Trustees and Opinion of
Counsel otherwise required pursuant to such preceding paragraph at or prior to
the time of authentication of each Convertible Debenture if such documents are
delivered at or prior to the time of authentication upon original issuance of
the first Convertible Debentures to be issued. After the original issuance of
the first Convertible Debenture to be issued, any separate request by the
Company that the Trustee authenticate Convertible Debentures for original
issuance will be deemed to be a certification by the Company that it is in
compliance with all conditions precedent provided for in this Indenture relating
to the authentication and delivery of such Convertible Debentures.
The Trustee shall have the right to decline to authenticate and deliver any
Convertible Debentures under this Section if the Trustee is advised by counsel
in good faith that the issuance of such Convertible Debentures would expose the
Trustee to personal liability or is unlawful.
<PAGE>
Section 2.7 Execution of Convertible Debentures. The Convertible Debentures
shall be signed on behalf of the Company by the chairman of its Board of
Directors, or any vice chairman of its Board of Directors, or its president or
any vice president and attested by its chief financial officer, treasurer or any
assistant treasurer or its secretary or any assistant secretary, under its
corporate seal. Such signatures may be the manual or facsimile signatures of
such officers. The seal of the Company may be in the form of a facsimile thereof
and may be impressed, affixed, imprinted or otherwise reproduced on the
Convertible Debentures. Typographical and other minor errors or defects in any
such reproduction of the seal or any such signature shall not affect the
validity or enforceability of any Convertible Debenture that has been duly
authenticated and delivered by the Trustee.
In case any officer of the Company who shall have signed any of the
Convertible Debentures shall cease to be such officer before the Convertible
Debenture so signed shall be authenticated and delivered by the Trustee or
disposed of by the Company, such Convertible Debenture nevertheless may be
authenticated and delivered or disposed of as though the person who signed such
Convertible Debenture had not ceased to be such officer of the Company; and any
Convertible Debenture may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Convertible Debenture, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Indenture any such person was not such an officer.
Section 2.8 Certificate of Authentication. Only such Convertible Debentures
as shall bear thereon a certificate of authentication substantially in the form
attached hereto as a part of Exhibit A and executed by the Trustee by the manual
signature of one of its authorized signatories shall be entitled to the benefits
of this Indenture or be valid or obligatory for any purpose. The execution of
such certificate by the Trustee upon any Convertible Debenture executed by the
Company shall be conclusive evidence that the Convertible Debenture so
authenticated has been duly authenticated and delivered hereunder and that the
Holder is entitled to the benefits of this Indenture.
Notwithstanding the foregoing, if any Convertible Debenture shall have been
duly authenticated and delivered hereunder but never issued and sold by the
Company, the Company shall deliver such Convertible Debenture to the Trustee for
cancellation as provided in Section 2.12 together with a written statement
(which need not comply with Section 14.5 and need not be accompanied by an
Opinion of Counsel) stating that such Convertible Debenture has never been
issued and sold by the Company, and for all purposes of this Indenture such
Convertible Debenture shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.
Section 2.9 Denomination and Date of Convertible Debentures; Payments of
Interest. Convertible Debentures shall be issuable in denominations of $25.00
and any integral multiple
<PAGE>
thereof. The Convertible Debentures shall be numbered, lettered, or otherwise
distinguished in such manner or in accordance with such plans as the officers of
the Company executing the same may determine with the approval of the Trustee as
evidenced by the execution and authentication thereof.
Each Convertible Debenture shall be dated the date of its authentication.
The term "record date" as used with respect to any Interest Payment Date
(except for payment of defaulted interest) shall mean the close of business on
the fifteenth day preceding such Interest Payment Date, whether or not such
record date is a Business Day.
Any interest on any Convertible Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (called
"defaulted interest" for purposes of this Section) shall remain due and payable
but, solely with respect to the previously declared relevant record date, shall
forthwith cease to be payable to the Holder on such relevant record date by
virtue of his having been such Holder; and such defaulted interest may be paid
by the Company, at its election in each case, as provided in clause (1) or
clause (2) below:
(1) The Company may elect to make payment of any defaulted
interest to the persons in whose names any such Convertible Debentures
(or their respective Predecessor Convertible Debentures) are
registered at the close of business on a special record date for the
payment of such defaulted interest, which shall be fixed in the
following manner. The Company shall notify the Trustee in writing of
the amount of defaulted interest proposed to be paid on each
Convertible Debenture and the date of the proposed payment, and at the
same time the Company shall deposit with the Trustee an amount of
money equal to the aggregate amount proposed to be paid in respect of
such defaulted interest or shall make arrangements satisfactory to the
Trustee for such deposit prior to the date of the proposed payment,
such money when deposited to be held in trust for the benefit of the
persons entitled to such defaulted interest as in this clause
provided. Thereupon the Trustee shall fix a special record date for
the payment of such defaulted interest in respect of Convertible
Debentures which shall not be more than 15 nor less than 10 days prior
to the date of the proposed payment and not less than 10 days after
the receipt by the Trustee of the notice of the proposed payment. The
Trustee shall promptly notify the Company of such special record date
and, in the name and at the expense of the Company shall cause notice
of the proposed payment of such defaulted interest and the special
record date thereof to be mailed, first class postage prepaid, to each
Holder at his address as it appears in the Security Register, not less
than 10 days prior to such special record date. Notice of the proposed
payment of such defaulted interest and the special record date
therefor having been mailed as aforesaid, such defaulted interest in
respect of Convertible Debentures shall be paid to the person in whose
names such Convertible Debentures (or their respective predecessor
Convertible Debentures) are
<PAGE>
registered on such special record date and such defaulted interest
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any defaulted interest on the
Convertible Debentures in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the
Convertible Debentures may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to
the Trustee of the proposed payment pursuant to this clause, such
manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Convertible
Debenture delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Convertible Debenture shall carry the rights to interest
accrued and unpaid, and to accrue, which were carried by such other Convertible
Debenture.
In the case of any Convertible Debenture which is converted into Common
Shares of the Company after any record date and on or prior to the next
succeeding Interest Payment Date (other than any Convertible Debenture whose
Maturity is prior to such Interest Payment Date), interest whose Stated Maturity
is on such Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose name that
Convertible Debenture (or one or more Predecessor Convertible Debentures) is
registered at the close of business on such record date. However, if a
redemption date falls between a record date and the subsequent Interest Payment
Date, the amount of such payment shall include accumulated and unpaid interest
accrued to, but excluding, such redemption date. Except as otherwise expressly
provided in the first two sentences of this paragraph, in the case of any
Convertible Debenture which is converted, interest whose Stated Maturity is
after the date of conversion of such Convertible Debenture shall not be payable.
Section 2.10 Registration, Transfer and Exchange. The provisions of this
Section 2.10 shall be subject in their entirety to the provisions of Section
2.4. The Company will cause to be kept at each office or agency to be maintained
for the purpose as provided in Section 3.2 a register or registers (herein
sometimes referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company will provide for the
registration and the registration of the transfer or exchange of the Convertible
Debentures. The Trustee is hereby appointed and accepts the appointment as
Registrar (the "Registrar") for purposes of registering, and registering
transfers of, the Convertible Debentures.
Upon surrender for registration of transfer of any Convertible Debenture at
any such office or agency to be maintained for the purpose as provided in
Section 3.2, the Company shall execute and the Trustee shall authenticate and
make available for delivery in the name of the
<PAGE>
transferee or transferees a new Convertible Debenture or Convertible Debentures
of a like tenor and containing the same terms (other than the principal amount
thereof, if more than one Convertible Debenture is executed, authenticated and
delivered in respect of any Convertible Debenture so presented, in which case
the aggregate principal amount of the executed, authenticated and delivered
Convertible Debentures shall equal the principal amount of the Convertible
Debenture presented in respect thereof) and conditions.
At the option of the Holder thereof, Convertible Debentures may be
exchanged for a Convertible Debenture or Convertible Debentures having
authorized denominations and an equal aggregate principal amount, upon surrender
of such Convertible Debentures to be exchanged at the agency of the Company that
shall be maintained for such purpose in accordance with Section 3.2 and upon
payment, if the Company shall so require, of the charge hereinafter provided.
Whenever any Convertible Debentures are so surrendered for exchange, the Company
shall execute, and the Trustee shall authenticate and deliver, the Convertible
Debentures which the Holder making the exchange is entitled to receive. All
Convertible Debentures surrendered upon any exchange or transfer provided for in
this Indenture shall be promptly canceled by the Trustee and the Trustee will
deliver a certificate of cancellation thereof to the Company.
All Convertible Debentures issued upon any transfer or exchange of
Convertible Debentures shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Convertible Debentures surrendered upon such transfer or exchange.
Every Convertible Debenture presented or surrendered for registration of
transfer or exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by the Holder thereof
or his attorney duly authorized in writing.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Convertible Debentures, but the company may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any transfer or exchange of Convertible
Debentures, other than exchanges pursuant to Sections 2.13, 8.5 or 11.5 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Convertible Debenture during a 15-day period prior to the day of
mailing of the relevant notice of redemption or (ii) to register the transfer of
or exchange any Convertible Debenture so selected for redemption in whole or in
part, except, in the case of any Convertible Debenture to be redeemed in part,
the portion thereof not redeemed.
Section 2.11 Mutilated, Defaced, Destroyed, Lost and Stolen Convertible
<PAGE>
Debentures. In case any temporary or definitive Convertible Debenture shall
become mutilated or defaced or be destroyed, lost or stolen, then, in the
absence of notice to the Company or the Trustee that the Convertible Debenture
has been acquired by a bona fide purchaser, the Company shall execute, and upon
the written request of any officer of the Company, the Trustee shall
authenticate and make available for delivery a new Convertible Debenture of like
tenor and principal amount and with the same terms and conditions, bearing a
number not contemporaneously outstanding, in exchange and substitution for the
mutilated or defaced Convertible Debenture or in lieu of and substitution for
the Convertible Debenture so destroyed, lost or stolen. In every case the
applicant for a substitute Convertible Debenture shall furnish to the Company
and to the Trustee and to any agent of the Company or the Trustee such security
or indemnity as may be required by them to indemnify and defend and to save each
of them harmless and, in every case of destruction, loss or theft, evidence to
their satisfaction of the destruction, loss or theft of such Convertible
Debenture and of the ownership thereof and in the case of mutilation or
defacement shall surrender the Convertible Debenture to the Trustee or such
agent.
Upon the issuance of any substitute Convertible Debenture, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee or its agent) connected therewith. In case
any Convertible Debenture which has matured or is about to mature or has been
called for redemption in full shall become mutilated or defaced or be destroyed,
lost or stolen, the Company may, instead of issuing a substitute Convertible
Debenture, pay or authorize, the payment of the same (without surrender thereof
except in the case of a mutilated or defaced Convertible Debenture); provided,
however, that the applicant for such payment shall furnish to the Company and to
the Trustee and any agent of the Company or the Trustee such security or
indemnity as any of them may require to save each of them harmless, and, in
every case of destruction, loss or theft, the applicant shall also furnish to
the Company and the Trustee and any agent of the Company or the Trustee evidence
to their satisfaction of the destruction, loss or theft of such Convertible
Debenture and of the ownership thereof.
Every substitute Convertible Debenture issued pursuant to the provisions of
this Section by virtue of the fact that any Convertible Debenture is destroyed,
lost or stolen shall constitute a contractual obligation of the Company, and
shall be entitled to all the benefits of (but shall be subject to all the
limitations of rights set forth in) this Indenture equally and proportionately
with any and all other Convertible Debentures duly authenticated and delivered
hereunder. All Convertible Debentures shall be held upon the express condition
that, to the extent permitted by law, the foregoing provisions are exclusive
with respect to the replacement or payment of mutilated, defaced, destroyed,
lost or stolen Convertible Debentures and shall preclude any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement or payment of negotiable
instruments or other securities without their surrender.
<PAGE>
Section 2.12 Cancellation of Convertible Debentures. All Convertible
Debentures surrendered for payment, redemption, conversion, registration of
transfer or exchange, or for credit against any payment in respect of a sinking
or analogous fund, shall, if surrendered to the Company or any agent of the
Company or the Trustee, be delivered to the Trustee for cancellation or, if
surrendered to the Trustee, shall be canceled by it; and no Convertible
Debentures shall be issued in lieu thereof, except as expressly permitted by any
of the provisions of this Indenture. The Company may at any time deliver to the
Trustee for cancellation any Convertible Debentures previously authenticated
hereunder which the Company has not issued and sold and all Convertible
Debentures so delivered shall be promptly canceled by the Trustee. If the
Company shall acquire any of the Convertible Debentures, such acquisition shall
not operate as a redemption or satisfaction of the indebtedness represented by
such Convertible Debentures unless and until the same are delivered to the
Trustee for cancellation. All canceled Convertible Debentures shall be disposed
of as directed by a Company Order or, in the absence of such Company Order, in
accordance with the Trustee's customary practices. The Trustee shall provide a
certificate of destruction to the Company with respect to all Convertible
Debentures disposed of by the Trustee.
Section 2.13 Temporary Convertible Debentures. Pending the preparation of
definitive Convertible Debentures, the Company may execute and the Trustee shall
authenticate and make available for delivery temporary Convertible Debentures
(printed, lithographed, typewritten or otherwise reproduced, in each case in
form reasonably acceptable to the Trustee). Temporary Convertible Debentures
shall be issuable in any authorized denomination, and substantially in the form
of the definitive Convertible Debentures but with such omissions, insertions and
variations as may be appropriate for temporary Convertible Debentures, all as
may be determined by the Company with the reasonable concurrence of the Trustee.
Temporary Convertible Debentures may contain such reference to any provisions of
this Indenture as may be appropriate. Every temporary Convertible Debenture
shall be executed by the Company and be authenticated by the Trustee upon the
same conditions and in substantially the same manner, and with like effect, as
the definitive Convertible Debentures. Without unreasonable delay the Company
shall execute and shall furnish definitive Convertible Debentures and thereupon
temporary Convertible Debentures may be surrendered in exchange therefor without
charge to the Holder at each office or agency to be maintained by the Company
for that purpose pursuant to Section 3.2, and the Trustee shall authenticate and
make available for delivery in exchange for such temporary Convertible
Debentures an equal aggregate principal amount of definitive Convertible
Debentures of authorized denominations. Until so exchanged, the temporary
Convertible Debentures shall be entitled to the same benefits under this
Indenture as definitive Convertible Debentures.
ARTICLE III
<PAGE>
COVENANTS OF THE COMPANY
Section 3.1 Payment of Principal and Interest. The Company covenants and
agrees for the benefit of the Holders of the Convertible Debentures that it will
duly and punctually pay or cause to be paid the principal of, and interest on,
each of the Convertible Debentures in accordance with the terms of such
Convertible Debentures and of this Indenture. The interest on Convertible
Debentures (together with any additional amounts payable pursuant to the terms
of such Convertible Debentures) shall be payable only to the Holders thereof and
at the option of the Company may be paid by wire transfer or by mailing checks
for such interest payable to such Holders at their last addresses as they appear
on the Security Register.
Section 3.2 Offices for Payment, etc. So long as any of the Convertible
Debentures remain outstanding, the Company will maintain the following: an
office or agency in the Borough of Manhattan, City of New York (a) where the
Convertible Debentures may be presented for payment, (b) where the Convertible
Debentures may be presented for registration of transfer and for exchange as
provided in this Indenture, and (c) where notices and demands may be served upon
the Company in respect of the Convertible Debentures, or this Indenture.
The Company will give to the Trustee written notice of the location of any
such office or agency and of any change of location thereof. In case the Company
shall fail to so designate or maintain any such office or agency or shall fail
to give such notice of the location or of any change in the location thereof,
presentations and demands may be made and notices may be served at the Corporate
Trust Office.
Section 3.3 Paying Agents. Whenever the Company is not the Paying Agent, it
shall appoint a Paying Agent other than the Trustee with respect to the
Convertible Debentures, it will cause such Paying Agent to execute and deliver
to the Trustee an instrument in which such Paying Agent shall agree with the
Trustee, subject to the provisions of this Section:
(a) that it will hold all sums received by it as such Paying
Agent for the payment of the principal of or interest on the
Convertible Debentures (whether such sums have been paid to it by the
Company or by any other obligor on the Convertible Debentures) in
trust for the benefit of the Holders of the Convertible Debentures or
of the Trustee, and upon the occurrence of an Event of Default and
upon the written request of the Trustee, pay over all such sums
received by it to the Trustee; and
(b) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Convertible Debentures) to
make any payment of the
<PAGE>
principal of or interest on the Convertible Debentures when the same
shall be due and payable.
The Company hereby appoints the Trustee as Paying Agent and the Trustee
accepts such appointment as Paying Agent and agrees to hold all sums received by
it as such Paying Agent for the payment of the principal of, or interest on, the
Convertible Debentures (whether such sums have been paid to it by the Company or
by any other obligor on the Convertible Debentures) in trust for the benefit of
the Holders of the Convertible Debentures.
The Company will, on or prior to each due date of the principal of or
interest on the Convertible Debentures, deposit in a timely manner with the
Paying Agent a sum sufficient to pay such principal or interest so becoming due,
and (unless such Paying Agent is the Trustee) the Company will promptly notify
the Trustee of any failure to take such action.
If the Company shall act as its own Paying Agent with respect to the
Convertible Debentures, it will, on or before each due date of the principal of
or interest on the Convertible Debentures, set aside, segregate and hold in
trust for the benefit of the holders of the Convertible Debentures a sum
sufficient to pay such principal or interest so becoming due. The Company will
promptly notify the Trustee of any failure to take such action.
Section 3.4 Written Statement to Trustee. The Company will deliver to the
Trustee, within 120 days after the end of each fiscal year of the Company ending
after the date hereof, a brief certificate (which need not comply with Section
14.5) from the principal executive, financial or accounting officer of the
Company as to his or her knowledge, after due inquiry, of the Company's
compliance with all conditions and covenants under this Indenture (such
compliance to be determined without regard to any period of grace or requirement
of notice provided under this Indenture), and if the Company shall not be in
compliance, specifying all such defaults or non-compliance and the nature and
status thereof.
Section 3.5 Limitation on Dividends. If any Convertible Debentures are
outstanding and (i) there shall have occurred any Event of Default or any event
that, with the giving of notice or lapse of time or both, would constitute an
Event of Default, or (ii) the Guarantor shall be in default with respect to its
payment or other obligations pursuant to Section 5.1 of the Preferred Securities
Guarantee or Section 2.1 of the Common Securities Guarantee, then the Company
shall not (a) declare or pay any dividend on, make any distribution with respect
to, or redeem, purchase or make a liquidation payment with respect to, any of
its Capital Stock or (b) make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior in interest to the Convertible Debentures or
make any guarantee payments with respect to any guarantee by the Company of the
debt securities of any subsidiary of the Company if such guarantee ranks pari
passu with or junior in interest to the Convertible Debentures (other than (i)
as a result of a reclassification of the Capital Stock of the Company or
<PAGE>
the exchange or conversion of one class or series of the Capital Stock of the
Company for another class or series of the Capital Stock of the Company, (ii)
the purchase of fractional interests in shares of the Capital Stock of the
Company pursuant to the conversion or exchange provisions of such Capital Stock
or the security being converted into or exchanged for such Capital Stock, (iii)
dividends or distributions in Common Shares of the Company, (iv) any declaration
of a dividend in connection with the implementation of a shareholders' rights
plan, or the issuance of Capital Stock under any such plan in the future, or the
redemption or repurchase of any such rights pursuant thereto, (v) payments under
the Trust Securities Guarantees, (vi) purchases of Common Shares of the Company
related to the issuance of Common Shares of the Company or rights under any of
the Company's benefit plans for its directors, officers or employees and (vii)
prior obligations under any dividend reinvestment and stock purchase plans to
issue shares other than as a result of the payment of a dividend), in each case
unless and until such default or Event of Default shall have been cured.
Section 3.6 Covenants as to WRP Trust. For so long as the Trust Securities
remain outstanding, the Company will (a) maintain 100% direct or indirect
ownership of the Common Securities of WRP Trust, provided, however, that any
permitted successor of the Company under this Indenture may succeed to the
Company's ownership of the Common Securities, (b) use its best efforts to cause
WRP Trust (i) to remain a statutory business trust, except in connection with
the distribution of Convertible Debentures to the holders of Trust Securities in
liquidation of WRP Trust, the redemption of all of the Trust Securities of WRP
Trust, or certain mergers or consolidations, each as permitted by the
Declaration, and (ii) to continue to be classified as a grantor trust for United
States federal income tax purposes and (c) use its best efforts to cause each
holder of Trust Securities to be treated as owning an undivided beneficial
interest in the Convertible Debentures.
Section 3.7 Existence. Except as permitted by the Declaration and Article
IX hereof, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect the Company's existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any such right or franchise if the Board of
Directors shall determine that the preservation thereof is no longer desirable
in the conduct of the business of the Company and that the loss thereof is not
disadvantageous in any material respect to the Holders.
ARTICLE IV
HOLDERS OF CONVERTIBLE DEBENTURES LISTS AND REPORTS
BY THE COMPANY AND THE TRUSTEE
<PAGE>
Section 4.1 Company to Furnish Trustee Information as to Names and
Addresses of Holders of Convertible Debentures. The Company covenants and agrees
that it will furnish or cause to be furnished to the Trustee a list in such form
as the Trustee may reasonably require of the names and addresses of the Holders
of the Convertible Debentures:
(i) semiannually and not more than 15 days after each record date
for the payment of interest on such Convertible Debentures, as
hereinabove specified, as of such record date, and
(ii) at such other times as the Trustee may reasonably request in
writing, within 30 days after receipt by the Company of any such
request, such list to be as of a date not more than 15 days prior to
the time such information is furnished, provided that if and so long
as the Trustee shall be the Registrar, such list shall not be required
to be furnished.
Section 4.2 Preservation and Disclosure of Holders of Convertible
Debentures Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of
Convertible Debentures contained in the most recent list furnished to it as
provided in Section 4.1 or maintained by the Trustee in its capacity as
Registrar, if so acting. The Trustee may destroy any list furnished to it as
provided in Section 4.1 upon receipt of a new list so furnished.
(b) In case three or more Holders of Convertible Debentures or, if there
are less than five Holders, the Holders of not less than a majority in aggregate
principal amount of the Convertible Debentures (hereinafter referred to as
"applicants") apply in writing to the Trustee and furnish to the Trustee
reasonable proof that each such applicant has owned a Convertible Debenture for
a period of at least 30 days preceding the date of such application, and such
application states that the applicants desire to communicate with other Holders
of Convertible Debentures (in which case the applicants must all hold
Convertible Debentures) or with Holders of all Convertible Debentures with
respect to their rights under this Indenture or under such Convertible
Debentures and such application is accompanied by a copy of the form of proxy or
other communication which such applicants propose to transmit, then the Trustee
shall, within five business days after the receipt of such application, at is
election, either
(i) afford to such applicants access to the information preserved
at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section, or
<PAGE>
(ii) inform such applicants as to the approximate number of
Holders of Convertible Debentures or of all Convertible Debentures, as
the case may be, whose names and addresses appear in the information
preserved at the time by the Trustee, in accordance with the
provisions of subsection (a) of this Section, as to the approximate
cost of mailing to such Holders of Convertible Debentures the form of
proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford to such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder of Convertible Debentures or all Holders of Convertible
Debentures, as the case may be, whose name and address appears in the
information preserved at the time by the Trustee in accordance with the
provisions of subsection (a) of this Section, a copy of the form of proxy or
other communication which is specified in such request, with reasonable
promptness after a tender to the Trustee of the material to be mailed and of
payment, or provision for the payment, of the reasonable expenses of mailing,
unless within five days after such tender, the Trustee shall mail to such
applicants and file with the Commission together with a copy of the material to
be mailed, a written statement to the effect that, in the opinion of the
Trustee, such mailing would be contrary to the best interests of the Holders of
Convertible Debentures or could be in violation of applicable law. Such written
statement shall specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the written statement
so filed, shall enter an order refusing to sustain any of such objections or if,
after the entry of such order sustaining one or more of such objections, the
Commission shall find, after notice and opportunity for hearing, that all the
objections so sustained have been met, and shall enter an order so declaring,
the Trustee shall mail copies of such material to all such Holders of
Convertible Debentures with reasonable promptness after the entry of such order
and the renewal of such tender; otherwise the Trustee shall be relieved of any
obligation or duty to such applicants respecting their application.
(c) Each and every Holder of Convertible Debentures, by receiving and
holding the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any agent of the Company or the Trustee shall be
held accountable by reason of the disclosure of any such information as to the
names and addresses of the Holders of Convertible Debentures in accordance with
the provisions of subsection (b) of this Section, regardless of the source from
which such information was derived, and that the Trustee shall not be held
accountable by reason of mailing any material pursuant to a request made under
such subsection (b).
Section 4.3 Reports by the Company. The Company covenants:
(a) to file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents, and other reports (or
copies of such portions and any of the
<PAGE>
foregoing as the Commission may from time to time by rules and
regulations prescribe) which the Company may be required to file with
the Commission pursuant to Section 13 or Section 15(d) of the Exchange
Act, or if the Company is not required to file information, documents,
or reports pursuant to either of such Sections, then to file with the
Trustee and the Commission to the extent permitted, in accordance with
rules and regulations prescribed from time to time by the Commission,
such of the supplementary and periodic information, documents, and
reports which may be required pursuant to Section 13 of the Exchange
Act, in respect of a security listed and registered on a national
securities exchange as may be prescribed from time to time in such
rules and regulations;
(b) to file with the Trustee and the Commission, in accordance
with rules and regulations prescribed from time to time by the
Commission, such additional information, documents, and reports with
respect to compliance by the Company with the conditions and covenants
provided for in this Indenture as may be required from time to time by
such rules and regulations; and
(c) to transmit by mail to the Holders of Convertible Debentures
in the manner and to the extent required by Sections 6.6 and 14.4,
within 30 days after the filing thereof with the Trustee, such
summaries of any information, documents, and reports required to be
filed by the Company pursuant to subsections (a) and (b) of this
Section as may be required to be transmitted to such Holders by rules
and regulations prescribed from time to time by the Commission.
ARTICLE V
REMEDIES OF THE TRUSTEE AND HOLDERS OF
CONVERTIBLE DEBENTURES ON EVENT OF DEFAULT
Section 5.1 Event of Default Defined; Acceleration of Maturity; Waiver of
Default. "Event of Default" with respect to the Convertible Debentures wherever
used herein, means any one or more of the following events which shall have
occurred and be continuing (whatever the reason for such Event of Default and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(a) default in the payment of any interest on the Convertible
Debentures, in cash or by the issuance of additional Convertible
Debentures pursuant to Section
<PAGE>
2.5(c) hereof (including any Additional Sums), or any additional
amounts payable in respect of any Convertible Debentures when it
becomes due and payable, and continuance of such default for a period
of 30 days, without regard to the application of Section 2.9 hereof;
or
(b) default in the payment of the principal of, or premium, if
any, on any Convertible Debentures as and when the same shall become
due and payable whether at maturity, upon redemption, by declaration
or otherwise; or
(c) default in the performance, or breach of any covenant or
warranty of the Company contained in the Convertible Debentures or in
this Indenture (other than a covenant or warranty a default in whose
performance or whose breach is elsewhere in this Section specifically
dealt with), and continuance of such default or breach for a period of
30 days after there has been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the Trustee by the
Holders of at least 25% in aggregate principal amount of the
Outstanding Convertible Debentures a written notice specifying such
default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(d) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of all or any substantial part of its
property, or ordering the winding up or liquidation of its affairs,
and the continuance of any such decree or order for relief or any such
other decree or order unstayed and in effect for a period of 90
consecutive days; or
(e) the commencement by the Company of a voluntary case or
proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect
of the Company in an involuntary case or proceeding under any
applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Company or of all or any substantial
<PAGE>
part of its property, or the making by it of an assignment for the
benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due, or the taking
of corporate action by the Company in furtherance of any such action;
or
(f) failure by the Company to convert Convertible Debentures into
Common Shares of the Company upon an appropriate election by a holder
of Trust Securities or a Holder of Convertible Debentures to convert
such Trust Securities or Convertible Debentures, as the case may be,
into such Common Shares (whether or not conversion or exchange is
prohibited by the subordination provisions set forth herein); or
(g) the WRP Trust shall have voluntarily or involuntarily
dissolved, wound- up its business or otherwise terminated its
existence except in connection with (i) the distribution of
Convertible Debentures to holders of Trust Securities in liquidation
of their interest in the WRP Trust upon the occurrence of a Special
Event, as defined in the Declaration, or upon the occurrence of events
as described in Section 3 of Annex I to the Declaration, (ii) the
redemption of all of the outstanding Trust Securities of the WRP
Trust, (iii) the conversion of all outstanding Convertible Preferred
Securities into Common Shares of the Company or (iv) certain mergers
or consolidations, each as permitted by the Declaration or Article IX
hereof;
(h) the Company shall have consummated a merger or consolidation
in which the successor will be taxed as a partnership for federal
income tax purposes;
(i) the Company shall convert into, or otherwise be taxed as, a
partnership for federal income tax purposes; or
(j) all or substantially all of the assets of the Company have
been transferred to an entity taxable as a partnership for federal
income tax purposes (for purposes of this paragraph (j), the
"partnership"), unless the Company is taxable as a REIT, is the
managing general partner of the partnership, owns in excess of 90% of
the partnership interests of the partnership, causes the partnership
to issue debentures to the Company with the same rights and privileges
as the Convertible Debentures, and the partnership has succeeded to
substantially all of the assets of the Company and has taken the
assets in exchange for a guarantee of the Convertible Debentures.
If an Event of Default occurs and is continuing, then and in each and every
such case, unless the principal of all Convertible Debentures shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the
<PAGE>
Convertible Debentures then Outstanding hereunder, by notice in writing to the
Company (and to the Trustee if given by such Holders), may declare the entire
principal of, plus accrued and unpaid interest on, all the Convertible
Debentures (including Additional Sums, if any) and any other amounts payable
under this Indenture to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable.
These provisions, however, are subject to the condition that if at any time
after the principal and other amounts due on the Convertible Debentures shall
have been so declared due and payable, and before any judgment or decree for the
payment of the moneys due shall have been obtained or entered as hereinafter
provided, the Company shall pay or shall deposit with the Trustee a sum
sufficient to pay all matured installments of interest, if any, upon all the
Convertible Debentures and the principal of any and all Convertible Debentures
which shall have become due otherwise than by such acceleration (with interest
upon such principal) or deposit in Dollars such amount as shall be sufficient to
cover reasonable compensation to the Trustee, its agents, attorneys and counsel
and all other expenses and liabilities incurred, and all advances with interest
made, by the Trustee, its agents, attorneys and counsel and if any and all
defaults under this Indenture, other than the nonpayment of the principal and
interest of Convertible Debentures which shall have become due by such
acceleration, shall have been cured or waived as provided herein, then and in
every such case the Holders of a majority in aggregate principal amount of the
Convertible Debentures then Outstanding, by written notice to the Company and to
the Trustee for the Convertible Debentures, may waive all defaults and rescind
and annul such declaration and its consequences; but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default
or shall impair any right consequent thereon.
Section 5.2 Collection of Indebtedness by Trustee; Trustee May Prove Debt.
The Company covenants that (a) in case default shall be made in the payment of
any installment of interest on any of the Convertible Debentures when such
interest shall have become due and payable, and such default shall have
continued for a period of 30 days, or (b) in case default shall be made in the
payment of all or any part of the principal of any of the Convertible Debentures
when the same shall have become due and payable, whether upon Maturity or upon
any redemption or by declaration or otherwise, then upon demand of the Trustee
for the Convertible Debentures, the Company will pay to the Trustee for the
benefit of the Holders of the Convertible Debentures the whole amount that then
shall have become due and payable on all Convertible Debentures for principal of
or interest, as the case may be (with interest to the date of such payment upon
the overdue principal and, to the extent that payment of such interest is
enforceable under applicable law, on overdue installments of interest at the
same rate as the rate of interest specified in the Convertible Debentures); and
in addition thereto, such further amount as shall be sufficient to cover the
costs and expenses of collection, including reasonable compensation to, and all
expenses and liabilities incurred and all advances with interest made by, the
Trustee and each predecessor Trustee except as a result of its negligence or bad
faith.
<PAGE>
Until such demand is made by the Trustee, the Company may pay the principal
of and interest on the Convertible Debentures to the persons entitled thereto,
whether or not the principal of and interest on the Convertible Debentures are
overdue.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee for the Convertible Debentures, in its own name and as
trustee of an express trust, shall be entitled and empowered to institute any
action or proceedings at law or in equity for the collection of the sums so due
and unpaid, and may prosecute any such action or proceedings to judgment or
final decree, and may enforce any such judgment or final decree against the
Company or other obligor upon such Convertible Debentures and collect in the
manner provided by law out of the property of the Company or other obligor upon
such Convertible Debentures, wherever situated, the moneys adjudged or decreed
to be payable.
In case there shall be pending proceedings relative to the Company or any
other obligor upon the securities under Title 11 of the United States Code or
any other applicable federal or state bankruptcy, insolvency or other similar
law, or in case a receiver, assignee or trustee in bankruptcy or reorganization,
liquidator, sequestrator or similar official shall have been appointed for or
taken possession of the Company or its property or such other obligor, or in
case of any other comparable judicial proceedings relative to the Company or
other obligor under the Convertible Debentures, or to the property of the
Company or such other obligor, the Trustee, irrespective of whether the
principal of any Convertible Debentures shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section, shall be
entitled and empowered, by intervention in such proceeding or otherwise:
(a) to file and prove a claim or claims for the whole amount of
principal and interest owing and unpaid in respect of the Convertible
Debentures, and to file such other papers or documents as may be
necessary or advisable in order to have the claims of the Trustee
(including any claim for reasonable compensation to, and all expenses
and liabilities incurred and all advances with interest made by, the
Trustee and each predecessor Trustee, and their respective agents,
attorneys and counsel, except as a result of negligence or bad faith)
and of the Holders of Convertible Debentures allowed in any judicial
proceedings relative to the Company or other obligor upon all
Convertible Debentures, or to the property of the Company or such
obligor, and
(b) to collect and receive any moneys or other property payable
or deliverable on any such claims, and to distribute all amounts
received with respect to the claims of the Holders of Convertible
Debentures and of the Trustee on their behalf; and any trustee,
receiver, liquidator, custodian or other similar official is hereby
authorized by each of the Holders of Convertible Debentures to make
payments to the Trustee for the Convertible Debentures, and, in the
event that such Trustee shall consent to
<PAGE>
the making of payments directly to the Holders of Convertible
Debentures, to pay to such Trustee such amounts as shall be sufficient
to cover reasonable compensation to, and all expenses and liabilities
incurred and all advances with interest made by, such Trustee, each
predecessor Trustee and their respective agents, attorneys and counsel
and all other amounts due to such Trustee or any predecessor Trustee
pursuant to Section 6.7, except as a result of Trustee's negligence or
bad faith.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder of
Convertible Debentures any plan of reorganization, arrangement, adjustment or
composition affecting the Convertible Debentures or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of Convertible Debentures in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Convertible Debentures, may be enforced by the Trustee for the
Convertible Debentures without the possession of any of the Convertible
Debentures or the production thereof at any trial or other proceedings relative
thereto, any such action or proceedings instituted by the Trustee shall be
brought in its own name as trustee of an express trust, and any recovery of
judgment, subject to the payment of the expenses, disbursements and compensation
of the Trustee, each predecessor Trustee and their respective agents and
attorneys, shall be for the ratable benefit of the Holders of the Convertible
Debentures in respect of which such action was taken.
In any proceedings brought by the Trustee for the Convertible Debentures
(and also any proceedings involving the interpretation of any provision of this
Indenture to which the Trustee shall be a party), the Trustee shall be held to
represent all the Holders of the Convertible Debentures in respect of which such
action was taken, and it shall not be necessary to make any Holders of such
Convertible Debentures parties to any such proceedings.
Section 5.3 Application of Proceeds. Any moneys collected by the Trustee
for the Convertible Debentures pursuant to this Article in respect of the
Convertible Debentures shall be applied in the following order at the date or
dates fixed by such Trustee and, in case of the distribution of such moneys on
account of principal or interest, upon presentation of the several Convertible
Debentures in respect of which moneys have been collected and stamping (or
otherwise noting) thereon the payment, or issuing Convertible Debentures in
reduced principal amounts in exchange for the presented Convertible Debentures
if only partially paid, or upon surrender thereof if fully paid:
FIRST: To the payment of costs and expenses applicable in respect
of which moneys have been collected, including reasonable compensation
to, and all expenses and liabilities incurred and all advances with
interest made by, the Trustee and each predecessor Trustee and their
respective agents and attorneys and all other amounts
<PAGE>
due to the Trustee or any predecessor Trustee pursuant to Section 6.7,
except as a result of Trustee's negligence or bad faith;
SECOND: To the payment of the amounts then due and unpaid for
interest on the Convertible Debentures for which principal is not yet
due and payable in respect of which moneys have been collected, such
payments to be made ratably to the persons entitled thereto, without
discrimination or preference, according to the amounts then due and
payable on such Convertible Debentures for interest;
THIRD: To the payment of the amounts then due and unpaid for
principal of and interest on the Convertible Debentures for which
principal is due and payable in respect of which moneys have been
collected, such payments to be made ratably to the persons entitled
thereto, without discrimination or preference, according to the
amounts then due and payable on such Convertible Debentures of
principal and interest, respectively; and
FOURTH: To the payment of the remainder, if any, to the Company
or any other Person lawfully entitled thereto.
Section 5.4 Restoration of Rights on Abandonment of Proceedings. In case
the Trustee for the Convertible Debentures or any Holder shall have proceeded to
enforce any right under this Indenture and such proceedings shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to the determination in any such proceeding, the Company, the Trustee and the
Holders shall be restored respectively to their former positions and rights
hereunder, and all rights, remedies and powers of the Company, the Trustee and
the Holders of Convertible Debentures shall continue as though no such
proceedings had been taken.
Section 5.5 Limitations on Suits by Holders of Convertible Debentures. No
Holder of any Convertible Debenture shall have any right by virtue or by
availing of any provision of this Indenture to institute any action or
proceeding at law or in equity or in bankruptcy or otherwise upon or under with
respect to this Indenture, or for the appointment of a trustee, receiver,
liquidator, custodian or other similar official or for any other remedy
hereunder, unless such Holder previously shall have given to the Trustee written
notice of any Event of Default and of the continuance thereof, as hereinbefore
provided, and unless also the Holders of not less than 25% in aggregate
principal amount of the Convertible Debentures then Outstanding shall have made
written request upon the Trustee to institute such action or proceedings in its
own name as trustee hereunder and shall have offered to the Trustee such
reasonable indemnity, as it may require, against the costs, expenses and
liabilities to be incurred therein or thereby and the Trustee for 30 days after
its receipt of such notice, request and offer of indemnity shall have failed to
institute any such action
<PAGE>
or proceeding and no direction inconsistent with such written request shall have
been given to the Trustee during such 30 day period by Holders of a majority in
principal amount of the Convertible Debentures then Outstanding; it being
understood and intended, and being expressly covenanted by the taker and Holder
of every Convertible Debenture with every other taker and Holder of a
Convertible Debenture and the Trustee, that no one or more Holders of
Convertible Debentures shall have any right in any manner whatever, by virtue or
by availing of any provision of this Indenture to affect, disturb or prejudice
the rights of any other such Holder of Convertible Debentures, or to obtain or
seek to obtain priority over or preference to any other such Holder or to
enforce any right under this Indenture, except in the manner herein provided and
for the equal, ratable and common benefit of all Holders of Convertible
Debentures.
Section 5.6 Unconditional Right of Holders of Convertible Debentures to
Institute Certain Suits. Notwithstanding any provision in this Indenture and any
provision of any Convertible Debenture, the right of any Holder of any
Convertible Debenture to receive payment of the principal of and (subject to
Section 2.9) interest on such Convertible Debenture at the respective rates, in
the respective amount on or after the respective due dates expressed in such
Convertible Debenture, and to institute suit for the enforcement of any such
payment on or after such respective dates, shall not be impaired or affected
without the consent of such Holder.
Section 5.7 Powers and Remedies Cumulative; Delay or Omission Not Waiver of
Default. Except as provided in Section 2.11 and Section 5.5, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders of
Convertible Debentures is intended to be exclusive of any other right or remedy,
and every right and remedy shall, to the extent permitted by law, be cumulative
and in addition to every other right and remedy given hereunder or now or
hereafter existing at law or in equity or otherwise. The assertion or employment
of any right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
No delay or omission of the Trustee or of any Holder of Convertible
Debentures to exercise any right or power accruing upon any Event of Default
occurring and continuing as aforesaid shall impair any such right or power or
shall be construed to be a waiver of any such Event of Default or an
acquiescence therein; and, subject to Section 5.5, every power and remedy given
by this Indenture or by law to the Trustee or to the Holders of Convertible
Debentures may be exercised from time to time, and as often as shall be deemed
expedient, by the Trustee or the Holders of Convertible Debentures.
Section 5.8 Control by Holders of Convertible Debentures. The Holders of a
majority in aggregate principal amount of the Convertible Debentures at the time
Outstanding shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
<PAGE>
exercising any trust or power conferred on the Trustee with respect to the
Convertible Debentures by this Indenture; provided that such direction shall not
be in conflict with any rule of law or the provisions of this Indenture; and
provided further that the Trustee, being advised by counsel, shall have the
right to decline to follow any such direction if the Trustee shall determine
that the action or proceedings so directed would involve the Trustee in personal
liability or if the Trustee in good faith shall so determine that the actions or
forbearance specified in or pursuant to such direction would be unduly
prejudicial to the interest of Holders of the Convertible Debentures not joining
in the giving of said direction.
Section 5.9 Waiver of Past Defaults. The Holders of not less than a
majority in aggregate principal amount of the Convertible Debentures at the time
Outstanding may on behalf of the Holders of all the Convertible Debentures waive
any past default hereunder or its consequences, except a default:
(a) in the payment of the principal of (or premium, if any) or
any interest on any Convertible Debenture as and when the same shall
become due by the terms of Convertible Debentures otherwise than by
acceleration (unless such default has been cured and sums sufficient
to pay all matured installments of interest and principal and any
premium has been deposited with the Trustee (in accordance with
Section 5.1)), or
(b) in respect of a covenant or provision hereof which under
Article VIII cannot be modified or amended without the consent of the
Holder of each Outstanding Convertible Debenture affected;
provided, however, that if the Convertible Debentures are held by the WRP Trust
or the Institutional Trustee of such Trust, such waiver or modification to such
waiver shall not be effective until the holders of a majority in aggregate
liquidation amount of Trust Securities of the WRP Trust shall have consented to
such waiver or modification to such waiver; provided further, that if the
consent of the Holder of each Outstanding Convertible Debenture is required,
such waiver shall not be effective until each holder of the Trust Securities of
the WRP Trust shall have consented to such waiver.
Upon any such waiver, such default shall cease to exist and be deemed to
have been cured and not to have occurred, and any Event of Default arising
therefrom shall be deemed to have been cured and not to have occurred for every
purpose of this Indenture; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon.
Section 5.10 Right of Court to Require Filing of Undertaking to Pay Costs.
All parties to this Indenture agree, and each Holder of any Convertible
Debenture, by his acceptance thereof, shall be deemed
<PAGE>
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture or in any suit
against the Trustee for any action taken, suffered or omitted by it as Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
such suit, having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this Section shall
not apply to any suit instituted by the Trustee, to any suit instituted by any
Holder of Convertible Debentures or group of Holders of Convertible Debentures
holding in the aggregate more than 10% in principal amount of the Outstanding
Convertible Debentures, or to any suit instituted by a Holder of Convertible
Debentures for the enforcement of the payment of the principal of or interest on
any Convertible Debenture on or after the due date expressed in such Convertible
Debenture or any date fixed for redemption.
Section 5.11 Suits for Enforcement. In case an Event of Default has
occurred, has not been waived and is continuing, the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Section 5.12 Unconditional Right of Holders to Receive Principal and
Interest and to Convert. Notwithstanding any other provision in this Indenture,
the Holder of any Convertible Debenture shall have the right, which is absolute
and unconditional, to receive payment of the principal of and interest
(including Additional Sums, if any) on such Convertible Debenture on the
respective Stated Maturities expressed in such Convertible Debenture (or, in the
case of redemption, on the redemption date) and to convert such Convertible
Debenture in accordance with Article XI and to institute suit for the
enforcement of any such payment and right to convert, and such rights shall not
be impaired without the consent of such Holder. If the Institutional Trustee is
the sole Holder of the Convertible Debentures, any holder of the Preferred
Securities shall have the right to institute suit on behalf of the Trust for the
enforcement of any such payment and right to convert. The Company may not amend
the Indenture to remove the foregoing right to institute a suit directly against
the Company without the prior written consent of the holders of all of the
Preferred Securities. If the right to institute a suit directly against the
Company is removed following the effectiveness of a registration statement in
respect of the Convertible Debentures, the Trust may become subject to the
reporting obligations under the Exchange Act. The Company shall have a right of
set-off to the extent of any payments made by the Company to such holder in any
such suit.
ARTICLE VI
CONCERNING THE TRUSTEE
Section 6.1 Duties of the Trustee.
(a) If an Event of Default has occurred and is continuing with respect to
the Convertible Debentures, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) Except during the continuance of an Event of Default with respect to
the Convertible Debentures:
(i) the Trustee need perform only those duties that are
specifically set forth in this Indenture and no others; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming on their face to the
requirements of this Indenture. However, in the case of any such
certificates or opinions which by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or
not they conform on their face to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own negligent
failure to act or its own willful misconduct, except that:
(i) this paragraph (c) does not limit the effect of paragraph (b)
of this Section 6.1;
(ii) the Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer unless it is proved that
the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 5.8.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 6.1.
<PAGE>
(e) The Trustee may refuse to perform any duty or exercise any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives indemnity satisfactory to it against any loss, liability or
expense.
(f) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
Section 6.2 Rights of Trustee. Subject to Section 6.1 and the provisions of
the Trust Indenture Act:
(a) The Trustee may rely on any document believed by it to be genuine and
to have been signed or presented by the proper person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require an
Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
Officers' Certificate or Opinion of Counsel.
(c) Subject to the provisions of Section 6.1(c), the Trustee shall not be
liable for any action it takes or omits to take in good faith which it believes
to be authorized or within its rights or powers.
(d) The Trustee may consult with counsel of its selection and the advice of
such counsel or any opinion of counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon in accordance with such advice
or opinion of counsel.
(e) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request or
direction.
(f) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
<PAGE>
Section 6.3 Individual Rights of Trustee. The Trustee in its individual or
any other capacity may become the owner or pledgee of Convertible Debentures and
may otherwise deal with the Company or its Affiliates with the same rights it
would have if it were not Trustee. Any Paying Agent, Registrar or co- Registrar
may do the same with like rights. However, the Trustee must comply with Sections
6.10 and 6.11.
Section 6.4 Trustee's Disclaimer. The Trustee makes no representation as to
the validity or adequacy of this Indenture or the Convertible Debentures, it
shall not be accountable for the Company's use of the proceeds from the
Convertible Debentures and it shall not be responsible for any statement in the
registration statement for the Common Shares of the Company into which the
Convertible Debentures are convertible under the Securities Act or in the
Indenture or the Convertible Debentures (other than its certificate of
authentication).
Section 6.5 Notice of Defaults. If a default occurs and is continuing with
respect to any Convertible Debentures and if it is known to the Trustee through
oral or written notice to a Responsible Officer, the Trustee shall give to each
Holder of Convertible Debentures notice of the default within 30 days after such
default occurs. Except in the case of a default described in Section 5.1(a) or
(b), the Trustee may withhold the notice if and so long as a committee of its
Responsible Officers in good faith determines that withholding the notice is in
the interest of Holders of Convertible Debentures.
Section 6.6 Reports by Trustee to Holders. Within 60 days after each
December 31 beginning with the December 31 following the date of this Indenture,
the Trustee shall mail to each Holder of Convertible Debentures and each other
person specified in TIA Section 313(c) a brief report dated as of such December
31 that complies with TIA Section 313(a) to the extent required thereby. The
Trustee also shall comply with TIA Section 313(b).
A copy of each report at the time of its mailing to Holders of Convertible
Debentures shall be filed with the Commission and each securities exchange on
which the Convertible Debentures are listed. The Company agrees promptly to
notify the Trustee whenever the Convertible Debentures become listed on any
securities exchange and of any delisting thereof.
Section 6.7 Compensation and Indemnity. The Company agrees:
(a) to pay to the Trustee from time to time in Dollars such
compensation as shall be agreed to in writing between the Company and
the Trustee for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
<PAGE>
(b) to reimburse the Trustee upon its request for all reasonable
expenses, disbursements and advances with interest thereon incurred or
made by the Trustee in accordance with any provision of this Indenture
(including the reasonable compensation and the expenses, advances with
interest thereon and disbursements of its agents and counsel), except
to the extent any such expense, disbursement or advance may be
attributable to its negligence or bad faith; and
(c) to indemnify the Trustee in Dollars for, and to hold it
harmless against, any loss, liability or expense arising out of or in
connection with the acceptance or administration of this trust or the
performance of its duties hereunder, including the costs and expenses
of defending itself against any claim or liability in connection with
the exercise or performance of any of its powers or duties hereunder
(including the reasonable compensation and the expenses, advances with
interest thereon and disbursements of its agents and counsel), except
to the extent that any such loss, liability or expense may be
attributable to its negligence or bad faith.
As security for the performance of the obligations of the Company in this
Section 6.7, the Trustee shall have a lien prior to the Convertible Debentures
on all money or property held or collected by the Trustee, except that held in
trust to pay the principal of or interest, if any, on particular Convertible
Debentures.
"Trustee" for purposes of this Section 6.7 includes any predecessor
Trustee, provided that the negligence or bad faith of any Trustee shall not be
attributable to any other Trustee.
The Company's payment obligations pursuant to this Section 6.7 shall
survive the discharge of this Indenture. When the Trustee incurs expenses after
the occurrence of a default specified in Sections 5.1(d) and 5.1(e), such
expenses are intended to constitute expenses of administration under bankruptcy
law.
Section 6.8 Replacement of Trustee. The Trustee may resign at any time with
respect to Convertible Debentures by so notifying the Company; provided,
however, no such resignation shall be effective until a successor Trustee has
accepted its appointment pursuant to this Section 6.8. The Holders of a majority
in aggregate principal amount of the Outstanding Convertible Debentures may
remove the Trustee at any time by so notifying the Trustee and the Company. The
Company shall remove the Trustee if:
(1) the Trustee fails to comply with Section 6.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or public officer takes charge of the Trustee or
its property; or
<PAGE>
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, with respect to the Convertible Debentures, the
Company shall promptly appoint, by resolution of its Board of Trustees, a
successor Trustee with respect to the Convertible Debentures.
A successor Trustee shall deliver a written acceptance of its appointment
to the retiring Trustee and to the Company. Thereupon the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture with
respect to the Convertible Debentures. The successor Trustee shall mail a notice
of its succession to Holders of Convertible Debentures so affected. The retiring
Trustee shall promptly transfer all property held by it as Trustee to the
successor Trustee, subject to the lien provided for in Section 6.7.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in aggregate principal amount of the Convertible
Debentures at the time Outstanding may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 6.10, any Holder of Convertible
Debentures may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
Section 6.9 Successor Trustee by Merger. If the Trustee consolidates with,
merges or converts into, or transfers all or substantially all its corporate
trust business or assets to, another corporation, the resulting, surviving or
transferee corporation without any further act shall be the successor Trustee.
Section 6.10 Eligibility; Disqualification. The Trustee shall at all times
satisfy the requirements of TIA Section 310(a)(1) and Section 310(a)(5). The
Trustee shall have combined capital and surplus of at least $50,000,000 as set
forth in its most recent published annual report of condition. The Trustee shall
comply with TIA Section 310(b).
Section 6.11 Preferential Collection of Claims Against Company. The Trustee
shall comply with TIA Section 311(a), excluding any creditor relationship listed
in TIA Section 311(b). A Trustee who has resigned or been removed shall be
subject to TIA Section 311(a) to the extent indicated therein.
ARTICLE VII
<PAGE>
CONCERNING THE HOLDERS OF CONVERTIBLE DEBENTURES
Section 7.1 Evidence of Action Taken by Holders of Convertible Debentures.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided in this Indenture to be given or taken by a specified
percentage in principal amount of the Holders of Convertible Debentures may be
embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such specified percentage of Holders of Convertible Debentures
in person or by agent duly appointed in writing; and, except as herein otherwise
expressly provided, such action shall become effective when such instrument or
instruments are delivered to the Trustee. Proof of execution of any instrument
or of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and (subject to Sections 6.1 and 6.2) conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Article.
(b) The ownership of such Convertible Debentures shall be proved by the
Security Register.
Section 7.2 Proof of Execution of Instruments. Subject to Sections 6.1 and
6.2, the execution of any instrument by a Holder of Convertible Debentures or
his agent or proxy may be proved in accordance with such reasonable rules and
regulations as may be prescribed by the Trustee or in such manner as shall be
satisfactory to the Trustee.
Section 7.3 Holders to be Treated as Owners. The Company, the Trustee and
any agent of the Company or the Trustee may deem and treat the person in whose
name any Convertible Debenture shall be registered upon the Security Register as
the absolute owner of such Convertible Debenture (whether or not such
Convertible Debenture shall be overdue and notwithstanding any notification of
ownership or other writing thereon) for the purpose of receiving payment of or
on account of the principal of and (subject to Section 2.9) interest on such
Convertible Debenture and for all other purposes; and neither the Company nor
the Trustee nor any agent of the Company or the Trustee shall be affected by any
notice to the contrary.
Section 7.4 Convertible Debentures Owned by Company Deemed Not Outstanding.
In determining whether the Holders of the requisite aggregate principal amount
of Outstanding Convertible Debentures have concurred in any direction, consent
or waiver under this Indenture, Convertible Debentures which are owned by the
Company or any other obligor on the Convertible Debentures with respect to which
such determination is being made or by any
<PAGE>
person directly or indirectly controlling or controlled by or under direct or
indirect common control with the Company or any other obligor on the Convertible
Debentures with respect to which such determination is being made shall be
disregarded and deemed not to be Outstanding for the purpose of any such
determination (it being understood that ERPLP and any affiliate of ERPLP shall
not be deemed to be under common control with the Company), except that for the
purpose of determining whether the Trustee shall be protected in relying on any
such direction, consent or waiver only Convertible Debentures which the Trustee
knows are so owned shall be so disregarded. Convertible Debentures so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right so to
act with respect to such Convertible Debentures and that the pledgee is not the
Company or any other obligor upon the Convertible Debentures or any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Convertible
Debentures.
Section 7.5 Right of Revocation of Action Taken. At any time prior to (but
not after) the evidencing to the Trustee, as provided in Section 7.1, of the
taking of any action by the Holders of the percentage in aggregate principal
amount of the Convertible Debentures, as the case may be, specified in this
Indenture in connection with such action, any Holder of a Convertible Debenture
the serial number of which is shown by the evidence to be included among the
serial numbers of the Convertible Debentures the Holders of which have consented
to such action may, by filing written notice at the Corporate Trust Office and
upon proof of holding as provided in this Article, revoke such action so far as
concerns such Convertible Debenture. Except as aforesaid any such action taken
by the Holder of any Convertible Debentures shall be conclusive and binding upon
such Holder and upon all future Holders and owners of such Convertible Debenture
and of any Convertible Debentures issued in exchange or substitution therefor,
irrespective of whether or not any notation in regard thereto is made upon any
such Convertible Debenture. Any action taken by the Holders of the percentage in
aggregate principal amount of the Convertible Debentures, as the case may be,
specified in this Indenture in connection with such action shall be conclusively
binding upon the Company, the Trustee and the Holders of all the Convertible
Debentures affected by such action.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
Section 8.1 Supplemental Indentures Without Consent of Holders of
Convertible Debentures. The Company, when authorized by a resolution of its
Board of Directors, and the Trustee for the Convertible Debentures may from time
to time and at any time enter into an indenture or indentures supplemental
hereto (which shall conform to the provisions of the Trust
<PAGE>
Indenture Act as in force at the date of the execution thereof), in form
satisfactory to such Trustee, for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge to the
Trustee as security for the Convertible Debentures any property or
assets;
(b) to evidence the succession of another corporation to the
Company, or successive successions, and the assumption by the
successor corporation of the covenants, agreements and obligations of
the Company pursuant to Article IX;
(c) to add to the covenants of the Company further covenants,
restrictions, conditions or provisions for the protection of the
Holders of Convertible Debentures;
(d) to cure any ambiguity or to correct or supplement any
provision contained herein or in any supplemental indenture which may
be defective or inconsistent with any other provision contained herein
or in any supplemental indenture, or to make such other provisions in
regard to matters or questions arising under this Indenture or under
any supplemental indenture as the Board of Directors may deem
necessary or desirable, and which shall not materially and adversely
affect the interests of the Holders of the Convertible Debentures; or
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Convertible
Debentures.
The Trustee is hereby authorized to join with the Company in the execution
of any such supplemental indenture, to make any further appropriate agreements
and stipulations which may be therein contained and to accept the conveyance,
transfer, assignment, mortgage or pledge of any property thereunder, but the
Trustee shall not be obligated to enter into any such supplemental indenture
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section may
be executed without the consent of the Holders of any of the Convertible
Debentures at the time Outstanding, notwithstanding any of the provisions of
Section 8.2.
Section 8.2 Supplemental Indentures With Consent of Holders of Convertible
Debentures. With the consent (evidenced as provided in Article VII) of the
Holders of not less than a majority in aggregate principal amount of the
Convertible Debentures at the time Outstanding (voting as one class), the
Company, when authorized by a resolution of its Board of Trustees, and the
Trustee may, from time to time and at any time, enter into an indenture or
indentures supplemental hereto (which shall conform to the provisions of the
Trust Indenture Act
<PAGE>
as in force at the date of execution thereof) for the purpose of adding any
provisions to or changing in any manner or eliminating any of the provisions of
this Indenture or of any supplemental indenture or of modifying in any manner
the rights of the Holders of the Convertible Debentures; provided, however, that
no such supplemental indenture shall (a) extend the Stated Maturity of any
Convertible Debenture, or reduce the principal amount thereof or any premium
thereon, or reduce the rate or extend the time of payment of interest thereon,
or reduce any amount payable on redemption thereof, or make the principal
thereof or interest thereon payable in any coin or currency other than that
provided in the Convertible Debentures or in accordance with the terms thereof,
or impair or affect the right of any Holder of Convertible Debentures to
institute suit for payment thereof, or adversely affect the right to convert
Convertible Debentures, or modify the subordination provisions of this Indenture
in any manner adverse to the Holders of Convertible Debentures without the
consent of the Holders of each Convertible Debenture so affected, or (b) reduce
the aforesaid percentage of Convertible Debentures, the consent of the Holders
of which is required for any such supplemental indenture, without the consent of
the Holders of each Convertible Debenture so affected; provided further, that no
such supplemental indenture shall result in the realization of unrelated
business income for the Holders of the Convertible Debentures without the
consent of each Holder of Convertible Debentures.
Upon the request of the Company, accompanied by a copy of a resolution of
the Board of Trustees certified by the secretary or assistant secretary of the
Company authorizing the execution of any such supplemental indenture, and upon
the filing with the Trustee of evidence of the consent of Holders of Convertible
Debentures as aforesaid and other documents, if any, required by Section 7.1,
the Trustee shall join with the Company in the execution of such supplemental
indenture or otherwise, in which case such Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture which affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
It shall not be necessary for the consent of the Holders of Convertible
Debentures under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such consent shall approve
the substance thereof.
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Company
shall give notice thereof to the Holders of then Outstanding Convertible
Debentures, by mailing a notice thereof by first-class mail to such Holders at
their addresses as they shall appear on the Security Register, and in each case
such notice shall set forth in general terms the substance of such supplemental
indenture. Any failure of the Company to give such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such supplemental indenture.
Section 8.3 Effect of Supplemental Indenture. Every supplemental indenture
executed pursuant to this Article VIII
<PAGE>
shall conform to the requirements of the Trust Indenture Act. Upon the execution
of any supplemental indenture pursuant to the provisions hereof, this Indenture
shall be and be deemed to be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Trustee, the Company and the Holders of Convertible
Debentures shall thereafter be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and all the terms
and conditions of any such supplemental indenture shall be and be deemed to be a
part of the terms and conditions of this Indenture for any and all purposes.
Section 8.4 Documents to Be Given to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, shall receive an Officers' Certificate and
an Opinion of Counsel as conclusive evidence that any supplemental indenture
executed pursuant to this Article VIII complies with the applicable provisions
of this Indenture.
Section 8.5 Notation on Convertible Debentures in Respect of Supplemental
Indentures. Convertible Debentures authenticated and delivered after the
execution of any supplemental indenture pursuant to the provisions of this
Article VIII may bear, upon the direction of the Company, a notation in form
satisfactory to the Trustee for the Convertible Debentures as to any matter
provided for by such supplemental indenture. If the Company or the Trustee shall
so determine, new Convertible Debentures so modified as to conform, in the
opinion of the Trustee and the Company, to any modification of this Indenture
contained in any such supplemental indenture may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Convertible
Debentures then Outstanding.
ARTICLE IX
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Section 9.1 Company May Consolidate, etc., on Certain Terms. The Company
may sell, transfer, lease or otherwise convey all or substantially all of its
assets on a consolidated basis to any Person, or consolidate or merge with or
into, any other Person, provided that in any such case, (a) either (i) the
Company shall be the continuing entity, or (ii) if the Company is not the
continuing entity, the successor entity or Person which acquires by sale,
transfer, lease or other conveyance all or substantially all of the assets of
the Company, shall be a Person organized and validly existing under the laws of
the United States of America or any state thereof or the District of Columbia
and shall expressly assume the due and punctual payment of the principal of,
premium, if any, and interest (including Additional Sums) on all of the
Convertible Debentures according to their tenor, and the due and punctual
performance and observance of all of the covenants, agreements
<PAGE>
and conditions of this Indenture to be performed or observed by the Company by
supplemental indenture satisfactory to the Trustee, executed and delivered to
the Trustee by such corporation or entity or Person, by amendment thereto, (b)
immediately after such merger or consolidation, or such sale, transfer, lease or
other conveyance, no Event of Default, and no event which, after notice or lapse
of time or both, would become an Event of Default, shall have occurred and be
continuing, and (c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that the requirements of
this Section have been complied with.
Section 9.2 Successor or Substituted Person. In case of any such
consolidation, merger, sale, transfer, or conveyance (but not in the case of any
such lease), and following such an assumption by the successor person, such
successor person shall succeed to and be substituted for the Company, with the
same effect as if it had been named herein, and the Company shall be discharged
from all obligations and covenants under this Indenture and the Convertible
Debentures and may be liquidated and dissolved. Such successor person may cause
to be signed, and may issue either in its own name or in the name of the Company
any or all of the Convertible Debentures issuable hereunder which theretofore
shall not have been signed by the Company and be delivered to the Trustee; and,
upon the order of such successor corporation instead of the Company and subject
to all the terms, conditions and limitations in this Indenture prescribed, the
Trustee shall authenticate and shall make available for delivery any Convertible
Debentures which previously shall have been signed and delivered by the officers
of the Company to the Trustee for authentication, and any Convertible
Debentures, which such successor person thereafter shall cause to be signed and
delivered to the Trustee for that purpose. All of the Convertible Debentures so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Convertible Debentures theretofore or thereafter issued in
accordance with the terms of this Indenture as though all of such Convertible
Debentures had been issued at the date of the execution hereof.
In case of any such consolidation, merger, sale, transfer, lease or
conveyance such changes in phraseology and form (but not in substance) may be
made in the Convertible Debentures thereafter to be issued as may be
appropriate.
Section 9.3 Opinion of Counsel to Trustee. The Trustee, subject to the
provisions of Sections 6.1 and 6.2, may receive an Opinion of Counsel, prepared
in accordance with Section 14.5, as conclusive evidence that any such
consolidation, merger, sale, lease or conveyance, and any such assumption, and
any such liquidation or dissolution, complies with the applicable provisions of
this Indenture.
ARTICLE X
REDEMPTION OF THE CONVERTIBLE DEBENTURES
<PAGE>
Section 10.1 Tax Event Redemption.
If a Tax Event (as defined in the Declaration) has occurred and is
continuing and:
(i) the Company has received a Redemption Tax Opinion (as defined
in Annex I to the Declaration); or
(ii) after receiving a Dissolution Tax Opinion (as defined in
Annex I to the Declaration), the Regular Trustees shall have been
informed by tax counsel rendering the Dissolution Tax Opinion that a
No Recognition Opinion (as defined in Annex I to the Declaration)
cannot be delivered to the Trust,
then, notwithstanding Section 10.2(a) but subject to Section 10.2(b), the
Company shall have the right, at its option, upon not less than 30 days nor more
than 60 days notice to the Holders of the Convertible Debentures to redeem the
Convertible Debentures, in whole or in part, for cash within 90 days following
the occurrence of such Tax Event (the "90-Day Period") at a redemption price
equal to 100% of the principal amount to be redeemed plus any accrued and unpaid
interest thereon to the date of such redemption (the "Redemption Price"),
provided that if at the time there is available to the Company or the Trust the
opportunity to eliminate, within the 90-Day Period, the Tax Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure which has no adverse effect on the
Company, the Trust or the Holders of the Trust Securities issued by the Trust
("Ministerial Action"), the Company shall pursue such Ministerial Action in lieu
of redemption.
Section 10.2 Optional Redemption by Company.
(a) Subject to the provisions of Section 10.2(b) and to the provisions of
this Article X generally, except as otherwise may be specified in Section 10.1
or elsewhere in this Indenture, the Company shall have the right to redeem the
Convertible Debentures, in whole or in part, from time to time, on or after May
30, 2002. Any redemption pursuant to this paragraph will be made upon not less
than 30 days nor more than 60 days notice to the Holders of the Convertible
Debentures, at a price equal to 100% of the principal amount of the Convertible
Debentures (the "Optional Redemption Price") together with accrued and unpaid
interest (including Additional Sums, if any) to, but excluding, the redemption
date.
If Convertible Debentures are redeemed on any January 15, April 15, July 15
or October 15, accrued and unpaid interest shall be payable to holders of record
on the relevant record date.
<PAGE>
The Company may not redeem fewer than all of the Outstanding Convertible
Debentures unless all accrued and unpaid interest has been paid on all
Convertible Debentures for all quarterly interest payment periods terminating on
or prior to the date of redemption.
So long as the corresponding Trust Securities are outstanding, the proceeds
from the redemption of the Convertible Debentures will be used to redeem the
Trust Securities.
If the Convertible Debentures are only partially redeemed pursuant to this
Section 10.2, the Convertible Debentures will be redeemed pro rata. The Optional
Redemption Price, together with any required interest payment, shall be paid in
immediately available funds prior to 12:00 noon, New York City time, on the
redemption date or at such earlier time as the Company determines provided that
the Company shall deposit with the Trustee an amount sufficient to pay the
Optional Redemption Price, together with any required interest payment, by 10:00
a.m., New York City time, on the date such amounts are to be paid. Partial
redemptions must be in an amount not less than $25.00 principal amount of
Convertible Debentures.
If Convertible Debentures selected for partial redemption are converted in
part before termination of the conversion right with respect to the portion of
the Convertible Debentures so selected, the converted portion of the Convertible
Debentures shall be deemed (so far as may be) to be the portion selected for
redemption. Convertible Debentures (or portions thereof) which have been
converted during a selection of Convertible Debentures to be redeemed shall be
treated by the Trustee as Outstanding for the purpose of such selection. In any
case where more than one Convertible Debenture is registered in the same name,
the Trustee in its discretion may treat the aggregate principal amount so
registered as if it were represented by one Convertible Debenture.
If any Convertible Debenture called for redemption is converted into Common
Shares of the Company, any money deposited with the Trustee or with any Paying
Agent or so segregated and held in trust for the redemption of such Convertible
Debenture shall (subject to any right of the Holder of such Convertible
Debenture or any Predecessor Convertible Debenture to receive interest as
provided in the last paragraph of Section 2.9) be paid to the Company upon the
Company's request or, if then held by the Company, shall be discharged from such
trust.
(b) If (i) a holder of Convertible Preferred Securities desires to convert
any of its Convertible Preferred Securities called for redemption into Common
Shares (effectively by converting such holder's share of the related Convertible
Debentures into Common Shares in accordance with the terms of the Indenture and
the Declaration) but such conversion would cause any direct or indirect holder
of Convertible Preferred Securities which is classified as a real estate
investment trust ("REIT") under Section 856 of the Code ("Preferred Holder") to:
(A) own more than 5% of the total outstanding voting securities of the Company,
(B) own more than 5% of the value of the total outstanding securities of the
Company, (C) violate the requirements of Code Section 856(c)(4)(B), or (D)
otherwise lose its status as a REIT under the Code (such Convertible Preferred
Securities which upon conversion into Common Shares would result in a REIT
owning
Common Shares in a manner described in subclause (A), (B), (C) or (D) of this
Section 10.2(b)(i) are referred to herein as the "Unconvertible Shares" and an
amount of Convertible Debentures equal to the aggregate liquidation amount of
the Unconvertible Shares is referred to herein as, the "Unconvertible
Debentures"), and (ii) any Preferred Holder has delivered to the Company, prior
to the date on which the Company would otherwise have redeemed the Convertible
Preferred Securities (the "Redemption Date"), a written notice signed by each
holder of Convertible Preferred Securities who desires to convert any of such
holder's Convertible Preferred Securities into Common Shares in accordance with
the terms of the Indenture and the Declaration which written notice sets forth
both the number of Convertible Preferred Securities that each such holder
desires to convert and the number of such Convertible Preferred Securities of
such holder that constitute Unconvertible Shares; then the Trust shall notify
the Company and the Company shall: (x) convert such Holder's Convertible
Debentures (other than the Unconvertible Debentures) for Common Shares in
accordance with the terms of the Indenture and the Declaration, (y) pay each
Holder of Convertible Debentures so converted in subsection (x) above and each
Holder of Unconvertible Debentures an amount of cash equal to the amount of any
accrued but unpaid interest owing on such Holder's Convertible Debentures so
converted and such Holder's Unconvertible Debentures, and (z) pay each Holder of
Unconvertible Debentures an amount of cash equal to the product of (A) the
Closing Price of a Common Share on the trading date immediately prior to the
Redemption Date, multiplied by (B) the maximum number of Common Shares into
which the Unconvertible Debentures held by such Holder could have been converted
in accordance with the terms of the Indenture and the Declaration on the trading
date immediately prior to the Redemption Date. For purposes of clause (i) of
this Section 10.2(b), a REIT shall be considered to own directly each of the
securities of the Company that are owned by such REIT directly or indirectly.
The Company shall reasonably and timely cooperate in furnishing the information
necessary to apply the provisions of this Section 10.2(b) to a holder of
Convertible Preferred Securities who requests such information in writing.
(c) If mutually agreed on or after January 1, 2001 by the Company and any
holder of Convertible Preferred Securities otherwise subject to Section 10.2(b),
a conversion of Convertible Debentures having a principal amount equal to the
liquidation amount of the Convertible Preferred Securities held by such holder
(and such holder's related Convertible Preferred Securities) into Common Shares
shall occur without regard to Section 10.2(b) provided the Company receives an
opinion of counsel in a form which is reasonably acceptable to the Holders that
the Company, or any successor thereto, qualifies as either a REIT under Section
856(a) of the Code or as a "taxable REIT subsidiary" of EQR (or any successor
thereto) under Section 856(l) of the Code.
(d) If a partial redemption of the Convertible Debentures would result in
the delisting of the Convertible Preferred Securities issued by the Trust from
any national securities exchange or other organization on which the Convertible
Preferred Securities are then listed, the Company shall not be permitted to
effect such partial redemption and may only redeem the Convertible Debentures in
whole.
<PAGE>
(e) Notwithstanding anything in this Indenture to the contrary:
(i) If (A) the Company enters into an agreement for a business combination
with another entity, whether by merger or other reorganization, and the
resulting or surviving entity (the "Survivor") wants to either (i) revoke a
prior election to be a taxable REIT subsidiary ("TRS") under Section 856(l) of
the Code, or (ii) desires to not become a TRS or a REIT in the future, and (B)
following such business combination, on an as converted pro forma basis (without
duplication), the aggregate outstanding Convertible Preferred Securities,
Convertible Debentures held in exchange for Convertible Preferred Securities,
and Common Shares held by reason of converting any of the foregoing held by any
Preferred Holder have an aggregate vote or value in excess of 5% of the total
voting power or total value of the outstanding securities of the Survivor, then
the Company shall give written notice of the foregoing (at least 45 days prior
to consummating such business combination) to each Preferred Holder. If within
thirty (30) days after receipt of such notice, such Preferred Holder fails to
(i) notify the Company in writing of its desire to not have the Convertible
Debentures redeemed, (ii) furnish to the Company its written consent and
election to revoke any prior TRS election jointly made by the Company (or any
successor) and the Preferred Holder or its Affiliates, and (iii) waive in
writing any future obligation of the Company (or any successor) to become a TRS
or a REIT, then, immediately prior to and in connection with the consummation of
the business combination described in subsection (e)(i)(A) above, the Company
shall redeem all of the Unconvertible Debentures (as determined by such
Preferred Holder with reference to Unconvertible Shares pursuant to Section
10.2(b)(ii) above) held by the WRP Trust or such Preferred Holder and its
Affiliates (including prior to May 30, 2002) in the manner and in the amounts
provided in Sections 10.2(b)(ii)(y) and (z) of the Indenture; provided, however,
that if the amount of payment calculated in accordance with Section
10.2(b)(ii)(z) above with respect to the Unconvertible Debentures is less than
the Optional Redemption Price with respect to the Unconvertible Debentures, in
lieu of paying such amount calculated in accordance with Section 10.2(b)(ii)(z),
the Company shall pay the Optional Redemption Price with respect to the
Unconvertible Debentures. Upon consummation of the foregoing, any and all
obligations of the Company to become or remain a TRS or a REIT or to deliver
opinions to that effect shall be terminated. All other Convertible Debentures
and related Convertible Preferred Securities shall remain outstanding unless the
liquidation amount of such outstanding Convertible Preferred Securities is less
than $10,000,000, in which event the Company shall redeem for cash all of such
Convertible Debentures equal to the liquidation amount of the outstanding
Convertible Preferred Securities in accordance with Section 10.2(a) above. For
purposes of calculating the 5% limitation described above, the Company shall
reasonably and timely cooperate in furnishing relevant information to a
Preferred Holder that requests such information in writing. For purposes of this
Section 10.2(e), a Preferred Holder shall be considered to hold directly all
securities it owns directly and indirectly.
(ii) If the events described in subsection (e)(1)(A) above have occurred,
the Company gives written notice thereof to each Preferred Holder, and the pro
forma
<PAGE>
computation described in subsection (e)(1)(B) results in a Preferred Holder
otherwise subject to Section 10.2(b) and its Affiliates owning 5% or less of
both the total voting power (on an as converted basis) or total value of the
outstanding securities of the Company, then the Convertible Debentures need not
be redeemed and any and all obligations of the Company to become or remain a TRS
or a REIT or to deliver opinions to that effect shall be terminated.
(iii) If the Company desires to take any action that would violate the
terms of Section 5.1(h), (i) or (j), then the Company can take such action
provided the Company redeems all outstanding Common Securities, Convertible
Debentures, Convertible Preferred Securities and any Common Shares acquired in
conversion thereof, by paying to the respective holders thereof in cash an
amount equal to (i) the Closing Price on the trading date immediately prior to
the Redemption Date of each such Common Share acquired in the aforementioned
conversion, and (ii) with respect to outstanding Convertible Debentures, Common
Securities and Convertible Preferred Securities the greater of, without
duplication (x) the Optional Redemption Price for all outstanding Convertible
Debentures (together with any required interest payment under Section 10.2(a)
above) plus the Redemption Price (as defined in the Declaration) for the Common
Securities and Convertible Preferred Securities and (y) the Closing Price of the
Common Shares into which such Convertible Debentures, Common Securities and
Convertible Preferred Securities, without duplication, are convertible on the
trading date immediately prior to the Redemption Date.
Section 10.3 No Sinking Fund. The Convertible Debentures are not entitled
to the benefit of any sinking fund or subject to any sinking fund.
Section 10.4 Election to Redeem; Notice of Redemption; Partial Redemptions.
The election of the Company to redeem any Convertible Debentures shall be
evidenced by, or pursuant to, a resolution of the Board of Directors. Notice of
redemption to the Holders of Convertible Debentures required to be redeemed or
to be redeemed as a whole or in part at the option of the Company shall be given
by giving notice of such redemption as provided in Section 15.4, at least 30
days and not more than 60 days prior to the date fixed for redemption to such
Holders of Convertible Debentures. Any notice which is mailed in the manner
herein provided shall be conclusively presumed to have been duly given, whether
or not the Holder receives the notice. Neither the failure to give notice by
mail, nor any defect in the notice so mailed to the Holder of any Convertible
Debenture designated for redemption as a whole or in part shall affect the
validity of the proceedings for such redemption.
The notice of redemption to each such Holder shall specify the date fixed
for redemption, the "CUSIP" number or numbers for such Convertible Debentures,
the redemption price, the Place or Places of Payment, that payment will be made
upon presentation and surrender of such Convertible Debentures, that interest
accrued to the date fixed for redemption will be paid as specified in such
notice and that on and after said date interest thereon or on the
<PAGE>
portions thereof to be redeemed will cease to accrue, the conversion rate or
price, the date on which the right to convert the Convertible Debentures to be
redeemed will terminate and the place or places where such Convertible
Debentures may be surrendered for conversion. If less than all of the
Convertible Debentures are to be redeemed, the notice of redemption shall
specify the number of the Convertible Debentures to be redeemed. In case any
Convertible Debenture is to be redeemed in part, the notice of redemption shall
state the portion of the principal amount thereof to be redeemed and shall state
that on and after the date fixed for redemption, upon surrender of such
Convertible Debenture, a new Convertible Debenture or Convertible Debentures in
principal amount equal to the unredeemed portion thereof will be issued.
The notice of redemption of Convertible Debentures to be redeemed at the
option of the Company shall be given by the Company or, at the Company's
request, by the Trustee in the name and at the expense of the Company. If such
notice is to be given by the Trustee, the Company shall provide notice of such
redemption to the Trustee at least 60 days prior to the date fixed for
redemption (unless a shorter notice shall be satisfactory to the Trustee). If
such notice is given by the Company, the Company shall provide a copy of such
notice given to the Holders of such redemption to the Trustee at least 2 days
prior to the date such notice is given to such Holders, but in any event at
least 30 days and not more than 60 days prior to the date fixed for redemption.
Not later than the redemption date specified in the notice of redemption
given as provided in this Section, the Company will have on deposit with the
Trustee or with one or more Paying Agents (or, if the Company is acting as its
own Paying Agent, set aside, segregate and hold in trust as provided in Section
3.3) in funds available on such date an amount of money sufficient to redeem on
the redemption date all the Convertible Debentures so called for redemption at
the appropriate redemption price, together with accrued interest to the date
fixed for redemption. If less than all of the Outstanding Convertible Debentures
are to be redeemed at the election of the Company, the Company will deliver to
the Trustee at least 60 days prior to the date fixed for redemption (unless a
shorter notice shall be satisfactory to the Trustee) an Officers' Certificate
stating the aggregate principal amount of Convertible Debentures to be redeemed.
For all purposes of this Indenture, unless the context otherwise requires,
all provisions relating to the redemption of Convertible Debentures shall
relate, in the case of any Convertible Debenture redeemed or to be redeemed only
in part, to the portion of the principal amount of such Convertible Debenture
which has been or is to be redeemed.
Section 10.5 Payment of Convertible Debentures Called for Redemption. If
notice of redemption has been given as above provided, the Convertible
Debentures or portions of Convertible Debentures specified in such notice shall
become due and payable on the date and at the place stated in such notice at the
Redemption Price, and on and after said date (unless the Company shall default
in the payment of such Convertible Debentures at the Redemption Price) interest
on the Convertible Debentures or portions of Convertible Debentures so called
for redemption shall cease to accrue,
<PAGE>
and, except as provided in Section 6.1, such Convertible Debentures shall cease
from and after the date fixed for redemption to be entitled to any benefit or
security under this Indenture, and the Holders thereof shall have no right in
respect of such Convertible Debentures except the right to receive the
redemption price thereof and unpaid interest to the date fixed for redemption.
On presentation and surrender of such Convertible Debentures at a Place of
Payment specified in said notice, said Convertible Debentures or the specified
portions thereof shall be paid and redeemed by the Company at the applicable
redemption price, together with interest accrued thereon to the date fixed for
redemption; provided that, payment of interest becoming due on or prior to the
date fixed for redemption shall be payable to the Holders of such Convertible
Debentures registered as such on the relevant record date subject to the terms
and provisions of Section 2.9 hereof.
If any Convertible Debenture called for redemption shall not be so paid
upon surrender thereof for redemption, the principal shall, until paid or duly
provided for, bear interest from the date fixed for redemption at the Coupon
Rate.
Upon presentation of any Convertible Debenture redeemed in part only, the
Company shall execute and the Trustee shall authenticate and make available for
delivery to or on the order of the Holder thereof, at the expense of the
Company, a new Convertible Debenture or Convertible Debentures, of authorized
denominations, in principal amount equal to the unredeemed portion of the
Convertible Debenture so presented.
Section 10.6 Exclusion of Certain Convertible Debentures from Eligibility
for Selection for Redemption. Convertible Debentures shall be excluded from
eligibility for selection for redemption if they are identified by registration
and certificate number in a written statement signed by an authorized officer of
the Company and delivered to the Trustee at least 30 days prior to the last date
on which notice of redemption may be given as being owned of record and
beneficially by, and not pledged or hypothecated by, either (a) the Company or
(b) an entity specifically identified in such written statement as directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company (it being understood that ERPLP and any Affiliate of
ERPLP shall not be deemed to be under common control with the Company).
Section 10.7 Required Redemption. Upon the occurrence of the earlier of (i)
an Event of Default (for purposes of this Section an Event of Default shall have
the meaning given it in Section 4(j) of Annex I to the Declaration) or (ii) May
30, 2012, the holder of any Convertible Preferred Securities may, at its option,
cause the Trust to redeem at any time all of the Convertible Preferred
Securities held by such holder at the Redemption Price, payable in cash. In the
event a holder of the Convertible Preferred Securities requires the Trust to
redeem such Securities, then the Trust shall require the Company to redeem a
like aggregate principal amount of Convertible Debentures from Holders of
Convertible Debentures which aggregate principal amount shall equal the
aggregate Redemption Price of
<PAGE>
such Convertible Preferred Securities so redeemed. Notwithstanding the
provisions of this Section 10.7, provided an Event of Default has not occurred,
the Regular Trustees shall have the right to extend the date during which a
required redemption of Convertible Preferred Securities is not permitted for two
separate additional five (5) year periods if the Coupon Rate is changed to the
then market rate of preferred stock comparable to the Convertible Preferred
Securities on the first day of each such additional five year period; provided,
however, in no event shall the Coupon Rate be reduced. In the event that the
Trust increases the Coupon Rate on the Convertible Preferred Securities in
accordance with the preceding sentence, then the Company shall increase the
Coupon Rate on the Convertible Debentures in a like percentage amount for a like
period.
ARTICLE XI
CONVERSION OF CONVERTIBLE DEBENTURES
Section 11.1 Conversion Rights. Subject to and upon compliance with the
provisions of this Article XI, the Convertible Debentures are convertible, at
the option of the Holders, at any time through the close of business on the last
Business Day prior to the Maturity Date (or, in the case of Convertible
Debentures called for redemption, prior to the close of business on the Business
Day prior to the corresponding redemption date) into fully paid and
nonassessable Common Shares of the Company at an initial conversion rate of
2.2474 Common Shares for each $25.00 in principal amount of Convertible
Debentures (equivalent to a conversion price of $11.124 per Common Share,
subject to certain adjustments set forth in this Article XI (as so adjusted, the
"Conversion Price")), subject to adjustment and reset as described in this
Article XI. Subject to the following sentence, a Holder of Convertible
Debentures may convert any portion of the principal amount of the Convertible
Debentures into that number of fully paid and nonassessable Common Shares
obtained by dividing the principal amount of the Convertible Debentures to be
converted by such Conversion Price. All calculations under this Article XI shall
be made to the nearest cent or to the nearest 1/100th of a share, as the case
may be.
Section 11.2 Conversion Procedures.
(a) In order to convert all or a portion of the Convertible Debentures, the
Holder thereof shall deliver to the Conversion Agent an irrevocable notice of
conversion (the "Notice of Conversion") setting forth the principal amount of
Convertible Debentures to be converted, together with the name or names, if
other than the Holder, in which the Common Shares should be issued upon
conversion and, surrender to the Conversion Agent the Convertible Debentures to
be converted, duly endorsed or assigned to the Company or in blank. In addition,
a holder of Convertible Preferred Securities may exercise its right under the
Declaration to convert
<PAGE>
such Convertible Preferred Securities into Common Shares by delivering to the
Conversion Agent an irrevocable Notice of Conversion setting forth the
information called for by the preceding sentence and directing the Conversion
Agent (i) to exchange such Convertible Preferred Securities for a portion of the
Convertible Debentures held by the Trust (at an exchange rate of $25.00
principal amount of Convertible Debentures for each Convertible Preferred
Security) and (ii) to immediately convert such Convertible Debentures, on behalf
of such holder, into Common Shares of the Company pursuant to this Article XI
and surrendering such Convertible Preferred Securities, duly endorsed or
assigned to the Company or in blank. So long as any Convertible Preferred
Securities are outstanding, the Trust shall not convert any Convertible
Debentures except pursuant to a Notice of Conversion delivered to the Conversion
Agent by a holder of Convertible Preferred Securities.
If a Notice of Conversion is delivered on or after the record date and
prior to the subsequent Interest Payment Date, the Holder will be entitled to
receive the interest payable on the subsequent Interest Payment Date on the
portion of Convertible Debentures to be converted notwithstanding the conversion
thereof prior to such Interest Payment Date. However, if a redemption date falls
between a record date and the subsequent Interest Payment Date, the Holder will
be entitled to receive, on such Interest Payment Date, the interest accrued to,
but excluding, the redemption date. Except as otherwise provided in the first
and second sentences of this paragraph, in the case of any Convertible Debenture
which is converted, interest the Stated Maturity of which is after the date of
conversion of such Convertible Debenture shall not be payable, and the Company
shall not make nor be required to make any other payment, adjustment or
allowance with respect to accrued but unpaid interest on the Convertible
Debentures being converted, which shall be deemed to be paid in full. Each
conversion shall be deemed to have been effected immediately prior to the close
of business on the day on which the Notice of Conversion was received (the
"Conversion Date") by the Conversion Agent from the Holder or from a holder of
the Convertible Preferred Securities effecting a conversion thereof pursuant to
its conversion rights under the Declaration, as the case may be. The Person or
Persons entitled to receive the Common Shares issuable upon such conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares as of the Conversion Date. As promptly as practicable on or after the
Conversion Date, the Company shall issue and deliver at the office of the
Conversion Agent, unless otherwise directed by the Holder in the Notice of
Conversion, a certificate or certificates for the number of full Common Shares
issuable upon such conversion, together with the cash payment, if any, in lieu
of any fraction of any share to the Person or Persons entitled to receive the
same. The Conversion Agent shall deliver such certificate or certificates to
such Person or Persons.
(b) The Company's delivery upon conversion of the fixed number of Common
Shares into which the Convertible Debentures are convertible (together with the
cash payment, if any, in lieu of any fractional share and the interest payable
pursuant to Section 11.2(a)) shall be deemed to satisfy the Company's obligation
to pay the principal amount at
<PAGE>
Maturity of the portion of Convertible Debentures so converted and any unpaid
interest accrued on such Convertible Debentures at the time of such conversion.
(c) The Company shall pay to the Conversion Agent a cash adjustment in an
amount equal to the same fraction of the Closing Price of such fractional
interest on the date on which the Convertible Debentures were duly surrendered
to the Conversion Agent for conversion, or, if such day is not a Trading Day, on
the next Trading Day, and the Conversion Agent in turn will make such payment,
if any, to the Holder of the Convertible Debentures or the holder of the
Convertible Preferred Securities so converted.
(d) In the event of the conversion of any Convertible Debenture in part
only, the Company shall execute and the Trustee shall authenticate and make
available for delivery to or on the order of the Holder thereof, at the expense
of the Company, a new Convertible Debenture or Convertible Debentures in the
aggregate principal amount equal to the unconverted portion thereof.
(e) In effecting the conversion transactions described in this Section
11.2, the Conversion Agent is acting as agent of the holders of Convertible
Preferred Securities (in the exchange of Convertible Preferred Securities for
Convertible Debentures) and as agent of the Holders of Convertible Debentures
(in the conversion of Convertible Debentures into Common Shares), as the case
may be. The Conversion Agent is hereby authorized (i) to exchange Convertible
Debentures held by the Trust from time to time for Convertible Preferred
Securities in connection with the conversion of such Convertible Preferred
Securities in accordance with this Article XI and (ii) to convert all or a
portion of the Convertible Debentures into Common Shares and thereupon to
deliver such Common Shares in accordance with the provisions of this Article XI
and to deliver to the Trust a new Convertible Debenture or Convertible
Debentures for any resulting unconverted principal amount.
Section 11.3 Conversion Price Adjustments. The Conversion Price shall be
adjusted from time to time as follows:
(a) In case the Company shall (1) pay or make a distribution in Common
Shares to holders of the Common Shares, (2) reclassify the outstanding Common
Shares into shares of some other class or series of shares, (3) subdivide the
outstanding Common Shares into a greater number of Common Shares or (4) combine
the outstanding Common Shares into a smaller number of Common Shares, the
conversion rate immediately prior to such action shall be adjusted so that the
Holder of any Convertible Debentures thereafter surrendered for conversion shall
be entitled to receive the number of Common Shares which he would have owned
immediately following such action had such Convertible Debentures been converted
immediately prior thereto. An adjustment made pursuant to this Section 11.3(a)
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.
<PAGE>
(b) In case the Company shall issue rights, options or warrants to all
holders of the Common Shares entitling them to subscribe for or purchase Common
Shares (or securities convertible into Common Shares) at a price per share less
than the current market price (as determined pursuant to Section 11.3(d)) of the
Common Shares on such record date, or shall issue options in excess of the
limitations set forth in Section 11.4 hereof, the number of Common Shares into
which each Convertible Debenture shall be convertible shall be adjusted so that
the same shall be equal to the number determined by multiplying the number of
Common Shares into which such Convertible Debenture was convertible immediately
prior to such record date by a fraction of which the numerator shall be the
number of Common Shares outstanding on such record date plus the number of
additional Common Shares offered (or into which the convertible securities so
offered are convertible), and of which the denominator shall be the number of
Common Shares outstanding on such record date, plus the number of Common Shares
which the aggregate offering price of the additional Common Shares 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 Shares entitled to receive such distribution. For purposes of this
subsection (b), the number of Common Shares at any time outstanding shall not
include Common Shares purchased by the Company.
(c) In case the Company shall distribute to all holders of the Common
Shares any class of shares of stock other than Common Shares, evidences of
indebtedness or assets of the Company (other than cash distributions out of
current or retained earnings), or shall distribute to all holders of the Common
Shares rights or warrants to subscribe for securities (other than those referred
to in Section 11.3(b)), then in each such case the number of Common Shares into
which each Convertible Debenture shall be convertible shall be adjusted so that
the same shall equal the number determined by multiplying the number of Common
Shares into which such Convertible Debenture was convertible immediately prior
to the date of such distribution by a fraction of which the numerator shall be
the current market price (determined as provided in Section 11.3(d)) of the
Common Shares on the record date mentioned below, and of which the denominator
shall be such current market price of the Common Shares, less the then fair
market value (as determined by the Board of Directors of the Company, 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 Common Share. Such adjustment shall become
effective immediately after the record date for the determination of the holders
of the Common Shares entitled to receive such distribution. Notwithstanding the
foregoing, in the event that the Company shall distribute rights or warrants
(other than those referred to in Section 11.3(b)) ("Rights") pro rata to holders
of the Common Shares, the Company may, in lieu of making any adjustment pursuant
to this Section 11.3(c), make proper provision so that each holder of a
Convertible Debenture who converts such security 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 Shares
issuable upon such
<PAGE>
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 Common Shares 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
Common Shares into which a Convertible Debenture 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 Shares on any date
shall be deemed to be the average of the daily closing prices for 30 consecutive
Trading Days commencing 45 Trading Days before the date in question. The closing
price for each day shall be the last reported sales price or, in case no such
reported sale takes place on such date, the average of the reported closing bid
and asked prices regular way, in either case on the American Stock Exchange, or
if the Common Shares are not listed or admitted to trading on such exchange, on
the principal national securities exchange on which the Common Shares are 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 Shares 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 Shares are 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 Company for that purpose.
(e) In any case in which this Section 11.3 shall require that an adjustment
be made immediately following a record date, the Company may elect to defer (but
only until five Business Days following the mailing of the notice described in
Section 11.2) issuing to the Holder of any Convertible Debenture converted after
such record date the Common Shares and other shares of stock of the Company
issuable upon such conversion over and above the Common Shares and other shares
of stock of the Company 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 Company shall issue or cause its transfer agents to
issue appropriate evidence of the right to receive such shares.
(f) No adjustment in the conversion rate shall be required until cumulative
adjustments result in a change of 1% or more of the conversion price as in
effect prior to the last adjustment of the conversion rate; provided, however,
that any adjustment which by reason of this Section 11.3(f) is not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11.3 shall be made to the
nearest
<PAGE>
cent ($.01) or the nearest one-hundredth (1/100th) of a share, as the case may
be. No adjustment to the conversion rate shall be made for cash dividends.
(g) In the event that, as a result of an adjustment made pursuant to
Section 11.3, the Holder of any Convertible Debentures thereafter surrendered
for conversion shall become entitled to receive any shares of stock of the
Company other than Common Shares, thereafter the number of such other shares so
receivable upon conversion of any Convertible Debenture 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 Shares contained in
this Section 11.3.
(h) The Company may make such increases in the conversion rate, in addition
to any increases or decreases required by Sections 11.3(a), (b) and (c), 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 Company shall promptly
mail to all Holders of record of Convertible Debentures a notice of the
adjustment and shall cause to be prepared a certificate signed by a principal
financial officer of the Company 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 Convertible Debentures.
(j) In the event that:
(i) the Company takes any action which would require an
adjustment in the conversion rate,
(ii) the Company consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and
shareholders of the Company must approve the transaction, or
(iii) there is a dissolution, winding up or liquidation of the
Company,
a Holder of Convertible Debentures may wish to convert some or all of such
Convertible Debentures into Common Shares 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 Shares on that date may receive.
Therefore, the Company shall mail to holders of Convertible Debentures a notice
stating the proposed record or effective date of the transaction, as the case
may be. The Company shall mail the notice at least ten days before such date;
however, failure to mail such notice or any defect therein shall not affect the
validity of any transaction referred to in clause (i), (ii) or (iii) of this
Section 11.3(j).
<PAGE>
(k) If any of the following shall occur, namely: (i) any reclassification
or change of outstanding Common Shares issuable upon conversion of Convertible
Debentures (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 Company is a party
other than a consolidation or merger in which the Company 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 Shares or (iii) any sale, transfer or lease
of all or substantially all of the property or business of the Company as an
entirety, then the Company, or such successor or purchasing entity, as the case
may be, shall, as a condition precedent to such reclassification, change,
consolidation, merger, sale, transfer or lease, agree in writing that each
Convertible Debenture 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 Common Shares deliverable upon conversion of such
Convertible Debentures immediately prior to such reclassification, change,
consolidation, merger, sale, transfer or lease. Such writing shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 11. The foregoing, however, shall not
in any way affect the right that a Holder of Convertible Debentures may
otherwise have, pursuant to clause (2) of the last sentence of 11.3.(c) to
receive Rights upon conversion of Convertible Debentures. 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 Shares 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 such other corporation or other entity shall agree in writing to
additional provisions to protect the interests of the Holders of Convertible
Debentures as the Board of Directors of the Company shall reasonably consider
necessary by reason of the foregoing. The provisions of this Section 11.3(k)
shall similarly apply to successive consolidations, mergers, sales, transfers or
leases.
No holder of Convertible Debentures will possess any preemptive rights to
subscribe for or acquire any unissued shares of the Company (whether now or
hereafter authorized) or securities of the Company convertible into or carrying
a right to subscribe to or acquire shares of the Company.
Section 11.4 So long as any Convertible Debentures are Outstanding, WRP
shall not issue any options to purchase Common Shares of WRP ("Employee Stock
Options") to officers, directors or employees of, or consultants to, WRP,
whether pursuant to employee stock option or purchase plans of WRP or employment
or consulting agreements or otherwise for an exercise price which is less than
the Closing Price of such Common Shares on
<PAGE>
the date of grant. In the event the number of Common Shares subject to Employee
Stock Options, excluding any Employee Stock Options which were issued in
exchange for options to purchase shares of Wellsford Residential Property Trust,
at any time exceeds, in the aggregate, 10% of the Common Shares of WRP
outstanding at such time, all Employee Stock Options outstanding at such time in
excess of such 10%, shall be deemed for purposes of Section 12.3(b) hereof to
have an exercise price per share equal to 20% of the average Closing Price of a
Common Share on each date of grant of Employee Stock Options exercisable for
Common Shares in excess of such 10%.
Section 11.5 Trustee Not Responsible for Determining Conversion Price or
Adjustments. Neither the Trustee nor any Conversion Agent shall at any time be
under any duty or responsibility to any Holder of any Convertible Debenture to
determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed. Neither the Trustee nor any
Conversion Agent shall be accountable with respect to the validity or value (or
the kind or amount) of any Common Shares or of any securities or property, which
may at any time be issued or delivered upon the conversion of any Convertible
Debenture; and neither the Trustee nor any Conversion Agent makes any
representation with respect thereto. Neither the Trustee nor any Conversion
Agent shall be responsible for any failure of the Company to make any cash
payment or to issue, transfer or deliver any Common Shares of the Company or
stock certificates or other securities or property upon the surrender of any
Convertible Debenture for the purpose of conversion. All Convertible Debentures
delivered for conversion shall be delivered to the Trustee to be canceled by or
at the discretion of the Trustee, which shall dispose of the same as provided in
Section 2.12 of this Indenture.
Section 11.6 Reservation of Common Shares. The Company shall at all times
reserve and keep available, free from preemptive rights, out of its authorized
but unissued Common Shares, for the purpose of effecting the conversion of
Convertible Debentures, the full number of Common Shares of the Company then
issuable upon the conversion of all Outstanding Convertible Debentures.
Section 11.7 Payment of Certain Taxes upon Conversion. The Company will pay
any and all taxes that may be payable in respect of the issue or delivery of its
Common Shares on conversion of Convertible Debentures pursuant hereto. The
Company shall not, however, be required to pay any tax which may be payable in
respect of any transfer involved in the issue and delivery of its Common Shares
in a name other than that of the Holder of the Convertible Debenture or
Convertible Debentures to be converted, and no such issue or delivery shall be
made unless and until the person requesting such issue has paid to the Company
the amount of any such tax, or has established, to the satisfaction of the
Company, that such tax has been paid.
<PAGE>
Section 11.8 Nonassessability. The Company covenants that all Common Shares
which may be issued upon conversion of Convertible Debentures will upon issue in
accordance with the terms hereof be duly and validly issued and fully paid and
nonassessable.
ARTICLE XII
SUBORDINATION OF CONVERTIBLE DEBENTURES
Section 12.1 Convertible Debentures Subordinate to Senior Indebtedness. The
Company covenants and agrees, and each Holder of a Convertible Debenture, by the
Holder's acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article, the indebtedness
represented by the Convertible Debentures and the payment of the principal of
(and premium, if any) and interest on each and all of the Convertible Debentures
are hereby expressly made subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness of the Company, whether
outstanding at the date of this Indenture or thereafter incurred. No provision
of this Article shall prevent the occurrence of any default or Event of Default
hereunder.
Section 12.2 Payment Over of Proceeds upon Dissolution, Etc. In the event
of (i) any insolvency, bankruptcy, receivership, liquidation, reorganization,
readjustment, composition or other similar proceeding relating to the Company,
its creditors or its property, (ii) any proceeding for the liquidation,
dissolution or other winding up of the Company voluntarily or involuntarily,
whether or not involving insolvency or bankruptcy proceedings, (iii) any
assignment by the Company for the benefit of creditors or (iv) any other
marshalling of assets of the Company, all amounts due upon all Senior
Indebtedness of the Company (including any interest thereon accruing after the
commencement of such proceedings) shall first be paid in full, or payment
thereof provided for in money in accordance with its terms, before any payment
is made by the Company on account of the principal (and premium, if any) or
interest on the Convertible Debentures; and any payment by the Company, or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, which the Holders of the Convertible Debentures or the
Trustee would be entitled to receive from the Company, except for the provisions
of this Article, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidation trustee, agent or other Person making such payment or
distribution, or by the Holders of the Convertible Debentures or by the Trustee
under this Indenture if received by them or it, directly to the holders of
Senior Indebtedness of the Company (pro rata to such holders on the basis of the
respective amounts of Senior Indebtedness held by such holders, as calculated by
the Company) or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Indebtedness may have been issued, as their
<PAGE>
respective interests may appear, to the extent necessary to pay such Senior
Indebtedness (including any interest thereon accruing after the commencement of
such proceedings) in full, after giving effect to any concurrent payment or
distribution to or for the holders of such Senior Indebtedness, before any
payment or distribution is made to the Holders of the Convertible Debentures or
to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Indebtedness of the Company is paid in full, or
provision is made for such payment, such payment or distribution shall be held
in trust for the benefit of and shall be paid over or delivered to the holders
of such Senior Indebtedness or their representative or representatives, or to
the trustee or trustees under any indenture pursuant to which any instruments
evidencing such Senior Indebtedness may have been issued, as their respective
interests may appear, as calculated by the Company, for application to the
payment of all Senior Indebtedness of the Company, remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full, after giving effect to
any concurrent payment or distribution to or for the benefit of the holders of
such Senior Indebtedness.
For purposes of this Article only, the words "cash, property or securities"
shall not be deemed to include shares of Capital Stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which are subordinated
in right of payment to all Senior Indebtedness which may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Convertible Debentures are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of its properties and assets substantially as an entirety to another
Person upon the terms and conditions set forth in Article IX of this Indenture
shall not be deemed a dissolution, winding up, liquidation, reorganization,
readjustment, composition, assignment for the benefit of creditors or
marshalling of assets and liabilities of the Company for the purposes of this
Section if the Person formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance or transfer such properties
and assets substantially as an entirety, as the case may be, shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
set forth in Article IX of this Indenture.
Section 12.3 Prior Payment to Senior Indebtedness upon Acceleration of
Convertible Debentures. In the event that any Convertible Debentures are
declared due and payable before their Stated Maturity, then and in such event
the holders of Senior Indebtedness shall be entitled to receive payment in full
of all amounts then due on or in respect of all Senior Indebtedness or provision
shall be made for such payment in cash, before the Holders of the Convertible
Debentures are entitled to receive any payment (including any payment which may
<PAGE>
be payable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Convertible Debentures) by the Company
on account of the principal of (or premium, if any) or interest on the
Convertible Debentures or on account of the purchase or other acquisition of
Convertible Debentures.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Convertible Debenture prohibited
by the foregoing provisions of this Section, and if such fact shall, at or prior
to the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with respect
to which Section 12.2 would be applicable.
Section 12.4 No Payment When Senior Indebtedness in Default. In the event
and during the continuation of any default by the Company in the payment of
principal, premium, if any, interest or any other payment due on any Senior
Indebtedness of the Company, as the case may be, beyond any applicable grace
period with respect thereto, or in the event that the maturity of any Senior
Indebtedness of the Company has been accelerated because of a default, then, in
any such case, no payment shall be made by the Company with respect to the
principal (including redemption payments, if any) of, premium, if any, or
interest on the Convertible Debentures until such default is cured or waived or
ceases to exist or any such acceleration or demand for payment has been
rescinded.
Section 12.5 Payment Permitted in Certain Situations. Nothing contained in
this Article or elsewhere in this Indenture or in the Convertible Debentures
shall prevent (a) the Company, at any time except during the pendency of any
dissolution, winding-up, liquidation or reorganization of the Company, whether
voluntary or involuntary, or any bankruptcy, insolvency, receivership or other
proceedings of the Company referred to in Section 12.2 or under the conditions
described in Section 12.3 or 12.4, from making payments at any time of principal
of or premium, if any, or interest on the Convertible Debentures, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of, or premium, if any, or interest on
the Convertible Debentures or the retention of such payment by the Holders, if,
at the time of such application by the Trustee, it did not have knowledge that
such payment would have been prohibited by the provisions of this Article.
Section 12.6 Subrogation to Rights of Holders of Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness or the provision for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Indebtedness, the Holders of Convertible Debentures
shall be subrogated to the extent of the payments or distributions made to the
holders
<PAGE>
of such Senior Indebtedness pursuant to the provisions of this Article (equally
and ratably with the holders of indebtedness of the Company which by its express
terms is subordinated to indebtedness of the Company to substantially the same
extent as the Convertible Debentures are subordinated to the Senior Indebtedness
and is entitled to like rights of subrogation) to the rights of the holders of
such Senior Indebtedness to receive payments and distributions of cash, property
and securities applicable to the Senior Indebtedness until the principal of (and
premium, if any) and interest on the Convertible Debentures shall be paid in
full. For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities to which
the Holders of Convertible Debentures or the Trustee would be entitled except
for the provisions of this Article, and no payments over pursuant to the
provisions of this Article to or for the benefit of the holders of Senior
Indebtedness by Holders of Convertible Debentures or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of Convertible Debentures, be deemed to be a payment or distribution
by the Company to or on account of the Senior Indebtedness.
Section 12.7 Provisions Solely to Define Relative Rights. The provisions of
this Article are and are intended solely for the purpose of defining the
relative rights of the Holders of Convertible Debentures on the one hand and the
holders of Senior Indebtedness on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Convertible Debentures is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of Convertible Debentures, the
obligation of the Company, which is absolute and unconditional (and which,
subject to the rights under this Article of the holders of Senior Indebtedness,
is intended to rank equally with all other general obligations of the Company),
to pay to the Holders of Convertible Debentures the principal of (and premium,
if any) and interest on the Convertible Debentures as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of Convertible Debentures and
creditors of the Company, as the case may be, other than the holders of Senior
Indebtedness; or (c) prevent the Trustee or the Holder of any Convertible
Debenture from exercising all remedies otherwise permitted by applicable law
upon default under this Indenture, subject to the rights, if any, under this
Article of the holders of Senior Indebtedness to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
Section 12.8 Trustee to Effectuate Subordination. Each Holder of a
Convertible Debenture by such Holder's acceptance thereof authorizes and directs
the Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes.
Section 12.9 No Waiver of Subordination Provisions. No right of any present
or future holder of any Senior Indebtedness to enforce subordination as herein
provided shall at any time in any way be prejudiced or impaired
<PAGE>
by any act or failure to act on the part of the Company or by any act or failure
to act, in good faith, by any such holder, or by any noncompliance by the
Company with the terms, provisions and covenants of this Indenture, regardless
of any knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Trustee or the Holders of the Convertible
Debentures, without incurring responsibility to the Holders of Convertible
Debentures and without impairing or releasing the subordination provided in this
Article or the obligations hereunder of the Holders of Convertible Debentures to
the holders of Senior Indebtedness do any one or more of the following: (a)
change the manner, place or terms of payment or extend the time of payment of,
or renew or alter, Senior Indebtedness or otherwise amend or supplement in any
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (b) sell, exchange,
release or otherwise deal with any property pledged, mortgaged or otherwise
securing Senior Indebtedness; (c) release any Person liable in any manner for
the collection of Senior Indebtedness; and (d) exercise or refrain from
exercising any rights against the Company and any other Person.
Section 12.10 Notice to Trustee. The Company shall give prompt written
notice to a Responsible Officer of the Trustee of any fact known to the Company
which would prohibit the making of any payment to or by the Trustee in respect
of the Convertible Debentures pursuant to the provisions of this Article.
Notwithstanding the provisions of this Article or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Convertible Debentures pursuant to the provisions of this
Article, unless and until a Responsible Officer of the Trustee shall have
received written notice thereof from the Company or a holder or holders of
Senior Indebtedness or from any trustee therefor; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Section 6.2
of this Indenture, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall have not received the
notice provided for in this Section at least two Business Days prior to the date
upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of (or premium, if
any) or interest on any Convertible Debentures), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
Subject to the provisions of Section 6.2 of this Indenture, the Trustee
shall be entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Indebtedness (or a trustee
therefor) to establish that such notice has been given by a
<PAGE>
holder of Senior Indebtedness (or a trustee therefor). In the event that the
Trustee determines in good faith that further evidence is required with respect
to the right of any Person as a holder of Senior Indebtedness to participate in
any payment or distribution pursuant to this Article, the Trustee may request
such Person to furnish evidence to the reasonable satisfaction of the Trustee as
to the amount of Senior Indebtedness held by such Person, the extent to which
such Person is entitled to participate in such payment or distribution and any
other facts pertinent to the rights of such Person under this Article, and if
such evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Section 12.11 Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 6.2 of this
Indenture, and the Holders of Convertible Debentures shall be entitled to
conclusively rely upon any order or decree entered by any court of competent
jurisdiction in which such insolvency, bankruptcy, receivership, liquidation,
reorganization, dissolution, winding up or similar case or proceeding is
pending, or a certificate of the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the Holders
of Convertible Debentures, for the purpose of ascertaining the Persons entitled
to participate in such payment or distribution, the holders of Senior
Indebtedness and other indebtedness of the Company, as the case may be, the
amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
Section 12.12 Trustee Not Fiduciary for Holders of Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee undertakes to
perform or to observe only such of its covenants and obligations as are
specifically set forth in this Article, and no implied covenants or obligations
with respect to the holders of such Senior Indebtedness shall be read into this
Indenture against the Trustee. Except with respect to Section 12.4, the Trustee
shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness and shall not be liable to any such holders or creditors if it
shall in good faith pay over or distribute to Holders of Convertible Debentures
or to the Company or to any other Person cash, property or securities to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
or otherwise.
Section 12.13 Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights. The Trustee in its individual capacity shall
be entitled to all the rights set forth in this Article with respect to any
Senior Indebtedness which may at any time be held by it, to the same extent as
any other holder of Senior Indebtedness and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
<PAGE>
Nothing in this Article XII shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.7 of this Indenture.
Section 12.14 Article Applicable to Paying Agents. In case at any time any
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article shall in
such case (unless the context otherwise requires) be construed as extending to
and including such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article in addition to or in
place of the Trustee; provided, however, that Section 12.13 shall not apply to
the Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
Section 12.15 Certain Conversions Deemed Payment. For purposes of this
Article only, (a) the issuance and delivery of junior securities (or cash paid
in lieu of fractional shares) upon conversion or redemption of Convertible
Debentures in accordance with Article XI shall not be deemed to constitute a
payment or distribution on account of the principal of or premium or interest on
Convertible Debentures or on account of the purchase or other acquisition of
Convertible Debentures, and (b) the payment, issuance or delivery of cash,
property or securities (other than junior securities and cash paid in lieu of
fractional shares) upon conversion or redemption of a Convertible Debenture
shall be deemed to constitute payment on account of the principal of such
Convertible Debenture. For the purposes of this Section, the term "junior
securities" means (i) shares of any Capital Stock of any class of the Company
and (ii) securities of the Company which are subordinated in right of payment to
all Senior Indebtedness which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Convertible Debentures are so subordinated as provided in this
Article. Nothing contained in this Article or elsewhere in this Indenture or in
the Convertible Debentures is intended to or shall impair, as among the Company,
its creditors other than holders of Senior Indebtedness and the Holders of
Convertible Debentures, the right, which is absolute and unconditional, of the
Holder of any Convertible Debenture to convert such Convertible Debenture in
accordance with Article XI.
Section 12.16 Further Subrogation. The Company shall be subrogated to all
(if any) rights of the Trust and any holder of beneficial interests in the
assets of the Trust against the Trustee in respect of any breach by the Trustee
of any of its obligations under this Indenture.
ARTICLE XIII
EXPENSES
<PAGE>
Section 13.1 Payment of Expenses. In connection with the offering, sale and
issuance of the Convertible Debentures to the Institutional Trustee and in
connection with the sale of the Trust Securities by the Trust, the Company, in
its capacity as borrower with respect to the Convertible Debentures, shall:
(a) pay all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the
Trust, the fees and expenses of the Institutional Trustee and the
Delaware Trustee, the costs and expenses relating to the operation of
the Trust, including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses
for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel
and telephone and other telecommunications expenses and costs and
expenses incurred in connection with the acquisition, financing, and
disposition of Trust assets);
(b) pay all costs and expenses related to the enforcement by the
Institutional Trustee of the rights of the holders of the Trust
Securities;
(c) be primarily liable for any indemnification obligations
arising with respect to the Declaration; and
(d) pay any and all taxes (other than United States income and
withholding taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the
Trust.
Section 13.2 Payment Upon Resignation or Removal. Upon termination of this
Indenture or the removal or resignation of the Trustee pursuant to Section 6.8
of this Indenture, the Company shall pay to the Trustee all amounts accrued to
the date of such termination, removal or resignation. Upon termination of the
Declaration or the removal or resignation of the Delaware Trustee or the
Institutional Trustee, as the case may be, pursuant to Section 5.6 of the
Declaration, the Company shall pay to the Delaware Trustee or the Institutional
Trustee, and their respective counsel, as the case may be, all amounts accrued
to the date of such termination, removal or resignation.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
Section 14.1 Incorporators, Shareholders, Officers and
<PAGE>
Directors of Company Exempt from Individual Liability. No recourse under or upon
any obligations, covenant or agreement contained in this Indenture, in any
Convertible Debenture, or because of any indebtedness evidenced thereby, shall
be had against any incorporator, as such or against any past, present or future
shareholder, officer or director, as such, of the Company or of any predecessor
or successor thereof, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of the
Convertible Debentures by the Holders thereof and as part of the consideration
of the issue of the Convertible Debentures.
Section 14.2 Provisions of Indenture for the Sole Benefit of Parties and
Holders of Convertible Debentures. Nothing in this Indenture or in the
Convertible Debentures, expressed or implied, shall give or be construed to give
to any Person, firm or corporation, other than the parties hereto, any Paying
Agent and their successors hereunder, the holders of Senior Indebtedness, the
holders of Convertible Preferred Securities (to the extent provided herein) and
the Holders of the Convertible Debentures any legal or equitable right, remedy
or claim under this Indenture or under any covenant or provision herein
contained, all such covenants and provisions being for the sole benefit of the
parties hereto and their successors and of the Holders of the Convertible
Debentures.
Section 14.3 Right to Assign; Successors and Assigns Bound by Indenture.
The Company shall have the right at all times to assign any of its respective
rights or obligations under this Indenture to a direct or indirect wholly-owned
Subsidiary of the Company, other than an entity which will be taxed as a
partnership for federal income tax purposes; provided that, in the event of any
such assignment, the Company shall remain liable for all of its obligations
under this Indenture. Subject to the foregoing, this Indenture will be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. The rights and obligations of the parties under this
Indenture may not otherwise be assigned by such parties.
All the covenants, stipulations, promises and agreements in this Indenture
by the parties hereto shall bind their respective successors and assigns,
whether so expressed or not.
Section 14.4 Notices and Demands on Company, Trustee and Holders of
Convertible Debentures. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the Holders of Convertible Debentures to or on the Company may be given or
served by being deposited postage prepaid, first-class mail (except as otherwise
specifically provided herein) addressed (until another address of the Company is
filed by the Company with the Trustee) to Wellsford Real Properties, Inc., 535
Madison Avenue, 26th Floor, New York, New York 10022, Attention: Jeffrey H.
<PAGE>
Lynford. Any notice, direction, request or demand by the Company or any Holder
of Convertible Debentures to or upon the Trustee shall be deemed to have been
sufficiently given or made, for all purposes, if given or made at the Corporate
Trust Office.
Where this Indenture provides for notice to Holders of Convertible
Debentures of any event such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed by first-class
mail, postage prepaid to such Holders as their names and addresses appear in the
Security Register within the time prescribed. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the Person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver. In
any case where notice to Holders is given by mail, neither the failure to mail
such notice, nor any defect in any notice so mailed, shall affect the
sufficiency of such notice, and any notice which is mailed in the manner herein
provided shall be conclusively presumed to have been duly given.
In case, by reason of the suspension of or irregularities in regular mail
service, it shall be impracticable to mail notice to the Company and Holders of
Convertible Debentures when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such notice as shall be
reasonably acceptable to the Trustee shall be deemed to be a sufficient giving
of such notice.
Section 14.5 Officers' Certificates and Opinions of Counsel; Statements to
Be Contained Therein. Upon any application or demand by the Company to the
Trustee to take action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent, if any, have been
complied with, except that in the case of any such application or demand as to
which the furnishing of such documents is specifically required by any provision
of this Indenture relating to such particular application or demand, no
additional certificate or opinion need be furnished.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (a) a statement that the person making such
certificate or opinion has read such covenant or condition and the definitions
herein relating thereto, (b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based, (c) a statement that, in the opinion of
such person, he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such covenant or
condition has been complied with and (d) a
<PAGE>
statement as to whether or not, in the opinion of such person, such condition or
covenant has been complied with.
Any certificate, statement or opinion of any officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion or representations with respect to the matters upon which his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of reasonable care should know that the same are erroneous. Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters or information with respect to which is in the possession of
the Company, upon the certificate, statement or opinion of or representations by
an officer or officers of the Company, unless such counsel knows that the
certificate, statement or opinion or representations with respect to the matters
upon which his certificate, statement or opinion may be based as aforesaid are
erroneous, or in the exercise of reasonable care should know that the same are
erroneous.
Any certificate, statement or opinion of an officer of the Company or of
counsel may be based, insofar as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Any certificate or opinion of any independent firm of public accountants
filed with and directed to the Trustee shall contain a statement that such firm
is independent.
Section 14.6 Payments Due on Saturdays, Sundays and Holidays. Except as
otherwise provided in Section 2.5, if the date of Maturity of interest on or
principal of the Convertible Debentures or the date fixed for redemption or
repayment of any such Convertible Debenture shall not be a Business Day, then
payment of interest or principal need not be made on such date, but may be made
on the next succeeding Business Day; provided that if such next succeeding
Business Day falls in the next succeeding calendar year, such payment shall be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on the date of Maturity or the date fixed for redemption,
and no interest shall accrue for the period after such date.
<PAGE>
Section 14.7 Conflict of Any Provision of Indenture with Trust Indenture
Act. If and to the extent that any provision of this Indenture limits, qualifies
or conflicts with another provision included in this Indenture which is required
by the Trust Indenture Act, such required provision shall control.
Section 14.8 Delaware Law to Govern. THIS INDENTURE AND THE CONVERTIBLE
DEBENTURES SHALL BE DEEMED TO BE CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN
THE STATE OF DELAWARE, AND FOR ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW
RULES OF SAID STATE.
Section 14.9 Counterparts. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
Section 14.10 Effect of Headings; Gender. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof. The use of the masculine, feminine or neuter gender
herein shall not limit in any way the applicability of any term or provision
hereof.
Section 14.11 Acceptable Counsel. In each instance herein which states that
legal counsel needs to be acceptable to a party (or similar language to that
affect), the law firm of Robinson Silverman Pearce Aronsohn & Berman LLP shall
be deemed to be acceptable legal counsel.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereto affixed and
attested, all as of the day and year first above written.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
----------------------------------
Name: Edward Lowenthal
Title: President
WILMINGTON TRUST COMPANY,
as Trustee
By: /s/ Jennifer Matz
----------------------------------
Name: Jennifer Matz
Title: Assistant Vice President
<PAGE>
No. 1 $ 25,775,000
WELLSFORD REAL PROPERTIES, INC.
8.25% CONVERTIBLE JUNIOR SUBORDINATED DEBENTURE
PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE, ANY CERTIFICATE
EVIDENCING A CONVERTIBLE DEBENTURE SHALL BEAR A LEGEND IN SUBSTANTIALLY THE
FOLLOWING FORM, UNLESS OTHERWISE AGREED BY THE COMPANY (WITH WRITTEN NOTICE
THEREOF TO THE TRUSTEE): THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR
THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED
INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY
EVIDENCED HEREBY IN AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR
TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY
EVIDENCED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR
PROVISION), RESELL OR OTHERWISE TRANSFER THE SECURITY EVIDENCED HEREBY OR, IF
THIS SECURITY IS CONVERTIBLE INTO COMMON SHARES, THE COMMON SHARES ISSUABLE UPON
CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO WELLSFORD REAL PROPERTIES,
INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRUSTEE UNDER THE INDENTURE (OR, IF THIS CERTIFICATE EVIDENCES COMMON
SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER
OF THE SECURITY EVIDENCED HEREBY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE SECURITY EVIDENCED
HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE SECURITY EVIDENCED HEREBY PRIOR TO THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION),
THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE
TRUSTEE UNDER THE INDENTURE (OR, IF THIS CERTIFICATE EVIDENCES COMMON SHARES,
SUCH HOLDER MUST FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS THE COMPANY OR WRP CONVERTIBLE TRUST I (THE
"TRUST") MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT
EVIDENCE COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE UNDER THE INDENTURE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THIS SECURITY IS ALSO
SUBJECT TO THE RESTRICTIONS ON TRANSFER SET FORTH IN THE INDENTURE.
Wellsford Real Properties, Inc., a Maryland corporation (the "Company",
which term includes any successor corporation or other entity under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to, Wilmington Trust Company, as Institutional Trustee (the "Institutional
Trustee") for WRP Convertible Trust I or registered assigns, the principal sum
of Twenty-Five Million Seven Hundred Seventy Five Thousand Dollars ($25,775,000)
and to pay interest on said principal sum from May 5, 2000 (the "Issuance
Date"), or from the most recent interest payment date to which interest has been
paid or duly provided for, quarterly in arrears by payment of $0.515625 per
Convertible Debenture on the fifteenth day of January, April July and October
(each such date, an "Interest Payment Date") of each year commencing July 17,
2000, at the rate of 8.25% per annum ($2.0625 per annum, $0.515625 per quarter)
from and including the Issuance Date to and including the Maturity Date, until
the principal hereof shall have become due and payable, and on any overdue
principal and premium, if any, and (without duplication and to the extent that
payment of such interest is enforceable under applicable law) on any overdue
installment of interest at the same rate per annum compounded quarterly. Each
quarterly period ending on an Interest Payment Date is hereafter referred to as
an "Interest Period." The amount of interest payable for the initial Interest
Period and for any Interest Period shorter than a full Interest Period shall be
prorated and shall be computed on the basis of a 360-day year of twelve 30-day
months. For any twelve quarterly interest periods during the term of the
Convertible Debentures, whether or not consecutive, and whether or not the
Company has available cash with which to pay interest, the Company shall have
the right to pay the interest due on the Convertible Debentures by the issuance
of additional Convertible Debentures, the number of which shall be determined by
dividing the total amount of interest to be paid by the issuance of additional
Convertible Debentures by $25.00. In the event that any date on which interest
is payable on this Convertible Debenture is not a Business Day, then payment of
interest payable on such date will be made on the next succeeding day that is a
Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date. The interest
installment so payable, and punctually paid or duly provided for, on any
Interest Payment Date will, as provided in the Indenture (referred to on the
reverse hereof) be paid to the person in whose name this Convertible Debenture
(or one or more Predecessor Convertible Debentures, as defined in said
Indenture) is registered on the record date for such interest installment, which
shall be the close of business on the fifteenth day prior to such Interest
Payment Date. Any such interest installment not punctually paid or duly provided
for shall forthwith cease to be payable to the registered Holders on such record
date and may be paid to the Person in whose name this Convertible Debenture (or
one or more Predecessor Convertible Debentures) is registered at the close of
business on a special record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered Holders
of the Convertible Debentures not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Convertible
Debentures may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. The principal of (and
premium, if any) and the interest on this Convertible Debenture shall be payable
at the office or agency of the Trustee maintained for that purpose in any coin
or currency of the United States of America that at the time of payment is legal
tender for payment of public and private debts; provided, however, that payment
of interest may be made at the option of the Company by check mailed to the
registered Holder at such address as shall appear in the Security Register.
Notwithstanding the foregoing, so long as the Holder of this Convertible
Debenture is the Institutional Trustee, the payment of the principal of (and
premium, if any) and interest on this Convertible Debenture will be made at such
place and to such account as may be designated by the Institutional Trustee.
The indebtedness evidenced by this Convertible Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Convertible Debenture
is issued subject to the provisions of the Indenture with respect thereto. Each
Holder of this Convertible Debenture, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
or her behalf to take such action as may be necessary or appropriate to
acknowledge or effectuate the subordination so provided and (c) appoints the
Trustee his or her attorney-in-fact for any and all such purposes. Each Holder
hereof, by his or her acceptance hereof, hereby waives all notice of the
acceptance of the subordination provisions contained herein and in the Indenture
by each holder of Senior Indebtedness, whether now outstanding or hereafter
incurred, and waives reliance by each such holder upon said provisions.
This Convertible Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee. The provisions of this Convertible Debenture are
continued on the reverse side hereof and such continued provisions shall for all
purposes have the same effect as though fully set forth at this place.
Capitalized terms used but not defined herein shall have the meaning given them
in the Indenture.
IN WITNESS WHEREOF, the Company has caused this instrument to be executed.
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
-----------------------------------------
Name: Edward Lowenthal
Title: President
Attest:
By: /s/ James J. Burns
-----------------------------------------
Name: James J. Burns
Title: Senior Vice President
CERTIFICATE OF AUTHENTICATION
This is one of the Convertible Debentures described in the within-mentioned
Indenture.
Dated: May 5, 2000
WILMINGTON TRUST COMPANY, By:
as Trustee ----------------------------------------
Authorized Signatory
<PAGE>
FORM OF REVERSE OF DEBENTURE
This Convertible Debenture is one of the 8.25% Convertible Junior
Subordinated Debentures (herein referred to as the "Convertible Debentures"),
issued or to be issued under and pursuant to an Indenture dated as of May 5,
2000, duly executed and delivered between the Company and Wilmington Trust
Company, as Trustee (the "Trustee") (the "Indenture"), to which Indenture and
all indentures supplemental thereto reference is hereby made for a description
of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the Holders of the Convertible
Debentures. The Convertible Debentures are limited in aggregate principal amount
as specified in the Indenture.
Because of the occurrence and continuation of a Tax Event, in certain
circumstances, this Convertible Debenture may be redeemed prior to maturity at
the principal amount specified on the face hereof together with any interest
accrued thereon (the "Redemption Price"). The Redemption Price shall be paid
prior to 12:00 noon, New York City time, on the date of such redemption or at
such earlier time as the Company determines. The Company shall have the right to
redeem this Convertible Debenture at the option of the Company, upon not less
than 30 nor more than 60 days notice, without premium or penalty, in whole or in
part at any time on or after May 30, 2002 (an "Optional Redemption") at a price
equal to 100% of the principal amount of the Convertible Debentures (the
"Optional Redemption Price") together with accrued and unpaid interest
(including Additional Sums, if any) to, but excluding, the redemption date. The
Holder of this Convertible Debenture also has the right to require that this
Convertible Debenture be redeemed pursuant to the terms of the Indenture.
If Convertible Debentures are redeemed on any January 15, April 15, July 15
or October 15, accrued and unpaid interest shall be payable to holders of record
on the relevant record date.
So long as the corresponding Trust Securities are outstanding, the proceeds
from the redemption of any of the Convertible Debentures will be used to redeem
Trust Securities.
If the Convertible Debentures are only partially redeemed by the Company
pursuant to an Optional Redemption, the Convertible Debentures will be redeemed
pro rata.
In the event of redemption of this Convertible Debenture in part only, a
new Convertible Debenture or Convertible Debentures for the unredeemed portion
hereof will be issued in the name of the Holder hereof upon the cancellation
hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Convertible Debentures
and the interest accrued thereon may be declared, and upon such declaration
shall become, due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the Holders of a majority of the aggregate principal amount
of the Convertible Debentures at the time Outstanding, evidenced as provided in
the Indenture, to execute supplemental indentures adding any provisions to or
changing in any manner or eliminating any of the provisions of the Indenture or
of any supplemental indenture or modifying in any manner the rights of the
Holders of the Convertible Debentures; provided, however, that no such
supplemental indenture shall (i) extend the Stated Maturity of any Convertible
Debenture, or reduce the principal amount thereof or any premium thereon, or
reduce the rate or extend the time of payment of interest thereon, or reduce any
amount payable upon redemption thereof, or impair or affect the right of any
Holder to institute suit for the payment thereof, without the consent of the
Holder of each Convertible Debenture so affected, or (ii) reduce the aforesaid
percentage of Convertible Debentures, the Holders of which are required to
consent to any such supplemental indenture, without the consent of the Holder of
each Convertible Debenture. It is also provided in the Indenture that, with
respect to certain defaults or Events of Default regarding the Convertible
Debentures, prior to any declaration accelerating the maturity of such
Convertible Debentures, the Holders of a majority in aggregate principal amount
Outstanding of the Convertible Debentures (or, in the case of certain defaults
or Events of Default, all of the Convertible Debentures), may on behalf of the
Holders of all the Convertible Debentures waive any such past default or Event
of Default and its consequences. The preceding sentence shall not, however,
apply to a default in the payment of the principal of or premium, if any, or
interest on any of the Convertible Debentures. Any such consent or waiver by the
Holder of this Convertible Debenture (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such Holder and upon all future
Holders and owners of this Convertible Debenture and any Convertible Debenture
which may be issued in exchange or substitution therefor, irrespective of
whether or not any notation thereof is made upon this Convertible Debenture or
such other Convertible Debenture.
No reference herein to the Indenture and no provision of this Convertible
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Convertible Debenture at the time and
place and at the rate and in the money herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, this Convertible Debenture is transferable by the registered Holder
hereof on the Security Register of the Company, upon surrender of this
Convertible Debenture for registration of transfer at the office or agency of
the Trustee in the City and State of New York accompanied by a written
instrument or instruments of transfer in form satisfactory to the Company or the
Trustee duly executed by the registered Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Convertible Debentures of
authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.
Prior to due presentment for registration of transfer of this Convertible
Debenture, the Company, the Trustee, any paying agent and the Registrar may deem
and treat the registered Holder hereof as the absolute owner hereof (whether or
not this Convertible Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon made by anyone other than the Registrar) for the
purpose of receiving payment of or on account of the principal hereof and
premium, if any, and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Registrar shall be
affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Convertible Debenture, or for any claim based hereon, or
otherwise in respect hereof, or based on or in respect of the Indenture, against
any incorporator, shareholder, officer or director, trustee, past, present or
future, as such, of the Company or of any predecessor or successor corporation,
whether by virtue of any constitution, statute or rule of law, or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issuance
hereof, expressly waived and released.
The Holder of any Convertible Debenture has the right, exercisable at any
time through the close of business (New York City time) on the last Business Day
prior to the Maturity Date (or, in the case of a Convertible Debenture called
for redemption, prior to the close of business on the Business Day prior to the
corresponding redemption date), to convert the principal amount thereof (or any
portion thereof that is an integral multiple of $25.00) into Common Shares of
the Company at the initial conversion rate of 2.2474 Common Shares for each
Convertible Debenture (equivalent to a Conversion Price of $11.124 per Common
Share), subject to adjustment under certain circumstances.
To convert a Convertible Debenture, a Holder must (a) complete and sign a
conversion notice substantially in the form attached hereto, (b) surrender the
Convertible Debenture to a Conversion Agent, (c) furnish appropriate
endorsements or transfer documents if required by the Conversion Agent and (d)
pay any transfer or similar tax, if required. Upon conversion, no adjustment or
payment will be made for interest or dividends, but if any Holder surrenders a
Convertible Debenture for conversion on or after the record date for the payment
of an installment of interest and prior to
<PAGE>
the opening of business on the next Interest Payment Date, then, notwithstanding
such conversion, the interest payable on such Interest Payment Date will be paid
to the registered Holder of such Convertible Debenture on such record date. In
such event, such Convertible Debenture, when surrendered for conversion, need
not be accompanied by payment of an amount equal to the interest payable on such
Interest Payment Date on the portion so converted. The number of shares issuable
upon conversion of a Convertible Debenture is determined by dividing the
principal amount of the Convertible Debenture converted by the Conversion Price
in effect on the Conversion Date. No fractional shares will be issued upon
conversion but a cash adjustment will be made for any fractional interest. The
outstanding principal amount of any Convertible Debenture shall be reduced by
the portion of the principal amount thereof converted into Common Shares.
The Convertible Debentures are issuable only in registered form without
coupons in denominations of $25.00 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Convertible Debentures are exchangeable for a like aggregate principal amount of
Convertible Debentures of a different authorized denomination, as requested by
the Holder surrendering the same.
THE INDENTURE AND THE CONVERTIBLE DEBENTURES SHALL BE DEEMED TO BE
CONTRACTS MADE AND TO BE PERFORMED ENTIRELY IN THE STATE OF DELAWARE, AND FOR
ALL PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
SAID STATE WITHOUT REGARD TO THE CONFLICTS OF LAW RULES OF SAID STATE.
This Indenture is subject to the Election to Convert and Assignment forms
annexed hereto and made a part hereof.
<PAGE>
ELECTION TO CONVERT
To: Wellsford Real Properties, Inc.
The undersigned owner of this Convertible Debenture hereby irrevocably
exercises the option to convert this Convertible Debenture, or the portion below
designated, into Common Shares of WELLSFORD REAL PROPERTIES, INC. in accordance
with the terms of the Indenture referred to in this Convertible Debenture, and
directs that the shares issuable and deliverable upon conversion, together with
any check in payment for fractional shares, be issued in the name of and
delivered to the undersigned, unless a different name has been indicated in the
assignment below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto.
Date: _______________, ____
Conversion in whole _____ in part _____
Portion of Convertible Debenture to be converted (if applicable):
($25.00 or integral multiples thereof): $_________________
Please indicate in the spaces below the name(s) in which the
_________________________ Common Shares are to be issued, if such
name(s) is other than the undersigned, along with the address(es) of
such person(s).
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
Signature (for conversion only)
Please Print or Typewrite Name and Address, Including Zip Code, and
Social Security or Other Identifying Number
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
ASSIGNMENT
For value received__________________________ hereby sell(s), assign(s) and
transfer(s) unto _______________________________________________________________
(Please insert social security or other taxpayer identification number of
assignee) the within Convertible Debenture and hereby irrevocably constitutes
and appoints _____________________________ attorney-in-fact to transfer the said
Convertible Debenture on the books of the Company, with full power of
substitution in the premises.
In connection with any transfer of the within Convertible Debenture
occurring prior to the Transfer Restriction Termination Date, the undersigned
confirms that such Convertible Debenture is being transferred:
/ / To Wellsford Real Properties, Inc. or a subsidiary thereof; or
/ / Pursuant to and in compliance with Rule 144A under the Securities
Act of 1933, as amended; or
/ / To an Institutional Accredited Investor pursuant to and in
compliance with the Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Regulation S under the
Securities Act of 1933, as amended; or
/ / Pursuant to and in compliance with Rule 144 under the Securities
Act of 1933, as amended;
/ / Pursuant to an effective registration statement;
/ / To ERPOLP; or
/ / To a taxable REIT subsidiary of Equity Residential Properties
Trust or any successor thereto.
and unless the box below is checked, the undersigned confirms that such
Convertible Debenture is not being transferred to an "affiliate" of the Company
as defined in Rule 144 under the Securities Act of 1933, as amended (an
"Affiliate"):
/ / The transferee is an Affiliate of the Company.
Dated:
---------------- ------------------------------------
------------------------------------
Signature(s)
NOTICE: The above signatures of the holder(s) hereof must correspond with the
name as written upon the face of this Convertible Debenture in every particular
without alteration or enlargement or any change whatever.
<PAGE>
PREFERRED SECURITIES PURCHASE AGREEMENT
among
WELLSFORD REAL PROPERTIES, INC.,
WRP CONVERTIBLE TRUST I
and
ERP OPERATING LIMITED PARTNERSHIP
MAY 5, 2000
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. PURCHASE AND SALE OF SECURITIES...........................2
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS............2
2.1 Organization; Powers......................................2
2.2 Authorizations............................................3
2.3 The Capital Stock.........................................5
2.4 Company SEC Reports and Filings...........................5
2.5 Company Financial Statements; Material Changes............6
2.6 Absence of Defaults, Conflicts, etc.......................7
2.7 Pending Actions...........................................7
2.8 Private Offering; Integration.............................7
2.9 Brokerage.................................................8
2.10 Subordination.............................................8
2.11 No Material Misstatements.................................8
2.12 Tax Matters...............................................8
2.13 Reservation and Valid Issuance of Shares..................8
2.14 Preferred Securities Guarantee............................9
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR............9
3.1 Certain Representations and Warranties....................9
3.2 Additional Representations and Warranties................10
SECTION 4. COVENANTS................................................10
4.1 Tax Matters..............................................10
SECTION 5. OFFERORS' CLOSING CONDITIONS.............................12
5.1 Compliance with Agreement................................12
5.2 Investor to Close........................................12
5.3 Representations and Warranties...........................12
SECTION 6. INVESTOR'S CLOSING CONDITIONS............................12
6.1 No Material Adverse Effect...............................12
6.2 Representations and Warranties...........................13
6.3 Compliance with Agreement and Purchase Agreement.........13
6.4 Approval of Proceedings..................................13
6.5 Injunction...............................................14
6.6 Additional Agreements....................................14
6.7 Opinions.................................................14
<PAGE>
SECTION 7. INDEMNIFICATION..........................................15
7.1 Indemnification Generally................................15
7.2 Indemnification Procedures for Third Party Claims........15
SECTION 8. INTERPRETATION OF THIS AGREEMENT.........................16
8.1 Terms Defined............................................16
8.2 Governing Law............................................18
8.3 Paragraph and Section Headings...........................19
SECTION 9. MISCELLANEOUS............................................19
9.1 Expenses.................................................19
9.2 Notices..................................................19
9.3 Survival.................................................20
9.4 Entire Agreement; Amendment and Waiver...................21
9.5 Counterparts.............................................21
9.6 Successors and Assigns...................................21
9.7 Severability.............................................21
9.8 Jurisdiction; Consent to Service of Process..............21
9.9 Trustee Exculpation......................................22
SCHEDULES
Schedule 2.3(a) Options, Warrants, Etc.
Schedule 2.5(b) Material Adverse Change
Schedule 6.2 Representations and Warranties
EXHIBITS
Exhibit A Form of Amendment to Registration Rights Agreement
Exhibit B Opinion of Ballard Spahr Andrews & Ingersoll, LLP
Exhibit C Opinion of Richards, Layton & Finger, P.A.
Exhibit D Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP
<PAGE>
PREFERRED SECURITIES PURCHASE AGREEMENT
This PREFERRED SECURITIES PURCHASE AGREEMENT (this "Agreement") is made as
of May 5, 2000 among Wellsford Real Properties, Inc., a Maryland corporation
(the "Company"), WRP Convertible Trust I, a Delaware statutory business trust
(the "Trust" and together with the Company, the "Offerors"), as issuer, and ERP
Operating Limited Partnership, an Illinois limited partnership (the "Investor"),
as purchaser.
PRELIMINARY STATEMENT
The Trust is a statutory business trust organized under the Business Trust
Act (the "Delaware Act") of the State of Delaware (Chapter 38, Title 12, of the
Delaware Code, 12 Del. C. Sections 3801 et seq.) pursuant to the Declaration of
Trust, dated and effective as of May 5, 2000, by the Company and the Trustees,
as defined therein, and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust (the "Declaration"). The Offerors confirm
their agreement with the Investor, with respect to the offer and sale by the
Trust and the purchase by the Investor of $25,000,000 in aggregate liquidation
amount of 8.25% Convertible Trust Preferred Securities (Liquidation Amount $25
per Security) representing undivided preferential beneficial interests in the
assets of the Trust (the "Preferred Securities"). The definitions of certain
capitalized terms used herein are set forth in Section 8.1. Capitalized terms
used herein and not otherwise defined herein shall have the meanings assigned
such terms in the Declaration.
The Preferred Securities will be guaranteed by the Company with respect to
distributions and amounts payable upon liquidation or redemption and otherwise
pursuant to the Preferred Securities Guarantee Agreement, dated as of May 5,
2000, of the Company (the "Preferred Securities Guarantee").
The entire proceeds from the sale of the Preferred Securities will be
combined with the entire proceeds from the sale by the Trust to the Company of
$775,000 in aggregate liquidation amount of its securities representing common
beneficial interests in the assets of the Trust (the "Common Securities") and
will be used by the Trust to purchase $25,775,000 in aggregate principal amount
of 8.25% Convertible Junior Subordinated Debentures due May 4, 2022 (the
"Subordinated Debentures") issued by the Company pursuant to an Indenture, dated
and effective as of May 5, 2000, by the Company and Wilmington Trust Company
(the "Trustee") (the "Indenture"). The Preferred Securities and the Common
Securities will be issued pursuant to the Declaration.
The Preferred Securities, the Preferred Securities Guarantee and the
Subordinated Debentures are collectively referred to herein as the "Preferred
Instruments." The Declaration, the Indenture, the Preferred Securities
Guarantee, and the Common Securities Guarantee and this Agreement are
hereinafter referred to collectively as the "Operative Documents."
<PAGE>
The Preferred Securities are offered and sold to the Investor without
registration under the Securities Act of 1933, as amended (the "Securities
Act"), in reliance upon exemptions therefrom, and Investor may only resell or
otherwise transfer such Preferred Securities if such Preferred Securities are
hereafter registered under the Securities Act or if an exemption from the
registration requirements of the Securities Act is available.
The parties hereto desire that the foregoing transaction be subject to the
terms and conditions set forth herein. Accordingly, the parties agree as
follows:
SECTION 1. PURCHASE AND SALE OF SECURITIES
(a) Subject to the terms and conditions set forth in this Agreement and in
reliance upon representations and warranties contained in this Agreement, the
Trust agrees to sell to the Investor, and the Investor agrees to purchase from
the Trust, at a purchase price of $25 per Preferred Security, 1,000,000
Preferred Securities.
(b) Such sale and purchase shall be effected at the Closing Time (as
defined below) when delivery of the certificates, duly registered in the
Investor's name evidencing the Preferred Securities being purchased by it, shall
be made against delivery by the Investor to the Trust of the aggregate purchase
price therefor by wire transfer(s) of immediately available funds to such
account as the Trust shall designate prior to the Closing Time.
(c) The closing (the "Closing") of such sale and purchase shall take place
at 11:00 A.M., New York City time, on May 5, 2000, or at such other time not
later than five business days after such date as the Investor and the Offerors
agree to in writing (such time and date of payment and delivery being
hereinafter referred to as the "Closing Time"), at the offices of Robinson
Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New York,
New York 10104, or at such other location as the Investor and the Offerors shall
select and agree to.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE OFFERORS
The Offerors, jointly and severally, represent and warrant to the Investor
as of the date hereof and as of the Closing Time referred to in Section (1)(c)
hereof, and agree with the Investor as follows:
2.1 Organization; Powers
(a) The Company and each of its Subsidiaries (a) is an entity duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of its
<PAGE>
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, (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 Company Material Adverse Effect, as defined in Section 2.5(b), and
(d) in the case of the Company, has the corporate power and authority to
execute, deliver and perform its obligations under this Agreement.
(b) The Trust has been duly created and is validly existing and in good
standing as a business trust under the Delaware Act with the trust power and
authority to own its properties and to conduct its business and to enter into
and perform its obligations under this Agreement, the Preferred Securities
Guarantee, the Common Securities Guarantee, and the Declaration. The Trust is
duly qualified to transact business and is in good standing in each jurisdiction
in which such qualification is necessary, except to the extent that the failure
to so qualify or be in good standing would not have a Trust Material Adverse
Effect, as defined in Section 2.5(b) hereof; and except as set forth on Schedule
2.5(a), the Trust is not a party to or otherwise bound by any agreement other
than documents referred to in this Agreement or entered into in connection with
the transactions referred to in this Agreement. The Trust is and will be, under
current law, classified for United States federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. As of the
Closing Time, the Trust is and will be treated as a subsidiary of the Company
pursuant to GAAP.
2.2 Authorizations
(a) The execution, delivery and performance by the Company of this
Agreement and the transactions contemplated hereby (a) have been duly authorized
by all requisite corporate action, and (b) will not (i) violate (A) any
provision of law, statute, rule or regulation to which the Company is subject,
or of the certificate or articles of incorporation, or other constitutive
documents or bylaws of the Company, or any subsidiary thereof, as the case may
be, (B) any order of any Governmental Authority (as defined below) or (C) any
provision of any indenture or other material agreement or instrument to which
the Company, or its Subsidiaries 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 security interest, mortgage, pledge, lien,
encumbrance, claim or equitable right upon or with respect to any property or
assets now owned or hereafter acquired by the Company, or any of its
Subsidiaries (a "Lien").
(b) The execution, delivery and performance by the Trust of this Agreement
and the transactions contemplated hereby (a) have been duly authorized by all
requisite trust action, and (b) will not (i) violate (A) any provision of law,
statute, rule or regulation to which the Trust is subject, or of the certificate
of trust of the Trust, (B) any order of any Governmental Authority or (C) any
provision of any indenture or other material agreement or instrument to
<PAGE>
which the Trust is a party or by which it or any of its 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.
(c) This Agreement is a valid and legally binding obligation of the
Offerors, enforceable against the Offerors in accordance with its terms except
as such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting creditors'
rights generally or by general principles of equity, including but not limited
to, principles governing the availability of the remedies of specific
performance and requisite relief (regardless of whether enforcement is
considered in a proceeding at law or in equity) (the "Bankruptcy Exceptions").
(d) The Declaration and the Indenture have been duly authorized by the
Company and, to the Company's knowledge, have been duly authorized by the other
parties thereto, and, at the Closing Time, will have been duly executed and
delivered by the Company and, to the Company's knowledge, by the other parties
thereto, and each agreement will be a valid and legally binding obligation of
the Company, and to the Company's knowledge, of the other parties thereto,
enforceable against the parties thereto in accordance with its terms, except to
the extent that enforcement thereof may be limited by Bankruptcy Exceptions.
(e) The Registration Rights Agreement has been duly authorized by the
Company and, at the Closing Time, will have been duly executed and delivered by
the Company and assuming the due authorization, execution and delivery by the
Investor, the Registration Rights Agreement will, at the Closing Time, be a
valid and legally binding obligation of the Company, enforceable against the
Company in accordance with its terms, except to the extent that enforcement
thereof may be limited by (i) Bankruptcy Exceptions or (ii) the effect of
applicable public policy on the enforceability of provisions relating to
indemnification and contribution.
(f) The Preferred Securities have been duly authorized by the Declaration
and, when issued and delivered by the Trust to the Investor pursuant to this
Agreement against payment therefor as provided herein, will be validly issued
and fully paid and non-assessable undivided preferential beneficial interests in
the assets of the Trust. The issuance of the Preferred Securities is not subject
to preemptive or other similar rights; and (subject to the terms of the
Declaration) holders of Preferred Securities will be entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit incorporated under the laws of the State of Delaware.
(g) The Common Securities have been duly authorized by the Declaration and,
when issued and delivered by the Trust to the Company against payment therefor,
will be validly issued and will represent undivided common beneficial interests
in the assets of the Trust.
<PAGE>
The issuance of the Common Securities is not subject to preemptive or other
similar rights; and, at the Closing Time, all of the issued and outstanding
Common Securities of the Trust will be directly or indirectly owned by the
Company, free and clear of any Lien.
(h) The Preferred Securities Guarantee has been duly authorized by the
Company and, at the Closing Time, the Preferred Securities Guarantee will have
been duly executed and delivered by the Company and will constitute a valid and
legally binding obligation of the Company, enforceable in accordance with its
terms, except to the extent that enforcement thereof may be limited by the
Bankruptcy Exceptions.
(i) The Subordinated Debentures have been duly authorized by the Company
and, at the Closing Time, the Subordinated Debentures will have been duly
executed, authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits provided by
the Indenture, enforceable in accordance with their terms, except to the extent
that enforcement thereof may be limited by the Bankruptcy Exceptions.
2.3 The Capital Stock
(a) Pursuant to the Articles of Amendment and Restatement, dated May 30,
1997, the Company is authorized to issue 199,650,000 shares of Common Stock,
16,636,955 of which are issued and outstanding. Pursuant to the Articles
Supplementary of the Company, dated May 30, 1997, the Company is authorized to
issue 2,000,000 shares of Preferred Stock, none of which have been issued as of
the date hereof and 350,000 shares of Class A Common Stock, 339,806 of which are
issued and outstanding as of the date hereof. Upon consummation of the
transactions contemplated by the Operative Documents: (i) no shares of the Class
A Common Stock will be issued and outstanding, (ii) the Company will be
authorized to issue 350,000 shares of Class A-1 Common Stock, and (iii) the
Company will have issued 339,806 shares of Class A-1 Common Stock. Except as
disclosed on Schedule 2.3(a) hereto and in a letter agreement of even date
herewith relating to the issuance by the Company of shares of Class A-1 Common
Stock of the Company executed by the Company and the Investor, and as issued or
entered into with current or former directors or employees, 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.
(b) As of the date hereof, there are no issued and outstanding beneficial
interests in the Trust. Upon consummation of the transaction contemplated by the
Operative Documents and a Subscription Agreement of even date herewith executed
by the Company, the Trust will have issued and outstanding $25,000,000 of
Preferred Securities and $775,000 of Common Securities. Except as provided for
in the Operative Documents, there are no existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
<PAGE>
commitments which obligate the Trust to issue, transfer or sell any beneficial
interests in the Trust.
2.4 Company SEC Reports and Filings
(a) The Company has caused to be delivered to the Investor copies of the
following documents, without exhibits thereto (collectively, the "SEC Reports
and Filings"):
(i) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (File No. 001-12917), as filed with the Commission on March
29, 2000;
(ii) The Company's Proxy Statement for the June 9, 2000 annual meeting of
shareholders, as filed with the Commission; and
(iii) The Company's registration statement on Form S-3, Registration No.
33356763, as filed with the Commission on June 12, 1998, and declared effective
on June 29, 1998.
(b) The SEC Reports and Filings, when filed, complied in all material
respects with all applicable requirements of the Securities Act and the
Securities Exchange Act of 1934 and the rules and regulations of the Commission
promulgated thereunder. None of the SEC Reports and Filings, at the time of
filing contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances in which they
were made.
2.5 Company Financial Statements; Material Changes
(a) The audited consolidated balance sheet of the Company as at December
31, 1999 included in the SEC Reports and Filings fairly presents in all material
respects the consolidated financial position of the Company and its Subsidiaries
at the date thereof, and the related consolidated statements of operations,
equity and cash flows for the year ended December 31, 1999 included in the SEC
Reports and Filings fairly present in all material respects the results of
operations and other information therein of the Company and its Subsidiaries for
the respective periods indicated (collectively, the "Financial Statements"). All
such Financial Statements, including the schedules and notes thereto, were
prepared in accordance with generally accepted accounting principles ("GAAP")
applied consistently throughout the periods involved.
(b) Since December 31, 1999 with respect to the Company and since the date
of its formation with respect to the Trust, (A) there has been no material
adverse change in or affecting the management, assets, business, business
prospects, earnings or condition (financial
<PAGE>
or otherwise) of the Trust (a "Trust Material Adverse Effect") or the Company
and its Subsidiaries considered as one enterprise (a "Company Material Adverse
Effect," together with a Trust Material Adverse Effect, a "Material Adverse
Effect"), whether or not arising in the ordinary course of business, (B) there
have been no transactions entered into by the Trust or the Company or any of its
Subsidiaries which are material with respect to the Trust or the Company and its
Subsidiaries considered as one enterprise, other than those in the ordinary
course of business, (C) except as set forth in Schedule 2.5(b), there has not
been any material change in the total assets, except assets acquired in the
ordinary course of business, or long term debt of the Company and (D) neither
the Trust nor the Company nor any of its Subsidiaries has sustained any material
loss or interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree.
2.6 Absence of Defaults, Conflicts, etc.
The execution and delivery of the Operative Documents and the Registration
Rights Agreement, the issuance, sale and delivery of the Preferred Instruments
and the consummation of the transactions contemplated herein and therein do not
and will not conflict with, or result in a breach or violation of any of the
terms, conditions or provisions of, or constitute a default under, or permit the
acceleration of rights under or termination of, any of the Key Agreements and
Instruments of the Company, or any of its Subsidiaries or the Trust or result in
the creation or imposition of any Lien, charge or encumbrance upon any property
or assets of the Company or any of its Subsidiaries or the Trust, and will not
result in any violation of the Organizational Documents of the Company or any of
its Subsidiaries or the Trust, or any existing Requirements of Law applicable to
the Company, or any of its Subsidiaries or the Trust.
2.7 Pending Actions
There is no action, suit, investigation or proceeding pending or, to the
Company's knowledge, threatened or contemplated against the Company or any of
its properties or assets by or before any Governmental Authority, which
questions the validity of the Operative Documents, the issuance or validity of
the Preferred Securities or any action taken or to be taken pursuant hereto or
thereto, or which could reasonably be expected individually or in the aggregate
to result in any Material Adverse Effect.
2.8 Private Offering; Integration
(a) None of the Offerors, their affiliates (as such term is defined in Rule
501(b) under the Securities Act for any person or entity) ("Affiliates"), or any
person acting on their or any of their Affiliates' behalf has engaged, or will
engage, in connection with the offering of the Preferred Securities, in any
communication or other form of general solicitation or general advertising
within the meaning of Rule 502(c) under the Securities Act. Based upon the
<PAGE>
representations of the Investor set forth in Section 3, the offer, issuance and
sale of the Preferred Securities in the manner contemplated by this Agreement
are exempt from the registration and prospectus delivery requirements of the
Securities Act, and have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws.
(b) The Offerors have not, directly or indirectly, solicited any offer to
buy or offered to sell, and will not, directly or indirectly, solicit any offer
to buy or offer to sell, in the United States or to any United States citizen or
resident, any security which is or would be integrated with the sale of the
Preferred Securities in a manner that would require the Preferred Securities to
be registered under the Securities Act.
2.9 Brokerage
There are no claims for brokerage commissions or finder's fees or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement made by or on behalf of the Company or the Trust with
any other person.
2.10 Subordination
The Subordinated Debentures, upon issuance, will be subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture) of the Company.
2.11 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.
2.12 Tax Matters
(a) The Company is taxed under Subchapter C of the Code as a corporation
for United States federal income tax purposes.
(b) The Trust, at the Closing Time, will be classified for United States
federal income tax purposes as a grantor trust and not as an association taxable
as a corporation.
(c) The Subordinated Debentures, at the Closing Time, will be classified
for United States federal income tax purposes as indebtedness of the Company.
2.13 Reservation and Valid Issuance of Shares
<PAGE>
The Common Shares issuable upon conversion of the Subordinated Debentures
and the Preferred Securities have been duly and validly reserved for issuance
and, upon issuance in accordance with the terms of the Indenture and the
Declaration, will be duly and validly issued, fully paid and non-assessable and
free of restrictions on transfer other than restrictions on transfer under the
Indenture and under applicable federal and state securities laws. Holders of
Common Shares shall not be personally liable as such for any liabilities, debts
or obligations of, or claims against, the Company, whether arising before or
after such holder became the owner or holder of the Common Shares.
2.14 Preferred Securities Guarantee
The Preferred Securities Guarantee, when taken together with the Company's
obligations under the Subordinated Debentures, the Declaration and the
Indenture, including its obligations to pay costs, expenses, debts and other
obligations of the Trust, provides a full and unconditional guarantee on a
subordinated basis by the Company of amounts due on the Preferred Securities and
the Subordinated Debentures. The obligations of the Company under the Preferred
Securities Guarantee and under the Subordinated Debentures, upon execution and
delivery thereof, will be subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Company.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
3.1 Certain Representations and Warranties
The Investor represents and warrants to the Offerors as follows:
(a) It is acquiring the Preferred Securities for its own account for
investment and not with a view towards the resale, transfer or distribution
thereof, nor with any present intention of distributing the Preferred
Securities, but subject, nevertheless, to any requirement of law that the
disposition of the Investor's property shall at all times be within the
Investor's control, and without prejudice to the Investor's right at all times
to sell or otherwise dispose of all or any part of such securities under a
registration under the Securities Act or under an exemption from said
registration available under the Securities Act.
(b) It has full power and legal right to execute and deliver this Agreement
and to perform its obligations hereunder.
(c) It has taken all action necessary for the authorization, execution,
delivery, and performance of this Agreement and its obligations hereunder, and,
upon execution and delivery by the Company, this Agreement shall constitute the
valid and binding obligations of
<PAGE>
the Investor, enforceable against the Investor in accordance with its terms,
except as such enforcement may be limited by Bankruptcy Exceptions.
(d) There are no claims for brokerage commissions or finder's fees or
similar compensation in connection with the transactions contemplated by this
Agreement based on any arrangement made by or on behalf of the Investor.
(e) It has such knowledge and experience in financial and business matters
that it is capable of evaluating the merits and risks of its investment in the
Trust and the Company as contemplated by this Agreement, and is able to bear the
economic risk of such investment for an indefinite period of time. It has been
furnished access to such information and documents as it has requested and has
been afforded an opportunity to ask questions of and receive answers from
representatives of the Company and the Trust concerning the terms and conditions
of this Agreement and the purchase of the Preferred Securities contemplated
hereby and the business and financial condition of the Company and the Trust.
(f) It is an "accredited investor" as such term is defined in Rule 501
under the Securities Act.
(g) It acknowledges that the Preferred Securities have not been registered
under the Securities Act and may not be offered or sold within the United
States, except pursuant to an exemption from, or in a transaction not subject to
or pursuant to, the registration requirements of the Securities Act. It has not
offered or sold, and will not offer or sell, the Preferred Securities within the
United States, except pursuant to an exemption from, or in a transaction not
subject to or pursuant to, the registration requirements of the Securities Act.
3.2 Additional Representations and Warranties
The Investor represents and warrants to the Offerors that it is a limited
partnership, duly authorized and existing under the laws of the State of
Illinois and has the requisite power and authority to carry on its business as
now being conducted.
SECTION 4. COVENANTS
4.1 Tax Matters.
(a) The Company shall not cause itself to be taxable for federal income tax
purposes as (i) a partnership, or (ii) a "publicly traded partnership" (as
defined in Section 7704(b) of the Code).
<PAGE>
(b) The Company and the Trust shall treat the Subordinated Debentures as
indebtedness for United States federal income tax purposes unless otherwise
required by a determination made by the Internal Revenue Service or the Investor
receives an opinion of counsel in a form which is reasonably acceptable to
Investor that as a result of a change in law or applicable legal authority, the
Subordinated Debentures are required to be treated for federal income tax
purposes as something other than indebtedness.
(c) The Company (or any successor thereto) will file a joint election,
together with Equity Residential Properties Trust ("EQR") (or any successor
thereto), a Maryland real estate investment trust and the general partner of
Investor, to be treated as a taxable REIT subsidiary (as defined in Section
856(l) of the Code) of EQR to be effective beginning January 1, 2001.
Thereafter, except as provided in section 10.2 (e) of the Indenture, if
requested by any party, any successor to the Company shall make such a joint
election with EQR (or any successor thereto) and any successor to EQR shall make
such a joint election with the Company (or any successor thereto). From and
after January 1, 2001, unless Investor has received an opinion of counsel in a
form which is reasonably acceptable to Investor that the Company qualifies as a
REIT under Section 856(a) of the Code or the provisions of Section 10.2(e)(2) of
the Indenture apply, (a) the Company shall not take any of the actions listed in
Section 856(l)(3)(A) or (B) or any other action that would cause it to not
constitute a taxable REIT subsidiary under Code Section 856(l)(1), and (b)
within five (5) days prior to the close of each quarter of each of EQR's taxable
years which begins after December 31, 2000, the Company shall deliver to EQR
written certification in a form reasonably acceptable to EQR that the Company
qualifies as a taxable REIT subsidiary under Code Section 856(l)(1).
(d) In the following circumstances, EQR shall, upon receipt of a written
request of the Company, revoke its election to treat the Company as a taxable
REIT subsidiary or, if such an election has not already been made, waive in
writing all future obligations of the Company to become a taxable REIT
subsidiary or a REIT or to deliver any opinions to that effect:
(i) that (A) the total value of the Preferred Securities, Subordinated
Debentures and Common Shares into which any Preferred Securities or Subordinated
Debentures have been converted that are owned by EQR or any of its Affiliates
constitute 1% or less of the total value of the outstanding securities of the
Company and (B) the total amount of the Preferred Securities and Subordinated
Debentures on an as converted basis and Common Shares into which any Preferred
Securities or Subordinated Debentures have been converted then owned by EQR or
any of its Affiliates would constitute 1% or less of the total outstanding
voting securities of the Company; or
(ii) that the events described in Sections 10.2(e)(1), 10.2(e)(2) or
10.2(e)(3) of the Indenture have occurred and the Company has satisfied all of
its obligations under such Sections 10.2(e)(1), 10.2(e)(2) or 10.2(e)(3), as the
case may be.
<PAGE>
(1) The Company shall file all applicable tax returns and information
reports required to be filed in order for the Company to qualify for any
exemption from any federal, state or local withholding taxes.
(2) To the extent not terminated in accordance with their terms, all of the
covenants set forth in this Agreement shall terminate when none of the
Subordinated Debentures or Preferred Securities are outstanding; provided,
however, if EQR or any of its Affiliates has acquired any Common Shares in
conversion of the Subordinated Debentures or the Preferred Securities, then
before the Company shall cease to comply with any of such covenants, the Company
shall give EQR at least ninety (90) days prior written notice following the
declaration by the Securities and Exchange Commission of an effective
registration statement with respect to all such Common Shares, so EQR or any of
its Affiliates can dispose of such Common Shares, as contemplated by that
Registration Rights Agreement.
SECTION 5. OFFERORS' CLOSING CONDITIONS
The obligation of the Offerors to sell the Preferred Securities at the
Closing Time, as provided in Section 1 hereof shall be subject to:
5.1 Compliance with Agreement
The Investor shall have performed and complied with in all material
respects all of its obligations and conditions contained in this Agreement which
are required to be performed or complied with by the Investor prior to or at the
Closing Time.
5.2 Investor to Close
The Investor shall have purchased and paid for the Preferred Securities
at the Closing Time pursuant to Section 1 hereof.
5.3 Representations and Warranties
The representations and warranties of the Investor contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Time as though such representations and warranties were made at such
time (unless any such representation and warranty is made as of a specific date
and then it shall be true and correct as of such date).
SECTION 6. INVESTOR'S CLOSING CONDITIONS
<PAGE>
The obligation of the Investor to purchase and pay for the Preferred
Securities at the Closing Time, as provided in Section 1 hereof, shall be
subject, in its discretion, to the performance by the Offerors of all of their
agreements theretofore to be performed hereunder and to the satisfaction, prior
thereto or concurrently therewith, of the following further conditions:
6.1 No Material Adverse Effect
At the Closing Time, there shall not have occurred since the date of the
Common Stock and Preferred Stock Purchase Agreement dated May 30, 1997 between
ERP Operating Limited Partnership and Wellsford Real Properties, Inc. (the
"Purchase Agreement") any change which has resulted in or could be expected to
result in a Company Material Adverse Effect other than an event which can be
completely cured by applying the proceeds of the sale of the Subordinated
Debentures, in which case the Company covenants and agrees to apply the proceeds
of the sale of the Subordinated Debentures to the extent required to effect such
cure. On or after the date hereof there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or on
Nasdaq; (ii) a suspension or material limitation in trading in the Company's
securities on the American Stock Exchange; (iii) a general moratorium on
commercial banking activities declared by federal, Illinois or New York State
authorities; or (iv) the outbreak or escalation of hostilities involving the
United States or the declaration by the United States of a national emergency or
war.
6.2 Representations and Warranties
(a) The representations and warranties of the Offerors contained in this
Agreement shall be true and correct in all material respects at and as of the
Closing Time as though such representations and warranties were made at such
time (unless any such representation and warranty is made as of a specific date
and then it shall be true and correct as of such date).
(b) The representations and warranties contained in Article 3 of the
Purchase Agreement, are true and correct in all material respects, except as
otherwise disclosed in this Agreement or any Schedule hereto.
6.3 Compliance with Agreement and Purchase Agreement
(a) The Offerors shall have performed and complied in all material respects
with all of their obligations and conditions contained in this Agreement which
are required to be performed or complied with by the Offerors prior to or at the
Closing Time.
<PAGE>
(b) The Company shall be in compliance in all material respects with all
the terms and provisions on its part to be observed or performed under the
Purchase Agreement, and at the time of and as a result of the Closing, no
Company Material Adverse Effect shall have occurred and be continuing, other
than an event which can be completely cured by applying the proceeds of the sale
of the Subordinated Debentures, in which case the Company covenants and agrees
to apply the proceeds of the sale of the Subordinated Debentures to the extent
required to effect such cure and shall provide notice to Investor of any such
use of proceeds.
6.4 Approval of Proceedings
All proceedings to be taken in connection with the transactions
contemplated by the Operative Documents and the Registration Rights Agreement
and the other Preferred Instruments and all documents incident thereto, shall be
reasonably satisfactory in form and substance to the Investor and its counsel;
and the Investor shall have received copies of all documents or other evidence
which it and such counsel may reasonably request in connection with such
transactions and of all records of corporate proceedings in connection therewith
in form and substance reasonably satisfactory to the Investor and its counsel.
6.5 Injunction
There shall be no effective injunction, writ, preliminary restraining order
or any order of any nature issued by a court of competent jurisdiction directing
that the transactions provided for herein or in the other Operative Documents or
any of them not be consummated as herein or therein provided.
6.6 Additional Agreements.
The Company and the Investor shall have entered into this Agreement and the
Registration Rights Agreement, as required thereby. The Company and Wilmington
Trust Company shall have entered into the Indenture, and the Company and the
trustees shall have entered into the Declaration. The Company shall have entered
into the Preferred Securities Guarantee.
6.7 Opinions
(a) The Investor shall have received an opinion of counsel, dated as of the
Closing Time, of Ballard Spahr Andrews & Ingersoll, LLP, in the form set forth
in Exhibit B hereto.
In rendering such opinion, such counsel may rely as to matters involving
the application of laws other than the laws of Maryland, to the extent they deem
proper and specified in such opinion, upon the opinion of Richards, Layton &
Finger, P.A.
<PAGE>
(b) The Investor shall have received an opinion of counsel, dated as of the
Closing Time, of Richards, Layton & Finger, P.A. in the form set forth in
Exhibit C hereto.
In rendering such opinion, such counsel may rely as to matters involving
the application of laws other than the laws of Delaware and federal law of the
United States, to the extent they deem proper and specified in such opinion,
upon the opinion of Ballard Spahr Andrews & Ingersoll, LLP.
(c) The Investor shall receive an opinion of Robinson Silverman Pearce
Aronsohn & Berman LLP, special tax counsel to the Offerors, in the form set
forth in Exhibit D hereto.
Such opinion may be conditioned on, among other things, the initial and
continuing accuracy of the facts, financial and other information, covenants and
representations set forth in certificates of officers of the Company and the
Trust and other documents deemed necessary for such opinion.
SECTION 7. INDEMNIFICATION
7.1 Indemnification Generally
The Offerors and the Investor (each an "Indemnifying Party"), shall
indemnify the other from and against any and all losses, damages, liabilities,
claims, charges, actions, proceedings, demands, judgments, settlement costs and
expenses of any nature whatsoever (including, without limitation, attorneys'
fees and expenses) or deficiencies resulting from any breach of a
representation, warranty or covenant by the Indemnifying Party and all claims,
charges, actions or proceedings incident to or arising out of the foregoing.
Except with respect to third party claims being defended in good faith or claims
for indemnification with respect to which there exists a good faith dispute, the
Indemnifying Party shall satisfy its obligations hereunder within thirty (30)
days of receipt of a notice of claim under this Section 6.1.
<PAGE>
7.2 Indemnification Procedures for Third Party Claims
If a claim by a third party is made against a Person entitled to
indemnification under this Section (an "Indemnified Party") and such Indemnified
Party intends to seek indemnity with respect thereto from any Indemnifying
Party, such Indemnified Party shall give notice in writing as promptly as
reasonably practicable to each such Indemnifying Party of any action commenced
against or by it in respect of which indemnity may be sought hereunder, but
failure to so notify an Indemnified Party shall not relieve such Indemnifying
Party from any liability that it may have otherwise than on account of this
indemnity agreement so long as such failure shall not have materially prejudiced
the position of the Indemnifying Party. Upon such notification, the Indemnifying
Party shall assume the defense of such action brought by a third party, and
after such assumption the Indemnified Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party shall have failed to promptly assume and thereafter with reasonable
diligence conduct such defense, (ii) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the contrary or (iii) the named parties in
any such action (including any impleaded parties) include both the Indemnifying
Party and the Indemnified Party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing or
conflicting interests between them. No Indemnifying Party, in the defense of a
third party claim shall, except with the consent of the Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect of such
claim. The Indemnifying Party shall not be liable for any settlement of any
proceeding effected without its written consent which shall not be unreasonably
withheld or delayed by such Indemnifying Party, but if settled with such consent
or if there be final judgment for the plaintiff, the Indemnifying Party shall
indemnify the Indemnified Party from and against any loss, damage or liability
by reason of such settlement or judgment.
<PAGE>
SECTION 8. INTERPRETATION OF THIS AGREEMENT
8.1 Terms Defined
As used in this Agreement, the following terms have the respective meanings
set forth below or set forth in the Section hereof following such term:
Affiliates: shall have the meaning set forth in Section 2.8(a).
Bankruptcy Exceptions: shall have the meaning set forth in Section 2.2(b).
<PAGE>
Business Day: shall mean a day other than a Saturday, Sunday or other day
on which banking institutions in New York, New York are permitted or required by
any applicable law to close.
Certificate of Trust: shall mean the organizational document filed on May
5, 2000 in Delaware with respect to the Trust.
Code: shall mean the Internal Revenue Code of 1986, as amended, and the
rules and regulations promulgated thereunder.
Closing: shall mean the consummation of the purchase and sale of the
Preferred Securities described in Section 1(c).
Closing Time: shall have the meaning set forth in Section 1(c).
Commission: shall mean the Securities and Exchange Commission.
Common Securities: shall have the meaning set forth in the preliminary
statement hereof.
Common Shares: shall mean the shares of common stock of the Company, par
value $.01 per share.
Company: shall have the meaning set forth in the preamble hereof.
Company Material Adverse Effect: shall have the meaning set forth in
Section 2.5(b).
Controlled: 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.
Declaration: shall have the meaning set forth in the preliminary statement
hereof.
Delaware Act: shall have the meaning set forth in the preliminary statement
hereof.
Financial Statements: shall have the meaning set forth in Section 2.5(a).
GAAP: shall have the meaning set forth in Section 2.5(a).
Governmental Authority: shall mean any nation or government, any state or
other political subdivision thereof, and any department, agency,
instrumentality, bureau, entity or official exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
<PAGE>
Indemnified Party: shall have the meaning set forth in Section 7.2.
Indemnifying Party: shall have the meaning set forth in Section 7.1.
Indenture: shall have the meaning set forth in the preliminary statement
hereof.
Investor: shall have the meaning set forth in the preamble hereof.
Key Agreements and Instruments: shall mean as to any Person any indenture,
mortgage, declaration, deed of trust, credit agreement, note or other evidence
of indebtedness, or other material agreement or instrument to which such Person
is a party or by which it is bound or, to which any of its property or assets is
subject.
Lien: shall have the meaning set forth in Section 2.2(a).
Material Adverse Effect: shall have the meaning set forth in Section
2.5(b).
Offerors: shall have the meaning set forth in the preamble hereof.
Operative Documents: shall have the meaning set forth in the preliminary
statement hereof.
Organizational Documents: shall mean as to any Person the articles or
certificate of incorporation, declaration of trust, bylaws, partnership
agreement or other organizational or governing documents of such Person.
Person: shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability company or other entity, a
government or agency or political subdivision thereof.
Preferred Instruments: shall have the meaning set forth in the preliminary
statement hereof.
Preferred Securities: shall have the meaning set forth in the preliminary
statement hereof.
Preferred Securities Guarantee: shall have the meaning set forth in the
preliminary statement hereof.
Purchase Agreement: Shall have the meaning set forth in Section 6.1.
Registration Rights Agreement: shall mean the Amendment to Registration
Rights Agreement in the form attached hereto as Exhibit A.
<PAGE>
Requirements of Law: means as to any Person, any domestic or foreign and
federal, state or local law, rule, regulation, statute or ordinance or judgment,
order, decree or determination of any arbitrator or a court or other
Governmental Authority, in each case applicable to or binding upon such Person
or any of its properties or to which such Person or any of its property is
subject.
SEC Reports and Filings: shall have the meaning set forth in Section
2.4(a).
Securities Act: shall have the meaning set forth in the preliminary
statement.
Share: shall mean a share of common stock, $.01 par value per share, of the
Company.
Subordinated Debentures: shall have the meaning set forth in the
preliminary statement hereof.
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.
Trust: shall have the meaning set forth in the preamble hereof.
Trust Material Adverse Effect: shall have the meaning set forth in Section
2.5(b).
8.2 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware without regard to its principles of conflicts of
law.
8.3 Paragraph and Section Headings
The headings of the sections and subsections of this Agreement are inserted
for convenience only and shall not be deemed to constitute a part thereof.
SECTION 9. MISCELLANEOUS
9.1 Expenses
<PAGE>
Each party to this Agreement shall bear its own respective costs and
expenses incurred in connection with the preparation, execution and delivery of
this Agreement and the agreements and transactions contemplated hereby except
that the Company agrees to reimburse the Investor for that portion of its legal
fees attributable solely to the review of the Key Agreements and Instruments in
connection with the transactions referred to in this Agreement by paying an
amount equal to $ 110,000 directly to Piper Marbury Rudnick & Wolfe on the date
of the Closing.
9.2 Notices.
All notices or other communications under this Agreement shall be
sufficient if in writing and delivered by hand or sent by telecopy, or sent,
postage prepaid by registered, certified or express mail, or by recognized
overnight air courier service and shall be deemed given when so delivered by
hand or telecopied, or if mailed or sent by overnight courier service, on the
third (3rd) Business Day after mailing (one Business Day in the case of express
mail or overnight courier service) to the parties at the following addresses:
(a) if to the Investor, to:
ERP Operating Limited Partnership
c/o Equity Residential Properties Trust
Two North Riverside Plaza, Suite 400
Chicago, IL 60606
Attention: Bruce Strohm
with a copy to:
Piper Marbury Rudnick & Wolfe
203 North Lasalle Street, Suite 1800
Chicago, IL 60601-1293
Attention: Errol Halperin
(b) if to the Company, to:
Wellsford Real Properties, Inc.
535 Madison Avenue, 26th floor
New York, New York 10022
Attention: Jeffrey H. Lynford
<PAGE>
with a copy to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Alan S. Pearce
(c) if to the Trust, to:
WRP Convertible Trust I
c/o Wellsford Real Properties, Inc.
535 Madison Avenue, 26th floor
New York, New York 10022
Attention: Jeffrey H. Lynford
with a copy to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Alan S. Pearce
or at such other address as the addressee may have furnished in writing to the
sender as provided herein.
9.3 Survival
All warranties, representations, and covenants made by the Investor and the
Offerors herein or in any certificate or other instrument delivered by the
Investor or the Offerors under this Agreement shall be considered to have been
relied upon by the Offerors or the Investor, as the case may be, and shall
survive for a period of one year from the closing of the sale to the Investor of
the Preferred Securities, or payment by the Investor for such Preferred
Securities, regardless of any investigation made by the Offerors or the
Investor, as the case may be, or on the Offerors' or the Investor's behalf. All
statements in any such certificate or other instrument shall constitute
warranties and representations by the Offerors or the Investor, as the case may
be, hereunder.
9.4 Entire Agreement; Amendment and Waiver
<PAGE>
This Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of each of the parties. This Agreement and the agreements
attached as Exhibits hereto constitute the entire understandings of the parties
hereto and supersede all prior agreements or understandings with respect to the
subject matter hereof between such parties. This Agreement may be amended, and
the observance of any term of this Agreement may be waived, with (and only with)
the written consent of the Offerors and the Investor.
9.5 Counterparts
This Agreement may be executed in one or more counterparts with the same
effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
9.6 Successors and Assigns
This Agreement and all of the provisions hereof, including all of the
rights of the Investor hereunder, shall inure to the benefit of the parties
hereto and their respective successors and assigns.
9.7 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.
9.8 Jurisdiction; Consent to Service of Process
(a) Each of the Investor and the Company hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any Delaware, Illinois or New York State court or Federal court
of the United States of America sitting in the City of Wilmington, 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 Delaware, 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
<PAGE>
right that any party may otherwise have to bring any action or proceeding
relating to this Agreement in the courts of any jurisdiction.
(b) Each of the Purchaser and the Company hereby irrevocably and
unconditionally waives, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this Agreement in
any Delaware, 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.
9.9 Trustee Exculpation
This Agreement and all documents, agreements, understandings and
arrangements relating hereto and to the transactions contemplated by this
Agreement have been executed or entered into by a trustee of the Trust in his
capacity as a trustee of the Trust which has been formed as a Delaware trust
pursuant to a Certificate of Trust dated as of May 5, 2000, as amended, and not
individually, and the trustees of the Trust shall not be bound or have any
personal liability hereunder or thereunder. All persons dealing with the Trust
shall look solely to the assets of the Trust for satisfaction of any liability
of the Trust in respect of this Agreement and all documents, agreements,
understandings and arrangements relating hereto and to the transactions
contemplated by this Agreement and will not seek recourse or commence any action
against any of the trustees of the Trust or any of their personal assets for the
performance or payment of any obligation hereunder or thereunder. The foregoing
shall also apply to any future documents, agreements, understandings,
arrangements and transactions between the parties hereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
OFFERORS:
WELLSFORD REAL PROPERTIES, INC.
By: /s/ Edward Lowenthal
-----------------------------------
Name: Edward Lowenthal
Title: President
WRP CONVERTIBLE TRUST I
By: /s/ James J. Burns
-----------------------------------
Name: James J. Burns
Title: Regular Trustee
INVESTOR:
ERP OPERATING LIMITED PARTNERSHIP
By: Equity Residential Properties Trust,
as its general partner
By: /s/ Bruce C. Strohm
-----------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
EQUITY RESIDENTIAL PROPERTIES TRUST
By: /s/ Bruce C. Strohm
-----------------------------------
Name: Bruce C. Strohm
Title: Executive Vice President
<PAGE>
SCHEDULE 2.3(A)
OPTIONS, WARRANTS, ETC.
Warrant Agreement, dated as of August 28, 1997, by and between Wellsford Real
Properties, Inc. ("Wellsford"), and the United States Trust Company of New York
("U.S. Trust")(the "Warrant Agreement"), pursuant to which Wellsford issued to
WHWEL Real Estate Limited Partnership warrants to purchase 4,132,230 shares of
Wellsford's common stock, as amended by Amendment No. 1 to Warrant Agreement,
dated July 16, 1998, and Amendment No. 2 to Warrant Agreement, dated May 28,
1999.
Warrant Agreement, dated as of May 28, 1999, by and between Wellsford and U.S.
Trust, pursuant to which Wellsford issued to W/W Group Holdings, L.L.C. warrants
to purchase 123,967 shares of Wellsford's common stock.
Letter Agreement between Wellsford and WHWEL Real Estate Limited Partnership,
dated May 28, 1999, pursuant to which Wellsford agrees to exchange shares of its
common stock for Excess Membership Units (as defined therein) issued with
respect to Capital Contributions (as defined therein) made to
Wellsford/Whitehall Properties Group, L.L.C. in excess of $50,000,000 and up to
$75,000,000.
Warrant Agreement, dated January 20, 1998, by and between Michael J. Vitale
("Vitale") and Wellsford, pursuant to which Wellsford issued a warrant to Vitale
to purchase up to 74,000 shares of Wellsford's common stock, at an exercise
price of $15.1750.
Warrant Agreement, dated January 20, 1998, by and between Frank G. Creamer, Jr.
("Creamer") and Wellsford, pursuant to which Wellsford issued a warrant to
Creamer to purchase up to 74,000 shares of Wellsford's common stock, at an
exercise price of $15.1750.
<PAGE>
SCHEDULE 2.5(B)
MATERIAL CHANGE
On February 25, 2000, the Company repurchased 2,573,632 shares of its
outstanding common stock from an institutional investor for approximately
$20,589,000.
<PAGE>
EXHIBIT A
FORM OF AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
------------------------------------------
Agreement dated as of May 5, 2000 by and between Wellsford
Real Properties, Inc. a Maryland corporation (the "Company"), and ERP Operating
Limited Partnership, an Illinois limited partnership ("ERPOLP")
W I T N E S S E T H
WHEREAS, the Company and ERPOLP entered into a Registration Rights
Agreement dated as of May 30, 1997 (the "RR Agreement");
WHEREAS, the Company does not intend to issue and ERPOLP does not intend to
acquire, the Preferred Stock, as defined in the RR Agreement;
WHEREAS, pursuant to a Declaration of Trust of WRP Convertible Trust I (the
"Trust"), dated May 5, 2000, the Trust intends to issue to ERPOLP $25,000,000 of
8.25% Preferred Securities (as defined below) which are convertible into Common
Stock as defined in the RR Agreement; and
WHEREAS, the parties hereto wish to amend the RR Agreement to eliminate the
registration rights granted therein to ERPOLP to have registered Common Stock
issuable upon conversion of Preferred Stock and to grant to ERPOLP the
registration rights previously granted with respect to Common Stock issuable
upon the conversion of the Preferred Stock to the Common Stock issuable upon
conversion of the Securities.
WHEREAS, all of the Company's shares of Class A Common Stock are being
exchanged for an equal number of shares of the Company's Class A-1 Common Stock.
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. The definition of Shares in the RR Agreement is hereby
deleted and a new definition of shares to read as follows is
hereby inserted in lieu thereof:
<PAGE>
"Shares shall mean Common Stock issuable or issued upon
conversion of all or any portion of the Preferred Securities
or Class A-1 common stock, par value $.01 per share, of the
Company of May 5, 2000".
2. The definition of "Preferred Stock" in the RR Agreement is
hereby deleted. A new definition of "Preferred Securities"
to read as follows is hereby inserted:
"Preferred Securities" shall mean the 8.25% Convertible
Trust Preferred Securities issued by WRP Convertible Trust
I.
3. Section 7 of the RR Agreement is amended to state that the
address of the Company to which notice shall be sent is
Wellsford Real Properties, Inc. 535 Madison Avenue, 26th
Floor, New York, New York 10022, Attention: Chairman; Fax
No. (212) 421-7244.
4. The RR Agreement shall remain in full force and effect as
hereby modified.
This Agreement may be executed in one or more counterparts with the same
effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ERP OPERATING LIMITED PARTNERSHIP WELLSFORD REAL PROPERTIES, INC.
By: Equity Residential Properties Trust, By:
its general partner ---------------------------
Name:
Title:
By:
---------------------------
Name:
Title:
EXHIBIT B
OPINION OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP
<PAGE>
EXHIBIT C
OPINION OF RICHARDS, LAYTON & FINGER, P.A.
<PAGE>
EXHIBIT D
OPINION OF ROBINSON SILVERMAN PEARCE ARONSOHN & BERMAN LLP
<PAGE>
- --------------------------------------------------------------------------------
PREFERRED SECURITIES GUARANTEE AGREEMENT
WRP CONVERTIBLE TRUST I
Dated as of May 5, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS AND INTERPRETATION.................................2
SECTION 1.1. Definitions and Interpretation.................................2
ARTICLE II TRUST INDENTURE ACT............................................4
SECTION 2.1. Trust Indenture Act; Application...............................4
SECTION 2.2. Lists of Holders...............................................4
SECTION 2.3. Reports by the Preferred Guarantee Trustee.....................5
SECTION 2.4. Periodic Reports to Preferred Guarantee Trustee................5
SECTION 2.5. Evidence of Compliance with Conditions Precedent...............5
SECTION 2.6. Events of Default; Waiver......................................6
SECTION 2.7. Event of Default; Notice.......................................6
SECTION 2.8. Conflicting Interests..........................................6
ARTICLE III POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE.......6
SECTION 3.1. Powers and Duties of the Preferred Guarantee Trustee...........6
SECTION 3.2. Certain Rights of Preferred Guarantee Trustee..................8
SECTION 3.3. Not Responsible for Recitals or Issuance of Preferred
Securities Guarantee................11
ARTICLE IV PREFERRED GUARANTEE TRUSTEE...................................11
SECTION 4.1. Preferred Guarantee Trustee: Eligibility. ....................11
SECTION 4.2. Appointment, Removal and Resignation of Preferred
Guarantee Trustee........................12
ARTICLE V GUARANTEE.....................................................12
SECTION 5.1. Guarantee.....................................................12
SECTION 5.2. Waiver of Notice and Demand...................................13
SECTION 5.3. Obligations Not Affected......................................13
SECTION 5.4. Rights of Holders.............................................14
SECTION 5.5. Guarantee of Payment..........................................15
SECTION 5.6. Subrogation...................................................15
SECTION 5.7. Independent Obligations.......................................15
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION ....................15
SECTION 6.1. Limitation of Transactions....................................15
SECTION 6.2. Subordination.................................................16
ARTICLE VII TERMINATION...................................................16
SECTION 7.1. Termination...................................................16
<PAGE>
ARTICLE VIII INDEMNIFICATION...............................................17
SECTION 8.1. Exculpation...................................................17
SECTION 8.2. Indemnification...............................................17
ARTICLE IX MISCELLANEOUS.................................................18
SECTION 9.1. Successors and Assigns........................................18
SECTION 9.2. Guarantor May Consolidate, etc., on Certain Terms.............18
SECTION 9.3. Amendments....................................................18
SECTION 9.4. Notices.......................................................19
SECTION 9.5. Counterparts..................................................19
SECTION 9.6. Benefit.......................................................20
SECTION 9.7. Governing Law.................................................20
<PAGE>
PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE (AS DEFINED IN THE
DECLARATION), ANY CERTIFICATE EVIDENCING THIS PREFERRED SECURITIES GUARANTEE
SHALL BEAR A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM, UNLESS OTHERWISE AGREED
BY THE REGULAR TRUSTEES (WITH WRITTEN NOTICE TO THE INSTITUTIONAL TRUSTEE)
PURSUANT TO SECTION 9.1(D) OF THE DECLARATION:
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY REPRESENTED HEREBY IN
AN OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF
THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY REPRESENTED HEREBY UNDER
RULE 144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR
OTHERWISE TRANSFER THE SECURITY REPRESENTED HEREBY OR THE COMMON SHARES ISSUABLE
UPON CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO WELLSFORD REAL
PROPERTIES, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE (OR, IF THIS CERTIFICATE REPRESENTS
COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY REPRESENTED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY REPRESENTED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY REPRESENTED
HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
SECURITY REPRESENTED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), THE HOLDER MUST CHECK
<PAGE>
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WILMINGTON TRUST COMPANY, AS
TRUSTEE (OR, IF THIS CERTIFICATE REPRESENTS COMMON SHARES, SUCH HOLDER MUST
FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY OR WRP CONVERTIBLE TRUST I (THE "TRUST") MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT REPRESENT
COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY REPRESENTED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATIONS UNDER THE SECURITIES ACT.
<PAGE>
PREFERRED SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Preferred Securities Guarantee"), dated as
of May 5, 2000, is executed and delivered by Wellsford Real Properties, Inc., a
Maryland corporation ("WRP" or the "Guarantor"), and Wilmington Trust Company,
as trustee (the "Preferred Guarantee Trustee"), for the benefit of the Holders
(as defined herein) from time to time of the Preferred Securities (as defined
herein) of WRP Convertible Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to a Declaration of Trust (the "Declaration"), dated as
of May 5, 2000, among the trustees of the Issuer named therein, WRP, as sponsor,
and the holders from time to time of undivided beneficial interests in the
assets of the Issuer, the Issuer is issuing on the date hereof 1,000,000
preferred securities (the "Preferred Securities"), having a liquidation amount
of $25 per Preferred Security, designated the 8.25% Convertible Trust Preferred
Securities.
WHEREAS, as incentives for the Holders to purchase the Preferred
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Preferred Securities Guarantee, to pay to the
Holders of the Preferred Securities the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
WHEREAS, as of the date hereof, the Guarantor is also executing and
delivering a guarantee agreement (the "Common Securities Guarantee") in
substantially identical terms to this Preferred Securities Guarantee for the
benefit of the holders of the Common Securities (as defined herein), except that
if an Event of Default (as defined in the Indenture), has occurred and is
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinated to the rights of
Holders of Preferred Securities to receive Guarantee Payments under this
Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Preferred Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION I.1. Definitions and Interpretation.
In this Preferred Securities Guarantee, unless the context otherwise
requires:
<PAGE>
(a) capitalized terms used in this Preferred Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) terms defined in the Declaration as at the date of execution of this
Preferred Securities Guarantee have the same meaning when used in this Preferred
Securities Guarantee unless otherwise defined in this Preferred Securities
Guarantee;
(c) a term defined anywhere in this Preferred Securities Guarantee has the
same meaning throughout;
(d) all references to "the Preferred Securities Guarantee" or "this
Preferred Securities Guarantee" are to this Preferred Securities Guarantee as
modified, supplemented or amended from time to time;
(e) all references in this Preferred Securities Guarantee to Articles and
Sections are to Articles and Sections of this Preferred Securities Guarantee,
unless otherwise specified; a term defined in the Trust Indenture Act has the
same meaning when used in this Preferred Securities Guarantee, unless otherwise
defined in this Preferred Securities Guarantee or unless the context otherwise
requires; and
(f) a reference to the singular includes the plural and vice versa.
"Authorized Officer" of a Person means any Person that is authorized to
legally bind such Person, provided, however, that the Authorized Officer signing
an Officers' Certificate given pursuant to Section 314(a)(4) of the Trust
Indenture Act shall be the principal executive, financial or accounting officer
of such Person.
"Common Securities" means the securities representing common undivided
beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the office of the Preferred Guarantee
Trustee at which the corporate trust business of the Preferred Guarantee Trustee
shall, at any particular time, be principally administered, which office at the
date of execution of this Agreement is located at 1100 North Market Street, 9th
Floor, Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
"Covered Person" means any Holder or beneficial owner of Preferred
Securities.
"Event of Default" means (a) a failure by the Guarantor to perform any of
its payment or other obligations under Section 5.1 of this Preferred Securities
Guarantee or (b) if applicable, the failure by WRP to deliver Common Shares upon
an appropriate election by a Holder of Preferred Securities to convert the
Preferred Securities into Common Shares.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Preferred Securities, to the extent not paid or
made by the Issuer:
(i) any accrued and unpaid Distributions (as defined in the Declaration) that
are required to be paid on such Preferred Securities in cash to the extent the
Issuer shall have funds available therefor or which have not been paid by the
issuance by the Issuer of additional Preferred Securities pursuant to the terms
of the Declaration, (ii) the redemption price (the "Redemption Price") specified
in the Indenture, and all accrued and unpaid Distributions to the date of
redemption, to the extent the Issuer has funds available therefor, with respect
to any Preferred Securities called for redemption by the Issuer, and (iii) upon
a voluntary or involuntary dissolution, winding-up or termination of the Issuer
(other than in connection with the redemption of all of the Preferred Securities
or the distribution of Debentures to the Holders in exchange for Preferred
Securities as provided in the Declaration), the aggregate of the liquidation
amount and all accrued and unpaid Distributions on the Preferred Securities to
the date of payment, to the extent the Issuer shall have funds available
therefor (the "Liquidation Distribution"). If an Event of Default (as defined in
the Indenture) has occurred and is continuing, the rights of holders of the
Common Securities to receive payments under the Common Securities Guarantee
Agreement are subordinated to the rights of Holders of Preferred Securities to
receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and records of
the Issuer, of any Preferred Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Preferred Securities have
given any request, notice, consent or waiver hereunder, "Holder" shall not
include the Guarantor or any of its Affiliates.
"Indemnified Person" means the Preferred Guarantee Trustee, any Affiliate
of the Preferred Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Preferred Guarantee Trustee.
"Indenture" means the Indenture, dated as of May 5, 2000, between the WRP
(the "Debenture Issuer") and Wilmington Trust Company, as trustee.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided in the terms of the Preferred Securities or except as provided by
the Trust Indenture Act, a vote by Holder(s), voting separately as a class, of
more than 50% of the liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all Preferred Securities.
"Preferred Guarantee Trustee" means Wilmington Trust Company, until a
Successor Preferred Guarantee Trustee has been appointed and has accepted such
appointment pursuant to the terms of this Preferred Securities Guarantee and
thereafter means each such Successor Preferred Guarantee Trustee.
"Responsible Officer" means, with respect to the Preferred Guarantee
Trustee, any officer within the Corporate Trust Office of the Preferred
Guarantee Trustee, including any vice president, any assistant vice president,
secretary, any assistant secretary, the treasurer, any assistant treasurer or
other officer of the Corporate Trust Office of the Preferred Guarantee
<PAGE>
Trustee customarily performing functions similar to those performed by any of
the above designated officers, and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.
"Successor Preferred Guarantee Trustee" means a successor Preferred
Guarantee Trustee possessing the qualifications to act as Preferred Guarantee
Trustee under Section 4.1.
"Trust Securities" means the Common Securities and the Preferred
Securities.
"WRP" shall mean Wellsford Real Properties, Inc., a Maryland corporation.
ARTICLE II
TRUST INDENTURE ACT
SECTION II.1. Trust Indenture Act; Application.
(a) This Preferred Securities Guarantee shall not be subject to the
provisions of the Trust Indenture Act unless and until the securities hereunder
are registered pursuant to a registration statement filed with and declared
effective by the Securities and Exchange Commission. Thereafter, this Preferred
Securities Guarantee shall be subject to the provisions of the Trust Indenture
Act that are required to be part of this Preferred Securities Guarantee and
shall, to the extent applicable, be governed by such provisions. Notwithstanding
the foregoing, the obligations under Sections 2.2(b), 2.3 and 4.1 shall at all
times be governed by the Trust Indenture Act as if this Preferred Securities
Guarantee and been issued pursuant to an effective registration statement; and
(b) Subject to the provisions of Section 2.1(a), if and to the extent that
any provision of this Preferred Securities Guarantee limits, qualifies or
conflicts with the duties imposed by Sections 310 to 317, inclusive, of the
Trust Indenture Act, such imposed duties shall control.
SECTION II.2. Lists of Holders.
(a) WRP shall provide the Preferred Guarantee Trustee with a list, in such
form as the Preferred Guarantee Trustee may reasonably require, of the names and
addresses of the Holders ("List of Holders") (i) within 7 days after each record
date for payment of Distributions, as of such record date, and (ii) at any other
time, within 30 days of receipt by WRP of a written request for a List of
Holders as of a date no more than 14 days before such List of Holders is given
to the Preferred Guarantee Trustee, provided that WRP shall not be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Preferred Guarantee Trustee by
WRP. The Preferred Guarantee
<PAGE>
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Preferred Guarantee Trustee shall comply with its obligations under
Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act.
SECTION II.3. Reports by the Preferred Guarantee Trustee.
Within 60 days after December 31 of each year, the Preferred Guarantee
Trustee shall provide to the Holders such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Preferred Guarantee Trustee shall
also comply with the requirements of Section 313(d) of the Trust Indenture Act.
SECTION II.4. Periodic Reports to Preferred Guarantee Trustee.
The Guarantor shall provide to the Preferred Guarantee Trustee such
documents, reports and information (if any) as are required by Section 314 and
the compliance certificate required by Section 314 of the Trust Indenture Act in
the form, the manner and at the times required by Section 314 of the Trust
Indenture Act.
Delivery of such reports, information and documents to the Preferred
Guarantee Trustee is for informational purposes only and the Preferred Guarantee
Trustee's receipt of such material shall not constitute constructive notice of
any information contained therein, including the Guarantor's compliance with any
of their covenants hereunder (as to which the Preferred Guarantee Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION II.5. Evidence of Compliance with Conditions Precedent.
The Guarantor shall provide to the Preferred Guarantee Trustee such
evidence of compliance with any conditions precedent, if any, provided for in
this Preferred Securities Guarantee that relate to any of the matters set forth
in Section 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given by an officer pursuant to Section 314(c)(1) may be given in
the form of an Officer's Certificate.
SECTION II.6. Events of Default; Waiver.
The Holders of a Majority in liquidation amount of Preferred Securities
may, by vote, on behalf of the Holders of all of the Preferred Securities, waive
any past Event of Default and its consequences. Upon such waiver, any such Event
of Default shall cease to exist, and any Event of Default arising therefrom
shall be deemed to have been cured, for every purpose of this Preferred
Securities Guarantee, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
<PAGE>
SECTION II.7. Event of Default; Notice.
(a) The Preferred Guarantee Trustee shall, within 30 days after the
occurrence of an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee, transmit by mail, first class postage prepaid, to
the Holders, notices of all such Events of Default unless such defaults have
been cured before the giving of such notice, provided that the Preferred
Guarantee Trustee shall be protected in withholding such notice if and so long
as a Responsible Officer of the Preferred Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders except in the case of a default in the Guarantor's obligation to make
Guarantee Payments.
(b) The Preferred Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Preferred Guarantee Trustee shall have
received written notice thereof, or a Responsible Officer of the Preferred
Guarantee Trustee charged with the administration of this Preferred Securities
Guarantee shall have obtained actual knowledge thereof.
SECTION II.8. Conflicting Interests.
The Declaration shall be deemed to be specifically described in this
Preferred Securities Guarantee for the purposes of clause (i) of the first
proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PREFERRED GUARANTEE TRUSTEE
SECTION III.1. Powers and Duties of the Preferred Guarantee Trustee.
(a) This Preferred Securities Guarantee shall be held by the Preferred
Guarantee Trustee for the benefit of the Holders and the Preferred Guarantee
Trustee shall not transfer this Preferred Securities Guarantee to any Person
except a Holder exercising his or her rights pursuant to Section 5.4(b) or to a
Successor Preferred Guarantee Trustee on acceptance by such Successor Preferred
Guarantee Trustee of its appointment to act as Successor Preferred Guarantee
Trustee. The right, title and interest of the Preferred Guarantee Trustee shall
automatically vest in any Successor Preferred Guarantee Trustee, and such
vesting and succession of title shall be effective whether or not conveyancing
documents have been executed and delivered pursuant to the appointment of such
Successor Preferred Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of the
Preferred Guarantee Trustee has occurred and is continuing, the Preferred
Guarantee Trustee shall enforce this Preferred Securities Guarantee for the
benefit of the Holders.
<PAGE>
(c) The Preferred Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Preferred Securities Guarantee, and no implied covenants shall be read into
this Preferred Securities Guarantee against the Preferred Guarantee Trustee. In
case an Event of Default has occurred (that has not been cured or waived
pursuant to Section 2.6) and is actually known to a Responsible Officer of the
Preferred Guarantee Trustee, the Preferred Guarantee Trustee shall exercise such
of the rights and powers vested in it by this Preferred Securities Guarantee,
and shall use the same degree of care and skill in its exercise thereof as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs.
(d) No provision of this Preferred Securities Guarantee shall be construed
to relieve the Preferred Guarantee Trustee from liability for its own negligent
action, its own negligent failure to act, or its own willful misconduct, except
that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have
occurred:
(A) the duties and obligations of the Preferred Guarantee
Trustee shall be determined solely by the express provisions of
this Preferred Securities Guarantee, and the Preferred Guarantee
Trustee shall not be liable except for the performance of such
duties and obligations as are specifically set forth in this
Preferred Securities Guarantee, and no implied covenants or
obligations shall be read into this Preferred Securities
Guarantee against the Preferred Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Preferred
Guarantee Trustee, the Preferred Guarantee Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Preferred Guarantee
Trustee and conforming to the requirements of this Preferred
Securities Guarantee; but in the case of any such certificates or
opinions that by any provision hereof are specifically required
to be furnished to the Preferred Guarantee Trustee, the Preferred
Guarantee Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Preferred Securities Guarantee;
(ii) the Preferred Guarantee Trustee shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Preferred Guarantee Trustee, unless it shall be proved that the
Preferred Guarantee Trustee was negligent in ascertaining the
pertinent facts upon which such judgment was made;
<PAGE>
(iii)the Preferred Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of not less than a
Majority in liquidation amount of the Preferred Securities
relating to the time, method and place of conducting any
proceeding for any remedy available to the Preferred Guarantee
Trustee, or exercising any trust or power conferred upon the
Preferred Guarantee Trustee under this Preferred Securities
Guarantee; and
(iv) no provision of this Preferred Securities Guarantee shall require
the Preferred Guarantee Trustee to expend or risk its own funds
or otherwise incur personal financial liability in the
performance of any of its duties or in the exercise of any of its
rights or powers, if the Preferred Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds
or liability is not reasonably assured to it under the terms of
this Preferred Securities Guarantee or indemnity, reasonably
satisfactory to the Preferred Guarantee Trustee, against such
risk or liability is not reasonably satisfactory to the Preferred
Guarantee Trustee, against such risk or liability is not
reasonably assured to it.
SECTION III.2. Certain Rights of Preferred Guarantee Trustee.
(a) Subject to the provisions of Section 3.1:
(i) The Preferred Guarantee Trustee may conclusively rely, and
shall be fully protected in acting or refraining from acting
upon, any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or
parties.
(ii) Any direction or act of the Guarantor contemplated by this
Preferred Securities Guarantee shall be sufficiently
evidenced by an Officer's Certificate.
(iii)Whenever, in the administration of this Preferred
Securities Guarantee, the Preferred Guarantee Trustee shall
deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder,
the Preferred Guarantee Trustee (unless other evidence is
herein specifically prescribed) may, in the absence of bad
faith on its part, request and conclusively rely upon
<PAGE>
an Officer's Certificate which, upon receipt of such
request, shall be promptly delivered by the Guarantor.
(iv) The Preferred Guarantee Trustee shall have no duty to see to
any recording, filing or registration of any instrument (or
any rerecording, refiling or re-registration thereof).
(v) The Preferred Guarantee Trustee may consult with counsel of
its selection, and the advice or opinion of such counsel
with respect to legal matters shall be full and complete
authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in
accordance with such advice or opinion. Such counsel may be
counsel to the Guarantor or any of its Affiliates and may
include any of its employees. The Preferred Guarantee
Trustee shall have the right at any time to seek
instructions concerning the administration of this Preferred
Securities Guarantee from any court of competent
jurisdiction.
(vi) The Preferred Guarantee Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Preferred Securities Guarantee at the request or direction
of any Holder, unless such Holder shall have provided to the
Preferred Guarantee Trustee such security and indemnity,
reasonably satisfactory to the Preferred Guarantee Trustee,
against the costs, expenses (including attorneys' fees and
expenses and the expenses of the Preferred Guarantee
Trustee's agents, nominees or custodians) and liabilities
that might be incurred by it in complying with such request
or direction, including such reasonable advances as may be
requested by the Preferred Guarantee Trustee; provided that
nothing contained in this Section 3.2(a)(vi) shall be taken
to relieve the Preferred Guarantee Trustee, upon the
occurrence of an Event of Default, of its obligation to
exercise the rights and powers vested in it by this
Preferred Securities Guarantee.
(vii)The Preferred Guarantee Trustee shall not be bound to make
any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other
paper or document, but the Preferred Guarantee Trustee, in
its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.
(viii) The Preferred Guarantee Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents, nominees,
custodians or attorneys, and the
<PAGE>
Preferred Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or
attorney appointed with due care by it hereunder.
(ix) Any action taken by the Preferred Guarantee Trustee or its
agents hereunder shall bind the Holders and the signature of
the Preferred Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No
third party shall be required to inquire as to the authority
of the Preferred Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this
Preferred Securities Guarantee, both of which shall be
conclusively evidenced by the Preferred Guarantee Trustee's
or its agent's taking such action.
(x) Whenever in the administration of this Preferred Securities
Guarantee the Preferred Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing
any remedy or right or taking any other action hereunder,
the Preferred Guarantee Trustee (i) may request instructions
from the Holders of a Majority in liquidation amount of the
Preferred Securities, (ii) may refrain from enforcing such
remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such
instructions.
(xi) The Preferred Securities Trustee shall not be liable for any
action taken, suffered, or omitted to be taken by it in good
faith and reasonably believed by it to be authorized or
within the discretion or rights or powers conferred upon it
by this Preferred Securities Guarantee.
(b) No provision of this Preferred Securities Guarantee shall be deemed to
impose any duty or obligation on the Preferred Guarantee Trustee to perform any
act or acts or exercise any right, power, duty or obligation conferred or
imposed on it in any jurisdiction in which it shall be illegal, or in which the
Preferred Guarantee Trustee shall be unqualified or incompetent in accordance
with applicable law, to perform any such act or acts or to exercise any such
right, power, duty or obligation. No permissive power or authority available to
the Preferred Guarantee Trustee shall be construed to be a duty.
SECTION III.3. Not Responsible for Recitals or Issuance of Preferred
Securities Guarantee.
The recitals contained in this Preferred Securities Guarantee shall be
taken as the statements of the Guarantor, and the Preferred Guarantee Trustee
does not assume any responsibility for their correctness. The Preferred
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Securities Guarantee.
<PAGE>
ARTICLE IV
PREFERRED GUARANTEE TRUSTEE
SECTION IV.1. Preferred Guarantee Trustee: Eligibility.
(a) There shall at all times be a Preferred Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory
thereof or of the District of Columbia, or a corporation or
Person permitted by the Securities and Exchange Commission
to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50
million U.S. dollars ($50,000,000), and subject to
supervision or examination by federal, state, territorial or
District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant
to law or to the requirements of the supervising or
examining authority referred to above, then, for the
purposes of this Section 4.1(a)(ii), the combined capital
and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent
report of condition so published.
(b) If at any time the Preferred Guarantee Trustee shall cease to be
eligible to so act under Section 4.1(a), the Preferred Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.2(c).
(c) If the Preferred Guarantee Trustee has or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Preferred Guarantee Trustee and Guarantor shall in all
respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION IV.2. Appointment, Removal and Resignation of Preferred Guarantee
Trustee.
(a) Subject to Section 4.2(b), the Preferred Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.
(b) The Preferred Guarantee Trustee shall not be removed in accordance with
Section 4.2(a) until a Successor Preferred Guarantee Trustee has been appointed
and has
<PAGE>
accepted such appointment by written instrument executed by such Successor
Preferred Guarantee Trustee and delivered to the Guarantor.
(c) The Preferred Guarantee Trustee appointed to office shall hold office
until a Successor Preferred Guarantee Trustee shall have been appointed or until
its removal or resignation. The Preferred Guarantee Trustee may resign from
office (without need for prior or subsequent accounting) by an instrument in
writing executed by the Preferred Guarantee Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Preferred
Guarantee Trustee has been appointed and has accepted such appointment by
instrument in writing executed by such Successor Preferred Guarantee Trustee and
delivered to the Guarantor and the resigning Preferred Guarantee Trustee.
(d) If no Successor Preferred Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery of an instrument of resignation or removal, the Preferred Guarantee
Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Preferred Guarantee Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Successor Preferred Guarantee Trustee.
(e) No Preferred Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Preferred Guarantee Trustee.
(f) Upon termination of this Preferred Securities Guarantee or removal or
resignation of the Preferred Guarantee Trustee pursuant to this Section 4.2, the
Guarantor, jointly and severally, shall pay to the Preferred Guarantee Trustee
all amounts accrued to the date of such termination, removal or resignation.
ARTICLE V
GUARANTEE
SECTION V.1. Guarantee.
(a) The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders. WRP will honor all obligations relating to the
conversion of the Preferred Securities into the Common Shares of WRP as set
forth in the Declaration and the Indenture.
(b) The Guarantor irrevocably and unconditionally agrees, in the event of
any distribution of Debentures, whether it be pursuant to Section 4(c) of Annex
I to the Declaration,
<PAGE>
pursuant to a conversion under Section 5 of Annex I to the Declaration,
dissolution or liquidation of the Issuer or otherwise (a "Distribution Event")
to the holders of Trust Securities pursuant to which the Holders of Preferred
Securities receive an aggregate principal amount of Debentures that is less than
the aggregate principal amount of Debentures that such Holder is entitled to
receive in connection with such Distribution Event, which amount of Debentures
shall be equal to the aggregate liquidation amount of the Preferred Securities
being liquidated as a result of such Distribution Event (the "Entitlement
Amount"), then the Guarantor shall issue additional Debentures pursuant to the
Indenture, in replacement of the initially issued Debentures not distributed to
Holders of Preferred Securities, to such Holders of Preferred Securities equal
to the amount by which the aggregate amount of the Entitlement Amount of
Debentures exceeds the aggregate amount of Debentures actually distributed.
SECTION V.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Preferred
Securities Guarantee and of any liability to which it applies or may apply,
presentment, demand for payment, any right or remedy to require a proceeding
first against the Issuer or any other Person before proceeding directly against
the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION V.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Preferred Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Securities to be performed
or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price or Liquidation Distribution or
any other sums payable under the terms of the Preferred Securities or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Preferred Securities (other than an extension of
time for payment of Distributions, Redemption Price or Liquidation Distribution
or other sum payable that results from the extension of any interest payment
period on the Debentures);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Preferred Securities, or
any action on the part of the Issuer granting indulgence or extension of any
kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization,
<PAGE>
arrangement, composition or readjustment of debt of, or other similar
proceedings affecting, the Issuer or any of the assets of the Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of the Guarantor, it being the intent of
this Section 5.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION V.4. Rights of Holders.
(a) The Holders of a Majority in liquidation amount of the Preferred
Securities then outstanding have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Preferred Guarantee
Trustee in respect of this Preferred Securities Guarantee or to direct the
exercise of any trust or power conferred upon the Preferred Guarantee Trustee
under this Preferred Securities Guarantee.
(b) If in the opinion of any Holder of any Preferred Securities the
Preferred Guarantee Trustee has failed to enforce this Preferred Securities
Guarantee, such Holder of Preferred Securities may institute a legal proceeding
directly against the Guarantor to enforce the Preferred Guarantee Trustee's
rights under this Preferred Securities Guarantee, without first instituting a
legal proceeding against the Issuer, the Preferred Guarantee Trustee or any
other person or entity. The Guarantor waives any right or remedy to require that
any action be brought first against the Issuer or any other person or entity
before proceeding directly against the Guarantor. Notwithstanding the foregoing,
if the Guarantor has failed to make a guarantee payment, a Holder of Preferred
Securities may directly institute a proceeding against the Guarantor for
enforcement of this Preferred Securities Guarantee for such payment.
SECTION V.5. Guarantee of Payment.
This Preferred Securities Guarantee creates a guarantee of payment and not
of collection.
SECTION V.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders of
Preferred Securities against the Issuer in respect of any amounts paid to such
Holders by the Guarantor under this Preferred Securities Guarantee; provided,
however, that the Guarantor shall not
<PAGE>
(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any right that it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Preferred Securities Guarantee, if, at the time of any such payment,
any amounts are due and unpaid under this Preferred Securities Guarantee. If any
amount shall be paid to the Guarantor in violation of the preceding sentence,
the Guarantor agrees to hold such amount in trust for the Holders and to pay
over such amount to the Holders.
SECTION V.7. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Issuer with respect to the Preferred Securities, and
that the Guarantor shall be liable as principals and as debtors hereunder to
make Guarantee Payments pursuant to the terms of this Preferred Securities
Guarantee notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3 hereof.
<PAGE>
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION VI.1. Limitation of Transactions.
So long as any Preferred Securities remain outstanding, if (i)
the Guarantor shall be in default with respect to its payment or other
obligations under Section 5.1 of this Preferred Securities Guarantee or (ii)
there shall have occurred and be continuing an Event of Default under the
Declaration or any event that, with the giving of notice or lapse of time or
both, would constitute an Event of Default under the Declaration then the
Guarantor shall not (a) declare or pay any dividend on, make any distributions
with respect to, or redeem, purchase, acquire, or make any liquidation payment
with respect to, any of its Capital Stock or (b) make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities of Guarantor that rank pari passu with or junior in interest to the
Debentures or make any guarantee payment with respect to any guarantee by
Guarantor of the debt securities of any subsidiary of Guarantor if such
guarantee ranks pari passu with or junior in interest to the Preferred
Securities Guarantee (other than (i) as a result of a reclassification of the
Capital Stock of the Guarantor or the exchange or conversion of one class or
series of the Capital Stock of the Guarantor for another class or series of the
Capital Stock of the Guarantor, (ii) the purchase of fractional interests in
shares of the Capital Stock of the Guarantor pursuant to the conversion or
exchange provisions of such Capital Stock or the security being converted into
or exchanged for such Capital Stock, (iii) dividends or distributions in Common
Shares of the Guarantor, (iv) any declaration of a dividend in connection with
the implementation of a stockholders' rights plan, or the issuance of shares
under any such plan in the future, or the redemption or repurchase of any such
rights pursuant thereto, (v) payments under the Guarantee and Common Securities
Guarantee, (vi) purchases of Common Shares of the Guarantor related to the
issuance of Common Shares of WRP's or rights under any of the Guarantor's
benefit plans for its directors, officers or employees and (vii) obligations
under any dividend reinvestment and stock purchase plans to issue shares other
than as a result of the payment of a dividend), in each case unless and until
such default or Event of Default shall have been cured.
SECTION VI.2. Subordination.
This Preferred Securities Guarantee will constitute an unsecured obligation
of the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor (except any liabilities that may be pari
passu expressly by their terms), (ii) pari passu with the most senior preferred
or preference shares now or hereafter issued by the Guarantor and with any
guaranty now or hereafter entered into by the Guarantor in respect of any
preferred or preference stock of any Affiliate of the Guarantor and (iii) senior
to Guarantor's Common Shares.
<PAGE>
ARTICLE VII
TERMINATION
SECTION VII.1. Termination.
This Preferred Securities Guarantee shall terminate as to each Holder upon
(i) full payment of the Redemption Price and accrued and unpaid distributions
with respect to all Preferred Securities, (ii) the distribution of the Common
Shares to such Holder upon the conversion of such Holder's Preferred Securities
into the Common Shares, (iii) the distribution of the Debentures to the Holders
of the Preferred Securities or (iv) full payment of the amounts payable in
accordance with the Declaration upon liquidation of the Issuer. This Preferred
Securities Guarantee shall terminate completely upon full payment of the amounts
payable in accordance with the Declaration. Notwithstanding the foregoing, this
Preferred Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sum paid under the Preferred Securities or under this Preferred
Securities Guarantee.
ARTICLE VIII
INDEMNIFICATION
SECTION VIII.1. Exculpation.
(a) No Indemnified Person shall be liable, responsible or accountable in
damages or otherwise to the Guarantor or any Covered Person for any loss,
damage, liability, expense or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith in accordance with
this Preferred Securities Guarantee and in a manner that such Indemnified Person
reasonably believed to be within the scope of the authority conferred on such
Indemnified Person by this Preferred Securities Guarantee or by law, except that
an Indemnified Person shall be liable for any such loss, damage or claim
incurred by reason of such Indemnified Person's negligence or willful misconduct
with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Guarantor and upon such information, opinions, reports
or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses or any
<PAGE>
other facts pertinent to the existence and amount of assets from which
Distributions to Holders might properly be paid.
SECTION VIII.2. Indemnification.
The Guarantor agrees to indemnify each Indemnified Person for, and to hold
each Indemnified Person harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of defending itself against, or investigating, any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The provisions of this Section 8.2 shall survive the termination of
this Preferred Securities Guarantee or the resignation or removal of the
Preferred Guarantee Trustee.
When the Preferred Guarantee Trustee incurs expenses or renders services in
connection with an Event of Default specified in Section 5.1(d) or Section
5.1(e) of the Indenture, the expenses (including the reasonable charges and
expenses of its counsel) and the compensation for services are intended to
constitute expenses of administration under any applicable federal or state
bankruptcy, insolvency or other similar law.
ARTICLE IX
MISCELLANEOUS
SECTION IX.1. Successors and Assigns.
All guarantees and agreements contained in this Preferred Securities
Guarantee shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with any
merger or consolidation of the Guarantor with or into another entity permitted
by Section 9.1 of the Indenture or any sale, transfer or lease of the
Guarantor's assets to another entity permitted by Section 9.1 of the Indenture,
the Guarantor may not assign its rights or delegate its obligations under this
Preferred Securities Guarantee without the prior approval of the holders of at
least a Majority in liquidation amount of the Preferred Securities then
outstanding.
SECTION IX.2. Guarantor May Consolidate, etc., on Certain Terms.
(a) Guarantor may sell, transfer, lease or otherwise convey all or
substantially all of its assets on a consolidated basis to any Persons, or
consolidate or merge with or into, any other Person, provided that in any such
case, (a) either (i) Guarantor shall be the continuing corporation, or (ii) if
Guarantor is not the continuing corporation, the successor corporation or
<PAGE>
Person which acquires by sale, transfer, lease or other conveyance all or
substantially all of the assets of Guarantor, shall be a corporation organized
and validly existing under the laws of the United States of America or any state
thereof or the District of Columbia and shall expressly assume the due and
punctual payment and performance by Guarantor of its obligations under this
Preferred Securities Guarantee, (b) immediately after such merger or
consolidation, or such sale, transfer, lease or other conveyance, no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have occurred and be continuing, and (c) the Company
has delivered to the Trustee an Officer's Certificate and an opinion of counsel,
each stating that the requirements of this Section have been complied with.
(b) In case of any such consolidation, merger, sale, transfer, or
conveyance (but not in the case of any such lease), and following such
an assumption by the successor corporation such successor corporation
shall succeed to and be substituted for Guarantor, with the same
effect as if it had been named herein, and Guarantor shall be
discharged from all obligations and covenants under this Preferred
Securities Guarantee and may be liquidated and dissolved
SECTION IX.3. Amendments.
Except with respect to any changes that do not adversely affect the rights
of Holders (in which case no consent of Holders will be required), this
Preferred Securities Guarantee may only be amended with the prior approval of
the Holders of at least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued
and unpaid Distributions to the date upon which the voting percentages are
determined) of the Preferred Securities then outstanding. The provisions of
Section 12.2 of the Declaration with respect to meetings of Holders apply to the
giving of such approval.
SECTION IX.4. Notices.
All notices provided for in this Preferred Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) If given to the Preferred Guarantee Trustee, at the Preferred Guarantee
Trustee's mailing address set forth below (or such other address as the
Preferred Guarantee Trustee may give notice of to the Holders of the Preferred
Securities):
Wilmington Trust Company
1100 North Market Street,
9th Floor
Wilmington, Delaware 19890-0001
Attention: Corporate Trust Administration
<PAGE>
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Preferred Securities):
Wellsford Real Properties, Inc.
535 Madison Avenue, 26th Floor
New York, New York 10022
Attention: Jeffrey H. Lynford
(c) If given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address of which no notice was
given, such notice or other document shall be deemed to have been delivered on
the date of such refusal or inability to deliver.
SECTION IX.5. Counterparts.
This Preferred Securities Guarantee may be executed in one or more
counterparts with the same effect as if the parties executing the counterparts
had each executed one instrument as of the day and year first above written.
SECTION IX.6. Benefit.
This Preferred Securities Guarantee is solely for the benefit of the
Holders of the Preferred Securities and, subject to Section 3.1(a), is not
separately transferable from the Preferred Securities.
SECTION IX.7. Governing Law.
THIS PREFERRED SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
<PAGE>
THIS PREFERRED SECURITIES GUARANTEE is executed as of the day and year
first above written.
WELLSFORD REAL PROPERTIES, INC., as Guarantor
By:/s/ Edward Lowenthal
----------------------------------
Name: Edward Lowenthal
Title: President
WILMINGTON TRUST COMPANY,
as Preferred Guarantee Trustee
By: /s/ Jennifer Matz
--------------------------------
Name: Jennifer Matz
Title: Assistant Vice President
<PAGE>
- --------------------------------------------------------------------------------
COMMON SECURITIES GUARANTEE AGREEMENT
WRP CONVERTIBLE TRUST I
Dated as of May 5, 2000
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND INTERPRETATION...........................2
SECTION 1.1. Definitions and Interpretation................2
ARTICLE II GUARANTEE................................................3
SECTION 2.1. Guarantee.....................................3
SECTION 2.2. Waiver of Notice and Demand...................4
SECTION 2.3. Obligations Not Affected......................4
SECTION 2.4. Rights of Holders.............................5
SECTION 2.5. Guarantee of Payment..........................5
SECTION 2.6. Subrogation...................................5
SECTION 2.7. Independent Obligations.......................6
ARTICLE III LIMITATION OF TRANSACTIONS; SUBORDINATION ...............6
SECTION 3.1. Limitation of Transactions....................6
SECTION 3.2. Subordination.................................7
ARTICLE IV TERMINATION..............................................7
SECTION 4.1. Termination...................................7
ARTICLE V MISCELLANEOUS............................................7
SECTION 5.1. Successors and Assigns........................7
SECTION 5.2. Amendments....................................8
SECTION 5.3. Notices.......................................8
SECTION 5.4. Benefit.......................................9
SECTION 5.5. Counterparts..................................9
SECTION 5.6. Governing Law.................................9
<PAGE>
PRIOR TO THE TRANSFER RESTRICTION TERMINATION DATE (AS DEFINED IN THE
DECLARATION), ANY CERTIFICATE REPRESENTING THIS COMMON SECURITIES GUARANTEE
SHALL BEAR A LEGEND IN SUBSTANTIALLY THE FOLLOWING FORM, UNLESS OTHERWISE AGREED
BY THE REGULAR TRUSTEES (WITH WRITTEN NOTICE TO THE INSTITUTIONAL TRUSTEE)
PURSUANT TO SECTION 9.1(D) OF THE DECLARATION:
THE SECURITY REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY
NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(A)(1), (2),
(3) OR (7) UNDER THE SECURITIES ACT) ("INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE SECURITY EVIDENCED HEREBY IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT PRIOR TO THE EXPIRATION OF THE
HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY EVIDENCED HEREBY UNDER RULE
144(K) UNDER THE SECURITIES ACT (OR ANY SUCCESSOR PROVISION) RESELL OR OTHERWISE
TRANSFER THE SECURITY EVIDENCED HEREBY OR THE COMMON SHARES ISSUABLE UPON
CONVERSION OR EXCHANGE OF THIS SECURITY EXCEPT (A) TO WELLSFORD REAL PROPERTIES,
INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, (C) TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (D)
TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE (OR, IF THIS CERTIFICATE REPRESENTS
COMMON SHARES, THE TRANSFER AGENT FOR THE COMMON SHARES), A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS
ON TRANSFER OF THIS SECURITY REPRESENTED HEREBY (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM SUCH TRUSTEE OR TRANSFER AGENT), (E) OUTSIDE THE UNITED STATES IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (F) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE), AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY REPRESENTED HEREBY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE SECURITY REPRESENTED
HEREBY PRIOR TO THE EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE
SECURITY REPRESENTED HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT (OR ANY
SUCCESSOR PROVISION), THE HOLDER MUST CHECK
<PAGE>
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WILMINGTON TRUST COMPANY, AS
TRUSTEE (OR, IF THIS CERTIFICATE REPRESENTS COMMON SHARES, SUCH HOLDER MUST
FURNISH TO THE TRANSFER AGENT SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS THE COMPANY OR WRP CONVERTIBLE TRUST I (THE "TRUST") MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT). IF THIS CERTIFICATE DOES NOT REPRESENT
COMMON SHARES AND IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR OR A PURCHASER WHO IS NOT A U.S. PERSON, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO THE WILMINGTON TRUST COMPANY, AS TRUSTEE, SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS THE COMPANY OR THE TRUST
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THIS LEGEND WILL BE REMOVED AFTER THE
EXPIRATION OF THE HOLDING PERIOD APPLICABLE TO SALES OF THE SECURITY REPRESENTED
HEREBY UNDER RULE 144(K) UNDER THE SECURITIES ACT. AS USED HEREIN, THE TERMS
"OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS
GIVEN TO THEM BY REGULATIONS UNDER THE SECURITIES ACT.
<PAGE>
COMMON SECURITIES GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (the "Common Securities Guarantee"), dated as of
May 5, 2000, is executed and delivered by Wellsford Real Properties, Inc., a
Maryland corporation ("WRP" or the "Guarantor") for the benefit of the Holders
(as defined herein) from time to time of the Common Securities (as defined
herein) of WRP Convertible Trust I, a Delaware statutory business trust (the
"Issuer").
WHEREAS, pursuant to a Declaration of Trust (the "Declaration"), dated as
of May 5, 2000, among the trustees of the Issuer named therein, WRP, as sponsor,
and the holders from time to time of undivided beneficial interests in the
assets of the Issuer, the Issuer is issuing on the date hereof 31,000 common
securities (the "Common Securities"), having an aggregate stated liquidation
amount of $775,000 designated the 8.25% Convertible Trust Common Securities;
WHEREAS, as incentive for the Holders to purchase the Common Securities,
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth in this Common Securities Guarantee, to pay to the Holders of the
Common Securities the Guarantee Payments (as defined herein) and to make certain
other payments on the terms and conditions set forth herein; and
WHEREAS, as of the date hereof, the Guarantor is also executing and
delivering a guarantee agreement (the "Preferred Securities Guarantee") in
substantially identical terms to this Common Securities Guarantee for the
benefit of the holders of the Preferred Securities (as defined herein), except
that if an Event of Default (as defined in the Indenture), has occurred and is
continuing, the rights of holders of the Common Securities to receive Guarantee
Payments under the Common Securities Guarantee are subordinated to the rights of
holders of Preferred Securities to receive guarantee payments under the
Preferred Securities Guarantee.
NOW, THEREFORE, in consideration of the purchase by each Holder of Common
Securities, which purchase the Guarantor hereby agrees shall benefit the
Guarantor, the Guarantor hereby executes and delivers this Common Securities
Guarantee for the benefit of the Holders.
ARTICLE I
DEFINITIONS AND INTERPRETATION
SECTION I.1. Definitions and Interpretation.
In this Common Securities Guarantee, unless the context otherwise requires:
<PAGE>
(a) capitalized terms used in this Common Securities Guarantee but not
defined in the preamble above have the respective meanings assigned to them in
this Section 1.1;
(b) terms defined in the Declaration as at the date of
execution of this Common Securities Guarantee have the same meaning when used in
this Common Securities Guarantee unless otherwise defined in this Common
Securities Guarantee;
(c) a term defined anywhere in this Common Securities Guarantee has the
same meaning throughout;
(d) all references to "the Common Securities Guarantee" or "this Common
Securities Guarantee" are to this Common Securities Guarantee as modified,
supplemented or amended from time to time;
(e) all references in this Common Securities Guarantee to Articles and
Sections are to Articles and Sections of this Common Securities Guarantee,
unless otherwise specified; and
(f) a reference to the singular includes the plural and vice versa.
"Guarantee Payments" means the following payments or distributions, without
duplication, with respect to the Common Securities, to the extent not paid or
made by the Issuer: (i) any accrued and unpaid Distributions (as defined in the
Declaration) that are required to be paid on such Common Securities in cash to
the extent the Issuer shall have funds available therefor or which have not been
paid by the issuance of additional Common Securities, par value $.01 per share,
pursuant to the terms of the Declaration, (ii) the redemption price (the
"Redemption Price") specified in the Indenture, and all accrued and unpaid
Distributions to the date of redemption, to the extent the Issuer has funds
available therefor, with respect to any Common Securities called for redemption
by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up
or termination of the Issuer (other than in connection with the redemption of
all of the Common Securities or the distribution of Debentures to the Holders in
exchange for Common Securities as provided in the Declaration), the aggregate of
the liquidation amount and all accrued and unpaid Distributions on the Common
Securities to the date of payment, to the extent the Issuer shall have funds
available therefor, the "Liquidation Distribution"). If an Event of Default (as
defined in the Indenture) has occurred and is continuing, the rights of holders
of the Common Securities to receive payments under the Common Securities
Guarantee Agreement are subordinated to the rights of Holders of Common
Securities to receive Guarantee Payments.
"Holder" shall mean any holder, as registered on the books and records of
the Issuer, of any Common Securities; provided, however, that, in determining
whether the holders of the requisite percentage of Common Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor or any Affiliates of the Guarantors.
<PAGE>
"Majority in liquidation amount of the Common Securities" means except as
provided in the terms of the Common Securities, or except as provided by the
Trust Indenture Act, a vote by Holder(s), voting separately as a class, of more
than 50% of the liquidation amount (including the stated amount that would be
paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all Common Securities.
"Majority in liquidation amount of the Preferred Securities" means, except
as provided in the terms of the Preferred Securities, or except as provided by
the Trust Indenture Act, a vote by Holder(s), voting separately as a class, of
more than 50% of the liquidation amount (including the stated amount that would
be paid on redemption, liquidation or otherwise, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined) of
all Preferred Securities.
"Preferred Securities" means the securities representing preferred
undivided beneficial interests in the assets of the Issuer.
ARTICLE II
GUARANTEE
SECTION II.1. Guarantee.
(a) The Guarantor irrevocably and unconditionally agrees to pay in full to
the Holders the Guarantee Payments (without duplication of amounts theretofore
paid by the Issuer), as and when due, regardless of any defense, right of
set-off or counterclaim that the Issuer may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Issuer to pay
such amounts to the Holders.
(b) The Guarantor irrevocably and unconditionally agrees, in the event of
any distribution of Debentures, whether it be pursuant to Section 4(c) of Annex
I to the Declaration, pursuant to a conversion under Section 5 of Annex I to the
Declaration, dissolution or liquidation of the Issuer or otherwise (a
"Distribution Event") to the holders of Trust Securities pursuant to which the
Holders of Common Securities receive an aggregate principal amount of Debentures
that is less than the aggregate principal amount of Debentures that such Holder
is entitled to receive in connection with such Distribution Event, which amount
of Debentures shall be equal to the aggregate liquidation amount of the Common
Securities being liquidated as a result of such Distribution Event (the
"Entitlement Amount"), then the Guarantor shall issue additional Debentures
pursuant to the Indenture, in replacement of the initially issued Debentures not
distributed to Holders of Common Securities, to such Holders of Common
Securities equal to the
<PAGE>
amount by which the aggregate amount of the Entitlement Amount of the Debentures
exceeds the aggregate amount of Debentures actually distributed.
SECTION II.2. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this Common Securities
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right or remedy to require a proceeding first against
the Issuer or any other Person before proceeding directly against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION II.3. Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Common Securities Guarantee shall in no way be affected or impaired by
reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Common Securities to be performed or
observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price or Liquidation Distribution or
any other sums payable under the terms of the Common Securities or the extension
of time for the performance of any other obligation under, arising out of, or in
connection with, the Common Securities (other than an extension of time for
payment of Distributions, Redemption Price or Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Common Securities, or any
action on the part of the Issuer granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Common Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
<PAGE>
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 2.3 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION II.4. Rights of Holders.
Any Holder of Common Securities may institute a legal proceeding directly
against the Guarantor to enforce its rights under this Common Securities
Guarantee, without first instituting a legal proceeding against the Issuer or
any other person or entity. The Guarantor waives any right or remedy to require
that any action be brought first against the Issuer or any other person or
entity before proceeding directly against the Guarantor.
SECTION II.5. Guarantee of Payment.
This Common Securities Guarantee creates a guarantee of payment and not of
collection.
SECTION II.6. Subrogation.
The Guarantor shall be subrogated to all (if any) rights of the Holders
against the Issuer in respect of any amounts paid to such Holders by the
Guarantor under this Common Securities Guarantee; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any right that it may acquire by way of
subrogation or any indemnity, reimbursement or other agreement, in all cases as
a result of payment under this Common Securities Guarantee, if, at the time of
any such payment, any amounts are due and unpaid under this Common Securities
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
SECTION II.7. Independent Obligations.
The Guarantor acknowledge that its obligations hereunder are independent of
the obligations of the Issuer with respect to the Common Securities, and that
the Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Common Securities Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 2.3 hereof.
<PAGE>
ARTICLE III
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION III.1. Limitation of Transactions.
So long as any Common Securities remain outstanding, if (i) the Guarantors
shall be in default with respect to its payment or other obligations under this
Common Securities Guarantee or (ii) there shall have occurred an Event of
Default under the Declaration or any event that, with the giving of notice or
lapse of time or both, would constitute an Event of Default under the
Declaration, then the Guarantor shall not (a) declare or pay any dividend on,
make any distributions with respect to, or redeem, purchase, acquire, or make
any liquidation payment with respect to, any of its Capital Stock or (b) make
any payment of interest, principal or premium, if any, on or repay, repurchase
or redeem any of its debt securities that rank PARI PASSU with or junior in
interest to the Debentures, make any payment of interest, principal or premium,
if any, on or repay, repurchase or redeem any debt securities that ranks PARI
PASSU with or junior in interest to this Common Securities Guarantee or make any
guarantee payment with respect to Securities by WRP of the debt securities of
any subsidiary of WRP if such guarantee rank PARI PASSU with or junior in
interest to the Common Securities Guarantee (other than (i) as a result of a
reclassification of the Capital Stock of the Guarantors or the exchange or
conversion of one class or series of the Capital Stock of the Guarantor for
another class or series of the Capital Stock of the Guarantor, (ii) the purchase
of fractional interests in shares of the Capital Stock of the Guarantor pursuant
to the conversion or exchange provisions of such Capital Stock or the security
being converted into or exchanged for such Capital Stock, (iii) dividends or
distributions in Common Shares of the Guarantor, (iv) any declaration of a
dividend in connection with the implementation of a stockholders' rights plan,
or the issuance of shares under any such plan in the future, or the redemption
or repurchase of any such rights pursuant thereto, (v) payments under the
Guarantee and Common Securities Guarantee, (vi) purchases of Common Shares of
the Guarantor related to the issuance of Common Shares or rights under any of
the Guarantor's benefit plans for its directors, officers or employees and (vii)
obligations under any dividend reinvestment and stock purchase plans to issue
shares other than as a result of the payment of a dividend), in each case unless
and until such default or Event of Default shall have been cured.
SECTION III.2. Subordination.
This Common Securities Guarantee will constitute an unsecured obligation of
the Guarantor and will rank (i) subordinate and junior in right of payment to
all other liabilities of the Guarantor (except any liabilities that may be PARI
PASSU expressly by their terms), (ii) PARI PASSU with the most senior preferred
or preference shares now or hereafter issued by the Guarantor and with any
guaranty now or hereafter entered into by the Guarantor in respect of any
preferred or preference stock of any Affiliate of the Guarantor and (iii) senior
to WRP's Common Shares.
<PAGE>
ARTICLE IV
TERMINATION
SECTION IV.1. Termination.
This Common Securities Guarantee shall terminate upon (i) full payment of
the Redemption Price and accrued and unpaid distributions with respect to all
Common Securities, (ii) the distribution of the Common Shares to such Holder
upon the conversion of such Holder's Common Securities into the Common Shares,
(iii) the distribution of the Debentures to the Holders of the Common
Securities, or (iv) full payment of the amounts payable in accordance with the
Declaration upon liquidation of the Issuer. This Common Securities Guarantee
shall terminate completely upon full payment of the amounts payable in
accordance with the Declaration. Notwithstanding the foregoing, this Common
Securities Guarantee will continue to be effective or will be reinstated, as the
case may be, if at any time any Holder must restore payment of any sum paid
under the Common Securities or under this Common Securities Guarantee.
ARTICLE V
MISCELLANEOUS
SECTION V.1. Successors and Assigns.
All guarantees and agreements contained in this Common Securities Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Preferred
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity permitted by Section
9.1 of the Indenture or any sale, transfer or lease of the Guarantor's assets to
another entity permitted by Section 9.1 of the Indenture, or permitted by
Section 9.2, the Guarantor may not assign its rights or delegate its obligations
under this Common Securities Guarantee without the prior approval of the holders
of at least a Majority in liquidation amount of the Preferred Securities then
outstanding.
SECTION V.2. Amendments.
(a) Except as set forth in subsection (b) below and with respect to any
changes that do not adversely affect the rights of Holders (in which case no
consent of Holders will be required), this Common Securities Guarantee may only
be amended with the prior approval of the Holders of at least a Majority in
liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the
<PAGE>
date upon which the voting percentages are determined) of the Common Securities
then outstanding. The provisions of Section 12.2 of the Declaration with respect
to meetings of Holders apply to the giving of such approval.
(b) Except with respect to any changes that do not materially adversely
affect the rights of Holders of Preferred Securities (in which case no consent
of such holders will be required), this Common Securities Guarantee, including
any amendment or changes whatsoever to Section 3.2 hereof, may only be amended
with the prior approval of the Holders of at least a Majority in liquidation
amount of the Preferred Securities then outstanding. The provisions of Section
12.2 of the Declaration with respect to meetings of Holders apply to the giving
of such approval.
SECTION V.3. Notices.
All notices provided for in this Common Securities Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:
(a) If given to the Issuer, in care of the Regular Trustees at the Issuer's
mailing address set forth below (or such other address as the Issuer may give
notice of to the Holders of the Common Securities):
WRP Convertible Trust I
Wellsford Real Properties, Inc.
535 Madison Avenue, 26th Floor
New York, New York 10022
Attention: Jeffrey H. Lynford
(b) If given to the Guarantor, at the Guarantor's mailing address set forth
below (or such other address as the Guarantor may give notice of to the Holders
of the Common Securities):
Wellsford Real Properties, Inc.
535 Madison Avenue, 26th Floor
New York, New York 10022
Attention: Jeffrey H. Lynford
(c) If given to any Holder of Common Securities, at the address set forth
on the books and records of the Issuer.
All such notices shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid, except that if a notice or other document is refused delivery
or cannot be delivered because of a changed address
<PAGE>
of which no notice was given, such notice or other document shall be deemed to
have been delivered on the date of such refusal or inability to deliver.
SECTION V.4. Benefit.
This Common Securities Guarantee is solely for the benefit of the Holders
of the Common Securities and is not separately transferable from the Common
Securities.
SECTION V.5. Counterparts.
This Common Securities Guarantee may be executed in one or more
counterparts with the same effect as if the parties executing the counterparts
had each executed one instrument as of the date and year first above written.
SECTION V.6. Governing Law.
THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, WITHOUT
REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
<PAGE>
THIS COMMON SECURITIES GUARANTEE is executed as of the day and year first
above written.
WELLSFORD REAL PROPERTIES, INC.,
as Guarantor
By: /s/ Edward Lowenthal
--------------------------------
Name: Edward Lowenthal
Title: President
<PAGE>
AMENDMENT TO REGISTRATION RIGHTS AGREEMENT
Agreement dated as of May , 2000 by and between Wellsford Real
Properties, Inc. a Maryland corporation (the "Company"), and ERP Operating
Limited Partnership, an Illinois limited partnership ("ERPOLP")
W I T N E S S E T H
WHEREAS, the Company and ERPOLP entered into a Registration Rights
Agreement dated as of May 30, 1997 (the "RR Agreement");
WHEREAS, the Company does not intend to issue and ERPOLP does not intend to
acquire, the Preferred Stock, as defined in the RR Agreement;
WHEREAS, pursuant to a Declaration of Trust of WRP Convertible Trust I (the
"Trust"), dated May , 2000, the Trust intends to issue to ERPOLP $25,000,000 of
8.25% Preferred Securities (as defined below) which are convertible into Common
Stock as defined in the RR Agreement; and
WHEREAS, the parties hereto wish to amend the RR Agreement to eliminate the
registration rights granted therein to ERPOLP to have registered Common Stock
issuable upon conversion of Preferred Stock and to grant to ERPOLP the
registration rights previously granted with respect to Common Stock issuable
upon the conversion of the Preferred Stock to the Common Stock issuable upon
conversion of the Securities.
WHEREAS, all of the Company's shares of Class A Common Stock are being
exchanged for an equal number of shares of the Company's Class A-1 Common Stock.
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. The definition of Shares in the RR Agreement is hereby deleted and a
new definition of shares to read as follows is hereby inserted in lieu
thereof:
"Shares shall mean Common Stock issuable or issued upon conversion of
all or any portion of the Preferred Securities or Class A-1 Common
Stock of May __, 2000".
<PAGE>
2. The definition of "Preferred Stock" in the RR Agreement is hereby
deleted. A new definition of "Preferred Securities" to read as follows
is hereby inserted:
"Preferred Securities" shall mean the 8.25% Convertible Trust
Preferred Securities issued by WRP Convertible Trust I.
3. Section 7 of the RR Agreement is amended to state that the address of
the Company to which notice shall be sent is Wellsford Real
Properties, Inc. 535 Madison Avenue, 26th Floor, New York, New York
10022, Attention: Chairman; Fax No. (212) 421-7244.
4. The RR Agreement shall remain in full force and effect as hereby
modified.
This Agreement may be executed in one or more counterparts with the same
effect as if the parties executing the counterparts had each executed one
instrument as of the day and year first above written.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
ERP OPERATING LIMITED PARTNERSHIP WELLSFORD REAL PROPERTIES, INC.
By: Equity Residential Properties Trust, By: /s/ Edward Lowenthal
its general partner ----------------------------
Name: Edward Lowenthal
By: Title: President
----------------------------
Name:
Title:
<PAGE>
WELLSFORD REAL PROPERTIES, INC.
-------------------------------
ARTICLES SUPPLEMENTARY
350,000 SHARES
CLASS A-1 COMMON STOCK
Wellsford Real Properties, Inc., a Maryland corporation (the
"Corporation"), hereby certifies to the State Department of Assessments and
Taxation of Maryland that:
FIRST: Under a power contained in Section 6.2 of the charter of the
Corporation (the "Charter"), the Board of Directors of the Corporation (the
"Board of Directors"), by resolutions adopted by the Board of Directors at a
meeting held on April 20, 2000, reclassified and designated 350,000 shares (the
"Shares") of unissued Common Stock (as defined in the Charter) as shares of
Class A-1 Common Stock, $.01 par value per share (the "Class A-1 Common Stock"),
with the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends and other distributions, qualifications and terms
and conditions of redemption as set forth as follows, which, upon any
restatement of the Charter shall be made part of Article VI, with any necessary
or appropriate changes to the enumeration or lettering of sections or
subsections hereof.
CLASS A-1 COMMON STOCK
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Section 1. CERTAIN DEFINITIONS. For purposes of the terms of the Class A-1
Common Stock the following terms have the following meanings:
"Affiliate" shall mean, when used with respect to a specified Person,
another Person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the Person
specified.
"Beneficial Ownership" shall mean ownership of stock by a REIT who would be
treated as an owner of such shares of stock under Section 856(c)(5) of the Code.
The terms "Beneficial Owner", "Beneficially Owns" and "Beneficially Owned" shall
have correlative meanings.
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"Business Day" shall mean any day, other than a Saturday or Sunday, that is
neither a legal holiday nor a day on which banking institutions in New York City
are authorized or required by law, regulation or executive order to close.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Common Stock" shall mean the common stock, $.01 par value per share, of
the Corporation.
"Class A-1 Common Stock" shall mean the Class A-1 common stock, $.01 par
value per share, of the Corporation.
"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.
"Convertible Preferred Securities" shall mean the convertible preferred
securities issued by the Trust, representing undivided beneficial interests in
the assets of the Trust, having the terms set forth in Annex I to the
Declaration of Trust of the Trust, dated as of May 5, 2000.
"Corporation" shall mean Wellsford Real Properties, Inc.
"Debentures" shall mean the 8.25% Convertible Junior Subordinated
Debentures issued by the Corporation pursuant to an Indenture, dated as of May
5, 2000, between the Corporation and Wilmington Trust Company, as Trustee.
"Liquidation Value", when used in connection with the Convertible Preferred
Securities or the Debentures, shall mean $25.00 per share of Convertible
Preferred Securities or $25.00 per Debenture, as the case may be.
"Person" shall mean any natural person, corporation, business or real
estate investment trust, joint venture, association, company, partnership, or
government, or any agency or political subdivision thereof.
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"REIT" shall mean a real estate investment trust under Section 856 of the
Code.
"REIT Ownership Limit" shall initially mean nine and nine-tenths percent
(9.9%) of the value of the outstanding Voting Stock of the Corporation.
"Responsible Officer" of any corporation shall mean any executive officer
of such corporation, and any other officer or similar official thereof
responsible for the administration of the obligations of such corporation in
respect of the terms of the Class A-1 Common Stock.
"Transfer" shall mean any sale, transfer, redemption, gift, hypothecation,
pledge, assignment, devise or other
disposition of Voting Stock, whether voluntary or involuntary, whether of
record, constructively or beneficially and whether by operation of law or
otherwise.
"Triggering Event" shall mean any event undertaken or caused by the
Corporation, which would result in ERP Operating Partnership, Equity Residential
Properties Trust or any Affiliate of either of them collectively to Beneficially
Own outstanding shares of Class A-1 Common Stock in excess of the REIT Ownership
Limit.
"Trust" shall mean WRP Convertible Trust I, a trust formed under the
Delaware Business Trust Act pursuant to a Certificate of Trust filed with the
Secretary of State of Delaware on May 5, 2000.
"Voting Stock" shall mean the Class A-1 Common Stock, the Common Stock and
any other outstanding shares of stock of the Corporation entitled to vote
generally in the election of directors.
Section 2. RIGHTS. The holders of Class A-1 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-1 Common Stock shall have such additional rights as
provided herein.
Section 3.
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(a) NOMINATION RIGHTS. The holders of the Class A-1 Common Stock, as a
class, shall be entitled to nominate one (1) nominee for election to the Board
of Directors of the Corporation at each annual meeting of shareholders of the
Corporation at which the Class II Directors are to be elected so long as (i) ERP
Operating Partnership has obligations pursuant to that certain Agreement
Regarding Palomino Park dated as of May 30, 1997 between ERP Operating
Partnership and the Corporation; (ii) ERP Operating Partnership has obligations
pursuant to that certain Credit Enhancement Agreement dated as of May 30, 1997
between ERP Operating Partnership and the Corporation, or any agreement executed
by the parties to the aforesaid agreement which states that it is in
substitution for the aforesaid agreement; or (iii) the aggregate Liquidation
Value of the shares of Convertible Preferred Securities of the Trust and the
Debentures of the Corporation owned by ERP Operating Partnership is greater than
$10,000,000.
(b) APPOINTMENT RIGHTS. Upon the receipt by Equity Residential Properties
Trust ("EQR") of a ruling from the Internal Revenue Service or an opinion of
counsel satisfactory to EQR that the rights in this Section 3(b) will not cause
EQR to lose its status as a REIT under the Code, and in the event a person
nominated by the holders of the Class A-1 Common Stock is not a member of the
Board of Directors of the Corporation at such time, the holders of the Class A-1
Common Stock, as a class, shall be entitled to elect one (1) member (the "Class
A-1 Director") of the Board of Directors of the Corporation so long as (i) ERP
Operating Partnership has obligations pursuant to that certain Agreement
Regarding Palomino Park dated as of May 30, 1997 between ERP Operating
Partnership and the Corporation; (ii) ERP Operating Partnership has obligations
pursuant to that certain Credit Enhancement Agreement dated as of May 30, 1997
between ERP Operating Partnership and the Corporation, or any agreement executed
by the parties to the aforesaid agreement which states that it is in
substitution for the aforesaid agreement; or (iii) the aggregate Liquidation
Value of the shares of Convertible Preferred Securities of the Trust and the
Debentures of the Corporation owned by ERP Operating Partnership is greater than
$10,000,000; provided, however, a Class A-1 Director may not hold office as such
a director at the same time as a person nominated by the holders of the Class
A-1 Common Stock pursuant to Section 3(a). The Class A-1 Director may be removed
without cause, only by the affirmative vote of a majority of the Class A-1
Common Stock.
Section 4. OPTIONAL CONVERSION.
(a) Holders of Class A-1 Common Stock shall have the right, exercisable at
any time and from time to time to convert all or any shares of Class A-1 Common
Stock into shares of Common Stock at a conversion rate of one share of Common
Stock for each share of Class A-1 Common Stock, subject to adjustment (the
"Conversion Rate"). Upon conversion, no adjustment or payment will be made for
distributions, but if any holder surrenders Class A-1 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-1 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-1 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
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holder and shall pay to the Corporation any amount required by the last sentence
of Section 4(a) hereof.
(d) The Corporation shall reserve and shall at all times have reserved out
of its authorized but unissued shares of Common Stock a sufficient number of
shares of Common Stock to permit the conversion of the then outstanding shares
of Class A-1 Common Stock. All shares of Common Stock which may be issued upon
conversion of shares of Class A-1 Common Stock shall be validly issued, fully
paid and nonassessable, and not subject to preemptive or other similar rights.
In order that the Corporation may issue shares of Common Stock upon conversion
of shares of Class A-1 Common Stock, the Corporation will endeavor to comply
with all applicable federal and state securities laws and will endeavor to list
such Common Stock to be issued upon conversion on each securities exchange on
which the Common Stock is listed.
(e) The Conversion Rate in effect at any time shall be subject to
adjustment from time to time as follows:
(i) If the Corporation shall (1) reclassify the outstanding shares of
Common Stock into shares of some other class or series of stock of the
Corporation, (2) subdivide the outstanding shares of Common Stock into a
greater number of shares of Common Stock or (3) combine the outstanding
shares of Common Stock into a smaller number of shares of Common Stock, the
conversion rate immediately prior to such action shall be adjusted so that
the holder of any shares of Class A-1 Common Stock thereafter surrendered
for conversion shall be entitled to receive the number of shares of Common
Stock which he would have owned immediately following such action had such
shares of Class A-1 Common Stock been converted immediately prior thereto.
An adjustment made pursuant to this Section 4(e)(i) shall become effective
immediately after the effective date of a subdivision, combination or
reclassification.
(ii) The Market Price per share of the Common Stock on any date shall
be deemed to be the average of the daily closing prices for 30 consecutive
trading days commencing 45 trading days before the date in question. The
closing price for each day shall be the last reported sales price or, in
case no such reported sale
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takes place on such date, the average of the reported closing bid and asked
prices, regular way, in either case on the New York Stock Exchange, or if
the Common Stock is not listed or admitted to trading on such Exchange, on
the principal national securities exchange on which the Common Stock is
listed or admitted to trading or, if not listed or admitted to trading on
any national securities exchange, the closing sale price of the Common
Stock or, in case no reported sale takes place, the average of the closing
bid and asked prices, on NASDAQ or any comparable system, or if the Common
Stock is not quoted on NASDAQ or any comparable system, the closing sale
price or, in case no reported sale takes place, the average of the closing
bid and asked prices, as furnished by any two members of the National
Association of Securities Dealers, Inc. selected from time to time by the
Corporation for that purpose.
(iii) In any case in which this Section 4 shall require that an
adjustment be made immediately following a record date, the Corporation may
elect to defer (but only until five Business Days following the mailing of
the notice described in Section 4(j)) issuing to the holder of any Class
A-1 Common Stock converted after such record date the Common Stock and
other shares of stock of the Corporation issuable upon such conversion over
and above the Common Stock and other shares of stock of the Corporation
issuable upon such conversion only on the basis of the conversion rate
prior to adjustment; and, in lieu of the shares the issuance of which is so
deferred, the Corporation shall issue or cause its transfer agents to issue
appropriate evidence of the right to receive such shares.
(f) No adjustment in the Conversion Rate shall be required until cumulative
adjustments result in a change of 1% or more of the conversion price as in
effect prior to the last adjustment of the Conversion Rate; provided, however,
that any adjustment which by reason of this Section 4(f) is not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 4 shall be made to the nearest
cent ($.01) or the nearest one-hundredth (1/100) of a share, as the case may be.
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(g) If, as a result of an adjustment made pursuant to Section 4(e), the
holder of any Class A-1 Common Stock thereafter surrendered for conversion shall
become entitled to receive any shares of stock of the Corporation other than
Common Stock, thereafter the number of such other shares so receivable upon
conversion of any Class A-1 Common Stock shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 4.
(h) The Corporation may make such increases in the Conversion Rate, in
addition to those required by Section 4(e), as is considered to be advisable in
order that any event treated for federal income tax purposes as a distribution
of shares or share rights shall not be taxable to the recipients thereof.
(i) Whenever the Conversion Rate is adjusted, the Corporation shall
promptly mail to all holders of record of Class A-1 Common Stock a notice of the
adjustment and shall cause to be prepared a certificate signed by the principal
financial officer of the Corporation setting forth the adjusted Conversion Rate
and a brief statement of the facts requiring such adjustment and the computation
thereof; such certificate shall forthwith be filed with each transfer agent for
the Class A-1 Common Stock.
(j) If:
(i) the Corporation takes any action which would require an
adjustment in the Conversion Rate, or
(ii) the Corporation consolidates or merges with, or transfers all or
substantially all of its assets to, another corporation and
shareholders of the Corporation must approve the transaction,
the Corporation shall mail to holders of shares of Class A-1 Common Stock a
notice stating the proposed record or effective date of the transaction, as the
case may be. The Corporation shall mail the notice at least 10 days before such
date; however, failure to mail such notice or any defect therein shall not
affect the validity of any transaction referred to in clauses (i) or (ii) of
this Section 4(j).
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(k) If any of the following shall occur, namely: (i) any reclassification
or change of outstanding shares of Common Stock issuable upon conversion of
Class A-1 Common Stock (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), (ii) any consolidation or merger to which the Corporation is a
party other than a consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any reclassification of, or
change (other than a change in name, or par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination) in, outstanding shares of Common Stock or (iii) any sale, transfer
or lease of all or substantially all of the property or business of the
Corporation as an entirety, then the Corporation, or such successor or
purchasing corporation, as the case may be, shall, as a condition precedent to
such reclassification, change, consolidation, merger, sale, transfer or lease,
provide in its charter that each share of Class A-1 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-1
Common Stock immediately prior to such reclassification, change, consolidation,
merger, sale, transfer or lease. Such provision in the charter document shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4. If, in the case
of any such reclassification, change, consolidation, merger, sale, transfer or
lease, the shares of stock or other securities and property (including cash)
receivable thereupon by a holder of the Common Stock includes shares of stock or
beneficial interest or other securities and property of a corporation or other
entity other than the successor or purchasing corporation, as the case may be,
in such reclassification, change, consolidation, merger, sale, transfer or
lease, then the charter of such other corporation, as a condition precedent to
such transaction, shall contain such additional provisions to protect the
interests of the holders of Class A-1 Common Stock as the Board of Directors
shall reasonably consider necessary by reason of the foregoing. The provisions
of this Section 4(k) shall similarly apply to successive consolidations,
mergers, sales, transfers or leases.
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No holder of Class A-1 Common Stock will possess any preemptive rights to
subscribe for or acquire any unissued shares of the Corporation (whether now or
hereafter authorized) or securities of the Corporation convertible into or
carrying a right to subscribe to or acquire shares of stock of the Corporation.
Section 5. AUTOMATIC CONVERSION. Any outstanding shares of Class A-1 Common
Stock shall automatically convert, at the Conversion Rate, into shares of Common
Stock upon the Transfer of such shares of Class A-1 Common Stock to any Person
other than an Affiliate of Equity Residential Properties Trust or ERP Operating
Partnership. Such automatic conversion shall be deemed to have occurred on the
date of such Transfer.
Section 6. PURCHASE OF SHARES OF VOTING STOCK IN EXCESS OF REIT OWNERSHIP
LIMIT. If, notwithstanding the other provisions contained in the terms of the
Class A-1 Common Stock, a Triggering Event shall occur, then the Corporation
shall (i) immediately deliver written notice of such Triggering Event to each of
Equity Residential Properties Trust and ERP Operating Partnership and (ii)
purchase such shares of Class A-1 Common Stock in excess of the REIT Ownership
Limit at a price per share equal to the Market Price per share of the Common
Stock no later than 25 days following the date of the Triggering Event which
resulted in the REIT Beneficially Owning shares of Class A-1 Common Stock in
excess of the REIT Ownership Limit.
SECOND: The Shares have been classified and designated by the Board of
Directors under the authority contained in the Charter.
THIRD: These Articles Supplementary have been approved by the Board of
Directors in the manner and by the vote required by law.
FOURTH: The undersigned President of the Corporation acknowledges these
Articles Supplementary to be the corporate act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
IN WITNESS WHEREOF, the Corporation has caused these Articles Supplementary
to be executed under seal in its name and on its behalf by its President and
attested to by its Secretary on this ___ of May, 2000.
ATTEST: WELLSFORD REAL PROPERTIES, INC
/s/ Jeffrey H. Lynford By: /s/ Edward Lowenthal (SEAL)
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Jeffrey H. Lynford Edward Lowenthal
Secretary President
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[LETTERHEAD]
EXHIBIT 99.1
FOR IMMEDIATE RELEASE:
WELLSFORD REAL PROPERTIES, INC. PLACES $25 MILLION CONVERTIBLE
TRUST PREFERRED WITH EQUITY RESIDENTIAL PROPERTIES TRUST
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EQR INCREASES STAKE IN REAL ESTATE MERCHANT BANKING FIRM TO 13.8 PERCENT
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NEW YORK, May 9, 2000--Wellsford Real Properties, Inc. (AMEX: WRP) announced
today the private placement of $25 million of convertible trust preferred
securities with ERP Operating Limited Partnership, the operating partnership of
Equity Residential Properties Trust (NYSE: EQR). The proceeds will replenish the
Company's liquidity, which was reduced in February to complete its share
repurchase program. On February 28, 2000 WRP repurchased 2.6 million of its
common shares from an institutional investor for approximately $20.6 million, or
approximately $8 per share.
The one million convertible trust preferred securities purchased by EQR at $25
each bear interest at 8.25 percent per annum and are convertible into the
Company's common stock at $11.124 per common share. The trust preferred
securities were issued through WRP Convertible Trust I, a Delaware statutory
business trust and subsidiary of WRP. WRP Convertible Trust I used the proceeds
from the sale to purchase convertible junior subordinated debentures of WRP. EQR
already holds approximately 340,000 Class A-1 common shares of WRP. With the
completion of this transaction, EQR owns 13.8% of WRP on a fully converted
basis.
In May 1997 EQR acquired WRP's predecessor, Wellsford Residential Property
Trust, in a merger valued at almost $1 billion. WRP was spun-off to shareholders
prior to this merger. At the time of the spin-off, WRP had a book value of
$10.30 per common share. As disclosed in the Company's 1999 Annual Report, at
December 31, 1999, WRP had a pro forma book value of $12.56 per common share.
Douglas Crocker II, EQR's President and Chief Executive Officer, is a member of
WRP's Board of Directors. Mr. Crocker stated, "With this investment we will
increase our ownership stake in a company with proven senior management and a
solid portfolio of real estate businesses and investments. This structure
permits EQR to acquire WRP shares at a 12 percent discount to book value and
receive a current 8.25 percent yield."
Wellsford Real Properties is a real estate merchant banking firm headquartered
in New York City, which acquires, develops, finances, and operates real
properties and organizes and invests in private and public real estate
companies.
Certain statements in this press release constitute "forward-looking statements"
under federal securities laws and involve known and unknown risks, uncertainties
and other factors which may cause the actual results to be materially different
from any future results implied by such forward-looking statements. Such factors
include, among others, general economic and business conditions, developmental
risks, construction and lease-up delays and cost overruns, inability to comply
with local zoning and other laws, environmental matters, demand by prospective
tenants, defaults by tenants, lower than anticipated rents, availability of and
cost of other properties and financing, and competition.
Press Contact: Jeffrey Lynford, Chairman
Wellsford Real Properties, Inc.
(212) 838-3400
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